<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1996
REGISTRATION NO. 333-11667
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN MEDSERVE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5122 36-3925637
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or organization)
</TABLE>
184 SHUMAN BLVD., SUITE 200
NAPERVILLE, ILLINOIS 60563
(630) 717-2904
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
TIMOTHY L. BURFIELD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
184 SHUMAN BLVD., SUITE 200
NAPERVILLE, ILLINOIS 60563
(630) 717-2820
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
Charles R. Wallace Glenn W. Reed, Esq. Kenneth J. Vaughan, Esq.
Vice President-Finance and Gardner, Carton & Douglas Chapman and Cutler
Chief Financial Officer 321 North Clark Street, 111 West Monroe Street
American Medserve Corporation Suite 3100 Chicago, Illinois 60603
184 Shuman Blvd., Suite 200 Chicago, Illinois 60610 (312) 845-3793
Naperville, Illinois 60563 (312) 245-8446
(630) 717-2904
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Estimated expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting compensation, are as
follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 31,865
National Association of Securities Dealers, Inc. filing fee...... 9,741
Nasdaq National Market entry fee................................. 45,947
Blue Sky fees and expenses....................................... *
Legal fees and expenses.......................................... *
Accountants' fees and expenses................................... *
Printing and engraving expenses.................................. *
Transfer Agent and Registrar fees and expenses................... *
Miscellaneous.................................................... *
---------
Total........................................................ $ *
---------
---------
</TABLE>
- ------------------------
*To be supplied by amendment.
The Company will bear all of the foregoing fees and expenses.
The foregoing, except for the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. filing
fee and the Nasdaq National Market entry fee, are estimates.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Registrant's Amended and Restated Certificate of Incorporation and
Amended and Restated By-laws provide that the Registrant shall, subject to
certain limitations, indemnify its directors and officers against expenses
(including attorneys' fees, judgments, fines and certain settlements) actually
and reasonably incurred by them in connection with any suit or proceeding to
which they are a party so long as they acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to a criminal action or proceeding, so long as
they had no reasonable cause to believe their conduct to have been unlawful.
Section 102 of the Delaware General Corporation Law permits a Delaware
corporation to include in its certificate of incorporation a provision
eliminating or limiting a director's liability to a corporation or its
stockholders for monetary damages for breaches of fiduciary duty. The enabling
statute provides, however, that liability for breaches of the duty of loyalty,
acts or omissions not in good faith or involving intentional misconduct, or
knowing violation of the law, and the unlawful purchase or redemption of stock
or payment of unlawful dividends or the receipt of improper personal benefits
cannot be eliminated or limited in this manner. The Registrant's Amended and
Restated Certificate of Incorporation includes a provision which eliminates, to
the fullest extent permitted, director liability for monetary damages for
breaches of fiduciary duty.
Pursuant to the Underwriting Agreement as set forth in Exhibit 1.1., the
directors and officers of the Registrant are indemnified against certain civil
liabilities that they may incur under the Securities Act of 1933, as amended, in
connection with this Registration Statement and the related Prospectus.
The Registrant may purchase directors and officers liability insurance,
which would provide coverage against certain liabilities.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this Registration Statement, the
Company sold the following securities that were not registered under the Act:
On August 2, 1994, the Registrant issued 7,867.1 shares of Class B
common stock (547,944 shares of Common Stock as reclassified) to Timothy L.
Burfield (889.7 of which Class B shares (61,966 shares of Common Stock) were
subsequently forfeited) for an aggregate consideration of $69,437.50.
Exemption from registration is claimed pursuant to Section 4(2) of the
Securities Act of 1933, no public sale having been involved.
On August 2, 1994, the Registrant issued 56,500 shares of Class A common
stock (3,935,238 shares of Common Stock as reclassified) to Golder, Thoma,
Cressey, Rauner Fund IV, L.P. for consideration of $5,650,000. Golder,
Thoma, Cressey, Rauner Fund IV, L.P contributed an additional aggregate of
$16,850,000 to the capital of the Registrant on March 9, 1995, April 13,
1995, May 8, 1995, August 3, 1995, January 15, 1996, April 15, 1996, April
30, 1996 and May 8, 1996. Exemption from registration is claimed pursuant to
Section 4(2) of the Securities Act of 1933, no public sale having been
involved.
On August 5, 1996, the Registrant issued a convertible promissory note
in the principal amount of $2,000,000 to Royal Care of America, Inc. ("Royal
Care") as partial payment for the acquisition of certain assets of Royal
Care. Exemption from registration is claimed pursuant to Section 4(2) of the
Securities Act of 1933, no public sale having been involved.
On August 23, 1996, the Registrant issued shares of Class B common stock
(Common Stock as reclassified) to the following persons in the following
amounts in exchange for their shares in certain of the Company's
subsidiaries: William J. and Mary Jane Gatti (3,909.06 Class B
shares/272,267 shares of Common Stock); Nelson L. Showalter (588.96 Class B
shares/41,021 shares of Common Stock); Frank R. Gelafio (1,220.74 Class B
shares/85,025 shares of Common Stock); Lee R. Youngberg (1,220.74 Class B
shares/85,025 shares of Common Stock); Ronald E. Keith (413.85 Class B
shares/28,825 shares of Common Stock); James Pietryga (103.65 Class B
shares/7,220 shares of Common Stock); Bruce Gerlich (90.86 Class B
shares/6,328 shares of Common Stock); Mitch Overstreet (90.86 Class B
shares/6,328 shares of Common Stock); Sterling Acquisition Partners, Inc.
(1,550.36 Class B shares/107,983 shares of Common Stock); Pharmed, Inc.
(1,054.33 Class B shares/73,435 shares of Common Stock); and Pharmed of
Baton Rouge, Inc. (243.46 Class B shares/16,957 shares of Common Stock).
Exemption from registration is claimed pursuant to Section 4(2) of the
Securities Act of 1933, no public sale having been involved.
On September 5, 1996, the Registrant issued shares of Class B common
stock (Common Stock as reclassified) for a purchase price of $98.46 per
Class B share ($1.41 per share of Common Stock) to the following persons in
the following amounts, each of whom paid 10% of the purchase price for their
shares in cash and 90% in the form of interest-bearing demand notes: Timothy
L. Burfield (340 Class B shares/23,681 shares of Common Stock); Charles R.
Wallace (1,496.45 Class B shares/104,228 shares of Common Stock); Michael B.
Freedman (1,156.08 Class B shares/80,522 shares of Common Stock); J. Jeffrey
Gephart (750.72 Class B shares/52,288 shares of Common Stock); Thomas C.
Loftus (100 Class B shares/6,965 shares of Common Stock); George E. Pepe
(100 Class B shares/6,965 shares of Common Stock); Charles C. Halberg
(170.18 Class B shares/11,853 shares of Common Stock); Mark A. Jerstad
(170.18 Class B shares/11,853 shares of Common Stock); and James H.S. Cooper
(170.18 Class B shares/11,853 shares of Common Stock). Exemption from
registration is claimed pursuant to Section 4(2) of the Securities Act of
1933, no public sale having been involved.
No underwriters were involved in any of the foregoing sales of securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits -- See Index to Exhibits.
II-2
<PAGE>
(b) Financial Statement Schedule.
Schedule VIII -- Valuation of Qualifying Accounts
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions specified in Item 14 of this Registration
Statement, 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 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 Act and
will be governed by the final adjudication of such issue.
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 this registration statement 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 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose 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 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Naperville,
Illinois, on the 3rd day of October, 1996.
AMERICAN MEDSERVE CORPORATION
By: ______/s/_TIMOTHY L. BURFIELD_____
Timothy L. Burfield
CHIEF EXECUTIVE OFFICER, PRESIDENT
AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 3, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------------- ------------------------------------------------------------
<C> <S>
/s/ TIMOTHY L. BURFIELD
---------------------------------------- President and Chief Executive Officer and Director
Timothy L. Burfield (Principal Executive Officer)
/s/ CHARLES R. WALLACE
---------------------------------------- Vice President-Finance and Chief Financial Officer
Charles R. Wallace (Principal Financial and Accounting Officer)
*
---------------------------------------- Chairman of the Board
Bryan C. Cressey
*
---------------------------------------- Director
James H.S. Cooper
*
---------------------------------------- Director
Charles C. Halberg
*
---------------------------------------- Director
Mark A. Jerstad
*/s/ CHARLES R. WALLACE
---------------------------------------
Charles R. Wallace, as
attorney-in-fact pursuant to
power of attorney granted in
Registration Statement No. 333-11667
filed on September 10, 1996
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTIONS
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Form of Amended and Restated Certificate of Incorporation
3.2 Amended and Restated By-laws
4.1* Specimen Common Stock Certificate
5.1* Opinion of Gardner, Carton & Douglas
10.1* 1996 Stock Option Plan
10.2 Stock Option Plan for Directors and Executive and Key Employees of Gatti LTC Services, Inc.
10.3 Stock Option Plan for Directors and Executive and Key Employees of Williamson Drug Company Incorporated
10.4 Stock Option Plan for Directors and Executive and Key Employees of Nihan & Martin, Inc.
10.5 Stock Option Plan for Directors and Executive and Key Employees of Dixon Pharmacy, Inc.
10.6 Form of Subsidiary Non-Qualified Stock Option Agreement
10.7 Form of Subsidiary Participation Agreement
10.8* Amended and Restated Senior Management Agreement, made as of , 1996, between the Company and
Timothy L. Burfield
10.9 Senior Management Agreement, made as of September 5, 1996, between the Company and Michael B. Freedman
10.10 Senior Management Agreement, made as of September 5, 1996, between the Company and Charles R. Wallace
10.11 Senior Management Agreement, made as of September 5, 1996, between the Company and J. Jeffrey Gephart
10.12 Director Stock Agreement, made as of September 5, 1996, between the Company and James H. S. Cooper
10.13 Director Stock Agreement, made as of September 5, 1996, between the Company and Charles C. Halberg
10.14 Director Stock Agreement, made as of September 5, 1996, between the Company and Mark A. Jerstad
10.15 Amended and Restated Stockholders Agreement, dated as of August 23, 1996, by and among the Company,
Golder, Thoma, Cressey, Rauner Fund IV, L.P. (the "GTCR Fund"), Timothy L. Burfield, Michael B. Freedman,
Charles R. Wallace, J. Jeffrey Gephart, James H. S. Cooper, Charles C. Halberg, Mark A. Jerstad, William
J. and Mary Jane Gatti, Nelson L. Showalter, Frank R. Gelafio, Lee R. Youngberg, Ronald E. Keith, James
Pietryga, Bruce Gerlich, Mitch Overstreet, Sterling Acquisition Partners, Inc., Pharmed, Inc., Pharmed of
Baton Rouge, Inc., Joseph Dellantonio, Thomas C. Loftus and George E. Pepe.
10.16 Registration Agreement, dated as of August 23, 1996, by and among the GTCR Fund, Timothy L. Burfield,
Michael B. Freedman, Charles R. Wallace, J. Jeffrey Gephart, James H. S. Cooper, Charles C. Halberg, Mark
A. Jerstad, William J. and Mary Jane Gatti, Nelson L. Showalter, Frank R. Gelafio, Lee R. Youngberg,
Ronald E. Keith, James Pietryga, Bruce Gerlich, Mitch Overstreet, Sterling Acquisition Partners, Inc.,
Pharmed, Inc., Pharmed of Baton Rouge, Inc., Joseph Dellantonio, Thomas C. Loftus and George E. Pepe.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTIONS
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
10.17* Agreement made and entered into as of October , 1996 by and between the Company the the GTCR Fund.
10.18 Amendment No. 1 to the Equity Purchase Agreement, made and entered into as of August 15, 1996, by and
between the Company and the GTCR Fund
10.19 Agreement, dated as of August 15, 1996, between the Company and the GTCR Fund relating to the Additional
GTCR Shares
10.20 Shareholders Agreement, dated as of April 30, 1996, by and among Good Samaritan Supply Services, Inc., The
Evangelical Lutheran Good Samaritan Foundation and the Company
10.21 Non-Competition and Marketing Assistance Agreement, made as of April 30, 1996, by and among the Company,
Good Samaritan Supply Services, Inc., The Evangelical Lutheran Good Samaritan Foundation and The
Evangelical Lutheran Good Samaritan Society
10.22 Letter Agreement, dated February 21, 1996, as amended, between the Company and Equitable Securities
Corporation
10.23 Credit Agreement, dated as of March 15, 1996, among AMC Regional Holdings, Inc., the Institutions from
time to time party thereto as Lenders and The First National Bank of Chicago, as Agent (the "Credit
Agreement"). The Company agrees to furnish supplementally to the Commission a copy of any omitted
schedule or exhibit to the Credit Agreement upon request by the Commission
10.24 Credit Agreement, dated as of June 21, 1996, among Good Samaritan Supply Services, Inc., the Institutions
from time to time party thereto as Lenders and LaSalle National Bank, as Agent. The Company agrees to
furnish supplementally to the Commission a copy of any omitted schedule or exhibit to the Credit
Agreement upon request by the Commission
10.25 Termination Agreement, dated as of August 15, 1996, between the Company and GTCR IV, L.P.
10.26 Reimbursement and Conversion Agreement between the Company and the GTCR Fund dated August 2, 1996.
11.1++ Statement re: computation of per share earnings
21.1* Subsidiaries of the Company
23.1++ Consent of Ernst & Young, LLP
23.2++ Consent of S.B. Hoover & Company, L.L.P.
23.3++ Consent of Lindgren, Callihan, Van Osdol & Co., Ltd.
23.4++ Consent of Coopers & Lybrand L.L.P.
23.5++ Consent of Price Waterhouse LLP
23.6* Consent of Gardner, Carton & Douglas (included in Exhibit 5.1)
24.1++ Powers of Attorney
27.1++ Financial Data Schedule
</TABLE>
- ------------------------
*To be filed by amendment.
++Filed on September 10, 1996 as part of the Registration Statement.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AMERICAN MEDSERVE CORPORATION
[INCORPORATED ON NOVEMBER 12, 1993 AS AMERICA MEDSERVE CORPORATION]
AMERICAN MEDSERVE CORPORATION, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: Pursuant to Section 245(b) and 242 of the General Corporation Law
of the State of Delaware (the "Delaware Law"), the Certificate of Incorporation,
as amended, of AMERICAN MEDSERVE CORPORATION, a Delaware corporation (the
"Corporation"), is hereby amended and restated to read in its entirety as
follows:
"AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
FIRST: The name of the corporation is American Medserve Corporation.
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of the Corporation's registered agent at such address is the
Corporation Trust Company.
THIRD: The nature of the business and the objects and purposes to be
conducted or promoted by the Corporation are to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH:
1. AUTHORIZED SHARES. The total number of shares of stock of all classes
which the Corporation shall have authority to issue is thirty one million
(31,000,000), of which one million (1,000,000) shall be shares of Preferred
Stock with a par value of $0.01 per share ("Preferred Stock"), and thirty
million (30,000,000) shall be shares of Common Stock with a par value of $0.01
per share ("Common Stock").
2. RECLASSIFICATION OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK. At
and upon the effectiveness of this Amended and Restated Certificate of
Incorporation, each and every issued and outstanding share of the Corporation's
Class A Common Stock, par value $0.01 per share ("Class A Common"), and each and
every issued and outstanding share of the Corporation's Class B Common Stock,
par value $0.01 per share ("Class B Common"), shall in each case be
automatically converted into and reclassified as 69.65023230 validly issued,
fully paid and non-assessable shares of Common Stock. Upon the Effective Time,
each certificate representing one or more shares of Class A Common and Class B
Common, as the case may be, shall in each case represent a number of shares of
Common Stock (rounded to the nearest whole share of Common Stock, with 0.5 being
rounded up) equal to the shares represented by such certificate of Class A
Common and Class B Common, as the case may be, multiplied
<PAGE>
by 69.65023230. As soon as practicable thereafter, the Corporation shall ask
the holders of certificates representing shares of Class A Common and holders of
certificates representing shares of Class B Common to deliver such certificates
to the Corporation or to its agent, and, upon the receipt thereof, the
Corporation shall distribute, or cause its agent to distribute, to each such
holder a certificate or certificates representing a number of shares of Common
Stock (rounded to the nearest whole share of Common Stock, with 0.5 being
rounded up) equal to the number of shares of Class A Common or Class B Common,
as the case may be, previously evidenced by such certificate(s) multiplied by
69.65023230. Until such time as the Corporation has distributed a new
certificate or certificate in exchange for a certificate or certificates
tendered by a holder pursuant to this paragraph, the certificate or certificates
being tendered by such holder shall be deemed to represent and shall represent a
number of shares of Common Stock equal to the number of shares of Class A Common
or Class B Common, as the case may be, previously evidenced by such
certificate(s) multiplied by 69.65023230.
3. PREFERRED STOCK.
(a) The Preferred Stock shall be issuable in series, and in connection
with the issuance of any series of Preferred Stock and to the extent now or
hereafter permitted by the laws of the State of Delaware, the Board of Directors
is authorized to fix by resolution the designation of each series, the stated
value of the shares of each series, the dividend rate or rates of each series
(which rate or rates may be expressed in terms of a formula or other method by
which such rate or rates shall be calculated from time to time) and the date or
dates and other provisions respecting the payment of dividends, the provisions,
if any, for a sinking fund for the shares of each series, the preferences of the
shares of each series in the event of the liquidation or dissolution of the
Corporation, the provisions, if any, respecting the redemption of the shares of
each series and, subject to requirements of the laws of the State of Delaware,
the voting rights (except that such shares shall not have more than one vote per
share), the terms, if any, upon which the shares of each series shall be
convertible into or exchangeable for any other shares of stock of the
Corporation and any other relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, of the shares
of each series.
(b) Preferred Stock of any series redeemed, converted, exchanged,
purchased, or otherwise acquired by the Corporation shall constitute authorized
but unissued Preferred Stock.
(c) All shares of any series of Preferred Stock, as between themselves,
shall rank equally and be identical (except that such shares may have different
dividend provisions); and all series of Preferred Stock, as between themselves,
shall rank equally and be identical except as set forth in resolutions of the
Board of Directors authorizing the issuance of such series.
4. COMMON STOCK.
(a) After dividends to which the holders of Preferred Stock may then be
entitled under the resolutions creating any series thereof have been declared
and after the Corporation shall have set apart the amounts required pursuant to
such resolutions for the purchase or redemption of any series of Preferred
Stock, the holders of Common Stock shall be entitled to have dividends declared
in cash, property, or other securities of the Corporation out of any net profits
or net assets of the Corporation legally available therefor, if, as and when
such dividends are declared by the Corporation's Board of Directors.
(b) In the event of the liquidation or dissolution of the Corporation's
business and after the holders of Preferred Stock shall have received amounts to
which they are entitled under the resolutions
2
<PAGE>
creating such series, the holders of Common Stock shall be entitled to receive
ratably the balance of the Corporation's net assets available for distribution.
(c) Each share of Common Stock shall be entitled to one vote upon all
matters upon which stockholders have the right to vote, but shall not be
entitled to vote for the election of any directors who may be elected by vote of
the Preferred Stock voting as a class if so provided in the resolution creating
such Preferred Stock pursuant to Section 3(a) of this Article FOURTH.
5. PREEMPTIVE RIGHTS. No holder of any shares of the Corporation shall
have any preemptive right to subscribe for or to acquire any additional shares
of the Corporation of the same or of any other class whether now or hereafter
authorized or any options or warrants giving the right to purchase any such
shares, or any bonds, notes, debentures or other obligations convertible into
any such shares.
FIFTH: The Corporation is to have perpetual existence.
SIXTH. The private property of the stockholders shall not be subject to
the payment of corporate debts to any extent whatever.
SEVENTH: Except as may otherwise be fixed by resolution of the Board of
Directors pursuant to the provisions of Article FOURTH hereof relating to the
rights of the holders of Preferred Stock to elect directors as a class, the
number of directors of the Corporation shall be fixed from time to time by or
pursuant to the By-Laws of the Corporation. The directors, other than those who
may be elected by the holders of Preferred Stock, shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible. The first class shall be initially elected
for a term expiring at the next ensuing annual meeting, the second class shall
be initially elected for a term expiring one year thereafter, and the third
class shall be elected for a term expiring two years thereafter, with each
member of each class to hold office until his successor is elected and
qualified. At each annual meeting of the stockholders of the Corporation held
after the initial classification and election of directors, the successors of
the class of directors whose term expires at that meeting shall be elected to
hold office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election.
Advance notice of stockholder nominations for the election of directors
shall be given in the manner provided in the By-Laws of the Corporation.
Except as may otherwise be fixed by resolution of the Board of Directors
pursuant to the provisions of Article FOURTH hereof relating to the rights of
the holders of Preferred Stock to elect directors as a class, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or any other cause shall be filled by the affirmative
vote of a majority of the remaining directors then in office, even though less
than a quorum of the Board of Directors. Any director elected in accordance
with the preceding sentence shall hold office for the remainder of the full term
of the class of directors in which the new directorship was created (subject to
the requirements of this Article SEVENTH that all classes be as nearly equal in
number as possible) or in which the vacancy occurred and until such director's
successor shall have been elected and qualified. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of an
incumbent director.
Subject to the rights of the holders of Preferred Stock to elect directors
as a class, a director may be removed only for cause and only by the affirmative
vote of the holders of 80% of the combined voting
3
<PAGE>
power of the then outstanding shares of stock entitled to vote generally in the
election of directors, voting together as a single class.
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
1. To adopt, amend and repeal the By-Laws of the Corporation. Any
By-Laws adopted by the directors under the powers conferred hereby may be
amended or repealed by the directors or by the stockholders.
Notwithstanding the foregoing or any other provision in this Certificate of
Incorporation or the By-Laws of the Corporation to the contrary, Article
II, Sections 3 and 7 and Article III, Sections 1, 2 and 3 of the By-Laws
shall not be amended or repealed and no provision inconsistent therewith
shall be adopted without the affirmative vote of the holders of at least
80% of the voting power of all the shares of the Corporation entitled to
vote generally in the election of directors, voting together as a single
class.
2. To fix and determine, and to vary the amount of, the working
capital of the Corporation, and to determine the use or investment of any
assets of the Corporation, to set apart out of any of the funds of the
Corporation available for dividends a reserve or reserves for any proper
purpose and to abolish any such reserve or reserves.
3. To authorize the purchase or other acquisition of shares of stock
of the Corporation or any of its bonds, debentures, notes, scrip, warrants
or other securities or evidence of indebtedness.
4. Except as otherwise provided by law, to determine the places
within or without the State of Delaware, where any or all of the books of
the Corporation shall be kept.
5. To authorize the sale, lease or other disposition of any part or
parts of the properties of the Corporation and to cease to conduct the
business connected therewith or again to resume the same, as it may deem
best.
6. To authorize the borrowing of money, the issuance of bonds,
debentures and other obligations or evidences of indebtedness of the
Corporation, secured or unsecured, and the inclusion of provisions as to
redeemability and convertibility into shares of stock of the Corporation or
otherwise; and the mortgaging or pledging, as security for money borrowed
or bonds, notes, debentures or other obligations issued by the Corporation,
of any property of the Corporation, real or personal, then owned or
thereafter acquired by the Corporation.
7. To authorize the negotiation and execution on behalf of the
Corporation of agreements with officers and other employees of the
corporation relating to the payment of severance compensation to such
officers or employees.
In addition to the powers and authorities herein or by statute expressly
conferred upon it, the Board of Directors may 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 laws of the State of Delaware,
of this Certificate of Incorporation and of the By-Laws of the Corporation.
Subject to any limitation in the By-Laws, the members of the Board of
Directors shall be entitled to reasonable fees, salaries, or other compensation
for their services, as determined from time to time by the Board of Directors,
and to reimbursement for their expenses as such members. Nothing herein
4
<PAGE>
contained shall preclude any director from serving the Corporation or its
subsidiaries or affiliates in any other capacity and receiving compensation
therefor.
Notwithstanding anything contained in this Amended and Restated Certificate
of Incorporation to the contrary, the affirmative vote of the holders of at
least 80% of the voting power of all shares of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to alter, amend, adopt any provision inconsistent with or repeal
this Article SEVENTH.
EIGHTH: Both stockholders and directors shall have power, if the By-Laws
so provide, to hold their meetings and to have one or more offices within or
without the State of Delaware.
Except as may otherwise be fixed by resolution of the Board of Directors
pursuant to the provisions of Article FOURTH hereof relating to the rights of
the holders of Preferred Stock, any action required or permitted to be taken by
the stockholders of the Corporation may be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such holders. Except as otherwise required by law and subject to the
rights of the holders of Preferred Stock, special meetings of stockholders may
be called only by the Chairman, if any, on his own initiative, the President on
his own initiative or by the Board of Directors pursuant to a resolution
approved by a majority of the entire Board of Directors. Notwithstanding
anything contained in this Amended and Restated Certificate of Incorporation to
the contrary, the affirmative vote of the holders of at least 80% of the voting
power of all shares of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
alter, amend, adopt any provision inconsistent with or repeal this Article
EIGHTH.
NINTH: Except as otherwise provided in this Amended and Restated
Certificate of Incorporation, the Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Amended and Restated
Certificate of Incorporation in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
TENTH:
(a) A director 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, except for liability (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 General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware, or any other applicable law, is amended to authorize corporation
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the General Corporation Law of the State of
Delaware, or any other applicable law, as so amended. Any repeal or
modification of this Section (a) by the stockholders of the Corporation shall
not adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
(b) (1) Each person who has or is made a party or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she or a person of whom he or she is the legal
representative is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer or employee or
agent of another corporation or of a partnership,
5
<PAGE>
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is an alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware, or any other
applicable law, as the same exists or may hereafter be amended (but, in the case
of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expenses,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that except as provided in
paragraph (2) of this Section (b) with respect to proceedings seeking to enforce
rights to indemnification, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section (b) shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that if the General Corporation Law of the State of Delaware, or any
other applicable law, requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding shall be made
only upon delivery to the Corporation of an undertaking by or on behalf of such
director or officer to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section (b) or otherwise.
(2) If a claim under paragraph (1) of this Section (b) is not paid in full
by the Corporation within thirty days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standard of conduct which make it permissible under the General
Corporation Law of the State of Delaware, or any other applicable law, for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, stockholders or independent legal
counsel) to have made a determination prior to the commencement of such action
that indemnification of the claimant is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in the General
Corporation Law of the State of Delaware, or any other applicable law, nor an
actual determination by the Corporation (including its Board of Directors,
stockholders or independent legal counsel) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
(3) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Section (b) shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, provision of this Certificate of
Incorporation, By-Law, agreement, vote of stockholders or disinterested
directors or otherwise.
6
<PAGE>
(4) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware, or any other
applicable law.
(5) The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification, and rights to be paid by
the Corporation the expenses incurred in defending any proceeding in advance of
its final disposition, to any employee or agent of the Corporation to the
fullest extent of the provisions of this Section (b) with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
(6) Any repeal or modification of this Section (b) by the stockholders of
the Corporation shall not adversely affect any right or protection of a
director, officer, employee or agent of the Corporation existing at the time of
such repeal or modification.
ELEVENTH: In determining whether an "Acquisition Proposal" is in the best
interests of the Corporation and its stockholders, the Board of Directors shall
consider all factors it deems relevant including, without limitation, the
following:
(a) The consideration being offered in the Acquisition Proposal, not only
in relation to the then current market price, but also in relation to the then
current value of the Corporation in a freely negotiated transaction and in
relation to the Board of Directors' estimate of the future value of the
Corporation as an independent entity; and
(b) Such other factors the Board of Directors determines to be relevant,
including among others the social, legal and economic effects upon employees,
suppliers, customers and the communities in which the Corporation is located, as
well as on the long term business prospects of the Corporation.
"Acquisition Proposal" means any proposal of any person (i) for a tender
offer, exchange offer or any other method of acquiring any equity securities of
the Corporation with a view to acquiring control of the Corporation, (ii) to
merge or consolidate the Corporation with another corporation, or (iii) to
purchase or otherwise acquire all or substantially all of the properties and
assets of the Corporation.
This Article ELEVENTH shall not be interpreted to create any rights on
behalf of third persons, such as employees, suppliers, or customers.
TWELFTH: The Corporation has elected to be governed by Section 203 of the
General Corporation Law of Delaware."
SECOND: The Board of Directors of the Corporation, at a meeting duly
called at which a quorum existed, duly adopted resolutions proposing and
approving the Amended and Restated Certificate of Incorporation of the
Corporation and directing that such Amended and Restated Certificate of
Incorporation be submitted to the stockholders of the Corporation to consider
and adopt the same.
7
<PAGE>
THIRD: Pursuant to Section 228 of the Delaware Law, the adoption of the
Amended and Restated Certificate of Incorporation was consented to in writing by
a majority of the holders of the voting power of all shares of capital stock of
the Corporation entitled to vote thereon.
FOURTH: The Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, AMERICAN MEDSERVE CORPORATION has caused this
Certificate to be signed by its President and its corporate seal to be hereunto
affixed and attested by its Secretary this __ day of October, 1996.
AMERICAN MEDSERVE CORPORATION
By:
---------------------------------
Timothy L. Burfield
President
8
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
AMERICAN MEDSERVE CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I.
Offices
Section 1. The registered office of American Medserve Corporation (the
"Corporation") shall be in Wilmington, New Castle County, Delaware.
Section 2. The Corporation shall have its principal office at 184 Shuman
Boulevard, Naperville, Illinois, and it may also have offices at such other
places as the board of directors may from time to time determine.
ARTICLE II.
Stockholders
Section 1. ANNUAL MEETING. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on such date as the board of
directors shall fix each year. At an annual meeting of stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be
(a) specified in the notice of meeting, or any supplement thereto, given by or
at the direction of the board of directors, (b) otherwise properly brought
before the meeting by or at the direction of the board of directors, or
(c) otherwise properly brought before the meeting by a stockholder. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the secretary of
the Corporation not less than one hundred and twenty (120) days prior to the
meeting nor more than one hundred and fifty (150) days prior to the meeting. A
stockholder's notice to the secretary of the Corporation shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before the annual
meeting, (b) the name and address, as they appear on the Corporation's
stockholder records, of the stockholder proposing such business, (c) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder, and (d) any material interest of the stockholder in such business.
Irrespective of anything in these by-laws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Section 1. The presiding officer of an annual meeting shall, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 1, and if it is so determined, shall so declare to the meeting and any
such business not properly brought before the meeting shall not be transacted.
<PAGE>
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders may be
called only by the chairman, the president or the board of directors pursuant to
a resolution approved by a majority of the entire board of directors.
Section 3. STOCKHOLDER ACTION; HOW TAKEN. Any action required or permitted
to be taken by the stockholders of the Corporation may be effected by a written
consent of the stockholders, provided that upon and after a Public Offering, any
such action must be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by such holders. A
"Public Offering" means a public offering of common stock of the Corporation
pursuant to an effective registration statement under the Securities Act of
1933, as amended.
Section 4. PLACE OF MEETING. The board of directors may designate any
place, either within or without Delaware, as the place of meeting for any annual
or special meeting. In the absence of any such designation, the place of
meeting shall be the principal office of the Corporation designated in Section 2
of Article I of these by-laws.
Section 5. NOTICE OF MEETINGS. Written or printed notice stating the place,
day and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than sixty days before the date of the meeting, or in the case of a
merger or consolidation, not less than twenty nor more than fifty days before
the date of the meeting, either personally or by mail, by or at the direction of
the chairman or the president, or the secretary, or the officer or persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mails in a sealed envelope addressed to the stockholder at
his address as it appears on the records of the Corporation with postage thereon
prepaid.
Section 6. RECORD DATE. For the purpose of determining (a) stockholders
entitled to notice of or to vote at any meeting of stockholders, or
(b) stockholders entitled to receive payment of any dividend, or
(c) stockholders for any other purpose, the board of directors may fix in
advance a date as the record date for any such determination of stockholders,
such date in any case to be not more than sixty days and not less than ten days,
or in the case of a merger or consolidation not less than twenty days, prior to
the date on which the particular action requiring such determination of
stockholders is to be taken.
Section 7. QUORUM. The holders of not less than one-third of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute, by the certificate of incorporation or by these by-laws.
If, however, such quorum shall not be present or represented at any meeting of
the stockholders, the chairman of the meeting shall have the power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes or of the certificate of
incorporation or of these by-laws, a different vote is required in which case
such express provision shall govern and control the decision of such question.
2
<PAGE>
Section 8. QUALIFICATION OF VOTERS. The board of directors may fix a day
and hour not more than sixty nor less than ten days prior to the day of holding
any meeting of stockholders as the time as of which the stockholders entitled to
notice of and to vote at such a meeting shall be determined. Only those persons
who were holders of record of voting stock at such time shall be entitled to
notice of and to vote at such meeting.
Section 9. PROCEDURE. The order of business and all other matters of
procedure at every meeting of stockholders shall be determined by the chairman
of the meeting. The board of directors shall appoint two or more inspectors of
election to serve at every meeting of stockholders at which directors are to be
elected.
ARTICLE III.
Directors
Section 1. NUMBER, ELECTION AND TERMS. Except as otherwise fixed pursuant
to the provisions of Article Fourth of the certificate of incorporation relating
to the rights of the holders of any class or series of stock having a preference
over the common stock as to dividends or upon liquidation to elect additional
directors under specified circumstances, the number of directors shall be a
minimum of three and fixed from time to time by the board of directors. The
directors, other than those who may be elected by the holders of any class or
series of stock having a preference over the common stock as to dividends or
upon liquidation, shall be classified, with respect to the time for which they
severally hold office, into three classes, as near equal in number as possible,
as determined by the board of directors, one class to hold office initially for
a term expiring at the annual meeting of stockholders to be held in 1997,
another class to hold office initially for a term expiring at the annual meeting
of stockholders to be held in 1998 and another class to hold office initially
for a term expiring at the annual meeting of stockholders to be held in 1999,
with the members of each class to hold office until their successors are elected
and qualified. At each annual meeting of stockholders, the successors of the
class of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election.
The term the "entire board" as used in these by-laws means the total number
of directors which the Corporation would have if there were no vacancies.
Subject to the rights of holders of any class or series of stock having a
preference over the common stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the board of directors
or a committee appointed by the board of directors or by any stockholder
entitled to vote in the election of directors generally. However, any
stockholder entitled to vote in the election of directors generally may nominate
one or more persons for election as directors at a meeting only if written
notice of such stockholder's intent to make such nomination or nominations has
been given, either by personal delivery or by United States mail, postage
prepaid, to the secretary of the Corporation not later than (a) with respect to
an election to be held at an annual meeting of stockholders, one hundred twenty
(120) days nor earlier than one hundred fifty (150) days prior to the
anniversary date of the immediately preceding annual meeting, and (b) with
respect to an election to be held at a special meeting of stockholders for the
election of directors, the close of business on the tenth day following the date
on which notice of such meeting is first given to stockholders. Each such
notice shall set forth: (a) the name and address of the stockholder who intends
to make the nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to
3
<PAGE>
nominate the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons, naming such person or persons, pursuant to which the
nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission; and (e) the consent of each nominee
to serve as a director of the Corporation if so elected. The chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
Section 2. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Except as otherwise
fixed pursuant to the provisions of Article Fourth of the certificate of
incorporation relating to the rights of the holders of any class or series of
stock having a preference over the common stock as to dividends or upon
liquidation to elect directors under specified circumstances, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the board of directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the board of directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors to which such director's predecessor
shall have been elected and qualified. No decrease in the number of directors
constituting the board of directors shall shorten the term of any incumbent
director.
Section 3. REMOVAL. Subject to the rights of any class or series of stock
having a preference over the common stock as to dividends or upon liquidation to
elect directors under specified circumstances, any director may be removed from
office only for cause and only by the affirmative vote of the holders of 80% of
the combined voting power of the then outstanding shares of stock entitled to
vote generally in the election of directors, voting together as a single class.
Section 4. REGULAR MEETINGS. Regular meetings of the board of directors
shall be held at such times and place as the board of directors may from time to
time determine.
Section 5. SPECIAL MEETINGS. Special meetings of the board of directors may
be called by or at the request of the chairman or the president or by an officer
of the Corporation upon the request of a majority of the entire board. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or without Delaware, as the place for holding
any special meeting of the board of directors called by them.
Section 6. NOTICE. Notice of regular meetings of the board of directors
need not be given. Notice of every special meeting of the board of directors
shall be given to each director at his usual place of business, or at such other
address as shall have been furnished by him for the purpose. Such notice shall
be given at least twenty-four hours before the meeting by telephone, by personal
delivery, by commercial courier, by mail or by facsimile transmission. Such
notice need not include a statement of the business to be transacted at, or the
purpose of, any such meeting.
Section 7. QUORUM. A majority of the entire Board shall constitute a quorum
for the transaction of business at any meeting of the board of directors,
provided, that if less than a majority of the entire board is present at said
meeting, a majority of the directors present may adjourn the meeting from time
to time until a quorum is obtained without further notice. The act of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the board of directors unless the act of a greater number is
required by the certificate of incorporation or the by-laws of the Corporation.
4
<PAGE>
Section 8. COMPENSATION. Directors who are also full time employees of the
Corporation shall not receive any compensation for their services as directors
but they may be reimbursed for reasonable expenses of attendance. By resolution
of the board of directors, all other directors may receive either an annual fee
or a fee for each meeting attended, or both, and expenses of attendance, if any,
at each regular or special meeting of the board of directors or of a committee
of the board of directors; provided, that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 9. COMMITTEES. The board of directors may, by resolution passed by
a majority of the entire board, designate one or more committees, each committee
to consist of two or more of the directors of the Corporation, which, to the
extent provided in the resolution, shall have and may exercise the powers 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 which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
board of directors. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
Section 10. DIRECTOR EMERITUS. The Board of Directors may by resolution
appoint any former director who has retired from the Board of Directors as a
Director Emeritus. Directors Emeritus may, but are not required to, attend all
meetings (regular and special) of the Board of Directors and will receive notice
of such meetings; however, they shall not have the right to vote and they shall
be excluded from the number of directors for quorum and other purposes.
Directors Emeritus shall be appointed for one year terms and may be reappointed
for up to two additional one year terms.
ARTICLE IV.
Officers
Section 1. NUMBER. The officers of the Corporation shall be a chairman, a
vice-chairman (if elected by the board of directors), a president, an executive
vice president (if elected by the board of directors), one or more vice
presidents (the number thereof to be determined by the board of directors), a
treasurer, a secretary and such other officers as may be elected in accordance
with the provisions of this Article.
Section 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of stockholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as convenient. Vacancies may be filled or new offices
created and filled at any meeting of the board of directors. Each officer shall
hold office until his successor shall have been duly elected and shall have
qualified or until his death or until he shall resign or shall have been removed
in the manner hereinafter provided.
Section 3. REMOVAL. Any officer or agent elected or appointed by the board
of directors may be removed by the board of directors whenever in its judgment
the best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
5
<PAGE>
Section 5. CHAIRMAN. The chairman shall preside at all meetings of the
stockholders and the board of directors. If so appointed by the board of
directors he shall be the chief executive officer of the Corporation and shall
have those duties and responsibilities described in Section 8 of this Article.
He shall perform such other duties as may be prescribed by the board of
directors.
Section 6. VICE-CHAIRMAN. The vice-chairman (if elected by the board of
directors) shall, in the absence of the chairman, preside at all meetings of the
stockholders and the board of directors. If so appointed by the board of
directors he shall be either the chief executive officer or the chief operating
officer, or both, and shall have those duties and responsibilities described in
Sections 8 and 9 of this Article, as the case may be. He shall perform such
other duties as may be prescribed by the board of directors and by the chief
executive officer if he does not have that position.
Section 7. PRESIDENT. The president shall be either the chief executive
officer or the chief operating officer, or both, as determined by the board of
directors, and shall have the duties and responsibilities described in Sections
8 and 9 of this Article, as the case may be. In the absence of the chairman and
vice-chairman he shall preside at all meetings of the stockholders and board of
directors. He shall perform such other duties as may be prescribed by the board
of directors and chief executive officer if he does not have that position.
Section 8. CHIEF EXECUTIVE OFFICER. The chief executive officer of the
Corporation shall be either the chairman, the vice-chairman or the president as
determined by the board of directors. The chief executive officer shall provide
overall direction and administration of the business of the Corporation, he
shall interpret and apply the policies of the board of directors, establish
basic policies within which the various corporate activities are carried out,
guide and develop long range planning and evaluate activities in terms of
objectives. He may sign (with the secretary or any other proper officer of the
Corporation thereunto authorized by the board of directors, if such additional
signature is necessary under the terms of the instrument document being executed
or under applicable law, stock certificates of the Corporation, any deeds,
mortgages, bonds, contracts, or other instruments except in cases where the
signing and execution thereof shall be required by law to be otherwise signed or
executed, and he may execute proxies on behalf of the Corporation with respect
to the voting of any shares of stock owned by the Corporation. He shall have
the power to (1) designate management committees of employees deemed essential
in the operations of the Corporation, its divisions or subsidiaries, and appoint
members thereof, subject to the approval of the board of directors; (2) appoint
certain employees of the Corporation as vice presidents of one or several
divisions or operations of the Corporation, subject to the approval of the board
of directors, provided however, that any vice president so appointed shall not
be an officer of the Corporation for any other purpose; and (3) appoint such
other agents and employees as in his judgment may be necessary or proper for the
transaction of the business of the Corporation and in general shall perform all
duties incident to the office of chief executive.
Section 9. CHIEF OPERATING OFFICER. The chief operating officer (if elected
by the board of directors) shall be either the vice-chairman or the president as
determined by the board of directors. The chief operating officer shall in
general be in charge of all operations of the Corporation and shall direct and
administer the activities of the Corporation in accordance with the policies,
goals and objectives established by the chief executive officer and the board of
directors. In the absence of the chief executive officer, the chief operating
officer shall assume his duties and responsibilities.
Section 10. EXECUTIVE VICE PRESIDENT. The executive vice president (if
elected by the board of directors) shall report to either the chief executive
officer or the chief operating officer as determined in the corporate
organization plan established by the board of directors. He shall direct and
coordinate such major activities as shall be delegated to him by his superior
officer in accordance with policies
6
<PAGE>
established and instructions issued by his superior officer, the chief executive
officer, or the board of directors.
Section 11. VICE PRESIDENT. The board of directors may elect one or several
vice presidents. Each vice president shall report to either the chief executive
officer, the chief operating officer or the executive vice president as
determined in the corporate organization plan established by the board of
directors. Each vice president shall perform such duties as may be delegated to
him by his superior officers and in accordance with the policies established and
instructions issued by his superior officer, the chief executive officer or the
board of directors. The board of directors may designate any vice president as
a senior vice president and a senior vice president shall be senior to all other
vice presidents and junior to the executive vice president. In the event there
is more than one senior vice president, then seniority shall be determined by
and be the same as the annual order in which their names are presented to and
acted on by the board of directors.
Section 12. THE TREASURER. The treasurer shall (a) have charge and custody
of and be responsible for all funds and securities of the Corporation; receive
and give receipts for moneys due and payable to the Corporation from any source
whatsoever, and deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected by the
Corporation; (b) in general perform all the duties incident to the office of
treasurer and such other duties as from time to time may be assigned to him by
the chief executive officer, chief operating officer or by the board of
directors. If required by the board of directors, the treasurer shall give a
bond for the faithful discharge of his duties in such sum and with such surety
or sureties as the board of directors shall determine.
Section 13. THE ASSISTANT TREASURER. The assistant treasurer (or, if more
than one, the assistant treasurers) shall, in the absence or disability of the
treasurer, 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
may from time to time prescribe.
Section 14. THE SECRETARY. The secretary shall: (a) keep the minutes of the
stockholders' and the board of directors' meetings in one or more books provided
for that purpose; (b) see that all notices are duly given in accordance with the
provisions of these by-laws or as required by law; (c) be custodian of the
corporate records and of the seal of the Corporation and see that the seal of
the corporation is affixed to all stock certificates prior to the issue thereof
and to all documents, the execution of which on behalf of the Corporation under
its seal is duly authorized in accordance with the provisions of these by-laws
or as required by law; (d) be custodian of the corporate records and of the seal
of the Corporation and see that the seal of the Corporation is affixed to all
stock certificates prior to the issue thereof and to all documents, the
execution of which on behalf of the Corporation under its seal is duly
authorized in accordance with the provisions of these by-laws; (e) keep a
register of the post office address of each stockholder which shall be furnished
to the secretary by such stockholder; (f) sign with the chairman, president, or
a vice president, stock certificates of the Corporation, the issue of which
shall have been authorized by resolution of the board of directors; (g) have
general charge of the stock transfer books of the Corporation; (h) in general
perform all duties incident to the office of secretary and such other duties as
from time to time may be assigned to him by the chief executive officer, chief
operating officer or by the board of directors.
Section 15. THE ASSISTANT SECRETARY. The assistant secretary (or, if more
than one, the assistant secretaries) shall in the absence or disability of the
secretary, 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
may from time to time prescribe.
7
<PAGE>
ARTICLE V.
Fiscal Year
The fiscal year of the Corporation shall begin on the first day of January
in each year and end on the thirty-first day of December in each year.
ARTICLE VI.
Seal
The board of directors shall provide a corporate seal which shall be in the
form of a circle and shall have inscribed thereon the name of the Corporation
and the words "Corporate Seal, Delaware".
ARTICLE VII.
Waiver of Notice
Whenever any notice whatsoever is required to be given under the provisions
of these by-laws or under the provisions of the certificate of incorporation or
under the provisions of the laws of the state of Delaware, waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
ARTICLE VIII.
Amendments
Subject to the provisions of the certificate of incorporation, these by-
laws may be altered, amended or repealed at any regular meeting of the
stockholders, or at any special meeting of stockholders duly called for that
purpose, by a majority vote of the shares represented and entitled to vote at
such meeting; provided that in the notice of such special meeting notice of such
purpose shall be given. Subject to the laws of the State of Delaware, the
certificate of incorporation and these by-laws, the board of directors may by a
majority vote of those present at any meeting at which a quorum is present amend
these by-laws, or enact such other by-laws as in their judgment may be advisable
for the regulation of the conduct of the affairs of the Corporation.
8
<PAGE>
STOCK OPTION PLAN
FOR DIRECTORS AND EXECUTIVE AND KEY EMPLOYEES
OF
GATTI LTC SERVICES, INC.
Gatti LTC Services, Inc., a corporation organized under the laws of
the Commonwealth of Pennsylvania, hereby adopts this Stock Option Plan for
Directors and Executive and Key Employees of Gatti LTC Services, Inc. The
purposes of this Plan are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its directors and
executive and other key Employees who have been or will be given responsibility
for the management or administration of the Company's business affairs by
assisting them to become owners of the Company's Common Stock and thus to
benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the
type of directors and professional, technical and managerial employees
considered essential to the long-range success of the Company by providing and
offering them an opportunity to become owners of the Company's Common Stock
under options.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The singular shall include the plural, where the context so
indicates.
SECTION 1.1 - AMC
"AMC" shall mean American Medserve Corporation, a Delaware
corporation.
<PAGE>
SECTION 1.2 - BOARD
"Board" shall mean the Board of Directors of the Company.
SECTION 1.3 - CAUSE
"Cause" shall mean, with respect to any Optionee, (a) the conviction
of a felony by such Optionee (b) the commission of any act by such Optionee that
is materially injurious to the Company and that involves dishonesty, disloyalty
or fraud with respect to the Company, (c) gross negligence or willful misconduct
with respect to the Company that is materially injurious to the Company or (d)
the Optionee's substantial and repeated failure to perform duties commensurate
with his or her position as reasonably directed in writing by the Board in good
faith.
SECTION 1.4 - CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.5 - COMMITTEE
"Committee" shall mean the full Board; provided, however, that the
Board may, but need not, delegate its rights and duties hereunder to a committee
consisting of two or more Board members to serve as the Committee hereunder
during the pleasure of the Board. Any such committee shall have such powers and
duties as are delegated to it by the Board.
SECTION 1.6 - COMMON STOCK
"Common Stock" shall mean the common stock of the Company.
SECTION 1.7 - COMPANY
"Company" shall mean Gatti LTC Services, Inc.
SECTION 1.8 - DIRECTOR
"Director" shall mean a member of the Board.
SECTION 1.9 - EMPLOYEE
"Employee" shall mean any employee (as defined in accordance with the
regulations and revenue rulings then applicable under Section 3401(c) of the
Code) of the Company or of any corporation which is then a Parent Corporation or
a Subsidiary, whether
2
<PAGE>
such employee is so employed at the time this Plan is adopted or becomes so
employed subsequent to the adoption of this Plan.
SECTION 1.10 - EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
SECTION 1.11 - OFFICER
"Officer" shall mean an officer of the Company, as defined in
Rule 16a-1(f) under the Exchange Act, as such Rule may be amended in the future.
SECTION 1.12 - OPTION
"Option" shall mean an option to purchase Common Stock of the Company,
granted under the Plan.
SECTION 1.13 - OPTION AGREEMENT
"Option Agreement" shall mean any Option Agreement evidencing the
grant of Options hereunder, as set forth in Section 4.1.
SECTION 1.14 - OPTIONEE
"Optionee" shall mean an Employee or Director to whom an Option is
granted under the Plan.
SECTION 1.15 - PARENT CORPORATION
"Parent Corporation" shall mean any corporation in an unbroken chain
of corporations ending with the Company if each of the corporations other than
the Company then owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
SECTION 1.16 - PARTICIPATION AGREEMENT
"Participation Agreement" shall mean the agreement entered into by and
among the Company and the Optionee that shall govern certain terms of Options
and shall govern the shares acquired upon exercise of Options.
3
<PAGE>
SECTION 1.17 - PLAN
"Plan" shall mean this Stock Option Plan for Directors and Executive
and Key Employees of Gatti LTC Services, Inc.
SECTION 1.18 - RULE 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange
Act, as such Rule may be amended in the future.
SECTION 1.19 - SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.20 - SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
SECTION 1.21 - SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
SECTION 1.22 - TERMINATION OF EMPLOYMENT
"Termination of Employment" shall mean the time when (a) the term of a
Director is terminated for any reason or (b) the employee-employer relationship
between the Optionee and the Company is terminated for any reason, with or
without Cause, including, but not by way of limitation, a termination by
resignation, discharge, death or retirement, but excluding terminations where
there is a simultaneous reemployment by the Company, a Parent Corporation or a
Subsidiary. The Committee, in its discretion, shall determine the effect of all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for Cause, and all questions of whether particular
leaves of absence constitute Terminations of Employment.
4
<PAGE>
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1 - SHARES SUBJECT TO PLAN
The shares of stock subject to Options shall be shares of Common
Stock. The aggregate number of such shares which may be issued upon exercise of
Options shall not exceed 2000 shares.
SECTION 2.2 - UNEXERCISED OPTIONS
If any Option (or portion thereof) expires or is cancelled without
having been fully exercised, the number of shares subject to such Option (or
portion thereof) but as to which such Option was not exercised prior to its
expiration or cancellation may again be optioned hereunder, subject to the
limitations of Section 2.1.
SECTION 2.3 - CHANGES IN COMPANY'S SHARES; ADJUSTMENTS IN OPTIONS
(a) Subject to Section 2.3(e), but notwithstanding any other term of
this Plan, in the event that the Committee determines, in its sole discretion,
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger, consolidation, split-
up, spin-off, combination, repurchase, or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other similar corporate
transaction or event affects the Common Stock such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to an Option, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of
(i) the number and type of shares of Common Stock (or other
securities or property) with respect to which Options may be granted under
the Plan (including, but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued),
(ii) the number and type of shares of Common Stock (or other
securities or property) subject to outstanding Options,
(iii) the grant or exercise price with respect to any Option,
and
5
<PAGE>
(iv) the financial or other "targets," if any, specified in
each Option Agreement for determining the exercisability of Options.
(b) Subject to Section 2.3(e), but notwithstanding any other term of
this Plan, in the event of any corporate transaction or other event described in
Section 2.3(a) which results in shares of Common Stock being exchanged for or
converted into cash, securities (including securities of another corporation) or
other property, the Committee will have the right to terminate this Plan as of
the date of the event or transaction, in which case all Options granted under
this Plan shall become the right to receive such cash, securities or other
property, net of any applicable exercise price.
(c) Subject to Section 2.3(e), but notwithstanding any other term of
this Plan, in the event of any corporate transaction or other event described in
Section 2.3(a) or any unusual or nonrecurring transactions or events affecting
the Company, the financial statements of the Company, or changes in applicable
laws, regulations, or accounting principles, the Committee, in its discretion,
is hereby authorized to take any one or more of the following actions whenever
the Committee determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Option, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or
principles:
(i) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either automatically or
upon the Optionee's request, for either the purchase of any such Option for
an amount of cash equal to the amount that could have been attained upon
the exercise of such Option or realization of the Optionee's rights had
such Option been currently exercisable or payable or the replacement of
such Option with other rights or property selected by the Committee in its
sole discretion;
(ii) In its discretion, the Committee may provide, either by
the terms of such Option or by a resolution adopted prior to the occurrence
of such transaction or event, that it cannot be exercised after such event;
(iii) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either by the terms of
such Option or by a resolution adopted prior to the occurrence of such
transaction or event, that for a specified period of time prior to such
transaction or event, such Option shall be exercisable as to all shares
covered thereby;
(iv) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either by the terms of
such Option or by a resolution adopted prior to the occurrence of such
transaction or event, that upon such event, such Option be assumed by the
successor corporation, or a parent or
6
<PAGE>
subsidiary thereof, or shall be substituted for by similar options, rights
or awards covering the stock of the successor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind
of shares and prices; and
(v) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may make adjustments in the number and
type of shares of Common Stock (or other securities or property) subject to
outstanding Options and/or in the terms and conditions of, and criteria
included in, outstanding Options, including the grant or exercise price,
and options which may be granted in the future.
(d) Any such adjustment made by the Committee in good faith pursuant
to the Section 2.3 shall be final and binding upon the Optionee, the Company and
all other interested parties.
(e) The Committee may elect at any time to exchange the number and
kind of shares as to which all outstanding Options, or portions thereof then
unexercised, shall be exercisable for shares of common stock of AMC as provided
in the Participation Agreement without change in the total price applicable to
the unexercised portion of the Options (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in the Option price per share. All terms
applicable to such options to purchase common stock of AMC, including price,
number of shares, and period of exercisability, shall be determined by the
Committee in its discretion in accordance with this Section 2.3(e) and in
accordance with the Participation Agreement, and shall be binding on all
Optionees, the Company, and all interested persons.
(f) In the event that the shares of Common Stock subject to Options
under this Plan are exchanged for other shares or securities as described in
this Section 2.3, then the provisions of the Plan shall be applicable to the
shares or other securities into which the shares have been exchanged.
(g) Subject to Section 2.3(e) but notwithstanding any other term of
this Plan, the Committee may, in its discretion, include such further provisions
and limitations in any Option Agreement as it may deem equitable and in the best
interests of the Company.
ARTICLE III
GRANTING OF OPTIONS
SECTION 3.1 - ELIGIBILITY
Any Director, executive or other key Employee shall be eligible to be
granted Options.
7
<PAGE>
SECTION 3.2 - GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its discretion:
(i) Determine which Employees are executive or other key
Employees and select from among them (including those to whom Options have
been previously granted under the Plan) such of them as in its opinion
should be granted Options; and
(ii) Select among Directors such of them as should be
granted Options; and
(iii) Determine the number of shares to be subject to such
Options granted to such selected Director or executive or other key
Employees; and
(iv) Determine the terms and conditions of such Options,
consistent with the Plan.
(b) Upon the selection of a Director or an executive or other key
Employee to be granted an Option, the Committee shall instruct the Secretary to
issue such Option and may impose such conditions on the grant of such Option as
it deems appropriate. Without limiting the generality of the preceding
sentence, the Committee may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option to an Employee or
Director that he or she surrender for cancellation some or all of the
unexercised Options which have been previously granted to him or her. An Option
the grant of which is conditioned upon such surrender may have an option price
lower (or higher) than the option price of the surrendered Option, may cover the
same (or a lesser or greater) number of shares as the surrendered Option, may
contain such other terms as the Committee deems appropriate and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, period of exercisability or any other term or condition of the
surrendered Option.
ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1 - OPTION AGREEMENT
Each Option shall be evidenced by a written Option Agreement, which
shall be executed by the Optionee and an authorized Officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with the Plan.
8
<PAGE>
SECTION 4.2 - OPTION PRICE
(a) The price of the shares subject to each Option shall be set by
the Committee; provided, however, that the price per share shall be not less
than 100% of the fair market value of such shares on the date such Option is
granted.
(b) For purposes of the Plan, the fair market value of a share of the
Company's Common Stock as of a given date shall be:
(i) if the Common Stock is not publicly traded, the fair
market value established by the Committee acting in good faith, but in no
event less than the Company's book value per share; and
(ii) if the Common Stock is publicly traded,
A the closing price of a share of the Company's Common Stock
on the principal exchange on which shares of the Company's Common
Stock are then trading, if any, on the day previous to such date, or,
if shares were not traded on the day previous to such date, then on
the next preceding trading day during which a sale occurred; or
B if such Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, (1) the last sales
price (if the Company's Common Stock is then listed as a National
Market Issue under the NASD National Market System) or (2) the mean
between the closing representative bid and asked prices (in all other
cases) for the Company's Common Stock on the day previous to such date
as reported by NASDAQ or such successor quotation system; or
C if such Common Stock is not publicly traded on an exchange
and not quoted on NASDAQ or a successor quotation system, the mean
between the closing bid and asked prices for the Company's Common
Stock, on the day previous to such date, as determined in good faith
by the Committee.
SECTION 4.3 - COMMENCEMENT OF EXERCISABILITY
(a) Except as the Committee may otherwise provide with respect to
Options granted to Employees or Directors who are not Officers, no Option may be
exercised in whole or in part during the first twelve months after such Option
is granted.
(b) Subject to the provisions of Sections 4.3(a), 4.3(c) and 7.3, and
except as the Committee may provide otherwise in the terms of any individual
Option Agreement as
9
<PAGE>
described in Section 4.4, Options shall become exercisable in equal one-seventh
installments on each of the first seven one-year anniversaries of the date of
grant of the Option; provided, however, that by a resolution adopted after an
Option is granted the Committee may, on such terms and conditions as it may
determine to be appropriate and subject to Sections 4.3(a), 4.3(c) and 7.3,
accelerate the time at which such Option or any portion thereof may be
exercised.
(c) Except as the Committee may, in its discretion, determine
otherwise, no portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable.
SECTION 4.4 - ACCELERATION OF EXERCISABILITY
The Committee may provide in the terms of an Option Agreement that,
notwithstanding Section 4.3, such Option shall become exercisable at such times
and in such installments (which may be cumulative) as the Committee shall
provide in the terms of such Option Agreement. Such terms may provide for
contingent exercisability related to the Company's achievement of specified
financial targets, the Optionee's achievement of individual performance targets,
or such other events and conditions as the Committee, in its discretion, shall
determine.
SECTION 4.5 - EXPIRATION OF OPTIONS
(a) No Option may be exercised to any extent by anyone after the
first to occur of the following events:
(i) The expiration of ten years from the date the Option
was granted; or
(ii) Except in the case of any Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the expiration of
three months from the date of the Optionee's Termination of Employment for
any reason other than death, Cause or voluntary resignation; provided that
if such Optionee dies within said three-month period, the Options shall
cease to be exercisable upon the expiration of one year from the Optionee's
date of death; or
(iii) In the case of an Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of one year from
the date of the Optionee's Termination of Employment for any reason other
than Cause or death, unless the Optionee dies within said one-year period;
or
(iv) The date of the Optionee's Termination of Employment
for Cause or by reason of voluntary resignation; or
10
<PAGE>
(v) The expiration of one year from the date of the
Optionee's death.
(b) Subject to the provisions of Section 4.4(a), the Committee shall
provide, in the terms of each individual Option Agreement when such Option
expires and becomes unexercisable; and (without limiting the generality of the
foregoing) the Committee may provide in the terms of individual Option
Agreements that said Options expire immediately upon a Termination of Employment
for any reason.
SECTION 4.6 - NOT A CONTRACT OF EMPLOYMENT
Nothing in this Plan or in any Option Agreement hereunder shall confer
upon any Optionee any right to continue as a Director or in the employ of the
Company, any Parent Corporation or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company, its Parent Corporations and its
Subsidiaries (if the Optionee is an Employee), which rights are hereby expressly
reserved, to discharge any Optionee at any time for any reason whatsoever, with
or without cause.
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he or she may exercise an
Option (or any portion thereof) granted to him or her. After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Option Agreement,
be exercised by his or her personal representative or by any person empowered to
do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.
SECTION 5.2 - PARTIAL EXERCISE
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Option Agreement, such Option or portion thereof may
be exercised in whole or in part; provided, however, that the Company shall not
be required to issue fractional shares and the Committee may, by the terms of
the Option, require any partial exercise to be with respect to a specified
minimum number of shares.
11
<PAGE>
SECTION 5.3 - MANNER OF EXERCISE
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his or her office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Option Agreement:
(a) Notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or portion
is exercised, such notice complying with all applicable rules established by the
Committee.
(b) Full payment for the shares with respect to which such Option or
portion is thereby exercised. The payment shall be paid in cash or if the Option
Agreement so provides, (i) in whole or in part, through the delivery of shares
of Common Stock owned by the Optionee, duly endorsed for transfer to the
Company, having a fair market value on the date of exercise equal to the
aggregate exercise price of the exercised Option or portion thereof, (ii) in
whole or in part, by surrender of shares of Common Stock then issuable upon
exercise of the Option having a fair market value on the date of exercise equal
to the aggregate exercise price of the exercised Option (or portion thereof), or
(iii) by any combination of the foregoing. Fair market value for purpose of
this Section 5.3(b) shall be determined as of the date of exercise pursuant to
the method described in Section 4.2(b) of the Plan.
(c) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option.
(d) Such representations and documents as the Committee, in its
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its discretion, also take
whatever additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and issuing
stop-transfer orders to transfer agents and registrars.
(e) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.
SECTION 5.4 - CERTAIN TIMING REQUIREMENTS
To the extent necessary to comply with the requirements to which
shares of Common Stock are subject under Rule 16b-3, Common Stock issuable to
the Optionee upon exercise of the Option may be used to satisfy the Option price
or the tax withholding
12
<PAGE>
consequences of such exercise only (a) during the period beginning on the third
business day following the date of release of the quarterly or annual summary
statement of sales and earnings of the Company and ending on the twelfth
business day following such date or (b) pursuant to an irrevocable written
election by the Optionee to use shares of the Company's Common Stock issuable to
the Optionee upon exercise of the Option to pay all or part of the Option price
or the withholding taxes (subject to the approval of the Committee) made at
least six months prior to the payment of such Option price or withholding taxes.
SECTION 5.5 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the Company. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on any and all stock
exchanges on which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which the Committee shall, in its discretion, deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its discretion,
determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience.
SECTION 5.6 - RIGHTS AS SHAREHOLDERS
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
13
<PAGE>
SECTION 5.7 - TRANSFER RESTRICTIONS
Shares acquired upon exercise of Options shall be subject to the terms
of the Stockholders Agreement. To the extent necessary to comply with the
requirements to which shares of Common Stock are subject under Rule 16b-3,
unless otherwise approved in writing by the Committee, no shares acquired upon
exercise of any Option by any Officer may be sold, assigned, pledged, encumbered
or otherwise transferred until at least six months have elapsed from (but
excluding) the date that such Option was granted. The Committee, in its
discretion, may impose such other restrictions on the transferability of the
shares purchasable upon the exercise of an Option as it deems appropriate. Any
such other restriction shall be set forth in the respective Option Agreement and
may be referred to on the certificates evidencing such shares.
ARTICLE VI
ADMINISTRATION
SECTION 6.1 - DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
SECTION 6.2 - MAJORITY RULE
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
SECTION 6.3 - PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
All expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Committee, the Company and its Officers shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Optionees, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith
14
<PAGE>
with respect to the Plan or the Options, and all members of the Committee shall
be fully protected by the Company in respect to any such action, determination
or interpretation.
ARTICLE VII
OTHER PROVISIONS
SECTION 7.1 - OPTIONS NOT TRANSFERABLE
No Option or interest or right therein or part thereof shall be liable
for the debts, contracts or engagements of the Optionee or his or her successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section 7.1 shall
prevent transfers by will or by the applicable laws of descent and distribution.
SECTION 7.2 - AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee.
However, without approval of the Company's shareholders given within 12 months
before or after the action by the Committee, no action of the Committee may,
except as provided in Section 2.3, increase any limit imposed in Section 2.1 on
the maximum number of shares which may be issued on exercise of Options,
materially modify the eligibility requirements of Section 3.1, reduce the
minimum Option price requirements of Section 4.2(a) or extend the limit imposed
in this Section 7.2 on the period during which Options may be granted or amend
or modify the Plan in a manner requiring shareholder approval under Rule 16b-3.
Neither the amendment, suspension nor termination of the Plan shall, without the
consent of the holder of the Option, impair any rights or obligations under any
Option theretofore granted. No Option may be granted during any period of
suspension nor after termination of the Plan, and in no event may any Option be
granted under this Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's shareholders under Section 7.3.
15
<PAGE>
SECTION 7.3 - APPROVAL OF PLAN BY SHAREHOLDERS
This Plan will be submitted for the approval of the Company's
shareholders within 12 months after the date of the Board's initial adoption of
the Plan. Options may be granted prior to such shareholder approval; provided,
however, that such Options shall not be exercisable prior to the time when the
Plan is approved by the shareholders; provided, further, that if such approval
has not been obtained at the end of said 12-month period, all Options previously
granted under the Plan shall thereupon be cancelled and become null and void.
The Company shall take such actions with respect to the Plan as may be necessary
to satisfy the requirements of Rule 16b-3(b).
SECTION 7.4 - EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary. Nothing in this Plan shall be construed to limit the right of the
Company, any Parent Corporation or any Subsidiary (a) to establish any other
forms of incentives or compensation for employees of the Company, any Parent
Corporation or any Subsidiary or (b) to grant or assume options otherwise than
under this Plan in connection with any proper corporate purpose, including, but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, firm or association.
SECTION 7.5 - TITLES
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan.
SECTION 7.6 - CONFORMITY TO SECURITIES LAWS
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3. Notwithstanding anything
herein to the contrary, the Plan shall be administered, and Options shall be
granted and may be exercised, only in such a manner as to conform to such laws,
rules and regulations. To the extent permitted by applicable law, the Plan and
Options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
SECTION 7.7 - GOVERNING LAW
To the extent not preempted by federal law, the Plan shall be
construed in accordance with and governed by the laws of the State of Delaware.
16
<PAGE>
SECTION 7.8 - SEVERABILITY
In the event any portion of the Plan or any action taken pursuant
thereto shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan, and the Plan shall
be construed and enforced as if the illegal or invalid provisions had not been
included, and the illegal or invalid action shall be null and void.
17
<PAGE>
STOCK OPTION PLAN
FOR DIRECTORS AND EXECUTIVE AND KEY EMPLOYEES
OF
WILLIAMSON DRUG COMPANY, INCORPORATED
Williamson Drug Company, Incorporated, a corporation organized under
the laws of the Commonwealth of Virginia, hereby adopts this Stock Option Plan
for Directors and Executive and Key Employees of Williamson Drug Company. The
purposes of this Plan are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its directors and
executive and other key Employees who have been or will be given responsibility
for the management or administration of the Company's business affairs by
assisting them to become owners of the Company's Common Stock and thus to
benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the
type of directors and professional, technical and managerial employees
considered essential to the long-range success of the Company by providing and
offering them an opportunity to become owners of the Company's Common Stock
under options.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The singular shall include the plural, where the context so
indicates.
SECTION 1.1 - AMC
"AMC" shall mean American Medserve Corporation, a Delaware
corporation.
<PAGE>
SECTION 1.2 - BOARD
"Board" shall mean the Board of Directors of the Company.
SECTION 1.3 - CAUSE
"Cause" shall mean, with respect to any Optionee, (a) the conviction
of a felony by such Optionee (b) the commission of any act by such Optionee that
is materially injurious to the Company and that involves dishonesty, disloyalty
or fraud with respect to the Company, (c) gross negligence or willful misconduct
with respect to the Company that is materially injurious to the Company or (d)
the Optionee's substantial and repeated failure to perform duties commensurate
with his or her position as reasonably directed in writing by the Board in good
faith.
SECTION 1.4 - CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.5 - COMMITTEE
"Committee" shall mean the full Board; provided, however, that the
Board may, but need not, delegate its rights and duties hereunder to a committee
consisting of two or more Board members to serve as the Committee hereunder
during the pleasure of the Board. Any such committee shall have such powers and
duties as are delegated to it by the Board.
SECTION 1.6 - COMMON STOCK
"Common Stock" shall mean the common stock of the Company.
SECTION 1.7 - COMPANY
"Company" shall mean Williamson Drug Company, Incorporated.
SECTION 1.8 - DIRECTOR
"Director" shall mean a member of the Board.
SECTION 1.9 - EMPLOYEE
"Employee" shall mean any employee (as defined in accordance with the
regulations and revenue rulings then applicable under Section 3401(c) of the
Code) of the Company or of any corporation which is then a Parent Corporation or
a Subsidiary, whether
2
<PAGE>
such employee is so employed at the time this Plan is adopted or becomes so
employed subsequent to the adoption of this Plan.
SECTION 1.10 - EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
SECTION 1.11 - OFFICER
"Officer" shall mean an officer of the Company, as defined in
Rule 16a-1(f) under the Exchange Act, as such Rule may be amended in the future.
SECTION 1.12 - OPTION
"Option" shall mean an option to purchase Common Stock of the Company,
granted under the Plan.
SECTION 1.13 - OPTION AGREEMENT
"Option Agreement" shall mean any Option Agreement evidencing the
grant of Options hereunder, as set forth in Section 4.1.
SECTION 1.14 - OPTIONEE
"Optionee" shall mean an Employee or Director to whom an Option is
granted under the Plan.
SECTION 1.15 - PARENT CORPORATION
"Parent Corporation" shall mean any corporation in an unbroken chain
of corporations ending with the Company if each of the corporations other than
the Company then owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
SECTION 1.16 - PARTICIPATION AGREEMENT
"Participation Agreement" shall mean the agreement entered into by and
among the Company and the Optionee that shall govern certain terms of Options
and shall govern the shares acquired upon exercise of Options.
3
<PAGE>
SECTION 1.17 - PLAN
"Plan" shall mean this Stock Option Plan for Directors and Executive
and Key Employees of Williamson Drug Company, Incorporated.
SECTION 1.18 - RULE 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange
Act, as such Rule may be amended in the future.
SECTION 1.19 - SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.20 - SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
SECTION 1.21 - SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
SECTION 1.22 - TERMINATION OF EMPLOYMENT
"Termination of Employment" shall mean the time when (a) the term of a
Director is terminated for any reason or (b) the employee-employer relationship
between the Optionee and the Company is terminated for any reason, with or
without Cause, including, but not by way of limitation, a termination by
resignation, discharge, death or retirement, but excluding terminations where
there is a simultaneous reemployment by the Company, a Parent Corporation or a
Subsidiary. The Committee, in its discretion, shall determine the effect of all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for Cause, and all questions of whether particular
leaves of absence constitute Terminations of Employment.
4
<PAGE>
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1 - SHARES SUBJECT TO PLAN
The shares of stock subject to Options shall be shares of Common
Stock. The aggregate number of such shares which may be issued upon exercise of
Options shall not exceed 25 shares.
SECTION 2.2 - UNEXERCISED OPTIONS
If any Option (or portion thereof) expires or is cancelled without
having been fully exercised, the number of shares subject to such Option (or
portion thereof) but as to which such Option was not exercised prior to its
expiration or cancellation may again be optioned hereunder, subject to the
limitations of Section 2.1.
SECTION 2.3 - CHANGES IN COMPANY'S SHARES; ADJUSTMENTS IN OPTIONS
(a) Subject to Section 2.3(e), but notwithstanding any other term of
this Plan, in the event that the Committee determines, in its sole discretion,
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger, consolidation, split-
up, spin-off, combination, repurchase, or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other similar corporate
transaction or event affects the Common Stock such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to an Option, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of
(i) the number and type of shares of Common Stock (or other
securities or property) with respect to which Options may be granted under
the Plan (including, but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued),
(ii) the number and type of shares of Common Stock (or other
securities or property) subject to outstanding Options,
(iii) the grant or exercise price with respect to any Option,
and
5
<PAGE>
(iv) the financial or other "targets," if any, specified in
each Option Agreement for determining the exercisability of Options.
(b) Subject to Section 2.3(e), but notwithstanding any other term of
this Plan, in the event of any corporate transaction or other event described in
Section 2.3(a) which results in shares of Common Stock being exchanged for or
converted into cash, securities (including securities of another corporation) or
other property, the Committee will have the right to terminate this Plan as of
the date of the event or transaction, in which case all Options granted under
this Plan shall become the right to receive such cash, securities or other
property, net of any applicable exercise price.
(c) Subject to Section 2.3(e), but notwithstanding any other term of
this Plan, in the event of any corporate transaction or other event described in
Section 2.3(a) or any unusual or nonrecurring transactions or events affecting
the Company, the financial statements of the Company, or changes in applicable
laws, regulations, or accounting principles, the Committee, in its discretion,
is hereby authorized to take any one or more of the following actions whenever
the Committee determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Option, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or
principles:
(i) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either automatically or
upon the Optionee's request, for either the purchase of any such Option for
an amount of cash equal to the amount that could have been attained upon
the exercise of such Option or realization of the Optionee's rights had
such Option been currently exercisable or payable or the replacement of
such Option with other rights or property selected by the Committee in its
sole discretion;
(ii) In its discretion, the Committee may provide, either by
the terms of such Option or by a resolution adopted prior to the occurrence
of such transaction or event, that it cannot be exercised after such event;
(iii) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either by the terms of
such Option or by a resolution adopted prior to the occurrence of such
transaction or event, that for a specified period of time prior to such
transaction or event, such Option shall be exercisable as to all shares
covered thereby;
(iv) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either by the terms of
such Option or by a resolution adopted prior to the occurrence of such
transaction or event, that upon such event, such Option be assumed by the
successor corporation, or a parent or
6
<PAGE>
subsidiary thereof, or shall be substituted for by similar options, rights
or awards covering the stock of the successor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind
of shares and prices; and
(v) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may make adjustments in the number and
type of shares of Common Stock (or other securities or property) subject to
outstanding Options and/or in the terms and conditions of, and criteria
included in, outstanding Options, including the grant or exercise price,
and options which may be granted in the future.
(d) Any such adjustment made by the Committee in good faith pursuant
to the Section 2.3 shall be final and binding upon the Optionee, the Company and
all other interested parties.
(e) The Committee may elect at any time to exchange the number and
kind of shares as to which all outstanding Options, or portions thereof then
unexercised, shall be exercisable for shares of common stock of AMC as provided
in the Participation Agreement without change in the total price applicable to
the unexercised portion of the Options (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in the Option price per share. All terms
applicable to such options to purchase common stock of AMC, including price,
number of shares, and period of exercisability, shall be determined by the
Committee in its discretion in accordance with this Section 2.3(e) and in
accordance with the Participation Agreement, and shall be binding on all
Optionees, the Company, and all interested persons.
(f) In the event that the shares of Common Stock subject to Options
under this Plan are exchanged for other shares or securities as described in
this Section 2.3, then the provisions of the Plan shall be applicable to the
shares or other securities into which the shares have been exchanged.
(g) Subject to Section 2.3(e) but notwithstanding any other term of
this Plan, the Committee may, in its discretion, include such further provisions
and limitations in any Option Agreement as it may deem equitable and in the best
interests of the Company.
ARTICLE III
GRANTING OF OPTIONS
SECTION 3.1 - ELIGIBILITY
Any Director, executive or other key Employee shall be eligible to be
granted Options.
7
<PAGE>
SECTION 3.2 - GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its discretion:
(i) Determine which Employees are executive or other key
Employees and select from among them (including those to whom Options have
been previously granted under the Plan) such of them as in its opinion
should be granted Options; and
(ii) Select among Directors such of them as should be
granted Options; and
(iii) Determine the number of shares to be subject to such
Options granted to such selected Director or executive or other key
Employees; and
(iv) Determine the terms and conditions of such Options,
consistent with the Plan.
(b) Upon the selection of a Director or an executive or other key
Employee to be granted an Option, the Committee shall instruct the Secretary to
issue such Option and may impose such conditions on the grant of such Option as
it deems appropriate. Without limiting the generality of the preceding
sentence, the Committee may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option to an Employee or
Director that he or she surrender for cancellation some or all of the
unexercised Options which have been previously granted to him or her. An Option
the grant of which is conditioned upon such surrender may have an option price
lower (or higher) than the option price of the surrendered Option, may cover the
same (or a lesser or greater) number of shares as the surrendered Option, may
contain such other terms as the Committee deems appropriate and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, period of exercisability or any other term or condition of the
surrendered Option.
ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1 - OPTION AGREEMENT
Each Option shall be evidenced by a written Option Agreement, which
shall be executed by the Optionee and an authorized Officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with the Plan.
8
<PAGE>
SECTION 4.2 - OPTION PRICE
(a) The price of the shares subject to each Option shall be set by
the Committee; provided, however, that the price per share shall be not less
than 100% of the fair market value of such shares on the date such Option is
granted.
(b) For purposes of the Plan, the fair market value of a share of the
Company's Common Stock as of a given date shall be:
(i) if the Common Stock is not publicly traded, the fair
market value established by the Committee acting in good faith, but in no
event less than the Company's book value per share; and
(ii) if the Common Stock is publicly traded,
A the closing price of a share of the Company's Common Stock
on the principal exchange on which shares of the Company's Common
Stock are then trading, if any, on the day previous to such date, or,
if shares were not traded on the day previous to such date, then on
the next preceding trading day during which a sale occurred; or
B if such Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, (1) the last sales
price (if the Company's Common Stock is then listed as a National
Market Issue under the NASD National Market System) or (2) the mean
between the closing representative bid and asked prices (in all other
cases) for the Company's Common Stock on the day previous to such date
as reported by NASDAQ or such successor quotation system; or
C if such Common Stock is not publicly traded on an exchange
and not quoted on NASDAQ or a successor quotation system, the mean
between the closing bid and asked prices for the Company's Common
Stock, on the day previous to such date, as determined in good faith
by the Committee.
SECTION 4.3 - COMMENCEMENT OF EXERCISABILITY
(a) Except as the Committee may otherwise provide with respect to
Options granted to Employees or Directors who are not Officers, no Option may be
exercised in whole or in part during the first twelve months after such Option
is granted.
(b) Subject to the provisions of Sections 4.3(a), 4.3(c) and 7.3, and
except as the Committee may provide otherwise in the terms of any individual
Option Agreement as
9
<PAGE>
described in Section 4.4, Options shall become exercisable in equal one-seventh
installments on each of the first seven one-year anniversaries of the date of
grant of the Option; provided, however, that by a resolution adopted after an
Option is granted the Committee may, on such terms and conditions as it may
determine to be appropriate and subject to Sections 4.3(a), 4.3(c) and 7.3,
accelerate the time at which such Option or any portion thereof may be
exercised.
(c) Except as the Committee may, in its discretion, determine
otherwise, no portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable.
SECTION 4.4 - ACCELERATION OF EXERCISABILITY
The Committee may provide in the terms of an Option Agreement that,
notwithstanding Section 4.3, such Option shall become exercisable at such times
and in such installments (which may be cumulative) as the Committee shall
provide in the terms of such Option Agreement. Such terms may provide for
contingent exercisability related to the Company's achievement of specified
financial targets, the Optionee's achievement of individual performance targets,
or such other events and conditions as the Committee, in its discretion, shall
determine.
SECTION 4.5 - EXPIRATION OF OPTIONS
(a) No Option may be exercised to any extent by anyone after the
first to occur of the following events:
(i) The expiration of ten years from the date the Option
was granted; or
(ii) Except in the case of any Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the expiration of
three months from the date of the Optionee's Termination of Employment for
any reason other than death, Cause or voluntary resignation; provided that
if such Optionee dies within said three-month period, the Options shall
cease to be exercisable upon the expiration of one year from the Optionee's
date of death; or
(iii) In the case of an Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of one year from
the date of the Optionee's Termination of Employment for any reason other
than Cause or death, unless the Optionee dies within said one-year period;
or
(iv) The date of the Optionee's Termination of Employment
for Cause or by reason of voluntary resignation; or
10
<PAGE>
(v) The expiration of one year from the date of the
Optionee's death.
(b) Subject to the provisions of Section 4.4(a), the Committee shall
provide, in the terms of each individual Option Agreement when such Option
expires and becomes unexercisable; and (without limiting the generality of the
foregoing) the Committee may provide in the terms of individual Option
Agreements that said Options expire immediately upon a Termination of Employment
for any reason.
SECTION 4.6 - NOT A CONTRACT OF EMPLOYMENT
Nothing in this Plan or in any Option Agreement hereunder shall confer
upon any Optionee any right to continue as a Director or in the employ of the
Company, any Parent Corporation or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company, its Parent Corporations and its
Subsidiaries (if the Optionee is an Employee), which rights are hereby expressly
reserved, to discharge any Optionee at any time for any reason whatsoever, with
or without cause.
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he or she may exercise an
Option (or any portion thereof) granted to him or her. After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Option Agreement,
be exercised by his or her personal representative or by any person empowered to
do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.
SECTION 5.2 - PARTIAL EXERCISE
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Option Agreement, such Option or portion thereof may
be exercised in whole or in part; provided, however, that the Company shall not
be required to issue fractional shares and the Committee may, by the terms of
the Option, require any partial exercise to be with respect to a specified
minimum number of shares.
11
<PAGE>
SECTION 5.3 - MANNER OF EXERCISE
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his or her office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Option Agreement:
(a) Notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or portion
is exercised, such notice complying with all applicable rules established by the
Committee.
(b) Full payment for the shares with respect to which such Option or
portion is thereby exercised. The payment shall be paid in cash or if the
Option Agreement so provides, (i) in whole or in part, through the delivery of
shares of Common Stock owned by the Optionee, duly endorsed for transfer to the
Company, having a fair market value on the date of exercise equal to the
aggregate exercise price of the exercised Option or portion thereof, (ii) in
whole or in part, by surrender of shares of Common Stock then issuable upon
exercise of the Option having a fair market value on the date of exercise equal
to the aggregate exercise price of the exercised Option (or portion thereof), or
(iii) by any combination of the foregoing. Fair market value for purpose of
this Section 5.3(b) shall be determined as of the date of exercise pursuant to
the method described in Section 4.2(b) of the Plan.
(c) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option.
(d) Such representations and documents as the Committee, in its
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its discretion, also take
whatever additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and issuing
stop-transfer orders to transfer agents and registrars.
(e) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.
SECTION 5.4 - CERTAIN TIMING REQUIREMENTS
To the extent necessary to comply with the requirements to which
shares of Common Stock are subject under Rule 16b-3, Common Stock issuable to
the Optionee upon exercise of the Option may be used to satisfy the Option price
or the tax withholding
12
<PAGE>
consequences of such exercise only (a) during the period beginning on the third
business day following the date of release of the quarterly or annual summary
statement of sales and earnings of the Company and ending on the twelfth
business day following such date or (b) pursuant to an irrevocable written
election by the Optionee to use shares of the Company's Common Stock issuable to
the Optionee upon exercise of the Option to pay all or part of the Option price
or the withholding taxes (subject to the approval of the Committee) made at
least six months prior to the payment of such Option price or withholding taxes.
SECTION 5.5 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the Company. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on any and all stock
exchanges on which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which the Committee shall, in its discretion, deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its discretion,
determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience.
SECTION 5.6 - RIGHTS AS SHAREHOLDERS
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
13
<PAGE>
SECTION 5.7 - TRANSFER RESTRICTIONS
Shares acquired upon exercise of Options shall be subject to the terms
of the Stockholders Agreement. To the extent necessary to comply with the
requirements to which shares of Common Stock are subject under Rule 16b-3,
unless otherwise approved in writing by the Committee, no shares acquired upon
exercise of any Option by any Officer may be sold, assigned, pledged, encumbered
or otherwise transferred until at least six months have elapsed from (but
excluding) the date that such Option was granted. The Committee, in its
discretion, may impose such other restrictions on the transferability of the
shares purchasable upon the exercise of an Option as it deems appropriate. Any
such other restriction shall be set forth in the respective Option Agreement and
may be referred to on the certificates evidencing such shares.
ARTICLE VI
ADMINISTRATION
SECTION 6.1 - DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
SECTION 6.2 - MAJORITY RULE
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
SECTION 6.3 - PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
All expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Committee, the Company and its Officers shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Optionees, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith
14
<PAGE>
with respect to the Plan or the Options, and all members of the Committee shall
be fully protected by the Company in respect to any such action, determination
or interpretation.
ARTICLE VII
OTHER PROVISIONS
SECTION 7.1 - OPTIONS NOT TRANSFERABLE
No Option or interest or right therein or part thereof shall be liable
for the debts, contracts or engagements of the Optionee or his or her successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section 7.1 shall
prevent transfers by will or by the applicable laws of descent and distribution.
SECTION 7.2 - AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee.
However, without approval of the Company's shareholders given within 12 months
before or after the action by the Committee, no action of the Committee may,
except as provided in Section 2.3, increase any limit imposed in Section 2.1 on
the maximum number of shares which may be issued on exercise of Options,
materially modify the eligibility requirements of Section 3.1, reduce the
minimum Option price requirements of Section 4.2(a) or extend the limit imposed
in this Section 7.2 on the period during which Options may be granted or amend
or modify the Plan in a manner requiring shareholder approval under Rule 16b-3.
Neither the amendment, suspension nor termination of the Plan shall, without the
consent of the holder of the Option, impair any rights or obligations under any
Option theretofore granted. No Option may be granted during any period of
suspension nor after termination of the Plan, and in no event may any Option be
granted under this Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's shareholders under Section 7.3.
SECTION 7.3 - APPROVAL OF PLAN BY SHAREHOLDERS
15
<PAGE>
This Plan will be submitted for the approval of the Company's
shareholders within 12 months after the date of the Board's initial adoption of
the Plan. Options may be granted prior to such shareholder approval; provided,
however, that such Options shall not be exercisable prior to the time when the
Plan is approved by the shareholders; provided, further, that if such approval
has not been obtained at the end of said 12-month period, all Options previously
granted under the Plan shall thereupon be cancelled and become null and void.
The Company shall take such actions with respect to the Plan as may be necessary
to satisfy the requirements of Rule 16b-3(b).
SECTION 7.4 - EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary. Nothing in this Plan shall be construed to limit the right of the
Company, any Parent Corporation or any Subsidiary (a) to establish any other
forms of incentives or compensation for employees of the Company, any Parent
Corporation or any Subsidiary or (b) to grant or assume options otherwise than
under this Plan in connection with any proper corporate purpose, including, but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, firm or association.
SECTION 7.5 - TITLES
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan.
SECTION 7.6 - CONFORMITY TO SECURITIES LAWS
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3. Notwithstanding anything
herein to the contrary, the Plan shall be administered, and Options shall be
granted and may be exercised, only in such a manner as to conform to such laws,
rules and regulations. To the extent permitted by applicable law, the Plan and
Options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
SECTION 7.7 - GOVERNING LAW
To the extent not preempted by federal law, the Plan shall be
construed in accordance with and governed by the laws of the State of Delaware.
16
<PAGE>
SECTION 7.8 - SEVERABILITY
In the event any portion of the Plan or any action taken pursuant
thereto shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan, and the Plan shall
be construed and enforced as if the illegal or invalid provisions had not been
included, and the illegal or invalid action shall be null and void.
17
<PAGE>
STOCK OPTION PLAN
FOR DIRECTORS AND EXECUTIVE AND KEY EMPLOYEES
OF
NIHAN & MARTIN, INC.
Nihan & Martin, Inc., a corporation organized under the laws of the
State of Delaware, hereby adopts this Stock Option Plan for Directors and
Executive and Key Employees of Nihan & Martin, Inc. The purposes of this Plan
are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its directors and
executive and other key Employees who have been or will be given responsibility
for the management or administration of the Company's business affairs by
assisting them to become owners of the Company's Common Stock and thus to
benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the
type of directors and professional, technical and managerial employees
considered essential to the long-range success of the Company by providing and
offering them an opportunity to become owners of the Company's Common Stock
under options.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The singular shall include the plural, where the context so
indicates.
SECTION 1.1 - AMC
"AMC" shall mean American Medserve Corporation, a Delaware
corporation.
SECTION 1.2 - BOARD
"Board" shall mean the Board of Directors of the Company.
<PAGE>
SECTION 1.3 - CAUSE
"Cause" shall mean, with respect to any Optionee, (a) the conviction
of a felony by such Optionee (b) the commission of any act by such Optionee that
is materially injurious to the Company and that involves dishonesty, disloyalty
or fraud with respect to the Company, (c) gross negligence or willful misconduct
with respect to the Company that is materially injurious to the Company or (d)
the Optionee's substantial and repeated failure to perform duties commensurate
with his or her position as reasonably directed in writing by the Board in good
faith.
SECTION 1.4 - CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.5 - COMMITTEE
"Committee" shall mean the full Board; provided, however, that the
Board may, but need not, delegate its rights and duties hereunder to a committee
consisting of two or more Board members to serve as the Committee hereunder
during the pleasure of the Board. Any such committee shall have such powers and
duties as are delegated to it by the Board.
SECTION 1.6 - COMMON STOCK
"Common Stock" shall mean the common stock of the Company.
SECTION 1.7 - COMPANY
"Company" shall mean Nihan & Martin, Inc.
SECTION 1.8 - DIRECTOR
"Director" shall mean a member of the Board.
SECTION 1.9 - EMPLOYEE
"Employee" shall mean any employee (as defined in accordance with the
regulations and revenue rulings then applicable under Section 3401(c) of the
Code) of the Company or of any corporation which is then a Parent Corporation or
a Subsidiary, whether such employee is so employed at the time this Plan is
adopted or becomes so employed subsequent to the adoption of this Plan.
2
<PAGE>
SECTION 1.10 - EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
SECTION 1.11 - OFFICER
"Officer" shall mean an officer of the Company, as defined in
Rule 16a-1(f) under the Exchange Act, as such Rule may be amended in the future.
SECTION 1.12 - OPTION
"Option" shall mean an option to purchase Common Stock of the Company,
granted under the Plan.
SECTION 1.13 - OPTION AGREEMENT
"Option Agreement" shall mean any Option Agreement evidencing the
grant of Options hereunder, as set forth in Section 4.1.
SECTION 1.14 - OPTIONEE
"Optionee" shall mean an Employee or Director to whom an Option is
granted under the Plan.
SECTION 1.15 - PARENT CORPORATION
"Parent Corporation" shall mean any corporation in an unbroken chain
of corporations ending with the Company if each of the corporations other than
the Company then owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
SECTION 1.16 - PARTICIPATION AGREEMENT
"Participation Agreement" shall mean the agreement entered into by and
among the Company and the Optionee that shall govern certain terms of Options
and shall govern the shares acquired upon exercise of Options.
SECTION 1.17 - PLAN
"Plan" shall mean this Stock Option Plan for Directors and Executive
and Key Employees of Nihan & Martin, Inc.
3
<PAGE>
SECTION 1.18 - RULE 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange
Act, as such Rule may be amended in the future.
SECTION 1.19 - SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.20 - SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
SECTION 1.21 - SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
SECTION 1.22 - TERMINATION OF EMPLOYMENT
"Termination of Employment" shall mean the time when (a) the term of a
Director is terminated for any reason or (b) the employee-employer relationship
between the Optionee and the Company is terminated for any reason, with or
without Cause, including, but not by way of limitation, a termination by
resignation, discharge, death or retirement, but excluding terminations where
there is a simultaneous reemployment by the Company, a Parent Corporation or a
Subsidiary. The Committee, in its discretion, shall determine the effect of all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for Cause, and all questions of whether particular
leaves of absence constitute Terminations of Employment.
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1 - SHARES SUBJECT TO PLAN
The shares of stock subject to Options shall be shares of Common
Stock. The aggregate number of such shares which may be issued upon exercise of
Options shall not exceed 500 shares.
4
<PAGE>
SECTION 2.2 - UNEXERCISED OPTIONS
If any Option (or portion thereof) expires or is cancelled without
having been fully exercised, the number of shares subject to such Option (or
portion thereof) but as to which such Option was not exercised prior to its
expiration or cancellation may again be optioned hereunder, subject to the
limitations of Section 2.1.
SECTION 2.3 - CHANGES IN COMPANY'S SHARES; ADJUSTMENTS IN OPTIONS
(a) Subject to Section 2.3(e), but notwithstanding any other term of
this Plan, in the event that the Committee determines, in its sole discretion,
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger, consolidation, split-
up, spin-off, combination, repurchase, or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other similar corporate
transaction or event affects the Common Stock such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to an Option, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of
(i) the number and type of shares of Common Stock (or other
securities or property) with respect to which Options may be granted under
the Plan (including, but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued),
(ii) the number and type of shares of Common Stock (or other
securities or property) subject to outstanding Options,
(iii) the grant or exercise price with respect to any Option,
and
(iv) the financial or other "targets," if any, specified in
each Option Agreement for determining the exercisability of Options.
(b) Subject to Section 2.3(e), but notwithstanding any other term of
this Plan, in the event of any corporate transaction or other event described in
Section 2.3(a) which results in shares of Common Stock being exchanged for or
converted into cash, securities (including securities of another corporation) or
other property, the Committee will have the right to terminate this Plan as of
the date of the event or transaction, in which case all Options granted under
this Plan shall become the right to receive such cash, securities or other
property, net of any applicable exercise price.
5
<PAGE>
(c) Subject to Section 2.3(e), but notwithstanding any other term of
this Plan, in the event of any corporate transaction or other event described in
Section 2.3(a) or any unusual or nonrecurring transactions or events affecting
the Company, the financial statements of the Company, or changes in applicable
laws, regulations, or accounting principles, the Committee, in its discretion,
is hereby authorized to take any one or more of the following actions whenever
the Committee determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Option, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or
principles:
(i) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either automatically or
upon the Optionee's request, for either the purchase of any such Option for
an amount of cash equal to the amount that could have been attained upon
the exercise of such Option or realization of the Optionee's rights had
such Option been currently exercisable or payable or the replacement of
such Option with other rights or property selected by the Committee in its
sole discretion;
(ii) In its discretion, the Committee may provide, either by
the terms of such Option or by a resolution adopted prior to the occurrence
of such transaction or event, that it cannot be exercised after such event;
(iii) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either by the terms of
such Option or by a resolution adopted prior to the occurrence of such
transaction or event, that for a specified period of time prior to such
transaction or event, such Option shall be exercisable as to all shares
covered thereby;
(iv) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either by the terms of
such Option or by a resolution adopted prior to the occurrence of such
transaction or event, that upon such event, such Option be assumed by the
successor corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar options, rights or awards covering the stock of
the successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices; and
(v) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may make adjustments in the number and
type of shares of Common Stock (or other securities or property) subject to
outstanding Options and/or in the terms and conditions of, and criteria
included in, outstanding Options, including the grant or exercise price,
and options which may be granted in the future.
6
<PAGE>
(d) Any such adjustment made by the Committee in good faith pursuant
to the Section 2.3 shall be final and binding upon the Optionee, the Company and
all other interested parties.
(e) The Committee may elect at any time to exchange the number and
kind of shares as to which all outstanding Options, or portions thereof then
unexercised, shall be exercisable for shares of common stock of AMC as provided
in the Participation Agreement without change in the total price applicable to
the unexercised portion of the Options (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in the Option price per share. All terms
applicable to such options to purchase common stock of AMC, including price,
number of shares, and period of exercisability, shall be determined by the
Committee in its discretion in accordance with this Section 2.3(e) and in
accordance with the Participation Agreement, and shall be binding on all
Optionees, the Company, and all interested persons.
(f) In the event that the shares of Common Stock subject to Options
under this Plan are exchanged for other shares or securities as described in
this Section 2.3, then the provisions of the Plan shall be applicable to the
shares or other securities into which the shares have been exchanged.
(g) Subject to Section 2.3(e) but notwithstanding any other term of
this Plan, the Committee may, in its discretion, include such further provisions
and limitations in any Option Agreement as it may deem equitable and in the best
interests of the Company.
ARTICLE III
GRANTING OF OPTIONS
SECTION 3.1 - ELIGIBILITY
Any Director, executive or other key Employee shall be eligible to be
granted Options.
SECTION 3.2 - GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its discretion:
(i) Determine which Employees are executive or other key
Employees and select from among them (including those to whom Options have
been previously granted under the Plan) such of them as in its opinion
should be granted Options; and
7
<PAGE>
(ii) Select among Directors such of them as should be
granted Options; and
(iii) Determine the number of shares to be subject to such
Options granted to such selected Director or executive or other key
Employees; and
(iv) Determine the terms and conditions of such Options,
consistent with the Plan.
(b) Upon the selection of a Director or an executive or other key
Employee to be granted an Option, the Committee shall instruct the Secretary to
issue such Option and may impose such conditions on the grant of such Option as
it deems appropriate. Without limiting the generality of the preceding
sentence, the Committee may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option to an Employee or
Director that he or she surrender for cancellation some or all of the
unexercised Options which have been previously granted to him or her. An Option
the grant of which is conditioned upon such surrender may have an option price
lower (or higher) than the option price of the surrendered Option, may cover the
same (or a lesser or greater) number of shares as the surrendered Option, may
contain such other terms as the Committee deems appropriate and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, period of exercisability or any other term or condition of the
surrendered Option.
ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1 - OPTION AGREEMENT
Each Option shall be evidenced by a written Option Agreement, which
shall be executed by the Optionee and an authorized Officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with the Plan.
SECTION 4.2 - OPTION PRICE
(a) The price of the shares subject to each Option shall be set by
the Committee; provided, however, that the price per share shall be not less
than 100% of the fair market value of such shares on the date such Option is
granted.
(b) For purposes of the Plan, the fair market value of a share of the
Company's Common Stock as of a given date shall be:
8
<PAGE>
(i) if the Common Stock is not publicly traded, the fair
market value established by the Committee acting in good faith, but in no
event less than the Company's book value per share; and
(ii) if the Common Stock is publicly traded,
A the closing price of a share of the Company's Common Stock
on the principal exchange on which shares of the Company's Common
Stock are then trading, if any, on the day previous to such date, or,
if shares were not traded on the day previous to such date, then on
the next preceding trading day during which a sale occurred; or
B if such Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, (1) the last sales
price (if the Company's Common Stock is then listed as a National
Market Issue under the NASD National Market System) or (2) the mean
between the closing representative bid and asked prices (in all other
cases) for the Company's Common Stock on the day previous to such date
as reported by NASDAQ or such successor quotation system; or
C if such Common Stock is not publicly traded on an exchange
and not quoted on NASDAQ or a successor quotation system, the mean
between the closing bid and asked prices for the Company's Common
Stock, on the day previous to such date, as determined in good faith
by the Committee.
SECTION 4.3 - COMMENCEMENT OF EXERCISABILITY
(a) Except as the Committee may otherwise provide with respect to
Options granted to Employees or Directors who are not Officers, no Option may be
exercised in whole or in part during the first twelve months after such Option
is granted.
(b) Subject to the provisions of Sections 4.3(a), 4.3(c) and 7.3, and
except as the Committee may provide otherwise in the terms of any individual
Option Agreement as described in Section 4.4, Options shall become exercisable
in equal one-seventh installments on each of the first seven one-year
anniversaries of the date of grant of the Option; provided, however, that by a
resolution adopted after an Option is granted the Committee may, on such terms
and conditions as it may determine to be appropriate and subject to Sections
4.3(a), 4.3(c) and 7.3, accelerate the time at which such Option or any portion
thereof may be exercised.
9
<PAGE>
(c) Except as the Committee may, in its discretion, determine
otherwise, no portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable.
SECTION 4.4 - ACCELERATION OF EXERCISABILITY
The Committee may provide in the terms of an Option Agreement that,
notwithstanding Section 4.3, such Option shall become exercisable at such times
and in such installments (which may be cumulative) as the Committee shall
provide in the terms of such Option Agreement. Such terms may provide for
contingent exercisability related to the Company's achievement of specified
financial targets, the Optionee's achievement of individual performance targets,
or such other events and conditions as the Committee, in its discretion, shall
determine.
SECTION 4.5 - EXPIRATION OF OPTIONS
(a) No Option may be exercised to any extent by anyone after the
first to occur of the following events:
(i) The expiration of ten years from the date the Option
was granted; or
(ii) Except in the case of any Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the expiration of
three months from the date of the Optionee's Termination of Employment for
any reason other than death, Cause or voluntary resignation; provided that
if such Optionee dies within said three-month period, the Options shall
cease to be exercisable upon the expiration of one year from the Optionee's
date of death; or
(iii) In the case of an Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of one year from
the date of the Optionee's Termination of Employment for any reason other
than Cause or death, unless the Optionee dies within said one-year period;
or
(iv) The date of the Optionee's Termination of Employment
for Cause or by reason of voluntary resignation; or
(v) The expiration of one year from the date of the
Optionee's death.
(b) Subject to the provisions of Section 4.4(a), the Committee shall
provide, in the terms of each individual Option Agreement when such Option
expires and becomes unexercisable; and (without limiting the generality of the
foregoing) the Committee
10
<PAGE>
may provide in the terms of individual Option Agreements that said Options
expire immediately upon a Termination of Employment for any reason.
SECTION 4.6 - NOT A CONTRACT OF EMPLOYMENT
Nothing in this Plan or in any Option Agreement hereunder shall confer
upon any Optionee any right to continue as a Director or in the employ of the
Company, any Parent Corporation or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company, its Parent Corporations and its
Subsidiaries (if the Optionee is an Employee), which rights are hereby expressly
reserved, to discharge any Optionee at any time for any reason whatsoever, with
or without cause.
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he or she may exercise an
Option (or any portion thereof) granted to him or her. After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Option Agreement,
be exercised by his or her personal representative or by any person empowered to
do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.
SECTION 5.2 - PARTIAL EXERCISE
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Option Agreement, such Option or portion thereof may
be exercised in whole or in part; provided, however, that the Company shall not
be required to issue fractional shares and the Committee may, by the terms of
the Option, require any partial exercise to be with respect to a specified
minimum number of shares.
SECTION 5.3 - MANNER OF EXERCISE
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his or her office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Option Agreement:
11
<PAGE>
(a) Notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or portion
is exercised, such notice complying with all applicable rules established by the
Committee;
(b) Full payment for the shares with respect to which such Option or
portion is thereby exercised. The payment shall be paid in cash or if the Option
Agreement so provides, (i) in whole or in part, through the delivery of shares
of Common Stock owned by the Optionee, duly endorsed for transfer to the
Company, having a fair market value on the date of exercise equal to the
aggregate exercise price of the exercised Option or portion thereof, (ii) in
whole or in part, by surrender of shares of Common Stock then issuable upon
exercise of the Option having a fair market value on the date of exercise equal
to the aggregate exercise price of the exercised Option (or portion thereof), or
(iii) by any combination of the foregoing. Fair market value for purpose of
this Section 5.3(b) shall be determined as of the date of exercise pursuant to
the method described in Section 4.2(b) of the Plan.
(c) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option;
(d) Such representations and documents as the Committee, in its
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its discretion, also take
whatever additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and issuing
stop-transfer orders to transfer agents and registrars; and
(e) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.
SECTION 5.4 - CERTAIN TIMING REQUIREMENTS
To the extent necessary to comply with the requirements to which
shares of Common Stock are subject under Rule 16b-3, Common Stock issuable to
the Optionee upon exercise of the Option may be used to satisfy the Option price
or the tax withholding consequences of such exercise only (a) during the period
beginning on the third business day following the date of release of the
quarterly or annual summary statement of sales and earnings of the Company and
ending on the twelfth business day following such date or (b) pursuant to an
irrevocable written election by the Optionee to use shares of the Company's
Common Stock issuable to the Optionee upon exercise of the Option to pay all or
part of the Option price or the withholding taxes (subject to the approval of
the Committee) made at least six months prior to the payment of such Option
price or withholding taxes.
12
<PAGE>
SECTION 5.5 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the Company. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on any and all stock
exchanges on which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which the Committee shall, in its discretion, deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its discretion,
determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience.
SECTION 5.6 - RIGHTS AS SHAREHOLDERS
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
SECTION 5.7 - TRANSFER RESTRICTIONS
Shares acquired upon exercise of Options shall be subject to the terms
of the Stockholders Agreement. To the extent necessary to comply with the
requirements to which shares of Common Stock are subject under Rule 16b-3,
unless otherwise approved in writing by the Committee, no shares acquired upon
exercise of any Option by any Officer may be sold, assigned, pledged, encumbered
or otherwise transferred until at least six months have elapsed from (but
excluding) the date that such Option was granted. The Committee, in its
13
<PAGE>
discretion, may impose such other restrictions on the transferability of the
shares purchasable upon the exercise of an Option as it deems appropriate. Any
such other restriction shall be set forth in the respective Option Agreement and
may be referred to on the certificates evidencing such shares.
ARTICLE VI
ADMINISTRATION
SECTION 6.1 - DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
SECTION 6.2 - MAJORITY RULE
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
SECTION 6.3 - PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
All expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Committee, the Company and its Officers shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Optionees, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Options, and all members of the Committee
shall be fully protected by the Company in respect to any such action,
determination or interpretation.
14
<PAGE>
ARTICLE VII
OTHER PROVISIONS
SECTION 7.1 - OPTIONS NOT TRANSFERABLE
No Option or interest or right therein or part thereof shall be liable
for the debts, contracts or engagements of the Optionee or his or her successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section 7.1 shall
prevent transfers by will or by the applicable laws of descent and distribution.
SECTION 7.2 - AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee.
However, without approval of the Company's shareholders given within 12 months
before or after the action by the Committee, no action of the Committee may,
except as provided in Section 2.3, increase any limit imposed in Section 2.1 on
the maximum number of shares which may be issued on exercise of Options,
materially modify the eligibility requirements of Section 3.1, reduce the
minimum Option price requirements of Section 4.2(a) or extend the limit imposed
in this Section 7.2 on the period during which Options may be granted or amend
or modify the Plan in a manner requiring shareholder approval under Rule 16b-3.
Neither the amendment, suspension nor termination of the Plan shall, without the
consent of the holder of the Option, impair any rights or obligations under any
Option theretofore granted. No Option may be granted during any period of
suspension nor after termination of the Plan, and in no event may any Option be
granted under this Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's shareholders under Section 7.3.
SECTION 7.3 - APPROVAL OF PLAN BY SHAREHOLDERS
This Plan will be submitted for the approval of the Company's
shareholders within 12 months after the date of the Board's initial adoption of
the Plan. Options may be granted prior to such shareholder approval; provided,
however, that such Options shall not
15
<PAGE>
be exercisable prior to the time when the Plan is approved by the shareholders;
provided, further, that if such approval has not been obtained at the end of
said 12-month period, all Options previously granted under the Plan shall
thereupon be cancelled and become null and void. The Company shall take such
actions with respect to the Plan as may be necessary to satisfy the requirements
of Rule 16b-3(b).
SECTION 7.4 - EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary. Nothing in this Plan shall be construed to limit the right of the
Company, any Parent Corporation or any Subsidiary (a) to establish any other
forms of incentives or compensation for employees of the Company, any Parent
Corporation or any Subsidiary or (b) to grant or assume options otherwise than
under this Plan in connection with any proper corporate purpose, including, but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, firm or association.
SECTION 7.5 - TITLES
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan.
SECTION 7.6 - CONFORMITY TO SECURITIES LAWS
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3. Notwithstanding anything
herein to the contrary, the Plan shall be administered, and Options shall be
granted and may be exercised, only in such a manner as to conform to such laws,
rules and regulations. To the extent permitted by applicable law, the Plan and
Options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
SECTION 7.7 - GOVERNING LAW
To the extent not preempted by federal law, the Plan shall be
construed in accordance with and governed by the laws of the State of Delaware.
SECTION 7.8 - SEVERABILITY
In the event any portion of the Plan or any action taken pursuant
thereto shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the
16
<PAGE>
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provisions had not been included, and the illegal or
invalid action shall be null and void.
17
<PAGE>
STOCK OPTION PLAN
FOR DIRECTORS AND EXECUTIVE AND KEY EMPLOYEES
OF
DIXON PHARMACY, INC.
Dixon Pharmacy, Inc., a corporation organized under the laws of the
State of Illinois, hereby adopts this Stock Option Plan for Directors and
Executive and Key Employees of Dixon Pharmacy, Inc. The purposes of this Plan
are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its directors and
executive and other key Employees who have been or will be given responsibility
for the management or administration of the Company's business affairs by
assisting them to become owners of the Company's Common Stock and thus to
benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the
type of directors and professional, technical and managerial employees
considered essential to the long-range success of the Company by providing and
offering them an opportunity to become owners of the Company's Common Stock
under options.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The singular shall include the plural, where the context so
indicates.
SECTION 1.1 - AMC
"AMC" shall mean American Medserve Corporation, a Delaware
corporation.
SECTION 1.2 - BOARD
"Board" shall mean the Board of Directors of the Company.
<PAGE>
SECTION 1.3 - CAUSE
"Cause" shall mean, with respect to any Optionee, (a) the conviction
of a felony by such Optionee (b) the commission of any act by such Optionee that
is materially injurious to the Company and that involves dishonesty, disloyalty
or fraud with respect to the Company, (c) gross negligence or willful misconduct
with respect to the Company that is materially injurious to the Company or (d)
the Optionee's substantial and repeated failure to perform duties commensurate
with his or her position as reasonably directed in writing by the Board in good
faith.
SECTION 1.4 - CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.5 - COMMITTEE
"Committee" shall mean the full Board; provided, however, that the
Board may, but need not, delegate its rights and duties hereunder to a committee
consisting of two or more Board members to serve as the Committee hereunder
during the pleasure of the Board. Any such committee shall have such powers and
duties as are delegated to it by the Board.
SECTION 1.6 - COMMON STOCK
"Common Stock" shall mean the common stock of the Company.
SECTION 1.7 - COMPANY
"Company" shall mean Dixon Pharmacy, Inc.
SECTION 1.8 - DIRECTOR
"Director" shall mean a member of the Board.
SECTION 1.9 - EMPLOYEE
"Employee" shall mean any employee (as defined in accordance with the
regulations and revenue rulings then applicable under Section 3401(c) of the
Code) of the Company or of any corporation which is then a Parent Corporation or
a Subsidiary, whether such employee is so employed at the time this Plan is
adopted or becomes so employed subsequent to the adoption of this Plan.
2
<PAGE>
SECTION 1.10 - EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
SECTION 1.11 - OFFICER
"Officer" shall mean an officer of the Company, as defined in
Rule 16a-1(f) under the Exchange Act, as such Rule may be amended in the future.
SECTION 1.12 - OPTION
"Option" shall mean an option to purchase Common Stock of the Company,
granted under the Plan.
SECTION 1.13 - OPTION AGREEMENT
"Option Agreement" shall mean any Option Agreement evidencing the
grant of Options hereunder, as set forth in Section 4.1.
SECTION 1.14 - OPTIONEE
"Optionee" shall mean an Employee or Director to whom an Option is
granted under the Plan.
SECTION 1.15 - PARENT CORPORATION
"Parent Corporation" shall mean any corporation in an unbroken chain
of corporations ending with the Company if each of the corporations other than
the Company then owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
SECTION 1.16 - PARTICIPATION AGREEMENT
"Participation Agreement" shall mean the agreement entered into by and
among the Company and the Optionee that shall govern certain terms of Options
and shall govern the shares acquired upon exercise of Options.
SECTION 1.17 - PLAN
"Plan" shall mean this Stock Option Plan for Directors and Executive
and Key Employees of Dixon Pharmacy, Inc.
3
<PAGE>
SECTION 1.18 - RULE 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange
Act, as such Rule may be amended in the future.
SECTION 1.19 - SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.20 - SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
SECTION 1.21 - SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
SECTION 1.22 - TERMINATION OF EMPLOYMENT
"Termination of Employment" shall mean the time when (a) the term of a
Director is terminated for any reason or (b) the employee-employer relationship
between the Optionee and the Company is terminated for any reason, with or
without Cause, including, but not by way of limitation, a termination by
resignation, discharge, death or retirement, but excluding terminations where
there is a simultaneous reemployment by the Company, a Parent Corporation or a
Subsidiary. The Committee, in its discretion, shall determine the effect of all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for Cause, and all questions of whether particular
leaves of absence constitute Terminations of Employment.
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1 - SHARES SUBJECT TO PLAN
The shares of stock subject to Options shall be shares of Common
Stock. The aggregate number of such shares which may be issued upon exercise of
Options shall not exceed 500 shares.
4
<PAGE>
SECTION 2.2 - UNEXERCISED OPTIONS
If any Option (or portion thereof) expires or is cancelled without
having been fully exercised, the number of shares subject to such Option (or
portion thereof) but as to which such Option was not exercised prior to its
expiration or cancellation may again be optioned hereunder, subject to the
limitations of Section 2.1.
SECTION 2.3 - CHANGES IN COMPANY'S SHARES; ADJUSTMENTS IN OPTIONS
(a) Subject to Section 2.3(e), but notwithstanding any other term of
this Plan, in the event that the Committee determines, in its sole discretion,
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger, consolidation, split-
up, spin-off, combination, repurchase, or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other similar corporate
transaction or event affects the Common Stock such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to an Option, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of
(i) the number and type of shares of Common Stock (or other
securities or property) with respect to which Options may be granted under
the Plan (including, but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued),
(ii) the number and type of shares of Common Stock (or other
securities or property) subject to outstanding Options,
(iii) the grant or exercise price with respect to any
Option, and
(iv) the financial or other "targets," if any, specified in
each Option Agreement for determining the exercisability of Options.
(b) Subject to Section 2.3(e), but notwithstanding any other term of
this Plan, in the event of any corporate transaction or other event described in
Section 2.3(a) which results in shares of Common Stock being exchanged for or
converted into cash, securities (including securities of another corporation) or
other property, the Committee will have the right to terminate this Plan as of
the date of the event or transaction, in which case all Options granted under
this Plan shall become the right to receive such cash, securities or other
property, net of any applicable exercise price.
5
<PAGE>
(c) Subject to Section 2.3(e), but notwithstanding any other term of
this Plan, in the event of any corporate transaction or other event described in
Section 2.3(a) or any unusual or nonrecurring transactions or events affecting
the Company, the financial statements of the Company, or changes in applicable
laws, regulations, or accounting principles, the Committee, in its discretion,
is hereby authorized to take any one or more of the following actions whenever
the Committee determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Option, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or
principles:
(i) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either automatically or
upon the Optionee's request, for either the purchase of any such Option for
an amount of cash equal to the amount that could have been attained upon
the exercise of such Option or realization of the Optionee's rights had
such Option been currently exercisable or payable or the replacement of
such Option with other rights or property selected by the Committee in its
sole discretion;
(ii) In its discretion, the Committee may provide, either by
the terms of such Option or by a resolution adopted prior to the occurrence
of such transaction or event, that it cannot be exercised after such event;
(iii) In its discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either by
the terms of such Option or by a resolution adopted prior to the occurrence
of such transaction or event, that for a specified period of time prior to
such transaction or event, such Option shall be exercisable as to all
shares covered thereby;
(iv) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either by the terms of
such Option or by a resolution adopted prior to the occurrence of such
transaction or event, that upon such event, such Option be assumed by the
successor corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar options, rights or awards covering the stock of
the successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices; and
(v) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may make adjustments in the number and
type of shares of Common Stock (or other securities or property) subject to
outstanding Options and/or in the terms and conditions of, and criteria
included in, outstanding Options, including the grant or exercise price,
and options which may be granted in the future.
6
<PAGE>
(d) Any such adjustment made by the Committee in good faith pursuant
to the Section 2.3 shall be final and binding upon the Optionee, the Company and
all other interested parties.
(e) The Committee may elect at any time to exchange the number and
kind of shares as to which all outstanding Options, or portions thereof then
unexercised, shall be exercisable for shares of common stock of AMC as provided
in the Participation Agreement without change in the total price applicable to
the unexercised portion of the Options (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in the Option price per share. All terms
applicable to such options to purchase common stock of AMC, including price,
number of shares, and period of exercisability, shall be determined by the
Committee in its discretion in accordance with this Section 2.3(e) and in
accordance with the Participation Agreement, and shall be binding on all
Optionees, the Company, and all interested persons.
(f) In the event that the shares of Common Stock subject to Options
under this Plan are exchanged for other shares or securities as described in
this Section 2.3, then the provisions of the Plan shall be applicable to the
shares or other securities into which the shares have been exchanged.
(g) Subject to Section 2.3(e) but notwithstanding any other term of
this Plan, the Committee may, in its discretion, include such further provisions
and limitations in any Option Agreement as it may deem equitable and in the best
interests of the Company.
ARTICLE III
GRANTING OF OPTIONS
SECTION 3.1 - ELIGIBILITY
Any Director, executive or other key Employee shall be eligible to be
granted Options.
SECTION 3.2 - GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its discretion:
(i) Determine which Employees are executive or other key
Employees and select from among them (including those to whom Options have
been previously granted under the Plan) such of them as in its opinion
should be granted Options; and
7
<PAGE>
(ii) Select among Directors such of them as should be
granted Options; and
(iii) Determine the number of shares to be subject to
such Options granted to such selected Director or executive or other key
Employees; and
(iv) Determine the terms and conditions of such Options,
consistent with the Plan.
(b) Upon the selection of a Director or an executive or other key
Employee to be granted an Option, the Committee shall instruct the Secretary to
issue such Option and may impose such conditions on the grant of such Option as
it deems appropriate. Without limiting the generality of the preceding
sentence, the Committee may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option to an Employee or
Director that he or she surrender for cancellation some or all of the
unexercised Options which have been previously granted to him or her. An Option
the grant of which is conditioned upon such surrender may have an option price
lower (or higher) than the option price of the surrendered Option, may cover the
same (or a lesser or greater) number of shares as the surrendered Option, may
contain such other terms as the Committee deems appropriate and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, period of exercisability or any other term or condition of the
surrendered Option.
ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1 - OPTION AGREEMENT
Each Option shall be evidenced by a written Option Agreement, which
shall be executed by the Optionee and an authorized Officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with the Plan.
SECTION 4.2 - OPTION PRICE
(a) The price of the shares subject to each Option shall be set by
the Committee; provided, however, that the price per share shall be not less
than 100% of the fair market value of such shares on the date such Option is
granted.
(b) For purposes of the Plan, the fair market value of a share of the
Company's Common Stock as of a given date shall be:
8
<PAGE>
(i) if the Common Stock is not publicly traded, the fair
market value established by the Committee acting in good faith, but in no
event less than the Company's book value per share; and
(ii) if the Common Stock is publicly traded,
A the closing price of a share of the Company's Common Stock
on the principal exchange on which shares of the Company's Common
Stock are then trading, if any, on the day previous to such date, or,
if shares were not traded on the day previous to such date, then on
the next preceding trading day during which a sale occurred; or
B if such Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, (1) the last sales
price (if the Company's Common Stock is then listed as a National
Market Issue under the NASD National Market System) or (2) the mean
between the closing representative bid and asked prices (in all other
cases) for the Company's Common Stock on the day previous to such date
as reported by NASDAQ or such successor quotation system; or
C if such Common Stock is not publicly traded on an exchange
and not quoted on NASDAQ or a successor quotation system, the mean
between the closing bid and asked prices for the Company's Common
Stock, on the day previous to such date, as determined in good faith
by the Committee.
SECTION 4.3 - COMMENCEMENT OF EXERCISABILITY
(a) Except as the Committee may otherwise provide with respect to
Options granted to Employees or Directors who are not Officers, no Option may be
exercised in whole or in part during the first twelve months after such Option
is granted.
(b) Subject to the provisions of Sections 4.3(a), 4.3(c) and 7.3, and
except as the Committee may provide otherwise in the terms of any individual
Option Agreement as described in Section 4.4, Options shall become exercisable
in equal one-seventh installments on each of the first seven one-year
anniversaries of the date of grant of the Option; provided, however, that by a
resolution adopted after an Option is granted the Committee may, on such terms
and conditions as it may determine to be appropriate and subject to Sections
4.3(a), 4.3(c) and 7.3, accelerate the time at which such Option or any portion
thereof may be exercised.
9
<PAGE>
(c) Except as the Committee may, in its discretion, determine
otherwise, no portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable.
SECTION 4.4 - ACCELERATION OF EXERCISABILITY
The Committee may provide in the terms of an Option Agreement that,
notwithstanding Section 4.3, such Option shall become exercisable at such times
and in such installments (which may be cumulative) as the Committee shall
provide in the terms of such Option Agreement. Such terms may provide for
contingent exercisability related to the Company's achievement of specified
financial targets, the Optionee's achievement of individual performance targets,
or such other events and conditions as the Committee, in its discretion, shall
determine.
SECTION 4.5 - EXPIRATION OF OPTIONS
(a) No Option may be exercised to any extent by anyone after the
first to occur of the following events:
(i) The expiration of ten years from the date the Option
was granted; or
(ii) Except in the case of any Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the expiration of
three months from the date of the Optionee's Termination of Employment for
any reason other than death, Cause or voluntary resignation; provided that
if such Optionee dies within said three-month period, the Options shall
cease to be exercisable upon the expiration of one year from the Optionee's
date of death; or
(iii) In the case of an Optionee who is disabled (within
the meaning of Section 22(e)(3) of the Code), the expiration of one year
from the date of the Optionee's Termination of Employment for any reason
other than Cause or death, unless the Optionee dies within said one-year
period; or
(iv) The date of the Optionee's Termination of Employment
for Cause or by reason of voluntary resignation; or
(v) The expiration of one year from the date of the
Optionee's death.
(b) Subject to the provisions of Section 4.4(a), the Committee shall
provide, in the terms of each individual Option Agreement when such Option
expires and becomes unexercisable; and (without limiting the generality of the
foregoing) the Committee
10
<PAGE>
may provide in the terms of individual Option Agreements that said Options
expire immediately upon a Termination of Employment for any reason.
SECTION 4.6 - NOT A CONTRACT OF EMPLOYMENT
Nothing in this Plan or in any Option Agreement hereunder shall confer
upon any Optionee any right to continue as a Director or in the employ of the
Company, any Parent Corporation or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company, its Parent Corporations and its
Subsidiaries (if the Optionee is an Employee), which rights are hereby expressly
reserved, to discharge any Optionee at any time for any reason whatsoever, with
or without cause.
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he or she may exercise an
Option (or any portion thereof) granted to him or her. After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Option Agreement,
be exercised by his or her personal representative or by any person empowered to
do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.
SECTION 5.2 - PARTIAL EXERCISE
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Option Agreement, such Option or portion thereof may
be exercised in whole or in part; provided, however, that the Company shall not
be required to issue fractional shares and the Committee may, by the terms of
the Option, require any partial exercise to be with respect to a specified
minimum number of shares.
SECTION 5.3 - MANNER OF EXERCISE
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his or her office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Option Agreement:
11
<PAGE>
(a) Notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or portion
is exercised, such notice complying with all applicable rules established by the
Committee.
(b) Full payment for the shares with respect to which such Option or
portion is thereby exercised. The payment shall be paid in cash or if the Option
Agreement so provides, (i) in whole or in part, through the delivery of shares
of Common Stock owned by the Optionee, duly endorsed for transfer to the
Company, having a fair market value on the date of exercise equal to the
aggregate exercise price of the exercised Option or portion thereof, (ii) in
whole or in part, by surrender of shares of Common Stock then issuable upon
exercise of the Option having a fair market value on the date of exercise equal
to the aggregate exercise price of the exercised Option (or portion thereof), or
(iii) by any combination of the foregoing. Fair market value for purpose of
this Section 5.3(b) shall be determined as of the date of exercise pursuant to
the method described in Section 4.2(b) of the Plan.
(c) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option.
(d) Such representations and documents as the Committee, in its
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its discretion, also take
whatever additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and issuing
stop-transfer orders to transfer agents and registrars.
(e) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.
SECTION 5.4 - CERTAIN TIMING REQUIREMENTS
To the extent necessary to comply with the requirements to which
shares of Common Stock are subject under Rule 16b-3, Common Stock issuable to
the Optionee upon exercise of the Option may be used to satisfy the Option price
or the tax withholding consequences of such exercise only (a) during the period
beginning on the third business day following the date of release of the
quarterly or annual summary statement of sales and earnings of the Company and
ending on the twelfth business day following such date or (b) pursuant to an
irrevocable written election by the Optionee to use shares of the Company's
Common Stock issuable to the Optionee upon exercise of the Option to pay all or
part of the Option price or the withholding taxes (subject to the approval of
the Committee) made at least six months prior to the payment of such Option
price or withholding taxes.
12
<PAGE>
SECTION 5.5 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the Company. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on any and all stock
exchanges on which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which the Committee shall, in its discretion, deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its discretion,
determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience.
SECTION 5.6 - RIGHTS AS SHAREHOLDERS
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
SECTION 5.7 - TRANSFER RESTRICTIONS
Shares acquired upon exercise of Options shall be subject to the terms
of the Stockholders Agreement. To the extent necessary to comply with the
requirements to which shares of Common Stock are subject under Rule 16b-3,
unless otherwise approved in writing by the Committee, no shares acquired upon
exercise of any Option by any Officer may be sold, assigned, pledged, encumbered
or otherwise transferred until at least six months have elapsed from (but
excluding) the date that such Option was granted. The Committee, in its
13
<PAGE>
discretion, may impose such other restrictions on the transferability of the
shares purchasable upon the exercise of an Option as it deems appropriate. Any
such other restriction shall be set forth in the respective Option Agreement and
may be referred to on the certificates evidencing such shares.
ARTICLE VI
ADMINISTRATION
SECTION 6.1 - DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
SECTION 6.2 - MAJORITY RULE
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
SECTION 6.3 - PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
All expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Committee, the Company and its Officers shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Optionees, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Options, and all members of the Committee
shall be fully protected by the Company in respect to any such action,
determination or interpretation.
14
<PAGE>
ARTICLE VII
OTHER PROVISIONS
SECTION 7.1 - OPTIONS NOT TRANSFERABLE
No Option or interest or right therein or part thereof shall be liable
for the debts, contracts or engagements of the Optionee or his or her successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section 7.1 shall
prevent transfers by will or by the applicable laws of descent and distribution.
SECTION 7.2 - AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee.
However, without approval of the Company's shareholders given within 12 months
before or after the action by the Committee, no action of the Committee may,
except as provided in Section 2.3, increase any limit imposed in Section 2.1 on
the maximum number of shares which may be issued on exercise of Options,
materially modify the eligibility requirements of Section 3.1, reduce the
minimum Option price requirements of Section 4.2(a) or extend the limit imposed
in this Section 7.2 on the period during which Options may be granted or amend
or modify the Plan in a manner requiring shareholder approval under Rule 16b-3.
Neither the amendment, suspension nor termination of the Plan shall, without the
consent of the holder of the Option, impair any rights or obligations under any
Option theretofore granted. No Option may be granted during any period of
suspension nor after termination of the Plan, and in no event may any Option be
granted under this Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's shareholders under Section 7.3.
SECTION 7.3 - APPROVAL OF PLAN BY SHAREHOLDERS
This Plan will be submitted for the approval of the Company's
shareholders within 12 months after the date of the Board's initial adoption of
the Plan. Options may be granted prior to such shareholder approval; provided,
however, that such Options shall not
15
<PAGE>
be exercisable prior to the time when the Plan is approved by the shareholders;
provided, further, that if such approval has not been obtained at the end of
said 12-month period, all Options previously granted under the Plan shall
thereupon be cancelled and become null and void. The Company shall take such
actions with respect to the Plan as may be necessary to satisfy the requirements
of Rule 16b-3(b).
SECTION 7.4 - EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary. Nothing in this Plan shall be construed to limit the right of the
Company, any Parent Corporation or any Subsidiary (a) to establish any other
forms of incentives or compensation for employees of the Company, any Parent
Corporation or any Subsidiary or (b) to grant or assume options otherwise than
under this Plan in connection with any proper corporate purpose, including, but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, firm or association.
SECTION 7.5 - TITLES
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan.
SECTION 7.6 - CONFORMITY TO SECURITIES LAWS
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3. Notwithstanding anything
herein to the contrary, the Plan shall be administered, and Options shall be
granted and may be exercised, only in such a manner as to conform to such laws,
rules and regulations. To the extent permitted by applicable law, the Plan and
Options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
SECTION 7.7 - GOVERNING LAW
To the extent not preempted by federal law, the Plan shall be
construed in accordance with and governed by the laws of the State of Delaware.
SECTION 7.8 - SEVERABILITY
In the event any portion of the Plan or any action taken pursuant
thereto shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the
16
<PAGE>
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provisions had not been included, and the illegal or
invalid action shall be null and void.
17
<PAGE>
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated ____________, 1996 and effective as of June 28,
1996, is made by and between __________, a __________ corporation hereinafter
referred to as "Company," and __________, an employee or director of the Company
or a Parent Corporation or Subsidiary of the Company, hereinafter referred to as
"Optionee":
WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its Common Stock; and
WHEREAS, the Company wishes to carry out the Plan (the terms of which
are hereby incorporated by reference and made a part of this Agreement); and
WHEREAS, the Committee appointed to administer the Plan has determined
that it would be to the advantage and best interest of the Company and its
shareholders to grant the Non-Qualified Option provided for herein to the
Optionee as an inducement to enter into or remain in the service of the Company,
its Parent Corporations or its Subsidiaries and as an incentive for increased
efforts during such service, and has advised the Company thereof and instructed
the undersigned officers to issue said Option;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall
have the meaning specified below unless the context clearly indicates to the
contrary and the singular shall include the plural, where the context so
indicates.
SECTION 1.1 - AMC
"AMC" shall mean American Medserve Corporation, a Delaware
corporation.
SECTION 1.2 - BOARD
"Board" shall mean the Board of Directors of the Company.
<PAGE>
SECTION 1.3 - CAUSE
"Cause" shall mean (a) the conviction of a felony by the Optionee (b)
the commission of any act by the Optionee that is materially injurious to the
Company and that involves dishonesty, disloyalty or fraud with respect to the
Company, (c) the Optionee's gross negligence or willful misconduct with respect
to the Company that is materially injurious to the Company or (d) the Optionee's
substantial and repeated failure to perform duties commensurate with his or her
position as reasonably directed in writing by the Board in good faith.
SECTION 1.4 - CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.5 - COMMITTEE
"Committee" shall mean the full Board; provided, however, that the
Board may, but need not, delegate its rights and duties hereunder to a committee
consisting of two or more Board members to serve as the Committee hereunder
during the pleasure of the Board. Any such committee shall have such powers and
duties as are delegated to it by the Board.
SECTION 1.6 - COMMON STOCK
"Common Stock" shall mean the common stock of the Company.
SECTION 1.7 - COMPANY
"Company" shall mean __________.
SECTION 1.8 - EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
SECTION 1.9 - MEASUREMENT DATE
"Measurement Date" shall mean __________.
SECTION 1.10 - OFFICER
"Officer" shall mean an officer of the Company, as defined in
Rule 16a-1(f) under the Exchange Act, as such Rule may be amended in the future.
2
<PAGE>
SECTION 1.11 - OPTION
"Option" shall mean the non-qualified option to purchase Common Stock
of the Company granted under this Agreement.
SECTION 1.12 - PARENT CORPORATION
"Parent Corporation" shall mean any corporation in an unbroken chain
of corporations ending with the Company if each of the corporations other than
the Company then owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one (1) of the other
corporations in such chain.
SECTION 1.13 - PARTICIPATION AGREEMENT
"Participation Agreement" shall mean the agreement of even date
herewith entered into by and among the Company and the Optionee that shall
govern certain terms of the Option and shall govern the shares acquired upon
exercise of the Option.
SECTION 1.14 - PLAN
"Plan" shall mean the Stock Option Plan for Directors and Executive
and Key Employees of __________.
SECTION 1.15 - RULE 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange
Act, as such Rule may be amended in the future.
SECTION 1.16 - SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.17 - SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
SECTION 1.18 - SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one (1) of the other corporations in such chain.
3
<PAGE>
SECTION 1.19 - TERMINATION OF EMPLOYMENT
"Termination of Employment" shall mean the time when the
employee-employer relationship between the Optionee and the Company is
terminated for any reason, with or without Cause, including, but not by way of
limitation, a termination by resignation, discharge, death or retirement, but
excluding any termination where there is a simultaneous reemployment by the
Company, a Parent Corporation or a Subsidiary. The Committee, in its
discretion, shall determine the effect of all other matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for Cause, and all questions of whether particular leaves of absence constitute
Terminations of Employment.
ARTICLE II
GRANT OF OPTION
SECTION 2.1 - GRANT OF OPTION
On the date hereof the Company irrevocably grants to the Optionee the
option to purchase any part or all of an aggregate of ______ shares of Common
Stock upon the terms and conditions set forth in this Agreement and in the
Participation Agreement.
SECTION 2.2 - PURCHASE PRICE
The purchase price of the shares of stock covered by the Option shall
be $______ per share without commission or other charge.
SECTION 2.3 - NOT A CONTRACT OF EMPLOYMENT
Nothing in this Agreement or in the Plan shall confer upon the
Optionee any right to continue in the employ of the Company, any Parent
Corporation or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company, its Parent Corporations and its Subsidiaries, which are
hereby expressly reserved, to discharge the Optionee at any time for any reason
whatsoever, with or without Cause.
SECTION 2.4 - ADJUSTMENTS IN OPTION
The Option shall be subject to the provisions of Section 2.3 of the
Plan and Section 4 of the Participation Agreement.
4
<PAGE>
ARTICLE III
PERIOD OF EXERCISABILITY
SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY
(a) (i) An installment consisting of 20% of the shares covered by
the Option shall become exercisable within 90 days following each of the
first five anniversaries of the Measurement Date if the Company achieves
the performance targets established by Committee for the fiscal year ending
immediately prior to such anniversary.
(ii) Within 90 days of each fiscal year end, the Committee shall
certify whether the respective performance targets have been met, and shall
determine the extent to which the Option has become exercisable.
(iii) As of the date hereof, ___% of the shares covered by the
Option are exercisable under this Section 3.1(a) based on attainment of the
performance targets through June 30, 1996.
(b) Notwithstanding subsection (a), and subject to Section 5.6, the Option
shall become exercisable in seven (7) equal cumulative installments of one-
seventh each on each of the first seven anniversaries of the Measurement Date.
(c) Except as the Committee may, in its discretion, determine otherwise,
no portion of the Option which is unexercisable at Termination of Employment
shall thereafter become exercisable.
SECTION 3.2 - EXPIRATION OF OPTION
The Option may not be exercised to any extent by anyone after the
first to occur of the following events:
(a) The expiration of ten years from the date the Option was granted; or
(b) Except if the Optionee is disabled (within the meaning of Section
22(e)(3) of the Code), the expiration of three months from the date of the
Optionee's Termination of Employment for any reason other than death, Cause or
voluntary resignation, provided that if the Optionee dies within said
three-month period, the Options shall cease to be exercisable upon the
expiration of one year from the Optionee's date of death; or
(c) If the Optionee is disabled (within the meaning of Section 22(e)(3) of
the Code), the expiration of one year from the date of the Optionee's
Termination of Employment for any reason other than Cause or death; provided
that if the Optionee dies within said one-year period, the Options shall cease
to be exercisable upon the expiration of one year from the Optionee's date of
death; or
5
<PAGE>
(d) The date of the Optionee's Termination of Employment for Cause or by
reason of voluntary resignation; or
(e) The expiration of one year from the date of the Optionee's death.
ARTICLE IV
EXERCISE OF OPTION
SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he or she may exercise the
Option or any portion thereof. After the death of the Optionee, any exercisable
portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 3.2, be exercised by his or her personal
representative or by any person empowered to do so under the Optionee's will or
under the then applicable laws of descent and distribution.
SECTION 4.2 - PARTIAL EXERCISE
Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time prior to
the time when the Option or portion thereof becomes unexercisable under Section
3.2.
SECTION 4.3 - MANNER OF EXERCISE
The Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary or his or her office of all of the following
prior to the time when the Option or such portion becomes unexercisable under
Section 3.2:
(a) Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion, stating that the Option or portion
is thereby exercised, such notice complying with all applicable rules
established by the Committee.
(b) Full payment for the shares with respect to which such Option or
portion is thereby exercised. The payment shall be paid in cash or if the
Option Agreement so provides, (i) in whole or in part, through the delivery of
shares of Common Stock owned by the Optionee, duly endorsed for transfer to the
Company, having a fair market value on the date of exercise equal to the
aggregate exercise price of the exercised Option or portion thereof, (ii) in
whole or in part, by surrender of shares of Common Stock then issuable upon
exercise of the Option having a fair market value on the date of exercise equal
to the aggregate exercise price of the exercised Option (or portion thereof), or
(iii) by any combination of the foregoing. Fair market value for purpose of
this Section 5.3(b) shall be determined as of the date of exercise pursuant to
the method described in Section 4.2(b) of the Plan.
6
<PAGE>
(c) Such representations and documents as the Committee, in its
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its discretion, also take
whatever additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and issuing
stop-transfer orders to transfer agents and registrars.
(d) Full payment to the Company (or other employer corporation) of all
amounts which, under federal, state or local tax law, it is required to withhold
upon exercise of the Option; provided, however, that with the consent of the
Committee, (i) shares of Common Stock owned by the Optionee duly endorsed for
transfer, or (ii) subject to the timing requirements of Section 4.4, shares of
Common Stock issuable to the Optionee upon exercise of the Option, valued in
accordance with Section 4.2(b) of the Plan at the date of Option exercise, may
be used to make all or part of such payment.
(e) In the event the Option or portion shall be exercised pursuant to
Section 4.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option.
SECTION 4.4 - CERTAIN TIMING REQUIREMENTS
To the extent necessary to comply with the requirements to which
shares of Common Stock are subject under Rule 16b-3, Common Stock issuable to
the Optionee upon exercise of the Option may be used to satisfy the tax
withholding consequences of such exercise only (a) during the period beginning
on the third business day following the date of release of the quarterly or
annual summary statement of sales and earnings of the Company and ending on the
twelfth business day following such date or (b) pursuant to an irrevocable
written election by the Optionee to use shares of the Company's Common Stock
issuable to the Optionee upon exercise of the Option to pay all or part of the
withholding taxes (subject to the approval of the Committee) made at least six
months prior to the payment of such Option price or withholding taxes.
SECTION 4.5 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock deliverable upon the exercise of the Option, or
any portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company. Such shares shall
be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions:
(a) The admission of such shares to listing on any and all stock exchanges
on which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations of the
Securities and Exchange
7
<PAGE>
Commission or of any other governmental regulatory body, which the Committee
shall, in its discretion, deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts which, under federal, state or local tax law, it is required to withhold
upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise of
the Option as the Committee may from time to time establish for reasons of
administrative convenience.
SECTION 4.6 - RIGHTS AS SHAREHOLDER
The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares purchasable
upon the exercise of any part of the Option unless and until certificates
representing such shares shall have been issued by the Company to such holder.
SECTION 4.7 - TRANSFER RESTRICTIONS
Shares acquired upon exercise of Options shall be subject to the terms
of the Participation Agreement. To the extent necessary to comply with the
requirements to which shares of Common Stock are subject under Rule 16b-3,
unless otherwise approved in writing by the Committee, no shares acquired upon
exercise of an Option by any Optionee who is an Officer may be sold, assigned,
pledged, encumbered or otherwise transferred until at least six months have
elapsed from (but excluding) the date that the Option was granted.
ARTICLE V
OTHER PROVISIONS
SECTION 5.1 - ADMINISTRATION
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Committee in good faith shall be final and binding upon the
Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Option.
8
<PAGE>
SECTION 5.2 - OPTION NOT TRANSFERABLE
Neither the Option nor any interest or right therein or part thereof
shall be liable for the debts, contracts or engagements of the Optionee or his
or her successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.
SECTION 5.3 - SHARES TO BE RESERVED
The Company shall at all times during the term of the Option reserve
and keep available such number of shares of stock as will be sufficient to
satisfy the requirements of this Agreement.
SECTION 5.4 - NOTICES
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Optionee shall be addressed to him or her at the
address given beneath his or her signature hereto. By a notice given pursuant
to this Section 5.4, either party may hereafter designate a different address
for notices to be given to him, her or it. Any notice which is required to be
given to the Optionee shall, if the Optionee is then deceased, be given to the
Optionee's personal representative if such representative has previously
informed the Company of his or her status and address by written notice under
this Section 5.4. Any notice shall be deemed duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by
the United States Postal Service.
SECTION 5.5 - TITLES
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
SECTION 5.6 - CONSTRUCTION
This Agreement shall be administered, interpreted and enforced under
the laws of the State of Delaware.
SECTION 5.7 - CONFORMITY TO SECURITIES LAWS
The Optionee acknowledges that the Plan is intended to conform to the
extent necessary with all provisions of the Securities Act and the Exchange Act
and any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder,
9
<PAGE>
including without limitation Rule 16b-3. Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Option is granted and may be
exercised, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, the Plan and this
Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.
SECTION 5.8 - COVENANT NOT TO COMPETE; CONFIDENTIAL INFORMATION
(a) In consideration of the Company entering into this Agreement with
the Optionee, the Optionee hereby agrees that effective as of the date hereof,
for so long as the Optionee is employed by the Company or a Parent Corporation
or Subsidiary and for a period of two years thereafter (the "Noncompete
Period"), the Optionee shall not at any time in any capacity, directly or
indirectly, do any of the following: (i) provide any management, consulting,
financial, administrative or other services to any Competing Organization (as
defined below), including without limitation, participating directly or
indirectly as an officer, director, stockholder, member, operator, sole
proprietor, independent contractor, consultant, franchisor, franchisee, owner,
employee, agent, representative or partner of, or having any direct or indirect
financial interest (including, without limitation, the interest of a creditor)
in, any "Competing Organization" or (ii) permit the Optionee's name to be used
by any Competing Organization. "Competing Organization" shall include any
person, organization, business or other enterprise (x) located or doing business
within the states of Illinois and Wisconsin (the "Geographic Area"), and (y)
currently engaged in, or about to become engaged in, a business identical to or
similar to the business of the Company or any of its affiliates, including
without limitation, the provision of the following services and/or products:
enteral nutrition services and products, parenteral services and products,
infusion therapy services and products, wound care management services and
products, urological services and products, ostomy services and products, and
pharmacy or pharmaceutical services and products.
(b) During the Non-Compete Period, the Optionee shall not at any time
in any capacity, directly or indirectly, (i) induce or attempt to induce any
employee of the Company or any of its affiliates to leave their employ, or
otherwise solicit the employment of any employee of the Company or any of its
affiliates, hire any such employee or in any way interfere with the relationship
between the Company or any of its affiliates and any of their respective
employees, (ii) induce or attempt to induce any supplier, licensee, licensor,
franchisee, or other business relation of either the Company or any of its
affiliates to cease doing business with them or in any way interfere with the
relationship between either the Company or any of its affiliates and any of
their respective customers or business relations, or (iii) solicit the business
of any then existing patient or customer of the Company or any of its
affiliates.
(c) The Optionee will not disclose or use at any time for so long as
the Optionee is employed by the Company or a Parent Corporation or Subsidiary
and thereafter, any Confidential Information (as defined below) of which the
Optionee is or becomes aware, whether or not such information is developed by
him or her, except to the extent that such disclosure or use is directly related
to and required by the Optionee's performance of duties,
10
<PAGE>
if any, assigned to the Optionee by the Company. As used in this Agreement, the
term "Confidential Information" means information that is not generally known to
the public and that is used, developed or obtained by the Company or a Parent
Corporation or Subsidiary in connection with its business, including but not
limited to (i) products or services, (ii) fees, costs and pricing structures,
(iii) designs, (iv) computer software, including operating systems, applications
and program listings, (v) flow charts, manuals and documentation, (vi) data
bases, (vii) accounting and business methods, (viii) inventions, devices, new
developments, methods and processes, whether patentable or unpatentable and
whether or not reduced to practice, (ix) customers and clients and customer or
client lists, (x) other copyrightable works, (xi) all technology and trade
secrets, and (xii) all similar and related information in whatever form.
Confidential Information will not include any information that has been
published in a form generally available to the public prior to the date the
Optionee proposes to disclose or use such information. The Optionee
acknowledges and agrees that all copyrights, works, inventions, innovations,
improvements, developments, patents, trademarks and all similar or related
information which relate to the actual or anticipated business of the Company
and any Parent Corporation or Subsidiary (including its predecessors) and
conceived, developed or made by the Optionee while employed by the Company or a
Parent Corporation or Subsidiary belong to the Company. The Optionee will
perform all actions reasonably requested by the Company (whether during or after
the Noncompete Period) to establish and confirm such ownership at the Company's
expense (including without limitation assignments, consents, powers of attorney
and other instruments).
(d) Notwithstanding subsections (a), (b) and (c), if, at the time of
enforcement of any of the provisions of this Section 5 a court holds that the
restrictions stated herein are unreasonable under the circumstances then
existing or are otherwise illegal, invalid or unenforceable in any respect by
reason of its duration, definition of Geographic Area or scope of activity, or
any other reason, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area.
(e) The Company and the Optionee Investor hereby acknowledge and
agree that the provisions of this Section 5 in no way amend, modify or supersede
any other non-compete or non-solicitation agreement between the Company or any
of its affiliates and the Optionee.
(f) Without limiting any of the Company's rights under this
Agreement, the parties hereto acknowledge that the Company shall be entitled to
enforce its rights under this Section 5 specifically, to recover damages and
costs (including reasonable attorneys' fees) caused by any breach of any
provisions of this Section 5 and to exercise all other rights existing in its
favor. The parties hereto acknowledge and agree that the breach of any term or
provision of this Section 5 by the Optionee shall materially and irreparably
harm the Company, that money damages shall accordingly not be an adequate remedy
for any breach of the provisions of this Section 5 by the Optionee and that the
Company in its sole discretion and in addition to any other remedies it may have
at law or in equity may apply to any court of law or equity of competent
jurisdiction (without posting any bond or deposit) for
11
<PAGE>
specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Section 5.
[signature page follows]
12
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
------------------------------
By
---------------------------
President
By
---------------------------
Secretary
- ----------------------------
-----------------
- ----------------------------
- ----------------------------
Address
Optionee's Taxpayer
Identification Number:
- ----------------------------
13
<PAGE>
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT (this "AGREEMENT") is made as of ________
_____, 1996, by and among __________, a __________ corporation (the "COMPANY")
and __________ (the "PARTICIPANT"). Capitalized terms used but not otherwise
defined herein are defined in Section 6 hereof.
Pursuant to the terms of the Stock Option Plan for Directors and Executive
and Key Employees of __________ (the "Option Plan") and that certain Non-
Qualified Stock Option Agreement dated _________, 1996 by and between the
Company and the Participant, the Company has granted the Participant an Option
to purchase shares of Common Stock. This Agreement is one of several
agreements ("Other Participation Agreements") which have been, or which in the
future will be, entered into between the Company and other individuals who are
or will be employees or directors of the Company or a Parent Corporation or one
of its Subsidiaries. The Company has granted to the Participant an option or
options (the "Options") to purchase _______ shares of Common Stock at an
exercise price of $______ per share. The term "Participant Stock" as used in
this Agreement shall include all shares of Common Stock of the Company issued to
the Participant by the Company upon exercise of the Options and of any other
stock options held by the Participant and any other Common Stock otherwise
acquired by the Participant at any time when this Agreement is in effect. The
term "Options" as used in this Agreement shall include all Options granted to
the Participant pursuant to this Agreement and any other stock options to
purchase Common Stock granted to the Participant by the Company and held by the
Participant at any time when this Agreement is in effect.
NOW THEREFORE, in consideration of the granting of the Options and the
promises made herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to the
following terms:
1. RESTRICTIONS ON TRANSFER OF PARTICIPANT STOCK.
(a) TRANSFER OF PARTICIPANT STOCK. Subject to Section 1(e), the
Participant shall not sell, transfer, assign, pledge or otherwise dispose of
(whether with or without consideration and whether voluntarily, involuntarily or
by operation of law) any interest in any shares of Participant Stock (a
"TRANSFER"), except with the approval of the Company and Holdings and pursuant
to the provisions of this Section 1; provided that in no event shall any
Transfer of Common Stock pursuant to this Section 1 be made for any
consideration other than cash payable upon consummation of such Transfer or in
installments over time. Prior to making any Transfer, the Participant will give
written notice (the "SALE NOTICE") to the Company and Holdings. The Sale Notice
will disclose in reasonable detail the identity of the prospective transferee or
transferees, the number of shares to be transferred and the terms and conditions
of the proposed transfer. The Participant will not consummate any Transfer
until 90 days after the Sale Notice has been given to the Company and Holdings,
unless the parties to the
<PAGE>
Transfer have been finally determined pursuant to this Section 1 prior to the
expiration of such 90-day period. The date of the first to occur of such events
is referred to herein as the "AUTHORIZATION DATE."
(b) FIRST REFUSAL RIGHTS. The Company may elect to purchase all (but not
less than all) of the shares of Participant Stock to be transferred upon the
same terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to the Participant and Holdings within sixty
(60) days after the Sale Notice has been given to the Company. If the Company
has not elected to purchase all of the Common Stock to be transferred, Holdings
may elect to purchase all (but not less than all) of the Participant Stock to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by giving written notice of such election to the Participant within
ninety (90) days after the Sale Notice has been given to Holdings. If neither
the Company nor Holdings elects to purchase all of the shares of Participant
Stock specified in the Sale Notice, the Participant may transfer the shares of
Participant Stock specified in the Sale Notice, subject to the provisions of
Section 1(d) below, at a price and on terms no more favorable to the
transferee(s) thereof than specified in the Sale Notice during the 60-day period
immediately following the Authorization Date. Any shares of Participant Stock
not transferred within such 60-day period will be subject to the provisions of
this Section 1(b) upon subsequent transfer. The Company may pay the purchase
price for such shares by offsetting amounts outstanding under any debts owed by
the Participant to the Company.
(c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this
Section 1 will not apply with respect to transfers of shares of Participant
Stock pursuant to applicable laws of descent and distribution or among any
Participant Family Group; provided that such restrictions will continue to be
applicable to Participant Stock after any such transfer and the transferees of
such Participant Stock will have agreed in writing to be bound by the provisions
of this Agreement.
(d) TERMINATION OF RESTRICTIONS. The restrictions on the Transfer of
shares of Participant Stock set forth in this Section 1 will continue with
respect to each share of Participant Stock until the date on which such
Participant Stock has been transferred in a transaction permitted by this
Section 1 (except in a transaction contemplated by Section 1(c)); provided that
in any event, subject to Section 1(e), such restrictions will terminate on the
first to occur of a Sale of the Company or a Qualified Public Offering.
(e) PLEDGE TO LENDER. Notwithstanding anything to the contrary contained
herein, the Participant hereby pledges to the First National Bank of Chicago
(the "Bank"), as lender pursuant to that certain Credit Agreement dated as of
March 15, 1996, as amended, restated or modified from time to time (the "Credit
Agreement") among Holdings, the Bank, and the other institutions set forth
therein, and grants to the Bank a continuing first priority and perfected
security interest in, the Participant Stock, as security for the obligations of
Holdings to the Bank under and pursuant to the terms of the Credit Agreement.
The Participant agrees to execute and deliver, or cause to be executed and
delivered, all powers, proxies, assignments, instruments and documents and take
all further action, that is reasonably necessary, at Holdings's or the Bank's
request, in order to perfect any security
2
<PAGE>
interest granted or purported to be granted hereby or to enable the Bank to
exercise and enforce its rights and remedies under the Credit Agreement with
respect to the Participant Stock.
2. LEGEND. Each certificate evidencing Participant Stock and each
certificate issued in exchange for or upon transfer of any Participant Stock (if
such shares remain Participant Stock as defined herein after such transfer)
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"The securities represented by this certificate are subject
to a Participation Agreement, dated as of __________, 1996
among the issuer of such securities (the "COMPANY") and
certain of the Company's stockholders. A copy of such
Participation Agreement will be furnished without charge by
the Company to the holder hereof upon written request."
3. SALE OF THE COMPANY.
(a) If the Board and the holders of a majority of the shares of Common
Stock then outstanding approve a Sale of the Company (an "APPROVED SALE"), the
Participant shall vote for and consent to such Approved Sale. If the Approved
Sale is structured as (i) a merger or consolidation, the Participant shall waive
any dissenters' rights, appraisal rights or similar rights in connection with
such merger or consolidation, (ii) a sale of stock, the Participant shall agree
to sell all of his shares and rights to acquire shares on the terms and
conditions approved by the Board and the holders of a majority of the shares
then outstanding, or (iii) a sale of assets, the Participant shall vote in favor
of and consent to the sale and any subsequent liquidation of the Company. The
Participant shall take all necessary or desirable actions in connection with the
consummation of the Approved Sale as requested by the Company.
(b) The obligations of the Participant with respect to the Approved Sale
of the Company are subject to satisfaction of the following conditions: (i) upon
the consummation of the Approved Sale, the Participant shall receive the same
form of consideration and the same amount of consideration as set forth in
paragraph (c) below; (ii) if any holders of a class of stock are given an option
as to the form and amount of consideration to be received, each holder of such
class of stock shall be given the same option; and (iii) each holder of then
currently exercisable rights to acquire shares of a class of stock shall be
given an opportunity to either (A) exercise such rights prior to the
consummation of the Approved Sale and participate in such sale as holders of
such class of stock or (B) upon the consummation of the Approved Sale, receive
in exchange for such rights consideration equal to the amount determined by
multiplying (1) the same amount of consideration per share of a class of stock
received by holders of such class of stock in connection with the Approved Sale
less the exercise price per share of such class of stock of such rights to
acquire such class of stock by (2) the number of shares of such class of stock
represented by such rights.
3
<PAGE>
(c) In the event of a sale or exchange by the stockholders of the Company
of all or substantially all of the Common Stock (whether by sale, merger,
recapitalization, reorganization, consolidation, combination or otherwise), the
Participant shall receive in exchange for the shares of Common Stock held by
such Participant the same portion of the aggregate consideration from such sale
or exchange that such Participant would have received if such aggregate
consideration had been distributed by the Company in complete liquidation
pursuant to the rights and preferences set forth in the Company's Certificate of
Incorporation as in effect immediately prior to such sale or exchange. Each
holder of Participant Stock shall take all necessary or desirable actions in
connection with the distribution of the aggregate consideration from such sale
or exchange as requested by the Company.
4. CONVERSION INTO AMC CLASS B COMMON.
(a) All (but not less than all) of the Participant Stock shall be
converted into Class B Common ("CONVERSION STOCK") at any time at the option of
the Company. The number of shares of Conversion Stock into which the
Participant Stock shall be converted hereunder shall be equal to that number of
shares which represents the percentage of the total number of Class A Common and
Class B Common then outstanding obtained by multiplying (i) the quotient
obtained by dividing (a) the number of shares of Participant Stock by (b) the
total number of shares of Common Stock outstanding on a fully-diluted basis,
times (ii) the quotient obtained by dividing (x) the Company's earnings before
interest, taxes, amortization and overhead charges (which overhead charges are
attributable to Holdings, Regional or AMC) for the twelve completed months prior
to the conversion ("TRAILING EBITACO") (as determined by the Board in good
faith) by (y) the Trailing EBITACO of AMC on a consolidated basis (as determined
by the board of directors of AMC in good faith).
FOR EXAMPLE, assume that at the time of conversion, AMC has
1,000 shares of Class A Common outstanding and 100 shares of
Class B Common outstanding. Further assume that there are
200 shares of Participant Stock outstanding, and that the
Company has a total of 10,000 shares outstanding. Finally,
assume that the Company's Trailing EBITACO is $20 million,
and that AMC's consolidated EBITACO is $100 millon.
The calculations are as follows:
200 x 20 million = .004 = .4%
--- ----------
10,000 100 million
The Participant Stock would be converted into 4.42 newly
issued shares of Conversion Stock, representing .4% of the
total of 1,000 shares of Class A Common and 104.42 shares of
Class B Common outstanding.
(b) All (but not less than all) of the Options (to the extent then
unexercised) shall be converted into options to purchase Class B Common
("CONVERSION STOCK") at any time at
4
<PAGE>
the option of the Company. The number of shares of Conversion Stock which shall
be subject to the Options shall be determined as provided in subsection (a)
above and shall be made without change in the total price applicable to the
unexercised portion of the Options (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in the Option price per share. All terms
applicable to such options to purchase Conversion Stock, including price, number
of shares, and period of exercisability, shall be determined by the Committee
under the Option Plan in its discretion in accordance with this Section 4, and
shall be binding on the Participant, the Company, and all interested persons.
(c) Upon the conversion of Participant Stock and/or the Options as
described in this Section 4, and as a condition precedent to such conversion,
the Participant shall be obligated to become a party to the Stockholders
Agreement by and among AMC, Golder, Thoma, Cressey, Rauner Fund IV, L.P., a
Delaware limited partnership ("GTCR"), and Timothy L. Burfield, made as of
December 3, 1993, as amended at the time of any such conversion to preserve the
restrictions and requirements on transfer of Conversion Stock which were
previously applicable to Participant Stock under this Agreement (the "AMC
STOCKHOLDERS AGREEMENT").
(d) The Company shall deliver written notice to the Participant and to AMC
and Holdings of its election to convert the Participant Stock and/or Options
pursuant hereto not less than five (5) business days prior to the effectiveness
of such conversion, whereupon the Company and the holders of Participant Stock
and/or Options shall be obligated to effect such conversion on the date
requested for effectiveness; provided that the Company may condition such
effectiveness on the occurrence of a particular event, and if such event has not
occurred by the date specified for effectiveness, such conversion shall not take
place and the election therefor shall be deemed withdrawn and of no further
force or effect.
(e) Following the occurrence of a Qualified Public Offering, AMC shall use
reasonable efforts to prepare and file with the Securities and Exchange
Commission on or before the last to occur of (i) the date falling 190 days after
the date of the Qualified Public Offering, or (ii) August 31, 1998, a
registration statement on an appropriate form, pursuant to which AMC will
register under the Securities Act the Conversion Stock issued or issuable under
the Option Plan or such common equity securities of AMC as the Conversion Stock
shall have been converted into.
5. DEFINITIONS.
"AMC" means American Medserve Corporation, a Delaware corporation.
"CLASS A COMMON" means AMC's Class A Common Stock, par value $.01 per
share.
"CLASS B COMMON" means AMC's Class B Common Stock, par value $.01 per
share.
"COMMON STOCK" means the Company's Common Stock, par value $.01 per share.
5
<PAGE>
"HOLDINGS" means AMC Regional Holdings, Inc., a Delaware corporation.
"PARTICIPANT STOCK" means (i) any Common Stock purchased or otherwise
acquired by the Participant, (ii) any equity securities issued or issuable
directly or indirectly with respect to the Common Stock referred to in clause
(i) above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares constituting Participant Stock,
such shares will cease to be Participant Stock when they have been (x)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (y) sold to the public through
a broker, dealer or market maker pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of shares of AMC's common equity
securities having an aggregate value of at least $30 million.
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person or entity acquires (i) capital stock of the Company
possessing the voting power under normal circumstances to elect a majority of
the Board (whether by merger, consolidation, reorganization, combination, sale
or transfer of the Company's capital stock or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"SUBSIDIARY" means any corporation of which the Company owns securities
having a majority of the ordinary voting power in electing the board of
directors directly or through one or more subsidiaries.
"PARTICIPANT FAMILY GROUP" means the descendants of a Participant (whether
natural or adopted) and any trust solely for the benefit of such Participant
and/or his or her descendants.
6. MISCELLANEOUS.
(a) TRANSFERS: TRANSFERS IN VIOLATION OF AGREEMENT. Prior to transferring
any Participant Stock to any Person, the transferring stockholder shall cause
the prospective transferee to execute and deliver to the Company a counterpart
of this Agreement. Any transfer or attempted transfer of any Participant Stock
in violation of any provision of this Agreement shall be void, and the Company
shall not record such transfer on its books or
6
<PAGE>
treat any purported transferee of such Participant Stock as the owner of such
shares for any purpose.
(b) AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company unless such modification, amendment or waiver is
approved in writing by the Company. The failure of any party to enforce any of
the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
(c) SEVERABILITY. Whenever possible, each provision of this Agreement
shall 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 shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) ENTIRE AGREEMENT. Except as otherwise expressly set forth herein,
this document embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(e) SUCCESSORS AND AGREEMENT. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Participant and any subsequent
holders of Participant Stock and the respective successors and assigns of each
of them, so long as they hold Participant Stock.
(f) COUNTERPARTS. This Agreement may be executed in separate counterparts
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
(g) REMEDIES. The Company shall be entitled to enforce its rights under
this Agreement specifically to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that the
Company may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief
(without posting a bond or other security) in order to enforce or prevent any
violation of the provisions of this Agreement.
(h) GOVERNING LAW. All questions concerning the construction, validity
and interpretation of this Agreement shall be governed by and construed in
accordance with the
7
<PAGE>
internal laws of the State of Delaware, without giving effect to any choice of
law or other conflict of law provision or rule (whether of the State of Delaware
or any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
(i) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
(j) RIGHT OF OFFSET. The Company shall have a right to set off amounts,
if any, required to be paid to the Participant pursuant to the terms of this
Agreement against any debts owed by such the Participant to the Company.
7. AMC AND HOLDINGS AS THIRD-PARTY BENEFICIARIES. AMC and Holdings shall
be deemed to be intended third-party beneficiaries hereof. Accordingly, each of
AMC and holdings shall be entitled to enforce the provisions hereof, including
without limitation, the provisions of Section 6 hereof, as though an original
party hereto.
8. IRREVOCABLE PROXY: CONFLICTING AGREEMENT.
(a) In order to secure the Participant's obligation to vote the
Participant Stock and other voting securities of the Company in accordance with
the provisions of this Agreement, the Participant hereby appoints Timothy L.
Burfield as his or her true and lawful proxy and attorney-in-fact, with full
power of substitution, to vote all of his or her voting securities of the
Company in all matters expressly provided for in this Agreement. Timothy L.
Burfield may exercise the irrevocable proxy granted to him hereunder at any time
a Participant fails to comply with the provisions of this Agreement. The proxies
and powers granted by the Participant pursuant to this Section 8 are coupled
with an interest and are given to secure the performance of the Participant's
obligations to Holdings under this Agreement. Such proxies and powers survive
the bankruptcy, insolvency, death, incompetency and disability of the
Participant and the holders of Participant Stock and are irrevocable until the
first to occur of (i) the tenth anniversary of the date hereof (unless extended
by the parties hereto in accordance with applicable law) or (ii) a Qualified
Public Offering.
(b) Each Stockholder represents that he or she has not granted and is not
a party to any proxy, voting trust or other agreement which is inconsistent with
or conflicts with the provisions of this Agreement, and no holder of Participant
Stock shall grant any proxy or become party to any voting trust or other
agreement which is inconsistent with or conflicts with the provisions of this
Agreement.
[SIGNATURE PAGES FOLLOW]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Participation
Agreement on the day and year first above written.
--------------------------
a corporation
----------
By:
--------------------------------
Its:
-------------------------------
--------------------------------------------------
-----------------
--------------------------------------------------
-------------------------------------------------
Address
Participant's
Taxpayer Identification Number:
--------------------------------------------------
S-1
<PAGE>
Exhibit 10.9
SENIOR MANAGEMENT AGREEMENT
THIS AGREEMENT is made as of September 5, 1996, between American Medserve
Corporation, a Delaware corporation (the "Company"), and Michael B. Freedman
("Executive").
The Company and Executive desire to enter into an agreement pursuant to
which Executive will purchase, and the Company will sell the number of shares of
the Company's Class B Common Stock, par value $.01 per share (the "Class B
Common") set forth in Section 1(a) below. All of such shares of Class B Common
and all shares of Class B Common hereafter acquired by Executive pursuant to
this Agreement are referred to herein as "Executive Stock." Certain definitions
are set forth in Section 15 of this Agreement.
The execution and delivery of this Agreement by the Company and Executive
is a condition to the Executive's purchase of shares of the Class B Common.
Certain provisions of this Agreement are intended for the benefit of, and will
be enforceable by, Golder, Thoma, Cressey, Rauner Fund IV, L.P. (the
"Investor"), and the Investor is an intended third party beneficiary of this
Agreement.
The parties also desire to enter into an agreement pursuant to which
Executive shall be employed by the Company as the Company's Vice President-
Business Development.
The parties hereto agree as follows:
PROVISIONS RELATING TO EXECUTIVE STOCK
1. PURCHASE AND SALE OF EXECUTIVE STOCK.
(a) Executive hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to Executive, 1,156.0843 shares of Class B Common.
The purchase price per share of Class B Common (the "Purchase Price") shall
equal $98.46.
(b) The closing of the purchase and sale of the Class B Common (the
"Closing") shall take place at the offices of Kirkland & Ellis, 200 East
Randolph Drive, Chicago, Illinois 60601 at 10:00 a.m. on September 5, 1996, or
at such other place or on such other date as may be mutually agreeable to the
Company and the Executive. At the Closing, the Company shall deliver to the
Executive stock certificates evidencing the Class B Common to be purchased by
the Executive, registered in the Executive's name, upon payment of the purchase
price thereof by a cashier's or certified check, or by wire transfer of
immediately available funds to such account as designated by the Company in an
amount not less than $11,383.00 and by delivery of a promissory note
substantially in the form attached hereto as EXHIBIT A (the "Executive Note") in
the amount of the balance of the Purchase Price owed in respect of the Class B
Common purchased hereunder. Executive's obligations under the Executive Note
will be secured by a pledge of all of the shares of Executive Stock to the
Company and in connection therewith Executive shall enter into a pledge
agreement in the form of EXHIBIT B attached hereto.
<PAGE>
(c) Within 30 days after the purchase of Executive Stock by Executive
from the Company, Executive shall make an effective election with the Internal
Revenue Service under Section 83(b) of the Internal Revenue Code and the
regulations promulgated thereunder substantially in the form of EXHIBIT C
attached hereto and will promptly notify the Company of such election.
(d) Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by Executive pursuant to
this Agreement will be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of
the Securities Act, or any applicable state securities laws, and the
Executive Stock will not be disposed of in contravention of the
Securities Act or any applicable state securities laws.
(ii) Executive is sophisticated in financial matters and is able
to evaluate the risks and benefits of the investment in the Executive
Stock.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Stock for an indefinite period of time
because the Executive Stock 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.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
the Executive Stock and has had access to such other information
concerning the Company as he has requested.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Executive
does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Executive is a party or any
judgment, order or decree to which Executive is subject.
(e) As an inducement to the Company to issue the Executive Stock to
Executive, and as a condition thereto, Executive acknowledges and agrees that:
(i) Neither the issuance of any of the Executive Stock to
Executive nor any provision hereof shall entitle Executive to remain
in the employment of the Company and its Subsidiaries or affect the
right of the Company to terminate Executive's employment at any time
for any reason.
(ii) The Company shall have no duty or obligation to disclose to
Executive, and Executive shall have no right to be advised of, any
material information regarding the Company or any Subsidiary at any
time prior to, upon
2
<PAGE>
or in connection with the repurchase of the Executive Stock upon the
termination of Executive's employment with the Company or any
Subsidiary or as otherwise provided hereunder.
(f) As an inducement to the Company to issue the Executive Stock to
Executive, and as a condition thereto, Executive covenants and agrees to enter
into an Amended and Restated Stockholders Agreement in the form of EXHIBIT D
attached hereto.
2. VESTING OF EXECUTIVE STOCK.
(a) FULLY VESTED SHARES. 35% of the shares of Executive Stock
purchased hereunder (the "Fully Vested Shares") are vested on the date hereof.
(b) PERFORMANCE VESTING SHARES.
(i) Except as otherwise provided in Sections 2(b)(ii) and
2(b)(iii) below, 20% of the shares of Executive Stock purchased
hereunder (the "Performance Vesting Shares") shall vest on the seventh
anniversary of the Start Date, if as of such date Executive is still
employed by the Company or any Subsidiary, provided that if at the end
of any of the first five fiscal years of the Company following the
date hereof, both the Company's EBITDA and EBITDA Percentage equal or
exceed 90% of the Company's Projected EBITDA and Projected EBITDA
Percentage, as determined in good faith by the Board, respectively,
for such fiscal years, then 20% of the Performance Vesting Shares
shall vest as of the end of each fiscal year in which such requirement
is satisfied. In the event the Company does not satisfy the
requirement for 20% of the Performance Vesting Shares to vest as of
the end of any fiscal year, if (i) the sum of the Company's EBITDA for
the fiscal year in which such requirement is not met and the
immediately succeeding fiscal year equals or exceeds 90% of the sum of
the Company's Projected EBITDA for such two fiscal years, and (ii) the
average of the Company's EBITDA Percentages for such two years equals
or exceeds 90% of the average of the Company's Projected EBITDA
Percentages for such two fiscal years, THEN 40% of the Performance
Vesting Shares shall vest as of the end of the second of such two
fiscal years.
(ii) Except as set forth in Section 2(b)(iii) below, in the event
Executive ceases to be employed by the Company for any reason, then
any Performance Vesting Shares which have not become vested on or
prior to such date shall not vest after such date. Upon the
occurrence of a Sale of the Company while the Executive is still
employed by the Company or its Subsidiaries, all Performance Vesting
Shares which have not yet become vested shall become vested at the
time of such event.
(iii) In the event the Company terminates Executive (other than
for Cause) or in the event of Executive's death or disability (as
reasonably determined by the Board or CEO) prior to the fifth
anniversary of the date of the Closing and
3
<PAGE>
the Additional Benefits Requirements (as defined below) are satisfied
as determined in good faith by the Board, the Performance Vesting
Shares shall continue to vest after Executive's termination, death or
disability as applicable in accordance with the provisions of
Section 2(b)(i) as if Executive were still employed by the Company.
The "Additional Benefits Requirements" are defined as:
(x) the Company's EBITDA for the 12 months ending as of the
month end immediately preceding the date of Executive's
termination equals or exceeds 85% of the Projected EBITDA for
such 12 month period, provided that if such 12 month period is
not one complete fiscal year of the Company, then the Projected
EBITDA for such period shall be deemed to be a proportionate
blend of the Projected EBITDA for the then current fiscal year
and the immediately preceding fiscal year taking into account the
relative number of months elapsed in each such fiscal year which
are part of such 12 month period; and
(y) the Company's EBITDA Percentage as of the end of such
12 month period equals or exceeds 85% of the Projected EBITDA
Percentage as of the end of such 12 month period, provided that
if such 12 month period is not one complete fiscal year of the
Company, then the Company's Projected EBITDA Percentage for such
period shall be deemed to be a proportionate blend of the
Projected EBITDA Percentages for the then current fiscal year and
the immediately preceding fiscal year, taking into account the
relative number of months elapsed in each such fiscal year which
are part of such 12 month period.
See attached Appendix 1 for an example of such calculation.
(c) TIME VESTING SHARES.
(i) Except as otherwise provided in Section 2(c)(ii) below, 45%
of the shares of Executive Stock purchased hereunder (the "Time
Vesting Shares") will become vested in accordance with the following
schedule, if as of each such date Executive is still employed by the
Company or any Subsidiary:
4
<PAGE>
CUMULATIVE PERCENTAGE OF
TIME VESTING SHARES
DATE VESTED
---- ------
At the Start Date 20%
1st Anniversary of the Start Date 36%
2nd Anniversary of the Start Date 52%
3rd Anniversary of the Start Date 68%
4th Anniversary of the Start Date 84%
5th Anniversary of the Start Date 100%
(ii) If Executive ceases to be employed by the Company or its
Subsidiaries on any date prior to an anniversary date listed above,
the cumulative percentage of Time Vesting Shares to become vested will
be determined on a pro rata basis according to the number of days
elapsed since the prior anniversary date. Upon the occurrence of a
Sale of the Company while Executive is still employed by the Company
or its Subsidiaries, all Time Vesting Shares which have not yet become
vested shall become vested at the time of such event. In the event
the Company terminates Executive (other than for Cause) or in the
event of Executive's death or disability (as reasonably determined by
the Board or CEO) prior to the fifth anniversary of the Start Date and
the Additional Benefits Requirements are satisfied as of the date of
Executive's termination, death or disability as applicable, all Time
Vesting Shares which have not become vested prior to the date of such
termination shall become vested on such date. Subject to the
preceding sentence, any Time Vesting Shares which have not become
vested as of the date that Executive ceases to be employed by the
Company or its Subsidiaries shall not vest after such date.
(d) Shares of Executive Stock which have become vested (including the
Fully Vested Shares) are referred to herein as "Vested Shares," and all other
shares of Executive Stock are referred to herein as "Unvested Shares."
3. REPURCHASE OPTION.
(a) Subject to 3(f) below, in the event Executive ceases to be
employed by the Company or its Subsidiaries for any reason (the "Termination"),
the Executive Stock (whether held by Executive or one or more of Executive's
transferees) will be subject to repurchase by the Company and the Investor
pursuant to the terms and conditions set forth in this Section 3 (the
"Repurchase Option").
(b) The purchase price for each Unvested Share will be the lesser of
Executive's Original Cost or the Fair Market Value for such share, and the
purchase price for each Vested Share will be the Fair Market Value for such
share.
5
<PAGE>
(c) The Board may elect to purchase all or any portion of the
Unvested Shares and the Vested Shares by delivering written notice (the
"Repurchase Notice") to the holder or holders of the Executive Stock within 100
days after the Termination. The Repurchase Notice will set forth the number of
Unvested Shares and Vested Shares to be acquired from each holder, the aggregate
consideration to be paid for such shares and the time and place for the closing
of the transaction. The number of shares to be repurchased by the Company shall
first be satisfied to the extent possible from the shares of Executive Stock
held by Executive at the time of delivery of the Repurchase Notice. If the
number of shares of Executive Stock then held by Executive is less than the
total number of shares of Executive Stock which the Company has elected to
purchase, the Company shall purchase the remaining shares elected to be
purchased from the other holder(s) of Executive Stock under this Agreement, pro
rata according to the number of shares of Executive Stock held by such other
holder(s) at the time of delivery of such Repurchase Notice (determined as
nearly as practicable to the nearest share). The number of Unvested Shares and
Vested Shares to be repurchased hereunder will be allocated among Executive and
the other holders of Executive Stock (if any) pro rata according to the number
of shares of Executive Stock to be purchased from such person.
(d) If for any reason the Company does not elect to purchase all of
the Executive Stock pursuant to the Repurchase Option, the Investor shall be
entitled to exercise the Repurchase Option for the shares of Executive Stock the
Company has not elected to purchase (the "Available Shares"). As soon as
practicable after the Company has determined that there will be Available
Shares, but in any event within 60 days after the Termination, the Company shall
give written notice (the "Option Notice") to the Investor setting forth the
number of Available Shares and the purchase price for the Available Shares. The
Investor may elect to purchase any or all of the Available Shares by giving
written notice to the Company within thirty days after the Option Notice has
been given by the Company. As soon as practicable, and in any event within ten
days after the expiration of the thirty day period set forth above, the Company
shall notify each holder of Executive Stock as to the number of shares being
purchased from such holder by the Investor (the "Supplemental Repurchase
Notice"). At the time the Company delivers the Supplemental Repurchase Notice
to the holder(s) of Executive Stock, the Company shall also deliver written
notice to the Investor setting forth the number of shares the Investor is
entitled to purchase, the aggregate purchase price and the time and place of the
closing of the transaction. The number of Unvested Shares and Vested Shares to
be repurchased hereunder shall be allocated among the Company and the Investor
pro rata according to the number of shares of Executive Stock to be purchased by
each of them.
(e) The closing of the purchase of the Executive Stock pursuant to
the Repurchase Option shall take place on the date designated by the Company in
the Repurchase Notice or Supplemental Repurchase Notice, which date shall not be
more than thirty days nor less than five days after the delivery of the later of
either such notice to be delivered. The Company and/or the Investor will pay
for the Executive Stock to be purchased pursuant to the Repurchase Option by
delivery of a check, a wire transfer of funds and/or a note (payable in three
equal annual installments commencing on the first anniversary of such closing
and bearing interest at the corporate base rate as determined by the First
National Bank of Chicago the time the note is issued) in form and substance
determined by the Board in good faith in the aggregate
6
<PAGE>
amount of the purchase price for such shares. In addition, the Company may pay
the purchase price for such shares by offsetting amounts outstanding under the
Executive Note issued to the Company hereunder and any other debts owed by
Executive to the Company. The Company and the Investor will be entitled to
receive customary representations and warranties from the sellers regarding such
sale and to require all sellers' signatures be guaranteed.
(f) Notwithstanding anything to the contrary set forth above, in the
event the Company terminates Executive (other than for Cause) prior to the fifth
anniversary of the date of Closing and the Additional Benefits Requirements are
satisfied, then (i) Executive will be entitled to retain all Performance Vesting
Shares which are Unvested Shares until it is finally determined whether they
will vest under the EBITDA and EBITDA Percentage tests described in Section 2(b)
above (at which time, as such determinations are made, the Company and the
Investor will be entitled to exercise the Repurchase Option in respect of such
Shares of Executive Stock) and (ii) subject to Section 3(h) below, Executive
shall be entitled to require the Company to purchase all Vested Shares as soon
as practicable after such termination by delivery of written notice to the
Company within 30 days following such termination and all Performance Vesting
Shares which had not vested as of the date of such termination as soon as
practicable after the date on which all such Performance Vesting Shares become
Vested Shares by delivery of written notice to the Company within 30 days
following such vesting. The Company will pay for the Executive Stock to be
purchased pursuant to this Section 3(f) by delivery of a check, a wire transfer
of funds and/or a note (payable in three equal annual installments commencing on
the first anniversary of the date of purchase by the Company and bearing
interest at the corporate base rate as determined by the First National Bank of
Chicago at the time the note is issued) in form and substance determined by the
Board in good faith. In addition, the Company, at its election, may pay the
purchase price of any such shares by offsetting amounts outstanding under the
Executive Note issued to the Company hereunder and any other debts owed by
Executive to the Company.
(g) The right of the Company and the Investor, and the requirement
for the Company, to repurchase Vested Shares pursuant to this Section 3 shall
terminate upon the first to occur of a Sale of the Company or a Qualified Public
Offering.
(h) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and any Subsidiary's debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Stock hereunder which the
Company is otherwise entitled (or required) to make, the Company may (or shall)
make such repurchases as soon as it is permitted to do so under such
restrictions.
4. RESTRICTIONS ON TRANSFER.
(a) TRANSFER OF EXECUTIVE STOCK. Prior to the earlier to occur of
(x) the fifth anniversary of the date of the Closing or (y) 100 days following
the Termination, Executive shall not sell, transfer, assign, pledge or otherwise
dispose of (whether with or without consideration
7
<PAGE>
and whether voluntarily or involuntarily or by operation of law) any interest in
any shares of Executive Stock (a "Transfer"), except pursuant to (i) the
provisions of Section 3 hereof, a Public Sale or a Sale of the Company ("Exempt
Transfers") or (ii) the approval of the Company and the Investor and pursuant to
the provisions of this Section 4; provided that in no event shall any Transfer
of Executive Stock pursuant to this Section 4 be made for any consideration
other than cash payable upon consummation of such Transfer or in installments
over time. Prior to making any Transfer other than an Exempt Transfer (whether
such Transfer occurs prior to or following the dates set forth in clauses (x)
and (y) above), Executive will give written notice (the "Sale Notice") to the
Company and the Investor. The Sale Notice will disclose in reasonable detail
the identity of the prospective transferee(s), the number of shares to be
transferred and the terms and conditions of the proposed transfer. Executive
will not consummate any Transfer until 90 days after the Sale Notice has been
given to the Company and to the Investor, unless the parties to the Transfer
have been finally determined pursuant to this Section 4 prior to the expiration
of such 90-day period. The date of the first to occur of such events is
referred to herein as the "Authorization Date". Notwithstanding the foregoing,
in no event shall Executive be entitled to Transfer (A) any Unvested Shares of
Executive Stock, other than to the Company or the Investor pursuant to Section 3
until, in the case of Time Vesting Shares which are Unvested Shares, 100 days
following such Termination, and in the case of Performance Vesting Shares which
are Unvested Shares, the later of 100 days following such Termination or, if the
Additional Benefits Requirements are satisfied, 100 days following the date upon
which it is finally determined whether such shares shall become Vested Shares or
(B) any Shares of Executive Stock which the Company and/or the Investor have
elected to purchase pursuant to Section 3, except to the Company or the
Investor, as applicable.
(b) FIRST REFUSAL RIGHTS. The Company may elect to purchase all (but
not less than all) of the shares of Executive Stock to be transferred upon the
same terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to Executive and the Investor within 60 days
after the Sale Notice has been given to the Company. If the Company has not
elected to purchase all of the Executive Stock to be transferred, the Investor
may elect to purchase all (but not less than all) of the Executive Stock to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by giving written notice of such election to Executive within 90 days
after the Sale Notice has been given to the Investor. If neither the Company
nor the Investor elects to purchase all of the shares of Executive Stock
specified in the Sale Notice, Executive may transfer the shares of Executive
Stock specified in the Sale Notice, subject to the provisions of Section 4(d)
below, at a price and on terms no more favorable to the transferee(s) thereof
than specified in the Sale Notice during the 60-day period immediately following
the Authorization Date. Any shares of Executive Stock not transferred within
such 60-day period will be subject to the provisions of this Section 4(b) upon
subsequent transfer. The Company may pay the purchase price for such shares by
offsetting amounts outstanding under the Executive Note or any other debts owed
by Executive to the Company.
(c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this
Section 4 will not apply with respect to (i) transfers of shares of Executive
Stock pursuant to applicable laws of descent and distribution or (ii) transfers
of shares of Executive Stock among Executive's Family Group, other than
transfers of the type described in the last sentence of Section 4(a)
8
<PAGE>
above; provided that such restrictions will continue to be applicable to the
Executive Stock after any such transfer and the transferees of such Executive
Stock will have agreed in writing to be bound by the provisions of this
Agreement.
(d) TERMINATION OF RESTRICTIONS. The restrictions on the Transfer of
shares of Executive Stock set forth in this Section 4 will continue with respect
to each share of Executive Stock until the date on which such Executive Stock
has been transferred in a transaction permitted by this Section 4 (except in a
transaction contemplated by Section 4(c)); provided that in any event such
restrictions will terminate on the first to occur of a Sale of the Company or a
Qualified Public Offering; and further provided that the restrictions contained
in clause (A) of the last sentence of Section 4(a) above shall survive in
perpetuity.
5. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) LEGEND. The certificates representing the Executive Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF SEPTEMBER 5, 1996, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER AND IN COMPLIANCE WITH STATE SECURITIES LAWS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT AGREEMENT
BETWEEN THE ISSUER (THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF
DATED AS OF SEPTEMBER 5, 1996. A COPY OF SUCH AGREEMENT MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Executive Stock may sell,
transfer or dispose of any Executive Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
6. LIMITED PREEMPTIVE RIGHTS.
(a) Except for the issuance of Common Stock (i) pursuant to a public
offering registered under the Securities Act, (ii) to a lender to the Company in
connection with a debt facility, (iii) in accordance with Section 8 of the
Stockholders Agreement, (iv) to employees or
9
<PAGE>
directors of the Company and/or its Subsidiaries pursuant to any plan approved
by the Board or (v) as consideration in connection with an acquisition, merger,
joint venture, strategic alliance or similar transaction, if the Company at any
time after the date hereof authorizes the issuance or sale of any shares of
Common Stock or any securities containing options or rights to acquire any
shares of Common Stock (other than as a dividend on the outstanding Common
Stock), the Company shall first offer to sell to each holder of Executive Stock
a portion of such stock or securities equal to the quotient determined by
dividing (1) the number of shares of Executive Stock held by such holder by
(2) the total number of shares of Common Stock outstanding on a fully diluted
basis immediately prior to such issuance. Each holder of Executive Stock shall
be entitled to purchase such stock or securities at the most favorable price and
on the most favorable terms as such stock or securities are to be offered to any
other Persons.
(b) In order to exercise its purchase rights hereunder, a holder of
Executive Stock must, within 30 days after receipt of written notice from the
Company describing in reasonable detail the stock or securities being offered,
the purchase price thereof, the payment terms and such holder's percentage
allotment, deliver a written notice to the Company describing its election
hereunder. If all of the stock and securities offered to the holders of
Executive Stock is not fully subscribed by such holders, the remaining stock and
securities shall be reoffered by the Company to the holders purchasing their
full allotment upon the terms set forth in this Section, except that such
holders must exercise their purchase rights within five days after receipt of
such reoffer.
(c) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the holders of
Executive Stock have not elected to purchase during the 90 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to such holders. Any stock or securities offered or sold by
the Company after such 90-day period must be reoffered to the holders of
Executive Stock pursuant to the terms of this Section.
(d) Nothing contained in this Section 6 shall be deemed to amend,
modify or limit in any way the restrictions on the issuance of shares of Stock
set forth in Section 3C of the Equity Purchase Agreement or in any other
agreement to which the Company is presently bound.
(e) The rights of Executive set forth in this Section 6 shall
terminate on the first to occur of a Sale of the Company or Qualified Public
Offering.
In the event that, in connection with its purchase of shares of Common
Stock or securities containing options or rights to acquire shares of Common
Stock ("Common Convertible Securities") as described in this Section 6, the
other purchasers are also purchasing other securities of the Company or any
Subsidiary (collectively, the "Other Securities"), then the Executive shall
purchase a ratio of Other Securities to the number of Shares of Common Stock or
Common Convertible Securities in the same proportion as the other purchasers
purchase in each of such securities.
10
<PAGE>
PROVISIONS RELATING TO EMPLOYMENT
7. EMPLOYMENT. The Company agrees to employ Executive and Executive
accepts such employment for the period beginning as of August 1, 1994 (the
"Start Date") and ending upon termination pursuant to Section 9 hereof (the
"Employment Period"). During the Employment Period, Executive shall serve as
the Vice President-Business Development of the Company and shall have the normal
duties, responsibilities and authority of a Vice President-Business Development,
including, without limitation, responsibility for all aspects of the negotiation
and integration of acquisitions, subject to the power of the Board and the CEO
to supervise, and to override any related actions.
8. SALARY, BONUS AND BENEFITS. During the Employment Period, the Company
will pay Executive a base salary (the "Annual Base Salary") as the Board or the
Compensation Committee of the Board may designate from time to time, in its sole
discretion. Following the end of each fiscal year, the Board may, in its sole
discretion, award a bonus to Executive in an amount not to exceed 40% of
Executive's Annual Base Salary for such year, as determined by the Board based
upon the Company's achievement of budgetary and other objectives. Executive's
Annual Base Salary for any partial year will be prorated based upon the number
of days elapsed in such year. Executive will also receive an automobile
allowance of $550 per month and be eligible to participate in group insurance,
vacation and retirement savings (401(k)) plans as the Company may make available
to its executives.
9. TERMINATION.
(a) The Employment Period will continue until Executive's
resignation, disability (as reasonably determined by the Board or the CEO) or
death or until the Board or the CEO determines in its good faith judgment that
termination of Executive's employment is in the best interests of the Company.
(b) If the Company terminates Executive's employment without Cause,
the Company shall provide at least six months written notice to the Executive
prior to the effectiveness of such termination (the "Notice Period"); provided,
however, that if the Company terminates Executive's employment without Cause and
determines that Executive's employment with the Company shall immediately cease,
Executive shall be entitled to receive payments (payable in monthly
installments) equal to the lower of (i) the rate of the Annual Base Salary for
six months following the date of such termination or (ii) the rate of the Annual
Base Salary for the portion of the Notice Period during which Executive is no
longer employed by the Company. Amounts payable by the Company to Executive
pursuant to this Section 9(b) shall be reduced by the amount of any payments
received by Executive from other employment (whether as an employee, consultant
or otherwise) during or in respect of the period in which payments are being
made pursuant to this Section 9(b), and Executive hereby agrees that upon the
termination of Executive, Executive shall use his best efforts to seek
employment with similar responsibilities and similar compensation to the
position with the Company contemplated by the terms of this Agreement. The
Company may cease making payments to Executive pursuant to this Section 9(b) at
any time after which Executive breaches any of the provisions of Section 10
11
<PAGE>
or 11; provided that no such cessation shall relieve Executive of his
obligations under Section 10 or 11.
(c) If Executive's employment with the Company is terminated by the
Company for Cause or as a result of a voluntary termination by Executive, then
Executive's right to receive the Annual Base Salary and other benefits shall
cease on the date of such termination and no severance payments shall be made.
(d) For purposes of this Agreement, "Cause" shall mean (i) the
commission of a felony or the commission of any other act which is materially
injurious to the Company or any Subsidiary involving dishonesty, disloyalty or
fraud with respect to the Company or any Subsidiary, (ii) gross negligence or
willful misconduct with respect to the Company or any Subsidiary which is
materially injurious to the Company or any Subsidiary, (iii) willful,
substantial and repeated failure to perform duties commensurate with his
position as reasonably directed in writing by the Board or the CEO in good
faith, or (iv) any other material breach of this Agreement which is not cured
within 21 days after written notice thereof to Executive.
10. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him during the course of his
performance under this Agreement concerning the business and affairs of the
Company and its affiliates are the property of the Company. Therefore,
Executive agrees that he will not disclose to any unauthorized person or use for
his own account or for the account of any third party any of such information,
observations or data without the Board's written consent, unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public other than as a result of Executive's acts or omissions to
act. Executive shall use his best efforts to prevent the unauthorized misuse,
espionage, loss or theft of the aforementioned matters. Executive agrees to
deliver to the Company at the termination of his employment, or at any other
time the Company may request in writing, all memoranda, notes, plans, records,
reports and other documents (and copies thereof) relating to the business of the
Company and its affiliates (including, without limitation, all acquisition
prospects, lists and contact information) which he may then possess or have
under his control.
11. NONCOMPETITION AND NONSOLICITATION.
(a) NONCOMPETITION. Executive acknowledges that in the course of his
employment with the Company he will become familiar with the Company's trade
secrets and with other confidential information concerning the Company and that
his services will be of special, unique and extraordinary value to the Company.
Therefore, in consideration of the opportunity to purchase Executive Stock and
in consideration of the other rights given to Executive hereunder, Executive
agrees that, during the Employment Period and (i) if Executive's employment is
terminated by the Company for Cause or as a result of voluntary termination by
Executive, for two years thereafter, or (ii) if Executive's employment is
terminated for any other reason, the period during which the Company is required
(without giving effect to the last two sentences of Section 9(b)) to make
payments to Executive pursuant to Section 9(b) (the "Noncompete Period"), he
shall not directly or indirectly own, manage, control, participate in,
12
<PAGE>
consult with, render services for, or in any manner engage in any business
competing with the businesses of the Company or its Subsidiaries as such
businesses exist on the date of the termination of Executive's employment,
within those limited states or metropolitan areas in which the Company is
engaged in business (or in which the Company is in the process of attempting to
engage in business) during the Employment Period or at the time of termination
of Executive's employment.
(b) NONSOLICITATION. During the Employment Period and for two years
thereafter, Executive shall not directly or indirectly through another person or
entity (i) induce or attempt to induce any employee of the Company or any
Subsidiary to leave the employ of the Company or such Subsidiary, or in any way
interfere with the relationship between the Company or any Subsidiary and any
employee thereof, (ii) hire any person who was an employee of the Company or any
Subsidiary at any time during the Employment Period, or (iii) induce or attempt
to induce any customer, supplier, licensee or other business relationship of the
Company or any Subsidiary to cease doing business with the Company or such
Subsidiary, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relationship and the Company or any
Subsidiary.
(c) ENFORCEMENT. If, at the time of enforcement of Section 10 or 11
of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum duration, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the court shall be allowed to revise the restrictions contained herein to cover
the maximum duration, scope and area permitted by law. Because Executive's
services are unique and because Executive has access to confidential
information, the parties hereto agree that money damages would be an inadequate
remedy for any breach of this Agreement. Therefore, in the event of a breach or
threatened breach of this Agreement, the Company or its successors or assigns
may, in addition to other rights and remedies existing in their favor, apply to
any court of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce, or prevent any violations of, the
provisions hereof (without posting a bond or other security).
12. CONFIDENTIAL INFORMATION OF PRIOR EMPLOYERS.
(a) DISCLOSURE AND USE. Executive acknowledges and agrees that
Executive has been employed based upon personal and professional attributes
attained through his experience and education and that his employment with the
Company is not predicated on any implied or explicit understanding or inference
that Executive shall disclose or use any proprietary or confidential information
that Executive has acquired or been made privy to as a result of his prior
employment or relationships. Executive acknowledges and affirms that he has
been directed by the Company not to display or otherwise make available to the
Company, directly or indirectly (including by undisclosed incorporation in his
work product), any such proprietary or confidential information. Executive
represents and warrants that: (i) he has not misappropriated, infringed or
otherwise improperly disclosed or used any proprietary or confidential
information (in whatever form or medium) that he has acquired or been made privy
to as a result of his prior employment or relationships; (ii) no claim by any of
Executive's former employers or any other
13
<PAGE>
third parties alleging misappropriation, infringement or improper disclosure or
use of same has been made, is currently outstanding or is threatened, and there
are no grounds therefor; and (iii) no injunction or judgment has been imposed on
Executive that restricts him from disclosing or using same.
(b) PRIOR AGREEMENTS. Executive represents and warrants that:
(i) Executive has provided the Company with copies of any and all written
agreements or other arrangements that restrict or limit his conduct or
activities; (ii) Executive has no oral agreements or constraints with respect to
his conduct or activities; and (iii) all such written and oral agreements,
arrangements and constraints are listed on SCHEDULE 14(b) attached hereto and
incorporated herein. Executive recognizes that the Company is not in a position
to evaluate the scope or extent of his obligations and agreements and is not a
party to such agreements. His disclosure of such agreements in no way creates
an imputation or assumption of such agreements to or by the Company.
(c) PERFORMANCE OF EMPLOYMENT DUTIES. The Company has explained to
Executive the scope and responsibilities of his employment, and Executive hereby
represents and warrants that the performance of his employment duties shall not
place him in breach or violation of any pre-existing fiduciary duty, covenant,
agreement, restriction or limitation. Executive acknowledges and agrees that
Executive has been directed by the Company not to engage in any conduct or
activity that would cause him to violate any pre-existing fiduciary duty,
covenant, agreement, restriction or limitation and that, if requested to engage
in any activity or job function or to disclose any information that would result
in any such violation, Executive shall report such request immediately and is
relieved from any obligation to comply with such request.
13. NO CONFLICTS. Executive represents and warrants that there is no
other contract in existence, written or oral, between him and any third party
that relates to the grant or assignment to others of any interest in
intellectual property hereafter contributed to, or conceived or made by, him and
that his performance of his duties to the Company will not place him in breach
of any existing agreement.
GENERAL PROVISIONS
14. CODE SECTION 280G. Notwithstanding any provision in this Agreement to
the contrary, if all or any portion of the payments or benefits received or
realized by Executive either alone or together with other payments or benefits
which Executive receives or realizes or is then entitled to receive or realize
from the Company or any of its affiliates would constitute a "parachute payment"
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (or any successor section) and the regulations promulgated thereunder
(the "Code") and/or any corresponding and applicable state law provision, such
payments or benefits provided to Executive shall be reduced by reducing the
amount of payments or benefits payable to Executive pursuant to Section 9 of
this Agreement to the extent necessary so that no portion of such payments shall
be subject to the excise tax imposed by Section 4999 of the Code and any
corresponding and/or applicable state law provision; provided, however, that
such reduction shall only be made if, by reason of such reduction, Executive's
net after tax benefit shall exceed the
14
<PAGE>
net after tax benefit if such reduction were not made. For purposes of this
Section 14, "net after tax benefit" shall mean the sum of (i) the total amount
received or realized by Executive pursuant to this Agreement that would
constitute a "parachute payment" within the meaning of Section 280G of the Code
and any corresponding and applicable state law provision plus (ii) all other
payments or benefits which Executive receives or realizes or is then entitled to
receive or realize from the Company and any of its affiliates that would
constitute a "parachute payment" within the meaning of Section 280G of the Code
and any corresponding and applicable state law provision, less (iii) the amount
of federal or state income taxes payable with respect to the payments or
benefits described in (i) and (ii) above calculated at the maximum marginal
individual income tax rate for each year in which payments or benefits shall be
realized by Executive (based upon the rate in effect for such year as set forth
in the Code at the time of the first receipt or realization of the foregoing),
less (iv) the amount of excise taxes imposed with respect to the payments or
benefits described in (i) and (ii) above by Section 4999 of the Code and any
corresponding and applicable state law provision.
15. DEFINITIONS.
"BOARD" means the Company's Board of Directors.
"CEO" means the Company's Chief Executive Officer.
"CHANGE OF CONTROL" means any sale, exchange, transfer or issuance, or
series of related sales, exchanges, transfers or issuances of shares of the
Company's capital stock in a recapitalization or otherwise which results in any
person or group of related persons other than holders of Common Stock as of the
date hereof, owning shares entitling them to a majority of the ordinary voting
power to elect directors of the Company.
"COMMON STOCK" means the Company's Class A Common and Class B Common.
"EBITDA" for any fiscal period of the Company means the Company's
consolidated earnings from continuing operations before interest, taxes,
depreciation and amortization for such fiscal period, as determined in
accordance with GAAP.
"EBITDA PERCENTAGE" as of the end of any fiscal period of the Company means
the quotient of (a) the Company's EBITDA for such period divided by (b) the sum
of (1) the monthly average amount of equity invested (not including retained
earnings) in the Company during such period plus (2) the monthly average amount
of Indebtedness of the Company during such period, all as determined in
accordance with GAAP.
"EQUITY PURCHASE AGREEMENT" means the Equity Purchase Agreement by and
between the Company and the Investor dated as of December 3, 1993.
"EXECUTIVE'S FAMILY GROUP" means Executive's spouse and descendants
(whether natural or adopted) and any trust solely for the benefit of Executive
and/or Executive's spouse and/or descendants. Executive Stock will also include
shares of the Company's capital stock issued with respect to Executive Stock by
way of a stock split, stock dividend or other recapitalization.
15
<PAGE>
"EXECUTIVE STOCK" will continue to be Executive Stock in the hands of any
holder other than Executive (except for the Company and the Investor and except
for transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Executive Stock will succeed to all rights and obligations
attributable to Executive as a holder of Executive Stock hereunder.
"FAIR MARKET VALUE" of each share of Executive Stock means the average of
the closing prices of the sales of the Company's Common Stock on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day the Common Stock is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or,
if on any day the Common Stock is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic over-the-
counter market as reported by the National Quotation Bureau Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which the Fair Market Value is being determined
and the 20 consecutive business days prior to such day. If at any time the
Common Stock is not listed on any securities exchange or quoted in the NASDAQ
System or the over-the-counter market, the Fair Market Value will be the fair
value of the Common Stock determined in good faith by the Board. Such
determination will not reflect discounts for "minority interest" restrictions
upon resale or "limited market" considerations. If the Executive does not agree
with the fair market value determined by the Board, then Executive may request
that such value be determined by an independent investment banking firm of
national or regional reputation utilizing valuation techniques then commonly
used for the valuation of such investment interests, which investment banking
firm will be jointly selected by the Board and Executive in good faith, and
expenses of which will be borne equally by the Company and Executive. If the
Board and Executive cannot agree on an investment banking firm, the Board shall
select one investment banking firm and Executive shall select a second
investment banking firm, which firms shall jointly select a third investment
banking firm (the "Third Firm"). The Third Firm shall then determine the Fair
Market Value in accordance with the specifications set forth within this
definition.
"GAAP" means generally accepted accounting principles, as in effect from
time to time.
"INDEBTEDNESS" shall mean at a particular time, without duplication,
(i) indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which any Person is liable, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business) or any commitment by which any Person assures a
creditor against loss, including contingent reimbursement obligations with
respect to letters of credit and (ii) indebtedness guaranteed in any manner by
any Person, including guarantees in the form of an agreement to repurchase or
reimburse.
"ORIGINAL COST" of each share of Class B Common purchased hereunder will be
equal to the price paid therefor as determined pursuant to Section 1(a) above
(as proportionately adjusted for all subsequent stock splits, stock dividends
and other recapitalizations).
16
<PAGE>
"PROJECTED EBITDA" for any fiscal period of the Company shall mean the
EBITDA of the Company for such fiscal period set forth on Appendix 2 attached
hereto.
"PROJECTED EBITDA PERCENTAGE" for any fiscal period of the Company shall
mean the EBITDA Percentage of the Company for such fiscal period set forth on
Appendix 2 attached hereto.
"PUBLIC SALE" means any sale pursuant to a registered public offering under
the Securities Act or any sale to the public pursuant to Rule 144 promulgated
under the Securities Act effected through a broker, dealer or market maker.
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Company's Common
Stock having an aggregate offering value of at least $30 million.
"SALE OF THE COMPANY" means any transaction or series of related
transactions pursuant to which any person or entity (other than the Investor)
acquires (i) capital stock of the Company possessing the voting power to elect a
majority of the Board (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock or otherwise) or
(ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"START DATE" shall have the meaning set forth in Section 7.
"STOCKHOLDERS AGREEMENT" means the Amended and Restated Stockholders
Agreement by and among the Company, the Investor, Timothy L. Burfield,
Michael B. Freedman, Charles R. Wallace, J. Jeffrey Gephart, Thomas C. Loftus,
George E. Pepe, James H.S. Cooper, Charles C. Halberg, Mark A. Jerstad,
William J. Gatti, Mary Jane Gatti, Sterling Acquisition Partners, Pharmed, Inc.,
Nelson C. Showalter, Bruce Gerlick, Mitch Overstreet, Lee R. Youngberg, Frank R.
Gelafio, Ronald E. Keith, James Pietryga, Pharmed of Baton Rouge, Joseph F.
Dellantonio, Thomas C. Loftus and George E. Pepe.
"SUBSIDIARY" means any corporation of which the Company owns securities
having a majority of the ordinary voting power in electing the board of
directors directly or through one or more subsidiaries.
16. NOTICES. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
service (charges prepaid) to the recipient at the address below indicated:
17
<PAGE>
IF TO THE COMPANY:
American Medserve Corporation
Park Lake Center
184 Shuman Boulevard
Naperville, Illinois 60563
Attention: CEO
WITH A COPY TO:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
AND
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street, Suite 3400
Chicago, Illinois 60610-4795
IF TO THE EXECUTIVE:
Michael B. Freedman
2022 North Dayton
Chicago, Illinois 60614
IF TO THE INVESTOR:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
WITH A COPY TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Gary R. Silverman, Esq.
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 deposit in the U.S. mail.
18
<PAGE>
17. MISCELLANEOUS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Executive Stock in violation of any provision of this Agreement
shall be void, and the Company shall not record such Transfer on its books or
treat any purported transferee of such Executive Stock as the owner of such
stock for any purpose.
(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 or 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.
(c) COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by
Executive, the Company, the Investor and their respective successors and assigns
(including subsequent holders of Executive Stock); provided that the rights and
obligations of Executive under this Agreement shall not be assignable except in
connection with a permitted transfer of Executive Stock hereunder.
(f) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by and construed in accordance with the internal laws
of the State of Delaware, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware.
(g) OTHER AGREEMENTS. Provisions pertaining to Executive's co-sale
rights are set forth in that certain Amended and Restated Stockholders Agreement
dated as of August 23, 1996 and provisions pertaining to Executive's
registration rights are set forth in that certain Registration Agreement dated
as of August 23, 1996.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
AMERICAN MEDSERVE CORPORATION
By: /s/ Timothy L. Burfield
------------------------------
Its: President
/s/ Michael B. Freedman
-----------------------------------
Michael B. Freedman
Agreed and Accepted:
GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P.
By: GTCR IV, L.P.
Its General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its General Partner
By: /s/ Bryan C. Cressey
-------------------------
Its: Principal
20
<PAGE>
SCHEDULE 14(b)
None
<PAGE>
APPENDIX 1
EXAMPLE OF ADDITIONAL BENEFITS REQUIREMENTS
Assume that Executive was terminated without Cause or assume Executive's
death or disability on the 100th day of a fiscal year and (i) actual EBITDA for
the immediately preceding 12 months was $8 million, (ii) Projected EBITDA for
the then current fiscal year was $10 million, (iii) Projected EBITDA for the
immediately preceding fiscal year was $9 million, (iv) the actual EBITDA
Percentage for the immediately preceding 12 months was 17%, (v) the Projected
EBITDA Percentage for the then current fiscal year was 20% and (vi) the
Projected EBITDA Percentage for the immediately preceding fiscal year was 18%.
Since 100 days had elapsed in the current fiscal year, the 12 month period would
include three months in the current fiscal year and nine months in the
immediately preceding fiscal year. In that event (a) applicable Projected
EBITDA would equal $9.25 million [i.e., (3 DIVIDED BY 12 x $10 million) + (9
DIVIDED BY 12 x $9 million)] and (b) the applicable Projected EBITDA Percentage
would equal 18.5% [i.e., (3 DIVIDED BY 12 x 20) + (9 DIVIDED BY 12 x 18)]. The
Performance Vesting Shares would continue to vest, since (x) actual EBITDA was
greater than 85% of applicable Projected EBITDA [i.e., $9.25 million x 85% =
$7.86 million, which is less than actual EBITDA of $8 million] and (y) the
actual EBITDA Percentage was greater than 85% of the applicable Projected EBITDA
Percentage [18.5 x 85% = 15.725%, which is less than the actual EBITDA
Percentage of 17%].
<PAGE>
APPENDIX 2
Projected
Year Projected EBITDA EBITDA Percentage
---- ---------------- -----------------
1996 $5,368,000 12.75%
1997 $9,337,000 16.95%
1998 $13,976,000 20.68%
1999 $19,387,000 24.43%
2000 $24,233,750 28.00%
NOTE: Projected EBITDA Percentage will be recalculated to reflect any
significant recapitalization, including a Qualified Public
Offering, of the Company.
<PAGE>
Exhibit 10.10
SENIOR MANAGEMENT AGREEMENT
THIS AGREEMENT is made as of September 5, 1996, between American Medserve
Corporation, a Delaware corporation (the "Company"), and Charles R. Wallace
("Executive").
The Company and Executive desire to enter into an agreement pursuant to
which Executive will purchase, and the Company will sell the number of shares of
the Company's Class B Common Stock, par value $.01 per share (the "Class B
Common") set forth in Section 1(a) below. All of such shares of Class B Common
and all shares of Class B Common hereafter acquired by Executive pursuant to
this Agreement are referred to herein as "Executive Stock." Certain definitions
are set forth in Section 15 of this Agreement.
The execution and delivery of this Agreement by the Company and Executive
is a condition to the Executive's purchase of shares of the Class B Common.
Certain provisions of this Agreement are intended for the benefit of, and will
be enforceable by, Golder, Thoma, Cressey, Rauner Fund IV, L.P. (the
"Investor"), and the Investor is an intended third party beneficiary of this
Agreement.
The parties also desire to enter into an agreement pursuant to which
Executive shall be employed by the Company as the Company's Vice President-
Finance and Chief Financial Officer.
The parties hereto agree as follows:
PROVISIONS RELATING TO EXECUTIVE STOCK
1. PURCHASE AND SALE OF EXECUTIVE STOCK.
(a) Executive hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to Executive, 1,496.4457 shares of Class B Common.
The purchase price per share of Class B Common (the "Purchase Price") shall
equal $98.46.
(b) The closing of the purchase and sale of the Class B Common (the
"Closing") shall take place at the offices of Kirkland & Ellis, 200 East
Randolph Drive, Chicago, Illinois 60601 at 10:00 a.m. on September 5, 1996, or
at such other place or on such other date as may be mutually agreeable to the
Company and the Executive. At the Closing, the Company shall deliver to the
Executive stock certificates evidencing the Class B Common to be purchased by
the Executive, registered in the Executive's name, upon payment of the purchase
price thereof by a cashier's or certified check, or by wire transfer of
immediately available funds to such account as designated by the Company in an
amount not less than $14,734.00 and by delivery of a promissory note
substantially in the form attached hereto as EXHIBIT A (the "Executive Note") in
the amount of the balance of the Purchase Price owed in respect of the Class B
Common purchased hereunder. Executive's obligations under the Executive Note
will be secured by a
<PAGE>
pledge of all of the shares of Executive Stock to the Company and in connection
therewith Executive shall enter into a pledge agreement in the form of EXHIBIT B
attached hereto.
(c) Within 30 days after the purchase of Executive Stock by Executive
from the Company, Executive shall make an effective election with the Internal
Revenue Service under Section 83(b) of the Internal Revenue Code and the
regulations promulgated thereunder substantially in the form of EXHIBIT C
attached hereto and will promptly notify the Company of such election.
(d) Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by Executive pursuant
to this Agreement will be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of
the Securities Act, or any applicable state securities laws, and the
Executive Stock will not be disposed of in contravention of the
Securities Act or any applicable state securities laws.
(ii) Executive is sophisticated in financial matters and is
able to evaluate the risks and benefits of the investment in the
Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Stock for an indefinite period of time
because the Executive Stock 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.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
the Executive Stock and has had access to such other information
concerning the Company as he has requested.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Executive
does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Executive is a party or any
judgment, order or decree to which Executive is subject.
(e) As an inducement to the Company to issue the Executive Stock to
Executive, and as a condition thereto, Executive acknowledges and agrees that:
(i) Neither the issuance of any of the Executive Stock to
Executive nor any provision hereof shall entitle Executive to remain
in the employment of the Company and its Subsidiaries or affect the
right of the Company to terminate Executive's employment at any time
for any reason.
2
<PAGE>
(ii) The Company shall have no duty or obligation to disclose
to Executive, and Executive shall have no right to be advised of, any
material information regarding the Company or any Subsidiary at any
time prior to, upon or in connection with the repurchase of the
Executive Stock upon the termination of Executive's employment with
the Company or any Subsidiary or as otherwise provided hereunder.
(f) As an inducement to the Company to issue the Executive Stock to
Executive, and as a condition thereto, Executive covenants and agrees to enter
into an Amended and Restated Stockholders Agreement in the form of EXHIBIT D
attached hereto.
2. VESTING OF EXECUTIVE STOCK.
(a) FULLY VESTED SHARES. 25% of the shares of Executive Stock
purchased hereunder (the "Fully Vested Shares") are vested on the date hereof.
(b) PERFORMANCE VESTING SHARES.
(i) Except as otherwise provided in Sections 2(b)(ii) and
2(b)(iii) below, 30% of the shares of Executive Stock purchased
hereunder (the "Performance Vesting Shares") shall vest on the seventh
anniversary of the Start Date, if as of such date Executive is still
employed by the Company or any Subsidiary, provided that if at the end
of any of the first five fiscal years of the Company following the
date hereof, both the Company's EBITDA and EBITDA Percentage equal or
exceed 90% of the Company's Projected EBITDA and Projected EBITDA
Percentage, as determined in good faith by the Board, respectively,
for such fiscal years, then 20% of the Performance Vesting Shares
shall vest as of the end of each fiscal year in which such requirement
is satisfied. In the event the Company does not satisfy the
requirement for 20% of the Performance Vesting Shares to vest as of
the end of any fiscal year, IF (i) the sum of the Company's EBITDA for
the fiscal year in which such requirement is not met and the
immediately succeeding fiscal year equals or exceeds 90% of the sum of
the Company's Projected EBITDA for such two fiscal years, and (ii) the
average of the Company's EBITDA Percentages for such two years equals
or exceeds 90% of the average of the Company's Projected EBITDA
Percentages for such two fiscal years, THEN 40% of the Performance
Vesting Shares shall vest as of the end of the second of such two
fiscal years.
(ii) Except as set forth in Section 2(b)(iii) below, in the
event Executive ceases to be employed by the Company for any reason,
then any Performance Vesting Shares which have not become vested on or
prior to such date shall not vest after such date. Upon the
occurrence of a Sale of the Company while the Executive is still
employed by the Company or its Subsidiaries, all Performance Vesting
Shares which have not yet become vested shall become vested at the
time of such event.
3
<PAGE>
(iii) In the event the Company terminates Executive (other than
for Cause) or in the event of Executive's death or disability (as
reasonably determined by the Board or CEO) prior to the fifth
anniversary of the date of the Closing and the Additional Benefits
Requirements (as defined below) are satisfied as determined in good
faith by the Board, the Performance Vesting Shares shall continue to
vest after Executive's termination, death or disability as applicable
in accordance with the provisions of Section 2(b)(i) as if Executive
were still employed by the Company.
The "Additional Benefits Requirements" are defined as:
(x) the Company's EBITDA for the 12 months ending as
of the month end immediately preceding the date of Executive's
termination equals or exceeds 85% of the Projected EBITDA for
such 12 month period, provided that if such 12 month period is
not one complete fiscal year of the Company, then the Projected
EBITDA for such period shall be deemed to be a proportionate
blend of the Projected EBITDA for the then current fiscal year
and the immediately preceding fiscal year taking into account the
relative number of months elapsed in each such fiscal year which
are part of such 12 month period; and
(y) the Company's EBITDA Percentage as of the end of
such 12 month period equals or exceeds 85% of the Projected
EBITDA Percentage as of the end of such 12 month period, provided
that if such 12 month period is not one complete fiscal year of
the Company, then the Company's Projected EBITDA Percentage for
such period shall be deemed to be a proportionate blend of the
Projected EBITDA Percentages for the then current fiscal year and
the immediately preceding fiscal year, taking into account the
relative number of months elapsed in each such fiscal year which
are part of such 12 month period.
See attached Appendix 1 for an example of such calculation.
(c) TIME VESTING SHARES.
(i) Except as otherwise provided in Section 2(c)(ii) below,
45% of the shares of Executive Stock purchased hereunder (the "Time
Vesting Shares") will become vested in accordance with the following
schedule, if as of each such date Executive is still employed by the
Company or any Subsidiary:
4
<PAGE>
Cumulative Percentage of
Time Vesting Shares
Date Vested
---- ------
At the Start Date 20%
1st Anniversary of the Start Date 36%
2nd Anniversary of the Start Date 52%
3rd Anniversary of the Start Date 68%
4th Anniversary of the Start Date 84%
5th Anniversary of the Start Date 100%
(ii) If Executive ceases to be employed by the Company or its
Subsidiaries on any date prior to an anniversary date listed above,
the cumulative percentage of Time Vesting Shares to become vested will
be determined on a pro rata basis according to the number of days
elapsed since the prior anniversary date. Upon the occurrence of a
Sale of the Company while Executive is still employed by the Company
or its Subsidiaries, all Time Vesting Shares which have not yet become
vested shall become vested at the time of such event. In the event
the Company terminates Executive (other than for Cause) or in the
event of Executive's death or disability (as reasonably determined by
the Board or CEO) prior to the fifth anniversary of the Start Date and
the Additional Benefits Requirements are satisfied as of the date of
Executive's termination, death or disability as applicable, all Time
Vesting Shares which have not become vested prior to the date of such
termination shall become vested on such date. Subject to the
preceding sentence, any Time Vesting Shares which have not become
vested as of the date that Executive ceases to be employed by the
Company or its Subsidiaries shall not vest after such date.
(d) Shares of Executive Stock which have become vested (including the
Fully Vested Shares) are referred to herein as "Vested Shares," and all other
shares of Executive Stock are referred to herein as "Unvested Shares."
3. REPURCHASE OPTION.
(a) Subject to 3(f) below, in the event Executive ceases to be
employed by the Company or its Subsidiaries for any reason (the "Termination"),
the Executive Stock (whether held by Executive or one or more of Executive's
transferees) will be subject to repurchase by the Company and the Investor
pursuant to the terms and conditions set forth in this Section 3 (the
"Repurchase Option").
(b) The purchase price for each Unvested Share will be the lesser of
Executive's Original Cost or the Fair Market Value for such share, and the
purchase price for each Vested Share will be the Fair Market Value for such
share.
5
<PAGE>
(c) The Board may elect to purchase all or any portion of the
Unvested Shares and the Vested Shares by delivering written notice (the
"Repurchase Notice") to the holder or holders of the Executive Stock within 100
days after the Termination. The Repurchase Notice will set forth the number of
Unvested Shares and Vested Shares to be acquired from each holder, the aggregate
consideration to be paid for such shares and the time and place for the closing
of the transaction. The number of shares to be repurchased by the Company shall
first be satisfied to the extent possible from the shares of Executive Stock
held by Executive at the time of delivery of the Repurchase Notice. If the
number of shares of Executive Stock then held by Executive is less than the
total number of shares of Executive Stock which the Company has elected to
purchase, the Company shall purchase the remaining shares elected to be
purchased from the other holder(s) of Executive Stock under this Agreement, pro
rata according to the number of shares of Executive Stock held by such other
holder(s) at the time of delivery of such Repurchase Notice (determined as
nearly as practicable to the nearest share). The number of Unvested Shares and
Vested Shares to be repurchased hereunder will be allocated among Executive and
the other holders of Executive Stock (if any) pro rata according to the number
of shares of Executive Stock to be purchased from such person.
(d) If for any reason the Company does not elect to purchase all of
the Executive Stock pursuant to the Repurchase Option, the Investor shall be
entitled to exercise the Repurchase Option for the shares of Executive Stock the
Company has not elected to purchase (the "Available Shares"). As soon as
practicable after the Company has determined that there will be Available
Shares, but in any event within 60 days after the Termination, the Company shall
give written notice (the "Option Notice") to the Investor setting forth the
number of Available Shares and the purchase price for the Available Shares. The
Investor may elect to purchase any or all of the Available Shares by giving
written notice to the Company within thirty days after the Option Notice has
been given by the Company. As soon as practicable, and in any event within ten
days after the expiration of the thirty day period set forth above, the Company
shall notify each holder of Executive Stock as to the number of shares being
purchased from such holder by the Investor (the "Supplemental Repurchase
Notice"). At the time the Company delivers the Supplemental Repurchase Notice
to the holder(s) of Executive Stock, the Company shall also deliver written
notice to the Investor setting forth the number of shares the Investor is
entitled to purchase, the aggregate purchase price and the time and place of the
closing of the transaction. The number of Unvested Shares and Vested Shares to
be repurchased hereunder shall be allocated among the Company and the Investor
pro rata according to the number of shares of Executive Stock to be purchased by
each of them.
(e) The closing of the purchase of the Executive Stock pursuant to
the Repurchase Option shall take place on the date designated by the Company in
the Repurchase Notice or Supplemental Repurchase Notice, which date shall not be
more than thirty days nor less than five days after the delivery of the later of
either such notice to be delivered. The Company and/or the Investor will pay
for the Executive Stock to be purchased pursuant to the Repurchase Option by
delivery of a check, a wire transfer of funds and/or a note (payable in three
equal annual installments commencing on the first anniversary of such closing
and bearing interest at the corporate base rate as determined by the First
National Bank of Chicago at the time the note is issued) in form and substance
determined by the Board in good faith in the aggregate
6
<PAGE>
amount of the purchase price for such shares. In addition, the Company may pay
the purchase price for such shares by offsetting amounts outstanding under the
Executive Note issued to the Company hereunder and any other debts owed by
Executive to the Company. The Company and the Investor will be entitled to
receive customary representations and warranties from the sellers regarding such
sale and to require all sellers' signatures be guaranteed.
(f) Notwithstanding anything to the contrary set forth above, in the
event the Company terminates Executive (other than for Cause) prior to the fifth
anniversary of the date of Closing and the Additional Benefits Requirements are
satisfied, then (i) Executive will be entitled to retain all Performance Vesting
Shares which are Unvested Shares until it is finally determined whether they
will vest under the EBITDA and EBITDA Percentage tests described in Section 2(b)
above (at which time, as such determinations are made, the Company and the
Investor will be entitled to exercise the Repurchase Option in respect of such
Shares of Executive Stock) and (ii) subject to Section 3(h) below, Executive
shall be entitled to require the Company to purchase all Vested Shares as soon
as practicable after such termination by delivery of written notice to the
Company within 30 days following such termination and all Performance Vesting
Shares which had not vested as of the date of such termination as soon as
practicable after the date on which all such Performance Vesting Shares become
Vested Shares by delivery of written notice to the Company within 30 days
following such vesting. The Company will pay for the Executive Stock to be
purchased pursuant to this Section 3(f) by delivery of a check, a wire transfer
of funds and/or a note (payable in three equal annual installments commencing on
the first anniversary of the date of purchase by the Company and bearing
interest at the corporate base rate as determined by the First National Bank of
Chicago at the time the note is issued) in form and substance determined by the
Board in good faith. In addition, the Company, at its election, may pay the
purchase price of any such shares by offsetting amounts outstanding under the
Executive Note issued to the Company hereunder and any other debts owed by
Executive to the Company.
(g) The right of the Company and the Investor, and the requirement
for the Company, to repurchase Vested Shares pursuant to this Section 3 shall
terminate upon the first to occur of a Sale of the Company or a Qualified Public
Offering.
(h) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and any Subsidiary's debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Stock hereunder which the
Company is otherwise entitled (or required) to make, the Company may (or shall)
make such repurchases as soon as it is permitted to do so under such
restrictions.
4. RESTRICTIONS ON TRANSFER.
(a) TRANSFER OF EXECUTIVE STOCK. Prior to the earlier to occur of
(x) the fifth anniversary of the date of the Closing or (y) 100 days following
the Termination, Executive shall not sell, transfer, assign, pledge or otherwise
dispose of (whether with or without consideration
7
<PAGE>
and whether voluntarily or involuntarily or by operation of law) any interest in
any shares of Executive Stock (a "Transfer"), except pursuant to (i) the
provisions of Section 3 hereof, a Public Sale or a Sale of the Company ("Exempt
Transfers") or (ii) the approval of the Company and the Investor and pursuant to
the provisions of this Section 4; provided that in no event shall any Transfer
of Executive Stock pursuant to this Section 4 be made for any consideration
other than cash payable upon consummation of such Transfer or in installments
over time. Prior to making any Transfer other than an Exempt Transfer (whether
such Transfer occurs prior to or following the dates set forth in clauses (x)
and (y) above), Executive will give written notice (the "Sale Notice") to the
Company and the Investor. The Sale Notice will disclose in reasonable detail
the identity of the prospective transferee(s), the number of shares to be
transferred and the terms and conditions of the proposed transfer. Executive
will not consummate any Transfer until 90 days after the Sale Notice has been
given to the Company and to the Investor, unless the parties to the Transfer
have been finally determined pursuant to this Section 4 prior to the expiration
of such 90-day period. The date of the first to occur of such events is
referred to herein as the "Authorization Date". Notwithstanding the foregoing,
in no event shall Executive be entitled to Transfer (A) any Unvested Shares of
Executive Stock, other than to the Company or the Investor pursuant to Section 3
until, in the case of Time Vesting Shares which are Unvested Shares, 100 days
following such Termination, and in the case of Performance Vesting Shares which
are Unvested Shares, the later of 100 days following such Termination or, if the
Additional Benefits Requirements are satisfied, 100 days following the date upon
which it is finally determined whether such shares shall become Vested Shares or
(B) any Shares of Executive Stock which the Company and/or the Investor have
elected to purchase pursuant to Section 3, except to the Company or the
Investor, as applicable.
(b) FIRST REFUSAL RIGHTS. The Company may elect to purchase all (but
not less than all) of the shares of Executive Stock to be transferred upon the
same terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to Executive and the Investor within 60 days
after the Sale Notice has been given to the Company. If the Company has not
elected to purchase all of the Executive Stock to be transferred, the Investor
may elect to purchase all (but not less than all) of the Executive Stock to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by giving written notice of such election to Executive within 90 days
after the Sale Notice has been given to the Investor. If neither the Company
nor the Investor elects to purchase all of the shares of Executive Stock
specified in the Sale Notice, Executive may transfer the shares of Executive
Stock specified in the Sale Notice, subject to the provisions of Section 4(d)
below, at a price and on terms no more favorable to the transferee(s) thereof
than specified in the Sale Notice during the 60-day period immediately following
the Authorization Date. Any shares of Executive Stock not transferred within
such 60-day period will be subject to the provisions of this Section 4(b) upon
subsequent transfer. The Company may pay the purchase price for such shares by
offsetting amounts outstanding under the Executive Note or any other debts owed
by Executive to the Company.
(c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this
Section 4 will not apply with respect to (i) transfers of shares of Executive
Stock pursuant to applicable laws of descent and distribution or (ii) transfers
of shares of Executive Stock among Executive's Family Group, other than
transfers of the type described in the last sentence of Section 4(a)
8
<PAGE>
above; provided that such restrictions will continue to be applicable to the
Executive Stock after any such transfer and the transferees of such Executive
Stock will have agreed in writing to be bound by the provisions of this
Agreement.
(d) TERMINATION OF RESTRICTIONS. The restrictions on the Transfer of
shares of Executive Stock set forth in this Section 4 will continue with respect
to each share of Executive Stock until the date on which such Executive Stock
has been transferred in a transaction permitted by this Section 4 (except in a
transaction contemplated by Section 4(c)); provided that in any event such
restrictions will terminate on the first to occur of a Sale of the Company or a
Qualified Public Offering; and further provided that the restrictions contained
in clause (A) of the last sentence of Section 4(a) above shall survive in
perpetuity.
5. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) LEGEND. The certificates representing the Executive Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF SEPTEMBER 5, 1996, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER AND IN COMPLIANCE WITH STATE SECURITIES LAWS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT AGREEMENT
BETWEEN THE ISSUER (THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF
DATED AS OF SEPTEMBER 5, 1996. A COPY OF SUCH AGREEMENT MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Executive Stock may sell,
transfer or dispose of any Executive Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
6. LIMITED PREEMPTIVE RIGHTS.
(a) Except for the issuance of Common Stock (i) pursuant to a public
offering registered under the Securities Act, (ii) to a lender to the Company in
connection with a debt facility, (iii) in accordance with Section 8 of the
Stockholders Agreement, (iv) to employees or
9
<PAGE>
directors of the Company and/or its Subsidiaries pursuant to any plan approved
by the Board or (v) as consideration in connection with an acquisition, merger,
joint venture, strategic alliance or similar transaction, if the Company at any
time after the date hereof authorizes the issuance or sale of any shares of
Common Stock or any securities containing options or rights to acquire any
shares of Common Stock (other than as a dividend on the outstanding Common
Stock), the Company shall first offer to sell to each holder of Executive Stock
a portion of such stock or securities equal to the quotient determined by
dividing (1) the number of shares of Executive Stock held by such holder by
(2) the total number of shares of Common Stock outstanding on a fully diluted
basis immediately prior to such issuance. Each holder of Executive Stock shall
be entitled to purchase such stock or securities at the most favorable price and
on the most favorable terms as such stock or securities are to be offered to any
other Persons.
(b) In order to exercise its purchase rights hereunder, a holder of
Executive Stock must, within 30 days after receipt of written notice from the
Company describing in reasonable detail the stock or securities being offered,
the purchase price thereof, the payment terms and such holder's percentage
allotment, deliver a written notice to the Company describing its election
hereunder. If all of the stock and securities offered to the holders of
Executive Stock is not fully subscribed by such holders, the remaining stock and
securities shall be reoffered by the Company to the holders purchasing their
full allotment upon the terms set forth in this Section, except that such
holders must exercise their purchase rights within five days after receipt of
such reoffer.
(c) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the holders of
Executive Stock have not elected to purchase during the 90 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to such holders. Any stock or securities offered or sold by
the Company after such 90-day period must be reoffered to the holders of
Executive Stock pursuant to the terms of this Section.
(d) Nothing contained in this Section 6 shall be deemed to amend,
modify or limit in any way the restrictions on the issuance of shares of Stock
set forth in Section 3C of the Equity Purchase Agreement or in any other
agreement to which the Company is presently bound.
(e) The rights of Executive set forth in this Section 6 shall
terminate on the first to occur of a Sale of the Company or a Qualified Public
Offering.
In the event that, in connection with its purchase of shares of Common
Stock or securities containing options or rights to acquire shares of Common
Stock ("Common Convertible Securities") as described in this Section 6, the
other purchasers are also purchasing other securities of the Company or any
Subsidiary (collectively, the "Other Securities"), then the Executive shall
purchase a ratio of Other Securities to the number of Shares of Common Stock or
Common Convertible Securities in the same proportion as the other purchasers
purchase in each of such securities.
10
<PAGE>
PROVISIONS RELATING TO EMPLOYMENT
7. EMPLOYMENT. The Company agrees to employ Executive and Executive
accepts such employment for the period beginning as of September 25, 1995 (the
"Start Date") and ending upon termination pursuant to Section 9 hereof (the
"Employment Period"). During the Employment Period, Executive shall serve as
the Vice President-Finance and Chief Financial Officer of the Company and shall
have the normal duties, responsibilities and authority of a Vice President-
Finance and Chief Financial Officer, including, without limitation,
responsibility for all aspects of financial management, subject to the power of
the Board and the CEO to supervise, and to override any related actions.
8. SALARY, BONUS AND BENEFITS. During the Employment Period, the Company
will pay Executive a base salary (the "Annual Base Salary") as the Board or the
Compensation Committee of the Board may designate from time to time, in its sole
discretion. Following the end of each fiscal year, the Board may, in its sole
discretion, award a bonus to Executive in an amount not to exceed 40% of
Executive's Annual Base Salary for such year, as determined by the Board based
upon the Company's achievement of budgetary and other objectives. Executive's
Annual Base Salary for any partial year will be prorated based upon the number
of days elapsed in such year. Executive will also receive an automobile
allowance of $550 per month and be eligible to participate in group insurance,
vacation and retirement savings (401(k)) plans as the Company may make available
to its executives.
9. TERMINATION.
(a) The Employment Period will continue until Executive's
resignation, disability (as reasonably determined by the Board or the CEO) or
death or until the Board or the CEO determines in its good faith judgment that
termination of Executive's employment is in the best interests of the Company.
(b) If the Company terminates Executive's employment without Cause,
the Company shall provide at least six months written notice to the Executive
prior to the effectiveness of such termination (the "Notice Period"); provided,
however, that if the Company terminates Executive's employment without Cause and
determines that Executive's employment with the Company shall immediately cease,
Executive shall be entitled to receive payments (payable in monthly
installments) equal to the lower of (i) the rate of the Annual Base Salary for
six months following the date of such termination or (ii) the rate of the Annual
Base Salary for the portion of the Notice Period during which Executive is no
longer employed by the Company. Amounts payable by the Company to Executive
pursuant to this Section 9(b) shall be reduced by the amount of any payments
received by Executive from other employment (whether as an employee, consultant
or otherwise) during or in respect of the period in which payments are being
made pursuant to this Section 9(b), and Executive hereby agrees that upon the
termination of Executive, Executive shall use his best efforts to seek
employment with similar responsibilities and similar compensation to the
position with the Company contemplated by the terms of this Agreement. The
Company may cease making payments to Executive pursuant to this Section 9(b) at
any time after which Executive breaches any of the provisions of Section 10
11
<PAGE>
or 11; provided that no such cessation shall relieve Executive of his
obligations under Section 10 or 11.
(c) If Executive's employment with the Company is terminated by the
Company for Cause or as a result of a voluntary termination by Executive, then
Executive's right to receive the Annual Base Salary and other benefits shall
cease on the date of such termination and no severance payments shall be made.
(d) For purposes of this Agreement, "Cause" shall mean (i) the
commission of a felony or the commission of any other act which is materially
injurious to the Company or any Subsidiary involving dishonesty, disloyalty or
fraud with respect to the Company or any Subsidiary, (ii) gross negligence or
willful misconduct with respect to the Company or any Subsidiary which is
materially injurious to the Company or any Subsidiary, (iii) willful,
substantial and repeated failure to perform duties commensurate with his
position as reasonably directed in writing by the Board or the CEO in good
faith, or (iv) any other material breach of this Agreement which is not cured
within 21 days after written notice thereof to Executive.
10. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him during the course of his
performance under this Agreement concerning the business and affairs of the
Company and its affiliates are the property of the Company. Therefore,
Executive agrees that he will not disclose to any unauthorized person or use for
his own account or for the account of any third party any of such information,
observations or data without the Board's written consent, unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public other than as a result of Executive's acts or omissions to
act. Executive shall use his best efforts to prevent the unauthorized misuse,
espionage, loss or theft of the aforementioned matters. Executive agrees to
deliver to the Company at the termination of his employment, or at any other
time the Company may request in writing, all memoranda, notes, plans, records,
reports and other documents (and copies thereof) relating to the business of the
Company and its affiliates (including, without limitation, all acquisition
prospects, lists and contact information) which he may then possess or have
under his control.
11. NONCOMPETITION AND NONSOLICITATION.
(a) NONCOMPETITION. Executive acknowledges that in the course of his
employment with the Company he will become familiar with the Company's trade
secrets and with other confidential information concerning the Company and that
his services will be of special, unique and extraordinary value to the Company.
Therefore, in consideration of the opportunity to purchase Executive Stock and
in consideration of the other rights given to Executive hereunder, Executive
agrees that, during the Employment Period and (i) if Executive's employment is
terminated by the Company for Cause or as a result of voluntary termination by
Executive, for two years thereafter, or (ii) if Executive's employment is
terminated for any other reason, the period during which the Company is required
(without giving effect to the last two sentences of Section 9(b)) to make
payments to Executive pursuant to Section 9(b) (the "Noncompete Period"), he
shall not directly or indirectly own, manage, control, participate in,
12
<PAGE>
consult with, render services for, or in any manner engage in any business
competing with the businesses of the Company or its Subsidiaries as such
businesses exist on the date of the termination of Executive's employment,
within those limited states or metropolitan areas in which the Company is
engaged in business (or in which the Company is in the process of attempting to
engage in business) during the Employment Period or at the time of termination
of Executive's employment.
(b) NONSOLICITATION. During the Employment Period and for two years
thereafter, Executive shall not directly or indirectly through another person or
entity (i) induce or attempt to induce any employee of the Company or any
Subsidiary to leave the employ of the Company or such Subsidiary, or in any way
interfere with the relationship between the Company or any Subsidiary and any
employee thereof, (ii) hire any person who was an employee of the Company or any
Subsidiary at any time during the Employment Period, or (iii) induce or attempt
to induce any customer, supplier, licensee or other business relationship of the
Company or any Subsidiary to cease doing business with the Company or such
Subsidiary, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relationship and the Company or any
Subsidiary.
(c) ENFORCEMENT. If, at the time of enforcement of Section 10 or 11
of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum duration, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the court shall be allowed to revise the restrictions contained herein to cover
the maximum duration, scope and area permitted by law. Because Executive's
services are unique and because Executive has access to confidential
information, the parties hereto agree that money damages would be an inadequate
remedy for any breach of this Agreement. Therefore, in the event of a breach or
threatened breach of this Agreement, the Company or its successors or assigns
may, in addition to other rights and remedies existing in their favor, apply to
any court of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce, or prevent any violations of, the
provisions hereof (without posting a bond or other security).
12. CONFIDENTIAL INFORMATION OF PRIOR EMPLOYERS.
(a) DISCLOSURE AND USE. Executive acknowledges and agrees that
Executive has been employed based upon personal and professional attributes
attained through his experience and education and that his employment with the
Company is not predicated on any implied or explicit understanding or inference
that Executive shall disclose or use any proprietary or confidential information
that Executive has acquired or been made privy to as a result of his prior
employment or relationships. Executive acknowledges and affirms that he has
been directed by the Company not to display or otherwise make available to the
Company, directly or indirectly (including by undisclosed incorporation in his
work product), any such proprietary or confidential information. Executive
represents and warrants that: (i) he has not misappropriated, infringed or
otherwise improperly disclosed or used any proprietary or confidential
information (in whatever form or medium) that he has acquired or been made privy
to as a result of his prior employment or relationships; (ii) no claim by any of
Executive's former employers or any other
13
<PAGE>
third parties alleging misappropriation, infringement or improper disclosure or
use of same has been made, is currently outstanding or is threatened, and there
are no grounds therefor; and (iii) no injunction or judgment has been imposed on
Executive that restricts him from disclosing or using same.
(b) PRIOR AGREEMENTS. Executive represents and warrants that:
(i) Executive has provided the Company with copies of any and all written
agreements or other arrangements that restrict or limit his conduct or
activities; (ii) Executive has no oral agreements or constraints with respect to
his conduct or activities; and (iii) all such written and oral agreements,
arrangements and constraints are listed on SCHEDULE 14(b) attached hereto and
incorporated herein. Executive recognizes that the Company is not in a position
to evaluate the scope or extent of his obligations and agreements and is not a
party to such agreements. His disclosure of such agreements in no way creates
an imputation or assumption of such agreements to or by the Company.
(c) PERFORMANCE OF EMPLOYMENT DUTIES. The Company has explained to
Executive the scope and responsibilities of his employment, and Executive hereby
represents and warrants that the performance of his employment duties shall not
place him in breach or violation of any pre-existing fiduciary duty, covenant,
agreement, restriction or limitation. Executive acknowledges and agrees that
Executive has been directed by the Company not to engage in any conduct or
activity that would cause him to violate any pre-existing fiduciary duty,
covenant, agreement, restriction or limitation and that, if requested to engage
in any activity or job function or to disclose any information that would result
in any such violation, Executive shall report such request immediately and is
relieved from any obligation to comply with such request.
13. NO CONFLICTS. Executive represents and warrants that there is no
other contract in existence, written or oral, between him and any third party
that relates to the grant or assignment to others of any interest in
intellectual property hereafter contributed to, or conceived or made by, him and
that his performance of his duties to the Company will not place him in breach
of any existing agreement.
GENERAL PROVISIONS
14. CODE SECTION 280G. Notwithstanding any provision in this Agreement to
the contrary, if all or any portion of the payments or benefits received or
realized by Executive either alone or together with other payments or benefits
which Executive receives or realizes or is then entitled to receive or realize
from the Company or any of its affiliates would constitute a "parachute payment"
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (or any successor section) and the regulations promulgated thereunder
(the "Code") and/or any corresponding and applicable state law provision, such
payments or benefits provided to Executive shall be reduced by reducing the
amount of payments or benefits payable to Executive pursuant to Section 9 of
this Agreement to the extent necessary so that no portion of such payments shall
be subject to the excise tax imposed by Section 4999 of the Code and any
corresponding and/or applicable state law provision; provided, however, that
such reduction shall only be made if, by reason of such reduction, Executive's
net after tax benefit shall exceed the
14
<PAGE>
net after tax benefit if such reduction were not made. For purposes of this
Section 14, "net after tax benefit" shall mean the sum of (i) the total amount
received or realized by Executive pursuant to this Agreement that would
constitute a "parachute payment" within the meaning of Section 280G of the Code
and any corresponding and applicable state law provision plus (ii) all other
payments or benefits which Executive receives or realizes or is then entitled to
receive or realize from the Company and any of its affiliates that would
constitute a "parachute payment" within the meaning of Section 280G of the Code
and any corresponding and applicable state law provision, less (iii) the amount
of federal or state income taxes payable with respect to the payments or
benefits described in (i) and (ii) above calculated at the maximum marginal
individual income tax rate for each year in which payments or benefits shall be
realized by Executive (based upon the rate in effect for such year as set forth
in the Code at the time of the first receipt or realization of the foregoing),
less (iv) the amount of excise taxes imposed with respect to the payments or
benefits described in (i) and (ii) above by Section 4999 of the Code and any
corresponding and applicable state law provision.
15. DEFINITIONS.
"BOARD" means the Company's Board of Directors.
"CEO" means the Company's Chief Executive Officer.
"CHANGE OF CONTROL" means any sale, exchange, transfer or issuance, or
series of related sales, exchanges, transfers or issuances of shares of the
Company's capital stock in a recapitalization or otherwise which results in any
person or group of related persons other than holders of Common Stock as of the
date hereof, owning shares entitling them to a majority of the ordinary voting
power to elect directors of the Company.
"COMMON STOCK" means the Company's Class A Common and Class B Common.
"EBITDA" for any fiscal period of the Company means the Company's
consolidated earnings from continuing operations before interest, taxes,
depreciation and amortization for such fiscal period, as determined in
accordance with GAAP.
"EBITDA PERCENTAGE" as of the end of any fiscal period of the Company means
the quotient of (a) the Company's EBITDA for such period divided by (b) the sum
of (1) the monthly average amount of equity invested (not including retained
earnings) in the Company during such period plus (2) the monthly average amount
of Indebtedness of the Company during such period, all as determined in
accordance with GAAP.
"EQUITY PURCHASE AGREEMENT" means the Equity Purchase Agreement by and
between the Company and the Investor dated as of December 3, 1993.
"EXECUTIVE'S FAMILY GROUP" means Executive's spouse and descendants
(whether natural or adopted) and any trust solely for the benefit of Executive
and/or Executive's spouse and/or descendants. Executive Stock will also include
shares of the Company's capital stock issued with respect to Executive Stock by
way of a stock split, stock dividend or other recapitalization.
15
<PAGE>
"EXECUTIVE STOCK" will continue to be Executive Stock in the hands of any
holder other than Executive (except for the Company and the Investor and except
for transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Executive Stock will succeed to all rights and obligations
attributable to Executive as a holder of Executive Stock hereunder.
"FAIR MARKET VALUE" of each share of Executive Stock means the average of
the closing prices of the sales of the Company's Common Stock on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day the Common Stock is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or,
if on any day the Common Stock is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic over-the-
counter market as reported by the National Quotation Bureau Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which the Fair Market Value is being determined
and the 20 consecutive business days prior to such day. If at any time the
Common Stock is not listed on any securities exchange or quoted in the NASDAQ
System or the over-the-counter market, the Fair Market Value will be the fair
value of the Common Stock determined in good faith by the Board. Such
determination will not reflect discounts for "minority interest" restrictions
upon resale or "limited market" considerations. If the Executive does not agree
with the fair market value determined by the Board, then Executive may request
that such value be determined by an independent investment banking firm of
national or regional reputation utilizing valuation techniques then commonly
used for the valuation of such investment interests, which investment banking
firm will be jointly selected by the Board and Executive in good faith, and
expenses of which will be borne equally by the Company and Executive. If the
Board and Executive cannot agree on an investment banking firm, the Board shall
select one investment banking firm and Executive shall select a second
investment banking firm, which firms shall jointly select a third investment
banking firm (the "Third Firm"). The Third Firm shall then determine the Fair
Market Value in accordance with the specifications set forth within this
definition.
"GAAP" means generally accepted accounting principles, as in effect from
time to time.
"INDEBTEDNESS" shall mean at a particular time, without duplication,
(i) indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which any Person is liable, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business) or any commitment by which any Person assures a
creditor against loss, including contingent reimbursement obligations with
respect to letters of credit and (ii) indebtedness guaranteed in any manner by
any Person, including guarantees in the form of an agreement to repurchase or
reimburse.
"ORIGINAL COST" of each share of Class B Common purchased hereunder will be
equal to the price paid therefor as determined pursuant to Section 1(a) above
(as proportionately adjusted for all subsequent stock splits, stock dividends
and other recapitalizations).
16
<PAGE>
"PROJECTED EBITDA" for any fiscal period of the Company shall mean the
EBITDA of the Company for such fiscal period set forth on Appendix 2 attached
hereto.
"PROJECTED EBITDA PERCENTAGE" for any fiscal period of the Company shall
mean the EBITDA Percentage of the Company for such fiscal period set forth on
Appendix 2 attached hereto.
"PUBLIC SALE" means any sale pursuant to a registered public offering under
the Securities Act or any sale to the public pursuant to Rule 144 promulgated
under the Securities Act effected through a broker, dealer or market maker.
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Company's Common
Stock having an aggregate offering value of at least $30 million.
"SALE OF THE COMPANY" means any transaction or series of related
transactions pursuant to which any person or entity (other than the Investor)
acquires (i) capital stock of the Company possessing the voting power to elect a
majority of the Board (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock or otherwise) or
(ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"START DATE" shall have the meaning set forth in Section 7.
"STOCKHOLDERS AGREEMENT" means the Amended and Restated Stockholders
Agreement by and among the Company, the Investor, Timothy L. Burfield,
Michael B. Freedman, Charles R. Wallace, J. Jeffrey Gephart, Thomas C. Loftus,
George E. Pepe, James H.S. Cooper, Charles C. Halberg, Mark A. Jerstad,
William J. Gatti, Mary Jane Gatti, Sterling Acquisition Partners, Pharmed, Inc.,
Nelson C. Showalter, Bruce Gerlick, Mitch Overstreet, Lee R. Youngberg, Frank R.
Gelafio, Ronald E. Keith, James Pietryga, Pharmed of Baton Rouge, Joseph F.
Dellantonio, Thomas C. Loftus and George E. Pepe.
"SUBSIDIARY" means any corporation of which the Company owns securities
having a majority of the ordinary voting power in electing the board of
directors directly or through one or more subsidiaries.
16. NOTICES. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
service (charges prepaid) to the recipient at the address below indicated:
17
<PAGE>
IF TO THE COMPANY:
American Medserve Corporation
Park Lake Center
184 Shuman Boulevard
Naperville, Illinois 60563
Attention: CEO
WITH A COPY TO:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
AND
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street, Suite 3400
Chicago, Illinois 60610-4795
IF TO THE EXECUTIVE:
Charles R. Wallace
393 Prairie Avenue
Elmhurst, Illinois 60126
IF TO THE INVESTOR:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
WITH A COPY TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Gary R. Silverman, Esq.
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 deposit in the U.S. mail.
18
<PAGE>
17. MISCELLANEOUS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Executive Stock in violation of any provision of this Agreement
shall be void, and the Company shall not record such Transfer on its books or
treat any purported transferee of such Executive Stock as the owner of such
stock for any purpose.
(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 or 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.
(c) COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by
Executive, the Company, the Investor and their respective successors and assigns
(including subsequent holders of Executive Stock); provided that the rights and
obligations of Executive under this Agreement shall not be assignable except in
connection with a permitted transfer of Executive Stock hereunder.
(f) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by and construed in accordance with the internal laws
of the State of Delaware, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware.
(g) OTHER AGREEMENTS. Provisions pertaining to Executive's co-sale
rights are set forth in that certain Amended and Restated Stockholders Agreement
dated as of August 23, 1996 and provisions pertaining to Executive's
registration rights are set forth in that certain Registration Agreement dated
as of August 23, 1996.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
AMERICAN MEDSERVE CORPORATION
By: /S/ TIMOTHY L. BURFIELD
----------------------------
Its: President
/s/ Charles R. Wallace
---------------------------------
Charles R. Wallace
Agreed and Accepted:
GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P.
By: GTCR IV, L.P.
Its General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its General Partner
By: /s/ BRYAN C. CRESSEY
-------------------------
Its: Principal
20
<PAGE>
SCHEDULE 14(b)
None
<PAGE>
APPENDIX 1
EXAMPLE OF ADDITIONAL BENEFITS REQUIREMENTS
Assume that Executive was terminated without Cause or assume Executive's
death or disability on the 100th day of a fiscal year and (i) actual EBITDA for
the immediately preceding 12 months was $8 million, (ii) Projected EBITDA for
the then current fiscal year was $10 million, (iii) Projected EBITDA for the
immediately preceding fiscal year was $9 million, (iv) the actual EBITDA
Percentage for the immediately preceding 12 months was 17%, (v) the Projected
EBITDA Percentage for the then current fiscal year was 20% and (vi) the
Projected EBITDA Percentage for the immediately preceding fiscal year was 18%.
Since 100 days had elapsed in the current fiscal year, the 12 month period would
include three months in the current fiscal year and nine months in the
immediately preceding fiscal year. In that event (a) applicable Projected
EBITDA would equal $9.25 million [i.e., (3 DIVIDED BY 12 x $10 million) + (9
DIVIDED BY 12 x $9 million)] and (b) the applicable Projected EBITDA Percentage
would equal 18.5% [i.e., (3 DIVIDED BY 12 x 20) + (9 DIVIDED BY 12 x 18)]. The
Performance Vesting Shares would continue to vest, since (x) actual EBITDA was
greater than 85% of applicable Projected EBITDA [i.e., $9.25 million x 85% =
$7.86 million, which is less than actual EBITDA of $8 million] and (y) the
actual EBITDA Percentage was greater than 85% of the applicable Projected EBITDA
Percentage [18.5 x 85% = 15.725%, which is less than the actual EBITDA
Percentage of 17%].
<PAGE>
APPENDIX 2
PROJECTED
YEAR PROJECTED EBITDA EBITDA PERCENTAGE
---- ---------------- -----------------
1996 $5,368,000 12.75%
1997 $9,337,000 16.95%
1998 $13,976,000 20.68%
1999 $19,387,000 24.43%
2000 $24,233,750 28.00%
NOTE: Projected EBITDA Percentage will be recalculated to reflect any
significant recapitalization, including a Qualified Public Offering,
of the Company.
<PAGE>
Exhibit 10.11
SENIOR MANAGEMENT AGREEMENT
THIS AGREEMENT is made as of September 5, 1996, between American Medserve
Corporation, a Delaware corporation (the "Company"), and J. Jeffrey Gephart
("Executive").
The Company and Executive desire to enter into an agreement pursuant to
which Executive will purchase, and the Company will sell the number of shares of
the Company's Class B Common Stock, par value $.01 per share (the "Class B
Common") set forth in Section 1(a) below. All of such shares of Class B Common
and all shares of Class B Common hereafter acquired by Executive pursuant to
this Agreement are referred to herein as "Executive Stock." Certain definitions
are set forth in Section 15 of this Agreement.
The execution and delivery of this Agreement by the Company and Executive
is a condition to the Executive's purchase of shares of the Class B Common.
Certain provisions of this Agreement are intended for the benefit of, and will
be enforceable by, Golder, Thoma, Cressey, Rauner Fund IV, L.P. (the
"Investor"), and the Investor is an intended third party beneficiary of this
Agreement.
The parties also desire to enter into an agreement pursuant to which
Executive shall be employed by the Company as the Company's Vice President-
Sales.
The parties hereto agree as follows:
PROVISIONS RELATING TO EXECUTIVE STOCK
1. PURCHASE AND SALE OF EXECUTIVE STOCK.
(a) Executive hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to Executive, 750.7229 shares of Class B Common.
The purchase price per share of Class B Common (the "Purchase Price") shall
equal $98.46.
(b) The closing of the purchase and sale of the Class B Common (the
"Closing") shall take place at the offices of Kirkland & Ellis, 200 East
Randolph Drive, Chicago, Illinois 60601 at 10:00 a.m. on September 5, 1996, or
at such other place or on such other date as may be mutually agreeable to the
Company and the Executive. At the Closing, the Company shall deliver to the
Executive stock certificates evidencing the Class B Common to be purchased by
the Executive, registered in the Executive's name, upon payment of the purchase
price thereof by a cashier's or certified check, or by wire transfer of
immediately available funds to such account as designated by the Company in an
amount not less than $7,392.00 and by delivery of a promissory note
substantially in the form attached hereto as EXHIBIT A (the "Executive Note") in
the amount of the balance of the Purchase Price owed in respect of the Class B
Common purchased hereunder. Executive's obligations under the Executive Note
will be secured by a pledge of all of the shares of Executive Stock to the
Company and in connection therewith Executive shall enter into a pledge
agreement in the form of EXHIBIT B attached hereto.
<PAGE>
(c) Within 30 days after the purchase of Executive Stock by Executive
from the Company, Executive shall make an effective election with the Internal
Revenue Service under Section 83(b) of the Internal Revenue Code and the
regulations promulgated thereunder substantially in the form of EXHIBIT C
attached hereto and will promptly notify the Company of such election.
(d) Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by Executive pursuant
to this Agreement will be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of
the Securities Act, or any applicable state securities laws, and the
Executive Stock will not be disposed of in contravention of the
Securities Act or any applicable state securities laws.
(ii) Executive is sophisticated in financial matters and is
able to evaluate the risks and benefits of the investment in the
Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Stock for an indefinite period of time
because the Executive Stock 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.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
the Executive Stock and has had access to such other information
concerning the Company as he has requested.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Executive
does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Executive is a party or any
judgment, order or decree to which Executive is subject.
(e) As an inducement to the Company to issue the Executive Stock to
Executive, and as a condition thereto, Executive acknowledges and agrees that:
(i) Neither the issuance of any of the Executive Stock to
Executive nor any provision hereof shall entitle Executive to remain
in the employment of the Company and its Subsidiaries or affect the
right of the Company to terminate Executive's employment at any time
for any reason.
(ii) The Company shall have no duty or obligation to disclose
to Executive, and Executive shall have no right to be advised of, any
material information regarding the Company or any Subsidiary at any
time prior to, upon
2
<PAGE>
or in connection with the repurchase of the Executive Stock upon the
termination of Executive's employment with the Company or any
Subsidiary or as otherwise provided hereunder.
(f) As an inducement to the Company to issue the Executive Stock to
Executive, and as a condition thereto, Executive covenants and agrees to enter
into an Amended and Restated Stockholders Agreement in the form of EXHIBIT D
attached hereto.
2. VESTING OF EXECUTIVE STOCK.
(a) FULLY VESTED SHARES. 30% of the shares of Executive Stock
purchased hereunder (the "Fully Vested Shares") are vested on the date hereof.
(b) PERFORMANCE VESTING SHARES.
(i) Except as otherwise provided in Sections 2(b)(ii) and
2(b)(iii) below, 25% of the shares of Executive Stock purchased
hereunder (the "Performance Vesting Shares") shall vest on the seventh
anniversary of the Start Date, if as of such date Executive is still
employed by the Company or any Subsidiary, provided that if at the end
of any of the first five fiscal years of the Company following the
date hereof, both the Company's EBITDA and EBITDA Percentage equal or
exceed 90% of the Company's Projected EBITDA and Projected EBITDA
Percentage, as determined in good faith by the Board, respectively,
for such fiscal years, then 20% of the Performance Vesting Shares
shall vest as of the end of each fiscal year in which such requirement
is satisfied. In the event the Company does not satisfy the
requirement for 20% of the Performance Vesting Shares to vest as of
the end of any fiscal year, IF (i) the sum of the Company's EBITDA for
the fiscal year in which such requirement is not met and the
immediately succeeding fiscal year equals or exceeds 90% of the sum of
the Company's Projected EBITDA for such two fiscal years, and (ii) the
average of the Company's EBITDA Percentages for such two years equals
or exceeds 90% of the average of the Company's Projected EBITDA
Percentages for such two fiscal years, THEN 40% of the Performance
Vesting Shares shall vest as of the end of the second of such two
fiscal years.
(ii) Except as set forth in Section 2(b)(iii) below, in the
event Executive ceases to be employed by the Company for any reason,
then any Performance Vesting Shares which have not become vested on or
prior to such date shall not vest after such date. Upon the
occurrence of a Sale of the Company while the Executive is still
employed by the Company or its Subsidiaries, all Performance Vesting
Shares which have not yet become vested shall become vested at the
time of such event.
(iii) In the event the Company terminates Executive (other than
for Cause) or in the event of Executive's death or disability (as
reasonably determined by the Board or CEO) prior to the fifth
anniversary of the date of the Closing and
3
<PAGE>
the Additional Benefits Requirements (as defined below) are satisfied
as determined in good faith by the Board, the Performance Vesting
Shares shall continue to vest after Executive's termination, death or
disability as applicable in accordance with the provisions of
Section 2(b)(i) as if Executive were still employed by the Company.
The "Additional Benefits Requirements" are defined as:
(x) the Company's EBITDA for the 12 months ending as of the
month end immediately preceding the date of Executive's
termination equals or exceeds 85% of the Projected EBITDA for
such 12 month period, provided that if such 12 month period is
not one complete fiscal year of the Company, then the Projected
EBITDA for such period shall be deemed to be a proportionate
blend of the Projected EBITDA for the then current fiscal year
and the immediately preceding fiscal year taking into account the
relative number of months elapsed in each such fiscal year which
are part of such 12 month period; and
(y) the Company's EBITDA Percentage as of the end of such
12 month period equals or exceeds 85% of the Projected EBITDA
Percentage as of the end of such 12 month period, provided that
if such 12 month period is not one complete fiscal year of the
Company, then the Company's Projected EBITDA Percentage for such
period shall be deemed to be a proportionate blend of the
Projected EBITDA Percentages for the then current fiscal year and
the immediately preceding fiscal year, taking into account the
relative number of months elapsed in each such fiscal year which
are part of such 12 month period.
See attached Appendix 1 for an example of such calculation.
(c) TIME VESTING SHARES.
(i) Except as otherwise provided in Section 2(c)(ii) below,
45% of the shares of Executive Stock purchased hereunder (the "Time
Vesting Shares") will become vested in accordance with the following
schedule, if as of each such date Executive is still employed by the
Company or any Subsidiary:
4
<PAGE>
Cumulative Percentage of
------------------------
Time Vesting Shares
-------------------
Date Vested
---- ------
At the Start Date 20%
1st Anniversary of the Start Date 36%
2nd Anniversary of the Start Date 52%
3rd Anniversary of the Start Date 68%
4th Anniversary of the Start Date 84%
5th Anniversary of the Start Date 100%
(ii) If Executive ceases to be employed by the Company or its
Subsidiaries on any date prior to an anniversary date listed above,
the cumulative percentage of Time Vesting Shares to become vested will
be determined on a pro rata basis according to the number of days
elapsed since the prior anniversary date. Upon the occurrence of a
Sale of the Company while Executive is still employed by the Company
or its Subsidiaries, all Time Vesting Shares which have not yet become
vested shall become vested at the time of such event. In the event
the Company terminates Executive (other than for Cause) or in the
event of Executive's death or disability (as reasonably determined by
the Board or CEO) prior to the fifth anniversary of the Start Date and
the Additional Benefits Requirements are satisfied as of the date of
Executive's termination, death or disability as applicable, all Time
Vesting Shares which have not become vested prior to the date of such
termination shall become vested on such date. Subject to the
preceding sentence, any Time Vesting Shares which have not become
vested as of the date that Executive ceases to be employed by the
Company or its Subsidiaries shall not vest after such date.
(d) Shares of Executive Stock which have become vested (including the
Fully Vested Shares) are referred to herein as "Vested Shares," and all other
shares of Executive Stock are referred to herein as "Unvested Shares."
3. REPURCHASE OPTION.
(a) Subject to 3(f) below, in the event Executive ceases to be
employed by the Company or its Subsidiaries for any reason (the "Termination"),
the Executive Stock (whether held by Executive or one or more of Executive's
transferees) will be subject to repurchase by the Company and the Investor
pursuant to the terms and conditions set forth in this Section 3 (the
"Repurchase Option").
(b) The purchase price for each Unvested Share will be the lesser of
Executive's Original Cost or the Fair Market Value for such share, and the
purchase price for each Vested Share will be the Fair Market Value for such
share.
5
<PAGE>
(c) The Board may elect to purchase all or any portion of the
Unvested Shares and the Vested Shares by delivering written notice (the
"Repurchase Notice") to the holder or holders of the Executive Stock within 100
days after the Termination. The Repurchase Notice will set forth the number of
Unvested Shares and Vested Shares to be acquired from each holder, the aggregate
consideration to be paid for such shares and the time and place for the closing
of the transaction. The number of shares to be repurchased by the Company shall
first be satisfied to the extent possible from the shares of Executive Stock
held by Executive at the time of delivery of the Repurchase Notice. If the
number of shares of Executive Stock then held by Executive is less than the
total number of shares of Executive Stock which the Company has elected to
purchase, the Company shall purchase the remaining shares elected to be
purchased from the other holder(s) of Executive Stock under this Agreement, pro
rata according to the number of shares of Executive Stock held by such other
holder(s) at the time of delivery of such Repurchase Notice (determined as
nearly as practicable to the nearest share). The number of Unvested Shares and
Vested Shares to be repurchased hereunder will be allocated among Executive and
the other holders of Executive Stock (if any) pro rata according to the number
of shares of Executive Stock to be purchased from such person.
(d) If for any reason the Company does not elect to purchase all of
the Executive Stock pursuant to the Repurchase Option, the Investor shall be
entitled to exercise the Repurchase Option for the shares of Executive Stock the
Company has not elected to purchase (the "Available Shares"). As soon as
practicable after the Company has determined that there will be Available
Shares, but in any event within 60 days after the Termination, the Company shall
give written notice (the "Option Notice") to the Investor setting forth the
number of Available Shares and the purchase price for the Available Shares. The
Investor may elect to purchase any or all of the Available Shares by giving
written notice to the Company within thirty days after the Option Notice has
been given by the Company. As soon as practicable, and in any event within ten
days after the expiration of the thirty day period set forth above, the Company
shall notify each holder of Executive Stock as to the number of shares being
purchased from such holder by the Investor (the "Supplemental Repurchase
Notice"). At the time the Company delivers the Supplemental Repurchase Notice
to the holder(s) of Executive Stock, the Company shall also deliver written
notice to the Investor setting forth the number of shares the Investor is
entitled to purchase, the aggregate purchase price and the time and place of the
closing of the transaction. The number of Unvested Shares and Vested Shares to
be repurchased hereunder shall be allocated among the Company and the Investor
pro rata according to the number of shares of Executive Stock to be purchased by
each of them.
(e) The closing of the purchase of the Executive Stock pursuant to
the Repurchase Option shall take place on the date designated by the Company in
the Repurchase Notice or Supplemental Repurchase Notice, which date shall not be
more than thirty days nor less than five days after the delivery of the later of
either such notice to be delivered. The Company and/or the Investor will pay
for the Executive Stock to be purchased pursuant to the Repurchase Option by
delivery of a check, a wire transfer of funds and/or a note (payable in three
equal annual installments commencing on the first anniversary of such closing
and bearing interest at the corporate base rate as determined by the First
National Bank of Chicago at the time the note is issued) in form and substance
determined by the Board in good faith in the aggregate
6
<PAGE>
amount of the purchase price for such shares. In addition, the Company may pay
the purchase price for such shares by offsetting amounts outstanding under the
Executive Note issued to the Company hereunder and any other debts owed by
Executive to the Company. The Company and the Investor will be entitled to
receive customary representations and warranties from the sellers regarding such
sale and to require all sellers' signatures be guaranteed.
(f) Notwithstanding anything to the contrary set forth above, in the
event the Company terminates Executive (other than for Cause) prior to the fifth
anniversary of the date of Closing and the Additional Benefits Requirements are
satisfied, then (i) Executive will be entitled to retain all Performance Vesting
Shares which are Unvested Shares until it is finally determined whether they
will vest under the EBITDA and EBITDA Percentage tests described in Section 2(b)
above (at which time, as such determinations are made, the Company and the
Investor will be entitled to exercise the Repurchase Option in respect of such
Shares of Executive Stock) and (ii) subject to Section 3(h) below, Executive
shall be entitled to require the Company to purchase all Vested Shares as soon
as practicable after such termination by delivery of written notice to the
Company within 30 days following such termination and all Performance Vesting
Shares which had not vested as of the date of such termination as soon as
practicable after the date on which all such Performance Vesting Shares become
Vested Shares by delivery of written notice to the Company within 30 days
following such vesting. The Company will pay for the Executive Stock to be
purchased pursuant to this Section 3(f) by delivery of a check, a wire transfer
of funds and/or a note (payable in three equal annual installments commencing on
the first anniversary of the date of purchase by the Company and bearing
interest at the corporate base rate as determined by the First National Bank of
Chicago at the time the note is issued) in form and substance determined by the
Board in good faith. In addition, the Company, at its election, may pay the
purchase price of any such shares by offsetting amounts outstanding under the
Executive Note issued to the Company hereunder and any other debts owed by
Executive to the Company.
(g) The right of the Company and the Investor, and the requirement
for the Company, to repurchase Vested Shares pursuant to this Section 3 shall
terminate upon the first to occur of a Sale of the Company or a Qualified Public
Offering.
(h) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and any Subsidiary's debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Stock hereunder which the
Company is otherwise entitled (or required) to make, the Company may (or shall)
make such repurchases as soon as it is permitted to do so under such
restrictions.
4. RESTRICTIONS ON TRANSFER.
(a) TRANSFER OF EXECUTIVE STOCK. Prior to the earlier to occur of
(x) the fifth anniversary of the date of the Closing or (y) 100 days following
the Termination, Executive shall not sell, transfer, assign, pledge or otherwise
dispose of (whether with or without consideration
7
<PAGE>
and whether voluntarily or involuntarily or by operation of law) any interest in
any shares of Executive Stock (a "Transfer"), except pursuant to (i) the
provisions of Section 3 hereof, a Public Sale or a Sale of the Company ("Exempt
Transfers") or (ii) the approval of the Company and the Investor and pursuant to
the provisions of this Section 4; provided that in no event shall any Transfer
of Executive Stock pursuant to this Section 4 be made for any consideration
other than cash payable upon consummation of such Transfer or in installments
over time. Prior to making any Transfer other than an Exempt Transfer (whether
such Transfer occurs prior to or following the dates set forth in clauses (x)
and (y) above), Executive will give written notice (the "Sale Notice") to the
Company and the Investor. The Sale Notice will disclose in reasonable detail
the identity of the prospective transferee(s), the number of shares to be
transferred and the terms and conditions of the proposed transfer. Executive
will not consummate any Transfer until 90 days after the Sale Notice has been
given to the Company and to the Investor, unless the parties to the Transfer
have been finally determined pursuant to this Section 4 prior to the expiration
of such 90-day period. The date of the first to occur of such events is
referred to herein as the "Authorization Date". Notwithstanding the foregoing,
in no event shall Executive be entitled to Transfer (A) any Unvested Shares of
Executive Stock, other than to the Company or the Investor pursuant to Section 3
until, in the case of Time Vesting Shares which are Unvested Shares, 100 days
following such Termination, and in the case of Performance Vesting Shares which
are Unvested Shares, the later of 100 days following such Termination or, if the
Additional Benefits Requirements are satisfied, 100 days following the date upon
which it is finally determined whether such shares shall become Vested Shares or
(B) any Shares of Executive Stock which the Company and/or the Investor have
elected to purchase pursuant to Section 3, except to the Company or the
Investor, as applicable.
(b) FIRST REFUSAL RIGHTS. The Company may elect to purchase all (but
not less than all) of the shares of Executive Stock to be transferred upon the
same terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to Executive and the Investor within 60 days
after the Sale Notice has been given to the Company. If the Company has not
elected to purchase all of the Executive Stock to be transferred, the Investor
may elect to purchase all (but not less than all) of the Executive Stock to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by giving written notice of such election to Executive within 90 days
after the Sale Notice has been given to the Investor. If neither the Company
nor the Investor elects to purchase all of the shares of Executive Stock
specified in the Sale Notice, Executive may transfer the shares of Executive
Stock specified in the Sale Notice, subject to the provisions of Section 4(d)
below, at a price and on terms no more favorable to the transferee(s) thereof
than specified in the Sale Notice during the 60-day period immediately following
the Authorization Date. Any shares of Executive Stock not transferred within
such 60-day period will be subject to the provisions of this Section 4(b) upon
subsequent transfer. The Company may pay the purchase price for such shares by
offsetting amounts outstanding under the Executive Note or any other debts owed
by Executive to the Company.
(c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this
Section 4 will not apply with respect to (i) transfers of shares of Executive
Stock pursuant to applicable laws of descent and distribution or (ii) transfers
of shares of Executive Stock among Executive's Family Group, other than
transfers of the type described in the last sentence of Section 4(a)
8
<PAGE>
above; provided that such restrictions will continue to be applicable to the
Executive Stock after any such transfer and the transferees of such Executive
Stock will have agreed in writing to be bound by the provisions of this
Agreement.
(d) TERMINATION OF RESTRICTIONS. The restrictions on the Transfer of
shares of Executive Stock set forth in this Section 4 will continue with respect
to each share of Executive Stock until the date on which such Executive Stock
has been transferred in a transaction permitted by this Section 4 (except in a
transaction contemplated by Section 4(c)); provided that in any event such
restrictions will terminate on the first to occur of a Sale of the Company or a
Qualified Public Offering; and further provided that the restrictions contained
in clause (A) of the last sentence of Section 4(a) above shall survive in
perpetuity.
5. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) LEGEND. The certificates representing the Executive Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF SEPTEMBER 5, 1996, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER AND IN COMPLIANCE WITH STATE SECURITIES LAWS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT AGREEMENT
BETWEEN THE ISSUER (THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF
DATED AS OF SEPTEMBER 5, 1996. A COPY OF SUCH AGREEMENT MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Executive Stock may sell,
transfer or dispose of any Executive Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
6. LIMITED PREEMPTIVE RIGHTS.
(a) Except for the issuance of Common Stock (i) pursuant to a public
offering registered under the Securities Act, (ii) to a lender to the Company in
connection with a debt facility, (iii) in accordance with Section 8 of the
Stockholders Agreement, (iv) to employees or
9
<PAGE>
directors of the Company and/or its Subsidiaries pursuant to any plan approved
by the Board or (v) as consideration in connection with an acquisition, merger,
joint venture, strategic alliance or similar transaction, if the Company at any
time after the date hereof authorizes the issuance or sale of any shares of
Common Stock or any securities containing options or rights to acquire any
shares of Common Stock (other than as a dividend on the outstanding Common
Stock), the Company shall first offer to sell to each holder of Executive Stock
a portion of such stock or securities equal to the quotient determined by
dividing (1) the number of shares of Executive Stock held by such holder by
(2) the total number of shares of Common Stock outstanding on a fully diluted
basis immediately prior to such issuance. Each holder of Executive Stock shall
be entitled to purchase such stock or securities at the most favorable price and
on the most favorable terms as such stock or securities are to be offered to any
other Persons.
(b) In order to exercise its purchase rights hereunder, a holder of
Executive Stock must, within 30 days after receipt of written notice from the
Company describing in reasonable detail the stock or securities being offered,
the purchase price thereof, the payment terms and such holder's percentage
allotment, deliver a written notice to the Company describing its election
hereunder. If all of the stock and securities offered to the holders of
Executive Stock is not fully subscribed by such holders, the remaining stock and
securities shall be reoffered by the Company to the holders purchasing their
full allotment upon the terms set forth in this Section, except that such
holders must exercise their purchase rights within five days after receipt of
such reoffer.
(c) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the holders of
Executive Stock have not elected to purchase during the 90 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to such holders. Any stock or securities offered or sold by
the Company after such 90-day period must be reoffered to the holders of
Executive Stock pursuant to the terms of this Section.
(d) Nothing contained in this Section 6 shall be deemed to amend,
modify or limit in any way the restrictions on the issuance of shares of Stock
set forth in Section 3C of the Equity Purchase Agreement or in any other
agreement to which the Company is presently bound.
(e) The rights of Executive set forth in Section 6 shall terminate on
the first to occur of a Sale of the Company or a Qualified Public Offering.
In the event that, in connection with its purchase of shares of Common
Stock or securities containing options or rights to acquire shares of Common
Stock ("Common Convertible Securities") as described in this Section 6, the
other purchasers are also purchasing other securities of the Company or any
Subsidiary (collectively, the "Other Securities"), then the Executive shall
purchase a ratio of Other Securities to the number of Shares of Common Stock or
Common Convertible Securities in the same proportion as the other purchasers
purchase in each of such securities.
10
<PAGE>
PROVISIONS RELATING TO EMPLOYMENT
7. EMPLOYMENT. The Company agrees to employ Executive and Executive
accepts such employment for the period beginning as of January 30, 1995 (the
"Start Date") and ending upon termination pursuant to Section 9 hereof (the
"Employment Period"). During the Employment Period, Executive shall serve as
the Vice President-Sales of the Company and shall have the normal duties,
responsibilities and authority of a Vice President-Sales, including, without
limitation, responsibility for all aspects of national sales activity, subject
to the power of the Board and the CEO to supervise, and to override any related
actions.
8. SALARY, BONUS AND BENEFITS. During the Employment Period, the Company
will pay Executive a base salary (the "Annual Base Salary") and a bonus
("Revenue Incentive Bonus") payable quarterly of up to 3% of revenue growth over
the comparable quarter from the prior year in each case as the Board or the
Compensation Committee of the Board may designate from time to time, in its sole
discretion. Executive will also receive an automobile allowance of $550 per
month and be eligible to participate in group insurance, vacation and retirement
savings (401(k)) plans as the Company may make available to its executives.
9. TERMINATION.
(a) The Employment Period will continue until Executive's
resignation, disability (as reasonably determined by the Board or the CEO) or
death or until the Board or the CEO determines in its good faith judgment that
termination of Executive's employment is in the best interests of the Company.
(b) If the Company terminates Executive's employment without Cause,
the Company shall provide at least six months written notice to the Executive
prior to the effectiveness of such termination (the "Notice Period"); provided,
however, that if the Company terminates Executive's employment without Cause and
determines that Executive's employment with the Company shall immediately cease,
Executive shall be entitled to receive payments (payable in monthly
installments) equal to the lower of (i) the rate of the Annual Base Salary for
six months following the date of such termination or (ii) the rate of the Annual
Base Salary for the portion of the Notice Period during which Executive is no
longer employed by the Company. Amounts payable by the Company to Executive
pursuant to this Section 9(b) shall be reduced by the amount of any payments
received by Executive from other employment (whether as an employee, consultant
or otherwise) during or in respect of the period in which payments are being
made pursuant to this Section 9(b), and Executive hereby agrees that upon the
termination of Executive, Executive shall use his best efforts to seek
employment with similar responsibilities and similar compensation to the
position with the Company contemplated by the terms of this Agreement. The
Company may cease making payments to Executive pursuant to this Section 9(b) at
any time after which Executive breaches any of the provisions of Section 10 or
11; provided that no such cessation shall relieve Executive of his obligations
under Section 10 or 11.
(c) If Executive's employment with the Company is terminated by the
Company for Cause or as a result of a voluntary termination by Executive, then
Executive's right
11
<PAGE>
to receive the Annual Base Salary, Revenue Incentive Bonus and other benefits
shall cease on the date of such termination and no severance payments shall be
made.
(d) For purposes of this Agreement, "Cause" shall mean (i) the
commission of a felony or the commission of any other act which is materially
injurious to the Company or any Subsidiary involving dishonesty, disloyalty or
fraud with respect to the Company or any Subsidiary, (ii) gross negligence or
willful misconduct with respect to the Company or any Subsidiary which is
materially injurious to the Company or any Subsidiary, (iii) willful,
substantial and repeated failure to perform duties commensurate with his
position as reasonably directed in writing by the Board or the CEO in good
faith, or (iv) any other material breach of this Agreement which is not cured
within 21 days after written notice thereof to Executive.
10. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him during the course of his
performance under this Agreement concerning the business and affairs of the
Company and its affiliates are the property of the Company. Therefore,
Executive agrees that he will not disclose to any unauthorized person or use for
his own account or for the account of any third party any of such information,
observations or data without the Board's written consent, unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public other than as a result of Executive's acts or omissions to
act. Executive shall use his best efforts to prevent the unauthorized misuse,
espionage, loss or theft of the aforementioned matters. Executive agrees to
deliver to the Company at the termination of his employment, or at any other
time the Company may request in writing, all memoranda, notes, plans, records,
reports and other documents (and copies thereof) relating to the business of the
Company and its affiliates (including, without limitation, all acquisition
prospects, lists and contact information) which he may then possess or have
under his control.
11. NONCOMPETITION AND NONSOLICITATION.
(a) NONCOMPETITION. Executive acknowledges that in the course of his
employment with the Company he will become familiar with the Company's trade
secrets and with other confidential information concerning the Company and that
his services will be of special, unique and extraordinary value to the Company.
Therefore, in consideration of the opportunity to purchase Executive Stock and
in consideration of the other rights given to Executive hereunder, Executive
agrees that, during the Employment Period and (i) if Executive's employment is
terminated by the Company for Cause or as a result of voluntary termination by
Executive, for two years thereafter, or (ii) if Executive's employment is
terminated for any other reason, the period during which the Company is required
(without giving effect to the last two sentences of Section 9(b)) to make
payments to Executive pursuant to Section 9(b) (the "Noncompete Period"), he
shall not directly or indirectly own, manage, control, participate in, consult
with, render services for, or in any manner engage in any business competing
with the businesses of the Company or its Subsidiaries as such businesses exist
on the date of the termination of Executive's employment, within those limited
states or metropolitan areas in which the Company is engaged in business (or in
which the Company is in the process of
12
<PAGE>
attempting to engage in business) during the Employment Period or at the time of
termination of Executive's employment.
(b) NONSOLICITATION. During the Employment Period and for two years
thereafter, Executive shall not directly or indirectly through another person or
entity (i) induce or attempt to induce any employee of the Company or any
Subsidiary to leave the employ of the Company or such Subsidiary, or in any way
interfere with the relationship between the Company or any Subsidiary and any
employee thereof, (ii) hire any person who was an employee of the Company or any
Subsidiary at any time during the Employment Period, or (iii) induce or attempt
to induce any customer, supplier, licensee or other business relationship of the
Company or any Subsidiary to cease doing business with the Company or such
Subsidiary, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relationship and the Company or any
Subsidiary.
(c) ENFORCEMENT. If, at the time of enforcement of Section 10 or 11
of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum duration, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the court shall be allowed to revise the restrictions contained herein to cover
the maximum duration, scope and area permitted by law. Because Executive's
services are unique and because Executive has access to confidential
information, the parties hereto agree that money damages would be an inadequate
remedy for any breach of this Agreement. Therefore, in the event of a breach or
threatened breach of this Agreement, the Company or its successors or assigns
may, in addition to other rights and remedies existing in their favor, apply to
any court of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce, or prevent any violations of, the
provisions hereof (without posting a bond or other security).
12. CONFIDENTIAL INFORMATION OF PRIOR EMPLOYERS.
(a) DISCLOSURE AND USE. Executive acknowledges and agrees that
Executive has been employed based upon personal and professional attributes
attained through his experience and education and that his employment with the
Company is not predicated on any implied or explicit understanding or inference
that Executive shall disclose or use any proprietary or confidential information
that Executive has acquired or been made privy to as a result of his prior
employment or relationships. Executive acknowledges and affirms that he has
been directed by the Company not to display or otherwise make available to the
Company, directly or indirectly (including by undisclosed incorporation in his
work product), any such proprietary or confidential information. Executive
represents and warrants that: (i) he has not misappropriated, infringed or
otherwise improperly disclosed or used any proprietary or confidential
information (in whatever form or medium) that he has acquired or been made privy
to as a result of his prior employment or relationships; (ii) no claim by any of
Executive's former employers or any other third parties alleging
misappropriation, infringement or improper disclosure or use of same has been
made, is currently outstanding or is threatened, and there are no grounds
therefor; and (iii) no injunction or judgment has been imposed on Executive that
restricts him from disclosing or using same.
13
<PAGE>
(b) PRIOR AGREEMENTS. Executive represents and warrants that:
(i) Executive has provided the Company with copies of any and all written
agreements or other arrangements that restrict or limit his conduct or
activities; (ii) Executive has no oral agreements or constraints with respect to
his conduct or activities; and (iii) all such written and oral agreements,
arrangements and constraints are listed on SCHEDULE 14(b) attached hereto and
incorporated herein. Executive recognizes that the Company is not in a position
to evaluate the scope or extent of his obligations and agreements and is not a
party to such agreements. His disclosure of such agreements in no way creates
an imputation or assumption of such agreements to or by the Company.
(c) PERFORMANCE OF EMPLOYMENT DUTIES. The Company has explained to
Executive the scope and responsibilities of his employment, and Executive hereby
represents and warrants that the performance of his employment duties shall not
place him in breach or violation of any pre-existing fiduciary duty, covenant,
agreement, restriction or limitation. Executive acknowledges and agrees that
Executive has been directed by the Company not to engage in any conduct or
activity that would cause him to violate any pre-existing fiduciary duty,
covenant, agreement, restriction or limitation and that, if requested to engage
in any activity or job function or to disclose any information that would result
in any such violation, Executive shall report such request immediately and is
relieved from any obligation to comply with such request.
13. NO CONFLICTS. Executive represents and warrants that there is no
other contract in existence, written or oral, between him and any third party
that relates to the grant or assignment to others of any interest in
intellectual property hereafter contributed to, or conceived or made by, him and
that his performance of his duties to the Company will not place him in breach
of any existing agreement.
GENERAL PROVISIONS
14. CODE SECTION 280G. Notwithstanding any provision in this Agreement to
the contrary, if all or any portion of the payments or benefits received or
realized by Executive either alone or together with other payments or benefits
which Executive receives or realizes or is then entitled to receive or realize
from the Company or any of its affiliates would constitute a "parachute payment"
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (or any successor section) and the regulations promulgated thereunder
(the "Code") and/or any corresponding and applicable state law provision, such
payments or benefits provided to Executive shall be reduced by reducing the
amount of payments or benefits payable to Executive pursuant to Section 9 of
this Agreement to the extent necessary so that no portion of such payments shall
be subject to the excise tax imposed by Section 4999 of the Code and any
corresponding and/or applicable state law provision; provided, however, that
such reduction shall only be made if, by reason of such reduction, Executive's
net after tax benefit shall exceed the net after tax benefit if such reduction
were not made. For purposes of this Section 14, "net after tax benefit" shall
mean the sum of (i) the total amount received or realized by Executive pursuant
to this Agreement that would constitute a "parachute payment" within the meaning
of Section 280G of the Code and any corresponding and applicable state law
provision plus (ii) all other payments or benefits which Executive receives or
realizes or is then entitled to receive or
14
<PAGE>
realize from the Company and any of its affiliates that would constitute a
"parachute payment" within the meaning of Section 280G of the Code and any
corresponding and applicable state law provision, less (iii) the amount of
federal or state income taxes payable with respect to the payments or benefits
described in (i) and (ii) above calculated at the maximum marginal individual
income tax rate for each year in which payments or benefits shall be realized by
Executive (based upon the rate in effect for such year as set forth in the Code
at the time of the first receipt or realization of the foregoing), less (iv) the
amount of excise taxes imposed with respect to the payments or benefits
described in (i) and (ii) above by Section 4999 of the Code and any
corresponding and applicable state law provision.
15. DEFINITIONS.
"BOARD" means the Company's Board of Directors.
"CEO" means the Company's Chief Executive Officer.
"CHANGE OF CONTROL" means any sale, exchange, transfer or issuance, or
series of related sales, exchanges, transfers or issuances of shares of the
Company's capital stock in a recapitalization or otherwise which results in any
person or group of related persons other than holders of Common Stock as of the
date hereof, owning shares entitling them to a majority of the ordinary voting
power to elect directors of the Company.
"COMMON STOCK" means the Company's Class A Common and Class B Common.
"EBITDA" for any fiscal period of the Company means the Company's
consolidated earnings from continuing operations before interest, taxes,
depreciation and amortization for such fiscal period, as determined in
accordance with GAAP.
"EBITDA PERCENTAGE" as of the end of any fiscal period of the Company means
the quotient of (a) the Company's EBITDA for such period divided by (b) the sum
of (1) the monthly average amount of equity invested (not including retained
earnings) in the Company during such period plus (2) the monthly average amount
of Indebtedness of the Company during such period, all as determined in
accordance with GAAP.
"EQUITY PURCHASE AGREEMENT" means the Equity Purchase Agreement by and
between the Company and the Investor dated as of December 3, 1993.
"EXECUTIVE'S FAMILY GROUP" means Executive's spouse and descendants
(whether natural or adopted) and any trust solely for the benefit of Executive
and/or Executive's spouse and/or descendants. Executive Stock will also include
shares of the Company's capital stock issued with respect to Executive Stock by
way of a stock split, stock dividend or other recapitalization.
"EXECUTIVE STOCK" will continue to be Executive Stock in the hands of any
holder other than Executive (except for the Company and the Investor and except
for transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Executive Stock will
15
<PAGE>
succeed to all rights and obligations attributable to Executive as a holder of
Executive Stock hereunder.
"FAIR MARKET VALUE" of each share of Executive Stock means the average of
the closing prices of the sales of the Company's Common Stock on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day the Common Stock is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or,
if on any day the Common Stock is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic over-the-
counter market as reported by the National Quotation Bureau Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which the Fair Market Value is being determined
and the 20 consecutive business days prior to such day. If at any time the
Common Stock is not listed on any securities exchange or quoted in the NASDAQ
System or the over-the-counter market, the Fair Market Value will be the fair
value of the Common Stock determined in good faith by the Board. Such
determination will not reflect discounts for "minority interest" restrictions
upon resale or "limited market" considerations. If the Executive does not agree
with the fair market value determined by the Board, then Executive may request
that such value be determined by an independent investment banking firm of
national or regional reputation utilizing valuation techniques then commonly
used for the valuation of such investment interests, which investment banking
firm will be jointly selected by the Board and Executive in good faith, and
expenses of which will be borne equally by the Company and Executive. If the
Board and Executive cannot agree on an investment banking firm, the Board shall
select one investment banking firm and Executive shall select a second
investment banking firm, which firms shall jointly select a third investment
banking firm (the "Third Firm"). The Third Firm shall then determine the Fair
Market Value in accordance with the specifications set forth within this
definition.
"GAAP" means generally accepted accounting principles, as in effect from
time to time.
"INDEBTEDNESS" shall mean at a particular time, without duplication,
(i) indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which any Person is liable, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business) or any commitment by which any Person assures a
creditor against loss, including contingent reimbursement obligations with
respect to letters of credit and (ii) indebtedness guaranteed in any manner by
any Person, including guarantees in the form of an agreement to repurchase or
reimburse.
"ORIGINAL COST" of each share of Class B Common purchased hereunder will be
equal to the price paid therefor as determined pursuant to Section 1(a) above
(as proportionately adjusted for all subsequent stock splits, stock dividends
and other recapitalizations).
"PROJECTED EBITDA" for any fiscal period of the Company shall mean the
EBITDA of the Company for such fiscal period set forth on Appendix 2 attached
hereto.
16
<PAGE>
"PROJECTED EBITDA PERCENTAGE" for any fiscal period of the Company shall
mean the EBITDA Percentage of the Company for such fiscal period set forth on
Appendix 2 attached hereto.
"PUBLIC SALE" means any sale pursuant to a registered public offering under
the Securities Act or any sale to the public pursuant to Rule 144 promulgated
under the Securities Act effected through a broker, dealer or market maker.
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Company's Common
Stock having an aggregate offering value of at least $30 million.
"SALE OF THE COMPANY" means any transaction or series of related
transactions pursuant to which any person or entity (other than the Investor)
acquires (i) capital stock of the Company possessing the voting power to elect a
majority of the Board (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock or otherwise) or
(ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"START DATE" shall have the meaning set forth in Section 7.
"STOCKHOLDERS AGREEMENT" means the Amended and Restated Stockholders
Agreement by and among the Company, the Investor, Timothy L. Burfield,
Michael B. Freedman, Charles R. Wallace, J. Jeffrey Gephart, Thomas C. Loftus,
George E. Pepe, James H.S. Cooper, Charles C. Halberg, Mark A. Jerstad,
William J. Gatti, Mary Jane Gatti, Sterling Acquisition Partners, Pharmed, Inc.,
Nelson C. Showalter, Bruce Gerlick, Mitch Overstreet, Lee R. Youngberg, Frank R.
Gelafio, Ronald E. Keith, James Pietryga, Pharmed of Baton Rouge, Joseph F.
Dellantonio, Thomas C. Loftus and George E. Pepe.
"SUBSIDIARY" means any corporation of which the Company owns securities
having a majority of the ordinary voting power in electing the board of
directors directly or through one or more subsidiaries.
16. NOTICES. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
service (charges prepaid) to the recipient at the address below indicated:
IF TO THE COMPANY:
American Medserve Corporation
Park Lake Center
184 Shuman Boulevard
Naperville, Illinois 60563
Attention: CEO
17
<PAGE>
WITH A COPY TO:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
AND
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street, Suite 3400
Chicago, Illinois 60610-4795
IF TO THE EXECUTIVE:
J. Jeffrey Gephart
1335 Willow Tree Drive
Woodstock, Georgia 30188
IF TO THE INVESTOR:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
WITH A COPY TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Gary R. Silverman, Esq.
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 deposit in the U.S. mail.
18
<PAGE>
17. MISCELLANEOUS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Executive Stock in violation of any provision of this Agreement
shall be void, and the Company shall not record such Transfer on its books or
treat any purported transferee of such Executive Stock as the owner of such
stock for any purpose.
(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 or 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.
(c) COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by
Executive, the Company, the Investor and their respective successors and assigns
(including subsequent holders of Executive Stock); provided that the rights and
obligations of Executive under this Agreement shall not be assignable except in
connection with a permitted transfer of Executive Stock hereunder.
(f) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by and construed in accordance with the internal laws
of the State of Delaware, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware.
(g) OTHER AGREEMENTS. Provisions pertaining to Executive's co-sale
rights are set forth in that certain Amended and Restated Stockholders Agreement
dated as of August 23, 1996 and provisions pertaining to Executive's
registration rights are set forth in that certain Registration Agreement dated
as of August 23, 1996.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
AMERICAN MEDSERVE CORPORATION
By: /s/ Timothy L. Burfield
-----------------------------
Its: President
/s/ J. Jeffrey Gephart
--------------------------------
J. Jeffrey Gephart
Agreed and Accepted:
GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P.
By: GTCR IV, L.P.
Its General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its General Partner
By: /s/ Bryan C. Cressey
------------------------------
Its: Principal
20
<PAGE>
SCHEDULE 14(B)
None
<PAGE>
APPENDIX 1
EXAMPLE OF ADDITIONAL BENEFITS REQUIREMENTS
Assume that Executive was terminated without Cause or assume Executive's
death or disability on the 100th day of a fiscal year and (i) actual EBITDA for
the immediately preceding 12 months was $8 million, (ii) Projected EBITDA for
the then current fiscal year was $10 million, (iii) Projected EBITDA for the
immediately preceding fiscal year was $9 million, (iv) the actual EBITDA
Percentage for the immediately preceding 12 months was 17%, (v) the Projected
EBITDA Percentage for the then current fiscal year was 20% and (vi) the
Projected EBITDA Percentage for the immediately preceding fiscal year was 18%.
Since 100 days had elapsed in the current fiscal year, the 12 month period would
include three months in the current fiscal year and nine months in the
immediately preceding fiscal year. In that event (a) applicable Projected
EBITDA would equal $9.25 million [i.e., (3 DIVIDED BY 12 x $10 million) + (9
DIVIDED BY 12 x $9 million)] and (b) the applicable Projected EBITDA Percentage
would equal 18.5% [i.e., (3 DIVIDED BY 12 x 20) + (9 DIVIDED BY 12 x 18)]. The
Performance Vesting Shares would continue to vest, since (x) actual EBITDA was
greater than 85% of applicable Projected EBITDA [i.e., $9.25 million x 85% =
$7.86 million, which is less than actual EBITDA of $8 million] and (y) the
actual EBITDA Percentage was greater than 85% of the applicable Projected EBITDA
Percentage [18.5 x 85% = 15.725%, which is less than the actual EBITDA
Percentage of 17%].
<PAGE>
APPENDIX 2
Projected
---------
Year Projected EBITDA EBITDA Percentage
---- ---------------- -----------------
1996 $5,368,000 12.75%
1997 $9,337,000 16.95%
1998 $13,976,000 20.68%
1999 $19,387,000 24.43%
2000 $24,233,750 28.00%
NOTE: Projected EBITDA Percentage will be recalculated to reflect any
significant recapitalization, including a Qualified Public Offering,
of the Company.
<PAGE>
Exhibit 10.12
DIRECTOR STOCK AGREEMENT
THIS AGREEMENT is made as of September 5, 1996, between American Medserve
Corporation, a Delaware corporation (the "Company"), and James H.S. Cooper
("Director").
The Company and Director desire to enter into an agreement pursuant to
which Director will purchase, and the Company will sell the number of shares of
the Company's Class B Common Stock, par value $.01 per share (the "Class B
Common") set forth in Section 1(a) below. All of such shares of Class B Common
and all shares of Class B Common hereafter acquired by Director pursuant to this
Agreement are referred to herein as "Director Stock." Certain definitions are
set forth in Section 7 of this Agreement.
The execution and delivery of this Agreement by the Company and Director is
a condition to the Director's purchase of shares of the Class B Common. Certain
provisions of this Agreement are intended for the benefit of, and will be
enforceable by, Golder, Thoma, Cressey, Rauner Fund IV, L.P. (the "Investor"),
and the Investor is an intended third party beneficiary of this Agreement.
The parties hereto agree as follows:
PROVISIONS RELATING TO DIRECTOR STOCK
1. PURCHASE AND SALE OF DIRECTOR STOCK.
(a) Director hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to Director, 170.1807 shares of Class B Common.
The purchase price per share of Class B Common (the "Purchase Price") shall
equal $98.46.
(b) The closing of the purchase and sale of the Class B Common (the
"Closing") shall take place at the offices of Kirkland & Ellis, 200 East
Randolph Drive, Chicago, Illinois 60601 at 10:00 a.m. on September 5, 1996, or
at such other place or on such other date as may be mutually agreeable to the
Company and the Director. At the Closing, the Company shall deliver to the
Director stock certificates evidencing the Class B Common to be purchased by the
Director, registered in the Director's name, upon payment of the purchase price
thereof by a cashier's or certified check, or by wire transfer of immediately
available funds to such account as designated by the Company in an amount not
less than $1,676 and by delivery of a promissory note substantially in the form
attached hereto as EXHIBIT A (the "Director Note") in the amount of the balance
of the Purchase Price owed in respect of the Class B Common purchased hereunder.
Director's obligations under the Director Note will be secured by a pledge of
all of the shares of Director Stock to the Company and in connection therewith
Director shall enter into a pledge agreement in the form of EXHIBIT B attached
hereto.
(c) Within 30 days after the purchase of Director Stock by Director
from the Company, Director shall make an effective election with the Internal
Revenue Service under
<PAGE>
Section 83(b) of the Internal Revenue Code and the regulations promulgated
thereunder substantially in the form of EXHIBIT C attached hereto and will
promptly notify the Company of such election.
(d) Director represents and warrants to the Company that:
(i) The Director Stock to be acquired by Director pursuant to
this Agreement will be acquired for Director's own account and not
with a view to, or intention of, distribution thereof in violation of
the Securities Act, or any applicable state securities laws, and the
Director Stock will not be disposed of in contravention of the
Securities Act or any applicable state securities laws.
(ii) Director is sophisticated in financial matters and is able
to evaluate the risks and benefits of the investment in the Director
Stock.
(iii) Director is able to bear the economic risk of his
investment in the Director Stock for an indefinite period of time
because the Director Stock 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.
(iv) Director has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of the
Director Stock and has had access to such other information concerning
the Company as he has requested.
(v) This Agreement constitutes the legal, valid and binding
obligation of Director, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Director
does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Director is a party or any
judgment, order or decree to which Director is subject.
(e) As an inducement to the Company to issue the Director Stock to
Director, and as a condition thereto, Director acknowledges and agrees that:
(i) Neither the issuance of any of the Director Stock to
Director nor any provision hereof shall entitle Director to remain a
member of the Board.
(ii) The Company shall have no duty or obligation to disclose to
Director, and Director shall have no right to be advised of, any
material information regarding the Company or any Subsidiary at any
time prior to, upon or in connection with the repurchase of the
Director Stock upon cessation of the Director being a member of the
Board or as otherwise provided hereunder.
-2-
<PAGE>
(f) As an inducement to the Company to issue the Director Stock to
Director, and as a condition thereto, Director covenants and agrees to enter
into an Amended and Restated Stockholders Agreement in the form of EXHIBIT D
attached hereto.
2. VESTING OF DIRECTOR STOCK.
(a) FULLY VESTED SHARES. 10% of the shares of Director Stock
purchased hereunder (the "Fully Vested Shares") are vested on the date hereof.
(b) TIME VESTING SHARES.
(i) Except as otherwise provided in Sections 2(c) below, 90% of
the shares of Director Stock purchased hereunder (the "Time Vesting
Shares") will become vested in accordance with the following schedule,
if as of each such date Director is still a member of the Board.
Date Cumulative Percentage of Time
Vesting Shares Vested
1st Anniversary of Closing 33 1/3%
2nd Anniversary of Closing 66 2/3%
3rd Anniversary of Closing 100%
(c) If Director ceases to be a member of the Board on any date prior
to an anniversary date listed above, the cumulative percentage of Time Vesting
Shares to become vested will be determined on a pro rata basis according to the
number of days elapsed since the prior anniversary date. Upon the occurrence of
a Sale of the Company while Director is still a member of the Board, all Time
Vesting Shares which have not yet become vested shall become vested at the time
of such event. In the event that Director is ready and willing to be a member
of the Board, but is not so elected (other than for Cause), then any Time
Vesting Shares which have not become vested shall become vested at the time of
such event.
(d) Shares of Director Stock which have become vested (including the
Fully Vested Shares) are referred to herein as "Vested Shares," and all other
shares of Director Stock are referred to herein as "Unvested Shares."
3. REPURCHASE OPTION.
(a) Subject to 3(f) below, in the event Director is no longer a
member of the Board, the Director Stock (whether held by Director or one or more
of Director's transferees) will
-3-
<PAGE>
be subject to repurchase by the Company and the Investor pursuant to the terms
and conditions set forth in this Section 3 (the "Repurchase Option").
(b) The purchase price for each Unvested Share will be the lesser of
Director's Original Cost or the Fair Market Value for such share, and the
purchase price for each Vested Share will be the Fair Market Value for such
share.
(c) The Board may elect to purchase all or any portion of the
Unvested Shares and the Vested Shares by delivering written notice (the
"Repurchase Notice") to the holder or holders of the Director Stock within 100
days after the date upon which Director is no longer a member of the Board. The
Repurchase Notice will set forth the number of Unvested Shares and Vested Shares
to be acquired from each holder, the aggregate consideration to be paid for such
shares and the time and place for the closing of the transaction. The number of
shares to be repurchased by the Company shall first be satisfied to the extent
possible from the shares of Director Stock held by Director at the time of
delivery of the Repurchase Notice. If the number of shares of Director Stock
then held by Director is less than the total number of shares of Director Stock
which the Company has elected to purchase, the Company shall purchase the
remaining shares elected to be purchased from the other holder(s) of Director
Stock under this Agreement, pro rata according to the number of shares of
Director Stock held by such other holder(s) at the time of delivery of such
Repurchase Notice (determined as nearly as practicable to the nearest share).
The number of Unvested Shares and Vested Shares to be repurchased hereunder will
be allocated among Director and the other holders of Director Stock (if any) pro
rata according to the number of shares of Director Stock to be purchased from
such person.
(d) If for any reason the Company does not elect to purchase all of
the Director Stock pursuant to the Repurchase Option, the Investor shall be
entitled to exercise the Repurchase Option for the shares of Director Stock the
Company has not elected to purchase (the "Available Shares"). As soon as
practicable after the Company has determined that there will be Available
Shares, but in any event within 60 days after the date upon which Director is no
longer a member of the Board, the Company shall give written notice (the "Option
Notice") to the Investor setting forth the number of Available Shares and the
purchase price for the Available Shares. The Investor may elect to purchase any
or all of the Available Shares by giving written notice to the Company within
thirty days after the Option Notice has been given by the Company. As soon as
practicable, and in any event within ten days after the expiration of the thirty
day period set forth above, the Company shall notify each holder of Director
Stock as to the number of shares being purchased from such holder by the
Investor (the "Supplemental Repurchase Notice"). At the time the Company
delivers the Supplemental Repurchase Notice to the holder(s) of Director Stock,
the Company shall also deliver written notice to the Investor setting forth the
number of shares the Investor is entitled to purchase, the aggregate purchase
price and the time and place of the closing of the transaction. The number of
Unvested Shares and Vested Shares to be repurchased hereunder shall be allocated
among the Company and the Investor pro rata according to the number of shares of
Director Stock to be purchased by each of them.
-4-
<PAGE>
(e) The closing of the purchase of the Director Stock pursuant to the
Repurchase Option shall take place on the date designated by the Company in the
Repurchase Notice or Supplemental Repurchase Notice, which date shall not be
more than thirty days nor less than five days after the delivery of the later of
either such notice to be delivered. The Company and/or the Investor will pay
for the Director Stock to be purchased pursuant to the Repurchase Option by
delivery of a check, a wire transfer of funds and/or a note (payable in three
equal annual installments commencing on the first anniversary of such closing
and bearing interest at the corporate base rate as determined by the First
National Bank of Chicago at the time the note is issued) in form and substance
determined by the Board in good faith in the aggregate amount of the purchase
price for such shares. In addition, the Company may pay the purchase price for
such shares by offsetting amounts outstanding under the Director Note issued to
the Company hereunder and any other debts owed by Director to the Company. The
Company and the Investor will be entitled to receive customary representations
and warranties from the sellers regarding such sale and to require all sellers'
signatures be guaranteed.
(f) Notwithstanding anything to the contrary set forth above, in the
event the Director is ready and willing to be a member of the Board, but is not
so elected (other than for Cause), then subject to Section 3(h) below, Director
shall be entitled to require the Company to purchase all Vested Shares as soon
as practicable after the date upon which Director is no longer a member of the
Board by delivery of written notice to the Company within 30 days following such
date. The Company will pay for the Director Stock to be purchased pursuant to
this Section 3(f) by delivery of a check, a wire transfer of funds and/or a note
(payable in three equal annual installments commencing on the first anniversary
of the date of purchase by the Company and bearing interest at the corporate
base rate as determined by the First National Bank of Chicago at the time the
note is issued) in form and substance determined by the Board in good faith. In
addition, the Company, at its election, may pay the purchase price of any such
shares by offsetting amounts outstanding under the Director Note issued to the
Company hereunder and any other debts owed by Director to the Company.
(g) The right of the Company and the Investor, and the requirement
for the Company, to repurchase Vested Shares pursuant to this Section 3 shall
terminate upon the first to occur of a Sale of the Company or a Qualified Public
Offering.
(h) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Director Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and any Subsidiary's debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Director Stock hereunder which the
Company is otherwise entitled (or required) to make, the Company may (or shall)
make such repurchases as soon as it is permitted to do so under such
restrictions.
(i) All shares of Director Stock purchased by the Company pursuant to
this Section 3 and pursuant to Section 4 shall remain available for reissuance
to new executives or directors as determined by the Board.
-5-
<PAGE>
4. RESTRICTIONS ON TRANSFER.
(a) TRANSFER OF DIRECTOR STOCK. Prior to the earlier to occur of
(x) the third anniversary of the date of the Closing or (y) 100 days following
the date upon which Director is no longer a member of the Board, Director shall
not sell, transfer, assign, pledge or otherwise dispose of (whether with or
without consideration and whether voluntarily or involuntarily or by operation
of law) any interest in any shares of Director Stock (a "Transfer"), except
pursuant to (i) the provisions of Section 3 hereof, a Public Sale or a Sale of
the Company ("Exempt Transfers") or (ii) the approval of the Company and the
Investor and pursuant to the provisions of this Section 4; provided that in no
event shall any Transfer of Director Stock pursuant to this Section 4 be made
for any consideration other than cash payable upon consummation of such Transfer
or in installments over time. Prior to making any Transfer other than an Exempt
Transfer (whether such Transfer occurs prior to or following the dates set forth
in clauses (x) and (y) above), Director will give written notice (the "Sale
Notice") to the Company and the Investor. The Sale Notice will disclose in
reasonable detail the identity of the prospective transferee(s), the number of
shares to be transferred and the terms and conditions of the proposed transfer.
Director will not consummate any Transfer until 90 days after the Sale Notice
has been given to the Company and to the Investor, unless the parties to the
Transfer have been finally determined pursuant to this Section 4 prior to the
expiration of such 90-day period. The date of the first to occur of such events
is referred to herein as the "Authorization Date". Notwithstanding the
foregoing, in no event shall Director be entitled to Transfer (A) any Unvested
Shares of Director Stock, other than to the Company or the Investor pursuant to
Section 3 until, in the case of Time Vesting Shares which are Unvested Shares,
100 days following the date upon which Director is no longer a member of the
Board or (B) any Shares of Director Stock which the Company and/or the Investor
have elected to purchase pursuant to Section 3, except to the Company or the
Investor, as applicable.
(b) FIRST REFUSAL RIGHTS. The Company may elect to purchase all (but
not less than all) of the shares of Director Stock to be transferred upon the
same terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to Director and the Investor within 60 days
after the Sale Notice has been given to the Company. If the Company has not
elected to purchase all of the Director Stock to be transferred, the Investor
may elect to purchase all (but not less than all) of the Director Stock to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by giving written notice of such election to Director within 90 days
after the Sale Notice has been given to the Investor. If neither the Company
nor the Investor elects to purchase all of the shares of Director Stock
specified in the Sale Notice, Director may transfer the shares of Director Stock
specified in the Sale Notice, subject to the provisions of Section 4(d) below,
at a price and on terms no more favorable to the transferee(s) thereof than
specified in the Sale Notice during the 60-day period immediately following the
Authorization Date. Any shares of Director Stock not transferred within such
60-day period will be subject to the provisions of this Section 4(b) upon
subsequent transfer. The Company may pay the purchase price for such shares by
offsetting amounts outstanding under the Director Note or any other debts owed
by Director to the Company.
-6-
<PAGE>
(c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this
Section 4 will not apply with respect to (i) transfers of shares of Director
Stock pursuant to applicable laws of descent and distribution or (ii) transfers
of shares of Director Stock among Director's Family Group, other than transfers
of the type described in the last sentence of Section 4(a) above; provided that
such restrictions will continue to be applicable to the Director Stock after any
such transfer and the transferees of such Director Stock will have agreed in
writing to be bound by the provisions of this Agreement.
(d) TERMINATION OF RESTRICTIONS. The restrictions on the Transfer of
shares of Director Stock set forth in this Section 4 will continue with respect
to each share of Director Stock until the date on which such Director Stock has
been transferred in a transaction permitted by this Section 4 (except in a
transaction contemplated by Section 4(c)); provided that in any event such
restrictions will terminate on the first to occur of a Sale of the Company or a
Qualified Public Offering; and further provided that the restrictions contained
in clause (A) of the last sentence of Section 4(a) above shall survive in
perpetuity.
5. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) LEGEND. The certificates representing the Director Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS
OF SEPTEMBER 5, 1996, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER AND IN
COMPLIANCE WITH STATE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A
DIRECTOR STOCK AGREEMENT BETWEEN THE ISSUER (THE "COMPANY") AND THE
ORIGINAL HOLDER HEREOF DATED AS OF SEPTEMBER 5, 1996. A COPY OF SUCH
AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL
PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Director Stock may sell,
transfer or dispose of any Director Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
-7-
<PAGE>
6. LIMITED PREEMPTIVE RIGHTS.
(a) Except for the issuance of Common Stock (i) pursuant to a public
offering registered under the Securities Act, (ii) to a lender to the Company in
connection with a debt facility, (iii) in accordance with Section 8 of the
Stockholders Agreement, (iv) to employees or directors of the Company and/or its
Subsidiaries pursuant to any plan approved by the Board or (v) as consideration
in connection with an acquisition, merger, joint venture, strategic alliance or
similar transaction, if the Company at any time after the date hereof authorizes
the issuance or sale of any shares of Common Stock or any securities containing
options or rights to acquire any shares of Common Stock (other than as a
dividend on the outstanding Common Stock), the Company shall first offer to sell
to each holder of Director Stock a portion of such stock or securities equal to
the quotient determined by dividing (1) the number of shares of Director Stock
held by such holder by (2) the total number of shares of Common Stock
outstanding on a fully diluted basis immediately prior to such issuance. Each
holder of Director Stock shall be entitled to purchase such stock or securities
at the most favorable price and on the most favorable terms as such stock or
securities are to be offered to any other Persons.
(b) In order to exercise its purchase rights hereunder, a holder of
Director Stock must, within 30 days after receipt of written notice from the
Company describing in reasonable detail the stock or securities being offered,
the purchase price thereof, the payment terms and such holder's percentage
allotment, deliver a written notice to the Company describing its election
hereunder. If all of the stock and securities offered to the holders of
Director Stock is not fully subscribed by such holders, the remaining stock and
securities shall be reoffered by the Company to the holders purchasing their
full allotment upon the terms set forth in this Section, except that such
holders must exercise their purchase rights within five days after receipt of
such reoffer.
(c) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the holders of
Director Stock have not elected to purchase during the 90 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to such holders. Any stock or securities offered or sold by
the Company after such 90-day period must be reoffered to the holders of
Director Stock pursuant to the terms of this Section.
(d) Nothing contained in this Section 6 shall be deemed to amend,
modify or limit in any way the restrictions on the issuance of shares of Stock
set forth in Section 3C of the Equity Purchase Agreement or in any other
agreement to which the Company is presently bound.
(e) The rights of Director set forth in this Section 6 shall
terminate on the first to occur of a Sale of the Company or a Qualified Public
Offering.
In the event that, in connection with its purchase of shares of Common
Stock or securities containing options or rights to acquire shares of Common
Stock ("Common Convertible Securities") as described in this Section 6, the
other purchasers are also purchasing other securities of the Company or any
Subsidiary (collectively, the "Other Securities"), then the Director shall
purchase a ratio of Other Securities to the number of Shares of Common Stock or
-8-
<PAGE>
Common Convertible Securities in the same proportion as the other purchasers
purchase in each of such securities.
7. DEFINITIONS.
"BOARD" means the Company's Board of Directors.
"CAUSE" with respect to a Director not being elected to the Board shall
mean (i) the commission of a felony or the commission of any other act which is
materially injurious to the Company or any Subsidiary involving dishonesty,
disloyalty or fraud with respect to the Company or any Subsidiary, (ii) gross
negligence or willful misconduct with respect to the Company or any Subsidiary
which is materially injurious to the Company or any Subsidiary, (iii) willful,
substantial and repeated failure to perform duties commensurate with his
position as reasonably directed in writing by the Board in good faith, or
(iv) any other material breach of this Agreement which is not cured within 21
days after written notice thereof to Director.
"CEO" means the Company's Chief Executive Officer.
"COMMON STOCK" means the Company's Class A Common and Class B Common.
"EQUITY PURCHASE AGREEMENT" means the Equity Purchase Agreement by and
between the Company and the Investor dated as of December 3, 1993.
"DIRECTOR'S FAMILY GROUP" means Director's spouse and descendants (whether
natural or adopted) and any trust solely for the benefit of Director and/or
Director's spouse and/or descendants. Director Stock will also include shares
of the Company's capital stock issued with respect to Director Stock by way of a
stock split, stock dividend or other recapitalization.
"DIRECTOR STOCK" will continue to be Director Stock in the hands of any
holder other than Director (except for the Company and the Investor and except
for transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Director Stock will succeed to all rights and obligations
attributable to Director as a holder of Director Stock hereunder.
"FAIR MARKET VALUE" of each share of Director Stock means the average of
the closing prices of the sales of the Company's Common Stock on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day the Common Stock is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or,
if on any day the Common Stock is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic over-the-
counter market as reported by the National Quotation Bureau Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which the Fair Market Value is being determined
and the 20 consecutive business days prior to such day. If at any time the
Common Stock is not listed on any securities exchange or quoted in the NASDAQ
-9-
<PAGE>
System or the over-the-counter market, the Fair Market Value will be the fair
value of the Common Stock determined in good faith by the Board. Such
determination will not reflect discounts for "minority interest" restrictions
upon resale or "limited market" considerations. If the Director does not agree
with the fair market value determined by the Board, then Director may request
that such value be determined by an independent investment banking firm of
national or regional reputation utilizing valuation techniques then commonly
used for the valuation of such investment interests, which investment banking
firm will be jointly selected by the Board and Director in good faith, and
expenses of which will be borne equally by the Company and Director. If the
Board and Director cannot agree on an investment banking firm, the Board shall
select one investment banking firm and Director shall select a second investment
banking firm, which firms shall jointly select a third investment banking firm
(the "Third Firm"). The Third Firm shall then determine the Fair Market Value
in accordance with the specifications set forth within this definition.
"ORIGINAL COST" of each share of Class B Common purchased hereunder will be
equal to the price paid therefor as determined pursuant to Section 1(a) above
(as proportionately adjusted for all subsequent stock splits, stock dividends
and other recapitalizations).
"PUBLIC SALE" means any sale pursuant to a registered public offering under
the Securities Act or any sale to the public pursuant to Rule 144 promulgated
under the Securities Act effected through a broker, dealer or market maker.
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Company's Common
Stock having an aggregate offering value of at least $30 million.
"SALE OF THE COMPANY" means any transaction or series of related
transactions pursuant to which any person or entity (other than the Investor)
acquires (i) capital stock of the Company possessing the voting power to elect a
majority of the Board (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock or otherwise) or
(ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"STOCKHOLDERS AGREEMENT" means the Amended and Restated Stockholders
Agreement by and among the Company, the Investor, Timothy L. Burfield,
Michael B. Freedman, Charles R. Wallace, J. Jeffrey Gephart, James H.S. Cooper,
Charles C. Halberg, Mark A. Jerstad, William J. Gatti, Mary Jane Gatti, Sterling
Acquisition Partners, Pharmed, Inc., Nelson C. Showalter, Bruce Gerlick, Mitch
Overstreet, Lee R. Youngberg, Frank R. Gelafio, Ronald E. Keith, James
Pietryga, Pharmed of Baton Rouge, Thomas C. Loftus and George E. Pepe.
"SUBSIDIARY" means any corporation of which the Company owns securities
having a majority of the ordinary voting power in electing the board of
directors directly or through one or more subsidiaries.
-10-
<PAGE>
8. NOTICES. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
service (charges prepaid) to the recipient at the address below indicated:
IF TO THE COMPANY:
American Medserve Corporation
Park Lake Center
184 Shuman Boulevard
Naperville, Illinois 60563
Attention: CEO
WITH A COPY TO:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
AND
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street, Suite 3400
Chicago, Illinois 60610-4795
IF TO THE DIRECTOR:
James H.S. Cooper
2106 Fairfax Avenue, #21
Nashville, TN 37212
IF TO THE INVESTOR:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
-11-
<PAGE>
WITH A COPY TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Gary R. Silverman, Esq.
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 deposit in the U.S. mail.
9. MISCELLANEOUS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Director Stock in violation of any provision of this Agreement
shall be void, and the Company shall not record such Transfer on its books or
treat any purported transferee of such Director Stock as the owner of such stock
for any purpose.
(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 or 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.
(c) COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by
Director, the Company, the Investor and their respective successors and assigns
(including subsequent holders of Director Stock); provided that the rights and
obligations of Director under this Agreement shall not be assignable except in
connection with a permitted transfer of Director Stock hereunder.
(f) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by and construed in accordance with the internal laws
of the State of Delaware, without giving effect to
-12-
<PAGE>
any choice of law or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
(g) OTHER AGREEMENTS. Provisions pertaining to Director's co-sale
rights are set forth in that certain Amended and Restated Stockholders Agreement
dated as of August 23, 1996 and provisions pertaining to Director's registration
rights are set forth in that certain Registration Agreement dated as of
August 23, 1996.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
AMERICAN MEDSERVE CORPORATION
By: /s/ Timothy L. Burfield
--------------------------------
Its: President
/s/ James H.S. Cooper
-------------------------------------
James H.S. Cooper
Agreed and Accepted:
GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P.
By: GTCR IV, L.P.
Its General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its General Partner
By: /s/ Bryan C. Cressey
------------------------------
Its: Principal
-13-
<PAGE>
Exhibit 10.13
DIRECTOR STOCK AGREEMENT
THIS AGREEMENT is made as of September 5, 1996, between American Medserve
Corporation, a Delaware corporation (the "Company"), and Charles C. Halberg
("Director").
The Company and Director desire to enter into an agreement pursuant to
which Director will purchase, and the Company will sell the number of shares of
the Company's Class B Common Stock, par value $.01 per share (the "Class B
Common") set forth in Section 1(a) below. All of such shares of Class B Common
and all shares of Class B Common hereafter acquired by Director pursuant to this
Agreement are referred to herein as "Director Stock." Certain definitions are
set forth in Section 7 of this Agreement.
The execution and delivery of this Agreement by the Company and Director is
a condition to the Director's purchase of shares of the Class B Common. Certain
provisions of this Agreement are intended for the benefit of, and will be
enforceable by, Golder, Thoma, Cressey, Rauner Fund IV, L.P. (the "Investor"),
and the Investor is an intended third party beneficiary of this Agreement.
The parties hereto agree as follows:
PROVISIONS RELATING TO DIRECTOR STOCK
1. PURCHASE AND SALE OF DIRECTOR STOCK.
(a) Director hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to Director, 170.1807 shares of Class B Common.
The purchase price per share of Class B Common (the "Purchase Price") shall
equal $98.46.
(b) The closing of the purchase and sale of the Class B Common (the
"Closing") shall take place at the offices of Kirkland & Ellis, 200 East
Randolph Drive, Chicago, Illinois 60601 at 10:00 a.m. on September 5, 1996, or
at such other place or on such other date as may be mutually agreeable to the
Company and the Director. At the Closing, the Company shall deliver to the
Director stock certificates evidencing the Class B Common to be purchased by the
Director, registered in the Director's name, upon payment of the purchase price
thereof by a cashier's or certified check, or by wire transfer of immediately
available funds to such account as designated by the Company in an amount not
less than $1,676 and by delivery of a promissory note substantially in the form
attached hereto as EXHIBIT A (the "Director Note") in the amount of the balance
of the Purchase Price owed in respect of the Class B Common purchased hereunder.
Director's obligations under the Director Note will be secured by a pledge of
all of the shares of Director Stock to the Company and in connection therewith
Director shall enter into a pledge agreement in the form of EXHIBIT B attached
hereto.
(c) Within 30 days after the purchase of Director Stock by Director
from the Company, Director shall make an effective election with the Internal
Revenue Service under
<PAGE>
Section 83(b) of the Internal Revenue Code and the regulations promulgated
thereunder substantially in the form of EXHIBIT C attached hereto and will
promptly notify the Company of such election.
(d) Director represents and warrants to the Company that:
(i) The Director Stock to be acquired by Director pursuant to
this Agreement will be acquired for Director's own account and not
with a view to, or intention of, distribution thereof in violation of
the Securities Act, or any applicable state securities laws, and the
Director Stock will not be disposed of in contravention of the
Securities Act or any applicable state securities laws.
(ii) Director is sophisticated in financial matters and is able
to evaluate the risks and benefits of the investment in the Director
Stock.
(iii) Director is able to bear the economic risk of his
investment in the Director Stock for an indefinite period of time
because the Director Stock 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.
(iv) Director has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
the Director Stock and has had access to such other information
concerning the Company as he has requested.
(v) This Agreement constitutes the legal, valid and binding
obligation of Director, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Director
does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Director is a party or any
judgment, order or decree to which Director is subject.
(e) As an inducement to the Company to issue the Director Stock to
Director, and as a condition thereto, Director acknowledges and agrees that:
(i) Neither the issuance of any of the Director Stock to
Director nor any provision hereof shall entitle Director to remain a
member of the Board.
(ii) The Company shall have no duty or obligation to disclose
to Director, and Director shall have no right to be advised of, any
material information regarding the Company or any Subsidiary at any
time prior to, upon or in connection with the repurchase of the
Director Stock upon cessation of the Director being a member of the
Board or as otherwise provided hereunder.
-2-
<PAGE>
(f) As an inducement to the Company to issue the Director Stock to
Director, and as a condition thereto, Director covenants and agrees to enter
into an Amended and Restated Stockholders Agreement in the form of EXHIBIT D
attached hereto.
2. VESTING OF DIRECTOR STOCK.
(a) FULLY VESTED SHARES. 10% of the shares of Director Stock
purchased hereunder (the "Fully Vested Shares") are vested on the date hereof.
(b) TIME VESTING SHARES.
(i) Except as otherwise provided in Sections 2(c) below, 90%
of the shares of Director Stock purchased hereunder (the "Time Vesting
Shares") will become vested in accordance with the following schedule,
if as of each such date Director is still a member of the Board.
Cumulative Percentage of Time
Date Vesting Shares Vested
---- ---------------------
1st Anniversary of Closing 33 1/3%
2nd Anniversary of Closing 66 2/3%
3rd Anniversary of Closing 100%
(c) If Director ceases to be a member of the Board on any date prior
to an anniversary date listed above, the cumulative percentage of Time Vesting
Shares to become vested will be determined on a pro rata basis according to the
number of days elapsed since the prior anniversary date. Upon the occurrence of
a Sale of the Company while Director is still a member of the Board, all Time
Vesting Shares which have not yet become vested shall become vested at the time
of such event. In the event that Director is ready and willing to be a member
of the Board, but is not so elected (other than for Cause), then any Time
Vesting Shares which have not become vested shall become vested at the time of
such event.
(d) Shares of Director Stock which have become vested (including the
Fully Vested Shares) are referred to herein as "Vested Shares," and all other
shares of Director Stock are referred to herein as "Unvested Shares."
3. REPURCHASE OPTION.
(a) Subject to 3(f) below, in the event Director is no longer a
member of the Board, the Director Stock (whether held by Director or one or more
of Director's transferees) will
-3-
<PAGE>
be subject to repurchase by the Company and the Investor pursuant to the terms
and conditions set forth in this Section 3 (the "Repurchase Option").
(b) The purchase price for each Unvested Share will be the lesser of
Director's Original Cost or the Fair Market Value for such share, and the
purchase price for each Vested Share will be the Fair Market Value for such
share.
(c) The Board may elect to purchase all or any portion of the
Unvested Shares and the Vested Shares by delivering written notice (the
"Repurchase Notice") to the holder or holders of the Director Stock within 100
days after the date upon which Director is no longer a member of the Board. The
Repurchase Notice will set forth the number of Unvested Shares and Vested Shares
to be acquired from each holder, the aggregate consideration to be paid for such
shares and the time and place for the closing of the transaction. The number of
shares to be repurchased by the Company shall first be satisfied to the extent
possible from the shares of Director Stock held by Director at the time of
delivery of the Repurchase Notice. If the number of shares of Director Stock
then held by Director is less than the total number of shares of Director Stock
which the Company has elected to purchase, the Company shall purchase the
remaining shares elected to be purchased from the other holder(s) of Director
Stock under this Agreement, pro rata according to the number of shares of
Director Stock held by such other holder(s) at the time of delivery of such
Repurchase Notice (determined as nearly as practicable to the nearest share).
The number of Unvested Shares and Vested Shares to be repurchased hereunder will
be allocated among Director and the other holders of Director Stock (if any) pro
rata according to the number of shares of Director Stock to be purchased from
such person.
(d) If for any reason the Company does not elect to purchase all of
the Director Stock pursuant to the Repurchase Option, the Investor shall be
entitled to exercise the Repurchase Option for the shares of Director Stock the
Company has not elected to purchase (the "Available Shares"). As soon as
practicable after the Company has determined that there will be Available
Shares, but in any event within 60 days after the date upon which Director is no
longer a member of the Board, the Company shall give written notice (the "Option
Notice") to the Investor setting forth the number of Available Shares and the
purchase price for the Available Shares. The Investor may elect to purchase any
or all of the Available Shares by giving written notice to the Company within
thirty days after the Option Notice has been given by the Company. As soon as
practicable, and in any event within ten days after the expiration of the thirty
day period set forth above, the Company shall notify each holder of Director
Stock as to the number of shares being purchased from such holder by the
Investor (the "Supplemental Repurchase Notice"). At the time the Company
delivers the Supplemental Repurchase Notice to the holder(s) of Director Stock,
the Company shall also deliver written notice to the Investor setting forth the
number of shares the Investor is entitled to purchase, the aggregate purchase
price and the time and place of the closing of the transaction. The number of
Unvested Shares and Vested Shares to be repurchased hereunder shall be allocated
among the Company and the Investor pro rata according to the number of shares of
Director Stock to be purchased by each of them.
-4-
<PAGE>
(e) The closing of the purchase of the Director Stock pursuant to the
Repurchase Option shall take place on the date designated by the Company in the
Repurchase Notice or Supplemental Repurchase Notice, which date shall not be
more than thirty days nor less than five days after the delivery of the later of
either such notice to be delivered. The Company and/or the Investor will pay
for the Director Stock to be purchased pursuant to the Repurchase Option by
delivery of a check, a wire transfer of funds and/or a note (payable in three
equal annual installments commencing on the first anniversary of such closing
and bearing interest at the corporate base rate as determined by the First
National Bank of Chicago at the time the note is issued) in form and substance
determined by the Board in good faith in the aggregate amount of the purchase
price for such shares. In addition, the Company may pay the purchase price for
such shares by offsetting amounts outstanding under the Director Note issued to
the Company hereunder and any other debts owed by Director to the Company. The
Company and the Investor will be entitled to receive customary representations
and warranties from the sellers regarding such sale and to require all sellers'
signatures be guaranteed.
(f) Notwithstanding anything to the contrary set forth above, in the
event the Director is ready and willing to be a member of the Board, but is not
so elected (other than for Cause), then subject to Section 3(h) below, Director
shall be entitled to require the Company to purchase all Vested Shares as soon
as practicable after the date upon which Director is no longer a member of the
Board by delivery of written notice to the Company within 30 days following such
date. The Company will pay for the Director Stock to be purchased pursuant to
this Section 3(f) by delivery of a check, a wire transfer of funds and/or a note
(payable in three equal annual installments commencing on the first anniversary
of the date of purchase by the Company and bearing interest at the corporate
base rate as determined by the First National Bank of Chicago at the time the
note is issued) in form and substance determined by the Board in good faith. In
addition, the Company, at its election, may pay the purchase price of any such
shares by offsetting amounts outstanding under the Director Note issued to the
Company hereunder and any other debts owed by Director to the Company.
(g) The right of the Company and the Investor, and the requirement
for the Company, to repurchase Vested Shares pursuant to this Section 3 shall
terminate upon the first to occur of a Sale of the Company or a Qualified Public
Offering.
(h) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Director Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and any Subsidiary's debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Director Stock hereunder which the
Company is otherwise entitled (or required) to make, the Company may (or shall)
make such repurchases as soon as it is permitted to do so under such
restrictions.
(i) All shares of Director Stock purchased by the Company pursuant to
this Section 3 and pursuant to Section 4 shall remain available for reissuance
to new executives or directors as determined by the Board.
-5-
<PAGE>
4. RESTRICTIONS ON TRANSFER.
(a) TRANSFER OF DIRECTOR STOCK. Prior to the earlier to occur of
(x) the third anniversary of the date of the Closing or (y) 100 days following
the date upon which Director is no longer a member of the Board, Director shall
not sell, transfer, assign, pledge or otherwise dispose of (whether with or
without consideration and whether voluntarily or involuntarily or by operation
of law) any interest in any shares of Director Stock (a "Transfer"), except
pursuant to (i) the provisions of Section 3 hereof, a Public Sale or a Sale of
the Company ("Exempt Transfers") or (ii) the approval of the Company and the
Investor and pursuant to the provisions of this Section 4; provided that in no
event shall any Transfer of Director Stock pursuant to this Section 4 be made
for any consideration other than cash payable upon consummation of such Transfer
or in installments over time. Prior to making any Transfer other than an Exempt
Transfer (whether such Transfer occurs prior to or following the dates set forth
in clauses (x) and (y) above), Director will give written notice (the "Sale
Notice") to the Company and the Investor. The Sale Notice will disclose in
reasonable detail the identity of the prospective transferee(s), the number of
shares to be transferred and the terms and conditions of the proposed transfer.
Director will not consummate any Transfer until 90 days after the Sale Notice
has been given to the Company and to the Investor, unless the parties to the
Transfer have been finally determined pursuant to this Section 4 prior to the
expiration of such 90-day period. The date of the first to occur of such events
is referred to herein as the "Authorization Date". Notwithstanding the
foregoing, in no event shall Director be entitled to Transfer (A) any Unvested
Shares of Director Stock, other than to the Company or the Investor pursuant to
Section 3 until, in the case of Time Vesting Shares which are Unvested Shares,
100 days following the date upon which Director is no longer a member of the
Board or (B) any Shares of Director Stock which the Company and/or the Investor
have elected to purchase pursuant to Section 3, except to the Company or the
Investor, as applicable.
(b) FIRST REFUSAL RIGHTS. The Company may elect to purchase all (but
not less than all) of the shares of Director Stock to be transferred upon the
same terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to Director and the Investor within 60 days
after the Sale Notice has been given to the Company. If the Company has not
elected to purchase all of the Director Stock to be transferred, the Investor
may elect to purchase all (but not less than all) of the Director Stock to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by giving written notice of such election to Director within 90 days
after the Sale Notice has been given to the Investor. If neither the Company
nor the Investor elects to purchase all of the shares of Director Stock
specified in the Sale Notice, Director may transfer the shares of Director Stock
specified in the Sale Notice, subject to the provisions of Section 4(d) below,
at a price and on terms no more favorable to the transferee(s) thereof than
specified in the Sale Notice during the 60-day period immediately following the
Authorization Date. Any shares of Director Stock not transferred within such
60-day period will be subject to the provisions of this Section 4(b) upon
subsequent transfer. The Company may pay the purchase price for such shares by
offsetting amounts outstanding under the Director Note or any other debts owed
by Director to the Company.
-6-
<PAGE>
(c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this
Section 4 will not apply with respect to (i) transfers of shares of Director
Stock pursuant to applicable laws of descent and distribution or (ii) transfers
of shares of Director Stock among Director's Family Group, other than transfers
of the type described in the last sentence of Section 4(a) above; provided that
such restrictions will continue to be applicable to the Director Stock after any
such transfer and the transferees of such Director Stock will have agreed in
writing to be bound by the provisions of this Agreement.
(d) TERMINATION OF RESTRICTIONS. The restrictions on the Transfer of
shares of Director Stock set forth in this Section 4 will continue with respect
to each share of Director Stock until the date on which such Director Stock has
been transferred in a transaction permitted by this Section 4 (except in a
transaction contemplated by Section 4(c)); provided that in any event such
restrictions will terminate on the first to occur of a Sale of the Company or a
Qualified Public Offering; and further provided that the restrictions contained
in clause (A) of the last sentence of Section 4(a) above shall survive in
perpetuity.
5. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) LEGEND. The certificates representing the Director Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF SEPTEMBER 5, 1996, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER AND IN COMPLIANCE WITH STATE SECURITIES LAWS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A DIRECTOR STOCK AGREEMENT
BETWEEN THE ISSUER (THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF
DATED AS OF SEPTEMBER 5, 1996. A COPY OF SUCH AGREEMENT MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Director Stock may sell,
transfer or dispose of any Director Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
-7-
<PAGE>
6. LIMITED PREEMPTIVE RIGHTS.
(a) Except for the issuance of Common Stock (i) pursuant to a public
offering registered under the Securities Act, (ii) to a lender to the Company in
connection with a debt facility, (iii) in accordance with Section 8 of the
Stockholders Agreement, (iv) to employees or directors of the Company and/or its
Subsidiaries pursuant to any plan approved by the Board or (v) as consideration
in connection with an acquisition, merger, joint venture, strategic alliance or
similar transaction, if the Company at any time after the date hereof authorizes
the issuance or sale of any shares of Common Stock or any securities containing
options or rights to acquire any shares of Common Stock (other than as a
dividend on the outstanding Common Stock), the Company shall first offer to sell
to each holder of Director Stock a portion of such stock or securities equal to
the quotient determined by dividing (1) the number of shares of Director Stock
held by such holder by (2) the total number of shares of Common Stock
outstanding on a fully diluted basis immediately prior to such issuance. Each
holder of Director Stock shall be entitled to purchase such stock or securities
at the most favorable price and on the most favorable terms as such stock or
securities are to be offered to any other Persons.
(b) In order to exercise its purchase rights hereunder, a holder of
Director Stock must, within 30 days after receipt of written notice from the
Company describing in reasonable detail the stock or securities being offered,
the purchase price thereof, the payment terms and such holder's percentage
allotment, deliver a written notice to the Company describing its election
hereunder. If all of the stock and securities offered to the holders of
Director Stock is not fully subscribed by such holders, the remaining stock and
securities shall be reoffered by the Company to the holders purchasing their
full allotment upon the terms set forth in this Section, except that such
holders must exercise their purchase rights within five days after receipt of
such reoffer.
(c) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the holders of
Director Stock have not elected to purchase during the 90 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to such holders. Any stock or securities offered or sold by
the Company after such 90-day period must be reoffered to the holders of
Director Stock pursuant to the terms of this Section.
(d) Nothing contained in this Section 6 shall be deemed to amend,
modify or limit in any way the restrictions on the issuance of shares of Stock
set forth in Section 3C of the Equity Purchase Agreement or in any other
agreement to which the Company is presently bound.
(e) The rights of Director set forth in this Section 6 shall
terminate on the first to occur of a Sale of the Company or a Qualified Public
Offering.
In the event that, in connection with its purchase of shares of Common
Stock or securities containing options or rights to acquire shares of Common
Stock ("Common Convertible Securities") as described in this Section 6, the
other purchasers are also purchasing other securities of the Company or any
Subsidiary (collectively, the "Other Securities"), then the Director shall
purchase a ratio of Other Securities to the number of Shares of Common Stock or
-8-
<PAGE>
Common Convertible Securities in the same proportion as the other purchasers
purchase in each of such securities.
7. DEFINITIONS.
"BOARD" means the Company's Board of Directors.
"CAUSE" with respect to a Director not being elected to the Board shall
mean (i) the commission of a felony or the commission of any other act which is
materially injurious to the Company or any Subsidiary involving dishonesty,
disloyalty or fraud with respect to the Company or any Subsidiary, (ii) gross
negligence or willful misconduct with respect to the Company or any Subsidiary
which is materially injurious to the Company or any Subsidiary, (iii) willful,
substantial and repeated failure to perform duties commensurate with his
position as reasonably directed in writing by the Board in good faith, or
(iv) any other material breach of this Agreement which is not cured within 21
days after written notice thereof to Director.
"CEO" means the Company's Chief Executive Officer.
"COMMON STOCK" means the Company's Class A Common and Class B Common.
"EQUITY PURCHASE AGREEMENT" means the Equity Purchase Agreement by and
between the Company and the Investor dated as of December 3, 1993.
"DIRECTOR'S FAMILY GROUP" means Director's spouse and descendants (whether
natural or adopted) and any trust solely for the benefit of Director and/or
Director's spouse and/or descendants. Director Stock will also include shares
of the Company's capital stock issued with respect to Director Stock by way of a
stock split, stock dividend or other recapitalization.
"DIRECTOR STOCK" will continue to be Director Stock in the hands of any
holder other than Director (except for the Company and the Investor and except
for transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Director Stock will succeed to all rights and obligations
attributable to Director as a holder of Director Stock hereunder.
"FAIR MARKET VALUE" of each share of Director Stock means the average of
the closing prices of the sales of the Company's Common Stock on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day the Common Stock is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or,
if on any day the Common Stock is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic over-the-
counter market as reported by the National Quotation Bureau Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which the Fair Market Value is being determined
and the 20 consecutive business days prior to such day. If at any time the
Common Stock is not listed on any securities exchange or quoted in the NASDAQ
-9-
<PAGE>
System or the over-the-counter market, the Fair Market Value will be the fair
value of the Common Stock determined in good faith by the Board. Such
determination will not reflect discounts for "minority interest" restrictions
upon resale or "limited market" considerations. If the Director does not agree
with the fair market value determined by the Board, then Director may request
that such value be determined by an independent investment banking firm of
national or regional reputation utilizing valuation techniques then commonly
used for the valuation of such investment interests, which investment banking
firm will be jointly selected by the Board and Director in good faith, and
expenses of which will be borne equally by the Company and Director. If the
Board and Director cannot agree on an investment banking firm, the Board shall
select one investment banking firm and Director shall select a second investment
banking firm, which firms shall jointly select a third investment banking firm
(the "Third Firm"). The Third Firm shall then determine the Fair Market Value
in accordance with the specifications set forth within this definition.
"ORIGINAL COST" of each share of Class B Common purchased hereunder will be
equal to the price paid therefor as determined pursuant to Section 1(a) above
(as proportionately adjusted for all subsequent stock splits, stock dividends
and other recapitalizations).
"PUBLIC SALE" means any sale pursuant to a registered public offering under
the Securities Act or any sale to the public pursuant to Rule 144 promulgated
under the Securities Act effected through a broker, dealer or market maker.
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Company's Common
Stock having an aggregate offering value of at least $30 million.
"SALE OF THE COMPANY" means any transaction or series of related
transactions pursuant to which any person or entity (other than the Investor)
acquires (i) capital stock of the Company possessing the voting power to elect a
majority of the Board (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock or otherwise) or
(ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"STOCKHOLDERS AGREEMENT" means the Amended and Restated Stockholders
Agreement by and among the Company, the Investor, Timothy L. Burfield,
Michael B. Freedman, Charles R. Wallace, J. Jeffrey Gephart, James H.S. Cooper,
Charles C. Halberg, Mark A. Jerstad, William J. Gatti, Mary Jane Gatti, Sterling
Acquisition Partners, Pharmed, Inc., Nelson C. Showalter, Bruce Gerlick, Mitch
Overstreet, Lee R. Youngberg, Frank R. Gelafio, Ronald E. Keith, James
Pietryga, Pharmed of Baton Rouge, Thomas C. Loftus and George E. Pepe.
"SUBSIDIARY" means any corporation of which the Company owns securities
having a majority of the ordinary voting power in electing the board of
directors directly or through one or more subsidiaries.
-10-
<PAGE>
8. NOTICES. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
service (charges prepaid) to the recipient at the address below indicated:
IF TO THE COMPANY:
American Medserve Corporation
Park Lake Center
184 Shuman Boulevard
Naperville, Illinois 60563
Attention: CEO
WITH A COPY TO:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
AND
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street, Suite 3400
Chicago, Illinois 60610-4795
IF TO THE DIRECTOR:
Charles C. Halberg
Good Samaritan Supply Services, Inc.
2177 Youngman Avenue
Suite 300
St. Paul, MN 55101
IF TO THE INVESTOR:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
-11-
<PAGE>
WITH A COPY TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Gary R. Silverman, Esq.
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 deposit in the U.S. mail.
9. MISCELLANEOUS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Director Stock in violation of any provision of this Agreement
shall be void, and the Company shall not record such Transfer on its books or
treat any purported transferee of such Director Stock as the owner of such stock
for any purpose.
(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 or 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.
(c) COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by
Director, the Company, the Investor and their respective successors and assigns
(including subsequent holders of Director Stock); provided that the rights and
obligations of Director under this Agreement shall not be assignable except in
connection with a permitted transfer of Director Stock hereunder.
(f) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by and construed in accordance with the internal laws
of the State of Delaware, without giving effect to
-12-
<PAGE>
any choice of law or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
(g) OTHER AGREEMENTS. Provisions pertaining to Director's co-sale
rights are set forth in that certain Amended and Restated Stockholders Agreement
dated as of August 23, 1996 and provisions pertaining to Director's registration
rights are set forth in that certain Registration Agreement dated as of
August 23, 1996.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
AMERICAN MEDSERVE CORPORATION
By: /s/ Timothy L. Burfield
----------------------------
Its: President
/s/ Charles C. Halberg
---------------------------------
Charles C. Halberg
Agreed and Accepted:
GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P.
By: GTCR IV, L.P.
Its General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its General Partner
By: /s/ Bryan C. Cressey
------------------------------
Its: Principal
-13-
<PAGE>
Exhibit 10.14
DIRECTOR STOCK AGREEMENT
THIS AGREEMENT is made as of September 5, 1996, between American Medserve
Corporation, a Delaware corporation (the "Company"), and Mark A. Jerstad
("Director").
The Company and Director desire to enter into an agreement pursuant to
which Director will purchase, and the Company will sell the number of shares of
the Company's Class B Common Stock, par value $.01 per share (the "Class B
Common") set forth in Section 1(a) below. All of such shares of Class B Common
and all shares of Class B Common hereafter acquired by Director pursuant to this
Agreement are referred to herein as "Director Stock." Certain definitions are
set forth in Section 7 of this Agreement.
The execution and delivery of this Agreement by the Company and Director is
a condition to the Director's purchase of shares of the Class B Common. Certain
provisions of this Agreement are intended for the benefit of, and will be
enforceable by, Golder, Thoma, Cressey, Rauner Fund IV, L.P. (the "Investor"),
and the Investor is an intended third party beneficiary of this Agreement.
The parties hereto agree as follows:
PROVISIONS RELATING TO DIRECTOR STOCK
1. PURCHASE AND SALE OF DIRECTOR STOCK.
(a) Director hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to Director, 170.1807 shares of Class B Common.
The purchase price per share of Class B Common (the "Purchase Price") shall
equal $98.46.
(b) The closing of the purchase and sale of the Class B Common (the
"Closing") shall take place at the offices of Kirkland & Ellis, 200 East
Randolph Drive, Chicago, Illinois 60601 at 10:00 a.m. on September 5, 1996, or
at such other place or on such other date as may be mutually agreeable to the
Company and the Director. At the Closing, the Company shall deliver to the
Director stock certificates evidencing the Class B Common to be purchased by the
Director, registered in the Director's name, upon payment of the purchase price
thereof by a cashier's or certified check, or by wire transfer of immediately
available funds to such account as designated by the Company in an amount not
less than $1,676 and by delivery of a promissory note substantially in the form
attached hereto as EXHIBIT A (the "Director Note") in the amount of the balance
of the Purchase Price owed in respect of the Class B Common purchased hereunder.
Director's obligations under the Director Note will be secured by a pledge of
all of the shares of Director Stock to the Company and in connection therewith
Director shall enter into a pledge agreement in the form of EXHIBIT B attached
hereto.
(c) Within 30 days after the purchase of Director Stock by Director
from the Company, Director shall make an effective election with the Internal
Revenue Service under
<PAGE>
Section 83(b) of the Internal Revenue Code and the regulations promulgated
thereunder substantially in the form of EXHIBIT C attached hereto and will
promptly notify the Company of such election.
(d) Director represents and warrants to the Company that:
(i) The Director Stock to be acquired by Director pursuant to
this Agreement will be acquired for Director's own account and not
with a view to, or intention of, distribution thereof in violation of
the Securities Act, or any applicable state securities laws, and the
Director Stock will not be disposed of in contravention of the
Securities Act or any applicable state securities laws.
(ii) Director is sophisticated in financial matters and is
able to evaluate the risks and benefits of the investment in the
Director Stock.
(iii) Director is able to bear the economic risk of his
investment in the Director Stock for an indefinite period of time
because the Director Stock 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.
(iv) Director has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
the Director Stock and has had access to such other information
concerning the Company as he has requested.
(v) This Agreement constitutes the legal, valid and binding
obligation of Director, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Director
does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Director is a party or any
judgment, order or decree to which Director is subject.
(e) As an inducement to the Company to issue the Director Stock to
Director, and as a condition thereto, Director acknowledges and agrees that:
(i) Neither the issuance of any of the Director Stock to
Director nor any provision hereof shall entitle Director to remain a
member of the Board.
(ii) The Company shall have no duty or obligation to disclose
to Director, and Director shall have no right to be advised of, any
material information regarding the Company or any Subsidiary at any
time prior to, upon or in connection with the repurchase of the
Director Stock upon cessation of the Director being a member of the
Board or as otherwise provided hereunder.
-2-
<PAGE>
(f) As an inducement to the Company to issue the Director Stock to
Director, and as a condition thereto, Director covenants and agrees to enter
into an Amended and Restated Stockholders Agreement in the form of EXHIBIT D
attached hereto.
2. VESTING OF DIRECTOR STOCK.
(a) FULLY VESTED SHARES. 10% of the shares of Director Stock
purchased hereunder (the "Fully Vested Shares") are vested on the date hereof.
(b) TIME VESTING SHARES.
(i) Except as otherwise provided in Sections 2(c) below, 90%
of the shares of Director Stock purchased hereunder (the "Time Vesting
Shares") will become vested in accordance with the following schedule,
if as of each such date Director is still a member of the Board.
Cumulative Percentage of Time
-----------------------------
Date Vesting Shares Vested
---- ---------------------
1st Anniversary of Closing 33 1/3%
2nd Anniversary of Closing 66 2/3%
3rd Anniversary of Closing 100%
(c) If Director ceases to be a member of the Board on any date prior
to an anniversary date listed above, the cumulative percentage of Time Vesting
Shares to become vested will be determined on a pro rata basis according to the
number of days elapsed since the prior anniversary date. Upon the occurrence of
a Sale of the Company while Director is still a member of the Board, all Time
Vesting Shares which have not yet become vested shall become vested at the time
of such event. In the event that Director is ready and willing to be a member
of the Board, but is not so elected (other than for Cause), then any Time
Vesting Shares which have not become vested shall become vested at the time of
such event.
(d) Shares of Director Stock which have become vested (including the
Fully Vested Shares) are referred to herein as "Vested Shares," and all other
shares of Director Stock are referred to herein as "Unvested Shares."
3. REPURCHASE OPTION.
(a) Subject to 3(f) below, in the event Director is no longer a
member of the Board, the Director Stock (whether held by Director or one or more
of Director's transferees) will
-3-
<PAGE>
be subject to repurchase by the Company and the Investor pursuant to the terms
and conditions set forth in this Section 3 (the "Repurchase Option").
(b) The purchase price for each Unvested Share will be the lesser of
Director's Original Cost or the Fair Market Value for such share, and the
purchase price for each Vested Share will be the Fair Market Value for such
share.
(c) The Board may elect to purchase all or any portion of the
Unvested Shares and the Vested Shares by delivering written notice (the
"Repurchase Notice") to the holder or holders of the Director Stock within 100
days after the date upon which Director is no longer a member of the Board. The
Repurchase Notice will set forth the number of Unvested Shares and Vested Shares
to be acquired from each holder, the aggregate consideration to be paid for such
shares and the time and place for the closing of the transaction. The number of
shares to be repurchased by the Company shall first be satisfied to the extent
possible from the shares of Director Stock held by Director at the time of
delivery of the Repurchase Notice. If the number of shares of Director Stock
then held by Director is less than the total number of shares of Director Stock
which the Company has elected to purchase, the Company shall purchase the
remaining shares elected to be purchased from the other holder(s) of Director
Stock under this Agreement, pro rata according to the number of shares of
Director Stock held by such other holder(s) at the time of delivery of such
Repurchase Notice (determined as nearly as practicable to the nearest share).
The number of Unvested Shares and Vested Shares to be repurchased hereunder will
be allocated among Director and the other holders of Director Stock (if any) pro
rata according to the number of shares of Director Stock to be purchased from
such person.
(d) If for any reason the Company does not elect to purchase all of
the Director Stock pursuant to the Repurchase Option, the Investor shall be
entitled to exercise the Repurchase Option for the shares of Director Stock the
Company has not elected to purchase (the "Available Shares"). As soon as
practicable after the Company has determined that there will be Available
Shares, but in any event within 60 days after the date upon which Director is no
longer a member of the Board, the Company shall give written notice (the "Option
Notice") to the Investor setting forth the number of Available Shares and the
purchase price for the Available Shares. The Investor may elect to purchase any
or all of the Available Shares by giving written notice to the Company within
thirty days after the Option Notice has been given by the Company. As soon as
practicable, and in any event within ten days after the expiration of the thirty
day period set forth above, the Company shall notify each holder of Director
Stock as to the number of shares being purchased from such holder by the
Investor (the "Supplemental Repurchase Notice"). At the time the Company
delivers the Supplemental Repurchase Notice to the holder(s) of Director Stock,
the Company shall also deliver written notice to the Investor setting forth the
number of shares the Investor is entitled to purchase, the aggregate purchase
price and the time and place of the closing of the transaction. The number of
Unvested Shares and Vested Shares to be repurchased hereunder shall be allocated
among the Company and the Investor pro rata according to the number of shares of
Director Stock to be purchased by each of them.
-4-
<PAGE>
(e) The closing of the purchase of the Director Stock pursuant to the
Repurchase Option shall take place on the date designated by the Company in the
Repurchase Notice or Supplemental Repurchase Notice, which date shall not be
more than thirty days nor less than five days after the delivery of the later of
either such notice to be delivered. The Company and/or the Investor will pay
for the Director Stock to be purchased pursuant to the Repurchase Option by
delivery of a check, a wire transfer of funds and/or a note (payable in three
equal annual installments commencing on the first anniversary of such closing
and bearing interest at the corporate base rate as determined by the First
National Bank of Chicago at the time the note is issued) in form and substance
determined by the Board in good faith in the aggregate amount of the purchase
price for such shares. In addition, the Company may pay the purchase price for
such shares by offsetting amounts outstanding under the Director Note issued to
the Company hereunder and any other debts owed by Director to the Company. The
Company and the Investor will be entitled to receive customary representations
and warranties from the sellers regarding such sale and to require all sellers'
signatures be guaranteed.
(f) Notwithstanding anything to the contrary set forth above, in the
event the Director is ready and willing to be a member of the Board, but is not
so elected (other than for Cause), then subject to Section 3(h) below, Director
shall be entitled to require the Company to purchase all Vested Shares as soon
as practicable after the date upon which Director is no longer a member of the
Board by delivery of written notice to the Company within 30 days following such
date. The Company will pay for the Director Stock to be purchased pursuant to
this Section 3(f) by delivery of a check, a wire transfer of funds and/or a note
(payable in three equal annual installments commencing on the first anniversary
of the date of purchase by the Company and bearing interest at the corporate
base rate as determined by the First National Bank of Chicago at the time the
note is issued) in form and substance determined by the Board in good faith. In
addition, the Company, at its election, may pay the purchase price of any such
shares by offsetting amounts outstanding under the Director Note issued to the
Company hereunder and any other debts owed by Director to the Company.
(g) The right of the Company and the Investor, and the requirement
for the Company, to repurchase Vested Shares pursuant to this Section 3 shall
terminate upon the first to occur of a Sale of the Company or a Qualified Public
Offering.
(h) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Director Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and any Subsidiary's debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Director Stock hereunder which the
Company is otherwise entitled (or required) to make, the Company may (or shall)
make such repurchases as soon as it is permitted to do so under such
restrictions.
(i) All shares of Director Stock purchased by the Company pursuant to
this Section 3 and pursuant to Section 4 shall remain available for reissuance
to new executives or directors as determined by the Board.
-5-
<PAGE>
4. RESTRICTIONS ON TRANSFER.
(a) TRANSFER OF DIRECTOR STOCK. Prior to the earlier to occur of
(x) the third anniversary of the date of the Closing or (y) 100 days following
the date upon which Director is no longer a member of the Board, Director shall
not sell, transfer, assign, pledge or otherwise dispose of (whether with or
without consideration and whether voluntarily or involuntarily or by operation
of law) any interest in any shares of Director Stock (a "Transfer"), except
pursuant to (i) the provisions of Section 3 hereof, a Public Sale or a Sale of
the Company ("Exempt Transfers") or (ii) the approval of the Company and the
Investor and pursuant to the provisions of this Section 4; provided that in no
event shall any Transfer of Director Stock pursuant to this Section 4 be made
for any consideration other than cash payable upon consummation of such Transfer
or in installments over time. Prior to making any Transfer other than an Exempt
Transfer (whether such Transfer occurs prior to or following the dates set forth
in clauses (x) and (y) above), Director will give written notice (the "Sale
Notice") to the Company and the Investor. The Sale Notice will disclose in
reasonable detail the identity of the prospective transferee(s), the number of
shares to be transferred and the terms and conditions of the proposed transfer.
Director will not consummate any Transfer until 90 days after the Sale Notice
has been given to the Company and to the Investor, unless the parties to the
Transfer have been finally determined pursuant to this Section 4 prior to the
expiration of such 90-day period. The date of the first to occur of such events
is referred to herein as the "Authorization Date". Notwithstanding the
foregoing, in no event shall Director be entitled to Transfer (A) any Unvested
Shares of Director Stock, other than to the Company or the Investor pursuant to
Section 3 until, in the case of Time Vesting Shares which are Unvested Shares,
100 days following the date upon which Director is no longer a member of the
Board or (B) any Shares of Director Stock which the Company and/or the Investor
have elected to purchase pursuant to Section 3, except to the Company or the
Investor, as applicable.
(b) FIRST REFUSAL RIGHTS. The Company may elect to purchase all (but
not less than all) of the shares of Director Stock to be transferred upon the
same terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to Director and the Investor within 60 days
after the Sale Notice has been given to the Company. If the Company has not
elected to purchase all of the Director Stock to be transferred, the Investor
may elect to purchase all (but not less than all) of the Director Stock to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by giving written notice of such election to Director within 90 days
after the Sale Notice has been given to the Investor. If neither the Company
nor the Investor elects to purchase all of the shares of Director Stock
specified in the Sale Notice, Director may transfer the shares of Director Stock
specified in the Sale Notice, subject to the provisions of Section 4(d) below,
at a price and on terms no more favorable to the transferee(s) thereof than
specified in the Sale Notice during the 60-day period immediately following the
Authorization Date. Any shares of Director Stock not transferred within such
60-day period will be subject to the provisions of this Section 4(b) upon
subsequent transfer. The Company may pay the purchase price for such shares by
offsetting amounts outstanding under the Director Note or any other debts owed
by Director to the Company.
-6-
<PAGE>
(c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this
Section 4 will not apply with respect to (i) transfers of shares of Director
Stock pursuant to applicable laws of descent and distribution or (ii) transfers
of shares of Director Stock among Director's Family Group, other than transfers
of the type described in the last sentence of Section 4(a) above; provided that
such restrictions will continue to be applicable to the Director Stock after any
such transfer and the transferees of such Director Stock will have agreed in
writing to be bound by the provisions of this Agreement.
(d) TERMINATION OF RESTRICTIONS. The restrictions on the Transfer of
shares of Director Stock set forth in this Section 4 will continue with respect
to each share of Director Stock until the date on which such Director Stock has
been transferred in a transaction permitted by this Section 4 (except in a
transaction contemplated by Section 4(c)); provided that in any event such
restrictions will terminate on the first to occur of a Sale of the Company or a
Qualified Public Offering; and further provided that the restrictions contained
in clause (A) of the last sentence of Section 4(a) above shall survive in
perpetuity.
5. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) LEGEND. The certificates representing the Director Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF SEPTEMBER 5, 1996, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER AND IN COMPLIANCE WITH STATE SECURITIES LAWS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A DIRECTOR STOCK AGREEMENT
BETWEEN THE ISSUER (THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF
DATED AS OF SEPTEMBER 5, 1996. A COPY OF SUCH AGREEMENT MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Director Stock may sell,
transfer or dispose of any Director Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
-7-
<PAGE>
6. LIMITED PREEMPTIVE RIGHTS.
(a) Except for the issuance of Common Stock (i) pursuant to a public
offering registered under the Securities Act, (ii) to a lender to the Company in
connection with a debt facility, (iii) in accordance with Section 8 of the
Stockholders Agreement, (iv) to employees or directors of the Company and/or its
Subsidiaries pursuant to any plan approved by the Board or (v) as consideration
in connection with an acquisition, merger, joint venture, strategic alliance or
similar transaction, if the Company at any time after the date hereof authorizes
the issuance or sale of any shares of Common Stock or any securities containing
options or rights to acquire any shares of Common Stock (other than as a
dividend on the outstanding Common Stock), the Company shall first offer to sell
to each holder of Director Stock a portion of such stock or securities equal to
the quotient determined by dividing (1) the number of shares of Director Stock
held by such holder by (2) the total number of shares of Common Stock
outstanding on a fully diluted basis immediately prior to such issuance. Each
holder of Director Stock shall be entitled to purchase such stock or securities
at the most favorable price and on the most favorable terms as such stock or
securities are to be offered to any other Persons.
(b) In order to exercise its purchase rights hereunder, a holder of
Director Stock must, within 30 days after receipt of written notice from the
Company describing in reasonable detail the stock or securities being offered,
the purchase price thereof, the payment terms and such holder's percentage
allotment, deliver a written notice to the Company describing its election
hereunder. If all of the stock and securities offered to the holders of
Director Stock is not fully subscribed by such holders, the remaining stock and
securities shall be reoffered by the Company to the holders purchasing their
full allotment upon the terms set forth in this Section, except that such
holders must exercise their purchase rights within five days after receipt of
such reoffer.
(c) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the holders of
Director Stock have not elected to purchase during the 90 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to such holders. Any stock or securities offered or sold by
the Company after such 90-day period must be reoffered to the holders of
Director Stock pursuant to the terms of this Section.
(d) Nothing contained in this Section 6 shall be deemed to amend,
modify or limit in any way the restrictions on the issuance of shares of Stock
set forth in Section 3C of the Equity Purchase Agreement or in any other
agreement to which the Company is presently bound.
(e) The rights of Director set forth in this Section 6 shall
terminate on the first to occur of a Sale of the Company or a Qualified Public
Offering.
In the event that, in connection with its purchase of shares of Common
Stock or securities containing options or rights to acquire shares of Common
Stock ("Common Convertible Securities") as described in this Section 6, the
other purchasers are also purchasing other securities of the Company or any
Subsidiary (collectively, the "Other Securities"), then the Director shall
purchase a ratio of Other Securities to the number of Shares of Common Stock or
-8-
<PAGE>
Common Convertible Securities in the same proportion as the other purchasers
purchase in each of such securities.
7. DEFINITIONS.
"BOARD" means the Company's Board of Directors.
"CAUSE" with respect to a Director not being elected to the Board shall
mean (i) the commission of a felony or the commission of any other act which is
materially injurious to the Company or any Subsidiary involving dishonesty,
disloyalty or fraud with respect to the Company or any Subsidiary, (ii) gross
negligence or willful misconduct with respect to the Company or any Subsidiary
which is materially injurious to the Company or any Subsidiary, (iii) willful,
substantial and repeated failure to perform duties commensurate with his
position as reasonably directed in writing by the Board in good faith, or
(iv) any other material breach of this Agreement which is not cured within 21
days after written notice thereof to Director.
"CEO" means the Company's Chief Executive Officer.
"COMMON STOCK" means the Company's Class A Common and Class B Common.
"EQUITY PURCHASE AGREEMENT" means the Equity Purchase Agreement by and
between the Company and the Investor dated as of December 3, 1993.
"DIRECTOR'S FAMILY GROUP" means Director's spouse and descendants (whether
natural or adopted) and any trust solely for the benefit of Director and/or
Director's spouse and/or descendants. Director Stock will also include shares
of the Company's capital stock issued with respect to Director Stock by way of a
stock split, stock dividend or other recapitalization.
"DIRECTOR STOCK" will continue to be Director Stock in the hands of any
holder other than Director (except for the Company and the Investor and except
for transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Director Stock will succeed to all rights and obligations
attributable to Director as a holder of Director Stock hereunder.
"FAIR MARKET VALUE" of each share of Director Stock means the average of
the closing prices of the sales of the Company's Common Stock on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day the Common Stock is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or,
if on any day the Common Stock is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic over-the-
counter market as reported by the National Quotation Bureau Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which the Fair Market Value is being determined
and the 20 consecutive business days prior to such day. If at any time the
Common Stock is not listed on any securities exchange or quoted in the NASDAQ
-9-
<PAGE>
System or the over-the-counter market, the Fair Market Value will be the fair
value of the Common Stock determined in good faith by the Board. Such
determination will not reflect discounts for "minority interest" restrictions
upon resale or "limited market" considerations. If the Director does not agree
with the fair market value determined by the Board, then Director may request
that such value be determined by an independent investment banking firm of
national or regional reputation utilizing valuation techniques then commonly
used for the valuation of such investment interests, which investment banking
firm will be jointly selected by the Board and Director in good faith, and
expenses of which will be borne equally by the Company and Director. If the
Board and Director cannot agree on an investment banking firm, the Board shall
select one investment banking firm and Director shall select a second investment
banking firm, which firms shall jointly select a third investment banking firm
(the "Third Firm"). The Third Firm shall then determine the Fair Market Value
in accordance with the specifications set forth within this definition.
"ORIGINAL COST" of each share of Class B Common purchased hereunder will be
equal to the price paid therefor as determined pursuant to Section 1(a) above
(as proportionately adjusted for all subsequent stock splits, stock dividends
and other recapitalizations).
"PUBLIC SALE" means any sale pursuant to a registered public offering under
the Securities Act or any sale to the public pursuant to Rule 144 promulgated
under the Securities Act effected through a broker, dealer or market maker.
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Company's Common
Stock having an aggregate offering value of at least $30 million.
"SALE OF THE COMPANY" means any transaction or series of related
transactions pursuant to which any person or entity (other than the Investor)
acquires (i) capital stock of the Company possessing the voting power to elect a
majority of the Board (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock or otherwise) or
(ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"STOCKHOLDERS AGREEMENT" means the Amended and Restated Stockholders
Agreement by and among the Company, the Investor, Timothy L. Burfield,
Michael B. Freedman, Charles R. Wallace, J. Jeffrey Gephart, James H.S. Cooper,
Charles C. Halberg, Mark A. Jerstad, William J. Gatti, Mary Jane Gatti, Sterling
Acquisition Partners, Pharmed, Inc., Nelson C. Showalter, Bruce Gerlick, Mitch
Overstreet, Lee R. Youngberg, Frank R. Gelafio, Ronald E. Keith, James
Pietryga, Pharmed of Baton Rouge, Thomas C. Loftus and George E. Pepe.
"SUBSIDIARY" means any corporation of which the Company owns securities
having a majority of the ordinary voting power in electing the board of
directors directly or through one or more subsidiaries.
-10-
<PAGE>
8. NOTICES. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
service (charges prepaid) to the recipient at the address below indicated:
IF TO THE COMPANY:
American Medserve Corporation
Park Lake Center
184 Shuman Boulevard
Naperville, Illinois 60563
Attention: CEO
WITH A COPY TO:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
AND
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street, Suite 3400
Chicago, Illinois 60610-4795
IF TO THE DIRECTOR:
Mark A. Jerstad
The Evangelical Lutheran
Good Samaritan Society
4800 West 57th Street
Sioux Falls, SD 57101
IF TO THE INVESTOR:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
-11-
<PAGE>
WITH A COPY TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Gary R. Silverman, Esq.
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 deposit in the U.S. mail.
9. MISCELLANEOUS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Director Stock in violation of any provision of this Agreement
shall be void, and the Company shall not record such Transfer on its books or
treat any purported transferee of such Director Stock as the owner of such stock
for any purpose.
(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 or 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.
(c) COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by
Director, the Company, the Investor and their respective successors and assigns
(including subsequent holders of Director Stock); provided that the rights and
obligations of Director under this Agreement shall not be assignable except in
connection with a permitted transfer of Director Stock hereunder.
(f) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by and construed in accordance with the internal laws
of the State of Delaware, without giving effect to
-12-
<PAGE>
any choice of law or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
(g) OTHER AGREEMENTS. Provisions pertaining to Director's co-sale
rights are set forth in that certain Amended and Restated Stockholders Agreement
dated as of August 23, 1996 and provisions pertaining to Director's registration
rights are set forth in that certain Registration Agreement dated as of
August 23, 1996.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
AMERICAN MEDSERVE CORPORATION
By: /s/ Timothy L. Burfield
---------------------------
Its: President
/s/ Mark A. Jerstad
--------------------------------
Mark A. Jerstad
Agreed and Accepted:
GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P.
By: GTCR IV, L.P.
Its General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its General Partner
By: /s/ Bryan C. Cressey
-----------------------
Its: Principal
-13-
<PAGE>
Exhibit 10.15
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Agreement"),
is made as of August 23, 1996 by and among (i) American Medserve Corporation, a
Delaware corporation (the "Company"), (ii) Golder, Thoma, Cressey, Rauner Fund
IV, L.P., a Delaware limited partnership (the "Investor"), (iii) Timothy L.
Burfield ("Burfield"), Michael B. Freedman ("Freedman"), Charles R. Wallace
("Wallace"), J. Jeffrey Gephart ("Gephart"), Thomas C. Loftus ("Loftus") and
George E. Pepe ("Pepe") (each, an "Executive" and, collectively, the
"Executives"), (iv) James H.S. Cooper ("Cooper"), Charles C. Halberg ("Halberg")
and Mark A. Jerstad ("Jerstad") and (v) each of the other individuals identified
on the signature page hereof (the "Subsidiary Investors"). The Investor, the
Executives, Cooper, Halberg and Jerstad and the Subsidiary Investors are
collectively referred to herein as the "Stockholders" and individually as a
"Stockholder." This Agreement amends, restates and supersedes that certain
Stockholders Agreement dated as of December 3, 1993 by and among the Company,
the Investor and Burfield and that certain Stockholders Agreement dated as of
April 30, 1996 by and among the Company, the Investor and Burfield. Capitalized
terms used but not otherwise defined herein are defined in Section 9 hereof.
Burfield and the Investor each hereby acknowledge that their limited
preemptive rights pursuant to Section 6 of the Senior Management Agreement dated
as of December 3, 1993 by and between the Company and Burfield (the "Burfield
Agreement") and Section 3G of the Equity Purchase Agreement dated as of December
3, 1993 by and between the Company and the Investor (the "Equity Purchase
Agreement"), respectively, will not be exercisable in connection with any future
issuance of common stock of the Company (a) to The Evangelical Lutheran Good
Samaritan Foundation (the "Foundation") or any of its affiliates pursuant to the
Conversion Option, the Put or the Call (each as defined in and) pursuant to the
Shareholders Agreement among the Foundation, the Company and Good Samaritan
Supply Services, Inc., ("GSSS") dated as of April 30, 1996 (the "GSSS
Shareholders Agreement") or (b) in exchange for the stock of any direct or
indirect subsidiary of the Company pursuant to the provisions of any
stockholders agreement to which such subsidiary and either the Company or AMC
Regional Holdings, Inc. is a party.
The Investor has purchased shares of the Company's Class A Common
Stock, par value $.01 per share (the "Class A Common"), pursuant to the Equity
Purchase Agreement. Burfield has purchased shares of the Company's Class B
Common Stock, par value $.01 per share (the "Class B Common"), pursuant to the
Burfield Agreement and will purchase additional shares of Class B Common
pursuant to an Amended and Restated Senior Management Agreement (the "Amended
and Restated Agreement"). Freedman will purchase shares of the Company's Class
B Common, pursuant to a Senior Management Agreement by and between the Company
and Freedman (the "Freedman Agreement"). Wallace will purchase shares of the
Company's Class B Common, pursuant to a Senior Management Agreement by and
between the Company and Wallace (the "Wallace Agreement"). Gephart will
purchase shares of the Company's Class B Common, pursuant to a Senior Management
Agreement by and between the Company and Gephart (the "Gephart Agreement").
Loftus will purchase shares of the Company's Class B Common, pursuant to a
Senior Management Agreement by and between the Company and Loftus (the "Loftus
Agreement"). Pepe will purchase shares of the Company's Class B Common,
pursuant to a Senior Management Agreement by and between the Company and Pepe
(the "Pepe Agreement"). Cooper will purchase shares of the Company's Class B
Common, pursuant to a Director Stock Agreement by and between the Company and
Cooper (the "Cooper Agreement"). Halberg will purchase shares of the Company's
Class B Common, pursuant to a Director Stock Agreement by and between the
Company and Halberg (the "Halberg Agreement"). Jerstad will purchase
-1-
<PAGE>
shares of the Company's Class B Common, pursuant to a Director Stock Agreement
by and between the Company and Jerstad (the "Jerstad Agreement"). Each of the
Subsidiary Investors will receive shares of the Company's Class B Common upon
exchange of each Subsidiary Investor's equity interest in certain subsidiaries
of the Company, pursuant to the terms of various stockholders agreements between
such Subsidiary Investors and such subsidiaries (the "Subsidiary Stockholder
Agreements").
The execution and delivery of this Agreement is a condition to the
Company's issuance of shares of Class B Common to Freedman, Wallace, Gephart,
Loftus, Pepe, Cooper, Halberg and Jerstad and each of the Subsidiary Investors
pursuant to the Freedman Agreement, Wallace Agreement, Gephart Agreement, Loftus
Agreement, Pepe Agreement, Cooper Agreement, Halberg Agreement, Jerstad
Agreement and the respective Subsidiary Stockholder Agreements, respectively.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. BOARD OF DIRECTORS.
(a) From and after the date of this Agreement and until the
provisions of this Section 1 cease to be effective, each Stockholder shall vote
all of his Stockholder Shares and any other voting securities of the Company
over which such Stockholder has voting control and shall take all other
necessary or desirable actions within his control (whether in his capacity as a
stockholder, director, member of a board committee or officer of the Company or
otherwise, and including, without limitation, attendance at meetings in person
or by proxy for the purposes of obtaining a quorum and execution of written
consents in lieu of meetings), and the Company shall take all necessary and
desirable actions within its control (including, without limitation, calling
special board and stockholder meetings), so that:
(i) the authorized number of directors on the Company's board of
directors (the "Board") shall be established at six directors;
(ii) the following persons shall be elected to the Board:
(A) two representatives designated by the Investor (the
"Investor Directors");
(B) the Company's Chief Executive Officer; and
(C) three representatives chosen jointly by the Investor and
Burfield (the "Outside Directors"); provided that such representative
shall not be a member of the Company's management or an employee or
officer of the Company or its subsidiaries; provided further that if
the Investor and Burfield are unable to agree on the Outside Directors
within 10 days after the date hereof and, in the future, within 10
days after the date for electing the Outside Directors, the Investor,
in its sole discretion, shall designate the Outside Directors;
(iii) the authorized number of directors on the Board may be set at
any number greater than six directors as determined by a resolution of the
Board and as agreed to in writing by Burfield and the Investor, and each
additional director shall be elected to (and may be removed from) the Board
in the same manner that the Outside Directors are elected to (and removed
from) the Board;
-2-
<PAGE>
(iv) the removal from the Board (with or without cause) of the
Investor Directors or the Outside Directors shall be only upon the written
request of Investor;
(v) the Company's Chief Executive Officer, upon his ceasing to be an
employee of the Company or its Subsidiaries, shall promptly be removed as a
director;
(vi) in the event that any representative designated hereunder for any
reason ceases to serve as a member of the Board during his term of office,
the resulting vacancy on the Board shall be filled by a representative
designated by the person or persons originally entitled to designate such
director pursuant to Section 1(a)(ii) above; and
(vii) one of the Investor Directors shall be named Chairman of the
Board, as designated by the Investor and who shall initially be Bryan C.
Cressey.
(b) There shall be at least four meetings of the Board during every
fiscal year, at least one of which shall be held in each 120-day period during
the Company's fiscal year. The Company shall pay all out-of-pocket expenses
incurred by each director in connection with attending regular and special
meetings of the Board and any committee thereof.
(c) The rights of Burfield under this Section 1 shall terminate at
such time as Burfield is no longer employed by the Company and its subsidiaries.
(d) The provisions of this Section 1 shall terminate automatically
and be of no further force and effect upon the vote of the holder(s) of a
majority of the Stockholder Shares to terminate this Section 1.
(e) If any party fails to designate a representative to fill a
directorship pursuant to the terms of this Section 1, the election of a person
to such directorship shall be accomplished in accordance with the Company's
bylaws and applicable law.
(f) Notwithstanding the foregoing, nothing herein shall be deemed to
require any member of the Board, in his capacity as a director, to take any
action in respect of these provisions to the extent such action or such
commitment to take such action would be prohibited under the Delaware General
Corporation Law.
2. IRREVOCABLE PROXY; CONFLICTING AGREEMENTS.
(a) In order to secure Cooper's, Halberg's, Jerstad's, each
Executive's and each Subsidiary Investor's obligations to vote his Stockholder
Shares and other voting securities of the Company in accordance with the
provisions of Section 1 hereof, Cooper, Halberg, Jerstad, each Executive and
each Subsidiary Investor hereby appoints Bryan C. Cressey as his true and lawful
proxy and attorney-in-fact, with full power of substitution, to vote all of his
Stockholder Shares and other voting securities of the Company for the election
and/or removal of directors and all such other matters as expressly provided for
in Section 1. With respect to Cooper, Halberg, Jerstad, each Executive and each
Subsidiary Investor, Bryan C. Cressey may exercise the irrevocable proxy granted
to him hereunder at any time such person fails to comply with the provisions of
this Agreement. The proxies and powers granted by Cooper, Halberg, Jerstad,
each Executive and each Subsidiary Investor pursuant to this Section 2 are
coupled with an interest and are given to secure the performance of Cooper's,
Halberg's, Jerstad's, each Executive's and each Subsidiary Investor's
obligations to the Investor under this Agreement. Such proxies and powers will
be irrevocable for the term set forth in Section 1(e) of this
-3-
<PAGE>
Agreement and will survive the death, incompetency and disability of Cooper,
Halberg, Jerstad, each Executive and each Subsidiary Investor and the holders of
their Stockholder Shares.
(b) Each Stockholder represents that he has not granted and is not a
party to any proxy, voting trust or other agreement which is inconsistent with
or conflicts with the provisions of this Agreement, and no holder of Stockholder
Shares shall grant any proxy or become party to any voting trust or other
agreement which is inconsistent with or conflicts with the provisions of this
Agreement.
3. LEGEND. Each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares as defined herein after such
transfer) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"The securities represented by this certificate are subject to an
Amended and Restated Stockholders Agreement dated as of August __,
1996, among the issuer of such securities (the "Company") and certain
of the Company's stockholders. A copy of such Amended and Restated
Stockholders Agreement will be furnished without charge by the Company
to the holder hereof upon written request."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding prior to the date hereof. The legend set forth above shall
be removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with Section 9 hereof.
4. RESTRICTIONS ON TRANSFER OF SUBSIDIARY INVESTOR STOCK.
(a) TRANSFER OF SUBSIDIARY INVESTOR STOCK. A Subsidiary Investor
shall not sell, transfer, assign, pledge or otherwise dispose of (whether with
or without consideration and whether voluntarily, involuntarily or by operation
of law) any interest in any shares of Subsidiary Investor Stock (a "TRANSFER"),
except pursuant to (i) a Public Sale or a Sale of the Company ("EXEMPT
TRANSFERS") or (ii) the approval of the Company and the Investor and, pursuant
to the provisions of this Section 4; provided that in no event shall any
Transfer of Common Stock pursuant to this Section be made for any consideration
other than cash payable upon consummation of such Transfer or in installments
over time. Prior to making any Transfer other than an Exempt Transfer, a
Subsidiary Investor will give written notice (the "SALE NOTICE") to the Company
and the Investor. The Sale Notice will disclose in reasonable detail the
identity of the prospective transferee or transferees, the number of shares to
be transferred and the terms and conditions of the proposed transfer. A
Subsidiary Investor will not consummate any Transfer until 90 days after the
Sale Notice has been given to the Company and the other Stockholders, unless the
parties to the Transfer have been finally determined pursuant to this Section 4
prior to the expiration of such 90-day period. The date of the first to occur
of such events is referred to herein as the "AUTHORIZATION DATE."
(b) FIRST REFUSAL RIGHTS. The Company may elect to purchase all (but
not less than all) of the shares of Subsidiary Investor Stock to be transferred
upon the same terms and conditions as those set forth in the Sale Notice by
delivering a written notice of such election to such Subsidiary Investor and the
Investor within sixty (60) days after the Sale Notice has been given to the
Company. If the Company has not elected to purchase all of the Common Stock to
be transferred, the Investor may elect to purchase all (but not less than all)
of the Subsidiary Investor Stock to be transferred upon the same terms and
conditions as those set forth in the Sale Notice by giving written notice of
such election to such Subsidiary Investor within ninety (90) days after the Sale
Notice has been given to the Investor. If neither the Company nor the Investor
elects to purchase all of the shares of Subsidiary Investor Stock specified in
the Sale Notice, such Subsidiary Investor may transfer the shares of Subsidiary
Investor Stock
-4-
<PAGE>
specified in the Sale Notice at a price and on terms no more favorable to the
transferee(s) thereof than specified in the Sale Notice during the 90-day period
immediately following the Authorization Date. Any shares of Subsidiary Investor
Stock not transferred within such 90-day period will be subject to the
provisions of this Section 4(b) upon subsequent transfer.
(c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this
Section 4 will not apply with respect to (i) transfers of shares of Subsidiary
Investor Stock pursuant to applicable laws of descent and distribution or (ii)
transfers of shares of Subsidiary Investor Stock among a Subsidiary Investor's
Family Group; provided that such restrictions will continue to be applicable to
Subsidiary Investor Stock after any such transfer and the transferees of such
Subsidiary Investor Stock will have agreed in writing to be bound by the
provisions of this Agreement.
5. REPURCHASE OPTION.
(a) Subject to Section 5(f) below, in the event a Subsidiary Investor
ceases to be employed by the Company or its Subsidiaries for any reason (the
"TERMINATION"), such Subsidiary Investor's Subsidiary Investor Stock (whether
held by such Subsidiary Investor or one or more of such Subsidiary Investor's
transferees) will be subject to repurchase by the Company and the Investor
pursuant to the terms and conditions set forth in this Section 5 (the
"REPURCHASE OPTION").
(b) The purchase price for each share of Subsidiary Investor Stock
will be the "FAIR MARKET VALUE" for such share. "FAIR MARKET VALUE" shall equal
the fair market value for each share of Subsidiary Investor Stock as of the date
of Termination, as mutually agreed upon by the Board and such Subsidiary
Investor; PROVIDED that if an agreement cannot be reached within thirty (30)
days of the Company's receipt of notice of exercise, the fair market value shall
be determined by an independent investment banking firm of regional reputation
mutually selected by the Board and such Subsidiary Investor, based upon what a
willing buyer would pay for 100% of the outstanding Common Stock on a fully-
diluted basis, in an orderly private transaction with no discount in respect of
the Subsidiary Investor Stock as a result of such Subsidiary Investor Stock
representing a minority interest or as a result of the liquidity restrictions
contained herein; FURTHER PROVIDED, if the parties cannot agree on such an
investment banking firm within 30 days, a firm shall be selected by lot based
upon two such firms nominated by each of the Board and such Subsidiary Investor,
after each of them has had the opportunity to eliminate one of the other party's
nominees (this reducing the total number of firms from six to four).
(c) The Board may elect to purchase all or any portion of the
Subsidiary Investor Stock at Fair Market Value as determined pursuant to Section
5(b) by delivering written notice (the "REPURCHASE NOTICE") to the holder of the
Subsidiary Investor Stock within 90 days after the Termination. The Repurchase
Notice will set forth the number of shares of Subsidiary Investor Stock to be
acquired from such holder, the aggregate consideration to be paid for such
shares and the time and place for the closing of the transaction.
(d) If for any reason the Company does not elect to purchase all of
such Subsidiary Investor's Subsidiary Investor Stock pursuant to the Repurchase
Option, the Investor shall be entitled to exercise the Repurchase Option for the
shares of Subsidiary Investor Stock the Company has not elected to purchase (the
"AVAILABLE SHARES") at Fair Market Value as determined pursuant to Section 5(b).
As soon as practicable after the Company has determined that there will be
Available Shares, but in any event within 60 days after the Termination, the
Company shall give written notice (the "OPTION NOTICE") to the Investor setting
forth the number of Available Shares and the purchase price for the Available
Shares. The Investor may elect to purchase any or all of the Available Shares
by giving written notice to the Company within 30 days after the Option Notice
has been given by the Company. As soon as practicable, and in any event within
10 days after the expiration of the 30 day period set forth above, the
-5-
<PAGE>
Company shall notify such holder of Subsidiary Investor Stock as to the number
of shares being purchased from such holder by the Investor (the "SUPPLEMENTAL
REPURCHASE NOTICE"). At the time the Company delivers the Supplemental
Repurchase Notice to such holder of Subsidiary Investor Stock, the Company shall
also deliver written notice to the Investor setting forth the number of shares
the Investor is entitled to purchase, the aggregate purchase price and the time
and place of the closing of the transaction.
(e) The closing of the purchase of the Subsidiary Investor Stock
pursuant to the Repurchase Option shall take place on the date designated by the
Company in the Repurchase Notice or Supplemental Repurchase Notice, which date
shall not be more than 30 days nor less than 5 days after the delivery of the
later of either such notice to be delivered. The Company and/or the Investor
will pay for the Subsidiary Investor Stock to be purchased pursuant to the
Repurchase Option by delivery of a check or a wire transfer of funds in form and
substance determined by the board in good faith in the aggregate amount of the
purchase price for such shares. The Company and the Investor will be entitled
to receive customary representations and warranties from the sellers regarding
such sale and to require all seller's signatures be guaranteed.
(f) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Subsidiary Investor Stock by the Company shall be
subject to applicable restrictions contained in the Delaware General Corporation
Law and in the Company's and any Subsidiary's debt and equity financing
agreements. If any such restrictions prohibit the repurchase of Subsidiary
Investor Stock hereunder which the Company is otherwise entitled (or required)
to make, the Company may (or shall) make such repurchases as soon as it is
permitted to do so under such restrictions.
6. SUBSIDIARY INVESTOR PUT OPTION.
(a) SUBSIDIARY INVESTOR PUT OPTION. If a Subsidiary Investor is an
employee of the Company, at any time upon or within ten (10) days after the date
on which a Subsidiary Investor's employment with the Company is terminated by
the Company other than for Cause (the date of such occurrence being referred to
herein as the "PUT TERMINATION DATE", and the period beginning on the Put
Termination Date and ending on the thirtieth (30th) day following such date
being referred to herein as the "PUT EXERCISE PERIOD"), such Subsidiary Investor
shall have the right, in accordance with the terms and conditions set forth in
this Section 6, to require the Company to repurchase all, but not less than all,
of the Subsidiary Investor Stock held by such Subsidiary Investor and/or such
Subsidiary Investor's Family Group (the "PUT") at the Put Price (as defined
below) by delivering written notice to the Company (the "PUT NOTICE") during the
Put Exercise Period. A Subsidiary Investor shall NOT be entitled to exercise
the Put pursuant to this Section 6 if such Subsidiary Investor is terminated by
the Company for Cause.
(b) PUT PRICE. Subject to the provisions set forth in Section 6(a)
above, the "PUT PRICE" for each share of Subsidiary Investor Stock purchased by
the Company pursuant to the Put will be equal to the Fair Market Value for each
such share determined as of the Put Termination Date in accordance with the
valuation method set forth in Section 5(b) hereof.
(c) PURCHASE CLOSING. Subject to the provisions hereof, the closing
of the purchase transaction pursuant to the Put (the "PUT CLOSING") will take
place at a mutually agreeable time and place on or within 30 days after the
later of (i) the date the Put Notice is delivered or (ii) the date of
determination of the Put Price. The Company will pay the aggregate purchase
price for the Subsidiary Investor Stock to be purchased pursuant to this
Section 6 (the "PUT PURCHASE PRICE") by cashier's check, certified check or wire
transfer of immediately available funds on the date of consummation of such
purchase, PROVIDED, that if the Board determines in its sole discretion that
either (i) such payment would have a materially adverse effect on the Company,
or (ii) such payment would constitute an event of default under the terms of any
agreement for indebtedness to which the Company is a party as of the Put
-6-
<PAGE>
Termination Date, such payment will be made by delivery of a promissory note(s)
issued by the Company to the holder(s) of such Subsidiary Investor Stock with an
aggregate principal amount equal to Put Purchase Price bearing interest at a
rate equal to the Prime Rate as announced by The First National Bank of Chicago
on the Put Termination Date PLUS one percent (1%) payable annually, and with
principal and interest payments made in three equal annual installments
commencing on the first anniversary of the date of the Put Closing (a "NOTE").
Within ten (10) days of a decision by the Board to pay the Put Purchase Price by
delivery of a Note, the Board will deliver written notice of such decision to
Executive. Within ten (10) days of receipt of such a notice, such Subsidiary
Investor may withdraw his notice to exercise the Put, at which time all of such
Subsidiary Investor's rights under the Put shall terminate. The Company may
also elect to pay all or any portion of such purchase price by offsetting
amounts outstanding under any bona fide debts owed by such Subsidiary Investor
to the Company. The Company will be entitled to receive customary
representations and warranties from each seller of Subsidiary Investor Stock
regarding the sale of the Subsidiary Investor Stock.
7. PUBLIC OFFERING. In the event that the Board and the holders of
a majority of the shares of Common Stock (voting as a single class) then
outstanding approve an initial public offering and sale of Common Stock (a
"Public Offering") pursuant to an effective registration statement under the
Securities Act of 1933, the Stockholders shall take all necessary or desirable
actions in connection with the consummation of the Public Offering. In the
event that such Public Offering is an underwritten offering and the managing
underwriters advise the Company in writing that in their opinion the capital
stock structure shall adversely affect the marketability of the offering, each
Stockholder shall consent to and vote for a recapitalization, reorganization
and/or exchange of the Common Stock into securities that the managing
underwriters, the Board and holders of a majority of the shares of Common Stock
then outstanding (voting as a single class) find acceptable and shall take all
necessary or desirable actions in connection with the consummation of the
recapitalization, reorganization and/or exchange; provided that the resulting
securities reflect and are consistent with the rights and preferences set forth
in the Company's Certificate of Incorporation as in effect immediately prior to
such Public Offering.
8. SALE OF THE COMPANY.
(a) If the Board and the holders of a majority of the shares of
Common Stock (voting as a single class) then outstanding approve a Sale of the
Company (an "Approved Sale"), each Stockholder shall vote for, consent to and
raise no objections against such Approved Sale. If the Approved Sale is
structured as (i) a merger or consolidation, each Stockholder shall waive any
dissenters' rights, appraisal rights or similar rights in connection with such
merger or consolidation, (ii) a sale of stock, each Stockholder shall agree to
sell all of his shares and rights to acquire shares on the terms and conditions
approved by the Board and the holders of a majority of the shares (voting as a
single class) then outstanding. Each Stockholder shall take all necessary or
desirable actions in connection with the consummation of the Approved Sale as
requested by the Company or (iii) a sale of assets, each Stockholder shall vote
in favor of the sale and any subsequent liquidation of the Company, and raise no
objection thereto.
(b) The obligations of the Stockholders with respect to the Approved
Sale of the Company are subject to the satisfaction of the following conditions:
(i) upon the consummation of the Approved Sale, each Stockholder shall receive
the same form of consideration and the same amount of consideration as set forth
in paragraph (c) below; (ii) if any holders of a class of stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of stock shall be given the same option; and (iii) each holder of
then currently exercisable rights to acquire shares of a class of stock shall be
given an opportunity to either (A) exercise such rights prior to the
consummation of the Approved Sale and participate in such sale as holders of
such class of stock or (B) upon the consummation of the Approved Sale, receive
in exchange for such rights consideration equal to the
-7-
<PAGE>
amount determined by multiplying (1) the same amount of consideration per share
of a class of stock received by holders of such class of stock in connection
with the Approved Sale less the exercise price per share of such class of stock
of such rights to acquire such class of stock by (2) the number of shares of
such class of stock represented by such rights.
(c) In the event of a sale or exchange by the Stockholders of all or
substantially all of the Common Stock held by the Stockholders (whether by sale,
merger, recapitalization, reorganization, consolidation, combination or
otherwise), each Stockholder shall receive in exchange for the shares of Common
Stock held by such Stockholder the same portion of the aggregate consideration
from such sale or exchange that such Stockholder would have received if such
aggregate consideration had been distributed by the Company in complete
liquidation pursuant to the rights and preferences set forth in the Company's
Certificate of Incorporation as in effect immediately prior to such sale or
exchange. Each holder of Common Stock shall take all necessary or desirable
actions in connection with the distribution of the aggregate consideration from
such sale or exchange as requested by the Company.
9. DEFINITIONS.
"AFFILIATE" of the Investor means any other person, entity or
investment fund controlling, controlled by or under common control with the
Investor and any partner of the Investor.
"BOARD" shall have the meaning set forth in Section 1 hereof.
"CAUSE" shall mean (i) commission of a felony or the commission of any
other act which is materially injurious to the Company or any Subsidiary
involving dishonesty, disloyalty or fraud with respect to the Company or any
Subsidiary or (ii) gross negligence or willful misconduct with respect to the
Company or any Subsidiary which is materially injurious to the Company or any
Subsidiary.
"COMMON STOCK" means the Class A Common and the Class B Common, and
shares of any single class of Common Stock into or for which shares of Class A
Common and Class B Common may hereafter be converted, reclassified or exchanged.
"PERMITTED TRANSFEREE" means (i) with respect to each Subsidiary
Investor, each Executive, Cooper, Halberg and Jerstad, their spouse and/or
descendants (whether natural or adopted), and any trust solely for any
Executive's, Cooper's, Halberg's or Jerstad's benefit and/or their spouse and/or
descendants, and (ii) in the case of the Investor, its Affiliates.
"PUBLIC OFFERING" means a public offering of the Company's common
equity securities registered under the Securities Act.
"PUBLIC SALE" means any sale of Stockholder Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person or entity acquires (i) capital stock of the Company
possessing the voting power under normal circumstances to elect a majority of
the Board (whether by merger, consolidation, reorganization, combination, sale
or transfer of the Company's capital stock or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
-8-
<PAGE>
"STOCKHOLDER SHARES" means (i) any Common Stock purchased or otherwise
acquired by any Stockholder, (ii) any equity securities issued or issuable
directly or indirectly with respect to the Common Stock referred to in
clause (i) above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares constituting Stockholder Shares,
such shares will cease to be Stockholder Shares when they have been
(x) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them or (y) sold to the
public through a broker, dealer or market maker pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act.
"SUBSIDIARY" shall mean any corporation of which the Company owns
securities having a majority of the ordinary voting power in electing the board
of directors directly or indirectly through one or more subsidiaries.
"SUBSIDIARY INVESTOR'S FAMILY GROUP" means a Subsidiary Investor's
spouse and descendants (whether natural or adopted) and any trust established
solely for the benefit of such Subsidiary Investor and/or such Subsidiary
Investor's spouse and/or descendants.
"SUBSIDIARY INVESTOR STOCK" means (i) any Common Stock acquired by any
Subsidiary Investor pursuant to the terms of a Subsidiary Stockholder Agreement,
(ii) any equity securities issued or issuable directly or indirectly with
respect to the Common Stock referred to in clause (i) above by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular shares constituting Subsidiary Investor Stock, such shares will cease
to be Subsidiary Investor Stock when they have been (x) effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them or (y) sold to the public through a broker, dealer or
market maker pursuant to Rule 144 (or any similar provision then in force) under
the Securities Act.
10. ADDITIONAL EQUITY.
(a) After the Company has received $10 million of paid-in capital,
except as provided below, any additional equity shall be issued by the Company
at a price per share equal to or greater than the Share Value. The "Share
Value" at the time of determination shall equal (i) the fair market value of
each share to be issued by the Company, as mutually agreed upon by the Investor
and each holder of at least 7.5% of the Company's fully diluted Common Stock, or
(ii) in the event the Investor and such holders are unable to agree on the fair
market value of a share, the fair market value as determined by an appraiser
which is not affiliated with the Company, the Investor or Burfield and which
appraiser is jointly selected by the Investor and Burfield. The determination
of such appraiser shall be final and binding upon the parties, and the fees and
expenses of such appraiser shall be paid by the Company. Additional equity may
be issued at a price per share lower than the Share Value only in the event that
(x) the Company is unable to issue the desired number of shares within 90 days
at the Share Value, (y) the Board determines that the Company will be unable to
issue the desired number of shares within a reasonable time at the Share Value
and (z) the Company issues such shares (or a greater or lesser number) to an
unaffiliated third party in an arm's length transaction. Notwithstanding
anything to the contrary set forth in this Section 10, the Company may sell
additional equity in the manner and at any price approved by the Board at any
time that the Company has failed to achieve at least 90% of "Projected EBITDA"
(as defined and described in the Amended and Restated Agreement) in respect of
any fiscal year through the Company's 1999 fiscal year, or, following the
Company's 1999 fiscal year, if the Company has failed to achieve 90% of budgeted
EBITDA (as defined in the Amended and Restated Agreement) in respect of any
fiscal year as established by the Board from time to time; in which event the
restrictions on the sale of additional equity contained in this Section 10 shall
immediately cease and be of no further force or effect.
-9-
<PAGE>
(b) Any common stock of the Company issued to the Foundation or any
of its affiliates pursuant to the Conversion Option, the Put or the Call (each
as defined in and) pursuant to the GSSS Shareholders Agreement, shall for
purposes of Section 10 of this Agreement be deemed to be issued at a price per
share greater than the Share Value.
11. TRANSFERS; TRANSFERS IN VIOLATION OF AGREEMENT. Prior to
transferring any Stockholder Shares to any person or entity, the transferring
Stockholder shall cause the prospective transferee to execute and deliver to the
Company and the other Stockholders a counterpart of this Agreement. Any
transfer or attempted transfer of any Stockholder Shares in violation of any
provision of this Agreement shall be void, and the Company shall not record such
transfer on its books or treat any purported transferee of such Stockholder
Shares as the owner of such shares for any purpose.
12. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company, the Investor and
Burfield; provided that any modification, amendment or waiver which materially
and adversely affects the rights of Cooper, Jerstad, Halberg or any other
Executive must be approved by Cooper, Jerstad, Halberg and such Executive. The
failure of any party to enforce any of the provisions of this Agreement shall in
no way be construed as a waiver of such provisions and shall not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement shall 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 shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
14. ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this document embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
15. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.
16. COUNTERPARTS. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
17. REMEDIES. The Company, the Investor, each of the Executives,
Cooper, Halberg and Jerstad and each of the Subsidiary Investors shall be
entitled to enforce their rights under this Agreement specifically to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in their favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that the Company, the Investor, each of the
Executives, Cooper, Halberg and Jerstad and each of the Subsidiary Investors may
in its sole discretion apply to any court of law or equity of competent
-10-
<PAGE>
jurisdiction for specific performance and/or injunctive relief (without posting
a bond or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.
18. NOTICES. Any notice shall be in writing and shall be personally
delivered, mailed first class mail (postage prepaid) or sent by reputable
overnight courier service (charges prepaid) to the Company and any other
recipient at the addresses set forth below and to any subsequent holder of
Common Stock subject to this Agreement at such address as indicated by the
Company's records, or at such address or to the attention of such other person
as the recipient party has specified by prior written notice to the sending
party. Notices will be deemed to have been given hereunder when delivered
personally, three days after deposit in the U.S. mail and one day after deposit
with a reputable overnight courier service.
IF TO THE COMPANY:
American Medserve Corporation
Park Lake Center
184 Shuman Boulevard
Naperville, Illinois 60563
Attention: CEO
IF TO THE INVESTOR:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bryan C. Cressey
WITH A COPY TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Gary R. Silverman, Esq.
IF TO ANY EXECUTIVE:
Timothy L. Burfield
9168 East 1200 Road
Cambridge, Illinois 61238
Michael B. Freedman
2022 North Dayton
Chicago, Illinois 60614
Charles R. Wallace
393 Prairie
Elmhurst, Illinois 60126
-11-
<PAGE>
J. Jeffrey Gephart
1335 Willow Tree Drive
Woodstock, Georgia 30188
Thomas C. Loftus
1200 W. Webster
Chicago, Illinois 60614
George E. Pepe
1327 N. Chestnut Avenue
Arlington Heights, Illinois 60004
IF TO COOPER, HALBERG AND/OR JERSTAD:
James H.S. Cooper
c/o Equitable Securities Corporation
800 Nashville City Center
Nashville, Tennessee 37219-1743
Charles C. Halberg
c/o Good Samaritan Supply Services, Inc.
2177 Youngman Avenue
St. Paul, Minnesota 55116
Mark A. Jerstad
c/o The Evangelical Lutheran Good Samaritan Foundation
4800 West 57th Street
Sioux Falls, South Dakota 57117
IF TO ANY SUBSIDIARY INVESTOR:
To the address designated
on EXHIBIT A hereto
19. GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware, without giving
effect to any choice of law or other conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
20. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
21. NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
-12-
<PAGE>
22. CO-SALE RIGHTS AND OBLIGATIONS.
(a) If at any time the Investor proposes to transfer shares of Common
Stock to any Person (an "Acquirer") other than to a Permitted Transferee or
pursuant to a Public Sale (a "Disposition"), the Investor shall, at least 30
days prior to the consummation of the Disposition, give notice (a "Disposition
Notice") to each of the other Stockholders (the "Other Stockholders"),
describing the terms and conditions of the Disposition in reasonable detail,
including the proposed price per share of Common Stock, the method of payment,
the anticipated closing date and the identity of the Acquirer, and stating that
each of the Other Stockholders may elect to participate in such Disposition in
accordance with this Section 22.
(b) The election by the Other Stockholders pursuant to subsection (a)
shall be exercised by notice to the Investor given within the time period
specified in the Disposition Notice, which time period shall not be less than 10
business days after such Disposition Notice is given. If an Other Stockholder
gives notice of its election to sell (an "Electing Stockholder"), such Electing
Stockholder shall be obligated to sell the shares of Common Stock specified in
its notice upon the terms and subject to the conditions specified in subsection
(a) to the Acquirer, conditional upon the closing of the Disposition and the
possible reduction in the number of shares to be purchased by the Acquirer
pursuant to paragraph (c) below.
(c) If the Acquirer pursuant to the Disposition has a specified
limited number of shares of Common Stock which it is willing to purchase in the
aggregate (the "Maximum Number"), each of the Electing Stockholders (together
with the Investor, the "Disposing Stockholders") shall have the right to sell to
the Acquirer that number of shares of Common Stock owned by such Electing
Stockholders which equals the product of (a) the Maximum Number times (b) a
fraction, the numerator of which is the number of shares of Common Stock then
held by such Electing Stockholder as of the date of the Disposition Notice and
the denominator of which is the sum of the total number of shares of Common
Stock then held by all Disposing Stockholders, including such Electing
Stockholder, all as of such date, and the Investor shall have the right to sell
the balance.
(d) The sale or transfer of the shares of Common Stock to the
Acquirer by the Investor and by the Electing Stockholders pursuant to this
Section 22 shall occur simultaneously. The Investor shall use reasonable
efforts to obtain the agreement of the Acquirer to the participation of the
Electing Stockholders in any contemplated Disposition, and the Investor shall
not transfer any of its shares of Common Stock if the Acquirer declines to allow
the participation of the Electing Stockholders as herein provided.
(e) In the event that at the time of such sale by the Investor, the
Investor still holds Class A Common and the Other Stockholders still hold Class
B Common, then in such event, in determining the purchase price to be paid for
the Class B Common in connection with such transaction, such price shall be that
price which equals the value which would have been distributed to the holder
thereof had the Company's assets been sold for a price which would result in the
Investor receiving, upon distribution of the proceeds therefrom, an amount for
its shares of Class A Common equal to the purchase price being paid therefor by
the Acquirer in connection with the transaction giving rise to such
determination, ignoring, for purposes hereof, any Company-level tax on such
deemed sale of assets.
23. TERMINATION. Sections 1 - 8 hereof, inclusive, and Section 10
hereof shall terminate upon the earlier of (i) a Sale of the Company or (ii) a
Public Offering, and shall thereupon be of no further force or effect.
* * * * *
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
AMERICAN MEDSERVE CORPORATION
By: /s/ Michael B. Freedman
----------------------------------
Its: Vice President - Business
Development
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV
By: GTCR IV, L.P.
Its General Partner
By: Golder, Thoma, Cressey, Rauner,
Inc.
Its General Partner
By: /s/ Bryan C. Cressey
----------------------------------
Its: Principal
/s/ Timothy L. Burfield
---------------------------------------
TIMOTHY L. BURFIELD
/s/ Michael B. Freedman
---------------------------------------
MICHAEL B. FREEDMAN
/s/ Charles R. Wallace
---------------------------------------
CHARLES R. WALLACE
/s/ J. Jeffrey Gephart
---------------------------------------
J. JEFFREY GEPHART
/s/ James Cooper
---------------------------------------
JAMES H.S. COOPER
/s/ Charles C. Halberg
---------------------------------------
CHARLES C. HALBERG
/s/ Mark A. Jerstad
---------------------------------------
MARK A. JERSTAD
-14-
<PAGE>
/s/ William J. Gatti
---------------------------------------
WILLIAM J. GATTI
/s/ Mary Jane Gatti
---------------------------------------
MARY JANE GATTI
STERLING ACQUISITION PARTNERS, INC.
By: /s/ Charles Brown
---------------------------------------
Its: President
PHARMED, INC.
By: /s/ James Vanderhoeven
---------------------------------------
Its: President
/s/ Nelson L. Showalter
---------------------------------------
NELSON L. SHOWALTER
/s/ Bruce Gerlich
---------------------------------------
BRUCE GERLICH
/s/ Mitch Overstreet
---------------------------------------
MITCH OVERSTREET
/s/ Lee R. Youngberg
---------------------------------------
LEE R. YOUNGBERG
/s/ Frank R. Gelafio
---------------------------------------
FRANK R. GELAFIO
/s/ Ronald E. Keith
---------------------------------------
RONALD E. KEITH
/s/ James Pietryga
---------------------------------------
JAMES PIETRYGA
PHARMED OF BATON ROUGE, INC.
By: /s/ James Vanderhoeven
---------------------------------------
Its: President
-15-
<PAGE>
---------------------------------------
JOSEPH F. DELLANTONIO
-16-
<PAGE>
/s/ Thomas C. Loftus
---------------------------------------
THOMAS C. LOFTUS
/s/ George E. Pepe
---------------------------------------
GEORGE E. PEPE
-17-
<PAGE>
EXHIBIT A
SUBSIDIARY INVESTORS
ADDRESSES FOR NOTICES
SUBSIDIARY INVESTORS ADDRESS FOR NOTICES
William J. and Mary Jane Gatti c/o Gatti LTC Services, Inc.
834 Philadelphia Street
Indiana, PA 15701
Pharmed, Inc. 3108 Jackson Street
Alexandria, LA 71301
ATTENTION: Mr. James Vanderhoeven
James Pietryga c/o Dixon Pharmacy, Inc.
742 N. Galena Avenue
Dixon, IL 61021
Ronald E. Keith c/o Dixon Pharmacy, Inc.
742 N. Galena Avenue
Dixon, IL 61021
Lee R. Youngberg c/o Nihan & Martin, Inc.
4440 Highcrest Road
Rockford, IL 61107
Frank R. Gelafio c/o Nihan & Martin, Inc.
4440 Highcrest Road
Rockford, IL 61107
Sterling Acquisition Partners, Inc. c/o Sterling Healthcare Services, Inc.
2132 Camden Way
Clearwater, FL 34619
ATTENTION: Mr. Charles L. Brown
Mitch Overstreet c/o Williamson Drug Company
1776 S. Main Street
Harrisonburg, VA 22801
Bruce Gerlich c/o Williamson Drug Company
1776 S. Main Street
Harrisonburg, VA 22801
Nelson L. Showalter c/o Williamson Drug Company
1776 S. Main Street
Harrisonburg, VA 22801
A-1
<PAGE>
Pharmed of Baton Ridge, Inc. 3108 Jackson Street
Alexandria, LA 71301
ATTENTION: Mr. James Vanderhoeven
Joseph F. Dellantonio c/o Joseph F. Dellantonio, Inc.
10 South Second Street
Clearfield, PA 16830
A-2
<PAGE>
Exhibit 10.16
REGISTRATION AGREEMENT
THIS AGREEMENT is made as of August 23, 1996, by and among American
Medserve Corporation, a Delaware corporation (the "COMPANY"), Golder, Thoma,
Cressey, Rauner Fund IV, L.P., a Delaware limited partnership ("GTCR"), and each
of the other investors in the Company listed on the signature pages hereof (the
"INVESTORS"). Unless otherwise provided in this Agreement, capitalized terms
used herein shall have the meanings set forth in paragraph 8 hereof.
The parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time after 90 days following
the date on which the Company has completed an initial public offering of its
Common Stock under the Securities Act, the holders of a majority of the GTCR
Registrable Securities may request registration under the Securities Act of all
or any portion of their GTCR Registrable Securities on Form S-1 or any similar
long-form registration ("LONG-FORM REGISTRATIONS") or on Form S-2 or S-3 or any
similar short-form registration ("SHORT-FORM REGISTRATIONS") if available. All
registrations requested pursuant to this paragraph 1(a) are referred to herein
as "DEMAND REGISTRATIONS." Each request for a Demand Registration shall specify
the approximate number of GTCR Registrable Securities requested to be registered
and the anticipated per share price range for such offering. Within ten days
after receipt of any such request, the Company shall give written notice of such
requested registration to all other holders of GTCR Registrable Securities and
shall include in such registration all GTCR Registrable Securities with respect
to which the Company has received written requests for inclusion therein within
15 days after the receipt of the Company's notice.
(b) LONG-FORM REGISTRATIONS. The holders of a majority of the GTCR
Registrable Securities shall be entitled to request three Long-Form
Registrations in which the Company shall pay all Registration Expenses. A
registration shall not count as one of the permitted Long-Form Registrations
until it has become effective (unless such Long-Form Registration has not become
effective due solely to the fault of the holders requesting such registration),
and no Long-Form Registration shall count as one of the permitted Long-Form
Registrations unless the holders of GTCR Registrable Securities are able to
register and sell at least 90% of the GTCR Registrable Securities requested to
be included in such registration; provided that in any event the Company shall
pay all Registration Expenses in connection with any registration initiated as a
Long-Form Registration whether or not it has become effective and whether or not
such registration has counted as one of the permitted Long-Form Registrations.
All Long-Form Registrations shall be underwritten registrations.
(c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registrations provided pursuant to paragraph 1(b), the holders of a majority of
the GTCR Registrable Securities shall be entitled to request five Short-Form
Registrations in which the Company shall pay all Registration Expenses. Demand
Registrations shall be Short-Form Registrations whenever the Company is
permitted to use any applicable short form. After the Company has become
subject to the reporting requirements of the Securities Exchange Act, the
Company shall use its reasonable best efforts to make Short-Form Registrations
on Form S-3 available for the sale of GTCR Registrable Securities.
(d) PRIORITY ON DEMAND REGISTRATIONS. If a Demand Registration is an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of GTCR Registrable Securities and, if
permitted hereunder, other securities requested to be included in
-1-
<PAGE>
such offering exceeds the number of GTCR Registrable Securities and other
securities, if any, which can be sold therein without adversely affecting the
marketability of the offering, the Company shall include in such registration
prior to the inclusion of any securities which are not GTCR Registrable
Securities the number of GTCR Registrable Securities requested to be included
which in the opinion of such underwriters can be sold without adversely
affecting the marketability of the offering, pro rata among the respective
holders thereof on the basis of the amount of GTCR Registrable Securities owned
by each such holder.
(e) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company shall not be
obligated to effect any Demand Registration within 180 days after the effective
date of a previous Demand Registration or a previous registration in which the
holders of GTCR Registrable Securities were given piggyback rights pursuant to
paragraph 2 and in which there was no reduction in the number of GTCR
Registrable Securities requested to be included. The Company may postpone for
up to 180 days the filing or the effectiveness of a registration statement for a
Demand Registration if the Company's board of directors determines in its
reasonable good faith judgment that such Demand Registration would reasonably be
expected to have a material adverse effect on any proposal or plan by the
Company or any of its Subsidiaries to engage in any acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer, reorganization or similar transaction; provided that in such event, the
holders of GTCR Registrable Securities initially requesting such Demand
Registration shall be entitled to withdraw such request and, if such request is
withdrawn, such Demand Registration shall not count as one of the permitted
Demand Registrations hereunder, and the Company shall pay all Registration
Expenses in connection with such registration. The Company may delay a Demand
Registration hereunder only once in any twelve-month period.
(f) OTHER REGISTRATION RIGHTS. Except as provided in this Agreement,
the Company shall not hereafter grant to any Persons the right to request the
Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, without the
prior written consent of GTCR; provided that the Company may grant rights (i) to
other Persons (including without limitation to optionees) to participate in
Piggyback Registrations so long as such rights are subordinate to the rights of
the holders of GTCR Registrable Securities with respect to such Piggyback
Registrations (except that such rights may be PARI PASSU with the rights of
holders of GTCR Registrable Securities in the case of such rights issued to
members of management of the Company and its subsidiaries) and (ii) pursuant to
the Shareholders Agreement, dated as of April 30, 1996, by and among Good
Samaritan Supply Services, Inc., a South Dakota corporation, The Evangelical
Lutheran Good Samaritan Foundation, a Minnesota non-profit corporation, and the
Company, as such agreement is in effect as of the date hereof.
(g) CONTEMPORANEOUS DEMANDS. If any holders of the Company's
securities (other than Persons who hold GTCR Registrable Securities) exercise
demand registration rights to have the Company register their securities under
the Securities Act within 15 days before or after the time that holders of GTCR
Registrable Securities have requested a Demand Registration, then (i) the
holders of GTCR Registrable Securities who desire to have securities included in
such registration and the holders of such other securities shall be entitled to
participate in such registration on a pro rata basis, according to the number of
shares owned by each such holder, (ii) the Company shall pay all of the
Registration Expenses of the holders of GTCR Registrable Securities, and (iii)
such registration shall not count as a Long-Form Registration for purposes of
paragraph 1(b) unless the holders of GTCR Registrable Securities are able to
register and sell at least 90% of the GTCR Registrable Securities requested to
be registered.
-2-
<PAGE>
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. At any time after 90 days following the date
on which the Company has completed an initial public offering, whenever the
Company proposes to register any of its securities under the Securities Act
(including without limitation pursuant to a Demand Registration) and the
registration form to be used may be used for the registration of Registrable
Securities (a "PIGGYBACK REGISTRATION"), the Company shall give prompt written
notice (in any event within three business days after its receipt of notice of
any exercise of demand registration rights other than under this Agreement) to
all holders of Registrable Securities of its intention to effect such a
registration and shall include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within 20 days after the receipt of the Company's notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the holders of
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration
is an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of the offering, the Company shall include in such registration
(i) first, the securities the Company proposes to sell, (ii) second, the
Registrable Securities requested to be included in such registration and the
Common Stock requested to be included in such registration by any other holder
of Common Stock exercising similar piggyback registration rights, pro rata among
the holders of such securities on the basis of the number of shares owned by
each such holder, and (iii) third, other securities requested to be included in
such registration.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company shall include
in such registration (i) first, the securities requested to be included in such
registration by the holders requesting such registration, (ii) second, the
Registrable Securities requested to be included in such registration pursuant to
paragraph 2(a), pro rata among the holders of such Registrable Securities on the
basis of the number of shares owned by each such holder, and (iii) third, other
securities requested to be included in such registration.
(e) SELECTION OF UNDERWRITERS. If any Piggyback Registration is an
underwritten offering, the selection of investment banker(s) and manager(s) for
the offering must be approved by the holders of a majority of the GTCR
Registrable Securities included in such Piggyback Registration. Such approval
shall not be unreasonably withheld.
(f) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or this paragraph 2, and if such previous registration has not been
withdrawn or abandoned, the Company shall not file or cause to be effected any
other registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-8 or any successor form), whether on its own behalf or at
the request of any holder or holders of such securities, until a period of at
least 90 days has elapsed from the effective date of such previous registration.
-3-
<PAGE>
3. HOLDBACK AGREEMENTS.
(a) Upon the request of the underwriters managing the registered
public offering, each Required Holder (as such term is hereinafter defined)
shall agree not to effect any public sale or distribution (including sales
pursuant to Rule 144) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, during the
seven days prior to and the 180-day period beginning on the effective date of
any underwritten Demand Registration or any underwritten Piggyback Registration
in which Registrable Securities are included (except as part of such
underwritten registration). For purposes hereof, a "Required Holder" with
respect to a registered public offering shall mean each holder of Registrable
Securities then representing not less than 3% of the Company's issued and
outstanding shares of Common Stock who either (i) sold Registrable Securities
pursuant to a Piggyback Registration or (ii) had the right to sell Registrable
Securities in such offering pursuant to a Piggyback Registration but elected not
to request inclusion in such offering pursuant to Section 2(a) hereof.
(b) The Company (i) shall not effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
90-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise agree, and (ii) shall cause each holder (other than a holder of
Registrable Securities who is not then a Required Holder) of at least 5% (on a
fully-diluted basis) of its Common Stock, or any securities convertible into or
exchangeable or exercisable for Common Stock, purchased from the Company at any
time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any public sale or distribution (including
sales pursuant to Rule 144) of any such securities during such period (except as
part of such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its reasonable best efforts to effect
the registration and the sale of such Registrable Securities in accordance with
the intended method of disposition thereof, and pursuant thereto the Company
shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed);
(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 180 days and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
-4-
<PAGE>
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company shall not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto 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 contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its reasonable
best efforts to secure designation of all such Registrable Securities covered by
such registration statement as a NASDAQ "national market system security" within
the meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or,
failing that, to secure NASDAQ authorization for such Registrable Securities
and, without limiting the generality of the foregoing, to arrange for at least
two market makers to register as such with respect to such Registrable
Securities with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including effecting a stock split or a combination of
shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as
-5-
<PAGE>
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months beginning with the first day of the Company's first full
calendar quarter after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder; and
(k) permit any holder of Registrable Securities which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Stock included in such registration statement for sale in any
jurisdiction, the Company shall use its reasonable best efforts promptly to
obtain the withdrawal of such order; and
(m) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the holders of a majority of the
Registrable Securities being sold reasonably request (provided that such
Registrable Securities constitute at least 10% of the securities covered by such
registration statement).
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "REGISTRATION EXPENSES"), shall be borne as provided in this
Agreement, and the Company shall pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance and the expenses and fees for
listing the securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed or on the NASD
automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
included in such registration and for the reasonable fees and disbursements of
each additional counsel retained by any holder of Registrable Securities for the
sole and limited purpose of rendering a legal opinion on behalf of such holder
in connection with any underwritten Demand Registration or Piggyback
Registration.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or
-6-
<PAGE>
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by or contained in any information furnished in writing to the
Company by such holder expressly for use therein. In connection with an
underwritten offering, the Company shall indemnify such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder
of Registrable Securities is participating, each such holder shall furnish to
the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder; provided that the obligation to indemnify
shall be individual, not joint and several, for each holder and shall be limited
to the net amount of proceeds received by such holder from the sale of
Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities. The
Company also agrees to make such provisions as are reasonably requested by any
indemnified party for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's
-7-
<PAGE>
intended method of distribution) or to undertake any indemnification obligations
to the Company or the underwriters with respect thereto, except as otherwise
provided in paragraph 6 hereof.
8. DEFINITIONS.
"COMMON STOCK" means Common Stock, $.01 par value per share, of
American Medserve Corporation.
"GTCR REGISTRABLE SECURITIES" means (i) any Common Stock issued to
GTCR and (ii) any Common Stock or other common stock of the Company issued or
issuable with respect to the securities referred to in clause (i) above by way
of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
"INVESTOR REGISTRABLE SECURITIES" means (i) any Common Stock issued to
the Investors and (ii) any Common Stock or other common stock of the Company
issued or issuable with respect to the securities referred to in clause (i)
above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint company, a trust, a joint venture, an
unincorporated organization, a governmental entity (or any department, agency or
political subdivision thereof) or any other entity.
"REGISTRABLE SECURITIES" means GTCR Registrable Securities and
Investor Registrable Securities. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to a offering registered under the Securities
Act or sold to the public through a broker, dealer or market maker in compliance
with Rule 144 or repurchased by the Company or any Subsidiary. For purposes of
this Agreement, a Person shall be deemed to be a holder of Registrable
Securities, and the Registrable Securities shall be deemed to be in existence,
whenever such Person has the right to acquire directly or indirectly such
Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and such Person shall be entitled to exercise the
rights of a holder of Registrable Securities hereunder.
"RULE 144" means Rule 144 under the Securities Act (or any similar
rule then in force).
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental body
or agency succeeding to the functions thereof.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"SUBSIDIARY" means any corporation of which the securities having a
majority of the ordinary voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through one or more Subsidiaries.
-8-
<PAGE>
9. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not hereafter
enter into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to the holders of Registrable Securities in
this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company shall
not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) REMEDIES. Any Person having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of at least a majority of the GTCR
Registrable Securities and a majority of the Investor Registrable Securities.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(f) SEVERABILITY. Whenever possible, each provision of this
Agreement shall 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 prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
-9-
<PAGE>
(j) NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, delivered to the recipient by reputable overnight courier
service (charges prepaid) or sent via facsimile to the recipient. Such notices,
demands and other communications shall be sent to GTCR and each Investor at the
address indicated on the records of the Company and to the Company at the
address indicated below:
American Medserve Corporation, Inc.
Park Lake Center
184 Shuman Boulevard
Naperville, IL 60563
Attn: President
Facsimile: (708) 717-4196
with copy to:
Gardner Carton & Douglas
Quaker Tower
321 N. Clark Street
Chicago, IL 60610-4795
Attn: Glenn W. Reed, Esq.
Facsimile: (312) 644-3381
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * *
-10-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AMERICAN MEDSERVE CORPORATION
By: /s/ Michael B. Freedman
-----------------------
Its: Vice President - Business
Development
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey, Rauner,
Inc.
Its: General Partner
By: /s/ Bryan C. Cressey
--------------------
Its: Principal
INVESTORS:
/s/ William J. Gatti
--------------------
WILLIAM J. GATTI
/s/ Mary Jane Gatti
-------------------
MARY JANE GATTI
STERLING ACQUISITION PARTNERS, INC.
By: /s/ Charles Brown
-----------------
Its: President
PHARMED. INC.
By: /s/ James Vanderhoeven
-----------------------
Its: President
/s/ Nelson L. Showalter
------------------------
NELSON L. SHOWALTER
/s/ B. Gerlich
--------------
BRUCE GERLICH
-11-
<PAGE>
/s/ Mitch Overstreet
--------------------
MITCH OVERSTREET
/s/ Lee R. Youngberg
--------------------
LEE R. YOUNGBERG
/s/ Frank R. Gelafio
--------------------
FRANK R. GELAFIO
/s/ Ron E. Keith
----------------
RONALD E. KEITH
/s/ James Pietryga
------------------
JAMES PIETRYGA
PHARMED OF BATON ROUGE, INC.
By: /s/ James Vanderhoeven
----------------------
Its: President
-12-
<PAGE>
/s/ Timothy L. Burfield
-----------------------
TIMOTHY L. BURFIELD
/s/ Michael B. Freedman
-----------------------
MICHAEL B. FREEDMAN
/s/ Charles R. Wallace
----------------------
CHARLES R. WALLACE
/s/ J. Jeffrey Gephart
----------------------
J. JEFFREY GEPHART
/s/ James Cooper
----------------
JAMES H. S. COOPER
/s/ Charles C. Halberg
----------------------
CHARLES C. HALBERG
/s/ Mark A. Jerstad
-------------------
MARK A. JERSTAD
------------------------------
JOSEPH F. DELLANTONIO
-13-
<PAGE>
/s/ Thomas C. Loftus
--------------------
THOMAS C. LOFTUS
/s/ George E. Pepe
------------------
GEORGE E. PEPE
-14-
<PAGE>
Exhibit 10.18
AMENDMENT NO. 1 TO EQUITY PURCHASE AGREEMENT
This Amendment No. 1 to Equity Purchase Agreement, dated as of August 23,
1996, is by and between Golder, Thoma, Cressey, Rauner Fund IV, L.P., a Delaware
limited partnership (the "Fund"), and American Medserve Corporation, a Delaware
corporation (the "Company").
WHEREAS, the Fund and the Company have entered into an Equity Purchase
Agreement, dated as of December 3, 1993 (the "Equity Purchase Agreement");
WHEREAS, the Company is contemplating engaging in an underwritten public
offering registered under the Securities Act of 1933, as amended, of shares of
the Company's common equity (the "IPO") pursuant to a Registration Statement on
Form S-1 to be filed with the Securities and Exchange Commission, and, in
contemplation thereof, the parties now wish to amend the terms of the Equity
Purchase Agreement;
WHEREAS, Section 7D of the Equity Purchase Agreement provides that the
Equity Purchase Agreement may be amended only with the written consent of the
holders of a majority of Investor Common Stock (as defined in the Agreement),
and the Fund is the holder of all of the Investor Common Stock.
THEREFORE, the parties agree as follows:
1. Effective upon the date hereof, Section 3C of the Equity Purchase
Agreement is amended by deleting subsection (xvii) in its entirety and inserting
in lieu thereof the following:
"(xvii) increase the authorized size of the Board above, or decrease
the authorized size of the Board below, six members."
2. Effective upon consummation of the IPO, the Equity Purchase Agreement
will terminate and be of no further force or effect, and, in connection
therewith, neither the Fund nor the Company shall have any further rights,
duties or obligations thereunder. Without limiting the generality of the
foregoing, the Company will release and hold harmless the Fund, and the Fund
will release and hold harmless the Company, from and against any and all
liability, causes of action, damages or any other claims whatsoever arising out
of the Equity Purchase Agreement.
3. Except as amended and modified hereby, the terms of the Equity
Purchase Agreement shall remain in full force and effect. This Amendment No. 1
(a) contains the complete and entire understanding and agreement of the Fund and
the Company with respect to the subject matter hereof, and (b) supersedes all
prior and contemporaneous understandings, condition and agreements, oral or
written, express or implied, respecting this Agreement and the termination of
the Equity Purchase Agreement.
4. This Amendment No. 1 may be executed in any number of counterparts,
and by the different parties on different counterparts, all of which taken
together shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed this Amendment No. 1 as of
the date first written above.
GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P.
By: GTCR IV, L.P.,
General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.,
General Partner
By: /s/ Bryan C. Cressey
------------------------------
Its: Principal
AMERICAN MEDSERVE CORPORATION
By: /s/ Timothy L. Burfield
------------------------------
2
<PAGE>
Exhibit 10.19
AGREEMENT
This Agreement, dated as of August 15, 1996, is by and between Golder,
Thoma, Cressey, Rauner Fund IV, L.P., a Delaware limited partnership (the
"Investor"), and American Medserve Corporation, a Delaware corporation (the
"Company").
WHEREAS, the Investor is the holder of 56,500 shares of the Company's Class
A Common Stock, $0.01 par value per share ("Class A Common");
WHEREAS, the Company intends to effect, upon the requisite approval of its
directors and stockholders, a recapitalization (the "Recapitalization"),
pursuant to which (i) the Company will create a newly authorized class of Common
Stock to be designated as shares of Common Stock, $0.01 par value per share
("AMC Common Stock"), and (ii) each issued and outstanding share of the
Company's Class A Common and Class B Common Stock, $0.01 par value per share,
will be converted into and reclassified as a number of newly-issued shares of
AMC Common Stock;
WHEREAS, pursuant to the terms of the Company's Certificate of
Incorporation, as amended, upon the occurrence of any Public Offering (as
defined) the holder of the Company's Class A Common is entitled to a
preferential distribution in the amount of the lesser of (a) 25% of the net cash
proceeds from the offering (after deducting all discounts and reasonable
expenses) or (b) the amount of all Unpaid Yield (as defined) plus Unreturned
Original Cost (as defined) with respect to Class A Common.
WHEREAS, the Company is preparing to file with the Securities and Exchange
Commission a Registration Statement on Form S-1 with respect to an initial
public offering (the "Company IPO") of not less than $30 million aggregate
offering amount of AMC Common Stock.
WHEREAS, to assist the Company in effecting the Company IPO, the Company
and the Investor desire to enter into this Agreement.
NOW, THEREFORE, the Company and the Investor agree as follows:
1. AUTHORIZATION OF AMC COMMON STOCK. On or prior to the Closing Date
(as such term is defined in Section 3), the Company shall have duly authorized
the issuance and delivery to the Investor, pursuant to the terms of this
Agreement, the number of shares of AMC Common Stock to be issued and delivered
to the Investor on the Closing Date.
2. ISSUANCE AND DELIVERY OF AMC COMMON STOCK. Subject to the provisions
of this Agreement and on the basis of the representations and warranties
contained herein, on the Closing Date (as hereinafter defined), for and in
consideration of Investor's full release and discharge of any and all future
preferences with respect to distributions to be made with respect to any class
of the Company's equity securities, the Company will issue and deliver to the
Investor that number of shares of the AMC Common Stock (the "Investor AMC
Shares"), if any, obtained by dividing (a) the difference between the Investor
Preference (as such term is hereinafter defined) and the Actual IPO Preferential
Amount (as such term is hereinafter defined) by (b) the initial price to the
public of shares of AMC Common Stock offered in the Company IPO.
For purposes hereof, the following capitalized terms shall have the
respective meanings hereinafter set forth:
<PAGE>
"Investor Preference" shall mean the sum of Unpaid Yield plus
Unreturned Original Cost, in each case as such amounts are calculated as of
the date of effectiveness of the Company's Registration Statement relating
to the Company IPO.
"Actual IPO Preferential Amount" shall mean the actual amount paid to
the Investor in connection with the Company IPO pursuant to Section 3A of
Part B of Article IV of the Company's Certificate of Incorporation, as
amended.
"Unpaid Yield" shall have the meaning set forth in ARTICLE IV of the
Company's Certificate of Incorporation as in effect on the date hereof.
"Unreturned Original Cost" shall have the meaning set forth in ARTICLE
IV of the Company's Certificate of Incorporation as in effect on the date
hereof.
3. CLOSING OF THE DELIVERY OF INVESTOR AMC COMMON. The delivery of the
Investor AMC Common (the "Closing") shall occur at the offices of Gardner,
Carton & Douglas, 321 North Clark Street, Chicago, Illinois 60610, and shall
occur at 9:00 a.m. local time on the closing date of the Company IPO (the
"Closing Date") or such other time and date as may be agreed upon by the Company
and the Investor. On the Closing Date the Company shall deliver to the Investor
a certificate for the Investor AMC Common to be issued and delivered to the
Investor, duly registered in such Investor's name or in the name of the
Investor's nominee.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company represents and
warrants to the Investor as follows:
4.1 ORGANIZATION, STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full power and authority to own,
lease and operate its properties and assets and to conduct its business as
presently conducted and proposed to be conducted hereby and to enter into
this Agreement.
4.2 VALIDITY OF INVESTOR AMC COMMON. The Investor AMC Common will be duly
authorized and, when issued and delivered in accordance with the terms of
this Agreement, will be duly and validly issued, and fully paid and non-
assessable.
4.3 AUTHORIZATION; APPROVALS. The execution, delivery and performance by
the Company of this Agreement have been duly authorized by all necessary
corporate action, and this Agreement has been duly executed and delivered
by the Company. This Agreement constitutes the valid and binding
obligations of the Company legally enforceable against the Company in
accordance with its terms.
4.4 EXEMPTION FROM REGISTRATION. In sole reliance upon representations
and warranties by the Investor in Section 5 hereof and without independent
investigation, the offer and sale of the AMC Common Stock are exempt from
the registration requirements of Section 5 of the Securities Act of 1933,
as amended.
-2-
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF INVESTOR. The Investor represents
and warrants to the Company as follows:
5.1 AUTHORIZATION. The Investor has full power and authority to enter
into and to perform this Agreement, and this Agreement has been duly
executed and delivered by it, and constitutes the valid and legally binding
obligation of the Investor, legally enforceable against the Investor in
accordance with its terms.
5.2 INVESTMENT REPRESENTATIONS. The Investor hereby represents and
warrants to the Company that it is acquiring the Investor AMC Shares for
its own account with the present intention of holding such securities for
purposes of investment, and that it has no intention of selling such
securities in a public distribution in violation of the securities laws.
5.3 ABSENCE OF REGISTRATION. The Investor understands that the shares of
Investor AMC Common to be issued hereunder have not been registered under
the Securities Act or any applicable state securities or "Blue Sky" laws,
and may be required to be held indefinitely, unless subsequently registered
under the Securities Act and such applicable Blue Sky laws, or an exemption
from such registration is available.
6. CONDITIONS TO CLOSING OF THE INVESTOR. The obligation of the Investor
on the Closing Date to accept delivery of the Shares required by Section 3
hereof shall be subject to each of the following conditions precedent, any one
or more of which may be waived by the Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Company herein shall be true and accurate on and as of the
Closing Date.
6.2 PERFORMANCE. The Company shall have performed and complied with all
agreements and conditions contained herein required to be performed or
complied with by it prior to or at the Closing.
6.3 CLOSING OF COMPANY IPO. The closing of the Company IPO shall have
contemporaneously occurred and been completed to the reasonable
satisfaction of the Company and the Investor.
7. CONDITIONS TO CLOSING OF COMPANY. The obligation of the Company on
the Closing Date to issue and deliver the Investor AMC Common to be issued and
delivered under this Agreement shall be subject to each of the following
conditions precedent, any one or more of which may be waived by the Company:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made herein by the Investor shall be true and accurate on and as of the
Closing Date and the Investor shall be deemed to have restated and
confirmed such representations and warranties as of the Closing Date by
authorizing or permitting the Closing to be effected without delivering in
writing to the Company a notice of change prior to the Closing.
7.2 CLOSING OF COMPANY IPO. The closing of the Company IPO shall have
contemporaneously occurred and been completed to the reasonable
satisfaction of the Company and the Investor.
-3-
<PAGE>
8. CERTIFICATE LEGEND. Certificates evidencing the Investor AMC Common
shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, UNLESS AND UNTIL REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND SUCH APPLICABLE STATE LAW OR, IN THE
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER OF THESE SECURITIES,
SUCH OFFER, SALE OR TRANSFER DOES NOT VIOLATE THE PROVISIONS THEREOF OR
UNLESS SOLD PURSUANT TO RULE 144 OF THE SECURITIES ACT OF 1933.
9. STOCKHOLDERS AGREEMENT; REGISTRATION AGREEMENT The Company and the
Investor acknowledge and agree that the Investor AMC Common, when issued and
delivered in accordance with the terms hereof, shall (i) be and become subject
to the terms of a Stockholders Agreement, dated as of December 3, 1993, as the
same may be amended from time to time, and (ii) constitute GTCR Registrable
Securities, as such term is defined in that certain Registration Agreement,
dated as of August 23, 1996, by and among the Company, the Investor and certain
other stockholders of the Company.
10. NOTICES. All notices, requests, consents and other communications
provided for herein shall be in writing, and shall be mailed by certified mail,
postage prepaid, delivered by Federal Express or similar overnight courier, or
personally delivered, as follows:
(a) If to the Company:
American Medserve Corporation
184 Shuman Boulevard
Suite 200
Naperville, Illinois 60563
with a copy to:
Gardner, Carton & Douglas
321 North Clark Street
Suite 3200
Chicago, Illinois 60610
Attention: Glenn W. Reed
(b) If to the Investor:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606
Attention: Bryan C. Cressey
-4-
<PAGE>
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Kevin R. Evanich, Esq.
or such other addresses as each of the parties hereto may provide from time to
time in writing to the other parties. For purposes of this Agreement (i) in the
case of communications sent by mail, the date of mailing shall be deemed to be
the delivery date and (ii) in the case of communications sent by overnight
courier, the date next succeeding the date of transmission shall be deemed to be
the delivery date
11. MODIFICATIONS; WAIVER. Neither this Agreement nor any provision
hereof may be changed or waived unless effected by a writing executed and
delivered by the parties.
12. ENTIRE AGREEMENT. This Agreement contains the entire agreements
between the parties with respect to the transactions contemplated hereby, and
supersedes all negotiations, agreements, representations, warranties,
commitments, whether in writing or oral, prior to the date hereof.
13. APPLICATION TO SUCCESSOR HOLDERS. The provisions hereof shall inure
to the benefit of and be binding upon the successors, assigns, heirs, executors
and administrators of the parties hereto. In addition, and whether or not any
express assignment has been made, the provisions of this Agreement which are for
the benefit of the Investor or holders of AMC Common Stock are also for the
benefit of, and enforceable by, any subsequent holders of such shares, except
any subsequent holder who acquires any such security in a registered public
offering.
14. EXECUTION AND COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument.
15. GOVERNING LAW AND SEVERABILITY. This Agreement shall be governed by
the laws of the State of Delaware.
16. HEADINGS. The descriptive headings of the Sections hereof are
inserted for convenience only, and do not constitute a part of this Agreement.
-5-
<PAGE>
This Agreement is hereby executed as of the date first above written.
AMERICAN MEDSERVE CORPORATION
By: /s/ Michael B. Freedman
----------------------------------
Name: Michael B. Freedman
Title: Vice President - Business
Development
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV. L.P.,
Its General Partner
By: Golder, Thoma, Cressey, Rauner,
Inc.,
Its General Partner
By: /s/ Bryan C. Cressey
----------------------------------
Name: Bryan C. Cressey
Title: Principal
-6-
<PAGE>
EXHIBIT 99.1
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this "Agreement"), dated as of April 30, 1996,
is made by and among Good Samaritan Supply Services, Inc., a South Dakota
corporation (the "Company"), The Evangelical Lutheran Good Samaritan Foundation,
a Minnesota non-profit corporation (the "Foundation"), American Medserve
Corporation, a Delaware corporation ("AMC"), and any other parties which may
become parties to this Agreement after the date hereof as provided in Section
3.6 below.
RECITALS
WHEREAS, the Foundation currently owns 1,000 Common Shares (as hereinafter
defined), constituting all of the issued and outstanding capital shares of the
Company;
WHEREAS, AMC and the Company concurrently herewith entered into a Share
Purchase Agreement, bearing even date herewith (the "Share Purchase Agreement"),
providing for the Company's sale and issuance of 666.667 newly-issued Common
Shares to AMC; and
WHEREAS, the parties hereto wish to set forth herein their agreements as to
the composition of the Board of Directors of the Company, transfers of the
Common Shares, certain conversion rights of the Foundation and its Affiliates,
put and call rights of the parties, certain registration rights, and the other
matters described below.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, the parties hereto, upon the terms and subject
to the conditions herein, hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Definitions. The following terms when used in this Agreement
shall have the following respective meanings:
"AFFILIATE" shall mean with respect to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under common control
with such Person or any Affiliate of such other Person, where "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the "controlled" Person, whether
through ownership of voting securities, by contract, or otherwise.
Notwithstanding the foregoing, in no
<PAGE>
event shall AMC or any of its Affiliates be deemed an Affiliate of the
Foundation or any of the Foundation's Affiliates, nor shall the Foundation or
any of its Affiliates be deemed an Affiliate of AMC or any of its Affiliates.
"AMC IPO COMPANY" shall mean (i) AMC and (ii) any Person which is an
Affiliate of AMC and directly or indirectly owns any Common Shares.
"AMC SHARES" has the meaning set forth in Section 5.1.
"AMC SHAREHOLDERS" means AMC and/or any Affiliates of AMC holding Common
Shares.
"BONA FIDE OFFER" shall mean an offer to a Person from a financially
responsible Person who is not an Affiliate of such Person to purchase all or any
portion of the Common Shares owned by such Person for a purchase price payable
in cash at closing.
"CHANGE IN CONTROL" shall have the meaning specified in Section 6.7.
"COMMON SHARES" means the shares, par value $.01 per share, of the Company.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GOOD SAMARITAN SHAREHOLDERS" means the Foundation and/or any Affiliates of
the Foundation holding Common Shares.
"INDEBTEDNESS" means all indebtedness for borrowed money (including
purchase money obligations) maturing one year or more from the date of creation
or incurrence thereof or renewable or extendible at the option of the debtor to
a date one year or more from the date of creation or incurrence thereof, all
indebtedness under revolving credit arrangements extending over a year or more,
all capitalized lease obligations and all guarantees of any of the foregoing.
"INVESTMENT" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person (excluding deposits
in or certificates of deposit issued by banks or other financial institutions)
and (ii) any capital contribution by such Person to any other Person.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Person making such sale or
-2-
<PAGE>
any Affiliate thereof, any filing or agreement to file a financing statement as
debtor under the Uniform Commercial Code or any similar statute other than to
reflect ownership by a third party of property leased to a lessee under a lease
which is not in the nature of a conditional sale or title retention agreement,
or any subordination arrangement in favor of another Person (other than any
subordination arising in the ordinary course of business).
"PERMITTED LIENS" means (i) Liens with respect to taxes not yet due and
payable or which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established in accordance with
GAAP; (ii) deposits or pledges made in connection with, or to secure payment of,
utilities or similar services, workers' compensation, unemployment insurance,
old age pensions or other social security obligations; (iii) purchase money
security interests and liens securing rental payments under capital lease
arrangements; (iv) interests or title of a lessor under any lease permitted by
this Agreement; (v) mechanics', materialmen's or contractors' liens or
encumbrances or any similar lien or restriction for amounts not yet due and
payable or which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established in accordance with
GAAP; and (vi) easements, rights-of-way, restrictions and other similar charges
and Liens not interfering with the ordinary conduct of the business of the
Person subject thereto or materially detracting from the value of the assets
thereof.
"PERSON" means an individual, corporation, partnership, joint venture,
trust, limited liability company, government, or other legal entity of any
nature whatsoever.
"PROPORTIONATE SHARE" shall mean, as used herein to determine the number of
Reoffered Shares (as defined in Section 3.2(c) hereof) which a Shareholder is
entitled to purchase, the same proportion of the Common Shares available for
purchase as the Common Shares held by such Shareholder bears to the Common
Shares held by all the Shareholders who have elected to purchase Common Shares
from the Selling Shareholder.
"PURCHASE PRICE" shall mean the purchase price per Common Share set forth
in the applicable Bona Fide Offer.
"RELATION" shall mean with respect to any natural Person, any individual
related by blood, marriage or adoption to such Person.
"SEC" shall mean the Securities and Exchange Commission, or any other
entity which succeeds to the duties and functions thereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time.
-3-
<PAGE>
"SHAREHOLDER" shall mean each of AMC, the Foundation and any holder of
Common Shares who becomes a party to this Agreement as contemplated herein.
"SHAREHOLDER OFFER" shall mean an irrevocable offer to sell Common Shares
to the Company and the Shareholders on the terms and conditions set forth in
Section 3.2, which shall include a copy of the applicable Bona Fide Offer and
shall set forth the terms of the proposed sale in reasonable detail, including,
without limitation, the name and address of the prospective buyer, the purchase
price and other terms and conditions of payment (or the basis for determining
the purchase price and other terms and conditions), the date on or about which
such sale is to be consummated, and the number of Common Shares to be sold.
"SOCIETY" shall mean The Evangelical Lutheran Good Samaritan Society, a
South Dakota non-profit corporation.
"SUBSIDIARY" means any Person as to which the Company directly or
indirectly owns a majority of the equity interests.
"TRANSFER" means any sale, assignment, pledge, hypothecation, encumbrance,
disposition, transfer (including, without limitation, a transfer by will or
intestate distribution), gift or attempt to create or grant a security interest
in Common Shares, whether voluntary, involuntary, by operation of law or
otherwise.
SECTION 2. THE BOARD OF DIRECTORS OF THE COMPANY;
GOVERNANCE; TAX SHARING AGREEMENT
2.1 COMPOSITION OF THE BOARD OF DIRECTORS. Each Shareholder agrees that
while this Agreement is in effect it will vote all of the Common Shares owned or
held by it and will take all other necessary or desirable actions within its
control (including, without limitation, calling and attending meetings in person
or by proxy for purposes of obtaining a quorum and execution of written consents
in lieu of meetings), and the Company shall take all necessary or desirable
actions within its control (including, without limitation, calling special board
and stockholder meetings), so that:
(i) At any time that the AMC Shareholders own at least 40% but less
than 50.1% of the then-outstanding Common Shares, a five (5) member Board of
Directors of the Company consisting of the following individuals shall be
elected and installed: (a) the President/Chief Executive Officer of the Company
from time to time, (b) two (2) members designated by AMC, and (c) two (2)
members designated by the Foundation;
-4-
<PAGE>
(ii) At any time that the AMC Shareholders own 50.1% or more of the
then-outstanding Common Shares, but less than 80% of the then-outstanding Common
Shares, a six (6) member Board of Directors of the Company consisting of the
following individuals shall be elected and installed: (a) the President/Chief
Executive Officer of the Company from time to time, (b) three (3) members
designated by AMC, and (c) two (2) members designated by the Foundation;
(iii) At any time that the AMC Shareholders own 80% or more of the
then-outstanding Common Shares, a ten (10) member Board of Directors of the
Company consisting of the following individuals shall be elected and installed:
(a) the President/Chief Executive Officer of the Company from time to time, (b)
eight (8) members designated by AMC, and (c) one (1) member designated by the
Foundation;
(iv) the composition of the board of directors of each Subsidiary (a
"Sub Board") shall be the same as that of the Company's Board of Directors; and
(v) any committees of the Company's Board of Directors or of any Sub
Board, other than the compensation committee of the Company's Board of
Directors, shall be created only upon approval of such number of Directors as
would constitute a majority of the number of Directors as the Company's Board of
Directors is required to consist of pursuant to this Section 2.1 as of the time
of the creation of such committee, and each such committee (if any) shall
include at least one (1) member of the Board of Directors designated by AMC and
one (1) member of the Board of Directors designated by the Foundation, in each
case unless all Directors then in office affirmatively vote otherwise.
Notwithstanding the foregoing, during any period during which either
the Good Samaritan Shareholders own no Common Shares or the AMC Shareholders own
less than forty percent (40%) of the then-outstanding Common Shares, this
Section 2.1 shall not apply.
The Foundation and AMC may change any of their designees to the Board of
Directors and any Sub Board at any time without cause upon written notice to the
other Shareholders, at which time the other Shareholders shall forthwith take
such action as the Shareholder changing its designees may request to change
forthwith the composition of the Board and any Sub Board, including execution of
a unanimous written consent of the Shareholders or calling and attending a
special meeting of Shareholders.
2.2 SELECTION OF SUCCESSOR PRESIDENT/CHIEF EXECUTIVE OFFICER. In the
event that the office of President/Chief Executive Officer of the Company should
at any time become vacant for any reason, AMC and the Foundation shall each
cause their respective designees to the Board of Directors to select a new
-5-
<PAGE>
person to serve in such position in accordance with the following:
(a) If AMC and the Foundation can agree in writing upon a person to fill
such position and the terms of his or her employment, and such person is willing
to serve in accordance with such terms, the Board of Directors of the Company
shall elect such person as the President/CEO of the Company in accordance with
such terms (a "Permanent CEO"); and
(b) If AMC and the Foundation are unable to agree upon a Permanent CEO as
set forth in clause (a) above, the Board of Directors of the Company shall elect
as the acting President/CEO of the Company (the "Acting CEO"):
(i) such person as may be designated by the Foundation, for a term of
one (1) year or until a Permanent CEO is selected, whichever occurs first;
(ii) provided that no Permanent CEO has been selected, upon the
expiration of the one (1) year term specified in clause (b)(i) above, such
person as may be designated by AMC, for a term of one (1) year or until a
Permanent CEO is selected, whichever occurs first; and
(iii) thereafter, provided that no Permanent CEO has been selected,
upon the expiration of the one (1) year term of any Acting CEO, such person
as may be designated by (x) the Foundation, if AMC designated the Acting
CEO whose term is then expiring or (x) AMC, if the Foundation designated
the Acting CEO whose term is then expiring, in each case for a term of one
(1) year or until a Permanent CEO is selected.
Notwithstanding the foregoing, this Section 2.2 shall be of no force or effect
during any period (i) that the Good Samaritan Shareholders hold ten percent
(10%) or less of the then-outstanding Common Shares, or (ii) that the AMC
Shareholders hold less than forty percent (40%) of the then-outstanding Common
Shares, or (iii) that the AMC Shareholders own eighty percent (80%) or more of
the then-outstanding Common Shares. Each Shareholder agrees that while this
Agreement is in effect it will vote all of the Common Shares owned or held by it
and will take all other necessary or desirable actions within its control
(including, without limitation, calling and attending meetings in person or by
proxy for purposes of obtaining a quorum and execution of written consents in
lieu of meetings), and the Company shall take all necessary or desirable actions
within its control (including, without limitation, calling special board and
stockholder meetings), as may be necessary to effectuate this Section 2.2,
including, without limitation, any amendments to the articles of incorporation
or bylaws of the Corporation. Notwithstanding anything in Section 8.1 to the
contrary, the
-6-
<PAGE>
restrictions of Section 8.1 will not apply with respect to any such action
described in the previous sentence.
2.3 LOCATION OF PRINCIPAL EXECUTIVE OFFICE. Unless and until either the
Good Samaritan Shareholders or the AMC Shareholders hold less than ten percent
(10%) of the then-outstanding Common Shares, the Shareholders shall cause the
principal executive office of the Company to remain in St. Paul, Minnesota.
2.4 TAX SHARING AGREEMENT. In any taxable year during which or after
which the Company becomes a member of an Affiliated Group (as defined in Section
1504 of the Internal Revenue Code of 1986, as amended, or any similar state or
local law) the common parent of which is AMC (the "AMC Affiliated Group"), the
Company shall join with AMC in filing consolidated returns for Federal, state
and local income and franchise tax purposes. In such event, the Company and AMC
shall enter into a tax allocation agreement pursuant to which (1) AMC will agree
to file all such consolidated returns, to pay or arrange for the payment of all
taxes shown as due on such returns, and to act as agent for the AMC Affiliated
Group in connection with the determination of the ultimate liability of the AMC
Affiliated Group for such taxes, (2) the Company will agree to pay to AMC, or to
the appropriate taxing authority at the direction of AMC, the amount of all
Federal, state and local corporate income and franchise taxes that would be
payable by the Company if the Company filed separate tax returns for all periods
beginning on or after the Closing Date, and (3) AMC and the Company will agree
to such other terms and conditions as are necessary to fairly apportion
responsibility for all Federal, state and local corporate income and franchise
taxes payable (or tax refunds receivable) by the AMC Affiliated Group among the
members of such AMC Affiliated Group. Such agreement shall also provide that
the Company will be paid currently the full tax benefit of any operating loss
used by other members of the AMC Affiliate Group to the extent that the Company
could otherwise have carried back that loss to its earlier years if the Company
filed separate tax returns for all periods beginning on or after the date of
this Agreement. Such tax allocation agreement shall also contain such other
terms as are normal, customary and commercially reasonable with respect to
similar agreements among members of affiliated groups of corporations.
SECTION 3. RESTRICTIONS ON TRANSFERS OF COMMON SHARES
3.1 RESTRICTION OF TRANSFERS. Except for Transfers of Common Shares made
pursuant to a Bona Fide Offer and in accordance with the provisions of this
Section 3 and Transfers of Common Shares which are excepted from the
restrictions on Transfer contained in this Section 3 by operation of Section
3.3,
-7-
<PAGE>
no Shareholder shall make any Transfer of Common Shares; PROVIDED, HOWEVER, that
(i) if at any time the Good Samaritan Shareholders hold ten percent (10%) or
less of the then-outstanding Common Shares, then the AMC Shareholders shall be
free to Transfer their Common Shares without regard to whether such Transfer is
made pursuant to a Bona Fide Offer and without first complying with the
procedure set forth in Section 3.2, and (ii) if at any time the AMC Shareholders
hold ten percent (10%) or less of the then-outstanding Common Shares, then the
Good Samaritan Shareholders shall be free to Transfer their Common Shares
without regard to whether such Transfer is made pursuant to a Bona Fide Offer
and without first complying with the procedure set forth in Section 3.2. Any
Transfer of Common Shares by a Shareholder which is not made in accordance with,
or which violates any of, the provisions of this Section 3, shall be null and
void and have no effect, and the Company shall not recognize any such Transfer
or recognize the Transferee as the holder of such Common Shares for any purpose.
3.2 RIGHTS OF FIRST REFUSAL. (a) Any Shareholder desiring to make a
Transfer of all or any portion of his, her or its Common Shares (a "Selling
Shareholder") (including any Common Shares acquired after the date hereof)
pursuant to a Bona Fide Offer shall first deliver to the Company and the other
Shareholders a Shareholder Offer in respect of such Common Shares (the "Offered
Shares").
(b) The Company may, within 45 days after receipt of any Shareholder
Offer, elect, in accordance with Section 3.2(d), to purchase any or all of the
Offered Shares for a purchase price equal to the product of the per share
Purchase Price multiplied by the number of Offered Shares to be purchased by the
Company, payable in cash at closing.
(c) In the event that the Company does not elect to purchase all of the
Offered Shares within the 45-day period specified above, the Company shall give
written notice to the Shareholders (the "Reoffer Notice") of the number of
Offered Shares available for purchase (the "Reoffered Shares") on or before the
final day of such 45-day period. Each of the other Shareholders may, within 15
days after receipt of the Reoffer Notice, elect to purchase any or all of the
Reoffered Shares for a purchase price equal to the product of the Purchase Price
multiplied by the number of Reoffered Shares to be purchased by the Shareholder,
payable in cash at closing.
(d) Acceptance of any Shareholder Offer or any offer of Reoffered Shares
shall be evidenced by a written notice given by the Company or a Shareholder
electing to purchase Reoffered Shares ("Purchasing Shareholder") to the Selling
Shareholder within the applicable time period. Each such acceptance shall
specify the number of Common Shares which the Company or such Purchasing
Shareholder desires to purchase. In the event that more than one Shareholder
elects to purchase Reoffered Shares, the
-8-
<PAGE>
number of Reoffered Shares purchasable by each Purchasing Shareholder shall be
determined in accordance with the following procedures:
(i) if the Purchasing Shareholder has elected to purchase a number of
Reoffered Shares equal to or less than its Proportionate Share of the Reoffered
Shares, it shall be entitled (and shall be deemed to have irrevocably elected)
to purchase the number of Reoffered Shares that it has elected to purchase;
(ii) if the Purchasing Shareholder has elected to purchase a number
of Reoffered Shares greater than its Proportionate Share of Reoffered Shares, it
shall be entitled (and shall be deemed to have irrevocably elected) to purchase
(A) its Proportionate Share of the Reoffered Shares, plus
(B) the lesser of
(1) the number of Reoffered Shares which such Purchasing
Shareholder has elected to purchase in excess of its Proportionate Share,
or
(2) the same proportion of the total number of Reoffered
Shares remaining after each Purchasing Shareholder shall have been
allocated Common Shares pursuant to subsection 3.2(d)(i) and 3.2(d)(ii)(A)
above as (x) the number of Common Shares owned by such Purchasing
Shareholder bears to (y) the total number of Common Shares owned by all
Purchasing Shareholders which have elected to purchase Common Shares in
excess of their respective Proportionate Share of the Reoffered Shares;
PROVIDED, HOWEVER, that if any Reoffered Shares remain to be purchased after the
foregoing calculation, the allocation of such remaining Reoffered Shares shall
be determined by repeated application of the calculation stated in (1) and (2)
above until all Reoffered Shares have been allocated.
Notwithstanding anything to the contrary stated in this Section 3.2,
neither the Company nor any Shareholder shall be entitled to purchase Offered
Shares unless they shall have collectively elected to purchase all the Offered
Shares.
(e) In the event that the Company and the Purchasing Shareholders
collectively elect to purchase all of the Offered Shares in accordance with
Sections 3.2(c) and 3.2(d), the Company and the Purchasing Shareholders shall
close such purchase of Common Shares at the principal office of the Company
promptly and in any event within 30 days after the date on which either (i) the
Company elected to purchase all of the Offered Shares, or (ii) the Company
and/or the Purchasing Shareholders collectively elected to
-9-
<PAGE>
purchase all of the Offered Shares, unless the parties agree on a different
place or time. At the closing of the Transfer of Common Shares contemplated by
this Section 3, (i) the Selling Shareholder shall deliver to the Company and/or
the Purchasing Shareholder(s) the certificate or certificates representing the
Offered Shares, properly endorsed for Transfer and with documentary stamps
affixed (the cost of which shall be borne by the Company), free and clear of all
security interests, liens and restrictions other than those imposed by this
Agreement, and (ii) the Company and/or the Purchasing Shareholder(s) shall
deliver to the Selling Shareholder payment in full of the purchase price.
Payment of the purchase price shall be made by certified check or wire transfer
to such accounts as are designated in writing by the Selling Shareholder.
(f) In the event that the Company and the other Shareholders do not
collectively elect to purchase all of the Offered Shares by the end of the 15-
day period specified in Section 3.2(c), all of the Offered Shares may be
Transferred by the Selling Shareholder to the Person(s) named in the Shareholder
Offer free of the rights of first refusal set forth in this Section 3.2 at any
time within 30 days after the expiration of such period, on the terms described
in the Shareholder Offer and applicable Bona Fide Offer; provided, however, that
such Transfer shall be permitted only if the Transferee shall have executed and
delivered to the Company and each Shareholder an instrument pursuant to which
such Transferee joins in and agrees to be bound by this Agreement as a
Shareholder. In the event that a Transfer pursuant to the Bona Fide Offer is
not consummated by the proposed Transferee and the Selling Shareholder within
such 30-day period, the Selling Shareholder may not thereafter Transfer the
Offered Shares without again complying with this Section 3.2.
3.3 UNRESTRICTED TRANSFERS. Notwithstanding any other provision of this
Section 3, the following Transfers of Common Shares shall not be subject to the
rights of first refusal contained in Section 3.2:
(a) any Transfer of Common Shares made in connection with a public
offering of Common Shares made by the Company pursuant to a registration
statement which has become effective under the Securities Act or to the
public through a broker, dealer or market maker pursuant to the provisions
of Rule 144 adopted under the Securities Act;
(b) any Transfer of Common Shares to the Company;
(c) any Transfer of Common Shares a Shareholder is required or
entitled to make pursuant to Sections 5 or 6 hereof; and
(d) any Transfer of Common Shares by a Shareholder to an Affiliate or
Relation of such Shareholder or to a trust established for the sole
-10-
<PAGE>
benefit of such Shareholder or a Relation of such Shareholder, provided,
however, that (x) AMC and its Affiliates shall be entitled to make such
Transfers only to Persons directly or indirectly majority owned or
controlled by AMC, (y) such Transfer shall only be permitted if the
Transferee shall have executed and delivered to the Company and each
Shareholder an instrument pursuant to which such Transferee joins in and
agrees to be bound by this Agreement as a Shareholder and further agrees to
be bound by all of the obligations hereunder of the Shareholder making such
Transfer, and (z) if any such Transferee which is an Affiliate of a
Shareholder shall at any time thereafter no longer be an Affiliate thereof,
such Transferee shall be obligated to Transfer its Common Shares back to
such Shareholder.
3.4 SECURITIES LAW RESTRICTIONS. Notwithstanding any other provision in
this Agreement, but subject to express written waiver by the Company in the
exercise of its good faith and reasonable judgment, no Shareholder shall
Transfer any Common Shares without the registration of the Transfer of such
Common Shares under the Securities Act and applicable state securities laws or
until the Company shall have received such legal opinions or other assurances
that such Transfer is exempt from the registration requirements under the
Securities Act and applicable state securities laws as the Company in its good
faith and reasonable discretion deems appropriate in light of the facts and
circumstances relating to such proposed Transfer, together with such
representations, warranties and indemnifications from the transferor and the
Transferee as the Company in its good faith and reasonable discretion deems
appropriate to confirm the accuracy of the facts and circumstances that are the
basis for any such opinion or other assurances and to protect the Company and
the Shareholders from any liability resulting from any such Transfer.
3.5 LEGENDS. All certificates representing Common Shares now or hereafter
owned by the Shareholders shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, ENCUMBERED OR OTHERWISE
DISPOSED OF ("TRANSFER") UNLESS THE SAME IS REGISTERED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE
EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION REASONABLY
SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG
-11-
<PAGE>
OTHER THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY).
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO (I) RESTRICTIONS ON
TRANSFER, AND (II) CERTAIN MANDATORY "CALL" OPTIONS, EACH OF WHICH ARE
CONTAINED IN THAT CERTAIN SHAREHOLDERS AGREEMENT DATED AS OF APRIL 30, 1996
TO WHICH THE COMPANY IS A PARTY, AS AMENDED, SUPPLEMENTED OR OTHERWISE
MODIFIED FROM TIME TO TIME. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO
THE HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST DELIVERED TO THE
COMPANY.
All certificates evidencing Common Shares hereafter issued to a Shareholder for
any reason or purpose shall, when issued, bear a similar legend. The Company
shall remove the foregoing legend, at the request of any Shareholder, when
appropriate.
3.6 FUTURE SHAREHOLDERS TO BECOME PARTIES TO THIS AGREEMENT.
Notwithstanding any other provision of this Agreement to the contrary, unless
both the Foundation and AMC shall have otherwise consented in writing, no party
to this Agreement (including, without limitation, the Company and any Person
becoming a party to this Agreement after the date hereof) shall Transfer any
Common Shares to any Person (including, without limitation, upon any initial
issuance of Common Shares by the Company) unless and until the Transferee shall
have executed and delivered to the Company and each Shareholder an instrument
pursuant to which such Transferee joins in and agrees to be bound by this
Agreement.
SECTION 4. COMPOSITION OF AMC BOARD UPON INITIAL PUBLIC
OFFERING OF AMC SHARES
4.1 APPOINTMENT TO AMC BOARD. Subject to Section 4.2, not later than five
(5) days after the closing of any initial public offering by an AMC IPO Company
of the common equity issued by such AMC IPO Company, AMC shall cause such AMC
IPO Company to cause MARK A. JERSTAD (or such other individual who may be Chief
Executive Officer of The Evangelical Lutheran Good Samaritan Society) and, if
and for so long as he is Chief Executive Officer of the Company, Charles C.
Halberg, to be added as members of the Board of Directors of such AMC IPO
Company and thereafter to nominate such individuals for election to the Board of
Directors of such AMC IPO Company in each subsequent election of directors
thereof.
4.2 TERMINATION OF SECTION 4.1. The obligations of the AMC IPO Company
pursuant to Section 4.1 shall terminate at such time as both of the following
clauses (i) and (ii) are true: (i) either the AMC Shareholders own ten percent
(10%) or less of the Company's then-outstanding Common Shares or the Good
-12-
<PAGE>
Samaritan Shareholders own ten percent (10%) or less of the Company's
then-outstanding Common Shares; and (ii) the Foundation and its Affiliates
collectively own five percent (5%) or less of the outstanding AMC Shares of any
AMC IPO Company.
SECTION 5. CONVERSION RIGHTS
5.1 GENERALLY. On the date of or at any time after such time as any AMC
IPO Company engages in an initial public offering of the common equity issued by
such AMC IPO Company (the "AMC Shares"), each Good Samaritan Shareholder shall
have the option ("Conversion Option") to elect to exchange any or all of its
Common Shares for AMC Shares issued by such AMC IPO Company in the manner and at
the exchange ratio provided in this Section 5; PROVIDED, HOWEVER, that (i) until
three (3) years after the date of this Agreement, the maximum aggregate number
of Common Shares which the Good Samaritan Shareholders may elect to exchange
pursuant to this Section 5 shall be two hundred (200) (which number shall be
adjusted as necessary to account for any stock split, stock dividend, merger,
consolidation, recapitalization or similar event affecting the number of Common
Shares outstanding), and (ii) until five (5) years after the date of this
Agreement, such Conversion Option shall not be exercisable to the extent that,
after any such exercise, the aggregate number of Common Shares held by the Good
Samaritan Shareholders would be ten percent (10%) or less of the then-issued and
outstanding Common Shares. Any Good Samaritan Shareholder shall exercise its
Conversion Option by giving written notice of such exercise (a "Conversion
Notice") to AMC, which Conversion Notice shall specify the number of Common
Shares as to which the Good Samaritan Shareholder is then exercising its
Conversion Option (the "Converting Shares"). AMC agrees to cause any AMC IPO
Company to comply with the obligations of such AMC IPO Company pursuant to this
Agreement.
5.2 CONVERSION FORMULA. (a) The number of AMC Shares (or fractions
thereof) issuable in exchange for the Converting Shares upon any exercise of the
option set forth in Section 5.1 (the "AMC Shares Issuable") shall be determined
as of the last day (the "Determination Date") of the last completed month
preceding the date on which any Conversion Notice is deemed given pursuant to
this Agreement, using the formula set forth in Sections 5.2(d) and (e) hereof
based upon the factors set forth in Sections 5.2(b) and (c) hereof.
Notwithstanding the foregoing, (i) in the event that, applying the foregoing
definition, the Determination Date would be a date prior to twenty (20) business
days after the date of any initial public offering of the AMC Shares (the "20th
Trading Day"), then the Determination Date shall instead be the last day of the
month in which the 20th Trading Day falls, and (ii) in the event that AMC
exercises its option to purchase "Control Shares" pursuant to Section 1.8 of the
Share Purchase Agreement prior to an exercise of the Conversion Option by a Good
-13-
<PAGE>
Samaritan Shareholder, then the purchase and sale of such Control Shares shall
be deemed to have occurred on the day before the Determination Date if such
purchase and sale actually occurs, for purposes of all definitions and
calculations under this Section 5.
(b) For purposes of this Agreement, the following terms shall have the
following meanings:
"AMC ADJUSTED NET INCOME" shall mean the consolidated net income of
the AMC IPO Company and its subsidiaries (excluding the Company, if the Company
is then a subsidiary of such AMC IPO Company) for the twelve (12) month period
ending on the Determination Date (the "Period"), determined in accordance with
GAAP excluding any effects of incremental goodwill created by purchase
accounting resulting from the AMC IPO Company's investment(s) in the Company,
adjusted on a retroactive pro-forma basis (i) to adjust for the effects of
acquisitions, divestitures, discontinued operations, changes in law and
regulations (e.g., changes in the maximum prices chargeable under applicable
law) which AMC or the Foundation can demonstrate will affect net income, and
other major changes in the business (e.g., the gain or loss of a major customer
relationship), as if all such events occurred on the first day of the Period,
and (ii) to adjust for any other extraordinary, unusual or non-recurring gains
or losses.
"AMC INTEREST" shall mean the percentage of the outstanding Common
Shares which is owned by the AMC IPO Company or any of its direct or indirect
subsidiaries as of the Determination Date.
"AMC SHARES OUTSTANDING" shall mean the number of AMC Shares issued
and outstanding as of the Determination Date.
"AMC SHARE PRICE" shall mean the average closing price per share of
the AMC Shares for the twenty (20) consecutive business days prior to the
Determination Date, as reported on the principal securities exchange or
interdealer quotation system on which the AMC Shares are traded for such period.
"AMORTIZATION PERIOD" shall mean the period over which the AMC IPO
Company will amortize the accounting goodwill created on its balance sheet as a
consequence of its acquisition of Common Shares pursuant to this Section 5. The
Shareholders agree that the Amortization Period shall be the longest period
allowable under the rules, regulations and policies of the SEC, and in no event
shorter than the period used by the AMC IPO Company to amortize goodwill
associated with its investment in any like company. In the event that the AMC
IPO Company and the Foundation disagree about what period is the longest
allowable period for such purposes, the AMC IPO Company shall promptly, by means
of a letter, pre-filing notification or other form of communication which is
appropriate under the circumstances, seek to obtain the SEC's acquiescence in
the AMC IPO Company's use of
-14-
<PAGE>
the longer of the two amortization periods proposed by the AMC IPO Company and
the Foundation. In such written communication and any subsequent submissions or
oral communications with the SEC, the AMC IPO Company shall advocate (and shall
cause its accountants and attorneys to advocate) for such longer period in
accordance with the reasonable suggestions of the party proposing the use of
such period. In the event of any such communication to the SEC, the
Amortization Period shall be such Amoritization Period as the SEC indicates to
be the longest allowable under the circumstances.
"BOOK VALUE" shall mean the book shareholders' equity of the Company
as of the Determination Date, determined in accordance with GAAP.
"COMPANY ADJUSTED NET INCOME" shall mean the consolidated net income
of the Company and its Subsidiaries for the Period, determined in accordance
with GAAP excluding any effects of incremental goodwill created by purchase
accounting resulting from the AMC IPO Company's investment(s) in the Company,
adjusted on a retroactive pro-forma basis (i) to adjust for the effects of
acquisitions, divestitures, discontinued operations, changes in law and
regulations (e.g., changes in the maximum prices chargeable under applicable
law) which AMC or the Foundation can demonstrate will affect net income, and
other major changes in the business (e.g., the gain or loss of a major customer
relationship), as if all such events occurred on the first day of the Period,
and (ii) to adjust for any other extraordinary, unusual or non-recurring gains
or losses.
"CONVERTING INTEREST" shall mean the percentage amount equal to (i)
the Converting Shares DIVIDED BY (ii) the number of outstanding Common Shares
which are owned by any Person other than the AMC IPO Company or any of its
direct or indirect subsidiaries as of the Determination Date.
"DISCOUNT FACTOR" shall mean ninety two and one half percent (92.5%);
PROVIDED, that for any Determination Date occurring after completion of the
Company's audited financial statements for fiscal year 1998, if the consolidated
net income of the Company and its Subsidiaries for the Company's fiscal year
1998 as shown thereon ("1998 Net Income") is greater than $3,049,000 but less
than $5,858,000, then the Discount Factor shall be 92.5% PLUS one tenth of one
percent (0.1%) for every increment of $37,453 by which the 1998 Net Income is
greater than $3,049,000; and PROVIDED, FURTHER, that if the 1998 Net Income is
$5,858,000 or greater, then the Discount Factor shall be one hundred percent
(100%).
"NON-AMC INTEREST" shall mean the percentage of the outstanding Common
Shares which is owned by any Person other than the AMC IPO Company or any of its
direct or indirect subsidiaries as of the Determination Date.
-15-
<PAGE>
"TOTAL CONVERTED AMC SHARES" shall mean the number of AMC Shares (or
fractions thereof) which would be issuable hereunder to a Good Samaritan
Shareholder in exchange for all Common Shares owned by such Good Samaritan
Shareholder if such Good Samaritan Shareholder owned all Common Shares
outstanding other than the Common Shares owned by the AMC IPO Company or any of
its direct or indirect subsidiaries, as of the Determination Date.
(c) For purposes of the formula set forth in Section 5.2(d), the foregoing
terms shall be represented by the following abbreviations:
AMC Adjusted Net Income - "Q";
AMC Interest - "R";
AMC Share Price - "S";
AMC Shares Outstanding - "T";
Amortization Period - "U";
Book Value - "V";
Company Adjusted Net Income - "W";
Discount Factor - "X";
Non-AMC Interest - "Y"; and
Total Converted AMC Shares - "Z".
(d) The Total Converted AMC Shares shall be determined using the following
formula:
(U * T * Y * W) + (T * Y * V)
Z = -------------------------------------
(U * Q) + (U * R * W) + (T * S * X)
(e) The AMC Shares Issuable for the number of Converting Shares specified
in the Conversion Notice shall be equal to (i) the number of Total Converted AMC
Shares as determined by the formula contained in Section 5.2(d), multiplied by
(ii) the Converting Interest, multiplied by (iii) the Discount Factor.
5.3 PROCEDURE. Within twenty (20) days after the later of the
Determination Date or the date on which any Conversion Notice is deemed given
pursuant to this Agreement, AMC shall cause the regular outside accountants
retained by the AMC IPO Company to deliver to the Foundation and to each Good
Samaritan Shareholder exercising its option pursuant to this Section 5 such
accounting firm's calculation of the number of AMC
-16-
<PAGE>
Shares Issuable in exchange for the Converting Shares, including detailed
supporting calculations specifying how all variables contained in Sections 5.2
and 5.3 were computed (including, without limitation, AMC Adjusted Net Income
and Company Adjusted Net Income) (the "AMC Calculation"). Unless the converting
Good Samaritan Shareholder shall have notified the AMC IPO Company in writing of
the converting Good Samaritan Shareholder's objection to the AMC Calculation,
specifying those aspects of the AMC Calculation to which such converting holder
objects (an "Objection Notice"), within ten (10) days after the Foundation's
receipt thereof, the AMC Calculation shall be deemed final and binding upon the
parties. If an Objection Notice is given within such period, then the AMC IPO
Company and the converting Good Samaritan Shareholder(s) shall attempt to
resolve any differences within a period of five (5) days after the giving of
such notice. If they are unable to agree upon the appropriate calculation
within such five (5) day period, then they shall mutually agree upon an
independent outside accounting firm to make such determination (or, if they are
unable to agree, shall select one of the Big-6 accounting firms (other than
AMC's, the AMC IPO Company's, the Foundation's or the Society's firm) by lot)
(the "Independent Accountant"). The parties shall use their reasonable best
efforts to cause the Independent Accountants to deliver to AMC, the AMC IPO
Company, the Foundation and each converting Good Samaritan Shareholder, within
fifteen (15) days after the expiration of the five (5) day period described
above, the Independent Accountant's calculation of the number of AMC Shares
Issuable in exchange for the Converting Shares, including detailed supporting
calculations specifying how all variables contained in Sections 5.2 and 5.3 were
computed (including, without limitation, AMC Adjusted Net Income and Company
Adjusted Net Income) (the "Independent Accountant's Calculation"). The
Independent Accountant's Calculation shall be deemed final and binding upon the
parties. The fees and expenses of AMC's regular outside accountants and any
Independent Accountants in performing the tasks described in this Section 5.3
shall be borne equally by the AMC IPO Company, on the one hand, and all Good
Samaritan Shareholders then electing to exchange Common Shares pursuant to this
Article 5, on the other.
5.4 CLOSING. The Good Samaritan Shareholders and the AMC IPO Company
shall close the exchange contemplated by this Section 5 at the principal office
of the AMC IPO Company within 45 days after the date on which any Conversion
Notice is deemed given pursuant to this Agreement, or, if later, five (5)
business days after the Determination Date, or, if later, within three (3)
business days after the AMC Calculation or Independent Accountant's Calculation
is deemed final pursuant to Section 5.3, in each case unless the parties agree
on a different place or time. At the closing of the exchange contemplated by
this Section 5, (i) each Good Samaritan Shareholder making such exchange shall
deliver to the AMC IPO Company the certificate or certificates representing the
Common Shares then being exchanged by such Good Samaritan Shareholder, properly
endorsed with documentary stamps affixed (the cost of which shall be borne by
-17-
<PAGE>
the Good Samaritan Shareholder making such exchange), free and clear of all
security interests, liens and restrictions other than those imposed by this
Agreement, and (ii) the AMC IPO Company shall deliver to each Good Samaritan
Shareholder making such exchange the AMC Shares Issuable in exchange for such
Common Shares then being exchanged by such Good Samaritan Shareholder, except
that AMC shall not be obligated to issue any fractional AMC Share (but rather
shall pay cash in lieu thereof, at the closing price per share of the AMC Shares
on the principle securities exchange or interdealer quotation system on which
the AMC Shares are traded as of the Determination Date).
SECTION 6. "PUT" AND "CALL" RIGHTS
6.1 PUT BY THE GOOD SAMARITAN SHAREHOLDERS. (a) At any time after that
date which is three (3) years after the date of this Agreement, the Foundation
may by written demand require the AMC Shareholders to purchase and the AMC
Shareholders hereby jointly and severally agree to purchase any or all of the
Common Shares owned by the Foundation and/or any Affiliates of the Foundation
(except for such number of Common Shares then held by the Foundation and any
Affiliates of the Foundation as is then equal to ten percent (10%) of the
then-issued and outstanding Common Shares) for the consideration and under the
conditions set forth in Sections 6.3 through 6.6
(b) At any time after that date which is five (5) years after the date of
this Agreement, the Foundation may by written demand require the AMC
Shareholders to purchase and the AMC Shareholders hereby jointly and severally
agree to purchase any or all of the Common Shares owned by the Foundation and/or
any Affiliates of the Foundation for the consideration and under the conditions
set forth in Sections 6.3 through 6.6.
(c) AMC's obligations under this Section 6 shall continue notwithstanding
any sale or other Transfer by AMC of any or all of its Common Shares.
6.2 CALL BY AMC. At any time after that date which is five (5) years
after the date of this Agreement, AMC may by written demand require all
Shareholders (other than AMC and its Affiliates) to sell and all such
Shareholders hereby agree to sell any or all of the Common Shares held by such
Shareholders to AMC or any AMC IPO Company (at the election of AMC) for the
consideration and under the conditions set forth in Sections 6.3 through 6.6;
provided, however, that the Foundation and its Affiliates shall have the right
to retain, collectively, a number of Common Shares equal to ten percent (10%) of
the then outstanding Common Shares of the Company; and provided, further, that
AMC shall have the option to exclude from any such call any or all Common Shares
held by any current or former employee, officer or director of the Company or
any Subsidiary, as specified
-18-
<PAGE>
by AMC in its discretion with respect to any or all of the Common Shares then
held by each such Person. Any exercise of such right for less than all Common
Shares owned by all Shareholders (other than the Common Shares which are or may
be excluded from such call pursuant to the provisos to the immediately preceding
sentence of this Section 6.2 ("Excluded Shares")) shall obligate each
Shareholder other than AMC and its Affiliates to sell the same percentage of
such Shareholder's Common Shares (after excluding the Excluded Shares). The
Foundation shall have the right to designate which Common Shares held by it
and/or its Affiliates shall not be subject to such call pursuant to the first
proviso of the first sentence of this Section 6.2.
6.3 LIMITATIONS ON EXERCISE OF PUT AND CALL RIGHTS. The Foundation shall
be entitled to exercise its rights pursuant to Section 6.1 no more than once in
any ninety (90) day period. AMC shall be entitled to exercise its rights
pursuant to Section 6.2 no more than once in any ninety (90) day period.
6.4 ELECTION OF FORM OF CONSIDERATION TO BE RECEIVED FOR COMMON SHARES TO
BE TRANSFERRED. If AMC Shares are publicly traded on the NASDAQ Stock Market,
the American Stock Exchange or the New York Stock Exchange at the time of an
exercise of an option pursuant to Section 6.1 or 6.2 hereof, then (i) upon any
exercise of the option set forth in Section 6.1 by the Foundation, AMC shall be
entitled to elect whether the consideration to be received for the Common Shares
to be sold to the AMC Shareholders shall be cash or AMC Shares, or some
combination thereof, and (ii) upon any exercise of the option set forth in
Section 6.2 by AMC, each selling Shareholder shall be entitled to elect whether
the consideration to be received for the Common Shares to be sold to AMC shall
be cash or AMC Shares, or some combination thereof. Such election shall be made
irrevocably by delivery of written notice to the party exercising such option
within thirty (30) days after delivery of the written demand described in
Sections 6.1 and 6.2, or if any party shall fail to so give such written notice
within such period, such party shall be deemed to have elected that the
consideration for all Common Shares to be purchased shall be cash. In
connection with any such transaction, (x) each party selling or issuing either
Common Shares or AMC Shares shall make customary representations and warranties
regarding such Shareholder's title to the Common Shares or AMC Shares being
transferred, and (y) each party receiving Common Shares or AMC Shares shall make
customary representations and warranties regarding federal and state securities
law compliance.
6.5 DETERMINATION OF AMOUNT OF CONSIDERATION FOR COMMON SHARES. (a) If
the AMC Shares are publicly traded on the NASDAQ Stock Market, the American
Stock Exchange or the New York Stock Exchange at the time of an exercise of an
option pursuant to Section 6.1 or 6.2 hereof, then the consideration for which
AMC and/or any AMC Shareholders shall purchase Common Shares pursuant to such
Sections shall be (i) for such number of Common Shares as are being purchased
for AMC Shares, such number of AMC Shares as
-19-
<PAGE>
such Common Shares would be convertible into pursuant to Section 5, and (ii) for
such number of Common Shares as are being purchased for cash, such number of AMC
Shares as such Common Shares would be convertible into pursuant to Section 5
MULTIPLIED BY the AMC Share Price. For purposes of such calculation, the
"Determination Date" shall be the last day of the last completed month prior to
the date on which any election pursuant to Section 6.4 occurs or is deemed to
occur; PROVIDED, HOWEVER, that (x) in the event that the Determination Date
would be a date prior to the 20th Trading Day, then the Determination Date shall
instead be the last day of the month in which the 20th Trading Day falls, and
(y) in the event that AMC exercises its option to purchase "Control Shares"
pursuant to Section 1.8 of the Share Purchase Agreement prior to the applicable
Good Samaritan Shareholder's exercise of its option pursuant to Section 6.1,
then the purchase and sale of such Control Shares shall be deemed to have
occurred on the day before the Determination Date if such purchase and sale
actually occurs, for purposes of all definitions and calculations under Sections
5 and 6. Further, the procedure described in Section 5.3 shall be employed by
and govern the parties' determination of the number of AMC Shares into which
such Common Shares would be convertible pursuant to Section 5, substituting "the
date on which any election pursuant to Section 6.4 occurs or is deemed to occur"
for "the date on which any Conversion Notice is deemed given" for purposes of
this Section 6.
(b) If the AMC Shares are not publicly traded on the NASDAQ Stock Market,
the American Stock Exchange or the New York Stock Exchange at the time of an
exercise of an option pursuant to Section 6.1 or 6.2 hereof, then the
consideration for which AMC and/or any AMC Shareholders shall purchase Common
Shares pursuant to such Sections shall be cash, and the purchase price shall be
the price agreed upon by the parties, or if the parties cannot agree on a price,
the Appraised Value (as hereinafter defined) of the Common Shares to be
purchased, calculated pursuant to subsection 6.5(c), as of the last day of the
last completed month prior to the date on which any election pursuant to Section
6.4 occurs or is deemed to occur.
(c) The "Appraised Value" of the Common Shares to be transferred shall be
determined by the appraisers identified below based on their determinations of
earnings, book value, and other appropriate items, as follows:
(i) AMC, on the one hand, and the selling Shareholders which cannot
agree on a price with AMC, on the other, shall each select an independent
appraiser which is either a big 6 accounting firm (or successor thereto) or an
investment banking firm having operations nationwide which conducts appraisals
of the type described in this Section 6.5, and such two (2) appraisers shall
each individually determine the fair market value of the Common Shares to be
transferred; PROVIDED, that if either party fails to so designate an appraiser
within fifteen (15) days after receipt of the notice referred to in Section 6.4,
the appraiser
-20-
<PAGE>
selected by the other party shall determine the fair market value of the Common
Shares to be transferred;
(ii) If the values determined by such two (2) appraisers are the same,
then such value shall be the Appraised Value;
(iii) If the values determined by such two appraisers are different by
an amount not greater than ten percent (10%) of the higher of the two
appraisals, then the Appraised Value shall be the average of such two values;
(iv) If the values determined by such two (2) appraisers are different
by an amount greater than ten percent (10%) of the higher of the two appraisals,
then the first two (2) appraisers shall jointly select an independent third
appraiser (of the same type described in clause (i) above) who shall determine a
value for the Common Shares to be transferred; the Appraised Value shall then be
the average of those two values determined by the three (3) appraisers which are
nearest to one another in total amount.
(d) In the event more than one selling Shareholder cannot agree on a price
with AMC pursuant to this Section 6, the Shareholder selling the most Common
Shares shall be entitled to select the appraiser on behalf of all such
Shareholders which have not agreed on a price per Common Share with AMC. The
cost of such appraisal shall be borne equally by AMC, on the one hand, and the
selling Shareholders which cannot agree on a price with AMC, on the other.
6.6 CLOSING. AMC and the Shareholders agree that they will close the
Transfer of Common Shares contemplated by Sections 6.1 through 6.5 within the
following periods after the date on which a Good Samaritan Shareholder or AMC,
as the case may be, gave the applicable notice under Section 6.1 or 6.2: (i) for
Common Shares being purchased for cash, within 120 days; and (ii) for Common
Shares being purchased for AMC Shares, within 30 days (or, if later, within
three (3) business days after final determination of the number of AMC Shares to
be issued in exchange for those Common Shares then being exchanged pursuant to
Sections 6.5(a) and 5.3). The closing shall take place at the principal office
of the party who gave the applicable notice under Section 6.1 or 6.2, unless the
parties agree on a different place or time. At the closing of the Transfer of
Common Shares contemplated by this Section 6, (i) the selling Shareholder(s)
shall deliver to AMC or the purchasing AMC Shareholders, as applicable, the
certificate or certificates representing the Common Shares purchased thereby,
properly endorsed for Transfer and with documentary stamps affixed (the cost of
which shall be borne by the party giving notice pursuant to Section 6.1 or 6.2),
free and clear of all security interests, liens and restrictions other than
those imposed by this Agreement, and (ii) AMC and/or such purchasing AMC
Shareholders shall deliver to the selling
-21-
<PAGE>
Shareholder(s) the consideration for which such Common Shares are being
purchased, in full. Payment of any cash purchase price shall be made by
certified check or wire transfer to such account as is designated in writing by
the selling Shareholders.
6.7 FOUNDATION EXIT OPTION UPON CHANGE IN CONTROL OF AMC SHAREHOLDER. (a)
As used in this Section 6.7, the following terms shall have the following
meanings:
"Change in Control" shall mean any transaction or series of transactions
(including any sale or exchange of stock, any sale or exchange of assets,
and any merger or consolidation) which would result in any AMC Shareholder
being directly or indirectly controlled by a Nursing Home Company (with
"control" meaning the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the AMC
Shareholder in question, whether through ownership of voting securities, by
contract, or otherwise); PROVIDED, that if such transaction or series of
transactions consists of a purchase or series of purchases of
publicly-traded securities made through the public securities markets and
not pursuant to any agreement or arrangement between the purchaser or any
of the purchaser's Affiliates and AMC or any of AMC's Affiliates, such
purchase or series of purchases shall not be deemed a Change of Control
hereunder;
"Discussions" shall mean discussions with respect to any transaction or
series of transactions which would result in a Change in Control; and
"Nursing Home Company" shall mean any Person which, on a consolidated basis
with its subsidiaries, derives a majority of its revenues from the
ownership and/or management of long-term care facilities (which term
includes, without limitation, skilled and intermediate nursing facilities
and assisted living facilities), and any Affiliate of any such Person.
(b) Notwithstanding anything to the contrary stated in this Section 6.7,
the provisions of Sections 6.7(c) through 6.7(f) shall apply only with respect
to Changes in Control which would occur while both (i) the Foundation and its
Affiliates hold more than ten percent (10%) of the Company's Common Shares and
(ii) AMC and its Affiliates hold more than ten percent (10%) of the Company's
Common Shares.
(c) In the event that AMC or any Affiliate thereof is at any time in
Discussions with any Nursing Home Company, AMC or such Affiliate may deliver
written notice (a "Change in Control Notice") to the Foundation stating that
Discussions are taking place and identifying the Nursing Home Company which
would directly or indirectly own or control an AMC Shareholder in the
-22-
<PAGE>
event of the Change of Control contemplated by such Discussions. Such Change in
Control Notice shall specify the type or types of transactions (E.G., merger or
sale of stock) to which such Discussions relate, as well as the entities which
would or may be involved in such transaction(s) (E.G., the parties to be merged
or whose stock would be sold).
(d) (i) For a period of twenty (20) business days after its receipt of a
Change in Control Notice, the Foundation shall have the option of whether or not
to consent to the Change in Control described in such Change in Control Notice
with respect to the Nursing Home Company identified in such Change in Control
Notice. If, within such twenty (20) business day period, the Foundation
delivers written notice to AMC stating that it does not consent to such Change
in Control (a "Disapproval Notice"), the Foundation shall be deemed to have
exercised its "Exit Option" pursuant to this Section 6.7 and the provisions of
6.7(e) shall apply. If the Foundation consents to such Change in Control by
delivery of written notice indicating such consent to AMC, or if, as of the end
of such twenty (20) business day period, the Foundation shall have failed to
deliver a Disapproval Notice to AMC, then the Foundation shall be deemed to have
waived its Exit Option with respect to the Change in Control described in the
Change of Control Notice and AMC and/or the Affiliate thereof delivering such
notice shall be entitled to engage in the Change in Control specified in such
Change in Control Notice with the Nursing Home Company identified therein.
(ii) If any Change in Control shall occur as to which no Change in
Control Notice was ever delivered, then, until the expiration of one hundred
twenty (120) days after written notice of such Change in Control shall have been
given to the Foundation pursuant to this Agreement, the Foundation shall have
the option to either (A) by written demand require the AMC Shareholders to
purchase (and the AMC Shareholders hereby agree to purchase) all of the Common
Shares owned by the Good Samaritan Shareholders, or (B) by written demand
require the AMC Shareholders to sell (and the AMC Shareholders hereby agree to
sell) all of the Common Shares owned by the AMC Shareholders, in each case for
cash. The price per Common Share to be paid for the Good Samaritan
Shareholders' Common Shares upon any exercise of the "put" described in clause
(A) above, and the price per Common Share to be paid for the AMC Shareholders'
Common Shares upon any exercise of the "call" described in clause (B) above,
shall be the Appraised Value of such Common Shares, determined in accordance
with Section 6.5(c) (and, for such purposes, the fifteen (15) day period
described in Section 6.5(c)(i) shall be fifteen (15) days from the date the
Foundation gives notice of its exercise of such put or call pursuant to this
Section 6.7(d)(ii)). The Good Samaritan Shareholders and the AMC Shareholders
shall close any "put" transaction pursuant to clause (A) above within one
hundred twenty (120) days after the Foundation shall have given notice of its
exercise of such put, and shall close any "call" transaction pursuant to clause
(B) above within thirty (30) days after the
-23-
<PAGE>
Foundation shall have given notice of its exercise of such call. In connection
with any such transaction, each selling Shareholder shall make customary
representations and warranties regarding its title to the Common Shares being
transferred, and each purchasing Shareholder shall make customary
representations and warranties regarding federal and state securities law
compliance. The closing of any such transaction shall take place at such
location within the United States as may be specified by the party acquiring
Common Shares pursuant thereto. At such closing, the selling Shareholder(s)
shall deliver to the applicable purchaser(s) the certificate or certificates
representing the Common Shares purchased thereby, properly endorsed for Transfer
and with documentary stamps affixed (the cost of which shall be borne by the
Company), free and clear of all security interests, liens and restrictions other
than those imposed by this Agreement, and (ii) the applicable purchaser(s) shall
deliver to the selling Shareholder(s) the applicable purchase price for such
Common Shares, in full. Payment of such purchase price shall be made by
certified check or wire transfer to such account as is designated in writing by
the selling Shareholders.
(e) (i) The Foundation's delivery of any Disapproval Notice and
consequent exercise of its Exit Option shall constitute the Good Samaritan
Shareholders' irrevocable offer ("Sale Offer") to sell all Common Shares then
held by the Good Samaritan Shareholders to AMC or any Affiliate of AMC for cash
in an amount equal to the Appraised Value thereof, determined in accordance with
Section 6.5(c) hereof, PROVIDED that the Change in Control described in the
applicable Change in Control Notice actually occurs.
(ii) For a period of ten (10) business days after its receipt of a
Disapproval Notice, AMC shall have the option to accept the Sale Offer, by
delivery of written notice to such effect to the Foundation; PROVIDED, that any
such acceptance shall be contingent upon the consummation of the transaction
which would result in the applicable Change in Control.
(iii) Unless the Foundation shall have received written notification
from AMC accepting a Sale Offer within the ten (10) business day period
described in subsection (e)(ii) above, AMC shall be deemed to have declined such
Sale Offer. If AMC declines such Sale Offer, either by delivery of written
notice stating that it declines the Sale Offer or by virtue of the expiration of
the ten (10) business day period described in subsection (e)(ii) above, then AMC
shall be deemed to have irrevocably offered ("Purchase Offer") to sell all
Common Shares then held by the AMC Shareholders to the Foundation or any
Affiliate of the Foundation for cash in an amount equal to the Appraised Value
thereof, determined in accordance with Section 6.5(c) hereof, PROVIDED that the
Change in Control described in the applicable Change in Control Notice actually
occurs.
-24-
<PAGE>
(iv) For a period of ten (10) business days after the commencement of
any such Purchase Offer, the Foundation shall have the option to accept the
Purchase Offer, by delivery of written notice to such effect to AMC; PROVIDED,
that any such acceptance shall be contingent upon the consummation of the
transaction which would result in the applicable Change in Control.
(v) Unless AMC shall have received written notification accepting a
Purchase Offer from the Foundation within the ten (10) business day period
described in subsection (e)(iv), the Foundation shall be deemed to have declined
such Purchase Offer. In the event that any such Purchase Offer is declined by
the Foundation, then AMC and its Affiliates shall thereafter be entitled to
engage in any transaction described in the Change in Control Notice with the
Nursing Home Company identified therein, without regard to the provisions of
this Section 6.7.
(f) If either AMC or the Foundation accepts a Sale Offer or a Purchase
Offer pursuant to Section 6.7(e), the parties shall proceed promptly and in good
faith to ascertain the Appraised Value of the Common Shares to be purchased and
sold in accordance with the provisions set forth in Section 6.5(c) (and, for
such purposes, the fifteen (15) day period described in Section 6.5(c)(i) shall
be fifteen (15) days from the date of any acceptance of such Sale Offer or
Purchase Offer, as the case may be). The parties shall close the purchase and
sale of Common Shares contemplated by such Sale Offer or Purchase Offer as soon
as practicable following such determination of Appraised Value and at the same
time as the transaction resulting in a Change in Control is consummated;
PROVIDED, HOWEVER, that in the event that the Appraised Value shall not have
been determined as of the date of the consummation of the transaction which
would result in a Change in Control, such Change in Control may occur
nonetheless if and only if all Persons which are party to such transaction
deliver to the Good Samaritan Shareholders their unconditional agreement to
cause the Sale Offer or Purchase Offer transaction to be consummated as soon as
practicable after the Appraised Value is determined in accordance with Section
6.5(c).
(g) The closing of any Sale Offer or Purchase Offer transaction shall take
place at such location within the United States as may be specified by the party
acquiring Common Shares pursuant thereto. At such closing, (i) the selling
Shareholder(s) shall deliver to the applicable purchaser(s) the certificate or
certificates representing the Common Shares purchased thereby, properly endorsed
for Transfer and with documentary stamps affixed (the cost of which shall be
borne by the Company), free and clear of all security interests, liens and
restrictions other than those imposed by this Agreement, and (ii) the applicable
purchaser(s) shall deliver to the selling Shareholder(s) the Appraised Value of
such Common Shares, in full. Payment of such Appraised Value shall be made by
certified check or wire transfer to such accounts as are designated in writing
by the selling Shareholders.
-25-
<PAGE>
SECTION 7. REGISTRATION RIGHTS
7.1 THE GOOD SAMARITAN SHAREHOLDERS' RIGHTS UPON CONVERSION. In the event
that any Good Samaritan Shareholder shall at any time receive AMC Shares
pursuant to Section 6, then all such Good Samaritan Shareholders shall
collectively have the rights set forth in this Section 7 with respect to all AMC
Shares received pursuant to Section 6. In the event that any Good Samaritan
Shareholder shall at any time receive AMC Shares pursuant to Section 5, then all
such Good Samaritan Shareholders shall have the rights set forth in this Section
7 (other than the rights set forth in Section 7.2(a) hereof, which shall not
apply in such case) with respect to all AMC Shares received pursuant to Section
5. AMC hereby agrees to cause any AMC IPO Company to comply with the
obligations thereof set forth in this Section 7.
7.2 REGISTRATION RIGHTS (a) Upon the receipt by AMC, at any time after 90
days after the date on which an AMC IPO Company completes an Initial Public
Offering of AMC Shares pursuant to a registration statement filed with the SEC,
of a written request from the Foundation to effect any registration, other than
a registration pursuant to Rule 415 under Regulation C promulgated under the
Securities Act, of all or any portion of the AMC Shares held by the Good
Samaritan Shareholders, the AMC IPO Company shall prepare and file as
expeditiously as possible a registration statement under the Securities Act
covering the AMC Shares subject to such request and shall use its reasonable
best efforts to cause such registration statement (a "Demand Registration") to
become effective within 120 days of the receipt of such request. The Foundation
shall be entitled to require the AMC IPO Company to effect two Demand
Registrations with respect to AMC Shares, pursuant to this subsection 7.2(a).
In the event that the Good Samaritan Shareholders determine for any reason
(other than at the request of the AMC IPO Company) not to proceed with a
registration of AMC Shares at any time before the registration statement has
been declared effective by the SEC, and such registration statement, if
theretofore filed with the SEC, is withdrawn with respect to the AMC Shares
covered thereby, and the Good Samaritan Shareholders agree to reimburse the AMC
IPO Company for the fees, costs and expenses in connection therewith, then the
Foundation shall not be deemed to have exercised its right to require the AMC
IPO Company to register the AMC Shares pursuant to this subsection 7.2(a). If
the Good Samaritan Shareholders determine not to proceed with such a
registration upon the request of the AMC IPO Company or the AMC IPO Company's
exercise of its right pursuant to Section 7.2(d), the Good Samaritan
Shareholders shall not be required to reimburse the AMC IPO Company for its
fees, costs and expenses and shall not be deemed to have exercised a Demand
Registration right to require the AMC IPO Company to register the AMC Shares
pursuant to this subsection 7.2(a).
-26-
<PAGE>
(b) Each time the AMC IPO Company shall determine to prepare and file a
registration statement under the Securities Act (other than pursuant to a Demand
Registration) in connection with the proposed offer and sale for cash of any AMC
Shares by the AMC IPO Company or any of its security holders (other than on
Forms S-4 or S-8, or any successor or similar form) and the registration
statement may be used for registration of the AMC Shares held by the Good
Samaritan Shareholders (a "Proposed Registration"), the AMC IPO Company shall
give written notice of its determination to the Good Samaritan Shareholders.
Upon the written request of the Good Samaritan Shareholders given to the AMC IPO
Company within 20 days after the giving of any such notice by the AMC IPO
Company, the AMC IPO Company shall, subject to Section 7.2(c) hereof, cause all
such AMC Shares which such Good Samaritan Shareholders have requested to be
registered to be included in such registration statement (a "PIGGYBACK
REGISTRATION"); provided, however, that the AMC IPO Company shall have the
option at any time to postpone or abandon any Proposed Registration and
Piggyback Registration at any time prior to the closing thereof. Any Good
Samaritan Shareholder shall have the right to withdraw its AMC Shares from a
Piggyback Registration if an underwritten offering of such AMC Shares is priced
below a minimum price specified in such Good Samaritan Shareholder's election.
(c) Notwithstanding Sections 7.2(a) or 7.2(b), if the managing
underwriter or underwriters advise the AMC IPO Company in writing that in its
or their opinion or, in the case of a Piggyback Registration not being
underwritten, the AMC IPO Company shall reasonably determine (and notify the
Good Samaritan Shareholders of such determination), that the number or kind
of securities proposed to be sold pursuant to the registration statement will
adversely affect the success of such offering, the AMC IPO Company shall be
obligated to include in the registration statement only that number of
securities, if any, which, in the opinion of such underwriter or
underwriters, or the AMC IPO Company, as the case may be, can be sold as
follows: (i) first, such AMC Shares as to which registration rights have been
exercised by the Good Samaritan Shareholders under subsection 7.2(a) above or
by any other holder of AMC shares exercising similar demand registration
rights, (ii) second, the AMC Shares which the AMC IPO Company proposes to
sell, and (iii) third, the AMC Shares requested to be included in such
registration by the Good Samaritan Shareholders under subsection 7.2(b) above
or by any other holder of AMC Shares exercising piggyback registration rights
(including, without limitation, management). In the event that one (1) or
more Good Samaritan Shareholders and one (1) or more other holders of AMC
Shares shall have exercised demand registration rights, then the priority
amongst holders exercising such demand registration rights pursuant to clause
(i) above shall be allocated pro rata amongst such holders in proportion to
the number of AMC Shares held by the Good Samaritan Shareholders versus the
number of AMC Shares held by such other exercising holders. In the event
that one (1) or more Good Samaritan Shareholders and one (1) or more other
holders of AMC Shares shall
-27-
<PAGE>
have exercised piggyback registration rights (including, without limitation,
management), then the priority amongst holders exercising such piggyback
registration rights pursuant to clause (iii) above shall be allocated pro rata
amongst such holders in proportion to the number of AMC Shares held by the Good
Samaritan Shareholders versus the number of AMC Shares held by such other
exercising holders of AMC Shares.
(d) Notwithstanding the provisions of subsections 7.2(a) and (b) hereof,
(i) the AMC IPO Company shall have the right to delay or suspend the preparation
and filing of a registration statement for up to 120 days if in the reasonable
judgment of a majority of the Directors on the Board of Directors of the AMC IPO
Company such preparation or filing would harm or hinder in any material fashion
the ability of the AMC IPO Company to conduct its affairs or would have a
material adverse effect on the business, properties or financial condition of
the AMC IPO Company; PROVIDED that the AMC IPO Company shall use its reasonable
best efforts to cause any such registration statement to become effective within
180 days of receipt of the request therefor and shall only be entitled to
utilize this clause (i) once in any 12 month period, (ii) if, prior to receiving
a request for a Demand Registration, the AMC IPO Company has given notice under
subsection 7.2(b) hereof that it intends to prepare and file a registration
statement (the "AMC Registration Statement"), then the AMC IPO Company shall
have the right to delay or suspend the filing of the registration statement
requested pursuant to subsection 7.2(a); PROVIDED that the AMC IPO Company shall
use its reasonable best efforts to cause any such registration statement
requested by the Good Samaritan Shareholders to become effective within 180 days
after the effective date of the AMC Registration Statement.
(e) The Good Samaritan Shareholders in an underwritten offering
contemplated by subsection 7.2(b) shall be a party to the underwriting agreement
between the AMC IPO Company and such underwriters and shall complete and execute
all questionaires, powers of attorney, indemnities and other documents required
under the terms of such underwriting arrangements.
7.3 STANDSTILL. The Good Samaritan Shareholders agree in connection with
any underwritten public offering of AMC Shares by the AMC IPO Company that, upon
the request of the managing underwriters (or, if not an underwritten offering,
upon the request of the AMC IPO Company), they shall commit themselves in
writing not to sell or offer to sell any AMC Shares other than such AMC Shares
included in the registration statement, during the 7 days prior to, and for a
period not to exceed 180 days from, the date of the final prospectus used in
such offering; PROVIDED, HOWEVER, that (i) nothing in such agreement shall
prevent any Good Samaritan Shareholder that is a partnership from making a
distribution to the partners of such Good Samaritan Shareholder of AMC Shares
that is otherwise in compliance with applicable securities law, if the
Transferees of the AMC Shares shall agree
-28-
<PAGE>
to be bound by the applicable provisions of such agreement, and (ii) the Good
Samaritan Shareholders shall have no obligation to enter into the agreement
described in this Section 7.3 unless the AMC IPO Company and all holders of AMC
Shares and all officers and directors of the AMC IPO Company holding AMC Shares
enter into similar agreements for the same duration.
7.4 REGISTRATION PROCEDURES. With respect to any Demand Registration or
Piggyback Registration the AMC IPO Company will:
(a) use its reasonable best efforts to prepare and file with the SEC,
as expeditiously as practicable, a registration statement which includes
the AMC Shares requested to be sold by the Good Samaritan Shareholders, as
the same may be reduced by the operation of Section 7.2(c) hereof (the
"Registrable Securities"), and to cause such registration statement to
become effective and remain effective for such period as may be reasonably
necessary to effect the sale of such Registrable Securities, not to exceed
one hundred eighty (180) days;
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective until the
earlier of (i) the date on which all securities covered by such
registration statement have been sold and (ii) 180 days after the effective
date of such registration statement;
(c) use its reasonable best efforts to register or qualify the
Registrable Securities for sale under such other securities or blue sky
laws of such jurisdictions as the Good Samaritan Shareholders may
reasonably request and do any and all other acts and things which may be
reasonably necessary or desirable to enable the Good Samaritan Shareholders
to consummate the disposition of the Registrable Shares in such
jurisdictions; PROVIDED, HOWEVER, that the AMC IPO Company shall not be
required to qualify to do business, to file a general consent to service of
process or to subject itself to taxation in any such jurisdictions;
(d) furnish to the Good Samaritan Shareholders and to the
underwriters of the securities being registered a reasonable number of
copies of the registration statement, preliminary prospectus, final
prospectus, and such other documents as the Good Samaritan Shareholders or
underwriters may reasonably request in order to facilitate the public
offering of such securities;
(e) notify the Good Samaritan Shareholders, promptly after it shall
receive notice thereof, of the time when such registration statement has
become effective or a supplement
-29-
<PAGE>
to any prospectus forming a part of such registration statement has
been filed;
(f) notify the Good Samaritan Shareholders promptly of any request by
the SEC for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) prepare and file with the SEC, promptly upon the request of the
Good Samaritan Shareholders, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel for
the Good Samaritan Shareholders (and concurred in by counsel for the AMC
IPO Company), is required under the Securities Act in connection with the
distribution of the Registrable Shares by the Good Samaritan Shareholders;
(h) prepare and promptly file with the SEC, and promptly notify the
Good Samaritan Shareholders of the filing of, any amendment or supplement
to such registration statement or prospectus as may be necessary to correct
any statements or omissions if, at the time when a prospectus relating to
such securities is required to be delivered under the Securities Act, any
event shall have occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statement therein, in the light of the circumstances in which they were
made, not misleading;
(i) advise the Good Samaritan Shareholders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that
purpose and promptly use its reasonable best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order
should be issued;
(j) at the request of the Good Samaritan Shareholders, use its
reasonable best efforts to cause to be furnished on the date or dates
provided for in the underwriting agreement: (i) an opinion of counsel
addressed to the Good Samaritan Shareholders and the underwriters, if any,
opining as to such matters as are customarily covered in counsel's opinions
to underwriters; and (ii) a letter or letters from the independent
certified public accountants of the AMC IPO Company, addressed to the
underwriters, if any, and to the Good Samaritan Shareholders, covering such
matters as such underwriters and the Good Samaritan Shareholders reasonably
request, in which letters such accountants shall state (without limiting
the generality of the foregoing) that they are independent certified public
accountants within the meaning of the Securities Act and that in the
opinion of such
-30-
<PAGE>
accountants the financial statements and other financial data of the AMC
IPO Company included in the registration statement or any amendment or
supplement thereto comply in all material respects with the applicable
accounting requirements of the Securities Act.
(k) if necessary to permit any Good Samaritan Shareholder to be able
to avail itself of any defense to a cause of action which would not
otherwise be available to the Good Samaritan Shareholders, and provided
that the Good Samaritan Shareholders first enter into a confidentiality
agreement reasonably acceptable to the AMC IPO Company, give such Good
Samaritan Shareholder, its underwriters, if any, and its respective counsel
and accountants the reasonable opportunity to participate in the
preparation of the registration statement, each prospectus included therein
or filed with the SEC, and each amendment thereof or supplement thereto,
and shall give each of them such reasonable access to its books and records
and such reasonable opportunities to discuss the business of the AMC IPO
Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the reasonable
opinion of any such Good Samaritan Shareholder's and such underwriter's
respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
7.5 EXPENSES. With respect to each Demand Registration, Piggyback
Registration or proposed Piggyback Registration, the AMC IPO Company shall bear
the fees, costs and expenses of such registrations, including but not limited to
the following fees, costs and expenses: all registration, filing, and stock
exchange fees, printing expenses, fees and disbursements of counsel and
accountants for the AMC IPO Company, fees and disbursements of other Persons
retained by the AMC IPO Company, all legal fees and disbursements and other
expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified, and the reasonable fees and disbursements of one counsel for the Good
Samaritan Shareholders and all other AMC IPO Company shareholders participating
in such registration; provided, that the Good Samaritan Shareholders
participating in such registration shall be responsible for, and shall pay,
their PRO RATA share of underwriting discounts and commissions, and shall be
solely responsible for all transfer taxes, fees of accountants and other
professional advisors retained by the Good Samaritan Shareholders, and all fees
and disbursements of attorneys retained by the Good Samaritan Shareholders in
excess of the reasonable fees and disbursements of the one counsel to be paid by
the AMC IPO Company.
7.6 INDEMNIFICATION.
(a) BY THE AMC IPO COMPANY. The AMC IPO Company shall indemnify and hold
harmless the Good Samaritan Shareholders and
-31-
<PAGE>
any underwriter (as defined in the Securities Act) for the Good Samaritan
Shareholders and their respective officers, directors, members, employees and
agents and each other Person, if any, who controls the Good Samaritan
Shareholders or such underwriter within the meaning of the Securities Act, from
and against any and all loss, damage, liability or claims, to which the Good
Samaritan Shareholders or any such underwriter becomes subject under the
Securities Act or otherwise, and subject to the provisions of Section 7.6(c)
hereof to reimburse them, from time to time upon request, for any legal or other
costs or expenses reasonably incurred by them in connection with investigating
any claims or defending any action (as provided in Section 7.6(c) hereof),
insofar as such losses, damages, liabilities, claims, costs or expenses are
caused by any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based upon the
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; provided, however, that
the AMC IPO Company will not be liable in any such case to the extent that any
such loss, damage, liability, claim, cost or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission (other than a statement or omission about the AMC IPO Company) made in
conformity with information furnished by the Good Samaritan Shareholders in
writing specifically for use in the preparation of a registration statement.
(b) BY THE GOOD SAMARITAN SHAREHOLDERS. The Good Samaritan Shareholders
holding AMC Shares that are included in a registration pursuant to this
Agreement will indemnify and hold harmless the AMC IPO Company, any underwriter
and their respective officers, directors, members, shareholders, employees and
agents and each other Person, if any, who controls the AMC IPO Company, such
other holder or such underwriter, from and against any and all loss, damage,
liability or claim, to which the AMC IPO Company or such other holder or any
controlling Person and/or any underwriter becomes subject under the Securities
Act or otherwise and to reimburse them, from time to time upon request, for any
legal or other costs or expense reasonably incurred by them in connection with
investigating any claims or defending any actions, insofar as such losses,
damages, liabilities, costs, or expenses are caused by any untrue or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein, or any amendment or supplement thereto, or
arise out of or are based upon the omission or the 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, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was so
made in reliance upon and in conformity
-32-
<PAGE>
with written information furnished by the Good Samaritan Shareholders
specifically for use in the preparation of such registration statement;
provided, however, that in any such case, the Good Samaritan Shareholders shall
not be required to provide indemnification pursuant to this subsection in an
amount exceeding the amount of net proceeds received by the Good Samaritan
Shareholders pursuant to such registration statement.
(c) NOTICE. Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this Section 7.6 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provision, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party in writing of the
commencement thereof; but the omission to so notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than hereunder. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in, and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party; PROVIDED, HOWEVER, if the defendants in any action
include both the indemnified party and the indemnifying party and there is a
conflict of interest which would prevent counsel for the indemnifying party from
also representing the indemnified party, the indemnified party or parties shall
have the right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said paragraph (a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the proviso of
the preceding sentence, (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after the notice of the commencement of the action, or
(iii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
(d) CONTRIBUTION. If for any reason the indemnification provided for in
paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to
hold it harmless as contemplated by such paragraphs, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnified party and the
-33-
<PAGE>
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations;
PROVIDED, HOWEVER, that, in any such case, (i) the Good Samaritan Shareholders
will not be required to contribute any amount in excess of the net proceeds
received by the Good Samaritan Shareholders for all such AMC Shares sold by the
Good Samaritan Shareholders pursuant to such registration statement, and (ii) no
Good Samaritan Shareholder guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any holder of AMC Shares who was not guilty of such fraudulent
misrepresentation.
Promptly after receipt of notice of the commencement of any action, suit or
proceeding in connection with a public offering of the AMC Shares, the
indemnified party will, if a claim for contribution in respect thereof is able
to be made against another party, notify the contributing party of the
commencement thereof. The omission so to notify the contributing party will not
relieve it from any liability which it may have to any other party other than
for contribution under the Securities Act. In case any such action, suit or
proceeding is brought against any party, and such party notifies a contributing
party of the commencement thereof, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified.
7.7 GOOD SAMARITAN SHAREHOLDERS TO PROVIDE INFORMATION. In the event the
Good Samaritan Shareholders request a registration of AMC Shares, the Good
Samaritan Shareholders shall provide all such information and materials and
shall take all such actions as may be reasonably requested by the AMC IPO
Company in connection therewith, including all actions and information required
in order to permit the AMC IPO Company to comply with all applicable
requirements of the SEC and to obtain any desired acceleration of the effective
date of such registration statement. Specifically, the AMC IPO Company may
require the Good Samaritan Shareholders to furnish the AMC IPO Company with such
information and affidavits regarding the Good Samaritan Shareholders and the
distribution of their securities as the AMC IPO Company may from time to time
reasonably request in writing.
7.8 RULE 144 REPORTING. The AMC IPO Company agrees that at all times
after it has filed a registration statement pursuant to the requirements of the
Securities Act relating to any class of equity securities of the AMC IPO
Company, it will use its best efforts to file in a timely manner all reports
required to be filed by it pursuant to the Securities Exchange Act of 1934, as
amended (the "Securities Act of 1934"), and the rules and regulations
promulgated thereunder. At any time and upon request of the Good Samaritan
Shareholders, the AMC IPO Company will furnish the Good Samaritan Shareholders
and others with such information as may be necessary to enable the Good
Samaritan
-34-
<PAGE>
Shareholders to effect sales of AMC Shares pursuant to Rule 144 under the
Securities Act of 1934.
SECTION 8. BOARD APPROVAL REQUIREMENTS FOR CERTAIN ACTIONS;
CERTAIN COVENANTS OF THE COMPANY
8.1 BOARD APPROVAL REQUIREMENTS FOR CERTAIN ACTIONS. Notwithstanding any
provision in the articles of incorporation or bylaws of the Company to the
contrary, (i) during any period that AMC and the Foundation each have the right,
pursuant to Section 2, to designate exactly two (2) members of the Board of
Directors of the Company, the Company shall not take any of the actions
specified in subsections 8.1(a) through 8.1(t) unless at least one (1) Director
designated by AMC and one (1) Director designated by the Foundation shall have
voted in favor thereof at a regular or special meeting of the Board of Directors
or pursuant to a unanimous written consent of Directors, and (ii) during any
period that, pursuant to Section 2, AMC has the right to designate three (3) or
more members of the Board of Directors of the Company and the Foundation has the
right to designate at least one (1) member of the Board of Directors of the
Company, the Company shall not take any of the actions specified in subsections
8.1(a), (b), (d), (e) (provided, that for such purposes "50%" shall be
substituted for "15%" in subsection 8.1(e)), (f), (j), (r) or (u), in each case
unless at least one (1) Director designated by AMC and one (1) Director
designated by the Foundation shall have voted in favor thereof at a regular or
special meeting of the Board of Directors or pursuant to a unanimous written
consent of Directors:
(a) directly or indirectly redeem, purchase or otherwise acquire, or
permit any Subsidiary to redeem, purchase or otherwise acquire, any of the
Company's or any Subsidiary's capital stock or other equity securities
(including, without limitation, warrants, options and other rights to
acquire such capital stock or other equity securities) or directly or
indirectly redeem, purchase or make any payments with respect to any stock
appreciation rights, phantom stock plans or similar rights or plans (other
than as required pursuant to the terms thereof);
(b) except pursuant to Sections 1.1, 1.7 or 1.8 of the Share Purchase
Agreement, authorize, issue or enter into any agreement providing for the
issuance (contingent or otherwise) of (i) any notes or debt securities
containing equity features (including, without limitation, any notes or
debt securities convertible into or exchangeable for capital stock or other
equity securities, issued in connection with the issuance of capital stock
or other equity securities or containing profit participating features), or
(ii) any capital stock or other equity securities (or any securities
-35-
<PAGE>
convertible into or exchangeable for any capital stock or other equity
securities);
(c) make, or permit any Subsidiary to make, any loans or advances to,
guarantees for the benefit of, or Investments in, any Person, except for
(i) reasonable advances to employees in the ordinary course of business,
(ii) acquisitions permitted pursuant to subsection (g) below and (iii)
Investments having a stated maturity no greater than one year from the date
the Company makes such Investment in (A) obligations of the United States
government or any agency thereof of obligations guaranteed by the United
States government or (B) commercial paper with a rating of a least
"Prime-1" by Moody's Investors Service, Inc.;
(d) merge or consolidate with any Person or, except as permitted by
subsection (g) below, permit any Subsidiary to merge or consolidate with
any Person;
(e) sell, lease or otherwise dispose of, or permit any Subsidiary to
sell, lease or otherwise dispose of, more than 15% of the consolidated
assets of the Company and its Subsidiaries (computed on the basis of book
value, determined in accordance with GAAP) in any transaction or series of
related transactions (other than sales of inventory in the ordinary course
of business);
(f) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation,
any reorganization into a limited liability company, a partnership or any
other non-corporate entity which is treated as a partnership for federal
income tax purposes);
(g) acquire, or permit any Subsidiary to acquire, any interest in any
company or business (whether by a purchase of assets, purchase of stock,
merger or otherwise), or enter into any joint venture, involving an
aggregate consideration (including, without limitation, the assumption of
liabilities whether direct or indirect) exceeding $250,000 in any one
transaction or series of related transactions or exceeding $500,000 in any
twelve-month period;
(h) enter into, or permit any Subsidiary to enter into, the
ownership, active management or operation of any lines of business other
than the lines of business engaged in by the Company as of the date hereof;
(i) become subject to, or permit any of its Subsidiaries to become
subject to (including, without limitation, by way of amendment to or
modification of) any agreement or instrument which by its terms would
(under any circumstances) restrict (i) the right of any Subsidiary to make
loans or advances or pay dividends to, transfer property
-36-
<PAGE>
to, or repay any Indebtedness owed to, the Company or another Subsidiary or
(ii) the Company's right to perform the provisions of this Agreement, the
Share Purchase Agreement, the Non-Competition Agreement, the Company's
articles of incorporation or the Company's bylaws;
(j) except as expressly contemplated by this Agreement, make any
amendment to the Company's articles of incorporation or the Company's
bylaws, or file any resolution of the Board of Directors with the South
Dakota Secretary of State;
(k) enter into, amend, modify or supplement, or permit any Subsidiary
to enter into, amend, modify or supplement, any agreement, transaction,
commitment or arrangement with any of its or any Subsidiary's officers,
directors, employees, stockholders or Affiliates or with any individual
related by blood, marriage or adoption to any such individual or with any
entity in which any such Person or individual owns a beneficial interest,
other than (i) agreements with the Society or any Affiliate of the Society
(including, without limitation, Society long-term care facilities)
providing for the provision of goods or services by the Company on terms
which are not commercially unreasonable to the Company, (ii) customary
employment arrangements and benefit programs on reasonable terms and
changes thereto approved by the compensation committee of the Board of
Directors of the Company in accordance with the bylaws of the Company and
(iii) as otherwise expressly contemplated by this Agreement or in any other
agreement disclosed to AMC and entered into concurrently herewith;
(l) except in connection with any acquisition permitted by subsection
(g) above, establish or acquire any Subsidiaries;
(m) create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, Indebtedness
exceeding an aggregate principal amount of $250,000 outstanding at any time
on a consolidated basis;
(n) create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any Liens other
than (i) Permitted Liens and (ii) Liens on assets acquired as permitted by
subsection (g) above securing Indebtedness permitted by subsection (m)
above;
(o) make any capital expenditures (including, without limitation,
payments with respect to capitalized leases, in excess of amounts therefor
approved in the annual budget of the Company;
-37-
<PAGE>
(p) enter into any leases or other rental agreements (excluding
capitalized leases, as determined in accordance with GAAP) under which the
amount of the aggregated lease payments for all such agreements exceeds
$250,000 on a consolidated basis for any twelve-month period;
(q) change its fiscal year;
(r) issue or sell any shares of the capital stock, or rights to
acquire shares of the capital stock, of any Subsidiary to any Person other
than the Company;
(s) enter into any material transaction outside of the ordinary
course of the Company's business which is not approved in the annual budget
of the Company (other than any transaction of a type described in any of
the foregoing subsections 8.1(a) through (r) which the Company is permitted
to enter into pursuant to the terms of such subsection);
(t) adopt the budget of the Company and its Subsidiaries for the next
fiscal year, or adopt any revisions thereto after the same has been
adopted; or
(u) except pursuant to Sections 1.1, 1.7 or 1.8 of the Share Purchase
Agreement, authorize, issue or enter into any agreement providing for the
issuance (contingent or otherwise) of (i) any notes or debt securities
containing equity features (including, without limitation, any notes or
debt securities convertible into or exchangeable for capital stock or other
equity securities, issued in connection with the issuance of capital stock
or other equity securities or containing profit participating features)
which, combined with Common Shares issued or issuable pursuant to clause
(ii) of this subsection 8.1(u), could result in the issuance of more than
three hundred (300) Common Shares, or (ii) any capital stock or other
equity securities (or any securities convertible into or exchangeable for
any capital stock or other equity securities) which, combined with Common
Shares issued or issuable pursuant to clause (i) of this subsection 8.1(u),
could result in the issuance of more than three hundred (300) Common
Shares; PROVIDED, that each such three hundred (300) Common Share
limitation number shall be adjusted as necessary to account for any stock
split, stock dividend, merger, consolidation, recapitalization or similar
event affecting the number of Common Shares outstanding.
Notwithstanding the foregoing, this Section 8.1 shall be of no force or effect
during any period that either the AMC Shareholders or the Good Samaritan
Shareholders hold ten percent (10%) or less of the then-outstanding Common
Shares.
8.2 AFFIRMATIVE COVENANTS OF THE COMPANY. Unless both AMC and the
Foundation shall have otherwise consented in writing, the Company shall, and
shall cause each Subsidiary to:
-38-
<PAGE>
(a) at all times cause to be done all things necessary to maintain,
preserve and renew its corporate existence and all material licenses,
authorizations and permits necessary to the conduct of its businesses;
(b) maintain and keep its material properties in good repair, working
order and condition, and from time to time make all necessary or desirable
repairs, renewals and replacements, so that its businesses may be properly
and advantageously conducted in all material respects at all times;
(c) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or
profits therefrom (in each case before the same becomes delinquent and
before penalties accrue thereon) and all material claims for labor,
materials or supplies which if unpaid would by law become a Lien upon any
of its property, unless and to the extent that the same are being contested
in good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with GAAP) have been established on its books with
respect thereto;
(d) comply in all material respects with all other material
obligations which it incurs pursuant to any contract or agreement, whether
oral or written, express or implied, as such obligations become due, unless
and to the extent that the same are being contested in good faith and by
appropriate proceedings and adequate reserves (as determined in accordance
with GAAP) have been established on its books with respect thereto;
(e) comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which could reasonably be
expected to have a material adverse effect on the business, assets,
liabilities, results of operations, financial condition or prospects of the
Company and its Subsidiaries, taken as a whole (a "Material Adverse
Effect");
(f) apply for and continue in force with good and responsible
insurance companies adequate insurance covering risks of such types and in
such amounts as are customary for corporations of similar size engaged in
similar lines of business; and
(g) maintain proper books of record and account which present fairly
in all material respects its financial condition and results of operations
and make provisions on its financial statements for all such proper
reserves as in each case are required in accordance with GAAP.
-39-
<PAGE>
8.3 FINANCIAL STATEMENTS AND OTHER INFORMATION. Unless both AMC and the
Foundation shall have otherwise consented in writing, the Company shall deliver
to each of AMC and the Foundation (in each case so long as it or any of its
Affiliates hold any Common Shares):
(a) as soon as available but in any event within 30 days after the
end of each monthly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for each monthly period and for the period
from the beginning of the fiscal year to the end of such month, and
unaudited consolidating 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 Company's annual budget and to the
corresponding period in the preceding fiscal year, and all such statements
shall be prepared in accordance with GAAP, subject to the absence of
footnote disclosures and to normal year-end audit adjustments, and shall be
certified by the Company's chief financial officer;
(b) accompanying the financial statements referred to in subsection
(a), a certificate of the Company executed by the chief executive officer
or chief financial officer of the Company (an "Officer's Certificate")
stating that the Company is not in default of any of its obligations
hereunder or under the Share Purchase Agreement (an "Event of
Noncompliance") and that neither the Company nor any of its Subsidiaries is
in default under any of its other material agreements or, if any Event of
Noncompliance or any such default exists, 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;
(c) within 90 days after the end of each fiscal year, consolidating
and consolidated statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, and consolidating 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 Company's annual
budget and to the preceding fiscal year, all prepared in accordance with
GAAP, and accompanied by (i) with respect to the consolidated portions of
such statements, an opinion containing no exceptions or qualifications
(except for qualifications regarding specified contingent liabilities) of
an independent accounting firm of recognized national standing, (ii) a
certificate from such accounting firm, addressed to the Company's Board of
Directors, stating that in the course of its examination nothing came to
its attention that caused it to believe that there was an Event of
Noncompliance in existence or that there was any other default by the
Company or any Subsidiary in the fulfillment of or compliance with any of
the terms,
-40-
<PAGE>
covenants, provisions or conditions of any other material agreement to
which the Company or any Subsidiary is a party or, if such accountants have
reason to believe any Event of Noncompliance or other default by the
Company or any Subsidiary exists, a certificate specifying the nature and
period of existence thereof, and (iii) a copy of such firm's annual
management letter to the board of directors;
(d) promptly upon receipt thereof, any additional reports, management
letters or other detailed information concerning significant aspects of the
Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials
provided hereunder);
(e) at least 30 days but not more than 90 days prior to the beginning
of each fiscal year, an annual budget prepared on a monthly basis for the
Company and its Subsidiaries for such fiscal year (displaying anticipated
statements of income and cash flows and balance sheets), and promptly upon
preparation thereof any other significant budgets prepared by the Company
and any revisions of such annual or other budgets;
(f) promptly (but in any event within five business days) after the
discovery or receipt of notice of any Event of Noncompliance, any default
under any material agreement to which it or any of its Subsidiaries is a
party, any condition or event which is reasonably likely to result in a
Material Adverse Effect (including, without limitation, the filing of any
material litigation against the Company or any Subsidiary or the existence
of any dispute with any Person which involves a reasonable likelihood of
such litigation being commenced), an Officer's 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;
(g) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general
written communications which the Company sends to its stockholders and
copies of all registration statements and all regular, special or periodic
reports which it files, or (to its knowledge) any of its officers or
directors files with respect to the Company, with the Securities and
Exchange 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 to the public concerning
material developments in the Company's and its Subsidiaries' businesses;
and
-41-
<PAGE>
(h) with reasonable promptness, such other information and financial
data concerning the Company and its Subsidiaries as AMC or the Foundation
may reasonably request.
Each of the financial statements referred to in subsections (a) and (c) above
shall be true and correct in all material respects as of the dates and for the
periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end audit adjustments.
8.4 INSPECTION OF PROPERTY. The Company shall permit any representatives
designated by AMC or the Foundation (in each case so long as it or any of its
Affiliates hold more than ten percent (10%) of the outstanding Common Shares),
upon reasonable notice and during normal business hours, to (i) visit and
inspect any of the properties of the Company and its Subsidiaries, (ii) examine
the corporate and financial records of the Company and its Subsidiaries and make
copies thereof or extracts therefrom and (iii) discuss the affairs, finances and
accounts of any such corporations with the directors, officers, key employees
and independent accountants of the Company and its Subsidiaries. The
presentation of an executed copy of this Agreement by AMC or the Foundation to
the Company's independent accountants shall constitute the Company's permission
to its independent accountants to participate in discussions with such Persons.
SECTION 9. GENERAL PROVISIONS
9.1 WAIVERS AND AMENDMENTS. This Agreement may be amended or modified in
whole or in part only by a writing which makes reference to this Agreement
executed by all of the parties to this Agreement. The obligations of any party
hereunder may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the party
claimed to have given the waiver; PROVIDED, HOWEVER, that any waiver by any
party of any violation of, breach of, or default under any provision of this
Agreement or any other agreement provided for herein shall not be construed as,
or constitute, a continuing waiver of such provision, or a waiver of any other
violation of, breach of or default under any other provision of this Agreement
or any other agreement provided for herein.
9.2 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the Company, its successors and permitted assigns,
and shall be binding upon and inure to the benefit of the other parties hereto
and their respective heirs, successors and permitted assigns. No party may
assign any or all of his rights or delegate any or all of his duties under this
Agreement without the prior written consent of each of the other parties hereto.
No Person which is not a party hereto shall have any rights pursuant to this
Agreement.
-42-
<PAGE>
9.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument.
9.4 NOTICES. All notices, elections and other communications pursuant to
this Agreement shall be made in writing and be deemed to have been duly given
(i) when delivered, if personally delivered, (ii) one business day after
delivered to (and accepted by) an overnight courier service, if sent by
overnight courier service addressed to the applicable address set forth below,
(iii) one business day after sent by facsimile transmission, if sent to the
applicable facsimile number set forth below, and (iv) five days after being sent
by registered or certified mail, return receipt requested, postage prepaid, to
the applicable address set forth below:
IF TO THE COMPANY:
Mr. Charles C. Halberg
President/Chief Executive Officer
Good Samaritan Supply Services, Inc.
2177 Youngman Ave.
St. Paul, MN 55116
Telephone: (612) 696-3501
Facsimile: (612) 696-
with a copy to:
Thomas C. Fox, Esq.
Reed Smith Shaw & McClay
1301 K Street, N.W.
Suite 1100 -- East Tower
Washington, D.C. 20005-3317
Telephone: (202) 414-9222
Facsimile: (202) 414-9299
IF TO AMC OR THE AMC IPO COMPANY:
American Medserve Corporation, Inc.
Park Lake Center
184 Shuman Boulevard
Naperville, IL 60563
Attention: Timothy L. Burfield and
Michael B. Freedman
Telephone: (708) 717-2820
Facsimile: (708) 717-4196
-43-
<PAGE>
with a copy to:
Gary R. Silverman, Esq.
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Telephone: (312) 861-2462
Facsimile: (312) 861-2200
IF TO THE FOUNDATION:
The Evangelical Lutheran Good Samaritan Foundation
4800 West 57th Street
Sioux Falls, SD 57117
Telephone: (605) 362-3100
Facsimile: (605) 362-3335
Attention: Mark Jerstad, Chief Executive Officer
with a copy to:
Mark Weitz, Esq.
Leonard, Street & Deinard
Suite 2300
150 South Fifth Street
Minneapolis, MN 55402
Telephone: (612) 335-1500
Telecopy: (612) 335-1657
9.5 ENTIRE AGREEMENT. This Agreement, together with the Share Purchase
Agreement and the Non-Competition and Marketing Assistance Agreement, embodies
the entire agreement among the Company, AMC and the Foundation in relation to
its subject matter, and, except as provided herein or therein, no
representations, warranties, covenants, understandings or agreements or
otherwise, in relation thereto, exist between any of the parties.
9.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the substantive law of the State of Delaware, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the laws of any
jurisdiction other than the State of Delaware to be applied.
9.7 SEVERABILITY. Each section, subsection and lesser section of this
Agreement constitutes a separate and distinct undertaking, covenant and/or
provision hereof. In the event that any provision of this Agreement shall
finally be determined to be unlawful, such provision shall be deemed severed
from this Agreement, but every other provision of this Agreement
-44-
<PAGE>
shall remain in full force and effect, and in substitution for any such
provision held unlawful, there shall be deemed substituted a provision of
similar import reflecting the original intent of the parties hereto to the
extent permissible under law.
9.8 SPECIFIC PERFORMANCE. The parties hereto agree that upon a breach of
any other provisions of this Agreement a remedy at law would not be adequate,
and that the parties hereto are entitled to injunctive relief and specific
performance, and any other legal or equitable remedies, as remedies for the
enforcement of this Agreement.
9.9 TIME OF THE ESSENCE. Time is of the essence in the parties'
performance of each and every provision of this Agreement.
IN WITNESS WHEREOF, the Company and the Shareholders have executed this
Shareholders Agreement as of the day and year first above written.
AMERICAN MEDSERVE CORPORATION, INC.
By: /s/ Timothy L. Burfield
---------------------------------------
Its: President/Chief Executive Officer
-----------------------------------
THE EVANGELICAL LUTHERAN GOOD SAMARITAN FOUNDATION
By: /s/ Mark A. Jerstad
---------------------------------------
Its: President/Chief Executive Officer
-----------------------------------
GOOD SAMARITAN SUPPLY SERVICES, INC.
By: /s/ Charles C. Halberg
---------------------------------------
Its: President/Chief Executive Officer
-----------------------------------
-45-
<PAGE>
EXHIBIT 99.2
NON-COMPETITION AND MARKETING ASSISTANCE AGREEMENT
THIS NON-COMPETITION AND MARKETING ASSISTANCE AGREEMENT (this
"Agreement") is made as of April 30, 1996, by and among American Medserve
Corporation, a Delaware corporation ("AMC"), Good Samaritan Supply Services,
Inc., a South Dakota corporation (the "Company"), The Evangelical Lutheran
Good Samaritan Foundation, a Minnesota non-profit corporation (the
"Foundation") and The Evangelical Lutheran Good Samaritan Society, a North
Dakota non-profit corporation (the "Society").
PRELIMINARY STATEMENT:
A. The Society is the sole member of the Foundation, and the
Foundation is the sole shareholder of the Company.
B. The Company and AMC concurrently herewith have entered into a Share
Purchase Agreement, bearing even date herewith (the "Share Purchase
Agreement"), providing for the Company's sale and issuance of 666.667
newly-issued shares of the Company ("Common Shares") to AMC.
C. The Company, AMC and the Foundation concurrently herewith have
entered into a Shareholders Agreement, bearing even date herewith (the
"Shareholders Agreement"), providing for the respective rights of the parties
in connection with the governance of the Company, transfers of Common Shares,
and other matters.
D. The Society and the Foundation will benefit from AMC's investment in
the Company pursuant to the Share Purchase Agreement and from AMC's covenants
pursuant to the Shareholders Agreement as a consequence of, among other
things, the expansion of the Company's business which will be made possible
(including expansion of the number of Society long-term care facilities whose
residents will be offered the Company's goods and services) and the
anticipated enhancement in the value of the Foundation's investment in the
Company.
E. AMC will benefit from the covenants of the Society, the Foundation
and the Company contained herein and in the Share Purchase Agreement as a
consequence of, among other things, the issuance of the 666.667 Common Shares
to be issued to AMC.
F. In order for the parties to induce one another to enter into or
approve the transactions contemplated by the Share Purchase Agreement and the
Shareholders Agreement, and so as to support and enhance the growth and value
of the Company in a
<PAGE>
manner which will benefit all of the parties hereto, the parties wish to
enter into the agreements set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, in the Share Purchase Agreement and the Shareholders
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. NON-COMPETITION; NON-SOLICITATION; CONFIDENTIALITY. The parties
hereto agree that, unless and until either (i) neither AMC nor any of its
Affiliates (as defined in Section 1(h) below) hold any Common Shares, or (ii)
neither the Foundation nor any of its Affiliates hold any Common Shares, and,
in each such case, for a period of five (5) years thereafter,
(a) AMC shall not:
(1) except to the extent permitted by Sections 1(d) or 1(e)
below, engage, directly or indirectly, whether as a shareholder, partner,
owner, consultant, management company, or otherwise, in the complete or
partial ownership, operation, management or conduct of any institutional
long-term care pharmacy which is located in or derives more than five percent
(5%) of its revenues from sales in the states of Arizona, Colorado, Idaho,
Iowa, Kansas, Minnesota, Missouri, Nebraska, New Mexico, North Dakota, South
Dakota, and Wyoming;
(2) except to the extent permitted by Sections 1(d) or 1(f)
below, engage, directly or indirectly, whether as a shareholder, partner,
owner, consultant, management company or otherwise, in the complete or
partial ownership, operation, management or conduct of any business or
enterprise that provides home medical equipment or supplies (such as
wheelchairs, walkers, beds, canes, bandages or sutures, but excluding drugs)
to customers in the United States of America;
(3) except with the consent of the President/Chief Executive
Officer of the Company, hire any employee of the Company for a position with
AMC or any Affiliate thereof;
(4) intentionally cause or encourage, by word or deed, any
person, firm, corporation or other entity having a business relationship with
the Company to sever such relationship with, or commit any act inimical to,
the Company; or
(5) except to the extent permitted by Section 1(g) below, use,
divulge or transfer to any person, firm, corporation or other entity any
trade secrets, customer lists or other confidential or proprietary
information with respect to the Company.
-2-
<PAGE>
(b) The Company shall not:
(1) except to the extent permitted by Sections 1(d) or 1(e)
below, engage, directly or indirectly, whether as a shareholder, partner,
owner, consultant, management company or otherwise, in the complete or
partial ownership, operation, management or conduct of any institutional
long-term care pharmacy which is located outside of or derives more than five
percent (5%) of its revenues from sales outside the states of Arizona,
Colorado, Florida, Idaho, Iowa, Kansas, Minnesota, Missouri, Nebraska, New
Mexico, North Dakota, South Dakota, and Wyoming; nor shall the Company
engage, directly or indirectly, in any such manner in any such institutional
long-term care pharmacy which is located in the State of Florida, other than
such pharmacies which serve primarily assisted living facilities or
congregate care facilities;
(2) hire any employee of AMC for a position with the Company or
any Affiliate thereof;
(3) intentionally cause or encourage, by word or deed, any
person, firm, corporation or other entity having a business relationship with
AMC to sever such relationship with, or commit any act inimical to, AMC; or
(4) except to the extent permitted by Section 1(g) below, use,
divulge or transfer to any person, firm, corporation or other entity any
trade secrets, customer lists or other confidential or proprietary
information with respect to AMC.
(c) The Foundation and the Society shall not:
(1) engage, directly or indirectly, whether as a shareholder,
partner, owner, consultant, management company or otherwise, in the complete
or partial ownership, operation, management or conduct of any institutional
long-term care pharmacy, except through ownership of an interest in either
the Company or AMC;
(2) engage, directly or indirectly, whether as a shareholder,
partner, owner, consultant, management company or otherwise, in the complete
or partial ownership, operation, management or conduct of any business or
enterprise that provides home medical equipment or supplies (such as
wheelchairs, walkers, beds, canes, bandages or sutures, but excluding drugs)
to customers in the United States of America, except through ownership of an
interest in either the Company, AMC, or any Affiliate of AMC;
(3) hire any employee of AMC for a position with the Society,
the Foundation or any Affiliate thereof, or directly or indirectly solicit
any employee of the Company for a position with the Society, the Foundation
or any Affiliate thereof;
-3-
<PAGE>
(4) intentionally cause or encourage, by word or deed, any
person, firm, corporation or other entity having a business relationship with
AMC to sever such relationship with, or commit any act inimical to, AMC; or
(5) except to the extent permitted by Section 1(g) below, use,
divulge or transfer to any person, firm, corporation or other entity any
trade secrets, customer lists or other confidential or proprietary
information with respect to AMC.
(d) Notwithstanding any provision in Sections 1(a)(1), 1(a)(2),
1(b)(1), 1(c)(1) or 1(c)(2) to the contrary, in no event shall any party
hereto be prohibited from directly or indirectly owning less than three
percent (3%) of any publicly-held company whose shares are listed and traded
on the New York or American Stock Exchanges, on the NASDAQ stock market or on
any automated interdealer quotation system.
(e) (1) Notwithstanding Section 1(a)(1) hereof, should AMC at any
time after the date hereof desire to acquire directly or indirectly an
institutional long-term care pharmacy which derives more than five percent
(5%) but less than thirty-five percent (35%) of its revenues (as measured
during the most recent 12-month period) from sales in the states of Arizona,
Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Nebraska, New Mexico,
North Dakota, South Dakota, and Wyoming, but which is located outside of such
states, then AMC may directly or indirectly make such acquisition provided
that it uses its reasonable efforts to cause the portion of such
institutional long-term care pharmacy's business which is derived from sales
in such states to be transferred to an institutional long-term care pharmacy
of the Company at such time as the Company has such a pharmacy reasonably
capable of servicing such business, on terms and conditions mutually
satisfactory to the Company and AMC, acting reasonably.
(2) Notwithstanding Section 1(b)(1) hereof, should the Company
at any time after the date hereof desire to acquire directly or indirectly an
institutional long-term care pharmacy which derives more than five percent
(5%) but less than thirty-five percent (35%) of its revenues (as measured
during the most recent 12-month period) from sales outside of the states of
Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Nebraska, New
Mexico, North Dakota, South Dakota, and Wyoming, but which is located in one
of such states, then the Company may directly or indirectly make such
acquisition provided that it uses its reasonable efforts to cause the portion
of such institutional long-term care pharmacy's business which is derived
from sales outside of such states to be transferred to an institutional
long-term care pharmacy of AMC or any of AMC's direct or indirect
subsidiaries at such time as AMC or any of such subsidiaries has such a
pharmacy reasonably capable of servicing such business, on terms and
conditions mutually satisfactory to the Company and AMC, acting reasonably.
-4-
<PAGE>
(f) (1) Notwithstanding Section 1(a)(2) hereof, the existing
direct and indirect subsidiaries of AMC shall be permitted to continue to
operate the existing home medical equipment and home medical supply
businesses operated by such direct and indirect subsidiaries, provided that
AMC uses its reasonable efforts to cause such direct and indirect
subsidiaries to transfer or combine such lines of business described by
Section 1(a)(2) to or with the Company's business activities of this type, on
terms and conditions mutually satisfactory to the Company, AMC and such
subsidiaries.
(2) If, after the date hereof, AMC desires to acquire directly
or indirectly a business or enterprise that provides home medical equipment
or supplies in the United States of America but which derives less than
thirty-five percent (35%) of its revenues (as measured during the most recent
12-month period) from such lines of business, then AMC may directly or
indirectly make such acquisition provided that it uses its reasonable efforts
to cause such lines of business to be transferred to or combined with the
Company's business activities of this type as soon as practicable after the
acquisition of such business or enterprise by AMC, on terms and conditions
mutually satisfactory to the Company and AMC, acting reasonably.
(3) If, after the date hereof, AMC desires to acquire directly
or indirectly a business or enterprise that provides home medical equipment
or supplies in the United States of America and which derives thirty-five
percent (35%) or more of its revenues (as measured during the most recent
12-month period) from such lines of business, then AMC may directly or
indirectly acquire such business notwithstanding Section 1(a)(2) if and only
if it shall have entered into an agreement with the Company to cause such
lines of business described by Section 1(a)(2) to be transferred to or
combined with the Company's business activities of this type, on terms and
conditions mutually satisfactory to the Company and AMC. The Company may
decline to enter into any such agreement in its sole and absolute discretion,
in which event the provisions of Section 1(a)(2) shall operate to prevent AMC
from directly or indirectly making such acquisition.
(g) Sections 1(a)(5), 1(b)(4) and 1(c)(5) shall not be deemed to
restrict any party from using, divulging or transferring any information
whatsoever which is, as of the time of such use, disclosure or transfer, (i)
generally available to the public other than as a result of a disclosure by
such party or its Affiliates, or (ii) available to such party on a
non-confidential basis from a source other than the Company (with respect to
confidential or proprietary information of the Company) or AMC (with respect
to confidential or proprietary information of AMC). Further, if any party is
required by law to disclose any information which it would otherwise be
prohibited from disclosing by virtue of Section 1(a)(5), 1(b)(4) or 1(c)(5),
then such party shall give the Company (with respect to confidential or
proprietary information of the Company) or AMC (with respect to
-5-
<PAGE>
confidential or proprietary information of AMC) prompt written notice of such
requirement and shall cooperate with the Company or AMC, as the case may be,
in seeking a protective order or other appropriate means of preventing or
limiting the disclosure of such information; and if, in the opinion of
counsel to the party which seeks to make such disclosure, the disclosure of
such information is required by law, such party may make such disclosure, but
only to the extent legally required in the opinion of its counsel and in
accordance with any protective order or other such means of limiting such
disclosure as may have been obtained.
(h) For purposes of this Agreement, "Affiliate" shall mean, with
respect to any person or entity, any (i) person or entity which wholly or
partially owns, is owned by, or is under common ownership with such person or
entity or any Affiliate of such person or entity, and (ii) any person or
entity which directly or indirectly controls, is controlled by, or is under
common control with such person or entity or any Affiliate of such person or
entity. A person or entity shall be deemed to control another person or
entity if such person or entity possesses, directly or indirectly, the power
to direct or cause the direction of the management and policies of the
"controlled" person or entity, whether through ownership of voting
securities, by contract, or otherwise. Notwithstanding the foregoing, in no
event shall AMC be deemed an Affiliate of either the Foundation or the
Society, and neither the Foundation nor the Society shall be deemed an
Affiliate of AMC.
2. MARKETING ASSISTANCE. AMC shall assist the Company in the Company's
marketing of home medical equipment and supplies to current and future
customers of AMC's institutional pharmacies.
3. GOOD SAMARITAN NAME. If, at any time and for any reason in its sole
discretion, the Society shall determine that it desires that the Company no
longer use the name "Good Samaritan", it may deliver written notice to the
Company, the Foundation and AMC requiring such parties to take the actions
described in the next sentence. Within six (6) months after their receipt of
such notice, the Company, AMC and the Foundation shall take such actions as
may be necessary to change the corporate name of the Company to a name which
does not include "Good Samaritan", or any derivations thereof, and which does
not convey an impression that the Company is associated with the Society (a
"Permitted Name"). From and after the end of such 6-month period, the
Company shall not, directly or indirectly, operate under any corporate or
trade name, trade or service mark or other name or identifying words other
than a Permitted Name, nor shall it transfer (whether by assignment, merger
or otherwise) any portion of its assets or business to any entity operating
under other than a Permitted Name. The parties agree that the following
shall be deemed Permitted Names for purposes of this Agreement: (i) "GS
Supply Services"; (ii) "GS Pharmacy"; and (iii) "GSP" (whether used in
conjunction with the Company's current logo or not).
-6-
<PAGE>
4. REMEDIES; RESOLUTION OF DISPUTES. AMC, the Foundation, the Society
and the Company acknowledge that they would be irreparably harmed by a breach
of this Agreement and that it would not be possible to estimate damages
resulting from such a breach and, consequently, AMC, the Foundation, the
Society, and the Company agree that equitable relief in the form of specific
performance or an injunction, in addition to any other remedy which may be
available at law or in equity, shall be the appropriate remedy for a breach
of this Agreement, and the recovery from the breaching party of reasonable
attorneys' fees and all costs and expenses incurred in connection with such
an action shall be available.
5. AMENDMENT; WAIVER. This Agreement may not be amended or modified
except by a writing signed by all parties. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver
of any other provisions, whether or not similar, nor shall any waiver of any
other provision constitute a continuing waiver, nor shall any waiver by any
party constitute a waiver with respect to any other party. No waiver shall
be binding unless executed in writing by the party making the waiver.
6. ENTIRE AGREEMENT. This Agreement supersedes any other agreement,
whether written or oral, that may have been made or entered into by the
parties with respect to the subject matter hereof. This Agreement
constitutes the entire agreement by and between the parties hereto with
respect to the subject matter hereof.
7. NOTICES. All notices, elections and other communications pursuant to
this Agreement shall be made in writing and be deemed to have been duly given
(i) when delivered, if personally delivered, (ii) one business day after
delivered to (and accepted by) an overnight courier service, if sent by
overnight courier service addressed to the applicable address set forth
below, (iii) one business day after sent by facsimile transmission, if sent
to the applicable facsimile number set forth below, and (iv) five days after
being sent by registered or certified mail, return receipt requested, postage
prepaid, to the applicable address set forth below:
IF TO THE COMPANY:
Mr. Charles C. Halberg
President/Chief Executive Officer
Good Samaritan Supply Services, Inc.
2177 Youngman Ave.
St. Paul, MN 55116
Telephone: (612) 696-3501
Facsimile: (612) 696-3520
with a copy to:
-7-
<PAGE>
Thomas C. Fox, Esq.
Reed Smith Shaw & McClay
1301 K Street, N.W.
Suite 1100 -- East Tower
Washington, D.C. 20005-3317
Telephone: (202) 414-9222
Facsimile: (202) 414-9299
IF TO AMC:
American Medserve Corporation, Inc.
Park Lake Center
184 Shuman Boulevard
Naperville, IL 60563
Attention: Timothy L. Burfield and
Michael B. Freedman
Telephone: (708) 717-2820
Facsimile: (708) 717-4196
with a copy to:
Gary R. Silverman, Esq.
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Telephone: (312) 861-2462
Facsimile: (312) 861-2200
IF TO THE FOUNDATION:
The Evangelical Lutheran Good Samaritan Foundation
4800 West 57th Street
Sioux Falls, SD 57117
Telephone: (605) 362-3100
Facsimile: (605) 362-3335
Attention: Mark Jerstad, Chief Executive Officer
with a copy to:
Mark Weitz, Esq.
Leonard, Street & Deinard
Suite 2300
150 South Fifth Street
Minneapolis, MN 55402
Telephone: (612) 335-1500
Telecopy: (612) 335-1657
-8-
<PAGE>
IF TO THE SOCIETY:
The Evangelical Lutheran Good Samaritan Society
4800 West 57th Street
Sioux Falls, SD 57117
Telephone: (605) 362-3100
Facsimile: (605) 362-3335
Attention: Mark Jerstad, Chief Executive Officer
with a copy to:
Duane C. Anderson, Esq.
Christopherson, Bailin & Anderson
509 South Dakota Ave.
Sioux Falls, SD 57102
Telephone: (605) 336-1030
Facsimile: (605) 336-1027
8. ASSIGNMENT; SUCCESSORS; BENEFITS. This Agreement shall not be
assignable by the parties hereto without the prior written consent of the
other parties hereto. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
permitted assigns. Nothing herein, expressed or implied, is intended to or
shall confer on any person other than the parties hereto and their respective
successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9. CONSTRUCTION; SEVERABILITY. (a) It is the agreement of AMC, the
Foundation, the Society and the Company that the maximum protection available
under the law shall be provided by this Agreement, to protect the parties'
interests under this Agreement and that, if the restrictions or obligations
hereby imposed are held by a court to be unreasonably broad in time,
territory or scope, this Agreement shall be construed to impose such
restrictions in this regard as are not unreasonable as to time, territory or
scope, as the case may be.
(b) In the event that any one or more of the provisions contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never
been contained herein and, in lieu of each such illegal, invalid or
unenforceable provision, there shall be added automatically as a part of this
Agreement, a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible to cause such illegal, invalid and
unenforceable provision to be legal, valid and enforceable.
-9-
<PAGE>
10. GOVERNING LAW. This Agreement shall in all respects be governed by
and construed in accordance with the internal substantive laws of the State
of Minnesota without giving effect to the principles of conflicts of law
thereof.
11. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
12. INTERPRETATION. The Section headings contained herein are for
convenience of reference only, are not part of this Agreement, and shall not
affect the meaning or interpretation of any provision hereof.
IN WITNESS WHEREOF, AMC, the Company, the Foundation and the Society have
executed this Non-Competition and Marketing Assistance Agreement as of the
day and year first above written.
AMERICAN MEDSERVE CORPORATION
By: /s/ Timothy L. Burfield
--------------------------------------
Its: President/Chief Executive Officer
----------------------------------
THE EVANGELICAL LUTHERAN GOOD
SAMARITAN FOUNDATION
By: /s/ Mark A Jerstad
--------------------------------------
Its: President/Chief Executive Officer
----------------------------------
THE EVANGELICAL LUTHERAN GOOD
SAMARITAN SOCIETY
By: /s/ Mark A. Jerstad
--------------------------------------
Its: President/Chief Executive Officer
----------------------------------
GOOD SAMARITAN SUPPLY SERVICES, INC.
By: /s/ Charles C. Halberg
--------------------------------------
Its President/Chief Executive Officer
-----------------------------------
-10-
<PAGE>
[LETTERHEAD]
STRICTLY CONFIDENTIAL
February 21, 1996
Mr. Michael B. Freedman
Vice President & Treasurer
American Medserve Corporation
184 Shuman Blvd., #200
Naperville, IL 60563
Dear Mike:
This letter will confirm that American Medserve Corporation (the "Company") is
establishing a working relationship with Equitable Securities Corporation
("Equitable") and is engaging Equitable to provide investment banking services
that will include, but not be limited to, the following: (i) advisory services
to assist in acquisitions made by the Company; (ii) financial advisory services
related to certain strategic issues necessary to further the organization and
growth of the Company; and (iii) underwriting the initial public offering of the
Company's stock. The purpose of this letter is to specify the terms of
Equitable's engagement and to provide a summary description of our anticipated
approach to this assignment and the compensation we are to receive.
NATURE OF ASSIGNMENT
Equitable will provide a wide range of strategic and financial advisory services
that are designed to assist the Company in developing and implementing the
growth strategy and capital plan necessary to facilitate the growth by
acquisition of, or joint venture or other business combination with, other
institutional pharmacy businesses. We will advise the Company regarding issues
such as transaction timing, transaction structure and valuation, preparation of
financial projections, general preparations for acceptance in the public equity
markets, and underwriting the initial public offering of the Company's stock.
Included in this assignment will be Equitable's advice and assistance in
structuring and pricing securities issued in conjunction with specific
transactions and in locating appropriate financing sources for purchase of the
securities.
PERIOD OF ENGAGEMENT
It is our understanding that this assignment will begin immediately. Except as
provided below, this exclusive (except with respect to underwriting any IPO)
engagement will be in effect through December 31, 1996, after which date the
agreement will terminate automatically unless an extension is mutually agreed to
in writing between the Company and Equitable. However, it is understood that
Equitable shall receive the agreed upon compensation described below in the
event that a transaction with respect to which Equitable provided advisory
services occurs on or before June 30, 1997.
<PAGE>
Mr. Michael B. Freedman
February 21, 1996
Page 2
COMPENSATION
Our compensation for providing investment banking services to the Company will
be calculated as follows:
(a) A retainer fee (the "Retainer Fee") of $25,000.00 that will be due and
payable in three equal monthly installments, with the first installment due
upon the execution of this engagement letter.
(b) An advisory fee of $250,000.00 for advisory services in connection with the
proposed transaction with NeighborCare Pharmacies of Maryland, which fee
shall be due and payable immediately following the closing of an
acquisition or other business combination with NeighborCare Pharmacies.
Not less than 25.0% of this advisory fee, and nor more than 33.33% of this
fee, shall be paid to Equitable in common stock of the Company, the number
of shares of which shall be determined by a mutually agreed upon valuation
of the Company at the time of the closing.
(c) In the event that the Company utilizes Equitable as financial advisor with
respect to any other contemplated acquisition, Equitable shall receive a
transaction fee (the "Transaction Fee") equal to a cash and share amount
per individual transaction mutually agreed upon by the Company and
Equitable in advance of each transaction, depending on the size and
complexity of the transaction. The Transaction Fee shall be due and
payable upon the closing of each transaction.
(d) In the event that the Company decides to pursue and initial public offering
(IPO) of its shares, Equitable has to right to at least be
co-manager of the IPO and to compete for the lead manager position.
(e) The Company grants Equitable the right to purchase shares of common stock
of the Company, up to an aggregate of 0.25% of the Company inclusive of the
shares that are received pursuant to (b) above, at a mutually agreed-upon
price.
(f) In the event that the Company terminates our engagement prior to the
expiration date of this letter, Equitable will receive a termination fee
(the "Termination Fee") of $75,000.00. This Termination Fee will be due
and payable upon such date of termination. In the event that Equitable
terminates its engagement prior to the expiration date of this letter, the
Retainer Fee will be refunded to the Company.
(g) In addition to our compensation for investment banking services, Equitable
will be reimbursed for reasonable out-of-pocket expenses incurred related
to this engagement, including the fees of our counsel and other experts
should their advice be required, with such expenses to be invoiced monthly.
We understand that the Company will not reimburse Equitable for aggregate
out-of-pocket expenses in excess of $25,000.00 unless mutually agreed upon
by both parties.
<PAGE>
Mr. Michael B. Freedman
February 21, 1996
Page 3
OTHER MATTERS
It is understood that Equitable will act as a consultant and advisor to the
Company and not as an agent (unless otherwise specifically provided) of or as a
co-venturer with the Company in any respect. The Company agrees to indemnify
and to hold Equitable (including any of our affiliates, officers, directors,
employees, or controlling persons) harmless from and against all claims,
liabilities, losses, damages, and expenses as they are incurred (including
actual fees and disbursements of our counsel which shall be reasonably
acceptable to the Company) related to or arising from the contemplated
investment banking services described above. However, the Company shall not be
responsible for any claims, liabilities, losses, damages, or expenses to the
extent they result primarily from actions taken, or omitted to be taken, by us
intentionally, willfully, recklessly, grossly negligently, in bad faith, or in
breach of this agreement. Notwithstanding the foregoing, the parties agree that
the terms of any underwriting agreement relating to a company IPO will supersede
the indemnification provision included in this letter.
It is understood that Equitable's services may be terminated with or without
cause by either the Company or Equitable at any time by notice to the other
party and without liability or continuing obligation to you or to us (except for
compensation earned by us, including the Termination Fee, and expenses incurred
up to the date of termination) and provided that the indemnity provisions will
remain in effect regardless of such termination.
If the terms of the engagement outlined above are acceptable, we would be
pleased if you would execute the acknowledgment below and return an executed
copy of this letter to us. We look forward to working with you on this
assignment.
Very truly yours,
EQUITABLE SECURITIES CORPORATION
By: /s/ R. Riley Sweat
--------------------------------
R. Riley Sweat
Managing Director
AGREED, AND ACKNOWLEDGED:
AMERICAN MEDSERVE CORPORATION
By: /s/ Michael B. Freedman
--------------------------------
Michael B. Freedman
Vice President & Treasurer
Date: 2/23/96
------------------------------
<PAGE>
[LETTERHEAD]
July 3, 1996
Mr. Tim Burfield
American Medserve Corporation
184 Shuman Blvd., Suite 200
Naperville, IL 60563
Dear Tim,
In reference to the Engagement Letter between our two firms dated February
21, 1996, there may be some confusion about the meaning of subparagraph (e) in
the section entitled Compensation on page 2. The language reads, "The Company
grants Equitable the right to purchase shares of common stock of the Company, up
to an aggregate of 0.25% of the Company inclusive of the shares that are
received pursuant to (b) above, at a mutually agreed upon price."
It was the intention of Equitable when this paragraph was written that this
right to purchase shares was contingent on Equitable's success in helping
American Medserve with the proposed NeighborCare Pharmacies transaction
(specified in paragraph (b)), which transaction never occurred. Therefore
Equitable has no right to purchase shares of the Company.
I hope that this clarification is helpful. If you or the folks at Gardner
Carton have any further questions, please do not hesitate to give me a call.
Sincerely,
/s/ Jim Cooper
Jim Cooper
cc: Glenn Reed
<PAGE>
EXECUTION COPY
CREDIT AGREEMENT
DATED AS OF MARCH 15, 1996
AMONG
AMC REGIONAL HOLDINGS, INC.,
AS BORROWER,
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS THE AGENT
<PAGE>
TABLE OF CONTENTS
ARTICLE I: DEFINITIONS.......................................................1
1.1 CERTAIN DEFINED TERMS................................................1
1.2 SUBSIDIARY REFERENCES...............................................37
1.3 SCHEDULE REFERENCES; SUPPLEMENTAL DISCLOSURE........................37
ARTICLE II: THE CREDITS.....................................................37
2.1. TERM LOANS..........................................................37
2.2 REVOLVING LOANS.....................................................40
2.3 RATABLE LOANS.......................................................40
2.4 RATE OPTIONS FOR ALL ADVANCES.......................................41
2.5 OPTIONAL PAYMENTS; MANDATORY PREPAYMENTS............................41
(A) OPTIONAL PAYMENTS..............................................41
(B) MANDATORY PREPAYMENTS..........................................41
2.6 REDUCTION OF COMMITMENTS............................................44
2.7 METHOD OF BORROWING.................................................44
2.8 METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR ADVANCES;
DETERMINATION OF APPLICABLE MARGINS................................44
2.9 MINIMUM AMOUNT OF EACH ADVANCE......................................46
2.10 METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR CONVERSION AND
CONTINUATION OF ADVANCES...........................................46
(A) RIGHT TO CONVERT...............................................46
(B) AUTOMATIC CONVERSION AND CONTINUATION..........................46
(C) NO CONVERSION POST-DEFAULT OR POST-UNMATURED DEFAULT...........46
(D) CONVERSION/CONTINUATION NOTICE.................................46
2.11 DEFAULT RATE.......................................................47
2.12 COLLECTIONS AND CONCENTRATION ACCOUNT ARRANGEMENTS.................47
2.13 METHOD OF PAYMENT..................................................47
2.14 NOTES, TELEPHONIC NOTICES..........................................48
2.15 PROMISE TO PAY; INTEREST AND FEES; INTEREST PAYMENT DATES; INTEREST
AND FEE BASIS; TAXES; LOAN AND CONTROL ACCOUNTS...................48
(A) PROMISE TO PAY.................................................48
(B) INTEREST PAYMENT DATES.........................................48
(C) COMMITMENT FEES................................................48
(D) INTEREST AND FEE BASIS.........................................49
(E) TAXES..........................................................49
(F) LOAN ACCOUNT...................................................52
(G) CONTROL ACCOUNT................................................52
(H) ENTRIES BINDING................................................52
2.16 NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND AGGREGATE
REVOLVING LOAN COMMITMENT REDUCTIONS..............................52
2.17 LENDING INSTALLATIONS..............................................52
2.18 NON-RECEIPT OF FUNDS BY THE AGENT..................................53
(i)
<PAGE>
2.19 TERMINATION DATE...................................................53
2.20 REPLACEMENT OF CERTAIN LENDERS.....................................53
2.21 LETTER OF CREDIT FACILITY..........................................54
2.22 LETTER OF CREDIT PARTICIPATION.....................................55
2.23 REIMBURSEMENT OBLIGATION...........................................55
2.24 CASH COLLATERAL....................................................56
2.25 LETTER OF CREDIT FEES..............................................56
2.26 INDEMNIFICATION; EXONERATION.......................................56
2.27 SUPPLEMENTAL COMMITMENT............................................57
ARTICLE III: CHANGE IN CIRCUMSTANCES........................................58
3.1 YIELD PROTECTION....................................................58
3.2 CHANGES IN CAPITAL ADEQUACY REGULATIONS.............................59
3.3 AVAILABILITY OF TYPES OF ADVANCES...................................59
3.4 FUNDING INDEMNIFICATION.............................................59
3.5 LENDER STATEMENTS; SURVIVAL OF INDEMNITY............................60
ARTICLE IV: CONDITIONS PRECEDENT............................................60
4.1 INITIAL ADVANCES AND LETTERS OF CREDIT..............................60
4.2 EACH ADVANCE AND LETTER OF CREDIT...................................61
4.3 CONDITIONS FOR ACQUISITION LOANS AND ADDITION OF SPECIFIED
SUBSIDIARIES.......................................................62
ARTICLE V: REPRESENTATIONS AND WARRANTIES...................................67
5.1 ORGANIZATION; CORPORATE POWERS......................................67
5.2 AUTHORITY...........................................................68
5.3 NO CONFLICT; GOVERNMENTAL CONSENTS..................................69
5.4 FINANCIAL STATEMENTS................................................69
5.5 NO MATERIAL ADVERSE CHANGE..........................................69
5.6 TAXES...............................................................69
(A) TAX EXAMINATIONS...............................................70
(B) PAYMENT OF TAXES AND CLAIMS....................................70
5.7 LITIGATION; LOSS CONTINGENCIES AND VIOLATIONS.......................70
5.8 SUBSIDIARIES........................................................70
5.9 ERISA...............................................................71
5.10 ACCURACY OF INFORMATION............................................71
5.11 SECURITIES ACTIVITIES..............................................72
5.12 MATERIAL AGREEMENTS................................................72
5.13 COMPLIANCE WITH LAWS...............................................72
5.14 ASSETS AND PROPERTIES; GOVERNMENT APPROVALS; VALIDITY OF RECEIVABLES
ON BORROWING BASE CERTIFICATE.....................................72
5.15 STATUTORY INDEBTEDNESS RESTRICTIONS................................74
5.16 POST-RETIREMENT BENEFITS...........................................74
5.17 INSURANCE..........................................................74
5.18 CONTINGENT OBLIGATIONS.............................................74
5.19 RESTRICTED JUNIOR PAYMENTS.........................................74
(ii)
<PAGE>
5.20 LABOR MATTERS......................................................74
5.21 THE ACQUISITIONS...................................................75
5.22 ENVIRONMENTAL MATTERS..............................................75
5.23 HEALTHCARE REGULATORY MATTERS......................................76
ARTICLE VI: COVENANTS.......................................................77
6.1 REPORTING...........................................................77
(A) FINANCIAL REPORTING............................................77
(B) NOTICE OF DEFAULT..............................................79
(C) LAWSUITS.......................................................79
(D) INSURANCE......................................................80
(E) ERISA NOTICES..................................................80
(F) LABOR MATTERS..................................................81
(G) OTHER INDEBTEDNESS.............................................81
(H) OTHER REPORTS..................................................81
(I) ENVIRONMENTAL NOTICES..........................................82
(J) BORROWING BASE CERTIFICATE.....................................82
(K) OTHER INFORMATION..............................................82
(L) HEALTHCARE NOTICES.............................................82
(M) REPORTS........................................................83
6.2 AFFIRMATIVE COVENANTS...............................................84
(A) CORPORATE EXISTENCE, ETC.......................................84
(B) CORPORATE POWERS; CONDUCT OF BUSINESS..........................84
(C) COMPLIANCE WITH LAWS, ETC......................................84
(D) PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.................84
(E) INSURANCE......................................................85
(F) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.........85
(G) INSURANCE AND CONDEMNATION PROCEEDS............................85
(H) ERISA COMPLIANCE...............................................86
(I) MAINTENANCE OF PROPERTY........................................86
(J) ENVIRONMENTAL COMPLIANCE.......................................87
(K) USE OF PROCEEDS................................................87
(L) INTEREST RATE AGREEMENTS.......................................87
(M) HEALTHCARE REGULATORY MATTERS..................................88
(N) KEY MAN LIFE INSURANCE.........................................88
(O) DEPOSIT ACCOUNTS...............................................88
(P) SEPARATE CORPORATE EXISTENCE...................................89
6.3 NEGATIVE COVENANTS..................................................90
(A) INDEBTEDNESS...................................................90
(B) SALES OF ASSETS................................................93
(C) LIENS..........................................................93
(D) INVESTMENTS....................................................94
(E) CONTINGENT OBLIGATIONS.........................................95
(F) RESTRICTED JUNIOR PAYMENTS.....................................95
(G) CONDUCT OF BUSINESS; SUBSIDIARIES; ACQUISITIONS................97
(H) TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES..................98
(iii)
<PAGE>
(I) RESTRICTION ON FUNDAMENTAL CHANGES.............................98
(J) SALES AND LEASEBACKS...........................................99
(K) MARGIN REGULATIONS.............................................99
(L) ERISA..........................................................99
(M) ISSUANCE OF CAPITAL STOCK......................................99
(N) CORPORATE DOCUMENTS............................................99
(O) OTHER INDEBTEDNESS.............................................99
(P) FISCAL YEAR...................................................100
(Q) SUBSIDIARY COVENANTS..........................................100
(R) RATE HEDGING OBLIGATIONS......................................100
(S) SUBORDINATED INDEBTEDNESS.....................................100
(T) CHANGE OF DEPOSIT ACCOUNTS....................................100
6.4 FINANCIAL COVENANTS................................................100
(A) DEFINED TERMS FOR FINANCIAL COVENANTS..........................101
(B) INTEREST EXPENSE COVERAGE RATIO...............................102
(C) FIXED CHARGE COVERAGE RATIO...................................102
(D) MINIMUM EBITA.................................................102
(E) MAXIMUM LEVERAGE RATIO........................................103
(F) CALCULATIONS FOR ACQUISITION..................................104
ARTICLE VII: DEFAULTS......................................................104
7.1 DEFAULTS...........................................................104
ARTICLE VIII: ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS AND
REMEDIES....................................................................108
8.1 TERMINATION OF COMMITMENTS; ACCELERATION...........................108
8.2 DEFAULTING LENDER..................................................108
8.3 AMENDMENTS.........................................................110
8.4 PRESERVATION OF RIGHTS.............................................111
ARTICLE IX: GENERAL PROVISIONS.............................................111
9.1 SURVIVAL OF REPRESENTATIONS........................................111
9.2 GOVERNMENTAL REGULATION............................................111
9.3 PERFORMANCE OF OBLIGATIONS.........................................111
9.4 HEADINGS...........................................................112
9.5 ENTIRE AGREEMENT...................................................112
9.6 SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT....................112
9.7 EXPENSES; INDEMNIFICATION..........................................112
(A) EXPENSES......................................................112
(B) INDEMNITY.....................................................113
(C) WAIVER OF CERTAIN CLAIMS......................................115
(D) SURVIVAL OF AGREEMENTS........................................115
9.8 NUMBERS OF DOCUMENTS...............................................115
9.9 ACCOUNTING; CHANGES IN AGREEMENT ACCOUNTING PRINCIPLES.............115
9.10 SEVERABILITY OF PROVISIONS........................................115
(iv)
<PAGE>
9.11 NONLIABILITY OF LENDERS...........................................116
9.12 GOVERNING LAW.....................................................116
9.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL...........116
(A) EXCLUSIVE JURISDICTION........................................116
(B) OTHER JURISDICTIONS...........................................116
(C) SERVICE OF PROCESS............................................117
(D) WAIVER OF JURY TRIAL..........................................117
(E) WAIVER OF BOND................................................117
(F) ADVICE OF COUNSEL.............................................117
9.14 NO STRICT CONSTRUCTION............................................118
9.15 SUBORDINATION OF INTERCOMPANY INDEBTEDNESS........................118
ARTICLE X: THE AGENT AS THE LENDERS' CONTRACTUAL REPRESENTATIVE............119
10.1 APPOINTMENT; NATURE OF RELATIONSHIP...............................119
10.2 POWERS............................................................119
10.3 GENERAL IMMUNITY..................................................119
10.4 NO RESPONSIBILITY FOR LOANS, CREDITWORTHINESS, COLLATERAL,
RECITALS, ETC....................................................120
10.5 ACTION ON INSTRUCTIONS OF LENDERS.................................120
10.6 EMPLOYMENT OF AGENTS AND COUNSEL..................................120
10.7 RELIANCE ON DOCUMENTS; COUNSEL....................................120
10.8 THE AGENT'S REIMBURSEMENT AND INDEMNIFICATION.....................120
10.9 RIGHTS AS A LENDER................................................121
10.10 LENDER CREDIT DECISION...........................................121
10.11 SUCCESSOR AGENT..................................................121
10.12 COLLATERAL DOCUMENTS.............................................122
10.13 DELIVERY OF DOCUMENTS............................................122
ARTICLE XI: SETOFF; RATABLE PAYMENTS.......................................122
11.1 SETOFF............................................................122
11.2 RATABLE PAYMENTS..................................................122
11.3 APPLICATION OF PAYMENTS...........................................122
11.4 RELATIONS AMONG LENDERS...........................................124
ARTICLE XII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.............124
12.1 SUCCESSORS AND ASSIGNS............................................124
12.2 PARTICIPATIONS....................................................124
(A) PERMITTED PARTICIPANTS; EFFECT................................124
(B) VOTING RIGHTS.................................................125
(C) BENEFIT OF SETOFF.............................................125
12.3 ASSIGNMENTS.......................................................125
(A) PERMITTED ASSIGNMENTS.........................................125
(B) EFFECT; EFFECTIVE DATE........................................126
(C) THE REGISTER..................................................126
(v)
<PAGE>
(D) MASTER ASSIGNMENT.............................................127
12.4 CONFIDENTIALITY...................................................129
12.5 DISSEMINATION OF INFORMATION......................................130
ARTICLE XIII: NOTICES......................................................130
13.1 GIVING NOTICE.....................................................130
13.2 CHANGE OF ADDRESS.................................................130
ARTICLE XIV: COUNTERPARTS..................................................130
(vi)
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBITS
- --------
EXHIBIT A -- Form of Borrowing Base Certificate (Definitions)
EXHIBIT B -- Revolving Loan Commitments, Term Loans and Acquisition Loan
Commitments (Definitions)
EXHIBIT C1 -- Form of Revolving Note (Definitions)
EXHIBIT C2 -- Form of Term Note (Definitions)
EXHIBIT D -- Form of Security Agreement (Definitions)
EXHIBIT E -- Form of Acquisition Loan Note (Definitions)
EXHIBIT F -- Form of Assignment Agreement (Sections 2.19, 12.3)
EXHIBIT G -- Form of Subsidiary Guarantee (Definitions)
EXHIBIT H -- Money Transfer Instructions (Section 4.1)
EXHIBIT I -- List of Closing Documents (Section 4.1)
EXHIBIT J -- Form of Officer's Certificate (Sections 4.2, 6.1(A)(v))
EXHIBIT K -- Form of Compliance Certificate (Sections 4.2, 6.1(A)(v))
EXHIBIT L -- Form of Intercompany Note (Section 6.3(A)(ii)(8))
EXHIBIT M -- Form of Intercompany Security Agreement (Section
6.3(A)(ii)(8))
EXHIBIT N -- Form of Intercompany Financing Statement (Section
6.3(A)(ii)(8))
EXHIBIT O -- Form of Contribution Agreement (Section 4.3(o))
EXHIBIT P -- Form of Assignment of Representations (Section 4.3(p))
EXHIBIT Q -- Form of Financial Conditions Certificate (Section 4.3(q))
EXHIBIT R -- Form of Acquisition Consent Certificate (Section 4.3)
EXHIBIT S -- Form of Notice of Supplemental Commitments (Section 2.27)
EXHIBIT T -- Terms of Parent Subordinated Note (Definitions)
EXHIBIT U -- Reaffirmation of AMC and the specified Subsidiaries
(Section 12.3(D))
SCHEDULES
Schedule 1.1.1 -- Permitted Existing Contingent Obligations
(Definitions)
Schedule 1.1.2 -- Permitted Existing Indebtedness (Definitions)
Schedule 1.1.3 -- Permitted Existing Investments (Definitions)
Schedule 1.1.4 -- Permitted Existing Liens (Definitions)
Schedule 4.3(m)(8) -- Sample List of Supplemental Closing Documents (Section
4.3(m)(8))
Schedule 5.3 -- Conflicts; Governmental Consents (Section 5.3)
Schedule 5.7 -- Litigation; Loss Contingencies (Section 5.7)
Schedule 5.8 -- Corporate Structure; Subsidiaries (Section 5.8)
Schedule 5.9 -- ERISA Matters (Section 5.9)
Schedule 5.14 -- Accreditations, Permits, CONs, Health Facility Licenses
(Section 5.14)
Schedule 5.17 -- Insurance (Sections 5.17, 6.2(E))
Schedule 5.18 -- Contingent Obligations (Sections 5.7, 5.18)
Schedule 5.20 -- Labor Matters; Compensation Agreements (Section 5.20)
Schedule 5.22 -- Environmental Matters (Section 5.22)
Schedule 5.23 -- Healthcare Regulatory Matters (Section 5.23)
Schedule 6.3(F)(ii) -- Computation of Permissible Tax Payments (Section
6.3(F)(ii))
(vii)
<PAGE>
CREDIT AGREEMENT
This Credit Agreement dated as of March 15, 1996 is entered into among AMC
Regional Holdings, Inc., a Delaware corporation, the institutions from time to
time a party hereto as Lenders, whether by execution of this Agreement,
execution of a Notice of Supplemental Commitment pursuant to SECTION 2.27, or
an Assignment pursuant to SECTION 12.3 (an "ASSIGNMENT"), and The First National
Bank of Chicago, in its capacity as the contractual representative for itself
and the other Lenders. The parties hereto agree as follows:
ARTICLE I: DEFINITIONS
1.1 CERTAIN DEFINED TERMS. In addition to the terms defined above, the
following terms used in this Agreement shall have the following meanings,
applicable both to the singular and the plural forms of the terms defined:
As used in this Agreement:
"ACCOMMODATION OBLIGATIONS" is defined in the definition "Contingent
Obligations" below.
"ACCOUNT DEBTOR" means and includes the account debtor or obligor with
respect to any of the Receivables and/or the prospective purchaser with respect
to any contract right, and/or any party who enters into or proposes to enter
into any contract or other arrangement with any member of the Borrower Corporate
Group.
"ACCREDITATION" means certification by a generally recognized independent
agency or other organization such as the JCAHO or other similar agency or
organization that a facility fully complies with the standards set by such
agency or organization for operation of such a facility.
"ACQUISITION" means any transaction, or any series of related transactions,
consummated on or after the Closing Date, by which any member of the Borrower
Corporate Group (i) acquires any going business or all or substantially all of
the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions at least a majority (in number of vote) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency), a majority (by percentage of voting power) of the membership,
ownership or other equity interests in a limited liability company or a majority
(by percentage of voting power) of the outstanding partnership interests of a
partnership (any such target business, assets, corporation, partnership or the
like being herein referred to as a "TARGET").
"ACQUISITION APPROVAL LENDERS" means Lenders whose Pro Rata Shares, in the
aggregate, are equal to or greater than eighty percent (80%); PROVIDED, HOWEVER,
that, in the event any of the Lenders shall have failed to fund its Pro Rata
Share of any Revolving Loan or Acquisition Loans requested by the Borrower which
such Lenders are obligated to fund under the terms of this Agreement and any
such failure has not been cured, then for so long as such failure continues,
"ACQUISITION APPROVAL LENDERS" means Lenders (excluding all Lenders whose
failure
<PAGE>
to fund their respective Pro Rata Shares of such Revolving Loans or Acquisition
Loans have not been so cured) whose Pro Rata Shares represent eighty percent
(80%) or more of the aggregate Pro Rata Shares of the remaining Lenders;
PROVIDED, FURTHER, HOWEVER, that, in the event that the Commitments have been
terminated pursuant to the terms of this Agreement, "ACQUISITION APPROVAL
LENDERS" means Lenders (without regard to such Lenders' performance of their
respective obligations hereunder) whose aggregate ratable shares (stated as a
percentage) of the aggregate outstanding principal balance of all Loans are
equal to or greater than eighty percent (80%).
"ACQUISITION APPROVAL PACKAGE" means, with respect to any proposed
Acquisition, those documents and financial statements prepared or supplied by
the Borrower in connection with the Acquisition, including without limitation,
an information package regarding the operations and prospects of the Target, the
financial background of the Target, the required documents itemized in SECTION
4.3 (b),(c),(f),(g) (IN DRAFT FORM), AND (r) (IN DRAFT FORM), and such other
information as is relevant for the specifics of the particular Target to inform
the Lenders about its business, financial condition, projections, operations,
performance and properties of the Target, and anticipated integration of the
Target into the Borrower Corporate Group.
"ACQUISITION CLOSING DATE" means the date of the consummation of any
Permitted Acquisition of any Target under the terms of this Agreement.
"ACQUISITION CONSENT CERTIFICATE" is defined in SECTION 4.3 below.
"ACQUISITION DOCUMENTS" means all documents, instruments and agreements
entered into by any member of the Borrower Corporate Group in connection with
the Specified Acquisitions.
"ACQUISITION LOAN" is defined in SECTION 2.1(b) below.
"ACQUISITION LOAN AVAILABILITY" means at any particular time prior to the
Conversion Date, the amount by which the Aggregate Acquisition Loan Commitments
at such time exceeds the aggregate principal amount of all of the outstanding
Acquisition Loans.
"ACQUISITION LOAN COMMITMENT" means, with respect to any Lender, the
obligation of such Lender to make one or more Acquisition Loans on an
Acquisition Closing Date pursuant to the terms and conditions of this Agreement,
and which shall not exceed its Acquisition Loan Commitment as set forth on
EXHIBIT B opposite such Lender's name under either of the applicable headings,
"Acquisition Loan Commitment Prior to the Commitment Increase Date" or
"Acquisition Loan Commitment After the Commitment Increase Date" or as indicated
in the Assignment by which it became a Lender, in each case as modified from
time to time pursuant to the terms of this Agreement.
"ACQUISITION LOAN NOTE" means a promissory note, in substantially the form
of EXHIBIT E hereto duly executed by the Borrower and payable to the order of a
Lender in the amount of its Acquisition Loan Commitment, including any
amendment, restatement, modification, renewal or replacement of such Acquisition
Loan Note.
"ACQUISITION SUBORDINATED DEBT" is defined in SECTION 4.3(c) below.
-2-
<PAGE>
"ADJUSTED AMOUNT OF ELIGIBLE INVENTORY" means, for any Specified
Subsidiary, the Eligible Inventory of such Specified Subsidiary valued at the
lower of cost determined on a first-in-first-out basis (determined in accordance
with Agreement Accounting Principles, consistently applied) or market value less
(i) the value of reserves which have been recorded by such Specified Subsidiary
with respect to obsolete, dated, slow-moving or excess Inventory and (ii) such
other reserves as the Agent elects to establish in accordance with its
reasonable credit judgment (which credit judgment shall be exercised in a manner
that is not arbitrary or capricious).
"ADJUSTED AMOUNT OF ELIGIBLE RECEIVABLES" means, for any Specified
Subsidiary, the face amount outstanding under such Specified Subsidiary's
Eligible Receivables, determined in accordance with Agreement Accounting
Principles consistently applied, adjusted to reflect the amount that the
applicable Specified Subsidiary reasonably calculates it expects to receive with
respect to the services performed or Inventory sold by such Specified
Subsidiary, including adjustments or reductions that such Specified Subsidiary
reasonably believes may be required by any Applicable Carrier or other Payor
with respect to the reimbursable amount for such services or Inventory, such
adjustments being reasonably based upon such Specified Subsidiary's past claims
history, agreements with such Applicable Carrier or other Payor, communications
with such Applicable Carrier or other Payor regarding the reimbursable amount
and/or coverage and eligibility for reimbursement (such adjustments being
referred to herein as the "CONTRACTUAL ALLOWANCES"), less (i) all finance
charges, service charges, late fees and other fees, (ii) the value of any
accrual which has been recorded by the applicable Specified Subsidiary with
respect to downward price adjustments, and (iii) such other reserves as the
Agent elects to establish in accordance with its reasonable credit judgment
(which credit judgment shall be exercised in a manner that is not arbitrary or
capricious).
"ADJUSTED NET INCOME" is defined in SECTION 6.4(A) hereof.
"ADVANCE" means a borrowing hereunder consisting of the aggregate amount of
the several Loans made by the Lenders to the Borrower of the same Type and, in
the case of Eurodollar Advances, for the same Interest Period.
"AFFECTED LENDER" is defined in SECTION 2.20 hereof.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person is the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act)
of greater than twenty percent (20%) of any class of voting securities (or other
voting interests) of the controlled Person or possesses, directly or indirectly,
the power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, by contract or otherwise.
"AGENT" means The First National Bank of Chicago in its capacity as
contractual representative for itself and the Lenders pursuant to ARTICLE X
hereof and any successor Agent appointed pursuant to ARTICLE X hereof.
"AGGREGATE BORROWING BASE" means, at any time, the aggregate amount of the
Borrowing Bases of all of the Specified Subsidiaries at such time.
-3-
<PAGE>
"AGGREGATE ACQUISITION LOAN COMMITMENT" means the aggregate of the
Acquisition Loan Commitments of all the Lenders as the same may from time to
time be modified to give effect to any applicable Assignment. The initial
Aggregate Acquisition Loan Commitment is Fifteen Million and 00/100 Dollars
($15,000,000).
"AGGREGATE REVOLVING LOAN COMMITMENT" means the aggregate of the Revolving
Loan Commitments of all the Lenders, as modified from time to time pursuant to
the terms hereof or to give effect to any applicable Assignment. The initial
Aggregate Revolving Loan Commitment is Ten Million and 00/100 Dollars
($10,000,000).
"AGREEMENT" means this Credit Agreement, as it may be amended, restated or
otherwise modified and in effect from time to time.
"AGREEMENT ACCOUNTING PRINCIPLES" means generally accepted accounting
principles as in effect as of the Closing Date, applied in a manner consistent
with that used in preparing the audited financial statements of each of the
Specified Subsidiaries (or the applicable predecessor entity) for the fiscal
year immediately preceding the Acquisition of it by the Borrower or if audited
financial statements are not available for a Specified Subsidiary (or the
applicable predecessor entity) for the fiscal year immediately preceding the
Acquisition of it by the Borrower, then the reviewed financial statements for
such Specified Subsidiary (or the applicable predecessor entity) delivered to
the Agent and the Lenders pursuant to the provisions of SECTION 4.3.
"ALTERNATE BASE RATE" means, for any day, a fluctuating rate of interest
per annum equal to the higher of (i) the Corporate Base Rate for such day and
(ii) the sum of (a) the Federal Funds Effective Rate for such day and (b) one-
half of one percent (1/2%) per annum.
"AMC" means American Medserve Corporation, a Delaware corporation, and its
successors and assigns, including a debtor-in-possession on behalf of AMC.
"AMC SUBORDINATED DEBT" means any Subordinated Debt issued by AMC the terms
(including without limitation, subordination, default, standstill, sinking fund,
maturity, amortization, interest rate, premiums, fees, covenants, events of
default, and remedies) of which are acceptable to the Lenders when issued but
not any increase in the principal amount thereof and not any refinancing,
modification, refunding or extension of maturity thereof, in whole or in part,
unless such refinancing, modification, refunding or extension is not materially
less favorable to AMC, including, without limitation, with respect to amount,
maturity, amortization, interest rate, premiums, fees, covenants, subordination
terms, events of default and remedies or materially adverse to the Lenders than
the terms of the original approved Subordinated Indebtedness, and PROVIDED,
THAT, any subordinated notes issued by AMC contain the terms set forth in
EXHIBIT T hereto.
"APPLICABLE CARRIER" means, with respect to any Person: (a) a private
insurance company providing reimbursement to the applicable patient for the
services performed by or Inventory sold by the applicable Person; (b) a Payor
for whom Interplan is a paying agent; or (c) Interplan.
-4-
<PAGE>
"APPLICABLE EURODOLLAR MARGIN" as at any date of determination, shall be
the rate per annum then applicable to Eurodollar Loans determined in accordance
with the provisions of SECTION 2.8(b).
"APPLICABLE FLOATING RATE MARGIN" as at any date of determination, shall be
the rate per annum then applicable to Base Rate Loans determined in accordance
with the provisions of SECTION 2.8(b).
"APPLICABLE LETTER OF CREDIT FEE" as at any date of determination, shall be
the rate per annum then applicable in the determination of the amount payable
under SECTION 2.25 with respect to Letters of Credit, determined in accordance
with the provisions of SECTION 2.8(b).
"APPLICABLE MARGIN(S)" shall have the meaning ascribed to that term in
SECTION 2.8(b).
"ASSET SALE" means, with respect to any Person, (i) the sale, lease,
conveyance, disposition or other transfer by such Person of any of its assets
(including by way of a sale-leaseback transaction and including the sale or
other transfer of any of the Capital Stock of any Subsidiary of such Person) or
(ii) the issuance, sale, conveyance, disposition or other transfer by such
Person of any Capital Stock of such Person or ownership, membership or other
equity interests in such Person; PROVIDED, HOWEVER, that notwithstanding the
foregoing, the term "ASSET SALE" shall not include the sale, lease, conveyance,
disposition or other transfer of any assets in the ordinary course of business.
"ASSIGNMENT" is defined in the preamble to this Agreement.
"AUTHORIZED OFFICER" means, with respect to any Person, any of such
Person's chairman, chief executive officer, chief operating officer, chief
financial officer, treasurer or controller, acting singly.
"BENEFIT PLAN" means a defined benefit plan as defined in Section 3(35) of
ERISA (other than a Multiemployer Plan) in respect of which Borrower or any
other member of the Controlled Group is, or within the immediately preceding six
(6) years was, an "employer" as defined in Section 3(5) of ERISA.
"BORROWER" means AMC Regional Holdings, Inc., a Delaware corporation, and
its successors and assigns, including a debtor-in-possession on behalf of
Borrower.
"BORROWING BASE" means, with respect to any Specified Subsidiary, as of any
date of calculation, an amount, as set forth on the most current Borrowing Base
Certificate delivered to the Agent for such Specified Subsidiary, equal to: (i)
seventy-five percent (75%) of the Adjusted Amount of Eligible Receivables of the
applicable Specified Subsidiary; PLUS (ii) fifty percent (50%) of the Adjusted
Amount of Eligible Inventory of the applicable Specified Subsidiary. The Agent
shall give the Borrower commercially reasonable notice, taking into account all
facts and circumstances known by the Agent at such time, of any change in the
criteria (or the application thereof) to determine the eligibility of any
Receivables or Inventory of any Specified Subsidiary or to the establishment by
the Agent of any reserves which, in any such case, might reasonably be expected
to materially decrease the amount of the Borrowing Base of any Specified
Subsidiary.
-5-
<PAGE>
"BORROWING BASE CERTIFICATE" means for any Specified Subsidiary a
certificate, in substantially the form of EXHIBIT A attached hereto and made a
part hereof, setting forth the Borrowing Base of such Specified Subsidiary and
the component calculations thereof for such Specified Subsidiary.
"BORROWER CORPORATE GROUP" means, as of any given time, the Borrower and
all of the Borrower's direct and indirect Subsidiaries.
"BORROWING DATE" means a date on which an Advance is made hereunder.
"BORROWING NOTICE" is defined in SECTION 2.8 hereof.
"BUSINESS ACTIVITY REPORT" means (A) a Notice of Business Activities Report
from the State of Minnesota, Department of Revenue, or (B) any similar report
required by any other State relating to the ability of any member of the
Borrower Corporate Group to enforce its accounts receivable claims against
account debtors located in any such state.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Loans bearing interest at the Eurodollar Rate, a day (other than a
Saturday or Sunday) on which banks are open for business in Chicago and New York
and on which dealings in United States dollars are carried on in the London
interbank market and (ii) for all other purposes a day (other than a Saturday or
Sunday) on which banks are open for business in Chicago, Illinois and New York,
New York.
"CAPITAL EXPENDITURES" is defined in SECTION 6.4(A) hereof.
"CAPITALIZED LEASE" of a Person means any lease of property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be capitalized
on a balance sheet of such Person prepared in accordance with Agreement
Accounting Principles.
"CAPITAL STOCK", with respect to any Person, means any capital stock of
such Person, regardless of class or designation, and all warrants, options,
purchase rights, conversion or exchange rights, voting rights, calls or claims
of any character with respect thereto.
"CARE APOTHECARY" is defined in the definition of Care Apothecary
Acquisition below.
"CARE APOTHECARY ACQUISITION" means the acquisition on June 14, 1994 by
GSHC of the assets constituting the Allentown division of Care Health Systems,
Inc., a Pennsylvania corporation ("CARE APOTHECARY"), substantially in
accordance with the terms and conditions set forth in the Asset Purchase
Agreement dated June 14, 1994 among Care Health Systems, Inc., Clyde L. Cressler
and GSHC.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United
-6-
<PAGE>
States government; (ii) domestic and Eurodollar certificates of deposit and time
deposits, bankers' acceptances and floating rate certificates of deposit issued
by any commercial bank organized under the laws of the United States, any state
thereof, the District of Columbia, or its branches or agencies and having
capital and surplus in an aggregate amount not less than $500,000,000 (fully
protected against currency fluctuations for any such deposits with a term of
more than ten (10) days); (iii) shares of money market, mutual or similar funds
having net assets in excess of $500,000,000 and the investments of which are
limited to investment grade securities (i.e., securities rated at least Baa by
Moody's Investors Service, Inc. or at least BBB by Standard & Poor's Corporation
or carrying an equivalent rating by a nationally recognized rating agency if
both of the aforementioned rating agencies cease publishing investment ratings)
and (iv) commercial paper of United States and foreign banks and bank holding
companies and their subsidiaries and United States and foreign finance,
commercial industrial or utility companies (other than any member of the
Borrower Corporate Group) which, at the time of acquisition, are rated A-1 (or
better) by Standard & Poor's Corporation or P-1 (or better) by Moody's Investors
Services, Inc. or carrying an equivalent rating by a nationally recognized
rating agency if both of the aforementioned rating agencies cease publishing
investment ratings; PROVIDED, that the maturities of such Cash Equivalents shall
not exceed 365 days.
"CASH FLOW PERIOD" means the twelve-month period ending December 31, 1996
and, thereafter, as separate periods, each subsequent 12-month period ending on
December 31 of each calendar year.
"CHAMPUS" means the Civilian Health and Medical Program of the Uniformed
Services established pursuant to 10 U.S.C. Sections 1071 ET SEQ. and any
Governmental Authority succeeding to the functions thereof.
"CHAMPUS CERTIFICATION" means certification by CHAMPUS or an agency or
entity under contract with CHAMPUS that the applicable facility fully complies
with all conditions of participation set forth in CHAMPUS Regulations.
"CHAMPUS RECEIVABLES" means a Receivable with respect to which the Account
Debtor is a Governmental Authority or agent thereof obligated thereunder
pursuant to CHAMPUS Regulations.
"CHAMPUS REGULATIONS" means, collectively, all federal statutes affecting
the medical benefits program for specified categories of individuals qualified
for CHAMPUS benefits by virtue of their relationship to the U.S. Army, Navy, Air
Force, Marine Corps, Coast Guard, Commissioned Corps of the U.S. Public Health
Service and Commissioned Corps of the National Oceanic and Atmospheric
Administration established by 5 U.S.C. Section 301 and 10 U.S.C. Sections 1079
and 1086, together with all applicable provisions of 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), as each may be amended,
supplemented, or otherwise modified from time to time.
"CHANGE" is defined in SECTION 3.2 hereof.
"CHANGE OF CONTROL" means an event or series of events by which:
-7-
<PAGE>
(a) prior to an initial public offering of the stock of either AMC or the
Borrower:
(i) the Borrower ceases to be the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act) of more than fifty percent
(50%) of the combined voting power of each of the Specified Subsidiaries'
outstanding Capital Stock ordinarily having the right to vote at an
election of directors;
(ii) the Borrower ceases to be the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act) of one hundred percent
(100%) of the outstanding Gatti Preferred Stock;
(iii) the Borrower ceases to have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the board of directors of each of the Specified Subsidiaries;
(iv) AMC ceases to be the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act), directly or indirectly, of at
least eighty percent (80%) of the combined voting power of the Borrower's
outstanding Capital Stock ordinarily having the right to vote at an
election of directors;
(v) AMC ceases to have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
board of directors of the Borrower;
(vi) GTCR Fund ceases to be the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of
more than fifty percent (50%) of the combined voting power of AMC's
outstanding Capital Stock ordinarily having the right to vote at an
election of directors; or
(vii) GTCR Fund ceases to have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
board of directors of AMC.
(b) after an initial public offering of the stock of either AMC or the
Borrower:
(i) the Borrower ceases to be the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act) of more than fifty percent
(50%) of the combined voting power of each of the Specified Subsidiaries'
outstanding Capital Stock ordinarily having the right to vote at an
election of directors;
(ii) the Borrower ceases to be the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act) of one hundred percent
(100%) of the outstanding Gatti Preferred Stock;
(iii) the Borrower ceases to have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the board of directors of each of the Specified Subsidiaries;
(iv) AMC ceases to be the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act), directly or indirectly, of at
least eighty percent (80%) of the
-8-
<PAGE>
combined voting power of the Borrower's outstanding Capital Stock
ordinarily having the right to vote at an election of directors;
(v) AMC ceases to have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
board of directors of the Borrower;
(vi) any "person" or "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Securities Exchange Act) becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act), directly or
indirectly, of an equal or greater percentage of the total voting power of
the then outstanding Capital Stock of either the Borrower or AMC entitled
to vote generally in the election of the directors of either the Borrower
or AMC than the percentage beneficially owned (within the meaning of Rule
13d-3 under the Securities Exchange Act) by, collectively, GTCR and AMC's
management;
(vii) any "person" or "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Securities Exchange Act) other than GTCR becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act), directly or indirectly, of 30% or more of the total voting power of
the then outstanding Capital Stock of AMC entitled to vote generally in the
election of the directors of AMC; or
(viii) with respect to either the Borrower or AMC, during any period
of twelve (12) consecutive calendar months, individuals:
(a) who were directors of such Person on the first day of
such period, or
(b) whose election or nomination for election to the board
of directors of such Person was recommended or approved
by at least a majority of the directors then still in
office who were directors of such Person on the first
day of such period, or whose election or nomination for
election was so approved,
shall cease to constitute a majority of the board of directors of such
Person unless as a result of the election or nomination of directors
recommended by GTCR.
"CLOSING DATE" means March 22, 1996.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"COLLATERAL" means all property and interests in property now owned or
hereafter acquired by any member of the Borrower Corporate Group in or upon
which a security interest, lien or mortgage is granted to the Agent, for the
benefit of the Holders of Secured Obligations, or to the Agent, for the benefit
of the Lenders, whether under any Security Agreement, under any of the other
Collateral Documents or under any of the other Loan Documents.
-9-
<PAGE>
"COLLATERAL DOCUMENTS" means all agreements, instruments and documents
executed in connection with this Agreement, including, without limitation the
Pledge Agreements, the Subsidiary Guarantees, the Security Agreements, the
Collection Account Agreements, all Intercompany Documents, and all other
security agreements, loan agreements, notes, guarantees, subordination
agreements, pledges, powers of attorney, consents, assignments, contracts, fee
letters, notices, leases and financing statements, whether heretofore, now, or
hereafter executed by or on behalf of any member of the Borrower Corporate Group
and delivered to the Agent or any of the Lenders, together with all agreements
and documents referred to therein or contemplated thereby.
"COLLECTION ACCOUNT" means each lock-box and blocked depository account
maintained by the Borrower or any other member of the Borrower Corporate Group,
subject to a Collection Account Agreement, for the collection of Receivables and
other proceeds of Collateral.
"COLLECTION ACCOUNT AGREEMENT" means a written agreement among a respective
member of the Borrower Corporate Group, the Agent, and, as applicable, each of
the banks at which any member of the Borrower Corporate Group maintains a
Collection Account.
"COMMITMENTS" means the Revolving Loan Commitments, and/or the Acquisition
Loan Commitments, as applicable in the context used.
"COMMITMENT INCREASE DATE" means the date on which the conditions of
Section 12.3(D)(j) have been satisfied.
"COMMISSION" means the Securities and Exchange Commission and any Person
succeeding to the functions thereof.
"CON" means a Certificate of Need or other license or Permit issued by a
health facilities planning board or similar agency or body required for the
construction or expansion of, investment in, or transfer of ownership relating
to a health facility.
"CONCENTRATION ACCOUNT" means the Collection Account maintained at First
Chicago into which collections of Receivables and other cash proceeds of
Collateral are transferred pursuant to the terms of the Collection Account
Agreements or otherwise as described in SECTION 2.12.
"CONCENTRATION ACCOUNT AGREEMENT" means an agreement executed and delivered
by the Borrower and the other members of Borrower Corporate Group, First Chicago
and the Agent with respect to the Concentration Account in the form and
substances acceptable to the Agent.
"CONCENTRATION ACCOUNT BLOCKAGE DATE" means the date, following the
occurrence of a Default on which the Agent or the Required Lenders, in the
Agent's or the Required Lenders' sole discretion, instruct(s) First Chicago as
described in the Concentration Account Agreement to remit, during the
continuance of such Default, all amounts deposited in the Concentration Account
to the Agent or as the Agent shall direct.
"CONSOLIDATED AMC GROUP" means, as of any given time, AMC and all of the
AMC's direct and indirect Subsidiaries.
-10-
<PAGE>
"CONTINGENT OBLIGATION", as applied to any Person, means (i) any
Contractual Obligation, contingent or otherwise, of that Person with respect to
any Indebtedness of another or other monetary obligation or liability of
another, including, without limitation, any such Indebtedness, obligation or
liability of another directly or indirectly guaranteed, endorsed (otherwise than
for collection or deposit in the ordinary course of business), co-made or
discounted or sold with recourse by that Person, or in respect of which that
Person is otherwise directly or indirectly liable, including Contractual
Obligations (contingent or otherwise) arising through any agreement to purchase,
repurchase, or otherwise acquire such Indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise), or to maintain solvency, assets, level of income, or other
financial condition, or to make payment other than for value received (such
obligations under this clause (i) being sometimes referred to as "ACCOMMODATION
OBLIGATIONS") and (ii) any other contingent obligation or liability of such
Person, whether or not reflected in financial statements of such Person as a
liability.
"CONTINGENT PURCHASE PRICE PAYMENTS" means any deferred purchase price
payments, earnouts, or performance based payments made in connection with the
Specified Acquisitions or any Permitted Acquisition.
"CONTRACTUAL ALLOWANCES" is defined in the definition of Adjusted Amount of
Eligible Receivables above.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of
any equity or debt securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument, in any case in writing, to which that
Person is a party or by which it or any of its properties is bound, or to which
it or any of its properties is subject.
"CONTROLLED GROUP" means the group consisting of (i) any corporation which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower; (ii) a partnership or other trade
or business (whether or not incorporated) which is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower; and (iii) a member
of the same affiliated service group (within the meaning of Section 414(m) of
the Code) as the Borrower, any corporation described in CLAUSE (i) above or any
partnership or trade or business described in CLAUSE (ii) above.
"CONVERSION/CONTINUATION NOTICE" is defined in SECTION 2.10(D) hereof.
"CONVERSION DATE" means March 15, 1998.
"CORPORATE BASE RATE" means the corporate base rate of interest announced
by First Chicago from time to time, changing when and as said corporate base
rate changes.
"CURE LOANS" is defined in SECTION 8.2(iii) hereof.
"CURRENT ASSETS" is defined in SECTION 6.4(A) hereof.
-11-
<PAGE>
"CUSTOMARY PERMITTED LIENS" means:
(i) statutory Liens of landlords and Liens of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen and other similar Liens
imposed by law created in the ordinary course of business for amounts not
yet due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with Agreement
Accounting Principles;
(ii) Liens (other than Environmental Liens and Liens in favor of the
PBGC) incurred or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
types of social security benefits or to secure the performance of bids,
tenders, sales, contracts (other than for the repayment of borrowed money),
surety, appeal and performance bonds; PROVIDED that (A) all such Liens do
not in the aggregate materially detract from the value of the applicable
Person's or its Subsidiary's assets or property taken as a whole or
materially impair the use thereof in the operation of the businesses taken
as a whole, and (B) all Liens securing bonds to stay judgments or in
connection with appeals do not secure at any time an aggregate amount for
all members of the Borrower Corporate Group exceeding $250,000;
(iii) Liens arising with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar charges or encumbrances on the use
of real property which do not interfere with the ordinary conduct of the
business of any respective member of the Borrower Corporate Group;
(iv) Liens of attachment or judgment with respect to judgments,
writs or warrants of attachment, or similar process against any member of
the Borrower Corporate Group which do not constitute a Default under
SECTION 7.1(h);
(v) Liens arising from leases or subleases granted to others which
do not interfere in any material respect with the respective business of
any member of the Borrower Corporate Group;
(vi) Liens (other than Environmental Liens and Liens in favor of the
PBGC) arising in the ordinary course of business securing the payment of
taxes, assessments, or governmental charges or other claims, either not yet
due or the validity of which is being contested in good faith by
appropriate proceedings, and as to which Borrower shall, if appropriate
under Agreement Accounting Principles, have set aside on its books and
records adequate reserves to the extent that (a) the amounts secured are
not prohibited by the terms of SECTION 6.2(D) and (b) the aggregate amount
of such claims or taxes together with all amounts secured by Liens pursuant
to CLAUSE (vii) below does not exceed $100,000 for any member of the
Consolidated AMC Group or $500,000 in the aggregate for all members of the
Consolidated AMC Group;
(vii) Liens arising in the ordinary course of business for amounts
not yet due or payable to the extent that (a) such Liens do not involve any
deposits or advances for borrowed money or the deferred purchase price of
property or services and (b) the
-12-
<PAGE>
aggregate amount secured by such Liens together with all amounts secured by
Liens pursuant to CLAUSE (vii) above does not exceed $100,000 for any
member of the Consolidated AMC Group or $500,000 in the aggregate for all
members of the Consolidated AMC Group; and
(viii) any interest or title of the lessor in the property subject to
any operating lease entered into by any member of the Borrower Corporate
Group in the ordinary course of business.
"DECISION PERIOD" is defined in SECTION 6.2(G) hereof.
"DECISION RESERVE" is defined in SECTION 6.2(G) hereof.
"DEFAULT" means an event described in ARTICLE VII hereof.
"DIXON" means Dixon Pharmacy, Inc., an Illinois corporation.
"DIXON ACQUISITION" means the acquisition on April 17, 1995 of certain of
the common stock of Dixon by the Borrower pursuant to that certain Stock
Purchase Agreement dated as of April 17, 1995 among the Borrower, Ronald E.
Keith, James M. Pietryga, and Dixon Pharmacy, Inc., an Illinois corporation.
"DOL" means the United States Department of Labor and any Person succeeding
to the functions thereof.
"EBITA" is defined in SECTION 6.4(A) hereof.
"ELIGIBLE INVENTORY" means, with respect to any Specified Subsidiary,
Inventory of the applicable Specified Subsidiary which is held for sale or lease
or furnished under any contract of service by the applicable Specified
Subsidiary which is at all times and shall continue to be acceptable to the
Agent in all respects. Standards of eligibility may be fixed and revised from
time to time by the Agent in the Agent's reasonable business judgment (which
credit judgment shall be exercised in a manner that is not arbitrary or
capricious). In general, without limiting the foregoing, the following
Inventory is not Eligible Inventory:
(i) (to the extent not provided for by reserves described in the
definition of the Adjusted Amount of Eligible Inventory) Inventory which is
obsolete, not in good condition, not either currently usable or currently
saleable in the ordinary course of the applicable Specified Subsidiary's
business or does not meet all material standards imposed by any
Governmental Authority having regulatory authority over such item of
Inventory, its use or its sale;
(ii) Inventory which the Agent determines, in the exercise of its
reasonable discretion (which discretion shall not be exercised in a manner
that is arbitrary or capricious), to be unacceptable because it is beyond
the manufacturer's dating or because a recall notice has been issued with
respect thereto;
-13-
<PAGE>
(iii) Inventory consisting of packaging material, supplies, raw
materials and work in process;
(iv) except to the extent provided in CLAUSE (viii) below, Inventory
(a) which is consigned to a third party for sale or (b) which is on
consignment from a third party to the applicable Specified Subsidiary for
sale;
(v) Inventory which consists of goods in transit;
(vi) Inventory which is subject to a Lien in favor of any Person
other than the Agent;
(vii) Inventory with respect to which the Agent does not have a first
and valid fully perfected security interest;
(viii) unless subject to a consignment agreement as set forth in
EXHIBIT D to the Security Agreement and a financing statement as set forth
therein, Inventory maintained by the Specified Subsidiaries at any health
care facility (a) for such facility's emergency use (including in such
health care facility's "stat boxes" or emergency kits) or (b) for
dispensing to a patient at such health care facility or for any other
purpose (whether or not consigned to such health care facility for sale) to
the extent that the aggregate value (valued at the lower of cost determined
on a first-in-first-out basis) of such Inventory maintained by all of the
Specified Subsidiaries at all such health care facilities exceeds $300,000;
(ix) unless covered by CLAUSE (viii) above, Inventory which is not
located either (a) on the applicable Specified Subsidiary's owned premises
in the United States listed on Schedule 2 to its Security Agreement or (b)
(1) on the Specified Subsidiary's leased premises in the United States
listed on Schedule 2-A to its Security Agreement, (2) in warehouses or with
other bailees in the United States, in each case as listed on Schedule 2-A
to its Security Agreement or (3) in other leased premises, warehouses or
with other bailees in the United States not listed on Schedule 2-A to its
Security Agreement permitted to be established under its Security Agreement
or established in connection with a Permitted Acquisition, in each case
under the immediately preceding clauses (1) through (3) in connection with
which the Agent shall have received landlord, mortgagee, bailee and/or
warehousemen's access and lien waiver agreements, as applicable, in each
case in form and substance acceptable to the Agent; PROVIDED it is
expressly understood and agreed that Inventory maintained at 1313 Gordon
St., Allentown, Pennsylvania 18102, shall not be eligible until such time
as the Agent shall have received an acceptable landlord agreement executed
by Clyde L. Cressler.
(x) Inventory which is evidenced by a Receivable;
(xi) Inventory with respect to any Specified Subsidiary which is a
retail pharmacy or other retail facility consisting of general sundries or
floor stock (including school supplies, stationery, sun glasses and small
gift items but excluding greeting cards, wrapping paper, paperback books,
magazines, weekly newspapers), edible Inventory (including candy, gum and
beverages), toiletries (including shaving creams, razor blades,
-14-
<PAGE>
deodorants, hygiene products), cosmetics, perfumes, colognes, and Inventory
consisting of photo processing items;
(xii) Inventory consisting of medical equipment for rental and/or
sale to customers; provided that notwithstanding the provisions of this
clause (xii), there shall be included as "Eligible Inventory" the medical
equipment held for sale by the Specified Subsidiaries with respect to their
respective "home health care" units which otherwise constitutes Eligible
Inventory including, without limitation, supports, chairs, portable
commodes, wheelchairs, and hospital beds; and
(xiii) Inventory which is not in conformity in all material respects
with the representations and warranties made by the applicable Specified
Subsidiary to the Agent with respect thereto whether contained in this
Agreement or the applicable Security Agreement.
Without limiting the foregoing, (1) Inventory of any Specified Subsidiary which
is acquired pursuant to a Permitted Acquisition shall not be deemed Eligible
Inventory unless and until the Agent and the Required Lenders, after concluding
any due diligence they reasonably deem necessary, shall be satisfied as to the
condition thereof and that such Inventory would otherwise meet the standards of
eligibility set forth herein (including, without limitation, perfection of the
Agent's security interests in such Inventory) but for the fact that it was
acquired by the applicable Specified Subsidiary outside of the ordinary course
of business and (2) Inventory acquired pursuant to such Permitted Acquisition
may be deemed Eligible Inventory from and after such Permitted Acquisition if
the foregoing determinations have been made to the Agent's and the Required
Lenders' satisfaction.
"ELIGIBLE RECEIVABLES" means Receivables of the applicable Specified
Subsidiary created by the applicable Specified Subsidiary in the ordinary course
of its respective business arising out of the sale of goods or rendition of
services by the applicable Specified Subsidiary, which Receivables are and at
all times shall continue to be acceptable to the Agent in all respects.
Standards of eligibility may be fixed and revised from time to time by the Agent
in the Agent's reasonable credit judgment (which credit judgment shall be
exercised in a manner that is not arbitrary or capricious). In general, without
limiting the foregoing, the following Receivables are not Eligible Receivables:
(i) Receivables (other than Receivables covered by clause (ii)
below) which remain unpaid ninety (90) days after date of the original
applicable invoice;
(ii) during the months of June through October in any year,
Receivables in connection with the Illinois Acquisitions consisting of
Perfected Government Receivables which remain unpaid one hundred twenty
(120) days after the date of the original applicable invoice;
(iii) all Receivables (other than Perfected Government Receivables)
owing by a single Account Debtor (including a Receivable which remains
unpaid fewer than the number of days set forth in clause (i) or clause (ii)
above) if twenty-five percent (25%) of the balance owing by such Account
Debtor to all members of the Borrower Corporate Group, calculated without
taking into account any credit balances of such Account
-15-
<PAGE>
Debtor, (y) remains unpaid ninety (90) days if covered by clause (i) above
or one hundred twenty (120) days if covered by clause (ii) above after the
date of the original applicable invoice or (z) has otherwise become, or has
been determined by the Agent to be ineligible;
(iv) Perfected Government Receivables owing by a single Account
Debtor (including a Receivable which remain unpaid fewer than the
applicable number of days set forth in clause (i) or (ii) above or fewer
than the number of days set forth in this clause (iv)) if seventy percent
(70%) of the balance owing by such Account Debtor to all members of the
Borrower Corporate Group, calculated without taking into account any credit
balances of such Account Debtor, (y) remains unpaid one hundred eighty
(180) days after the date of the original applicable invoice or (z) has
otherwise become, or has been determined by the Agent to be ineligible;
(v) Receivables, other than Perfected Government Receivables, from
any single Account Debtor and its Affiliates which otherwise constitute
Eligible Receivables comprising more than fifteen percent (15%) of all
Eligible Receivables of all members of the Borrower Corporate Group but
only to the extent that such Receivables exceed such fifteen percent
amount;
(vi) Receivables with respect to which the Account Debtor is a
director, officer, employee, Subsidiary or Affiliate of any member of the
Borrower Corporate Group;
(vii) Receivables, other than Perfected Government Receivables
consisting of Medicare Receivables or Medicaid Receivables, with respect to
which the Account Debtor is any federal Governmental Authority, the United
States of America, or, in each case, any department, agency or
instrumentality thereof, unless with respect to any such Receivable, the
applicable Specified Subsidiary has complied to the Agent's satisfaction
with the provisions of the Federal Assignment of Claims Act or other
applicable statutes, including, without limitation, executing and
delivering to the Agent all statements of assignment and/or notification
which are in form and substance acceptable to the Agent and which are
deemed necessary by the Agent to effectuate the assignment to the Agent on
behalf of the Lenders of such Receivables;
(viii) Receivables not denominated in U.S. dollars or with respect to
which the Account Debtor is not a resident of the United States unless the
Account Debtor has supplied the applicable Specified Subsidiary with an
irrevocable letter of credit, issued by a financial institution
satisfactory to the Agent, sufficient to cover such Receivable in form and
substance satisfactory to the Agent;
(ix) Receivables with respect to which the Account Debtor (a) has
asserted or is reasonably likely to assert a counterclaim, including,
without limitation, any periodic reconciliation of such Receivable by such
patient or Payor with respect thereto, (b) has a right of setoff or (c) has
a receivable owing from the applicable Specified Subsidiary but only to the
extent of such counterclaim, setoff or receivable;
(x) Receivables for which the prospect of payment or performance by
the Account Debtor is or will be impaired (including, without limitation as
a result of the deterioration
-16-
<PAGE>
of the funding sources or funding status of any Governmental Authority in
connection with any Government Receivables) as determined by the Agent in
the exercise of its reasonable credit judgment (which credit judgment shall
not be exercised in a manner that is arbitrary or capricious);
(xi) Receivables with respect to which the Agent does not have a
first and valid fully perfected and enforceable security interest
(including, without limitation, such Receivables arising from the
assignment to the applicable Specified Subsidiary of any Insurance Claims);
(xii) Receivables with respect to which the applicable Account Debtor
is the subject of bankruptcy or a similar insolvency proceeding, has been
dissolved or has made an assignment for the benefit of creditors or whose
assets have been conveyed to a receiver or trustee;
(xiii) Receivables with respect to which the Account Debtor's
obligation to pay the Receivable is conditional upon the Account Debtor's
approval or is otherwise subject to any repurchase obligation or return
right, as with sales made on a bill-and-hold, guaranteed sale, sale-and-
return, sale on approval (except with respect to (a) Receivables in
connection with which Account Debtors are entitled to return Inventory on
the basis of the quality of such Inventory or (b) Perfected Government
Receivables in connection with which the patient or applicable health care
facility is entitled to return the unused portion or non-dispensed portion
of such Inventory in the ordinary course and pursuant to requirements of
the applicable Government Authority) or consignment basis;
(xiv) Receivables with respect to which the Account Debtor is located
in Minnesota (or any other jurisdiction which adopts a statute or other
requirement with respect to which any Person that obtains business from
within such jurisdiction or is otherwise subject to such jurisdiction's tax
law requiring such Person to file a Business Activity Report or make any
other required filings in a timely manner in order to enforce its claims in
such jurisdiction's courts or arising under such jurisdiction's laws);
provided, however, such Receivables shall nonetheless be eligible if the
applicable Specified Subsidiary has filed a Business Activity Report (or
other applicable report) with the applicable state office or is qualified
to do business in such jurisdiction and, at the time the Receivable was
created, was qualified to do business in such jurisdiction or had on file
with the applicable state office a current Business Activity Report (or
other applicable report);
(xv) Receivables with respect to which the Account Debtor's
obligation does not constitute its legal, valid and binding obligation,
enforceable against it in accordance with its terms;
(xvi) Receivables with respect to which the applicable Specified
Subsidiary has not yet dispensed or shipped the applicable goods or
performed the applicable service;
(xvii) Receivables which the Agent, exercising reasonable discretion
(which discretion shall not be exercised in a manner that is arbitrary or
capricious), has determined to be unacceptable to it;
-17-
<PAGE>
(xviii) any Receivable which is not in conformity in all material
respects with the representations and warranties made in the Loan Documents
with respect thereto whether contained in this Agreement or the applicable
Security Agreement;
(xix) Receivables in connection with which the applicable Specified
Subsidiary has not complied with all material requirements contained in the
charter and by-laws or other organizational or governing documents of the
applicable Specified Subsidiary, and any law, rule or regulation, or
determination of an arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon the applicable Specified
Subsidiary or any of its property or to which the applicable Specified
Subsidiary or any of its property is subject, including, without
limitation, all laws, rules, regulations and orders of any Governmental
Authority or judicial authority relating to truth in lending, billing
practices, fair credit reporting, equal credit opportunity, debt collection
practices and consumer debtor protection, applicable to such Receivable (or
any related contracts) or affecting the collectability of such Receivables
to the extent that (x) such noncompliance may result in such Receivable
being deemed invalid or uncollectible, (y) such noncompliance impairs the
Agent's ability to realize on its security interest therein or (z) such
noncompliance impairs the value of such Receivable;
(xx) Receivables in connection with which the applicable Specified
Subsidiary or any other party to such Receivable is in default in the
performance or observance of any of the terms thereof in any material
respect; and
(xxi) Receivables with respect to which (a) the applicable Specified
Subsidiary has not received an enforceable assignment of the applicable
patient's claim or (b) the applicable Specified Subsidiary's right to
receive payment from the Applicable Carrier or other Payor is not mature.
Without limiting the foregoing, (i) Receivables of any Specified Subsidiary
which are acquired pursuant to a Permitted Acquisition shall not be deemed
Eligible Receivables unless and until the Agent and the Required Lenders, after
concluding any due diligence they reasonably deem necessary, shall be satisfied
as to the quality and creditworthiness thereof and that such Receivables would
otherwise meet the standards of eligibility set forth herein (including, without
limitation, perfection and priority of the Agent's security interests in such
Receivables) but for the fact that they were acquired by the Specified
Subsidiary outside of the ordinary course of business and (ii) Receivables
acquired pursuant to such Permitted Acquisition may be deemed Eligible
Receivables from and after such Permitted Acquisition if the foregoing
determinations have been made to the Agent's and the Required Lenders'
satisfaction.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all
Requirements of Law that are federal, state and local laws, ordinances, rules,
regulations, Permits, licenses or other binding determination of any
Governmental Authority relating to, imposing liability or standards concerning,
or otherwise addressing the environment (including, without limitation, those
applicable to the disposal of medical waste), health and/or protection of worker
health or safety, including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 ET SEQ., the
Occupational Safety and Health Act of 1970, 29 U.S.C. Sections 651 ET SEQ., the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901 ET SEQ.,
and the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Sections
136 ET
-18-
<PAGE>
SEQ., public health codes and Health Facility License requirements, in each case
including any amendments thereto, any successor statutes, and any regulations
promulgated thereunder, and any state or local equivalent thereof.
"ENVIRONMENTAL LIEN" means a lien in favor of any governmental entity for
(a) any liability under Environmental, Health or Safety Requirements of Law, or
(b) damages arising from, or costs incurred by such governmental entity in
response to, a release or threatened release of a contaminant (including,
without limitation, any medical waste) into the environment.
"ENVIRONMENTAL PROPERTY TRANSFER ACT" means any applicable requirement of
law that conditions, restricts, prohibits or requires any notification or
disclosure triggered by the closure of any property or the transfer, sale or
lease of any property or deed or title for any property for environmental
reasons, including, but not limited to, any so-called "Industrial Site Recovery
Act" or "Responsible Property Transfer Act."
"EQUIPMENT" means all of the applicable Specified Subsidiary's present and
future (i) equipment, including, without limitation, machinery, manufacturing,
distribution, selling, data processing and office equipment, assembly systems,
tools, molds, dies, fixtures, appliances, furniture, furnishings, vehicles,
vessels, aircraft, aircraft engines, and trade fixtures, (ii) other tangible
personal property (other than Inventory), and (iii) any and all accessions,
parts and appurtenances attached to any of the foregoing or used in connection
therewith, and any substitutions therefor and replacements, products and
proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time including (unless the context otherwise requires) any
rules or regulations promulgated thereunder.
"EURODOLLAR ADVANCE" means an Advance which bears interest at the
Eurodollar Rate.
"EURODOLLAR BASE RATE" means, with respect to a Eurodollar Loan for the
relevant Interest Period, the rate determined by the Agent to be the rate at
which deposits in U.S. dollars are offered by First Chicago to first-class banks
in the London interbank market at approximately 11 a.m. (London time) two
Business Days prior to the first day of such Interest Period, in the approximate
amount of First Chicago's relevant Eurodollar Loan and having a maturity
approximately equal to such Interest Period, as adjusted for Reserves.
"EURODOLLAR LOAN" means a Loan, or portion thereof, which bears interest at
the Eurodollar Rate.
"EURODOLLAR RATE" means, with respect to a Eurodollar Loan for the relevant
Interest Period, the Eurodollar Base Rate applicable to such Interest Period
PLUS the Applicable Eurodollar Margin. The Eurodollar Rate shall be rounded to
the next higher multiple of 1/16 of 1% if the rate is not such a multiple.
"EXCESS CASH FLOW" means, for any Cash Flow Period, an amount equal to the
Borrower Corporate Group's consolidated (i) earnings before interest expense,
tax expense, depreciation and amortization for such period, PLUS (ii) the net
reduction, if any, in Working Capital during such period, MINUS (iii) the net
increase, if any, in Working Capital during such period, MINUS
-19-
<PAGE>
(iv) current (not deferred) income taxes, whether paid in cash or accrued, MINUS
(v) Capital Expenditures, whether paid in cash or accrued during such period,
MINUS (vi) Interest Expense for such period, MINUS (vii) scheduled amortization
of the principal portion of the Term Loans and scheduled amortization of the
principal portion of all other Indebtedness of Borrower Corporate Group during
such period, MINUS (viii) the aggregate amount (without duplication) of (x) cash
dividends and/or cash redemptions paid during such period with respect to all of
the Specified Subsidiaries' Capital Stock, (y) Restricted Junior Payments (other
than Contingent Purchase Price Payments) paid during such period pursuant to
SECTION 6.3(F) and (z) Contingent Purchase Price Payments required to be paid
with respect to such period (but only to the extent thereafter actually paid)
and permitted pursuant to SECTION 6.3(F), MINUS (ix) all prepayments of Loans
made (other than ordinary course repayments of the Revolving Loans), PLUS or
MINUS (x) reductions or increases in long-term assets, as calculated in
accordance with Agreement Accounting Principles and not otherwise accounted for
herein (excluding therefrom reductions resulting in Net Cash Proceeds for which
the Lenders have received a mandatory prepayment pursuant to SECTION
2.5(B)(i)(a)), PLUS or MINUS (xi) increases or decreases in long-term
liabilities, as calculated in accordance with Agreement Accounting Principles
and not otherwise accounted for herein. All such amounts shall be calculated
assuming that the Specified Subsidiaries have conducted their respective
businesses in the ordinary course and in accordance with past practices.
"EXCLUDED INSURANCE PROCEEDS" is defined in SECTION 6.2(G) hereof.
"EXTENDED CARE ACQUISITION" means the acquisition on April 14, 1995 by
Williamson of certain of the assets of Extended Care Associates, Inc., a
Virginia corporation pursuant to that certain Asset Purchase Agreement dated as
of April 14, 1995 between Williamson and Extended Care Associates, Inc., Bruce
Gerlich, and Mitch Overstreet.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"FEES" is defined in SECTION 6.4(A) hereof.
"FIRST CHICAGO" means The First National Bank of Chicago, in its individual
capacity, and its successors.
"FLOATING RATE" means, for any day, a rate per annum equal to (i) the
Alternate Base Rate for such day PLUS (ii) the Applicable Floating Rate Margin,
changing when and as the Alternate Base Rate changes.
"FLOATING RATE ADVANCE" means an Advance which bears interest at the
Floating Rate.
-20-
<PAGE>
"FLOATING RATE LOAN" means a Loan, or portion thereof, which bears interest
at the Floating Rate.
"GATTI" means Gatti LTC Services, Inc., a Pennsylvania corporation
(formerly known as Louis F. Gatti, Incorporated). All references to Gatti shall
be to such corporation after the consummation of the Gatti Acquisition.
"GATTI ACQUISITION" means:
(a) (i) the purchase by the Borrower on August 2, 1994 from William J.
Gatti and Mary Jane Gatti as tenants by the entirety of 38.89% of the
outstanding common Capital Stock of Louis Gatti substantially in accordance
with the terms and conditions set forth in the Stock Purchase Agreement
dated as of August 2, 1994 among Louis Gatti, William J. Gatti and Mary
Jane Gatti as tenants by the entirety and the Borrower (the "LOUIS GATTI
ACQUISITION AGREEMENT");
(ii) the amendment by Louis Gatti of its Articles of Incorporation to
(y) increase to 40,000 from 10,000 the authorized common Capital Stock and
(z) authorize the issuance of 20,000 shares of preferred stock (the terms
and conditions of which shall be acceptable to the Agent (the "GATTI
PREFERRED STOCK"));
(iii) the purchase by the Borrower from Louis Gatti and the issuance
by Louis Gatti of that number of shares of common Capital Stock which, when
added with the shares acquired pursuant to clause (a)(i) herein comprise
eighty percent (80%) of the outstanding common Capital Stock of Louis
Gatti;
(iv) the purchase by the Borrower from Louis Gatti of 7,000 shares of
Gatti Preferred Stock comprising one-hundred percent of the issued and
outstanding Gatti Preferred Stock; and
(b) the acquisition by Louis Gatti of substantially all of the assets
of GSHC (following its completion of the Care Apothecary Acquisition)
substantially in accordance with the terms and conditions set forth in the
Asset Purchase Agreement dated as of August 2, 1994 among GSHC, William J.
Gatti and Mary Jane Gatti as tenants by the entirety and Gatti (the "GSHC
ACQUISITION AGREEMENT").
"GATTI PREFERRED STOCK" is defined in the definition of Gatti Acquisition
above.
"GOVERNMENT RECEIVABLES" means, collectively, Medicaid Receivables,
Medicare Receivables, and CHAMPUS Receivables, and other Receivables from a
Governmental Authority payable to a Specified Subsidiary under government health
care reimbursement and/or payment programs.
"GOVERNMENTAL ACTS" is defined in SECTION 2.26(A) hereof.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without
-21-
<PAGE>
limitation, HCFA, HHS, the Office of CHAMPUS, the Pennsylvania Department of
Public Welfare, the Virginia Department of Medical Assistance Services, and any
other entity responsible for administering payment of any Government
Receivables, including, without limitation in connection with the black lung
program, the railroad retirement assistance program or veterans programs.
"GROSS NEGLIGENCE" means recklessness, the absence of the slightest care or
the complete disregard of consequences. Gross Negligence does not mean the
absence of ordinary care or diligence, or an inadvertent act or inadvertent
failure to act. To the extent the term "gross negligence" is used with respect
to any Person in any of the other Loan Documents, it shall have the meaning set
forth herein.
"GSHC" means G.S.H.C., Inc., a Pennsylvania corporation, prior to the
consummation of the Gatti Acquisition.
"GSHC ACQUISITION AGREEMENT" is defined in the definition of Gatti
Acquisition above.
"GTCR" means, collectively, Golder, Thoma, Cressey, Rauner, Inc., a
Delaware corporation, Golder, Thoma, Cressey, Rauner Fund IV, L.P., a Delaware
limited partnership ("GTCR FUND"), and each of their Affiliates and their
respective successors and assigns.
"HCFA" means the Healthcare Financing Administration of HHS and any Person
succeeding to the functions thereof.
"HEALTH FACILITY LICENSE" means a license or other similar authorization
issued by a federal or state health agency or similar agency or body, including,
without limitation, the Federal Drug Enforcement Agency.
"HHS" means the Department of Health and Human Services and any Person
succeeding to the functions thereof.
"HOLDERS OF SECURED OBLIGATIONS" is defined as set forth in the Security
Agreements.
"ILLINOIS ACQUISITIONS" means the N&M Acquisition and the Dixon
Acquisition.
"INCOME TAX" or "INCOME TAXES" means all federal, state, local, and
foreign taxes (i) based upon, measured by, or calculated with respect to, gross
or net income (including, but not limited to, any capital gains taxes, franchise
taxes, branch profits taxes, minimum taxes and any taxes on items of tax
preference) and (ii) any tax based on, measured by, or calculated with respect
to multiple bases (including, but not limited to, franchise or occupation taxes)
if one or more of the bases on which such tax may be based, measured by, or
computed with respect to, is described in (i) above. With respect to the Agent
or a Lender, "Income Tax" or "Income Taxes" shall include United States federal
withholding taxes under Code Sections 881 and 1442 (or any successor provisions
thereto) imposed on the Lender or the Agent unless the Lender or the Agent, as
the case may be, was not subject to such withholding taxes (either under an
applicable tax treaty concluded by the United States or under the provisions of
Code Sections 881 and 1442) on the later of (i) the Closing Date or (ii) the
date on which the Lender became a Lender or such Agent became the Agent.
-22-
<PAGE>
"INDEBTEDNESS" of any Person means (i) any indebtedness of such Person,
contingent or otherwise, in respect of borrowed money including all principal,
interest, fees and expenses with respect thereto (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, acceptances, debentures or other
instruments or letters of credit (or reimbursement obligations with respect
thereto, including, Reimbursement Obligations under the Letters of Credit) or
representing the balance deferred and unpaid of the purchase price of any
property (including pursuant to Capitalized Leases) or services, if and to the
extent any of the foregoing indebtedness would appear as a liability upon a
balance sheet of such Person prepared in accordance with Agreement Accounting
Principles (except that any such balance that constitutes a trade payable and/or
an accrued liability arising in the ordinary course of business shall not be
considered Indebtedness); (ii) to the extent not otherwise included, (a)
interest accruing after the commencement of any bankruptcy, insolvency,
receivership or similar proceedings and other interest that would have accrued
but for the commencement of such proceedings, (b) any Capitalized Lease
Obligations, (c) the maximum fixed repurchase price of any Redeemable Stock, (d)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, (e) Contingent Obligations (exclusive of whether such items would appear
upon such balance sheet) and (f) Rate Hedging Obligations. For purposes of the
preceding sentence, the maximum fixed repurchase price of any Redeemable Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Redeemable Stock as if such Redeemable Stock were
repurchased on any date on which Indebtedness shall be required to be determined
pursuant to this Agreement, provided that if such Redeemable Stock is not then
permitted to be repurchased, the repurchase price shall be the book value of
such Redeemable Stock. The amount of Indebtedness of any Person at any date
shall be without duplication (i) the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability of any
such Contingent Obligations at such date and (ii) in the case of Indebtedness of
others secured by a Lien to which the property or assets owned or held by such
Person is subject, the lesser of the fair market value at such date of any asset
subject to a Lien securing the Indebtedness of others and the amount of the
Indebtedness secured.
"INDEMNIFIED MATTERS" is defined in SECTION 9.7(B) hereof.
"INDEMNITEES" is defined in SECTION 9.7(B) hereof.
"INSURANCE CLAIMS" shall mean all now owned or hereafter acquired claims,
rights and interests of any Specified Subsidiary arising from a patient's
assignment of his or her claim against an insurance company, proponent of a
health plan or other Person, for services performed for, or Inventory sold to,
such patient by such Specified Subsidiary; PROVIDED Insurance Claims shall not
be construed to include any claims governed by CHAMPUS, CHAMPUS Regulations,
Medicare Regulations or Medicaid Regulations.
"INTERCOMPANY DOCUMENTS" is defined in SECTION 6.3(A)(ii)(8) hereof.
"INTERCOMPANY FINANCING STATEMENT" is defined in SECTION 6.3(A)(ii)(8)
hereof.
"INTERCOMPANY NOTE" is defined in SECTION 6.3(A)(ii)(8) hereof.
-23-
<PAGE>
"INTERCOMPANY SECURITY AGREEMENT" is defined in SECTION 6.3(A)(ii)(8)
hereof.
"INTEREST EXPENSE" is defined in SECTION 6.4(A) hereof.
"INTEREST EXPENSE COVERAGE RATIO" is defined in SECTION 6.4(B) hereof.
"INTEREST PERIOD" means, with respect to a Eurodollar Loan, a period of one
(1), two (2), three (3) or six (6) months commencing on a Business Day selected
by the Borrower pursuant to this Agreement. Such Interest Period shall end on
(but exclude) the day which corresponds numerically to such date one, two, three
or six months thereafter; provided, however, that if there is no such
numerically corresponding day in such next, second, third or sixth succeeding
month, such Interest Period shall end on the last Business Day of such next,
second, third or sixth succeeding month. If an Interest Period would otherwise
end on a day which is not a Business Day, such Interest Period shall end on the
next succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.
"INTEREST RATE AGREEMENTS" is defined in SECTION 6.3(R) hereof.
"INTERPLAN" shall mean a paying agent for certain out-of-state Blue Cross
and/or Blue Shield claims.
"INVENTORY" shall mean any and all goods, including, without limitation,
goods in transit, wheresoever located, whether now owned or hereafter acquired
by any of the members of the Borrower Corporate Group, which are held for sale
or lease, furnished under any contract of service or held as raw materials, work
in process or supplies, and all materials used or consumed in any of the
businesses of the applicable member of the Borrower Corporate Group, and shall
include such property the sale or other disposition of which has given rise to
Receivables and which has been returned to or repossessed or stopped in transit
by any member of the Borrower Corporate Group.
"INVESTMENT" means, with respect to any Person, (i) any purchase or other
acquisition by that Person of stock, partnership interest, membership, ownership
or other equity interests, notes, debentures or other securities, or of a
beneficial interest in stock, partnership interest, membership, ownership or
other equity interests, notes, debentures or other securities, issued by any
other Person, (ii) any purchase by that Person of all or substantially all of
the assets of a business conducted by another Person, and (iii) any loan,
advance (other than deposits with financial institutions available for
withdrawal on demand, prepaid expenses, accounts receivable, advances to
employees and similar items made or incurred in the ordinary course of business)
or capital contribution by that Person to any other Person, including all
Indebtedness to such Person arising from a sale of property by such Person other
than in the ordinary course of its business.
"INVESTOR GROUP" means GTCR Fund and management of AMC.
"IRS" means the Internal Revenue Service and any Person succeeding to the
functions thereof.
-24-
<PAGE>
"JCAHO" means the Joint Commission for Accreditation of Healthcare
Organizations or any Person succeeding to the functions thereof.
"JOHNSON ACQUISITION" means the acquisition on April 17, 1995 by Gatti of
certain of the assets of Johnson Pharmacy & Medical Supply, Inc., a Pennsylvania
corporation, pursuant to that certain Asset Purchase Agreement dated as of April
17, 1995 between Gatti and Johnson Pharmacy & Medical Supply, Inc., Howard L.
Johnson, and Arlene F. Johnson.
"KNOWLEDGE" means as applied to any Person generally, the actual knowledge,
after due inquiry, of any fact or circumstance or any fact or circumstance which
such Person should have known, with respect to any of the (A) chairman of the
board of directors, chief executive officer, chief financial officer, chief
operating officer, executive vice president for operations, treasurer and/or
controller of such Person (or persons performing the functions typically
performed by persons with such titles) and (B) the senior corporate executive
officers and chairman of the board of each Subsidiary of such Person; provided,
however, with respect to Requirements of Law and other matters regulated by any
Governmental Authority the list of Persons in clauses (A) and (B) shall include
the persons primarily responsible for monitoring and ensuring compliance with
such Requirements of Law and other regulatory matters or Persons succeeding to
their respective duties as employees of the such Person as of the Closing Date.
"ISSUING LENDER" is defined in SECTION 2.21 hereof.
"L/C DRAFT" means a draft drawn on any Issuing Lender pursuant to a Letter
of Credit.
"L/C INTEREST" shall have the meaning ascribed to such term in SECTION
2.22.
"L/C OBLIGATIONS" means, with respect to any Specified Subsidiary, without
duplication, an amount equal to the sum of (i) the aggregate of the amount then
available for drawing under each of such Specified Subsidiary's Letters of
Credit, (ii) the face amounts of all outstanding L/C Drafts corresponding to
such Specified Subsidiary's Letters of Credit, which L/C Drafts have been
accepted by the applicable Issuing Lender, (iii) the aggregate outstanding
amount of all Reimbursement Obligations with respect to such Specified
Subsidiary's Letters of Credit at such time and (iv) the aggregate face amount
of all Letters of Credit requested by or on behalf of such Specified Subsidiary
but not yet issued (unless the request for an unissued Letter of Credit has been
denied).
"LENDERS" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns. Unless the context
otherwise requires, references in this Agreement to a Lender or to the Lenders
shall be to such lending institutions in their capacity as a Lender or an
Issuing Lender hereunder.
"LENDING INSTALLATION" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"LETTER OF CREDIT" means (a) that certain outstanding letter of credit (L/C
No. 373035) issued by the Agent for the account of the Borrower in the amount
of $100,000 (the "Existing Letter of Credit"); and (b) the letters of credit to
be issued by one or more of the Issuing Lenders pursuant to SECTION 2.21 hereof.
When reference is made herein to a specified Person's "Letters
-25-
<PAGE>
of Credit," "L/C Drafts" or "Reimbursement Obligations" such reference shall
mean and be with respect to letters of credit issued by an Issuing Lender
pursuant to SECTION 2.21 hereof (i) for the account of such Person or (ii) for
the account of the Borrower and for which such Person is the co-applicant.
"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, the interest of a vendor or lessor
under any conditional sale, Capitalized Lease or other title retention
agreement).
"LOAN(S)" means (i) with respect to a Lender, such Lender's portion of any
Advance made pursuant to SECTION 2.1 or SECTION 2.2, as applicable, (ii) with
respect to the Borrower, Advances made to the Borrower pursuant to SECTION 2.1
or SECTION 2.2, as applicable, and (iii) collectively, all Term Loans,
Acquisition Loans and Revolving Loans, whether made or continued as or
converted to Floating Rate Loans or Eurodollar Loans.
"LOAN ACCOUNT" is defined in SECTION 2.15(F) hereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Subsidiary
Guarantees, the Security Agreement, the Pledge Agreements, the other Collateral
Documents and all other documents, instruments and agreements executed by or on
behalf of any member of the Borrower Corporate Group in connection therewith or
contemplated thereby, as the same may be amended, restated or otherwise modified
and in effect from time to time.
"LOUIS GATTI" means Louis F. Gatti, Incorporated, a Pennsylvania
corporation, after the consummation of the asset and liability transfers to
William J. Gatti and Mary Jane Gatti, as tenants by the entirety, contemplated
by SECTION 7(B) of the Louis Gatti Acquisition Agreement and prior to the
consummation of the Gatti Acquisition.
"LOUIS GATTI ACQUISITION AGREEMENT" is defined in the definition of Gatti
Acquisition above.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (a) the
business, financial condition, operations, performance, or properties of (x) the
Borrower and its Subsidiaries, taken as a whole, (y) any Specified Subsidiary,
individually, or (z) any Specified Subsidiary and its Subsidiaries, taken as a
whole, (b) the ability of any member of the Borrower Corporate Group to perform
any of its respective obligations in any material respect under the Loan
Documents, or (c) the ability of the Lenders, or the Agent to enforce in any
material respect the Obligations or their rights with respect to the Collateral.
"MAXIMUM REVOLVING CREDIT AMOUNT" means, at any particular time, (i) the
lesser of (A) the Revolving Credit Commitments at such time and (B) the
Aggregate Borrowing Base at such time LESS (ii) the amount of any Decision
Reserve in effect at such time.
"MEDICAID CERTIFICATION" means, with respect to any Person or health care
facility, certification by HCFA or a state agency or entity under contract with
HCFA that such Person or facility, as applicable, fully complies with all the
conditions of participation set forth in Medicaid Regulations.
-26-
<PAGE>
"MEDICAID RECEIVABLE" means a Receivable with respect to which the Account
Debtor is a Governmental Authority or agent thereof obligated thereunder
pursuant to Medicaid Regulations.
"MEDICAID REGULATIONS" means, collectively, (i) all federal statutes
(whether set forth in Title XIX of the Social Security Act (42 U.S.C. Sections
1396 ET SEQ.) or elsewhere) affecting the medical assistance program established
by Title XIX of the Social Security Act; (ii) all applicable provisions of all
federal rules, regulations, manuals, orders and administrative, reimbursement
and other guidelines of all Governmental Authorities (whether or not having the
force of law) promulgated pursuant to or in connection with the statutes
described in CLAUSE (i) above; (iii) all state statutes enacted and all state
plans for medical assistance and state plan amendments filed by the state with
HCFA in connection with the statutes and provisions described in CLAUSES (i) and
(ii) above; and (iv) all applicable provisions of all rules, regulations,
manuals, orders and administrative, reimbursement, and other guidelines of all
Governmental Authorities (whether or not having the force of law) promulgated
pursuant to or in connection with any of the foregoing, in each case as may be
amended, supplemented or otherwise modified from time to time.
"MEDICARE CERTIFICATION" means, with respect to any Person or health care
facility, certification by HCFA or a state agency or entity under contract with
HCFA that such Person or facility, as applicable, fully complies with all the
conditions of participation set forth in Medicare Regulations.
"MEDICARE RECEIVABLE" means a Receivable with respect to which the Account
Debtor is a Governmental Authority or agent thereof obligated thereunder
pursuant to Medicare Regulations.
"MEDICARE REGULATIONS" means, collectively, all federal statutes (whether
set forth in Title XVIII of the Social Security Act (42 U.S.C. Sections 1395 ET
SEQ.) or elsewhere) affecting the health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act, together with
all applicable provisions of all rules, regulations, manuals, orders and
administrative, reimbursement and other guidelines of all Governmental
Authorities (including, without limitation, HHS, HCFA, the Office of the
Inspector General for HHS, or any Person succeeding to the functions of any of
the foregoing) promulgated pursuant to or in connection with any of the
foregoing (whether or not having the force of law), as each may be amended,
supplemented or otherwise modified from time to time.
"MULTIEMPLOYER PLAN" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is party to which more than one employer is
obligated to make contributions.
"N&M ACQUISITION" means the acquisition on March 10, 1995 by a Subsidiary
of the Borrower of certain of the assets of Nihan & Martin, Inc. by N&M
Acquisition, Inc. pursuant to that certain Asset Purchase Agreement dated as of
March 10, 1995 between Nihan & Martin, Inc., an Illinois corporation, Frank R.
Gelafio, Lee R. Youngberg, and N&M Acquisition, Inc. (presently known as Nihan &
Martin).
"NET CASH PROCEEDS" means, with respect to any Asset Sale of any Person,
(a) cash (freely convertible into U.S. dollars) received by such Person or any
Subsidiary of such Person
-27-
<PAGE>
from such Asset Sale (including cash received as consideration for the
assumption or incurrence of liabilities incurred in connection with or in
anticipation of such Asset Sale), after (i) provision for all income or other
taxes measured by or resulting from such Asset Sale, (ii) payment of all
brokerage commissions and other fees and expenses related to such Asset Sale,
(iii) all amounts used to repay Indebtedness secured by a Lien on any asset
disposed of in such Asset Sale or which is or may be required (by the express
terms of the instrument governing such Indebtedness) to be repaid in connection
with such Asset Sale (including payments made to obtain or avoid the need for
the consent of any holder of such Indebtedness), (iv) deduction of appropriate
amounts to be provided by such Person or a Subsidiary of such Person as a
reserve, in accordance with Agreement Accounting Principles, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by such Person or a Subsidiary of such Person after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold or disposed of in
such Asset Sale; and (v) with respect to proceeds of an initial public offering
of Capital Stock of AMC, deduction of contractual obligations which exist as of
March 15, 1996 to GTCR and minority shareholders that result from the
consummation of the initial public offering, (b) cash payments in respect of any
Indebtedness, Capital Stock or other consideration received by such Person or
any Subsidiary of such Person from such Asset Sale upon receipt of such cash
payments by such Person or such Subsidiary.
"NET INCOME" is defined in SECTION 6.4(A) hereof.
"NIHAN & MARTIN" means Nihan & Martin, Inc., a Delaware corporation
(formerly known as N&M Acquisition, Inc.)
"NON PRO RATA LOAN" is defined in SECTION 8.2 hereof.
"NOTES" means the Revolving Notes, the Acquisition Loan Notes and the Term
Notes.
"NOTICE OF ASSIGNMENT" is defined in SECTION 12.3(B) hereof.
"OBLIGATIONS" means all Loans, advances, debts, liabilities, obligations,
covenants and duties owing by the Borrower or any other member of the Borrower
Corporate Group to the Agent, any Issuing Lender, any Lender, any Affiliate of
the Agent, any Issuing Lender or any Lender, or any Indemnitee, of any kind or
nature, present or future, arising under this Agreement, the Notes, any other
Loan Document, whether or not evidenced by any note, guaranty or other
instrument, whether or not for the payment of money, whether arising by reason
of an extension of credit, loan, guaranty, indemnification, or in any other
manner, whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, now existing or hereafter arising
and however acquired. The term includes, without limitation, all interest,
charges, expenses, fees, attorneys' fees and disbursements, paralegals' fees (in
each case whether or not allowed), and any other sum chargeable to the Borrower
or any other member of the Borrower Corporate Group under this Agreement or any
other Loan Document.
"OLD WILLIAMSON" means Williamson Drug Company, Incorporated, a Virginia
corporation, prior to the consummation of the Williamson Acquisition.
-28-
<PAGE>
"OTHER TAXES" is defined in SECTION 2.15(E)(ii) hereof.
"PARTICIPANTS" is defined in SECTION 12.2(A) hereof.
"PAYMENT DATE" means the last Business Day of each month.
"PAYOR" shall mean an insurance company, a proponent of a healthcare plan
and other Persons reasonably acceptable to the Agent and the Required Lenders.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PERFECTED GOVERNMENT RECEIVABLES" means Receivables with respect to which
the Account Debtor is any federal, state or municipal Governmental Authority or
any agency or instrumentality thereof in connection with which the Agent has
received an opinion of counsel, from a firm and in form and substance
satisfactory to the Agent, with respect to perfection of the Agent's security
interest with respect thereto. The term "Perfected Government Receivables"
shall also include Medicare and Medicaid Receivables of Williamson's up to an
aggregate amount not to exceed $5,000,000 notwithstanding the fact that the
Agent has not received an opinion of counsel with respect thereto.
"PERMITS" means any permit, approval, authorization, license, variance, or
permission required from a Governmental Authority or other Person under an
applicable Requirement of Law, and shall include, without limitation,
Accreditations, CONs, Health Facility Licenses, CHAMPUS Certifications, Medicaid
Certifications, and Medicare Certifications.
"PERMITTED ACQUISITION" is defined in SECTION 6.3(G) hereof.
"PERMITTED EXISTING CONTINGENT OBLIGATIONS" means those Contingent
Obligations of any member of the Borrower Corporate Group identified as such on
SCHEDULE 1.1.1 to this Agreement.
"PERMITTED EXISTING INDEBTEDNESS" means the Indebtedness of each member of
the Borrower Corporate Group identified as such on SCHEDULE 1.1.2 to this
Agreement.
"PERMITTED EXISTING INVESTMENTS" means the Investments of each member of
the Borrower Corporate Group identified as such on SCHEDULE 1.1.3 to this
Agreement.
"PERMITTED EXISTING LIENS" means the Liens on assets of any member of the
Borrower Corporate Group identified as such on SCHEDULE 1.1.4 to this Agreement.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" means the Indebtedness permitted
pursuant to SECTION 6.3(A)(ii)(12).
"PERMITTED SUBORDINATED INDEBTEDNESS" means Subordinated Indebtedness, if
any, permitted pursuant to SECTION 6.3(A)(ii)(6) and shall include Acquisition
Subordinated Debt, if any, incurred pursuant to SECTION 4.3(C).
-29-
<PAGE>
"PERSON" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any government or political subdivision or any agency, department or
instrumentality thereof.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA in
respect of which the Borrower or any member of the Controlled Group is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"PLEDGE AGREEMENT(S)" means individually or collectively, as applicable,
(a) the Pledge Agreement executed by AMC in favor of the Agent, for the benefit
of itself and the Holders of Secured Obligations, pursuant to which AMC pledges
all of the Capital Stock of the Borrower; (b) the Pledge Agreement executed by
the Borrower in favor of the Agent, for the benefit of itself and the Holders of
Secured Obligations, pursuant to which the Borrower pledges all of the Capital
Stock owned by the Borrower (other than the Gatti Preferred Stock) in each of
its Subsidiaries owned by the Borrower, and; (c) any Pledge Agreement executed
by a Specified Subsidiary in favor of the Agent, for the benefit of itself and
the Holders of Secured Obligations, pursuant to which the Specified Subsidiary
pledges all of the Capital Stock owned by the Specified Subsidiary in each of
its Subsidiaries, in each case as now owned or hereafter acquired by the
respective pledgor to the Agent as collateral security for the Secured
Obligations, as the same may from time to time be amended, modified,
supplemented or restated.
"PRO RATA SHARE" means, with respect to any Lender, the percentage obtained
by dividing (A) the sum of such Lender's Term Loans, such Lender's Acquisition
Loans, such Lender's Acquisition Loan Commitment and Revolving Credit Commitment
at such time (in each case, as adjusted from time to time in accordance with the
provisions of this Agreement or to give effect to any applicable Assignment) by
(B) the sum of the aggregate amount of all of the Term Loans, the Aggregate
Acquisition Loan Commitments and the Aggregate Revolving Loan Commitments at
such time; PROVIDED, HOWEVER, if all of the Commitments are terminated pursuant
to the terms of this Agreement, then "Pro Rata Share" means the percentage
obtained by dividing (x) the sum of such Lender's Term Loans, Revolving Loans
and Acquisition Loans by (y) the aggregate amount of all Term Loans, Revolving
Loans and Acquisition Loans.
"PROVIDER AGREEMENT" means, with respect to any health care facility to
which any Specified Subsidiary provides services or sells Inventory, the
agreement between such health care facility and CHAMPUS, the state agency
administering the Medicaid program and/or HCFA under which such health care
facility agrees to provide services for CHAMPUS patients, Medicaid patients
and/or Medicare patients, as applicable, in accordance with the terms of such
agreement and the applicable CHAMPUS Regulations, Medicaid Regulations and/or
Medicare Regulations.
"PURCHASERS" is defined in SECTION 12.3(A) hereof.
"RATE HEDGING OBLIGATIONS" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-
-30-
<PAGE>
denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants, and (ii) any
and all cancellations, buy backs, reversals, terminations or assignments of any
of the foregoing.
"RATE OPTION" means the Eurodollar Rate or the Floating Rate.
"RECEIVABLE(S)" means and includes, with respect to any Person, all of such
Person's presently existing and hereafter arising or acquired accounts, accounts
receivable, including, without limitation, Government Receivables, and all
present and future rights of such Person to payment for goods sold or leased or
for services rendered (except those evidenced by instruments or chattel paper),
whether or not they have been earned by performance, and all rights in any
merchandise or goods which any of the same may represent, and all rights, title,
security and guaranties with respect to each of the foregoing, including,
without limitation, any right of stoppage in transit.
"REDEEMABLE STOCK" means any Capital Stock which by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, in whole or in part, prior to the maturity of the Obligations
(including any extensions thereof contemplated by this Agreement), or is, by its
terms or upon the happening of any event, redeemable at the option of the holder
thereof, in whole or in part, prior to the maturity of the Obligations
(including any extensions thereof contemplated by this Agreement).
"REDUCED MINIMUMS" is defined in SECTION 2.9 hereof.
"REGISTER" is defined in SECTION 12.3(C) hereof.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"REIMBURSEMENT OBLIGATION" is defined in SECTION 2.23 hereof.
"RENTALS" is defined in SECTION 6.4(A) hereof.
"REPLACEMENT LENDER" is defined in SECTION 2.20 hereof.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it
-31-
<PAGE>
be notified within 30 days of the occurrence of such event, provided, however,
that a failure to meet the minimum funding standards of Section 412 of the Code
and of Section 302 of ERISA shall be a Reportable Event regardless of the
issuance of any such waiver of the notice requirement in accordance with either
Section 4043(a) of ERISA or Section 412(d) of the Code.
"REQUIRED LENDERS" means Lenders whose Pro Rata Shares, in the aggregate,
are equal to or greater than sixty-six and two-thirds percent (66-2/3%);
PROVIDED, HOWEVER, that, in the event any of the Lenders shall have failed to
fund its Pro Rata Share of any Revolving Loan or Acquisition Loans requested by
the Borrower which such Lenders are obligated to fund under the terms of this
Agreement and any such failure has not been cured, then for so long as such
failure continues, "REQUIRED LENDERS" means Lenders (excluding all Lenders whose
failure to fund their respective Pro Rata Shares of such Revolving Loans or
Acquisition Loans have not been so cured) whose Pro Rata Shares represent sixty-
six and two-thirds percent (66-2/3%) or more of the aggregate Pro Rata Shares of
the remaining Lenders; PROVIDED, FURTHER, HOWEVER, that, in the event that the
Commitments have been terminated pursuant to the terms of this Agreement,
"REQUIRED LENDERS" means Lenders (without regard to such Lenders' performance of
their respective obligations hereunder) whose aggregate ratable shares (stated
as a percentage) of the aggregate outstanding principal balance of all Loans are
equal to or greater than sixty-six and two-thirds percent (66-2/3%).
"REQUIREMENTS OF LAW" means, as to any Person, the charter and by-laws or
other organizational or governing documents of such Person, and any law, rule or
regulation, or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject including,
without limitation, the Securities Act, the Securities Exchange Act,
Regulations G, U and X, ERISA, the Fair Labor Standards Act, the Worker
Adjustment and Retraining Notification Act, Americans with Disabilities Act of
1990, the Social Security Act, CHAMPUS Regulations, Medicaid Regulations,
Medicare Regulations, any CON, and any certificate of occupancy, zoning
ordinance, building, environmental or land use requirement or Permit or
environmental, labor, employment, occupational safety or health law, rule or
regulation, including Environmental, Health or Safety Requirements of Law
(including, without limitation, those applicable to the disposal of medical
waste).
"RESERVES" shall mean the maximum reserve requirement, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) with respect
to "Eurocurrency liabilities" or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on Eurodollar
Loans is determined or category of extensions of credit or other assets which
includes loans by a non-United States office of any Lender to United States
residents.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of Capital Stock of
any member of the Borrower Corporate Group now or hereafter outstanding, except
a dividend payable solely in shares of that class of stock or in any junior
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of Capital Stock of any member of the
Borrower Corporate Group now or hereafter outstanding, (iii) any payment or
prepayment of principal of, premium, if any, or interest, fees or other charges
on or with respect to, and any redemption, purchase,
-32-
<PAGE>
retirement, defeasance, sinking fund or similar payment and any claim for
rescission with respect to any Permitted Subordinated Indebtedness, (iv) any
payment made to redeem, purchase, repurchase or retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of Capital Stock of any member of the Borrower Corporate
Group now or hereafter outstanding (v) any payment of a claim for the rescission
of the purchase or sale of, or for material damages arising from the purchase or
sale of any Permitted Subordinated Indebtedness or any shares of the capital
stock of any member of the Borrower Corporate Group or of a claim for
reimbursement, indemnification or contribution arising out of or related to any
such claim for damages or rescission, (vi) any payment of management fees (A) by
the Borrower or any other member of the Borrower Corporate Group to AMC or (B)
by any member of the Borrower Corporate Group to GTCR, any member of the
Investor Group or their Affiliates and (vii) any Contingent Purchase Price
Payments.
"REVOLVING CREDIT AVAILABILITY" means, at any particular time, the amount
by which the Maximum Revolving Credit Amount at such time exceeds the Revolving
Credit Obligations at such time.
"REVOLVING CREDIT OBLIGATIONS" means, at any particular time (i) the
aggregate principal amount of all of the Revolving Loans at such time PLUS (ii)
the aggregate L/C Obligations at such time.
"REVOLVING LOAN COMMITMENT" means, with respect to any Lender, the
obligation of such Lender to make Revolving Loans and to purchase participations
in Letters of Credit on the terms and conditions of this Agreement, and which
shall not exceed the aggregate principal amount set forth on EXHIBIT B opposite
such Lender's name under either of the applicable headings "Revolving Loan
Commitment Prior to the Commitment Increase Date" or "Revolving Loan Commitment
After the Commitment Increase Date" or as indicated in the Assignment by which
it became a Lender, in each case as modified from time to time pursuant to the
terms of this Agreement or to give effect to any applicable Assignment.
"REVOLVING NOTE" means a promissory note, in substantially the form of
EXHIBIT C1 hereto, duly executed by the Borrower and payable to the order of a
Lender in the amount of its Revolving Loan Commitment, including any amendment,
restatement, modification, renewal or replacement of such Revolving Note.
"RISK BASED CAPITAL GUIDELINES" is defined in SECTION 3.2 hereof.
"SECURED OBLIGATIONS" means, collectively, (i) the Obligations and (ii) all
Rate Hedging Obligations owing to one or more of the Lenders.
"SECURITY AGREEMENT(S)" means (i) those certain Security Agreements each
dated as of the date hereof executed by the Borrower and each of its Specified
Subsidiaries as of the date of this Agreement, respectively, in favor of the
Agent for the benefit of the Holders of Secured Obligations, and (ii) any
Security Agreement executed by any other member of the Borrower Corporate Group
in favor of the Agent for the benefit of the Holders of Secured Obligations in
connection with this Agreement, which Subsidiary Security Agreement shall be in
substantially the form of EXHIBIT D attached hereto, in each case as amended,
restated or otherwise modified from time to time.
-33-
<PAGE>
"SERVICES AGREEMENT" means the Professional Services Agreement dated as of
December 3, 1993 by and between GTCR Fund and AMC, as the same is in existence
as of August 2, 1994.
"SINGLE EMPLOYER PLAN" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"SOCIAL SECURITY ACT" means the Social Security Act, 42 U.S.C. Sections 301
ET SEQ., any amendments thereto, any successor statutes, and any regulations or
guidance promulgated thereunder.
"SPECIFIED ACQUISITIONS" means, as of the date of this Agreement, the Care
Apothecary Acquisition, the Gatti Acquisition, the Williamson Acquisition, the
N&M Acquisition, the Dixon Acquisition, the Sterling Acquisition, the Johnson
Acquisition and the Extended Care Acquisition and shall mean and include, as of
the consummation thereof in accordance with the terms of this Agreement, any
Permitted Acquisition.
"SPECIFIED SUBSIDIARIES" means, as of the date of this Agreement, Gatti,
Williamson's, Nihan & Martin, Dixon and Sterling, and shall mean and include
each other Subsidiary of the Borrower acquired or established as of the date of
consummation of a Permitted Acquisition on the terms and conditions set forth in
this Agreement and subject to satisfaction of the terms of SECTION 4.3 herein
and "SPECIFIED SUBSIDIARY" shall mean any one of the foregoing.
"STERLING" means Sterling Healthcare Services, Inc., a Delaware
corporation.
"STERLING ACQUISITION" means the acquisition on August 3, 1995 of certain
of the assets of Sterling Acquisition Partners, Inc., by Sterling pursuant to
that certain Asset Purchase Agreement dated as of August 3, 1995 between
Sterling Acquisition Partners, Inc., Barry J. Klein, Robert Foley, Charles L.
Brown, John F. Johnston, James Vanderhoven, Michael S. Brown, Richard L. Greer,
Paul A. Green, Kaissar Ibrahim, Wayne S. Morehead, Matthew S. Robinson and
Darius Nida, and Sterling.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Borrower or any
other member of the Consolidated AMC Group, the payment of which is subordinated
to payment of the Secured Obligations to the written satisfaction of the
Required Lenders.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "SUBSIDIARY"
shall mean a Subsidiary of the Borrower.
"SUBSIDIARY GUARANTEES" means (i) those certain Guarantees each dated as of
the date hereof executed by the Borrower and each of its Specified Subsidiaries
as of the date of this Agreement, respectively, in favor of the Agent for the
benefit of the Holders of Secured
-34-
<PAGE>
Obligations, and (ii) any Guarantees executed by any other member of the
Borrower Corporate Group in favor of the Agent for the benefit of the Holders of
Secured Obligations in connection with this Agreement, which Guarantees shall be
in substantially the form of EXHIBIT G attached hereto, in each case as amended,
restated or otherwise modified from time to time.
"SUPPLEMENTAL COMMITMENT" means, for each Lender, the obligation of such
lender to make one or more Revolving Loans or Acquisition Loans not exceeding
the amount set forth on EXHIBIT B opposite such Lender's name (or, if
applicable, Additional Lender(s)) under the respective heading "Acquisition Loan
Commitment After the Commitment Increase Date" and "Revolving Loan Commitment
After the Commitment Increase Date", or as indicated in the Assignment by which
it became a Lender in each case as modified from time to time pursuant to the
terms of this Agreement.
"TARGET" is defined in the definition of Acquisition above.
"TAXES" is defined in SECTION 2.15(E)(i) hereof.
"TERM LOAN(S)" is defined in SECTION 2.1(A) hereof.
"TERM LOAN TERMINATION DATE" means March 15, 2002.
"TERM NOTE" means a promissory note, in substantially the form of EXHIBIT
C2 hereto, duly executed by the Borrower and payable to the order of a Lender in
an amount which shall not exceed the aggregate principal amount set forth on
Exhibit B opposite such Lender's name under either of the applicable headings
"Term Loan Amounts Prior to the Commitment Increase Date" or "Term Loan Amounts
After the Commitment Increase Date" or as indicated in the Assignment by which
it became a Lender, (in each case as modified from time to time pursuant to this
Agreement), including any amendment, restatement, modification, renewal or
replacement of such Term Note.
"TERMINATION DATE" means the earlier of (a) March 15, 2002 and (b) the date
of termination of the Commitments pursuant to SECTION 2.6 or SECTION 8.1.
"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Borrower or any member of the
Controlled Group from a Benefit Plan during a plan year in which the Borrower or
such Controlled Group member was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the cessation of operations which results in the
termination of employment of twenty percent (20%) of Benefit Plan participants
who are employees of the Borrower or any member of the Controlled Group; (iii)
the imposition of an obligation on the Borrower or any member of the Controlled
Group under Section 4041 of ERISA to provide affected parties written notice of
intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to
terminate a Benefit Plan; (v) any event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Benefit Plan; or (vi) the partial or complete
withdrawal of the Borrower or any member of the Controlled Group from a
Multiemployer Plan.
-35-
<PAGE>
"TRANSACTION COSTS" means the fees, costs and expenses payable by the
Borrower and/or any other member of the Borrower Corporate Group in connection
with the execution, delivery and performance of the Transaction Documents and
the consummation of the Specified Acquisitions.
"TRANSACTION DOCUMENTS" means the Loan Documents and the Acquisition
Documents.
"TRANSFEREE" is defined in SECTION 12.4 hereof.
"TYPE" means, with respect to any Loan, its nature as a Floating Rate Loan
or a Eurodollar Loan.
"UNFUNDED LIABILITIES" means the amount (if any) by which the present value
of all vested nonforfeitable benefits under all Single Employer Plans exceeds
the fair market value of all such Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plans, and (ii) in
the case of Multiemployer Plans, the withdrawal liability that would be incurred
by the Controlled Group if all members of the Controlled Group completely
withdrew from all Multiemployer Plans.
"UNMATURED DEFAULT" means an event which, but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"WILLIAMSON ACQUISITION" means the acquisition on August 11, 1994, by the
Borrower of ninety percent (90%) of the outstanding Capital Stock of Old
Williamson's, substantially in accordance with the terms and conditions set
forth in Stock Purchase Agreement dated as of August 11, 1994 among Old
Williamson's, Nelson L. Showalter, AMC, and the Borrower.
"WILLIAMSON" means Williamson Drug Company, Incorporated, a Virginia
corporation.
"WORKING CAPITAL" means, as at any date of determination, the excess, if
any, consolidated in each case for the Borrower Corporate Group of
(i) consolidated current assets, except cash and Cash Equivalents, over (ii) the
consolidated current liabilities, except current maturities of long-term debt
and Revolving Credit Obligations as of such date and all accrued interest as of
such date.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms. Any accounting terms used in this
Agreement which are not specifically defined herein shall have the meanings
customarily given them in accordance with generally accepted accounting
principles in existence as of the date hereof, consistently applied. For any
Person which was the subject of an Acquisition such accounting principles shall
be applied in a manner consistent with that used in preparing the audited or
reviewed, as applicable, financial statements for such Person's fiscal year
immediately preceding its Acquisition.
-36-
<PAGE>
1.2 SUBSIDIARY REFERENCES. The existence throughout this Agreement of
references to the Borrower's Subsidiaries is for a matter of convenience only
and shall not in any way be construed as consent by the Agent or any Lender to
the establishment, maintenance or Acquisition of any additional Subsidiary or
Specified Subsidiary.
1.3 SCHEDULE REFERENCES; SUPPLEMENTAL DISCLOSURE. The parties to this
Agreement acknowledge and agree that the Schedules hereto have been prepared
without reference to factual changes which may result from consummation of any
Permitted Acquisition. The Borrower shall be permitted to revise the Schedules
in connection with Permitted Acquisitions after the Closing Date provided such
changes are reasonably acceptable to the Agent and the Required Lenders. At any
time at the request of the Agent and at such additional times as the Borrower
determines, the Borrower shall supplement each schedule or representation herein
or in the other Loan Documents with respect to any matter hereafter arising
which, if existing or occurring at the date of this Agreement, would have been
required to be set forth or described in such schedule or as an exception to
such representation or which is necessary to correct any information in such
schedule or representation which has been rendered inaccurate thereby. If any
such supplement to such schedule or representation discloses the existence or
occurrence of events, facts or circumstances which are restricted or prohibited
by the terms of this Agreement or any other Loan Documents, such supplement to
such schedule or representation shall not be deemed an amendment thereof unless
expressly consented to in writing by Agent and the Required Lenders, and no such
amendments, except as the same may be consented to in a writing which expressly
includes a waiver, shall be or be deemed a waiver by the Agent or any Lender of
any Default disclosed therein. Any items disclosed in any such supplemental
disclosures shall be included in the calculation of any baskets, limits or
similar restrictions contained in this Agreement or any other Loan Document.
ARTICLE II: THE CREDITS
2.1. TERM LOANS. (a) AMOUNT OF TERM LOANS. Subject to the terms and
conditions set forth in this Agreement, each Lender hereby severally and not
jointly agrees to make on the Closing Date, a term loan, in Dollars, to the
Borrower in an amount equal to such Lender's Term Loan in an amount set forth in
EXHIBIT B (individually, a "TERM LOAN" and, collectively, the "TERM LOANS").
The aggregate amount of the Term Loans is $25,000,000. All Term Loans shall be
made by the Lenders simultaneously and proportionately to their respective Pro
Rata Shares, it being understood that no Lender shall be responsible for any
failure by any other Lender to perform its obligation to make any Term Loan
hereunder nor shall the Term Loan of any Lender be increased or decreased as a
result of any such failure.
(b) ACQUISITION LOANS. Subject to the terms and conditions set forth in
this Agreement (including the conditions precedent set forth in SECTION 4.3),
each Lender hereby severally and not jointly agrees to make from time to time on
each Acquisition Closing Date, revolving loans, in Dollars, to the Borrower
which shall convert into term loans (individually, an "ACQUISITION LOAN" and
collectively, the "ACQUISITION LOANS") from time to time in an amount not to
exceed such Lender's Pro Rata Share of Acquisition Loan Availability at such
time; PROVIDED, HOWEVER, at no time shall the aggregate outstanding Acquisition
Loans exceed the Aggregate Acquisition Loan Commitment. Subject to the terms
and conditions set forth in this Agreement (including the conditions precedent
set forth in SECTION 4.3), the Borrower may borrow, repay and reborrow
-37-
<PAGE>
Acquisition Loans at any time on or prior to the Conversion Date in connection
with any Acquisition approved by the Required Lenders under SECTION 4.3. The
initial Acquisition Loans to the Borrower shall be Floating Rate Loans and
thereafter may be continued as Floating Rate Loans or converted into Eurodollar
Loans in the manner provided in SECTION 2.10 and subject to the other conditions
and limitations therein set forth and set forth in ARTICLE II. On the
Conversion Date, the Acquisition Loans shall automatically convert to term loans
and be repaid in accordance with SECTION 2.1(e)(ii). All Acquisition Loans
shall be made by the Lenders simultaneously and proportionately to their
respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any failure by any other Lender to perform its obligation to
make any Acquisition Loan hereunder nor shall the Acquisition Loan Commitment of
any Lender be increased or decreased as a result of any such failure.
(c) BORROWING NOTICE. The Borrower shall deliver to the Agent an executed
Borrowing Notice on the Closing Date and on the date that is one (1) Business
Day prior to any Acquisition Closing Date. Such Borrowing Notice shall specify
(i) the aggregate amount of the Term Loans or the Acquisition Loans to be made
to it, respectively, and (ii) instructions for the disbursement of the proceeds
of such Acquisition Loans or Term Loans, respectively. The Term Loans of the
Borrower shall initially be Floating Rate Loans and thereafter may be continued
as Floating Rate Loans or converted into Eurodollar Loans in the manner provided
in SECTION 2.10 and subject to the other conditions and limitations therein set
forth and set forth in ARTICLE II. Any Borrowing Notice given pursuant to this
SECTION 2.1(c) shall be irrevocable.
(d) MAKING OF TERM LOANS AND ACQUISITION LOANS. Promptly after receipt of
the Borrowing Notice under SECTION 2.1(c) in respect of the Term Loans or
Acquisition Loans, the Agent shall notify each Lender by telex or telecopy, or
other similar form of transmission, of the proposed Advance. Each Lender shall
deposit an amount equal to its Pro Rata Share of the Term Loans or Acquisition
Loans, respectively, with the Agent at its office in Chicago, Illinois, in
immediately available funds, on the date of borrowing specified in the Borrowing
Notice. Subject to the fulfillment of the conditions precedent set forth in
SECTIONS 4.1, 4.2, and, if applicable, 4.3 the Agent shall make the proceeds of
such amounts received by it available to the Borrower at the Agent's office in
Chicago, Illinois on such Borrowing Date and shall disburse such proceeds in
accordance with the Borrower's disbursement instructions set forth in such
Borrowing Notice. The failure of any Lender to deposit the amount described
above with the Agent on the applicable Borrowing or Acquisition Closing Date
shall not relieve any other Lender of its obligations hereunder to make its Term
Loan or Acquisition Loan on such date.
(e) REPAYMENT OF THE TERM LOANS AND ACQUISITION LOANS. (i) The Term Loans
shall be repayable in twenty-four (24) consecutive quarterly installments
payable on the last day of each calendar quarter commencing on June 30, 1996 and
continuing thereafter until the Term Loan Termination Date, and the Term Loans
shall be permanently reduced by the amount of each installment on the date
payment thereof is required to be made hereunder. The installments shall be in
the aggregate amount set forth below:
INSTALLMENT DATE INSTALLMENT AMOUNT
---------------- ------------------
June 30, 1996 $375,000
September 30, 1996 $375,000
December 31, 1996 $375,000
-38-
<PAGE>
March 31, 1997 $375,000
June 30, 1997 $875,000
September 30, 1997 $875,000
December 31, 1997 $875,000
March 31, 1998 $875,000
June 30, 1998 $906,000
September 30, 1998 $906,000
December 31, 1998 $906,000
March 31, 1999 $906,000
June 30, 1999 $906,000
September 30, 1999 $906,000
December 31, 1999 $906,000
March 31, 2000 $906,000
June 30, 2000 $1,438,000
September 30, 2000 $1,438,000
December 31, 2000 $1,438,000
March 31, 2001 $1,438,000
June 30, 2001 $1,750,000
September 30, 2001 $1,750,000
December 31, 2001 $1,750,000
March 31, 2002 $1,750,000
In addition, the then outstanding principal balance of the Term Loans shall be
due and payable on the Term Loan Termination Date. All amounts repaid with
respect to the Term Loans may not be reborrowed.
(ii) The outstanding principal balance of the Acquisition Loans on the
Conversion Date shall be repayable in sixteen consecutive quarterly installments
payable on the last day of each calendar quarter commencing on June 30, 1998 and
continuing thereafter until the Term Loan Termination Date, and the Acquisition
Loans shall be permanently reduced by the amount of each installment on the date
payment thereof is required to be made hereunder. The installments shall be in
the aggregate amount equal to the applicable percentage of the principal balance
of the Acquisition Loans outstanding on the Conversion Date set forth below:
INSTALLMENT DATE APPLICABLE PERCENTAGE
---------------- ---------------------
June 30, 1998 .875%
September 30, 1998 .875%
December 31, 1998 .875%
March 31, 1999 .875%
June 30, 1999 2.0833%
September 30, 1999 2.0833%
-39-
<PAGE>
December 31, 1999 2.0833%
March 31, 2000 2.0833%
June 30, 2000 2.0833%
September 30, 2000 2.0833%
December 31, 2000 2.0833%
March 31, 2001 2.0833%
June 30, 2001 2.5972%
September 30, 2001 2.5972%
December 31, 2001 2.5972%
March 31, 2002 72.0420%
In addition, the then outstanding principal balance of the Acquisition Loans
shall be due and payable on the Term Loan Termination Date. After the
Conversion Date, amounts repaid with respect to the Acquisition Loans may not be
reborrowed.
(iii) In addition to the scheduled payments on the Term Loans and
Acquisition Loans, the Borrower may make the voluntary prepayments described in
SECTION 2.5(A) and shall make the mandatory prepayments prescribed in SECTION
2.5(B), for credit against such scheduled payments on the Term Loans or the
Acquisition Loans, respectively, pursuant to SECTION 2.5(B).
2.2 REVOLVING LOANS. Upon the satisfaction of the conditions precedent
set forth in SECTIONS 4.1 and 4.2 hereof, from and including the date of this
Agreement and prior to the Termination Date, each Lender severally agrees, on
the terms and conditions set forth in this Agreement, to make revolving loans
(individually, a "REVOLVING LOAN" and collectively "REVOLVING LOANS") to the
Borrower from time to time in an amount not to exceed such Lender's Pro Rata
Share of Revolving Credit Availability at such time; PROVIDED, HOWEVER, at no
time shall the Revolving Credit Obligations exceed the Maximum Revolving Credit
Amount. Subject to the terms of this Agreement, the Borrower may borrow, repay
and reborrow at any time prior to the Termination Date. The initial Revolving
Loans to the Borrower shall be Floating Rate Loans and thereafter may be
continued as Floating Rate Loans or converted into Eurodollar Loans in the
manner provided in SECTION 2.10 and subject to the other conditions and
limitations therein set forth and set forth in ARTICLE II. On the Termination
Date, the Borrower shall repay in full the outstanding principal balance of its
Revolving Loans.
2.3 RATABLE LOANS. (i) Each Advance under SECTION 2.1(b) shall consist of
Acquisition Loans made by each Lender ratably in proportion to such Lender's
respective Pro Rata Share. (ii) Each Advance under SECTION 2.2 shall consist of
Revolving Loans made by each Lender ratably in proportion to such Lender's
respective Pro Rata Share.
2.4 RATE OPTIONS FOR ALL ADVANCES. The Advances may be Floating Rate
Advances or Eurodollar Advances, or a combination thereof, selected by the
Borrower in accordance with SECTION 2.10; provided, however, notwithstanding
anything herein to the contrary, the Borrower may not select Eurodollar Rate
Interest Periods in excess of one (1) month for any Loans prior to the earlier
to occur of (a) three (3) months after the Commitment Increase Date or (b)
November 31, 1996 without the Agent's consent. The Borrower may select, in
accordance with SECTION
-40-
<PAGE>
2.10, Rate Options and Interest Periods applicable to portions of the Revolving
Loans, Acquisition Loans and the Term Loans; PROVIDED that there shall be no
more than ten (10) Interest Periods in effect with respect to all of the Loans
of the Borrower at any time.
2.5 OPTIONAL PAYMENTS; MANDATORY PREPAYMENTS.
(A) OPTIONAL PAYMENTS. The Borrower may from time to time repay or
prepay, without penalty or premium, all or any part of outstanding Floating Rate
Advances. Subject to payment of all amounts payable pursuant to SECTION 3.4, a
Eurodollar Advance may be voluntarily repaid or prepaid prior to the last day of
the applicable Interest Period. Unless the aggregate outstanding principal
balance of the Borrower's Term Loans and, after the Conversion Date, the
Acquisition Loans are to be prepaid in full, voluntary prepayments of the Term
Loans and the Acquisition Loans shall be in an aggregate minimum amount of
$250,000 and integral multiples of $100,000 in excess of that amount. Each
voluntary prepayment shall be applied (i) first, prior to the Conversion Date,
to the unpaid installments of the Term Loans in the inverse order of maturity;
and (ii) second, after the Conversion Date, ratably to the unpaid installments
of the Term Loans and Acquisition Loans in the inverse order of maturity.
(B) MANDATORY PREPAYMENTS.
(i) MANDATORY PREPAYMENTS OF TERM LOANS AND ACQUISITION LOANS.
(a) Except as expressly provided in CLAUSES (1) through (3) below,
upon the consummation of any Asset Sale by AMC or any member of the
Borrower Corporate Group, the Net Cash Proceeds of which (when aggregated
with all other Asset Sales in the immediately 12-month period) are greater
than $200,000 in any 12-month period, within three (3) Business Days after
AMC or the applicable Borrower Corporate Group member's (i) receipt of any
Net Cash Proceeds from any such Asset Sale, or (ii) conversion to cash or
Cash Equivalents of non-cash proceeds (whether principal or interest and
including securities, release of escrow arrangements or lease payments)
received from any such Asset Sale, the Borrower shall make or cause to be
made a mandatory prepayment of the Obligations in an amount equal to (x)
fifty percent (50%) of such Net Cash Proceeds in the case of an Asset Sale
in connection with the Borrower's or AMC's issuance of Capital Stock or
public offering of Capital Stock and (y) one hundred percent (100%) of such
Net Cash Proceeds or such proceeds converted from non-cash to cash or Cash
Equivalents of all other Asset Sales. No mandatory prepayment shall be
required:
(1) in the case of Asset Sales conducted pursuant to the terms
of SECTION 6.3(B)(i) below;
(2) in connection with an Asset Sale comprised of a sale,
conveyance, disposition or other transfer of any Capital Stock of the
Borrower to AMC or GTCR pursuant to the terms of SECTION 6.3(B)(iv)
provided the Net Cash Proceeds therefrom are received when no Default
has occurred and is continuing;
(3) if, within sixty (60) days after the consummation of any
Asset Sale (other than with respect to Receivables or Inventory) that
is made in connection
-41-
<PAGE>
with the anticipated purchase by the applicable Specified Subsidiary
of replacement assets of a like kind, the Net Cash Proceeds thereof
have been used by the applicable Specified Subsidiary for the
replacement of the assets sold by assets of a like kind and the
Specified Subsidiary shall have delivered to the Agent written
evidence of the use of the Net Cash Proceeds for such purchase;
PROVIDED, FURTHER if such Specified Subsidiary shall not have provided
evidence of such use or if less than all of the Net Cash Proceeds are
used for such replacement, then a mandatory prepayment will be
required to be made on the sixtieth (60th) day after the consummation
of such Asset Sale in the amount of such Net Cash Proceeds (or
unutilized portion thereof).
(b) Simultaneously with the delivery of the annual audited financial
statements for the Borrower Corporate Group required to be delivered
pursuant to SECTION 6.1(a)(iii) for each Cash Flow Period, the Borrower
shall calculate Excess Cash Flow for such Cash Flow Period and shall make a
mandatory prepayment, payable no later than ten (10) days after such
calculation and financial statements are delivered, in an amount equal to
(i) one hundred percent (100%) of such Excess Cash Flow if the Leverage
Ratio reflected in such audited financial statements was greater than or
equal to 3.5 to 1.0 and (ii) seventy-five percent (75%) of such Excess Cash
Flow if the Leverage Ratio reflected in such audited financial statements
was less than 3.5 to 1.0.
(c) Within two (2) Business Days after receipt by the any member of
the Borrower Corporate Group of any Net Cash Proceeds of Indebtedness
permitted by SECTION 6.3(A)(6), other than Indebtedness issued to AMC or
GTCR, if such cash proceeds are received at a time when no Default has
occurred and is continuing, at the request of the Agent or the Required
Lenders, the Borrower shall make or cause to be made a mandatory prepayment
in an amount equal to one-hundred percent (100%) of such proceeds of
Indebtedness.
(d) Nothing in this SECTION 2.5(B)(I) shall be construed to
constitute the Lenders' consent to any transaction referred to in CLAUSES
(a) and (c) above which is not expressly permitted by or is prohibited by
the terms of this Agreement.
(e) Each mandatory prepayment required by CLAUSES (a), (b) and (c) of
this SECTION 2.5(B) shall be referred to herein as a "DESIGNATED
PREPAYMENT". Designated Prepayments resulting from Asset Sales which are
not public offerings of the stock of either AMC or the Borrower, shall be
allocated and applied to the Obligations as follows:
(I) the amount of each Designated Prepayment shall be
applied:
(i) prior to the Conversion Date, to the unpaid installments of
the Term Loans in the inverse order of maturity,
(ii) after the Conversion Date, ratably to the unpaid
installments of the Term Loans and Acquisition Loans in the
inverse order of maturity and, if the Term Loans and Acquisition
Loans are repaid in full, to repay the Revolving Loans (but shall
reduce Revolving Loan Commitments only at the option of the
Borrower);
-42-
<PAGE>
and thereafter
(II) the amount of each Designated Prepayment shall be
applied first to repay Revolving Loans (but shall reduce
Revolving Loan Commitments only at the option of the Borrower);
second, following the payment in full of the Revolving Loans if
such prepayment is made prior to the Conversion Date to repay the
Acquisition Loans (but shall reduce the Acquisition Loan
Commitments only at the option of the Borrower); and third,
following the payment in full of the Revolving Loans and
Acquisition Loans, the amount of each Designated Prepayment shall
be applied first to interest on the Reimbursement Obligations,
then to principal on the Reimbursement Obligations, then to fees
on account of Letters of Credit and then, to the extent any L/C
Obligations are contingent, deposited with the Agent as cash
collateral in respect of such L/C Obligations.
Designated Prepayments resulting from Asset Sales which are public
offerings of the stock of either AMC or the Borrower shall be
allocated and applied to the Obligations as follows: the amount of
each Designated Prepayment shall be applied first to repay Revolving
Loans (but shall reduce Revolving Loan Commitments only at the option
of the Borrower); second, following the payment in full of the
Revolving Loans if such prepayment is made prior to the Conversion
Date, to repay the Acquisition Loans (but shall reduce the Acquisition
Loan Commitments only at the option of the Borrower); or if such
prepayment is made after the Conversion Date to the unpaid
installments of the Acquisition Loans in the inverse order of
maturity.
(f) On the date any Designated Prepayment is received by the Agent,
such prepayment shall be applied first to Floating Rate Loans and to any
Eurodollar Loans maturing on such date. The Agent shall hold the remaining
portion of such Designated Prepayment as cash collateral in an interest
bearing deposit account and shall apply funds from such account to
subsequently maturing Eurodollar Loans in order of maturity.
(ii) MANDATORY PREPAYMENTS OF REVOLVING LOANS. In addition to repayments
under SECTION 2.5(B)(i)(e)(II), immediately, if the Revolving Credit Obligations
are greater than the Maximum Revolving Credit Amount, the Borrower shall make a
mandatory prepayment of the Obligations in an amount equal to such excess. In
addition, to the extent the Maximum Revolving Credit Amount is at any time less
than the amount of contingent L/C Obligations outstanding at any time, the
Borrower shall deposit cash collateral with the Agent in an amount equal to the
amount by which such L/C Obligations exceed such Maximum Revolving Credit
Amount.
2.6 REDUCTION OF COMMITMENTS. The Borrower may permanently reduce either
the Aggregate Revolving Loan Commitment or the Aggregate Acquisition Loan
Commitment in whole, or in part ratably among the Lenders, in an aggregate
minimum amount of $250,000 and integral multiples of $100,000 in excess of that
amount, upon at least three Business Days' written notice to the Agent, which
notice shall specify the amount of any such reduction and whether such reduction
relates to the Aggregate Revolving Loan Commitment or the Aggregate
-43-
<PAGE>
Acquisition Loan Commitment; PROVIDED, HOWEVER, that the amount of the Aggregate
Revolving Loan Commitment may not be reduced below the aggregate principal
amount of the outstanding Revolving Credit Obligations. All accrued commitment
fees with respect to the portion of the Aggregate Revolving Loan Commitments or
Aggregate Acquisition Loan Commitments being terminated shall be payable on the
effective date of any termination of the obligations of the Lenders to make
Revolving Loans or Acquisition Loans, as applicable, hereunder.
2.7 METHOD OF BORROWING. Not later than 2:00 p.m. (Chicago time) on each
Borrowing Date or Acquisition Loan Closing Date, each Lender shall make
available its Revolving Loan or Revolving Loans or Acquisition Loan or
Acquisition Loans (respectively) in funds immediately available in Chicago to
the Agent at its address specified pursuant to ARTICLE XIII hereof. The Agent
will promptly make the funds so received from the Lenders available to the
Borrower at the Agent's aforesaid address.
2.8 METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR ADVANCES;
DETERMINATION OF APPLICABLE MARGINS.
(a) METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR ADVANCES. The
Borrower shall select the Type of Advance and, in the case of each Eurodollar
Advance, the Interest Period applicable to each of its Advances from time to
time. The Borrower shall give the Agent irrevocable notice (a "BORROWING
NOTICE") not later than 11:00 a.m. (Chicago time) on the Borrowing Date of each
Floating Rate Advance and three Business Days before the Borrowing Date for each
Eurodollar Advance, specifying: (i) the Borrowing Date (which shall be a
Business Day) of such Advance; (ii) the aggregate amount of such Advance; (iii)
the Type of Advance selected; and (iv) in the case of each Eurodollar Advance,
the Interest Period applicable thereto. The Borrower shall select Interest
Periods so that, to the best of the Borrower's knowledge, it will not be
necessary to prepay all or any portion of any Eurodollar Advance prior to the
last day of the applicable Interest Period in order to make mandatory
prepayments as required pursuant to the terms hereof. Each Floating Rate
Advance and all Obligations other than Loans shall bear interest from and
including the date of the making of such Advance to (but not including) the date
of repayment thereof at the Floating Rate, changing when and as such Floating
Rate changes. Changes in the rate of interest on that portion of any Advance
maintained as a Floating Rate Loan will take effect simultaneously with each
change in the Alternate Base Rate. Each Eurodollar Advance shall bear interest
from and including the first day of the Interest Period applicable thereto to
(but not including) the last day of such Interest Period at the interest rate
determined as applicable to such Eurodollar Advance.
(b) DETERMINATION OF APPLICABLE MARGINS AND APPLICABLE LETTER OF CREDIT
FEE.
(i) DEFINITIONS. As used in this SECTION 2.8(b) and in this Agreement,
the following terms shall have the following meanings:
"APPLICABLE LETTER OF CREDIT FEE" and "APPLICABLE MARGINS" shall mean
the Applicable Letter of Credit Fee, and Applicable Floating Rate Margin
and/or Applicable Eurodollar Margin, as the case may be. The Applicable
Letter of Credit Fee and Applicable Margins shall be determined, in
accordance with the provisions of this SECTION 2.8(b), by reference to the
following:
-44-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Applicable
Eurodollar Applicable Floating Applicable Letter
Leverage Ratio Margin Rate Margin of Credit Fee
-------------- ------ ----------- -------------
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Greater than or equal to 4.25 to 3.00% 1.75% 3.00%
1.00
- -------------------------------------------------------------------------------------------------
Less than 4.25 to 1.00 and greater 2.75% 1.50% 2.75%
than or equal to 3.50 to 1.00
- -------------------------------------------------------------------------------------------------
Less than 3.50 to 1.00 and greater 2.50% 1.25% 2.50%
than or equal to 3.00 to 1.00
- -------------------------------------------------------------------------------------------------
Less than 3.00 to 1.00 and greater 2.25% 1.00% 2.25%
than or equal to 2.00 to 1.00
- -------------------------------------------------------------------------------------------------
Less than 2.00 to 1.00 and greater 2.00% 0.75% 2.00%
than or equal to 1.00
- -------------------------------------------------------------------------------------------------
Less than 1.00 to 1.00 1.25% 0.00% 1.25%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
PROVIDED, HOWEVER, the Applicable Eurodollar Margin shall be increased by one-
eighth of one percent per annum (0.125%) in the event that the Reduced Minimums
are utilized pursuant to SECTION 2.9 below.
"LEVERAGE RATIO" shall have the meaning ascribed to that term in SECTION
6.4(D).
(ii) DETERMINATION OF APPLICABLE MARGINS AND APPLICABLE LETTER OF CREDIT
FEE.
(A) The Applicable Margin in respect of any Loan and the Applicable Letter
of Credit Fee payable under SECTION 2.25 shall be determined by reference to the
tables set forth in CLAUSE (i) above, as applicable, on the basis of the
Leverage Ratio (calculated on a rolling four quarter basis) determined by
reference to (1) the most recent financial statements delivered pursuant to
SECTION 6.1(A)(ii) or 6.1(A)(iii) or (2) the PRO FORMA financial statements
delivered in connection with an Acquisition pursuant to SECTION 4.3.
(B) Upon receipt of the financial statements with respect to the Borrower
Corporate Group delivered pursuant to SECTION 6.1(A)(ii) or SECTION 6.1(A)(iii),
as applicable, the Applicable Margins for all outstanding Loans and the
Applicable Letter of Credit Fee shall be adjusted, such adjustment being
effective on the tenth (10th) Business Day after receipt of such financial
statements and the Compliance Certificate to be delivered in connection
therewith; PROVIDED, HOWEVER, if the Borrower shall not have timely delivered
such financial statements in accordance with SECTION 6.1(A)(ii) or SECTION
6.1(A)(iii), as applicable, beginning with the date upon which such financial
statements should have been delivered and continuing until such financial
statements are delivered, it shall be assumed for purposes of determining the
Applicable Margins and the Applicable Letter of Credit Fee that the Leverage
Ratio was greater than 4.25 to 1.0. Notwithstanding the provisions set forth
above, upon receipt of the PRO FORMA financial statements with respect to the
Borrower Corporate Group delivered pursuant to SECTION 4.3 in
-45-
<PAGE>
connection with an Acquisition, the Applicable Margins for all outstanding Loans
and the Applicable Letter of Credit Fee shall be adjusted, such adjustment being
effective on the Acquisition Closing Date with respect to such Acquisition.
2.9 MINIMUM AMOUNT OF EACH ADVANCE. Each Eurodollar Advance shall be in
the minimum amount of $1,000,000 (and in multiples of $500,000 if in excess
thereof), and each Floating Rate Advance shall be in the minimum amount of
$100,000 (and in multiples of $100,000 if in excess thereof); PROVIDED, HOWEVER,
that any Floating Rate Advance may be in the amount of the unused Aggregate
Revolving Loan Commitment and/or the unused Aggregate Acquisition Loan
Commitment; and PROVIDED, FURTHER, Eurodollar Advances may be in a minimum
amount of less than $1,000,000 but not less than $500,000 and/or in multiples of
less than $500,000 but not less than $250,000 (the "REDUCED MINIMUMS") subject
however to the increase in the Applicable Eurodollar Rate Margin described in
SECTION 2.8(b)(i) above.
2.10 METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR CONVERSION AND
CONTINUATION OF ADVANCES.
(A) RIGHT TO CONVERT. The Borrower may elect from time to time, subject
to the provisions of SECTION 2.4 and SECTION 2.10, to convert all or any part of
its Loan of any Type into any other Type or Types of Loans; PROVIDED that any
conversion of any Eurodollar Advance shall be made on, and only on, the last day
of the Interest Period applicable thereto.
(B) AUTOMATIC CONVERSION AND CONTINUATION. Floating Rate Loans shall
continue as Floating Rate Loans unless and until such Floating Rate Loans are
converted into Eurodollar Loans. Eurodollar Loans shall continue as Eurodollar
Loans until the end of the then applicable Interest Period therefor, at which
time such Eurodollar Loans shall be automatically converted into Floating Rate
Loans unless the Borrower shall have given the Agent notice in accordance with
SECTION 2.10(D) requesting that, at the end of such Interest Period, such
Eurodollar Loans continue as a Eurodollar Loan.
(C) NO CONVERSION POST-DEFAULT OR POST-UNMATURED DEFAULT. Notwithstanding
anything to the contrary contained in SECTION 2.10(A) or SECTION 2.10(B), no
Loan may be converted into or continued as a Eurodollar Loan (except with the
consent of the Required Lenders) when any Default or Unmatured Default has
occurred and is continuing.
(D) CONVERSION/CONTINUATION NOTICE. The Borrower shall give the Agent
irrevocable notice (a "CONVERSION/CONTINUATION NOTICE") of each conversion of a
Floating Rate Loan into a Eurodollar Loan or continuation of a Eurodollar Loan
not later than 11:00 a.m. (Chicago time) three Business Days prior to the date
of the requested conversion or continuation, specifying: (1) the requested date
(which shall be a Business Day) of such conversion or continuation; (2) the
amount and Type of the Loan to be converted or continued; and (3) the amount of
Eurodollar Loan(s) into which such Loan is to be converted or continued and the
duration of the Interest Period applicable thereto.
2.11 DEFAULT RATE. After the occurrence and during the continuance of a
Default, at the option of the Agent or at the direction of the Required Lenders,
the interest rate(s) applicable to
-46-
<PAGE>
the Obligations shall be increased by two percent (2.0%) per annum above the
Floating Rate or Eurodollar Rate, as applicable.
2.12 COLLECTIONS AND CONCENTRATION ACCOUNT ARRANGEMENTS. (a) All
collections of Receivables included in the Collateral and other proceeds of
Collateral shall be deposited in a Collection Account which is subject to a
Collection Account Agreement or pursuant to another similar arrangement for the
collection of such amounts established by the Specified Subsidiaries and Agent
and shall be transferred in accordance with the provisions of the respective
Collection Account Agreements into the Concentration Account. Any collections
received by a member of the Borrower Corporate Group and not so deposited, shall
be deemed to have been received by such Person as the Agent's trustee and, upon
such Person's receipt thereof, such Person shall immediately transfer all such
amounts into a Collection Account or the Concentration Account in their original
form. Such deposits shall be remitted to the Agent, the Borrower, the Specified
Subsidiary or as the Agent may direct, all in accordance with the provisions of
the Concentration Account Agreement.
(b) Following the Concentration Account Blockage Date and during the
continuance of a Default giving rise thereto, all payments received by the
Agent, all collections of Receivables included in the Collateral received by the
Agent, and all proceeds of other Collateral received by the Agent, whether
through payment or otherwise, will be the sole property of the Agent for the
benefit of the Holders of Secured Obligations and will be deemed received by the
Agent for application to the Obligations pursuant to the terms of this
Agreement.
(c) Following the occurrence of any Default under SECTION 7.1(a) or any
failure of the Borrower to perform any of the covenants contained in SECTION
6.4, then on or prior to the date that is forty-five (45) days following the
Agent's request therefor (which request the Agent shall be required to make upon
the direction of the Required Lenders), the Borrower and the Specified
Subsidiaries shall have entered into lock-box services agreements with banks
which are parties to Collection Account Agreements and to which lock-boxes all
Account Debtors shall be directed to remit all payments on Receivables.
2.13 METHOD OF PAYMENT. All payments of principal, interest, and fees
hereunder, including without limitation payments with respect to Reimbursement
Obligations and fees with respect to Letters of Credit, shall be made, without
setoff, deduction or counterclaim, in immediately available funds to the Agent
at the Agent's address specified pursuant to ARTICLE XIII, or at any other
Lending Installation of the Agent specified in writing by the Agent to the
Borrower, by 2:00 p.m. (Chicago time) on the date when due and shall be made
ratably among the Lenders (unless such amount is not to be shared ratably in
accordance with the terms hereof). Each payment delivered to the Agent for the
account of any Lender shall be delivered promptly by the Agent to such Lender in
the same type of funds which the Agent received at its address specified
pursuant to ARTICLE XIII or at any Lending Installation specified in a notice
received by the Agent from such Lender. The Agent is hereby authorized to
charge the account of the Borrower maintained with First Chicago for each
payment of principal, interest and fees as it becomes due hereunder.
2.14 NOTES, TELEPHONIC NOTICES. Each Lender is hereby authorized to
record the principal amount of each of its Loans to the Borrower and each
repayment with respect to its
-47-
<PAGE>
Loans on the schedule attached to its respective Note; PROVIDED, HOWEVER, that
the failure to so record shall not affect the Borrower's obligations under any
such Note. The Borrower hereby authorizes the Lenders and the Agent to extend
Advances, effect selections of Types of Advances and to transfer funds based on
telephonic notices made by any person or persons the Agent or any Lender in good
faith believes to be acting on behalf of the Borrower. The Borrower agrees to
deliver promptly to the Agent a written confirmation signed by an Authorized
Officer, if such confirmation is requested by the Agent or any Lender, of each
telephonic notice. If the written confirmation differs in any material respect
from the action taken by the Agent and the Lenders, (i) the telephonic notice
shall govern absent manifest error and (ii) the Agent or the Lender, as
applicable, shall promptly notify the Authorizing Officer who provided such
confirmation of such difference.
2.15 PROMISE TO PAY; INTEREST AND FEES; INTEREST PAYMENT DATES; INTEREST
AND FEE BASIS; TAXES; LOAN AND CONTROL ACCOUNTS.
(A) PROMISE TO PAY. The Borrower hereby unconditionally promises to pay
when due the principal amount of each Loan which is made to it, and to pay all
unpaid interest accrued thereon, in accordance with the terms of this Agreement
and Notes.
(B) INTEREST PAYMENT DATES. Interest accrued on each Floating Rate Loan
shall be payable on each Payment Date, commencing with the first such date to
occur after the date hereof and at maturity (whether by acceleration or
otherwise). Interest accrued on each Eurodollar Loan shall be payable on the
last day of its applicable Interest Period, on any date on which the Eurodollar
Loan is prepaid, whether by acceleration or otherwise, and at maturity.
Interest accrued on each Eurodollar Loan having an Interest Period longer than
three months shall also be payable on the last day of each three-month interval
during such Interest Period. Interest accrued on the principal balance of all
other Obligations shall be payable in arrears (i) on the last day of each
calendar month, commencing on the first such day following the incurrence of
such Obligation, (ii) upon repayment thereof in full or in part, and (iii) if
not theretofore paid in full, at the time such other Obligation becomes due and
payable (whether by acceleration or otherwise).
(C) COMMITMENT FEES.
(i) The Borrower shall pay to the Agent, for the account of the
Lenders, in accordance with their Pro Rata Shares, a commitment fee
accruing at the rate of one-half of one percent (0.50%) per annum from and
after the date of this Agreement until the Termination Date on the amount
by which (A) the Aggregate Revolving Loan Commitment in effect from time to
time exceeds (B) the Revolving Credit Obligations in effect from time to
time. All such commitment fees payable under this CLAUSE (C)(i) shall be
payable quarterly in arrears on the last calendar day of each March, June,
September and December occurring after the Closing Date and, in addition,
on the Termination Date.
(ii) In addition, the Borrower shall pay to the Agent, for the
account of the Lenders, in accordance with their Pro Rata Shares, a
commitment fee accruing at the rate of one-half of one percent (0.50%) per
annum from and after the date of this Agreement
-48-
<PAGE>
until the Conversion Date on the unborrowed amount of the Aggregate
Acquisition Loan Commitment in effect from time to time. All such
commitment fees payable under this CLAUSE (C)(ii) shall be payable
quarterly in arrears on the last calendar day of each March, June,
September and December occurring after the date of this Agreement and, in
addition, on the Conversion Date.
(iii) The Borrower agrees to pay to the Agent for the sole account of
the Agent (unless otherwise agreed between the Agent and any Lender) the
fees set forth in the letter agreements between the Agent and the Borrower
dated January 12, 1996, and March 15, 1996, respectively, payable at the
times and in the amounts set forth therein.
(D) INTEREST AND FEE BASIS. Interest and fees shall be calculated for
actual days elapsed on the basis of a 360-day year. Interest shall be payable
for the day an Obligation is incurred but not for the day of any payment on the
amount paid if payment is received prior to 2:00 p.m. (Chicago time) at the
place of payment. If any payment of principal of or interest on a Loan or any
payment of any other Obligations shall become due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day
and, in the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
(E) TAXES.
(i) Any and all payments by the Borrower hereunder shall be made free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges, or withholdings, and all liabilities
with respect thereto including those arising after the date hereof as a
result of the adoption of or any change in any law, treaty, rule,
regulation, guideline or determination of a Governmental Authority or any
change in the interpretation or application thereof by a Governmental
Authority but excluding, in the case of each Lender, and the Agent, any
Income Taxes imposed on the Lender or Agent by the United States of America
or any Governmental Authority of the jurisdiction under the laws of which
such Lender or the Agent, as the case may be, is organized or maintains a
Lending Installation (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings, and liabilities which the Agent or a
Lender determines to be applicable to this Agreement, the other Loan
Documents, the Revolving Loan Commitments, the Acquisition Loan
Commitments, the Loans or the Letters of Credit being hereinafter referred
to as "TAXES"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder or under the other
Loan Documents 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 2.15(E)) 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. If a withholding tax of
the United States of America or any other Governmental Authority shall be
or become applicable (y) after the date of this Agreement, to such payments
by the Borrower made to the Lending Installation or any other office that a
Lender may claim as its Lending Installation, or (z)
-49-
<PAGE>
after such Lender's selection and designation of any other Lending
Installation, to such payments made to such other Lending Installation,
such Lender shall use reasonable efforts to make, fund and maintain its
Loans through another Lending Installation of such Lender in another
jurisdiction so as to reduce the Borrower's liability hereunder, if the
making, funding or maintenance of such Loans through such other Lending
Installation of such Lender does not, in the judgment of such Lender,
otherwise adversely affect such Loans, or obligations under the Revolving
Loan Commitments or Acquisition Loan Commitments or such Lender.
(ii) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges,
or similar levies which arise from any payment made hereunder, from the
issuance of Letters of Credit hereunder, or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, the other
Loan Documents, the Acquisition Loan Commitments, the Revolving Loan
Commitments, the Loans or the Letters of Credit (hereinafter referred to as
"OTHER TAXES").
(iii) The Borrower will indemnify each Lender and the Agent for the
full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any Governmental Authority on amounts
payable under this SECTION 2.15(E)) 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 or Other Taxes were correctly or legally asserted. This
indemnification shall be made within thirty (30) days after the date such
Lender or the Agent (as the case may be) makes written demand therefor. A
certificate as to any additional amount payable to any Lender or the Agent
under this SECTION 2.15(E) submitted to the Borrower and the Agent (if a
Lender is so submitting) by such Lender or the Agent shall show in
reasonable detail the amount payable and the calculations used to determine
such amount and shall, absent manifest error, be final, conclusive and
binding upon all parties hereto. With respect to such deduction or
withholding for or on account of any Taxes and to confirm that all such
Taxes have been paid to the appropriate Governmental Authorities, the
Borrower shall promptly (and in any event not later than thirty (30) days
after receipt) furnish to each Lender and the Agent such receipts or other
appropriate documentation evidencing payment thereof.
(iv) Within thirty (30) days after the date of any payment of Taxes
or Other Taxes by the Borrower, the Borrower will furnish to the Agent the
original or a certified copy of a receipt or other appropriate
documentation evidencing payment thereof.
(v) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower
contained in this SECTION 2.15(E) shall survive the payment in full of
principal and interest hereunder, the termination of the Letters of Credit
and the termination of this Agreement.
(vi) Without limiting the obligations of the Borrower under this
SECTION 2.15(E), each Lender that is not created or organized under the
laws of the United States of America or a political subdivision thereof
shall deliver to the Borrower and the Agent on
-50-
<PAGE>
or before the Closing Date, or, if later, the date on which such Lender
becomes a Lender pursuant to SECTION 12.3 hereof, a true and accurate
certificate executed in duplicate by a duly authorized officer of such
Lender, in a form satisfactory to the Borrower and the Agent, to the effect
that such Lender is capable under the provisions of an applicable tax
treaty concluded by the United States of America (in which case the
certificate shall be accompanied by two executed copies of Form 1001 of the
IRS) or under Section 1442 of the Code (in which case the certificate shall
be accompanied by two copies of Form 4224 of the IRS) of receiving payments
of interest hereunder without deduction or withholding of United States
federal income tax. Each such Lender further agrees to deliver to the
Borrower and the Agent from time to time a true and accurate certificate
executed in duplicate by a duly authorized officer of such Lender
substantially in a form satisfactory to the Borrower and the Agent, before
or promptly upon the occurrence of any event requiring a change in the most
recent certificate previously delivered by it to the Borrower and the Agent
pursuant to this SECTION 2.15(E)(vi). Further, each Lender which delivers
a certificate accompanied by Form 1001 of the IRS covenants and agrees to
deliver to the Borrower and the Agent within fifteen (15) days prior to
January 1, 1997, and every third (3rd) anniversary of such date thereafter
(or such earlier date as provided for by the Code or the applicable
regulations promulgated thereunder) on which this Agreement is still in
effect, another such certificate and two accurate and complete original
signed copies of Form 1001 (or any successor form or forms required under
the Code or the applicable regulations promulgated thereunder), and each
Lender that delivers a certificate accompanied by Form 4224 of the IRS
covenants and agrees to deliver to the Borrower and the Agent within
fifteen (15) days prior to the beginning of each subsequent taxable year
(or such earlier date as provided for by the Code or the applicable
regulations promulgated thereunder) of such Lender during which this
Agreement is still in effect, another such certificate and two accurate and
complete original signed copies of IRS Form 4224 (or any successor form or
forms required under the Code or the applicable regulations promulgated
thereunder). Each such certificate shall certify as to one of the
following:
(a) that such Lender is capable of receiving payments of
interest hereunder without deduction or withholding of United
States of America federal income tax;
(b) that such Lender is not capable of receiving payments
of interest hereunder without deduction or withholding of United
States of America federal income tax as specified therein but is
capable of recovering the full amount of any such deduction or
withholding from a source other than the Borrower and will not
seek any such recovery from the Borrower; or
(c) that, as a result of the adoption of or any change in
any law, treaty, rule, regulation, guideline or determination of
a Governmental Authority or any change in the interpretation or
application thereof by a Governmental Authority after the date
such Lender became a party hereto, such Lender is not capable of
receiving payments of interest hereunder without deduction or
withholding of United States of America federal
-51-
<PAGE>
income tax as specified therein and that it is not capable of
recovering the full amount of the same from a source other than the
Borrower.
Each Lender shall promptly furnish to the Borrower and the Agent such
additional documents as may be reasonably required by the Borrower or the
Agent to establish any exemption from or reduction of any Taxes or Other
Taxes required to be deducted or withheld and which may be obtained without
undue expense to such Lender.
(F) LOAN ACCOUNT. Each Lender shall maintain in accordance with its usual
practice an account or accounts (a "LOAN ACCOUNT") evidencing the Obligations of
the Borrower to such Lender resulting from each Loan owing to such Lender from
time to time, including the amount of principal and interest payable and paid to
such Lender from time to time hereunder and under the Notes.
(G) CONTROL ACCOUNT. The Register maintained by the Agent pursuant to
SECTION 12.3 shall include a control account, and a subsidiary account for the
Borrower and each Lender, in which accounts (taken together) shall be recorded
(i) the date and amount of each Advance made hereunder, the type of Loan
comprising such Advance and any Interest Period applicable thereto, (ii) the
effective date and amount of each assignment and acceptance delivered to and
accepted by it and the parties thereto pursuant to SECTION 12.3, (iii) the
amount of any principal or interest due and payable or to become due and payable
from the Borrower to each Lender hereunder or under the Notes, (iv) the amount
of any sum received by the Agent from the Borrower hereunder and each Lender's
share thereof, and (v) all other appropriate debits and credits as provided in
this Agreement, including, without limitation, all fees, charges, expenses and
interest.
(H) ENTRIES BINDING. The entries made in the Register and each Loan
Account shall be conclusive and binding for all purposes, absent manifest error,
unless the Borrower objects to information contained in the Register and each
Loan Account within thirty (30) days of the Borrower's receipt of such
information.
2.16 NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND AGGREGATE
REVOLVING LOAN COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Agent
will notify each Lender of the contents of each Aggregate Revolving Loan
Commitment or Aggregate Acquisition Loan Commitment reduction notice, Borrowing
Notice, Continuation/Conversion Notice, and repayment or prepayment notice
received by it hereunder. The Agent will notify each Lender of the interest
rate applicable to each Eurodollar Loan promptly upon determination of such
interest rate and will give each Lender prompt notice of each change in the
Alternate Base Rate.
2.17 LENDING INSTALLATIONS. Each Lender may book its Loans at any Lending
Installation selected by such Lender and may change its Lending Installation
from time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Notes shall be deemed held by each Lender for the benefit
of such Lending Installation. Each Lender may, by written or facsimile notice
to the Agent and the Borrower, designate a Lending Installation through which
Loans will be made by it and for whose account Loan payments are to be made.
Any Lender claiming any additional amounts payable pursuant to SECTION 2.15(e)
OR ARTICLE III agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Lending Installation if the making of such a change would avoid the
-52-
<PAGE>
need for, or reduce the amount of, any such additional amounts that may
thereafter accrue and would not, in the sole judgment of such Lender, be
otherwise disadvantageous to such Lender.
2.18 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Borrower or a Lender,
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that the Borrower
or Lender does not intend to make such payment, the Agent may assume that such
payment has been made. The Agent may, but shall not be obligated to, make the
amount of such payment available to the intended recipient in reliance upon such
assumption. If such Lender or the Borrower, as the case may be, has not in fact
made such payment to the Agent, the recipient of such payment shall, on demand
by the Agent, repay to the Agent the amount so made available together with
interest thereon in respect of each day during the period commencing on the date
such amount was so made available by the Agent until the date the Agent recovers
such amount at a rate per annum equal to (i) in the case of payment which was
assumed to have been made by a Lender, the Federal Funds Effective Rate for such
day or (ii) in the case of payment which was assumed to have been made by the
Borrower, the interest rate applicable to the relevant Loan.
2.19 TERMINATION DATE. This Agreement shall be effective until the
Termination Date. Notwithstanding the termination of this Agreement on the
Termination Date, until all of the Obligations (other than contingent indemnity
obligations) shall have been fully and indefeasibly paid and satisfied, all
financing arrangements among the Borrower, the Agent and the Lenders shall have
been terminated (other than under Interest Rate Agreements or other agreements
with respect to Rate Hedging Obligations) and all of the Letters of Credit shall
have expired, been cancelled or terminated, all of the rights and remedies under
this Agreement and the other Loan Documents shall survive and the Agent shall be
entitled to retain its security interest in and to all existing and future
Collateral for the benefit of itself and the Holders of Secured Obligations.
2.20 REPLACEMENT OF CERTAIN LENDERS. In the event a Lender ("AFFECTED
LENDER") shall have: (i) failed to fund its Pro Rata Share of any Advance
requested by the Borrower which such Lender is obligated to fund under the terms
of this Agreement and which failure has not been cured, (ii) requested
compensation from the Borrower under SECTIONS 2.15(E), 3.1 or 3.2 to recover
Taxes, Other Taxes or other additional costs incurred by such Lender which are
not being incurred generally by the other Lenders, (iii) delivered a notice
pursuant to SECTION 3.3 claiming that such Lender is unable to extend Eurodollar
Loans to the Borrower for reasons not generally applicable to the other Lenders
or (iv) invoked SECTION 9.2, then, in any such case, the Borrower or the Agent
may make written demand on such Affected Lender (with a copy to the Agent in the
case of a demand by the Borrower and a copy to the Borrower in the case of a
demand by the Agent) for the Affected Lender to assign, and such Affected Lender
shall use its best efforts to assign pursuant to one or more duly executed
Assignments in substantially the form of EXHIBIT F five (5) Business Days after
the date of such demand, to one or more financial institutions which complies
with the provisions of SECTION 12.3(A) (and, if selected by the Borrower is
reasonably acceptable to the Agent) which the Borrower or the Agent, as the case
may be, shall have engaged for such purpose ("REPLACEMENT LENDER"), all of such
Affected Lender's rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, its Revolving Loan Commitment, its
Acquisition Loan Commitment, all Loans
-53-
<PAGE>
owing to it, all of its participation interests in existing Letters of Credit,
and its obligation to participate in additional Letters of Credit hereunder) in
accordance with SECTION 12.3. If the Affected Lender is also an Issuing Lender,
then prior to or simultaneously with the assignment to the Replacement Lender,
all Letters of Credit issued by the Affected Lender shall be replaced by Letters
of Credit issued by the Agent, the Replacement Lender or another Issuing Lender.
The Agent hereby agrees, upon the occurrence of such events with respect to an
Affected Lender and upon the written request of the Borrower, to use its
reasonable efforts to obtain the commitments from one or more financial
institutions to act as a Replacement Lender. The Agent is hereby authorized to
execute one or more of such assignment agreements as attorney-in-fact for any
Affected Lender failing to execute and deliver the same within five (5) Business
Days after the date of such demand. Further, with respect to such assignment
the Affected Lender shall have concurrently received, in cash, all amounts due
and owing to the Affected Lender hereunder or under any other Loan Document,
including, without limitation, the aggregate outstanding principal amount of the
Loans owed to such Lender, together with accrued interest thereon through the
date of such assignment, amounts payable under SECTIONS 2.15(E), 3.1, and 3.2
with respect to such Affected Lender and compensation payable under SECTION
2.15(C) through the date of such assignment in the event of any replacement of
any Affected Lender under CLAUSE (ii) or CLAUSE (iii) of this SECTION 2.20;
PROVIDED, upon such Affected Lender's replacement, such Affected Lender shall
cease to be a party hereto but shall continue to be entitled to the benefits of
SECTIONS 2.15(E), 2.26, 3.1, 3.2, 3.4, and 9.7, as well as to any fees accrued
for its account hereunder and not yet paid, and shall continue to be obligated
under SECTION 10.8 with respect to matters arising out of events which occurred
prior to the date of replacement of such Affected Lender. Upon the replacement
of any Affected Lender pursuant to this SECTION 2.20, the provisions of SECTION
8.2 shall continue to apply with respect to Loans which are then outstanding
with respect to which the Affected Lender failed to fund its Pro Rata Share and
which failure has not been cured.
2.21 LETTER OF CREDIT FACILITY. Upon receipt of duly executed
applications therefor, and such other documents, instructions and agreements as
such Issuing Lender may require, and subject to the provisions of ARTICLE IV,
the Agent shall or any other Lender, in its sole discretion, may, issue letters
of credit for the account of the Borrower and for which a Specified Subsidiary
is the co-applicant (the Agent and each such other Lender in such capacity being
referred to as an "ISSUING LENDER"), on terms as are satisfactory to such
Issuing Lender; PROVIDED, HOWEVER, that no Letter of Credit will be issued for
the account of the Borrower by an Issuing Lender if (i) on the date of issuance,
before or after taking such Letter of Credit into account the aggregate of all
Revolving Credit Obligations exceeds the Maximum Revolving Credit Amount at such
time; or (ii) the aggregate outstanding amount of the L/C Obligations exceeds
$500,000; and PROVIDED, FURTHER, that no Letter of Credit shall be issued which
has an expiration date later than the date which is five (5) Business Days
immediately preceding the Termination Date. If the Borrower and a Specified
Subsidiary apply for a Letter of Credit from any Lender other than the Agent,
the Borrower and Specified Subsidiary shall simultaneously notify the Agent of
the proposed amount and expiration date of such Letter of Credit. The Agent
shall promptly notify the Borrower and the Lender to which such application has
been made whether issuance of such Letter of Credit would comply with the terms
of this SECTION 2.21.
2.22 LETTER OF CREDIT PARTICIPATION. Immediately (i) upon the Closing
Date with respect to the Existing Letter of Credit and (ii) upon the issuance of
each additional Letter of Credit
-54-
<PAGE>
hereunder, each Lender shall be deemed to have automatically, irrevocably and
unconditionally purchased and received from the applicable Issuing Lender an
undivided interest and participation in and to such Letter of Credit, the
obligations of the Borrower (and the applicable Specified Subsidiary which is
the co-applicant) in respect thereof, and the liability of the applicable
Issuing Lender thereunder (collectively, an "L/C INTEREST") in an amount equal
to the amount available for drawing under such Letter of Credit multiplied by
such Lender's Pro Rata Share. The Agent will notify each Lender (or in the case
of an Issuing Lender other than the Agent, such Issuing Lender shall notify the
Agent who in turn will notify each Lender) promptly (a) upon the issuance of any
Letter of Credit and (b) upon presentation to it of an L/C Draft or upon any
other draw under a Letter of Credit. On or before the Business Day on which the
applicable Issuing Lender makes payment of each such L/C Draft or, in the case
of any other draw on a Letter of Credit, on demand of the applicable Issuing
Lender (which demand shall not require payment prior to the Business Day such
payment is required to be made by the Issuing Lender under the Letter of
Credit), each Lender shall make payment to the Agent for the account of the
applicable Issuing Lender, in immediately available funds on an amount equal to
such Lender's pro rata share of the amount of such payment or draw. The
obligation of each Lender to reimburse the Agent for the account of the
applicable Issuing Lender under this SECTION 2.22 shall be unconditional,
continuing, irrevocable and absolute. In the event that any Lender fails to
make payment to the Agent for the account of the applicable Issuing Lender of
any amount due under this SECTION 2.22, the Agent shall be entitled to receive,
retain and apply against such obligation the principal and interest otherwise
payable to such Lender hereunder until the Agent receives such payment from such
Lender on behalf of the applicable Issuing Lender or such obligation is
otherwise fully satisfied; PROVIDED, HOWEVER, that nothing contained in this
sentence shall relieve such Lender of its obligation to reimburse the Agent on
behalf of the applicable Issuing Lender for such amount in accordance with this
SECTION 2.22.
2.23 REIMBURSEMENT OBLIGATION. The Borrower agrees unconditionally,
irrevocably and absolutely to pay immediately to the Agent, for the account of
the applicable Issuing Lender or the account of the Lenders, as the case may be,
the amount of each advance which may be drawn under or pursuant to a Letter of
Credit issued for its account or an L/C Draft related thereto (such obligation
of the Borrower to reimburse the Issuing Lender or the Agent for an advance
made under a Letter of Credit or L/C Draft being hereinafter referred to as a
"REIMBURSEMENT OBLIGATION" with respect to such Letter of Credit or L/C Draft).
If the Borrower at any time fails to repay a Reimbursement Obligation pursuant
to this SECTION 2.23, the Borrower shall be deemed to have elected to borrow a
Revolving Loan from the Lenders, as of the date of the advance giving rise to
the Reimbursement Obligation, consisting of a Floating Rate Advance equal in
amount to the amount of the unpaid Reimbursement Obligation, the proceeds of
which Advance shall be used to repay such Reimbursement Obligation. If, for any
reason, the Borrower fails to repay a Reimbursement Obligation on the day such
Reimbursement Obligation arises, then such Reimbursement Obligation shall bear
interest from and after such day, until paid in full, at the interest rate
applicable to Revolving Loans consisting of Floating Rate Loans.
2.24 CASH COLLATERAL. Notwithstanding anything to the contrary herein or
in any application for a Letter of Credit, after the occurrence and during the
continuance of Default, the Borrower shall, upon the Agent's demand, deliver to
the Agent for the benefit of the Lenders, cash, or other collateral of a type
satisfactory to the Required Lenders, having a value, as determined by such
Lenders, equal to the aggregate outstanding L/C Obligations. In addition, to
-55-
<PAGE>
the extent the Maximum Revolving Credit Amount is at any time less than the
amount of contingent L/C Obligations outstanding at any time, the Borrower shall
deposit cash collateral with the Agent in an amount equal to the amount by which
such L/C Obligations exceed such Maximum Revolving Credit Amount. Any such
collateral shall be held by the Agent in a separate account appropriately
designated as a cash collateral account in relation to this Agreement and the
Letters of Credit and retained by the Agent for the benefit of the Lenders as
collateral security for the Borrower's obligations in respect of this Agreement
and each of the Letters of Credit and L/C Drafts. Such amounts shall be applied
to reimburse the Agent or each Issuing Lender, as applicable, for drawings or
payments under or pursuant to Letters of Credit or L/C Drafts, or if no such
reimbursement is required, to payment of such of the other Obligations as the
Agent shall determine. If no Default shall be continuing, amounts remaining in
any cash collateral account established pursuant to this SECTION 2.24 which are
not to be applied to reimburse the Agent for amounts actually paid or to be paid
by the Agent in respect of a Letter of Credit or L/C Draft, shall be returned to
the Borrower (after deduction of the Agent's expenses incurred in connection
with such cash collateral account).
2.25 LETTER OF CREDIT FEES. The Borrower agrees to pay (i) monthly, in
arrears, to the Agent for the ratable benefit of the Lenders, except as set
forth in SECTION 8.2, a letter of credit fee in the amount of the Applicable
Letter of Credit Fee rate per annum on the aggregate amount available for
drawing under all of the standby Letters of Credit issued for the Borrower's
account and (ii) to the Issuing Lender directly for its benefit as issuing bank,
all customary fees (including fronting fees) and other issuance, amendment,
document examination, negotiation and presentment expenses and related charges
in connection with the issuance, amendment, presentation of L/C Drafts, and the
like customarily charged by such Issuing Lender with respect to standby and
commercial Letters of Credit issued by it for the Borrower's account, including,
without limitation standard commissions with respect to commercial Letters of
Credit, payable at the time of invoice of such amounts.
2.26 INDEMNIFICATION; EXONERATION. (a) In addition to amounts payable as
elsewhere provided in this Agreement, the Borrower hereby agrees to protect,
indemnify, pay and save harmless the Agent, each Lender and each Issuing Lender
from and against any and all liabilities and costs which the Agent, any Lender
or any Issuing Lender may incur or be subject to as a consequence, direct or
indirect, of (i) the issuance of any Letter of Credit other than, in the case of
the Issuing Lender thereof, as a result of its Gross Negligence or willful
misconduct, as determined by the final judgment of a court of competent
jurisdiction, or (ii) the failure of the Issuing Lender of such Letter of Credit
to honor a drawing under such Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto Governmental Authority (all such acts or omissions herein called
"GOVERNMENTAL ACTS").
(b) As among the Borrower, the Lenders, the Issuing Lenders and the Agent,
the Borrower assumes all risks of the acts and omissions of, or misuse of such
Letter of Credit by, the beneficiary of any Letter of Credit. In furtherance
and not in limitation of the foregoing, subject to the provisions of the Letter
of Credit applications and Letter of Credit reimbursement agreements executed by
the Borrower at the time of request for any Letter of Credit, the Issuing Lender
of a Letter of Credit, the Agent and the Lenders shall not be responsible (in
the absence of Gross Negligence or willful misconduct in connection therewith,
as determined by the final judgment of a court of competent jurisdiction):
(i) for the form, validity, sufficiency, accuracy,
-56-
<PAGE>
genuineness or legal effect of any document submitted by any party in connection
with the application for and issuance of the Letters of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
(iii) for failure of the beneficiary of a Letter of Credit to comply duly with
conditions required in order to draw upon such Letter of Credit; (iv) for
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex, or other similar form of
teletransmission or otherwise; (v) for errors in interpretation of technical
trade terms; (vi) for any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit or of
the proceeds thereof; (vii) for the misapplication by the beneficiary of a
Letter of Credit of the proceeds of any drawing under such Letter of Credit; and
(viii) for any consequences arising from causes beyond the control of the Agent,
the Issuing Lender of the Letter of Credit and the Lenders including, without
limitation, any Governmental Acts. None of the above shall affect, impair, or
prevent the vesting of any Issuing Lender's rights or powers under this
SECTION 2.26.
(c) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Issuing
Lender under or in connection with Letters of Credit issued on behalf of the
Borrower or any related certificates shall not, in the absence of Gross
Negligence or willful misconduct, as determined by the final judgment of a court
of competent jurisdiction, put the Issuing Lender, the Agent or any Lender under
any resulting liability to the Borrower or relieve the Borrower of any of its
obligations hereunder to any such Person.
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this SECTION 2.26 shall survive the payment in full of principal and interest
hereunder, the termination of the Letters of Credit and the termination of this
Agreement.
2.27 SUPPLEMENTAL COMMITMENT. At the request of the Borrower and to the
extent that their exists no Default or Unmatured Default, the Commitments may be
increased (or decreased) by the Lenders and such additional Lender or Lenders
who are willing to become parties hereto such that all of the Lenders will have
an equal pro rata share in the Loans and Commitments as set forth on EXHIBIT B.
Upon the delivery to the Agent of a Notice of Supplemental Commitments executed
by the Borrower and any Lender substantially in the form of EXHIBIT S attached
hereto, and satisfaction of the conditions in SECTION 12.3(D) of the Agreement,
the Lenders' Commitments and Term Loans shall be in the amounts set forth in
EXHIBIT B hereto under the headings relating to "After the Commitment Increase
Date". Upon the delivery of a Notice of Supplemental Loan Commitment, the
Borrower shall execute and deliver to the Agent Notes in accordance with SECTION
12.3(D) of the Agreement. Notwithstanding any of the foregoing, any Notice of
Supplemental Commitment delivered pursuant hereto must be received by the Agent
on or before August 31, 1996 in order for any such Notice of Supplemental
Commitment to be of any force or effect.
ARTICLE III: CHANGE IN CIRCUMSTANCES
-57-
<PAGE>
3.1 YIELD PROTECTION. If any law or any governmental or quasi-
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) adopted after the date of this Agreement and having
general applicability to all banks within the jurisdiction in which such Lender
operates (excluding, for the avoidance of doubt, the effect of and phasing in of
capital requirements or other regulations or guidelines passed prior to the date
of this Agreement), or any interpretation or application thereof by any
governmental authority charged with the interpretation or application thereof,
or the compliance of any Lender therewith,
(i) subjects any Lender (each reference in this SECTION 3.1 to a
Lender being in its capacity either as a Lender or an Issuing Lender, or
both) or any applicable Lending Installation to any tax, duty, charge or
withholding on or from payments due from the Borrower, or changes the basis
of taxation of payments to any Lender in respect of its Loans, its L/C
Interests, the Letters of Credit or other amounts due it hereunder
(excluding for purposes of this Section 3.1(i), any Income Taxes imposed on
any Lender or applicable Lending Installation by the United States of
America or any Governmental Authority of the jurisdiction under the laws of
which such Lender is organized or maintains a Lending Installation, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended
by, any Lender or any applicable Lending Installation (other than reserves
and assessments taken into account in determining the interest rate
applicable to Eurodollar Loans) with respect to its Loans, L/C Interests or
the Letters of Credit, or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation of making,
funding or maintaining the Loans, the L/C Interests or the Letters of
Credit or reduces any amount received by any Lender or any applicable
Lending Installation in connection with Loans or Letters of Credit, or
requires any Lender or any applicable Lending Installation to make any
payment calculated by reference to the amount of Loans or L/C Interests
held or interest received by it or by reference to the Letters of Credit,
by an amount deemed material by such Lender;
and the result of any of the foregoing is to increase the cost to that Lender of
making, renewing or maintaining its Loans, L/C Interests or Letters of Credit or
to reduce any amount received under this Agreement, then, within 15 days after
receipt by the Borrower of written demand by such Lender pursuant to SECTION
3.5, the Borrower shall pay such Lender that portion of such increased expense
incurred or reduction in an amount received which such Lender determines is
attributable to making, funding and maintaining its Loans, L/C Interests,
Letters of Credit, its Acquisition Loan Commitment and its Revolving Loan
Commitment.
3.2 CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Lender (each reference
in this SECTION 3.2 to a Lender being in its capacity either as a Lender or an
Issuing Lender, or both) determines (i) the amount of capital required or
expected to be maintained by such Lender, any Lending Installation of such
Lender or any corporation controlling such Lender is increased as a result of a
"Change" (as defined below), and (ii) such increase in capital will result in an
increase
-58-
<PAGE>
in the cost to such Lender of maintaining its Loans, L/C Interests, the Letters
of Credit or its obligation to make Loans hereunder, then, within 15 days after
receipt by the Borrower of written demand by such Lender pursuant to SECTION
3.5, the Borrower shall pay such Lender the amount necessary to compensate for
any shortfall in the rate of return on the portion of such increased capital
which such Lender determines is attributable to this Agreement, its Loans, its
L/C Interests, the Letters of Credit or its obligation to make Loans hereunder
(after taking into account such Lender's policies as to capital adequacy).
"CHANGE" means (i) any change after the date of this Agreement in the "Risk-
Based Capital Guidelines" (as defined below) excluding, for the avoidance of
doubt, the effect of any phasing in of such Risk Based Capital Guidelines or any
other capital requirements passed prior to the date hereof, or (ii) any adoption
of or change in any other law, governmental or quasi-governmental rule,
regulation, policy, guideline, interpretation, or directive (whether or not
having the force of law) after the date of this Agreement and having general
applicability to all banks and financial institutions within the jurisdiction in
which such Lender operates which affects the amount of capital required or
expected to be maintained by any Lender or any Lending Installation or any
corporation controlling any Lender. "RISK-BASED CAPITAL GUIDELINES" means (i)
the risk-based capital guidelines in effect in the United States on the date of
this Agreement, including transition rules, and (ii) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.3 AVAILABILITY OF TYPES OF ADVANCES. If (i) any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation or directive, whether or not having
the force of law, or (ii) the Required Lenders determine that (x) deposits of a
type and maturity appropriate to match fund Eurodollar Advances are not
available or (y) the interest rate applicable to a Type of Advance does not
accurately reflect the cost of making or maintaining such an Advance, then the
Agent shall suspend the availability of the affected Type of Advance and, in the
case of any occurrence set forth in clause (i) require any Advances of the
affected Type to be repaid or converted into Advances of another Type.
3.4 FUNDING INDEMNIFICATION. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment, or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower for any reason other
than default by the Lenders, the Borrower will indemnify each Lender for any
loss or cost incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to fund or
maintain the Eurodollar Advance. In connection with any assignment by any of
the Lenders of any portion of the Loans made pursuant to SECTION 12.3 and made
on or prior to the earlier to occur of (a) three (3) months after the Commitment
Increase Date or (b) November 31, 1996 and if Eurodollar Loans are outstanding
on the date of such assignment, the Borrower shall be deemed to have repaid all
outstanding Eurodollar Advances as of such date and reborrowed such amount as a
Floating Rate Advance and/or Eurodollar Advance (chosen in accordance with the
provisions of SECTION 2.4) and the indemnification provisions under this SECTION
3.4 shall apply.
-59-
<PAGE>
3.5 LENDER STATEMENTS; SURVIVAL OF INDEMNITY. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under SECTIONS 3.1 and 3.2 or to avoid the unavailability of a Type of
Advance under SECTION 3.3, so long as such designation is not disadvantageous to
such Lender. Each Lender requiring compensation pursuant to SECTION 2.15(E) or
to this ARTICLE III shall use its best efforts to notify the Borrower and the
Agent in writing of any Change, law, policy, rule, guideline or directive giving
rise to such demand for compensation as soon as practicable but not later than
ninety (90) days following the date upon which the responsible account officer
of such Lender knows or should have known of such Change, law, policy, rule,
guideline or directive. Any demand for compensation pursuant to this ARTICLE
III shall be in writing and shall state the amount due, if any, under SECTION
3.1, 3.2 or 3.4 and shall set forth in reasonable detail the calculations upon
which such Lender determined such amount. Such written demand shall be
rebuttably presumed correct for all purposes. Notwithstanding anything in this
Agreement to the contrary, the Borrower shall not be obligated to pay any amount
or amounts under SECTION 2.15(E) or this Article III to the extent such amount
or amounts result from a Change, law, policy, rule, guideline or directive which
took effect more than ninety (90) days prior to the date of delivery of the
notice described above. Determination of amounts payable under such Sections in
connection with a Eurodollar Loan shall be calculated as though each Lender
funded its Eurodollar Loan through the purchase of a deposit of the type and
maturity corresponding to the deposit used as a reference in determining the
Eurodollar Rate applicable to such Loan, whether in fact that is the case or
not. The obligations of the Borrower under SECTIONS 3.1, 3.2 and 3.4 shall
survive payment of the Obligations and termination of this Agreement. The
obligations of the Borrower under SECTIONS 3.1, 3.2 and 3.4 shall survive the
replacement of a Lender pursuant to SECTION 2.20 or the assignment by a Lender
of all of its rights and obligations under the Agreement pursuant to SECTION
12.3.
ARTICLE IV: CONDITIONS PRECEDENT
4.1 INITIAL ADVANCES AND LETTERS OF CREDIT. The Lenders shall not be
required to make the initial Loans under this Agreement or issue any Letters of
Credit or purchase any participations therein unless such loans are made not
later than June 30, 1996, and the Agent has received (with sufficient copies for
each of the Lenders) the following:
(1) A certificate, signed by a financial officer acceptable to the
Agent, stating that on the Closing Date no Default or Unmatured Default has
occurred and is continuing;
(2) Copies of the Certificate of Incorporation of the Borrower and
each Specified Subsidiary, together with all amendments, and a certificate
of good standing, in each case certified by the appropriate governmental
officer in its jurisdiction of incorporation and good standing certificates
from each other jurisdiction where the ownership of its assets or conduct
of its business dictates that it should be qualified;
(3) Copies, certified by the Secretary or Assistant Secretary of each
of the Borrower and each Specified Subsidiary, of its respective By-Laws
and of its Board of Directors' resolutions (and resolutions of other
bodies, if any are deemed necessary by counsel for any Lender) authorizing
the execution of the Loan Documents;
-60-
<PAGE>
(4) An incumbency certificate, executed by the Secretary or Assistant
Secretary of each of the Borrower and each Specified Subsidiary, which
shall identify by name and title and bear the signature of the officers of
the Borrower and each Specified Subsidiary authorized to sign the Loan
Documents and to make borrowings hereunder, upon which certificate the
Lenders shall be entitled to rely until informed of any change in writing
by the Borrower;
(5) A written opinion of AMC's, the Borrower's and each Specified
Subsidiary's counsel, addressed to the Agent and the Lenders in form and
substance acceptable to the Agent;
(6) Notes payable to the order of each of the Lenders;
(7) Such other documents as the Agent or any Lender or its counsel
may have reasonably requested, including, without limitation, all of the
documents reflected on the List of Closing Documents attached as EXHIBIT I
to this Agreement (unless designated thereon to be received after the
Closing Date).
4.2 EACH ADVANCE AND LETTER OF CREDIT. The Lenders shall not be required
to make any Advance, issue any Letter of Credit or purchase any participation
therein, unless on the applicable Borrowing Date, or in the case of a Letter of
Credit, the date on which the Letter of Credit is to be issued:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in ARTICLE V are
true and correct as of such Borrowing Date except for changes in the
Schedules to this Agreement reflecting transactions permitted by this
Agreement as such Schedules have been amended pursuant to the terms of
SECTION 1.3 hereof.
Each Borrowing Notice with respect to each such Advance and the letter of
credit application with respect to a Letter of Credit shall constitute a
representation and warranty by the Borrower that the conditions contained in
SECTIONS 4.2(i) and (ii) have been satisfied. The Agent may require a duly
completed officer's certificate in substantially the form of EXHIBIT J hereto
and/or a duly completed compliance certificate in substantially the form of
EXHIBIT K hereto as a condition to making an Advance.
4.3 CONDITIONS FOR ACQUISITION LOANS AND ADDITION OF SPECIFIED
SUBSIDIARIES. The Lenders shall not be required to make any Advance in
connection with an Acquisition Loan and no Target shall be permitted to be added
as a Specified Subsidiary hereunder, unless the Agent and the Acquisition
Approval Lenders shall have consented to the proposed Acquisition of such
Target, which consent shall not be unreasonably withheld. In connection with
each proposed Acquisition Loan, the Borrower shall deliver an Acquisition
Approval Package to each of the Lenders containing such information and in such
detail as shall be satisfactory to the Agent. Within ten (10) Business Days of
receipt of the completed Acquisition Approval Package, each Lender in its
discretion, shall deliver to the Agent a certificate in the form of EXHIBIT R
hereto ("ACQUISITION CONSENT CERTIFICATE") indicating whether or not such Lender
consents to the
-61-
<PAGE>
proposed Acquisition. If a Lender fails to timely deliver the Acquisition
Consent Certificate, then the Lender shall be deemed to have disapproved of the
Acquisition. If the Agent has received within such ten (10) Business Day
period, executed Acquisition Consent Certificates from the Acquisition Approval
Lenders indicating their consent to the proposed Acquisition, then, subject to
the Agent's satisfaction with all documentation in connection therewith and that
the Borrower is in compliance with the criteria set forth below, the approved
Acquisition may be consummated not later than thirty (30) days after the consent
of the Acquisition Approval Lenders has been received by the Agent on the terms
and conditions of the Acquisition Approval Package:
(a) No Default or Unmatured Default shall have occurred and be continuing
or would result from such Acquisition or the incurrence of any
Indebtedness in connection therewith.
(b) The Agent shall have been provided with two years of audited financial
statements with respect to the Target for distribution to the Lenders.
In the event that audited financial statements for such period are not
available as a result of divisional accounting or similar accounting
issues or past business practices, then the Agent shall have received
for distribution to the Lenders a due diligence review of the
financial statements of the Target for the prior one-year period,
reviewed by independent certified public accountants of national
standing and acceptable to the Agent or other certified public
accountants acceptable to the Agent; PROVIDED, HOWEVER, that an audit
or review shall not be required if the purchase price of a Target is
less than $1,000,000 and in the aggregate such Acquisitions do not
exceed $3,000,000 in any 12-month period.
(c) Any Indebtedness (other than the applicable Acquisition Loan)
("ACQUISITION SUBORDINATED DEBT") incurred for the purpose of
financing all or any part of the Acquisition shall be subordinated to
the Obligations on terms and conditions acceptable to the Agent and
the Lenders. The terms and conditions of any such Acquisition
Subordinated Debt, including without limitation, those pertaining to
subordination, default, standstill, sinking fund, amortization,
interest rate, covenants and defaults, the entity or entities which
issue or are otherwise liable for the Acquisition Subordinated Debt,
shall be in form and substance reasonably acceptable to the Agent and
the Lenders. Without limiting the foregoing: (i) the scope and nature
of covenants and defaults which the Agent and the Lenders may deem
acceptable will be determined taking into account the Person(s) to
which such Indebtedness is issued (it being expected that the scope
and nature of covenants and defaults in Indebtedness issued to the
seller of a Target would be significantly more limited than terms from
third-party financing sources) and the relative size of the
Acquisition Subordinated Indebtedness compared to the size of the
Acquisition Loan; (ii) financial covenants, if any, contained in the
agreement governing such Acquisition Subordinated Debt shall be less
restrictive by a factor of not less than fifteen percent (15%) than
the financial covenants included in this Agreement; (iii) other
covenants or defaults, if any, contained in the agreement governing
such Acquisition Subordinated Debt which covenants or defaults contain
monetary baskets or restrictions shall be materially less restrictive
than those
-62-
<PAGE>
contained in this Agreement; (iv) such Acquisition Subordinated Debt
shall be unsecured; (v) there shall be no mandatory prepayments or
redemptions of such Acquisition Subordinated Debt of any type;
PROVIDED, HOWEVER, those annual interest and principal payments
permissible as Restricted Junior Payments pursuant to SECTION
6.3(F)(viii) may be paid in accordance therewith; (vi) none of the
Acquisition Subordinated Debt shall mature prior to December 31, 2003
or, if later, until at least one year after the Termination Date in
effect as of the date of such Acquisition; (vii) the agreement
governing such Acquisition Subordinated Debt shall not contain a
cross-default to this Agreement or other Indebtedness (but may contain
a cross-acceleration clause to this Agreement and other Indebtedness
in excess of a threshold amount to be determined based upon the size
of the Target); and (viii) the agreement governing such Acquisition
Subordinated Debt shall contain no limitation on the sale of assets of
any member of the Borrower Corporate Group provided that any such sale
does not involve a transfer of all or substantially all of the assets
of the Target, any such sale is made in good faith on an arm's length
basis and the net proceeds of such sale are applied to repay or retire
Obligations under this Agreement.
(d) The Acquisition is either a purchase of assets by a Specified
Subsidiary or the resulting entity becomes a Specified Subsidiary, is
consummated pursuant to a negotiated acquisition agreement on a non-
hostile basis on terms and conditions reasonably acceptable to the
Agent and the Acquisition Approval Lenders and involves the purchase
of a business line similar to that of the Borrower's Specified
Subsidiaries as of Closing Date. In the event that the acquisition
agreement contains any Contingent Purchase Price Payments, the terms
thereof shall be reasonably acceptable to the Agent and the
Acquisition Approval Lenders but shall include a requirement that such
Contingent Purchase Price Payments not be made prior to receipt of the
annual audited financial statements for the Borrower Corporate Group
required to be delivered pursuant to SECTION 6.1(a)(iii) and shall not
be required to be made at a time when there is a Default.
(e) After giving effect to such Acquisition, the representations and
warranties set forth in ARTICLE V hereof shall be true and correct in
all material respects on and as of the date of such Acquisition with
the same effect as though made on and as of such date except for those
made only as of the Closing Date.
(f) Prior to such Acquisition, the Borrower shall deliver to the Agent for
distribution to the Lenders (i) PRO FORMA historical financial
statements for the twelve-month period ending on the last day of the
Borrower's most recently completed fiscal quarter taking into account
the proposed Acquisition and the incurrence of Indebtedness in
connection therewith; (ii) PRO FORMA opening date balance sheets as of
the date of such proposed Acquisition taking into account the
consummation thereof and the incurrence of any Indebtedness proposed
to be incurred in connection therewith; and (iii) PRO FORMA
projections for the period remaining until the Termination Date.
Based upon the delivered PRO FORMA financial statements and
projections, the financial covenants set forth in SECTION 6.4 may need
to be modified, which modifications shall be on a mutually agreeable
basis among the
-63-
<PAGE>
Borrower and the Lenders and which modifications shall not be
inconsistent with the general framework of covenants set forth in
SECTION 6.4 on the Closing Date and discussed between the Agent and
the Borrower. The financial information delivered pursuant to this
clause (f) shall also contain a revised plan and forecast (including a
projected balance sheet, income statement and funds flow statement) of
the Borrower and each member of the Borrower Corporate Group for the
balance of the fiscal year prepared in such detail as shall be
reasonably satisfactory to the Agent.
(g) As of the applicable Acquisition Closing Date, the Borrower shall
deliver to the Agent and the Lenders a certificate from the Borrower's
chief financial officer demonstrating to the satisfaction of the Agent
and the Acquisition Approval Lenders that after giving effect to such
Acquisition and the incurrence of any Indebtedness permitted in
connection therewith on a PRO FORMA basis as if such Acquisition and
such incurrence of Indebtedness had occurred on the first day of the
twelve-month period ending on the last day of the Borrower's most
recently completed fiscal quarter, the Borrower would have been in
compliance with all provisions of SECTION 6.4 (as so modified pursuant
to clause (f) above) at all times during such twelve-month period and
will be in compliance with all provisions of SECTION 6.4 (as so
modified) at all times during the period from such Acquisition Closing
Date until the Termination Date.
(h) All material regulatory and legal approvals for the Acquisition shall
have been obtained.
(i) There shall be an absence of injunction or temporary restraining order
which, in the judgment of the Agent would prohibit the making of the
Acquisition Loans or the consummation of the Acquisition.
(j) The Agent (directly or through its travelling auditors and/or outside
auditing consultants) shall have completed its review of the Target
and, if applicable, its subsidiaries and their respective business
operations, assets and liabilities, including, without limitation,
review of financial statements and review of pending and threatened
litigation and insurance coverage relating thereto, environmental
risks and liabilities, material agreements, retiree medical benefits,
ERISA obligations and compliance with applicable laws and regulations
deemed necessary or prudent by the Agent and the Acquisition Approval
Lenders, and such review shall have provided the Agent and the Lenders
with results and information which, in the Agent's and the Acquisition
Approval Lenders' reasonable determination, are satisfactory to permit
the Lenders to enter into the secured financing transaction in
connection with the Acquisition and to make the Acquisition Loans in
connection therewith. The Agent and the Acquisition Approval Lenders
shall have determined that all financial, accounting and tax aspects
of the Acquisition are reasonably acceptable.
(k) Without in any way limiting the foregoing, in the event that the
preliminary environmental assessment conducted by the Agent and its
counsel (including
-64-
<PAGE>
through a telephone interview of the Target and its counsel) with the
assistance of the Borrower and its counsel reveals any material
environmental liabilities or potential material environmental
liabilities, if requested by the Agent, the Agent and the Lenders
shall have been provided with an environmental review report, at the
Borrower's sole cost and expense, satisfactory in form and substance
to the Agent, from an environmental review firm acceptable to the
Agent, as to any environmental liabilities which the Agent reasonably
concludes may exist with respect to the Target or any of its
subsidiaries and as to the Borrower's plans with respect thereto.
(l) The Agent and the Lenders shall have received legal opinions from the
Borrower's and the Target's counsel (or other counsel reasonably
satisfactory to the Agent) in form and substance reasonably
satisfactory to the Agent addressing such matters as the Agent shall
reasonably designate and such other opinions as are customary for
transactions of a similar nature.
(m) Simultaneously with any such Acquisition, the Borrower and the Target
shall have taken all action required under applicable law, or
reasonably requested by the Agent, to grant to the Agent, for the
benefit of the Holders of Secured Obligations, a valid and perfected
first-priority security interest in all of the stock of the Target
owned by the Borrower, if the Target will be a direct Subsidiary of
the Borrower, or owned by any other Specified Subsidiary if the Target
will be an indirect Subsidiary of the Borrower, and, subject to
Customary Permitted Liens and Liens securing Indebtedness or leases of
the Target which the Agent and the Acquisition Approval Lenders agree
to permit to remain outstanding, all of the assets of the Target,
under documentation consistent with the documentation used with
respect to the current Specified Subsidiaries. In connection
therewith:
(1) The Target shall have executed a Subsidiary Guarantee in
substantially the form attached hereto as EXHIBIT G;
(2) The Target shall have executed a Security Agreement in
substantially the form attached hereto as EXHIBIT D and shall
have obtained all of the third party agreements from the
applicable parties as set forth in such Security Agreement;
(3) Each other Person party to any of the Loan Documents shall have
executed a consent and reaffirmation of such Person's obligations
under the Loan Documents;
(4) The Target shall have executed in favor of the Borrower the
Intercompany Documents required pursuant to the terms set forth
in SECTION 6.3(A)(8);
(5) The Borrower or the Specified Subsidiary of which the Target will
be a direct Subsidiary, as applicable, shall have delivered to
the Agent as Collateral stock certificates representing all of
the Capital Stock of the Target owned by the Borrower or such
Specified Subsidiary and (a) such
-65
<PAGE>
Capital Stock together with the Capital Stock of other Persons
which have executed a Pledge Agreement shall be for not less than
80% of the combined voting power of the Target's outstanding
Capital Stock ordinarily having the right to vote at an election
of directors and (b) such Capital Stock shall be subject to the
Pledge Agreement.;
(6) The Agent shall have received in form suitable for filing UCC-1
financing statements naming Target as debtor and the Agent as
secured party in all jurisdictions requested by the Agent and
shall have confirmed that no Liens exist with respect to the
assets or property of the Target except Liens permitted under the
terms of this Agreement and the relevant Security Agreement
(PROVIDED, HOWEVER, the Agent and the Lenders agree that pre-
filing and post-filing Lien searches need not be conducted in
jurisdictions where the aggregate book value of assets of the
Target do not exceed $100,000 provided the aggregate book value
of assets of all members of the Borrower Corporate Group for
which such Lien searches have not been conducted shall not exceed
five percent (5.0%) of the consolidated book value of all assets
of all members of the Borrower Corporate Group);
(7) The Agent shall have been provided with endorsements with respect
to the insurance to be maintained with respect to the Target as
required pursuant to SECTION 6.2(E); and
(8) The Target and the Borrower shall have executed such other Loan
Documents and/or Collateral Documents and delivered such
documents, instruments and agreements as shall be reasonably
requested by the Agent, in each case, in form and substance
reasonably satisfactory to the Agent. Such additional documents
shall disclose any revisions necessary to the Schedules to this
Agreement or any of the other Loan Documents, all of which
revisions shall be reasonably acceptable to the Agent and the
Acquisition Approval Lenders and which shall not disclose any
information which is inconsistent with the other criteria for
permitting an Acquisition under this SECTION 4.3. Set forth as
SCHEDULE 4.3(m)(8) is a sample list of closing documents which
would be delivered in connection with the closing of an
Acquisition Loan.
(n) As of the Acquisition Closing Date, the Borrower shall have executed
and delivered a Borrowing Base Certificate.
(o) Each of the Borrower and the Specified Subsidiaries shall have
executed and delivered an addendum and a revised SCHEDULE I to the
Contribution Agreement in substantially the form attached hereto as
EXHIBIT O.
(p) The applicable members of the Borrower Corporate Group shall have
entered into a Collateral Assignment of Representations, Warranties
and Covenants in substantially the form attached hereto as EXHIBIT P
with respect to the acquisition agreement in connection with the
proposed Acquisition.
-66-
<PAGE>
(q) The Borrower shall have delivered to the Agent certificates of value,
solvency and other appropriate factual information from Borrower's
chief financial officer substantially in the form of EXHIBIT Q
attached hereto supporting the conclusions that after giving effect to
the Acquisition of the Target, the Borrower is solvent and will be
solvent subsequent to incurring the Indebtedness in connection with
the Acquisition, will be able to pay its debts and liabilities as they
become due and will not be left with unreasonably small capital with
which to engage in its businesses.
(r) The Acquisition constitutes a Permitted Acquisition pursuant to
SECTION 6.3(G) and the Agent shall have been provided with the
certificate required pursuant to SECTION 6.3(G)(2) for distribution to
the Lenders.
ARTICLE V: REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this Agreement
and to make the Loans and the other financial accommodations to the Borrower and
to issue the Letters of Credit described herein, the Borrower hereby represents
and warrants as follows to each Lender and the Agent as of the Closing Date and
thereafter on each date as required by SECTION 4.2 and SECTION 4.3:
5.1 ORGANIZATION; CORPORATE POWERS. Each member of the Borrower Corporate
Group (i) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (ii) is duly qualified
to do business as a foreign corporation and is in good standing under the laws
of each jurisdiction in which failure to be so qualified and in good standing
will have or is reasonably likely to have a Material Adverse Effect, (iii) has
filed and maintained effective (unless exempt from the requirements for filing)
a current Business Activity Report with the appropriate governmental authority
in the States in which failure to file and maintain such a report (y) has or is
reasonably likely to have a Material Adverse Effect or (z) impair the
enforceability of Receivables in excess of $25,000 for any Specified Subsidiary
or $100,000 in the aggregate for all Specified Subsidiaries and (iv) has all
requisite corporate power and authority to own, operate and encumber its
property and to conduct its business as presently conducted after giving effect
to the Care Apothecary Acquisition, the Gatti Acquisition, the Williamson
Acquisition, the N&M Acquisition, the Dixon Acquisition, the Sterling
Acquisition, the Extended Care Acquisition and the Johnson Acquisition and as
proposed to be conducted in connection with and following the consummation of
the transactions contemplated by this Agreement (including, without limitation,
any Acquisitions, if any, permitted under the terms of this Agreement).
5.2 AUTHORITY.
(A) Each member of the Consolidated AMC Group has the requisite corporate
power and authority (i) to execute, deliver and perform each of the Transaction
Documents executed by it in connection with the Specified Acquisitions or which
have been executed by it as required by this Agreement and (ii) to file the
Transaction Documents which must be filed by it in connection
-67-
<PAGE>
with the Specified Acquisitions or which have been filed by it as required by
this Agreement with any Governmental Authority.
(B) The execution, delivery, performance and filing, as the case may be, of
each of the Transaction Documents which must be executed or filed by any member
of the Consolidated AMC Group in connection with the Specified Acquisitions or
which have been executed or filed as required by this Agreement and to which any
member of the Consolidated AMC Group is party, and the consummation of the
transactions contemplated thereby, including, without limitation consummation of
the Specified Acquisitions, have been duly approved by the respective boards of
directors and, if necessary, the shareholders of such member of the Consolidated
AMC Group, and such approvals have not been rescinded. No other corporate
action or proceedings on the part of any member of the Consolidated AMC Group is
necessary to consummate such transactions, including, without limitation, the
Specified Acquisitions.
(C) Each of the Transaction Documents to which any member of the
Consolidated AMC Group is a party has been duly executed, delivered or filed, as
the case may be, by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms (except as enforceability
may be limited by bankruptcy, insolvency, or similar laws affecting the
enforcement of creditor's rights generally), is in full force and effect, and no
material term or condition thereof has been amended, modified or waived from the
terms and conditions contained in the Transaction Documents delivered to the
Agent pursuant to SECTIONS 4.1 OR 4.3 without the prior written consent of the
Required Lenders, and each member of the Consolidated AMC Group has, and, to
such Person's Knowledge, all other parties thereto have, performed and complied
with all the terms, provisions, agreements and conditions set forth therein and
required to be performed or complied with by such parties on or before the
Closing Date, and no unmatured default, default or breach of any covenant by any
member of the Consolidated AMC Group and, to the Knowledge of each member of the
Consolidated AMC Group, no unmatured default, default or breach of any covenant
by any other party to the Transaction Documents exists thereunder.
5.3 NO CONFLICT; GOVERNMENTAL CONSENTS. Except as set forth on SCHEDULE
5.3 to this Agreement, the execution, delivery and performance of each of the
Loan Documents and other Transaction Documents to which any member of the
Consolidated AMC Group is a party do not and will not (i) conflict with the
certificate or articles of incorporation or by-laws of such Person, (ii) to such
Person's Knowledge constitute a violation of or breach under any Contractual
Obligation of any Person or conflict with, result in a breach of or constitute
(with or without notice or lapse of time or both) a default under any
Requirement of Law (including, without limitation, any Environmental Property
Transfer Act) or Contractual Obligation of any such member of the Consolidated
AMC Group, or require termination of any Contractual Obligation, except such
interference, breach, default or termination which individually or in the
aggregate would not reasonably be likely to have a Material Adverse Effect,
(iii) with respect to the Loan Documents and, to their Knowledge, with respect
to the other Transaction Documents, result in or require the creation or
imposition of any Lien whatsoever upon any of the property or assets of any
member of the Borrower Corporate Group, other than Liens permitted by the Loan
Documents, or (iv) require any approval of any such member's shareholders except
such as have been obtained. Except as set forth on SCHEDULE 5.3 to this
Agreement, the execution, delivery and performance of each of the Transaction
Documents to which any member of the Consolidated
-68-
<PAGE>
AMC Group is a party do not and will not require any registration with, consent
or approval of, or notice to, or other action to, with or by any Governmental
Authority, including under any Environmental Property Transfer Act, except
(i) filings, consents or notices which have been made, obtained or given, or
which, if not made, obtained or given, individually or in the aggregate would
not reasonably be likely to have a Material Adverse Effect, and (ii) filings
necessary to create or perfect security interests in the Collateral.
5.4 FINANCIAL STATEMENTS. Complete and accurate copies of the following
financial statements and the following related information have been delivered
to the Agent:
(1) the audited financial statements of the Borrower and its
Subsidiaries as of June 30, 1995;
(2) the unaudited Financial Statements of the Borrower and its
Subsidiaries for each month from June 30, 1995 to January 31, 1996; and
(3) each and every other balance sheet, statement of income,
statement of cash flow or other financial statement of any sort delivered
on or prior to any Acquisition Closing Date by any of the parties to the
Acquisition Agreements in connection with the Specified Acquisitions.
5.5 NO MATERIAL ADVERSE CHANGE. Since June 30, 1995, there has occurred
no change in the business, properties, prospects, condition (financial or
otherwise) or results of operations of (x) Borrower and its Subsidiaries, taken
as a whole, (y) any Specified Subsidiary, or (z) any Specified Subsidiary and
its Subsidiaries, taken as a whole, or any other event which has had or is
reasonably likely to have a Material Adverse Effect.
5.6 TAXES.
(A) TAX EXAMINATIONS. All deficiencies which have been asserted against
AMC or any member of the Borrower Corporate Group as a result of any federal,
state, local or foreign tax examination for each taxable year in respect of
which an examination has been conducted have been fully paid or finally settled
or are being contested in good faith, and as of the Closing Date no issue has
been raised by any taxing authority in any such examination which, by
application of similar principles, reasonably can be expected to result in
assertion by such taxing authority of a material deficiency for any other year
not so examined which has not been reserved for in the applicable consolidated
financial statements to the extent, if any, required by Agreement Accounting
Principles. Except as permitted pursuant to SECTION 6.2(D), neither AMC nor any
member of the Borrower Corporate Group anticipates any material tax liability
with respect to the years which have not been closed pursuant to applicable law.
(B) PAYMENT OF TAXES AND CLAIMS. All tax returns and reports of each of
AMC and each member of the Borrower Corporate Group required to be filed have
been timely filed, and all taxes, assessments, fees and other governmental
charges thereupon and upon their respective property, assets, income and
franchises which are shown in such returns or reports to be due and payable have
been paid, except those items which are being contested in good faith and have
been reserved for in accordance with Agreement Accounting Principles. Neither
AMC nor any
-69-
<PAGE>
member of the Borrower Corporate Group has any Knowledge of any proposed tax
assessment against AMC or any member of the Borrower Corporate Group that will
have or is reasonably likely to have a Material Adverse Effect.
5.7 LITIGATION; LOSS CONTINGENCIES AND VIOLATIONS. Except as set forth in
SCHEDULES 5.7 and 5.18 to this Agreement, there is no action, suit, proceeding,
investigation of which AMC or any member of the Borrower Corporate Group has
Knowledge or arbitration before or by any Governmental Authority or private
arbitrator pending or, to the Knowledge of AMC or any member of the Borrower
Corporate Group, threatened against AMC or any member of the Borrower Corporate
Group or any property of any of them (i) challenging the validity or the
enforceability of any material provision of the Transaction Documents or
(ii) which will have or is reasonably likely to have a Material Adverse Effect.
There is no material loss contingency within the meaning of Agreement Accounting
Principles which has not been reflected in the consolidated financial statements
of each of AMC and the Borrower and the consolidated financial statements of
each of the applicable Specified Subsidiaries prepared and delivered to SECTION
6.1(A)(i) for the fiscal period during which such material loss contingency was
incurred. No member of the Consolidated AMC Group (A) in violation of any
applicable Requirements of Law which violation will have or is reasonably likely
to have a Material Adverse Effect, or (B) subject to or in default with respect
to any final judgment, writ, injunction, restraining order or order of any
nature, decree, rule or regulation of any court or Governmental Authority which
will have or is reasonably likely to have a Material Adverse Effect.
5.8 SUBSIDIARIES. SCHEDULE 5.8 to this Agreement (i) contains a
description of the corporate structure and capitalization of AMC, the Borrower,
and their Subsidiaries and any other Person in which AMC, the Borrower or any of
their Subsidiaries holds an equity interest (both narratively and in chart
form); and (ii) accurately sets forth (A) the correct legal name, the
jurisdiction of incorporation and the jurisdictions in which each such Person is
qualified to transact business as a foreign corporation, (B) the authorized,
issued and outstanding shares of each class of Capital Stock of AMC, the
Borrower and each of their Subsidiaries and the owners of such shares (and on a
fully-diluted basis after the exercise of all options, warrants, or other equity
interests), and (C) a summary of the direct and indirect partnership, joint
venture, or other equity interests, if any, of AMC, the Borrower and each of
their respective Subsidiaries in any Person that is not a corporation. None of
the issued and outstanding Capital Stock of the Borrower or any of its
Subsidiaries is subject to any vesting, redemption, or repurchase agreement,
(other than obligations pursuant to Specified Subsidiaries' shareholder
agreements to purchase shares of certain minority shareholders upon termination
of their employment) and there are no warrants or options outstanding with
respect to such Capital Stock. The outstanding Capital Stock of the Borrower
and each of its Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and is not margin stock (as defined in Regulation U). Except as
set forth on SCHEDULE 5.8, the Borrower does not have any Subsidiaries.
5.9 ERISA. Except as set forth on SCHEDULE 5.9, no member of the Borrower
Corporate Group is now maintaining or contributing to or has ever maintained or
contributed to any Benefit Plan. No member of the Borrower Corporate Group is
now contributing to or has ever contributed to or been obligated to contribute
to any Multiemployer Plan. No member of the Borrower Corporate Group maintains
or contributes to any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides benefits to employees after termination of
-70-
<PAGE>
employment other than as required by Section 601 of ERISA. Each Plan maintained
or contributed to by any member of the Borrower Corporate Group which is
intended to be qualified under Section 401(a) of the Code as currently in effect
is so qualified, and each trust related to any such Plan is exempt from federal
income tax under Section 501(a) of the Code as currently in effect. Each member
of the Borrower Corporate Group is in compliance in all material respects with
the responsibilities, obligations and duties imposed on it by ERISA and the Code
with respect to all Plans maintained or contributed to by any member of the
Borrower Corporate Group. Neither Borrower nor any other member of the Borrower
Corporate Group nor, to the Knowledge of the Borrower or any member of the
Borrower Corporate Group, any fiduciary of any Plan has engaged in a nonexempt
prohibited transaction described in Sections 406 of ERISA or 4975 of the Code
which could reasonably be expected to subject the Borrower or any member of the
Borrower Corporate Group to liability in excess of $100,000 or all of the
members of the Borrower Corporate Group to liability in excess of $500,000.
Neither Borrower nor any member of the Controlled Group has taken or failed to
take any action which would constitute or result in a Termination Event, which
action or inaction could reasonably be expected to subject Borrower or any
member of the Controlled Group to liability in excess of $100,000 or all of the
members of the Controlled Group to liability in excess of $500,000. No member
of the Borrower Corporate Group is subject to any liability under Sections 4063,
4064, 4069, 4204 or 4212(c) of ERISA and no other member of the Controlled Group
is subject to any liability under Sections 4063, 4064, 4069, 4204 or 4212(c) of
ERISA which could reasonably be expected to subject Borrower or any member of
the Controlled Group to liability in excess of $100,000 or all of members of the
Controlled Group in the aggregate to liability in excess of $500,000. Neither
AMC nor any member of the Borrower Corporate Group has, by reason of the
transactions contemplated hereby, any obligation to make any payment to any
employee pursuant to any Plan or existing contract or arrangement.
5.10 ACCURACY OF INFORMATION. The written information, exhibits and
reports (other than projections from time to time delivered to the Agent)
furnished by AMC and any member of the Borrower Corporate Group to the Agent or
to any Lender in connection with the negotiation of, or compliance with, the
Loan Documents, the representations and warranties of the members of the
Consolidated AMC Group contained in the Loan Documents, and all certificates and
documents delivered to the Agent and the Lenders pursuant to the terms thereof
do not contain as of the date furnished any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
5.11 SECURITIES ACTIVITIES. No member of the Borrower Corporate Group is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (as defined in Regulation U).
5.12 MATERIAL AGREEMENTS; LICENSES. No member of the Borrower Corporate
Group is a party to any agreement or instrument or subject to any charter or
other corporate restriction which will have or is reasonably likely to have a
Material Adverse Effect. No member of the Borrower Corporate Group has received
notice or has Knowledge that (i) it is in default in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained in
any Contractual Obligation applicable to it, or (ii) any condition exists which,
with the giving of notice or the lapse of time or both, would constitute a
default with respect to any
-71-
<PAGE>
such Contractual Obligation, in each case, except where such default or
defaults, if any, will not have or are not reasonably likely to have a Material
Adverse Effect. Since December 31, 1993, no Permit, agreement or other license
or authorization which, in the judgment of the Required Lenders, is material to
the business, operations or employee relations of any member of the Borrower
Corporate Group has been suspended, terminated, modified, revoked, breached or
declared to be in default.
5.13 COMPLIANCE WITH LAWS. Each of members of the Borrower Corporate
Group is in compliance with all Requirements of Law applicable to it and its
respective businesses, in each case where the failure to so comply individually
or in the aggregate (a) will have or is reasonably likely to have a Material
Adverse Effect (b) has resulted in or is reasonably likely to result in loss of
any such member's eligibility to participate in CHAMPUS, Medicare or Medicaid or
to accept assignments or rights to reimbursement under CHAMPUS Regulations,
Medicaid Regulations or Medicare Regulations.
5.14 ASSETS AND PROPERTIES; GOVERNMENT APPROVALS; VALIDITY OF RECEIVABLES
ON BORROWING BASE CERTIFICATE.
(a) Each member of the Borrower Corporate Group has good and marketable
title to substantially all of its assets and properties (tangible and
intangible, real or personal) owned by it or a valid leasehold interest in all
of its leased assets and all such assets and property are free and clear of all
Liens, except Liens securing the Obligations and Liens permitted under
SECTION 6.3(C). Substantially all of the assets and properties owned by, leased
to or used by each member of the Borrower Corporate Group are in adequate
operating condition and repair, ordinary wear and tear excepted. Except for
Liens granted to the Agent for the benefit of the Agent and the Holders of
Secured Obligations, neither this Agreement nor any other Transaction Document,
nor any transaction contemplated under any such agreement, will affect any
right, title or interest of any member of the Borrower Corporate Group in and to
any of such assets in a manner that would have or is reasonably likely to have a
Material Adverse Effect.
(b) Each of the Specified Subsidiaries: (i) maintains eligibility for
reimbursement from CHAMPUS, Medicare, Medicaid, and other federal health care
programs, as applicable; (ii) maintains eligibility for reimbursement from
Applicable Carriers; (iii) and each of the other members of the Borrower
Corporate Group owns, is licensed or otherwise has the lawful right to use, or
has all Permits and other governmental approvals, patents, trademarks, trade
names, copyrights, technology, know-how and processes used in or necessary for
the conduct of their businesses as currently conducted which are material to
their business, financial condition, operations, performance or properties.
SCHEDULE 5.14, describes (A) all Accreditations, Permits, CONs, Health Facility
Licenses, CHAMPUS Certifications, Medicare Certifications, and Medicaid
Certifications in effect as of the Closing Date with respect to any member of
the Borrower Corporate Group, (B) those patents, trademarks, trade names, and
copyrights which are deemed, by the applicable Person, to be material to the
continued operations of any member of the Borrower Corporate Group, and (C) all
pending patent and trademark applications and Permits of each member of the
Borrower Corporate Group. Except as set forth on SCHEDULE 5.14, (1) no member of
the Borrower Corporate Group, and no facilities operated by any such Person, is
subject to any ongoing or, to such Person's Knowledge, threatened review by any
Governmental Authority or other Person, the outcome of which might result in the
loss of any
-72-
<PAGE>
Permit and (2) no claims are pending or, to the Knowledge of any member of the
Borrower Corporate Group, threatened, that any such Person is infringing or
otherwise adversely affecting the rights of any Person with respect to such
Permits and other governmental approvals, patents, trademarks, trade names,
licenses, copyrights, technology, know-how and processes, except for such claims
and infringements as do not give rise to any liability on the part of any member
of the Borrower Corporate Group which has or is reasonably likely to have a
Material Adverse Effect.
(c) The consummation of the transactions contemplated by the Acquisition
Documents and/or the Loan Documents will not impair the ownership of or rights
under (or the license or other right to use, as the case may be) any Permits and
governmental approvals, patents, trademarks, trade names, licenses, copyrights,
technology, know-how or processes of any member of the Borrower Corporate Group
in any manner which has or is reasonably likely to have a Material Adverse
Effect.
(d) The Eligible Receivables listed or referred to in any Borrowing Base
Certificate delivered by the Specified Subsidiaries or the Borrower hereunder,
to the Borrower's or such Specified Subsidiaries' Knowledge, (i) are genuine,
are in all respects what they purport to be, and are not evidenced by a
judgment, (ii) have arisen in the ordinary course of the applicable Specified
Subsidiary's business and reflect BONA FIDE obligations for the payment of goods
and services provided by such Specified Subsidiary, and (iii) will not be
subject to any deduction, offset, counterclaim, return privilege or other
condition (except as has already been reflected in the adjustments made in
determining the Adjusted Amount of Eligible Receivables reflected therein),
other than in accordance with the provisions of the applicable Payor Agreement,
if any, with respect to the Account Debtor obligated on such Receivable and
reflected in the Borrowing Base Certificate.
5.15 STATUTORY INDEBTEDNESS RESTRICTIONS. No member of the Consolidated
AMC Group is subject to regulation under the Public Utility Holding Company Act
of 1935, the Federal Power Act, the Interstate Commerce Act, or the Investment
Company Act of 1940, or any other federal or state statute or regulation which
limits its ability to incur indebtedness or its ability to consummate the
transactions contemplated hereby or in connection with Specified Acquisitions.
5.16 POST-RETIREMENT BENEFITS. No member of the Borrower Corporate Group
has any expected cost of post-retirement medical and insurance benefits payable
by it to its employees and former employees, as estimated in accordance with
Financial Accounting Standards Board Statement No. 106, except such as are
reflected on the financial statements delivered pursuant to this Agreement.
5.17 INSURANCE. SCHEDULE 5.17 to this Agreement accurately sets forth as
of the Closing Date all insurance policies and programs currently in effect with
respect to the respective properties, assets and businesses of each member of
the Borrower Corporate Group, specifying for each such policy and program,
(i) the amount thereof, (ii) the risks insured against thereby, (iii) the name
of the insurer and each insured party thereunder, (iv) the policy or other
identification number thereof, (v) the expiration date thereof, (vi) the annual
premium with respect thereto and (vii) describes any reserves, relating to any
self-insurance program that is in
-73-
<PAGE>
effect. Such insurance policies and programs reflect coverage that is
reasonably consistent with prudent industry practice.
5.18 CONTINGENT OBLIGATIONS. Except as set forth on SCHEDULE 5.18 to this
Agreement, no member of the Borrower Corporate Group has any Contingent
Obligation, contingent liability, long-term lease or commitment, not reflected
in its audited financial statements delivered to the Agent on or prior to the
Closing Date or otherwise disclosed to the Agent in the other Schedules to this
Agreement, which will have or is reasonably likely to have a Material Adverse
Effect.
5.19 RESTRICTED JUNIOR PAYMENTS. No member of the Borrower Corporate
Group has directly or indirectly declared, ordered, paid or made or set apart
any sum or properties for any Restricted Junior Payment or agreed to do so,
except as permitted pursuant to SECTION 6.3(F) of this Agreement.
5.20 LABOR MATTERS.
(A) Except as listed on SCHEDULE 5.20 to this Agreement, there are on the
Closing Date no collective bargaining agreements, other labor agreements or
Multiemployer Plans covering any of the employees of any member of the Borrower
Corporate Group. As of the Closing Date, no attempt to organize the employees
of any member of the Borrower Corporate Group, no labor disputes, strikes or
walkouts affecting the operations of any member of the Borrower Corporate Group,
is pending, or, to such Persons' Knowledge, threatened, planned or
contemplated.
(B) Set forth in SCHEDULE 5.20 to this Agreement is a list, as of the
Closing Date, of all material consulting agreements, executive compensation
plans, deferred compensation agreements, employee pension plans or retirement
plans, employee profit sharing plans, employee stock purchase and stock option
plans, severance plans, group life insurance, hospitalization insurance or other
plans or arrangements of AMC and each member of the Borrower Corporate Group
providing for benefits for employees of AMC, the Borrower or any member of the
Borrower Corporate Group.
5.21 THE ACQUISITIONS. As of the Acquisition Closing Date with respect to
any Acquisition:
(a) the Acquisition Documents with respect to such Acquisition are in
full force and effect, no material breach or default of any term or
provision of any of such Acquisition Documents by AMC, the Borrower or any
member of the Borrower Corporate Group or, to the Knowledge of such
Persons, the other parties thereto has occurred (except for such defaults,
if any, consented to in writing by the Agent and the Required Lenders);
(b) the representations and warranties of each member of the
Consolidated AMC Group, and, to their Knowledge, each other Person a party
thereto, contained in the Acquisition Documents, are true and correct in
all material respects;
(c) except as otherwise provided in the Acquisition Documents, all
conditions precedent to (including, without limitation compliance with all
applicable bulk sales laws),
-74-
<PAGE>
and all consents necessary to permit, the applicable Acquisition pursuant
to the Acquisition Documents related thereto have been satisfied or waived
with the prior written consent of the Agent and the Required Lenders;
(d) the Acquisition has each been consummated, and whether by merger,
stock acquisition or asset acquisition, the assets of the Target are owned
by the Specified Subsidiary established in connection with such Acquisition
free and clear of any Liens, other than Liens permitted pursuant to the
terms of this Agreement;
(e) no member of the Borrower Corporate Group has assumed any
liabilities in connection with such Acquisition other than disclosed
liabilities set forth in the Acquisition Documents presented to the Agent
and the Lenders pursuant to SECTION 4.3; and
(f) no action has been taken by any competent authority which
restrains, prevents or imposes any material adverse condition upon, or
seeks to restrain, prevent or impose any material adverse condition upon,
any Acquisition.
5.22 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 5.22 to this
Agreement or except as would not reasonably be likely to subject any member of
the Borrower Corporate Group to liability in excess of $100,000 or all of the
members of the Borrower Corporate Group to liability in excess of $500,000, the
operations of each member of the Borrower Corporate Group comply in all material
respects with Environmental, Health or Safety Requirements of Law (including,
without limitation, those applicable to the disposal of medical waste) and
neither any member of the Borrower Corporate Group nor any of their respective
present property or operations, or, to their Knowledge, any of their respective
past property or operations, are subject to or the subject of, any investigation
of which any member of the Borrower Corporate Group has Knowledge, judicial or
administrative proceeding, order, judgment, decree, settlement or other
agreement respecting (a) any violation of Environmental, Health or Safety
Requirements of Law (including, without limitation, those applicable to the
disposal of medical waste), (b) any remedial action or (c) any claims or
liabilities arising from the release or threatened release of a contaminant
(including, without limitation, any medical waste) into the environment. Except
as disclosed on SCHEDULE 5.22 to this Agreement or except as would not
reasonably be likely to subject any member of the Borrower Corporate Group to
liability in excess of $100,000 or all of the members of the Borrower Corporate
Group in the aggregate to liability in excess of $500,000, there is not now, nor
to the best of any of such Persons' Knowledge has there ever been on or in the
property of any member of the Borrower Corporate Group any landfill, waste pile,
underground storage tanks, aboveground storage tanks, surface impoundment or
hazardous waste storage facility of any kind, any polychlorinated biphenyls
(PCBs) used in hydraulic oils, electric transformers or other equipment, or any
asbestos containing material. Neither Borrower nor any other member of the
Borrower Corporate Group has any material Contingent Obligation in connection
with any release or threatened release of a contaminant (including, without
limitation, any medical waste) into the environment which could reasonably be
likely to subject Borrower or any other member of the Borrower Corporate Group
to liability in excess of $100,000 or all of the members of the Borrower
Corporate Group to liability in excess of $500,000.
-75-
<PAGE>
5.23 HEALTHCARE REGULATORY MATTERS. (i) Except as disclosed on SCHEDULE
5.23, each facility operated by any member of the Borrower Corporate Group has:
(A) where required by applicable law, obtained all CONs;
(B) obtained and maintains in good standing all required Health
Facility Licenses;
(C) where required by applicable law, obtained and maintains
Accreditation for such facilities;
(D) obtained and maintains all certifications required from any
Governmental Authority including, without limitation, where required by
applicable law, obtained and maintains CHAMPUS Certification (if
applicable), Medicaid Certification and Medicare Certification;
(E) obtained and maintains CHAMPUS, Medicaid and Medicare provider
numbers which were initially issued to the current Specified Subsidiary
operating the Facility (after consummation of the Specified Acquisitions)
and which have not been used by any predecessor in interest; and
(F) obtained and maintains eligibility and good standing for
reimbursement from CHAMPUS, Medicare and Medicaid.
(ii) Except as disclosed on SCHEDULE 5.23, to the Knowledge of each member
of the Borrower Corporate Group, each facility to which any member of the
Borrower Corporate Group sells Inventory or provides services:
(A) where required by applicable law, obtained all CONs;
(B) obtained and maintains in good standing all required Health
Facility Licenses;
(C) where required by applicable law, obtained and maintains
Accreditation for such facilities;
(D) obtained and maintains all certifications required from any
Governmental Authority including, without limitation, where required by
applicable law, obtained and maintains CHAMPUS Certification, Medicaid
Certification and Medicare Certification; and
(E) entered into and maintains in good standing its Provider
Agreements.
(iii) The Adjusted Amount of Eligible Receivables of each Specified
Subsidiary listed on each Borrowing Base Certificate have been and will continue
to be appropriately adjusted to reflect current reimbursement policies of third
party payors and Applicable Carriers, including, without limitation, CHAMPUS,
Medicare, Medicaid, Blue Cross/Blue Shield, private insurers, health maintenance
organizations, preferred provider organizations, alternative delivery systems,
and/or managed care systems. The Adjusted Amount of Eligible Receivables,
adjusted as set
-76-
<PAGE>
forth above, relating to such third party payors do not and shall not exceed
amounts the applicable Specified Subsidiary reasonably believes it is entitled
to receive under any capitation arrangement, fee schedule, discount formula,
cost-based reimbursement, or other adjustment or limitation to the usual charges
of such Specified Subsidiary.
ARTICLE VI: COVENANTS
The Borrower covenants and agrees that so long as any Commitments are
outstanding and thereafter until payment in full of all of the Obligations
(other than contingent indemnity obligations), unless the Required Lenders shall
otherwise give prior written consent:
6.1 REPORTING. The Borrower shall:
(A) FINANCIAL REPORTING. Furnish to the Agent or caused to be furnished
to the Agent (in sufficient copies for each of the Lenders):
(i) MONTHLY REPORTS. As soon as practicable, and in any event
within (y) forty-five (45) days after the end of each calendar month, the
consolidated balance sheet of the Borrower as at the end of such period and
the related consolidated statements of income and statement of cash flow of
the Borrower for such calendar month, certified by the chief financial
officer of the Borrower as fairly presenting the consolidated financial
position of the Borrower and the other members of the Borrower Corporate
Group at the dates indicated and the results of their operations and cash
flow for the calendar months indicated in accordance with Agreement
Accounting Principles, subject to normal year end adjustments.
(ii) QUARTERLY REPORTS. (a) As soon as practicable, and in any
event within forty-five (45) days after the end of each fiscal quarter in
each fiscal year, the consolidated balance sheet of the Borrower as at the
end of such period and the related consolidated and consolidating (only
with respect to items necessary to calculate EBITA) statements of income,
and cash flow of each member of the Borrower Corporate Group for such
fiscal quarter and for the period from the beginning of the then current
fiscal year to the end of such fiscal quarter and a comparison of the
statement of earnings and cash flow to the budget, and to the prior year,
certified by the chief financial officer of the Borrower, with respect to
each member of the Borrower Corporate Group, as fairly presenting the
consolidated and consolidating (only with respect to items necessary to
calculate EBITA), financial position of such Persons as at the dates
indicated and the results of their operations and cash flow for the periods
indicated in accordance with Agreement Accounting Principles, subject to
normal year end adjustments.
(b) As soon as practicable, and in any event within forty-five (45)
days after the end of the last fiscal quarter in each fiscal year, the
preliminary annual unaudited consolidated balance sheets of AMC, the
Borrower and each other member of the Borrower Corporate Group as at the
end of such fiscal year and the related consolidated statements of income,
stockholders' equity and cash flow of AMC, the Borrower and each other
member of the Borrower Corporate Group for such fiscal year, setting forth
in each
-77-
<PAGE>
case in comparative form the corresponding actual and forecasted figures
for the previous fiscal year, subject to revisions based on the annual
reports delivered pursuant to CLAUSE (iii) below, along with consolidating
schedules in form and substance sufficient to calculate the financial
covenants set forth in SECTION 6.4.
(iii) ANNUAL REPORTS. As soon as practicable, and in any event
within ninety (90) days after the end of each fiscal year, (a) the
consolidated balance sheets of the Borrower and its Subsidiaries as at the
end of such fiscal year and, in each case, the related consolidated
statements of income, stockholders' equity and cash flow of for such fiscal
year, and in comparative form the corresponding figures for the previous
fiscal year along with consolidating schedules in form and substance
sufficient to calculate the financial covenants set forth in ARTICLE 6.4,
(b) a schedule from each member of the Borrower Corporate Group setting
forth for each item in CLAUSE (a)(ii) hereof, the corresponding figures
from the consolidated financial budget for the current fiscal year
delivered pursuant to SECTION 6.1(A)(vi), and (c) an audit report on the
items listed in CLAUSE (a) hereof of independent certified public
accountants of recognized national standing, which audit report shall be
unqualified and shall state that such financial statements fairly present
the consolidated financial position of the Borrower and its Subsidiaries as
at the dates indicated and the results of their operations and cash flow
for the periods indicated in conformity with Agreement Accounting
Principles and that the examination by such accountants in connection with
such consolidated financial statements has been made in accordance with
generally accepted auditing standards. The deliveries made pursuant to
this CLAUSE (iii) shall be, accompanied by (y) any management letter
prepared by the above-referenced accountants and (z) a certificate of such
accountants that, in the course of their examination necessary for their
certification of the foregoing, they have obtained no knowledge of any
Default or Unmatured Default, or if, in the opinion of such accountants,
any Default or Unmatured Default shall exist, stating the nature and status
thereof.
(iv) MANAGEMENT DISCUSSION AND ANALYSIS. Together with each
delivery of the financial statements delivered pursuant to CLAUSES (ii) or
(iii), the Borrower shall deliver management's discussion and analysis of
such financial statements consistent with the requirements of Item 303 of
Regulation S-K issued under the Securities Act of 1933.
(v) OFFICER'S CERTIFICATE. Together with each delivery of any
financial statement (a) pursuant to CLAUSES (i), (ii), (iii) and (iv) of
this SECTION 6.1(A), an Officer's Certificate of the chief financial
officer or treasurer of the Borrower, substantially in the form of EXHIBIT
J attached hereto and made a part hereof, stating that no Default or
Unmatured Default exists, or if any Default or Unmatured Default exists,
stating the nature and status thereof and (b) pursuant to CLAUSES (ii) and
(iii) of this SECTION 6.1(A), a Compliance Certificate, substantially in
the form of EXHIBIT K attached hereto and made a part hereof, signed by the
Borrower's chief financial officer or treasurer, with respect to each
member of the Borrower Corporate Group, setting forth calculations for the
period then ended for SECTION 2.5(B), if applicable, and which demonstrate
compliance, when applicable, with the provisions of SECTION 6.4.
-78-
<PAGE>
(vi) BUDGETS; BUSINESS PLANS; FINANCIAL PROJECTIONS. As soon as
practicable and in any event not later than the thirtieth (30th) day prior
to the beginning of each fiscal year, a copy of the plan and forecast
(including a projected balance sheet, income statement and funds flow
statement) of each of the Borrower and each member of the Borrower
Corporate Group for the upcoming fiscal year prepared in such detail as
shall be reasonably satisfactory to the Agent.
(B) NOTICE OF DEFAULT. Promptly upon any member of the Consolidated AMC
Group having Knowledge (i) of any condition or event which constitutes a Default
or Unmatured Default, or becoming aware that any Lender or the Agent has given
any written notice with respect to a claimed Default or Unmatured Default under
this Agreement, or (ii) that any Person has given any written notice to Borrower
or any member of the Borrower Corporate Group or taken any other action with
respect to a claimed default or event or condition of the type referred to in
SECTION 7.1(e), deliver to the Agent an Officer's Certificate specifying (A) the
nature and period of existence of any such claimed default, Default, Unmatured
Default, condition or event, (B) the notice given or action taken by such Person
in connection therewith, and (C) what action the applicable Person has taken, is
taking and proposes to take with respect thereto.
(C) LAWSUITS. (i) Promptly upon any member of the Borrower Corporate
Group obtaining Knowledge of the institution of, or written threat of, any
action, suit, proceeding, governmental investigation or arbitration against or
affecting any member of the Borrower Corporate Group or any property of any
member of the Borrower Corporate Group not previously disclosed pursuant to
SECTION 5.7, which action, suit, proceeding, governmental investigation or
arbitration exposes, or in the case of multiple actions, suits, proceedings,
governmental investigations or arbitrations arising out of the same general
allegations or circumstances which expose the Borrower or any member of the
Borrower Corporate Group to liability in an amount aggregating $50,000 or more
(exclusive of claims covered by applicable insurance policies unless the
insurers of such claims have disclaimed coverage or reserved the right to
disclaim coverage on such claims and exclusive of claims covered by the
indemnity of a financially responsible indemnitor in favor of the applicable
Person unless the indemnitor has disclaimed or reserved the right to disclaim
indemnity thereof), give written notice thereof to the Agent and provide such
other information as may be reasonably available to enable each Lender and the
Agent and its counsel to evaluate such matters; and (ii) in addition to the
requirements set forth in CLAUSE (i) of this SECTION 6.1(C), upon request of the
Agent or the Required Lenders, promptly give written notice of the status of any
action, suit, proceeding, governmental investigation or arbitration covered by a
report delivered pursuant to CLAUSE (i) above and provide such other information
as may be reasonably available to it that would not violate any attorney-client
privilege by disclosure to the Lenders to enable each Lender and the Agent and
its counsel to evaluate such matters.
(D) INSURANCE. As soon as practicable and in any event within ninety (90)
days of the end of each fiscal year commencing with fiscal year ending December
31, 1996, deliver to the Agent (i) a report in form and substance reasonably
satisfactory to the Agent and the Lenders outlining all material insurance
coverage maintained as of the date of such report by the Borrower Corporate
Group and the duration of such coverage and (ii) an insurance broker's statement
that all premiums with respect to such coverage have been paid when due.
-79-
<PAGE>
(E) ERISA NOTICES. Deliver or cause to be delivered to the Agent, at the
Borrower's expense, the following information and notices as soon as reasonably
possible, and in any event:
(i) within ten (10) Business Days after any member of the
Controlled Group has Knowledge that a Termination Event has occurred which
could reasonably be expected to subject Borrower or any other member of the
Controlled Group to liability in excess of $100,000 or Borrower and all
members of the Controlled Group in the aggregate to liability in excess of
$500,000, a written statement of the chief financial officer of the
applicable Person describing such Termination Event and the action, if any,
which the member of the Controlled Group has taken, is taking or proposes
to take with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto;
(ii) within ten (10) Business Days after AMC or any member of the
Borrower Corporate Group has Knowledge that an assessment of a prohibited
transaction excise tax under Section 4975 of the Code has occurred, a
statement of the chief financial officer of the applicable Person
describing such transaction and the action which the applicable Person has
taken, is taking or proposes to take with respect thereto;
(iii) within ten (10) Business Days after the establishment by any
member of the Borrower Corporate Group of any Benefit Plan or the
commencement of, or obligation to commence, contributions by any member of
the Borrower Corporate Group to any Benefit Plan or Multiemployer Plan to
which AMC or any member of the Borrower Corporate Group was not previously
contributing, notification of such establishment, commencement or
obligation to commence and the amount of such contributions;
(iv) within ten (10) Business Days after AMC or any member of the
Borrower Corporate Group receives notice of any unfavorable determination
letter from the IRS regarding the qualification of a Plan under Section
401(a) of the Code, copies of each such letter; and
(v) within ten (10) Business Days after the establishment by any
member of the Borrower Corporate Group of any foreign employee benefit plan
or the commencement of, or obligation to commence, contributions by any
member of the Borrower Corporate Group to any foreign employee benefit plan
to which any member of the Borrower Corporate Group was not previously
contributing, notification of such establishment, commencement or
obligation to commence and the amount of such contributions.
For purposes of this SECTION 6.1(E), each member of the Borrower Corporate Group
and any member of the Controlled Group shall be deemed to know all facts known
by the Administrator of any Plan of which any such Person is the plan sponsor.
(F) LABOR MATTERS. Notify the Agent in writing, promptly upon learning
thereof, of (i) any material labor dispute to which any member of the Borrower
Corporate Group may become a party, including, without limitation, any strikes,
lockouts or other disputes relating to such Person's plants and other facilities
and (ii) any Worker Adjustment and Retraining
-80-
<PAGE>
Notification Act liability incurred with respect to the closing of any plant or
other facility of any of the members of the Borrower Corporate Group.
(G) OTHER INDEBTEDNESS. Deliver to the Agent (i) a copy of each regular
report, notice or communication regarding potential or actual defaults
(including any accompanying officers' certificate) delivered by or on behalf of
any member of the Borrower Corporate Group of funded Indebtedness pursuant to
the terms of the agreements governing such Indebtedness, such delivery to be
made at the same time and by the same means as such notice or other
communication is delivered to such holders, and (ii) a copy of each notice or
other communication received by any member of the Borrower Corporate Group from
the holders of funded Indebtedness pursuant to the terms of such Indebtedness,
such delivery to be made promptly after such notice or other communication is
received by such member of the Borrower Corporate Group.
(H) OTHER REPORTS; SEC FILINGS, NOTICES AND OTHER PUBLIC INFORMATION. As
soon as practicable after such items are available, deliver or cause to be
delivered to the Agent copies of all financial statements, reports and notices,
if any, sent or made available generally by any member of the Consolidated AMC
Group to its securities holders or filed with the Commission by any member of
the Consolidated AMC Group, all press releases made available generally by any
member of the Consolidated AMC Group to the public concerning material
developments in the business of any such member of the Consolidated AMC Group
and all notifications received from the Commission by any member of the
Consolidated AMC Group pursuant to the Securities Exchange Act and the rules
promulgated thereunder. Promptly upon the filing thereof or receipt thereof,
deliver copies to the Agent of all registration statements and annual,
quarterly, monthly or other reports (including 8-Ks), if any, which any member
of the Consolidated AMC Group files with the Securities and Exchange Commission
(other than routine reports which are required to be filed concerning the
management of employee benefit plans, including, without limitation, stock
purchases or the exercise of stock options made under any such employee benefit
plan) and all notifications received from the Securities and Exchange Commission
by any member of the Consolidated AMC Group, if any, pursuant to the Securities
Exchange Act and the rules promulgated thereunder.
(I) ENVIRONMENTAL NOTICES. As soon as possible and in any event within
ten (10) days after receipt by any member of the Borrower Corporate Group, a
copy of (i) any notice or claim to the effect that any member of the Borrower
Corporate Group is or may be liable to any Person as a result of the release by
any such Person or any other Person of any contaminant (including, without
limitation, any medical waste) into the environment, and (ii) any notice
alleging any violation of any Environmental, Health or Safety Requirements of
Law by any member of the Borrower Corporate Group if, in either case, such
notice or claim relates to an event which could reasonably be expected to
subject the Borrower or any other member of the Borrower Corporate Group to
liability in excess of $100,000 or all of the members of the Borrower Corporate
Group to liability in excess of $500,000.
(J) BORROWING BASE CERTIFICATE. As soon as practicable, and in any event
(i) within forty-five (45) days after the end of each calendar month (and more
often if requested by the Agent or the Required Lenders) and (ii) on each
Acquisition Closing Date, each of the Specified Subsidiaries shall provide to
the Borrower (with respect to such Specified Subsidiary) with, and the Borrower
shall provide the Agent (with respect to all Specified Subsidiaries) with a
-81-
<PAGE>
Borrowing Base Certificate, together with such supporting documents as the Agent
deems desirable, all certified as being true and correct by the chief financial
officer or treasurer of the applicable Person. Without limiting the foregoing,
together with each Borrowing Base Certificate, the Borrower shall provide to the
Agent detailed information regarding unpaid taxes, assessments or other similar
amounts which are payable to any federal, state, county or municipal
Governmental Authority or any agency or instrumentality thereof if the aggregate
amount payable to any municipal, county, state or federal Governmental Authority
equals or exceeds $1,000.
(K) OTHER INFORMATION. Promptly upon receiving a request therefor from
the Agent, prepare and deliver to the Agent such other information with respect
to any member of the Borrower Corporate Group, or the Collateral, including,
without limitation, schedules identifying and describing the Collateral and any
dispositions thereof or any Asset Sale (and the use of the Net Cash Proceeds
thereof), as from time to time may be reasonably requested by the Agent.
(L) HEALTHCARE NOTICES. Deliver or cause to be delivered to the Agent, at
the Borrower's expense, the following information and notices as soon as
reasonably possible, and in any event:
(i) within ten (10) Business Days after receipt by any member of
the Borrower Corporate Group, copies of all notices received by any such
Person which contain any recommendation from any Governmental Authority or
other regulatory body that any such Person or any Account Debtor to which
any Specified Subsidiary sells Inventory or provides services should have
its licensure or Accreditation revoked, or have its eligibility to
participate in CHAMPUS, Medicare or Medicaid or to accept assignments or
rights to reimbursement under CHAMPUS Regulations, Medicaid Regulations or
Medicare Regulations revoked unless certain corrections are made;
(ii) within ten (10) Business Days after receipt by any member of
the Borrower Corporate Group, notice of any investigation or pending or
threatened proceedings relating to any possible violation by any such
Person or any health care facility to which any Specified Subsidiary
provides services or sells Inventory of CHAMPUS, CHAMPUS Regulations,
Medicare Regulations, Medicaid Regulations, including, without limitation,
any investigation or proceeding involving possible violation of any of the
Medicare and/or Medicaid fraud and abuse provisions;
(iii) within three (3) Business Days after any of any member of the
Borrower Corporate Group obtains knowledge thereof, notice of any claims to
recover any alleged overpayments with respect to any of the Specified
Subsidiaries' Receivables, whether such payments were received from
CHAMPUS, Medicare, Medicaid or from any Applicable Carrier;
(iv) within three (3) Business Days after any member of the Borrower
Corporate Group obtains knowledge thereof, notice of termination of
eligibility of any member of the Borrower Corporate Group or any health
care facility to which any Specified Subsidiary provides any material
amount of services or sells any material amount of Inventory to participate
in any reimbursement program of any Applicable Carrier or other Payor
applicable to it;
-82-
<PAGE>
(v) within three (3) Business Days after the occurrence thereof,
notice of any reduction in the level of reimbursement expected to be
received with respect to any Receivables of any Specified Subsidiary unless
such reduction has already been reflected in the Adjusted Amount of
Eligible Receivables delivered on the most recently delivered Borrowing
Base Certificate; and
(vi) within ten (10) Business Days after receipt thereof, copies of
any report or communication from any Governmental Authority in connection
with any inspection of any facility of any member of the Borrower Corporate
Group or any health care facility to which any member of the Borrower
Corporate Group provides services or sells Inventory.
(M) REPORTS IN CONNECTION WITH ACQUISITION AGREEMENTS. Deliver or cause
to be delivered to the Agent as soon as reasonably possible, and in any event
within five (5) Business Days of when such item was sent or received , as
applicable, copies of all financial statements, reports and notices, if any,
sent, made or received by any member of the Consolidated AMC Group to or from
(i) William J. Gatti, Mary Jane Gatti or any other Person in connection with the
Gatti Acquisition, (ii) Care Health Systems, Inc., Clyde L. Cressler or any
other Person in connection with the Care Apothecary Acquisition, (iii) Nelson L.
Showalter or any other Person in connection with the Williamson Acquisition (iv)
Lee R. Youngberg, Frank R. Gelafio, Nihan & Martin, Inc., an Illinois
Corporation, or any other Person in connection with the N&M Acquisition; (v)
Ronald E. Keith, James M. Pietryga, or any other Person in connection with the
Dixon Acquisition; (vi) Charles L. Brown, Robert Foley, Barry J. Klein, John F.
Johnston, James Vanderhoven, Michael S. Brown, Richard L. Greer, Paul A. Green,
Kaisser Ibrahim, Wayne S. Morehead, Matthew S. Robinson and Darius Nida,
Sterling Acquisition Partners, Inc. or any other Person in connection with the
Sterling Acquisition; and (vii) any other Person in connection with any other
Permitted Acquisition.
6.2 AFFIRMATIVE COVENANTS.
(A) CORPORATE EXISTENCE, ETC. The Borrower shall and shall cause each
member of the Borrower Corporate Group to, at all times maintain its corporate
existence and preserve and keep, or cause to be preserved and kept, in full
force and effect its rights and franchises material to its businesses.
(B) CORPORATE POWERS; CONDUCT OF BUSINESS; BORROWER AS HOLDING COMPANY.
The Borrower shall, and shall cause each member of the Borrower Corporate Group
to, qualify and remain qualified to do business in each jurisdiction in which
the nature of its business requires it to be so qualified and where the failure
to be so qualified will have or is reasonably likely to have a Material Adverse
Effect. The Borrower shall, and shall cause each member of the Borrower
Corporate Group to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted, including any business related or incidental thereto. Without
limiting the foregoing, the Borrower's business shall be limited to holding the
Capital Stock of the Specified Subsidiaries and shall not include any operating
activities or ownership of the Capital Stock of or any other interest or
Investment in any other Person except as expressly permitted in accordance with
the terms of this
-83-
<PAGE>
Agreement, PROVIDED, HOWEVER, the Borrower may make the investments permitted
pursuant to SECTION 6.3(D)(vi).
(C) COMPLIANCE WITH LAWS, ETC. The Borrower shall, and shall cause each
member of the Borrower Corporate Group to, (a) comply with all Requirements of
Law and Permits and all restrictive covenants affecting such Person or the
business, properties, assets or operations of such Person unless failure to
comply could not reasonably be anticipated to have a Material Adverse Effect,
(b) obtain as needed all Permits and other government approvals and
authorizations necessary for its operations and maintain such Permits, approvals
and authorizations in good standing unless failure to obtain or maintain such
Permits, approvals or authorizations has not is not reasonably likely to have a
Material Adverse Effect and (c) maintain adequate assets, licenses, patents,
copyrights, trademarks, service marks, trade names, privileges, franchises and
concessions as are reasonably necessary to conduct its respective business.
(D) PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. The Borrower shall
pay, and shall cause each of AMC and each other member of the Borrower Corporate
Group to pay, (i) all material taxes, assessments and other governmental charges
imposed upon it or on any of its properties or assets or in respect of any of
its franchises, business, income or property before any penalty or interest
accrues thereon, and (ii) all claims (including, without limitation, claims for
labor, services, materials and supplies) for sums which have become due and
payable and which by law have or may become a Lien (other than a Lien permitted
by SECTION 6.3(C) upon any of the Collateral, prior to the time when any penalty
or fine shall be incurred with respect thereto; PROVIDED, HOWEVER, that no such
taxes, assessments and governmental charges referred to in CLAUSE (i) above or
claims referred to in CLAUSE (ii) above (and interest, penalties or fines
relating thereto) need be paid if being contested in good faith by appropriate
proceedings diligently instituted and conducted and if such reserve or other
appropriate provision, if any, as shall be required in conformity with Agreement
Accounting Principles shall have been made therefor. The Borrower will not
permit any member of the Borrower Corporate Group to, file or consent to the
filing of any consolidated income tax return with any Person other than AMC and
its consolidated Subsidiaries.
(E) INSURANCE. The Borrower shall maintain for itself and each other
member of the Borrower Corporate Group, or shall cause each member of the
Borrower Corporate Group to maintain in full force and effect the insurance
policies and programs listed on SCHEDULE 5.17 to this Agreement or substantially
similar policies and programs or other policies and programs as reflect coverage
that is reasonably consistent with prudent industry practice. Each certificate
and policy relating to coverages shall contain an endorsement (i) naming the
Agent and the Lenders as additional insureds under such policy with respect to
liability coverage and (ii) naming the Agent and the Lenders as loss payees with
respect to property damage, boiler and machinery and business interruption
insurance coverage. In the event any member of the Borrower Corporate Group, at
any time or times hereafter shall fail to obtain or maintain any of the policies
or insurance required herein or to pay any premium in whole or in part relating
thereto, then the Agent, without waiving or releasing any obligations or
resulting Default hereunder, may at any time or times thereafter (but shall be
under no obligation to do so) obtain and maintain such policies of insurance and
pay such premiums and take any other action with respect thereto which
-84-
<PAGE>
the Agent deems advisable. All sums so disbursed by the Agent shall constitute
part of the Obligations, payable as provided in this Agreement.
(F) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The Borrower
shall permit, and shall cause each of AMC and the members of the Borrower
Corporate Group to permit, any authorized representative(s) designated by either
the Agent or any Lender to visit and inspect any of the properties of AMC or any
member of the Borrower Corporate Group, to examine, audit, check and make
copies, at the Borrower's expense, of their respective financial and accounting
records, books, journals, orders, receipts and any correspondence and other data
relating to their respective businesses or the transactions contemplated hereby
and by the Specified Acquisitions (including, without limitation, in connection
with environmental compliance, hazard or liability), and to discuss their
affairs, finances and accounts with their officers and independent certified
public accountants, all upon reasonable notice and at such reasonable times
during normal business hours, as often as may be reasonably requested. The
Borrower shall keep and maintain, and cause each of AMC and the members of the
Borrower Corporate Group to keep and maintain, in all material respects, proper
books of record and account in which entries in conformity with Agreement
Accounting Principles shall be made of all dealings and transactions in relation
to their respective businesses and activities, including, without limitation,
transactions and other dealings with respect to the Collateral. If a Default
has occurred and is continuing, the Borrower, upon the Agent's request, shall
and shall cause each other member of the Borrower Corporate Group to turn over
copies of any such records to the Agent or its representatives.
(G) INSURANCE AND CONDEMNATION PROCEEDS. The Borrower hereby directs, and
shall cause its Subsidiaries to direct, all insurers under policies of property
damage, boiler and machinery and business interruption insurance and payors of
any condemnation claim or award relating to the property to pay all proceeds
payable under such policies or with respect to such claim or award for any loss
with respect to the Collateral directly to the Agent, for the benefit of the
Agent and the Holders of the Secured Obligations; PROVIDED, HOWEVER, in the
event that such proceeds or award are less than $150,000 in the aggregate for
all events during the prior 12-month period ("EXCLUDED INSURANCE PROCEEDS"),
unless a Default shall have occurred and be continuing, the Agent shall remit
such Excluded Insurance Proceeds to the Borrower or the applicable Specified
Subsidiary. Each such policy shall contain a loss-payable endorsement naming
the Agent as loss payee, which endorsement shall be in form and substance
acceptable to the Agent. The Agent shall, upon receipt of such proceeds (other
than Excluded Insurance Proceeds) and at Borrower's direction, either apply the
same to the principal amount of the Loans outstanding at the time of such
receipt and create a corresponding reserve against Revolving Credit Availability
in an amount equal to such application (the "DECISION RESERVE") or hold them as
cash collateral for the Obligations. For up to 60 days from the date of any
loss (the "DECISION PERIOD"), the Borrower may notify the Agent that the
applicable Specified Subsidiary intends to restore, rebuild or replace the
property subject to any insurance payment or condemnation award and shall, as
soon as practicable thereafter, provide the Agent detailed information,
including a construction schedule and cost estimates. Should a Default occur at
any time during the Decision Period, should the Borrower notify the Agent that
the applicable Specified Subsidiary has decided not to rebuild or replace such
property during the Decision Period, or should the Borrower fail to notify the
Agent of the Borrower's or the applicable Specified Subsidiary's decision during
the Decision Period, then the amounts held as cash collateral pursuant to this
SECTION 6.2(G) or as the
-85-
<PAGE>
Decision Reserve shall upon the Required Lenders' direction be applied as a
mandatory prepayment of the Term Loans and Acquisition Loans pursuant to SECTION
2.5(B)(i)(e), prior to the Conversion Date to the unpaid installments of the
Borrower's Term Loans in inverse order of maturity and after the Conversion
Date, ratably to the unpaid installments of the Term Loans and Acquisition Loans
in the inverse order of maturity. Proceeds held as cash collateral pursuant to
this SECTION 6.2(G) or constituting the Decision Reserve shall be disbursed as
payments for restoration, rebuilding or replacement of such property become due;
PROVIDED, HOWEVER, should a Default occur after the Borrower has notified the
Agent that its Specified Subsidiary intends to rebuild or replace the property,
the Decision Reserve or amounts held as cash collateral may, or shall, upon the
Required Lenders' direction, be applied as a mandatory prepayment of the Term
Loans or Acquisition Loans as set forth above. Upon completion of the
restoration, rebuilding or replacement of such property, the unused proceeds
shall constitute Net Cash Proceeds of an Asset Sale and shall be applied as a
mandatory prepayment of the Term Loans and Acquisition Loans pursuant to SECTION
2.5(B).
(H) ERISA COMPLIANCE. The Borrower shall and shall cause AMC and each
member of the Borrower Corporate Group to, establish, maintain and operate all
Plans to comply in all material respects with the provisions of ERISA, the Code,
all other applicable laws, and the regulations and interpretations thereunder
and the respective requirements of the governing documents for such Plans.
(I) MAINTENANCE OF PROPERTY. Each member of the Borrower Corporate Group
shall cause substantially all property used or useful in the conduct of its
business or the business of any of its respective Subsidiaries to be maintained
and kept in good condition, repair and working order (ordinary wear and tear
excepted) and supplied with all necessary equipment and shall cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as may be necessary so that the business carried on in connection
therewith may be effectively and lawfully conducted at all times; PROVIDED,
HOWEVER, that nothing in this Section shall prevent any member of the Borrower
Corporate Group from discontinuing the operation or maintenance of any of such
property if such discontinuance, in the judgment of the applicable Person, is
desirable in the conduct of its business or the business of any of its
Subsidiaries and not disadvantageous in any material respect to the Agent or the
Lenders.
(J) ENVIRONMENTAL COMPLIANCE. Each member of the Borrower Corporate Group
shall comply with all Environmental, Health or Safety Requirements of Law
(including, without limitation, those applicable to the disposal of medical
waste), except where noncompliance would not reasonably be likely to subject the
Borrower or any other member of the Borrower Corporate Group to liability in
excess of $100,000 or all of the members of the Borrower Corporate Group in the
aggregate to liability in excess of $500,000.
(K) USE OF PROCEEDS. The Borrower will use the proceeds of the Revolving
Loans solely (i) to effect the Specified Acquisitions and (ii) to provide funds
for the working capital needs of the Specified Subsidiaries and other general
corporate purposes and to repay outstanding Loans. The Borrower will use the
proceeds of the Term Loans solely for the purpose of prepaying prior
indebtedness and paying Transaction costs, and will use the proceeds of the
Acquisition Loans solely for the purpose of facilitating the Specified
Acquisitions and paying Transaction Costs. The Borrower will not use any of the
proceeds of the Loans, nor will it permit any member of
-86-
<PAGE>
the Borrower Corporate Group to, use any of the proceeds of the Loans to (1)
purchase or carry any "margin stock" (as defined in Regulation U), (2) to make
any other Acquisition or (3) to make loans to, Investments in or otherwise enter
into any transaction with AMC or any of its Subsidiaries or Affiliates which are
not part of the Borrower Corporate Group, PROVIDED, HOWEVER, that the Borrower
may make the investments permitted by SECTION 6.3 D(iv).
(L) INTEREST RATE AGREEMENTS. The Borrower shall enter into, and shall
thereafter maintain, Interest Rate Agreements for a minimum term of three (3)
years and on other terms and with counterparties determined by the Borrower and
reasonably acceptable to the Agent by which the Borrower is protected against
increases in interest rates from and after the date of such contracts as to a
notional amount with respect to the Term Loans to be determined by the Agent
after consultation with the Borrower, but which notional amount shall not be
required to exceed fifty percent (50%) of the outstanding principal amount of
the Term Loans. In addition, for each $10,000,000 increase in the incremental
amount outstanding under the Acquisition Loans, within sixty (60) days after
each such increase, the Borrower shall enter into, and shall thereafter
maintain, Interest Rate Agreements for a minimum term of three (3) years and on
other terms and with counterparties determined by the Borrower and reasonably
acceptable to the Agent by which the Borrower is protected against increases in
interest rates from and after the date of such contracts as to a notional amount
with respect to the Acquisition Loans outstanding to be determined by the Agent
after consultation with the Borrower, but which notional amount shall not be
required to exceed fifty percent (50%) of the outstanding principal amount of
such Acquisition Loans on such date. In the event a Lender elects to enter into
any Interest Rate Agreement with the Borrower, the Rate Hedging Obligations of
the Borrower with respect to such Interest Rate Agreement shall be Secured
Obligations secured by the Collateral.
(M) HEALTHCARE REGULATORY MATTERS. The Borrower shall, and shall cause
each member of the Borrower Corporate Group at all times to:
(i) comply with all applicable CON requirements in jurisdictions
where such Person operates;
(ii) maintain in good standing all required Health Facilities
Licenses for each facility operated by such Person;
(iii) maintain the requisite Accreditation, if any, of each facility
operated by such Person;
(iv) maintain eligibility to participate in CHAMPUS, Medicaid and
Medicare or to accept assignments or rights to reimbursement under CHAMPUS
Regulations, Medicaid Regulations or Medicare Regulations and from any
Applicable Carrier;
(v) maintain CHAMPUS, Medicare and Medicaid provider numbers for
each facility which initially were issued to the current operator of each
facility and which have not been used by any predecessor in interest;
(vi) comply with all applicable provisions of CHAMPUS, CHAMPUS
Regulations, Medicaid Regulations and Medicare Regulations; and
-87-
<PAGE>
(vii) operate the businesses acquired prior to the Closing Date in
connection with any Specified Acquisition pursuant to operative Health
Facility Licenses and operate the businesses acquired in connection with
any other Specified Acquisition pursuant to a valid and enforceable power
of attorney for the period from the Acquisition Closing Date with respect
thereto through not later than the date that is sixty (60) days after such
Acquisition Closing Date and on or before such sixtieth (60th) day obtain
and thereafter maintain Health Facility Licenses with respect to the
operations so acquired.
(N) KEY MAN LIFE INSURANCE. The Borrower has obtained and shall maintain
a key man life insurance policy covering Timothy L. Burfield, in an amount of
not less than $3,000,000 and shall maintain such insurance in full force and
effect until the earlier of (i) all of the Obligations (other than contingent
indemnity obligations) shall have been fully and indefeasibly paid and
satisfied, all financing arrangements among Borrower, the Agent and the Lenders
shall have been terminated (other than under Interest Rate Agreements or other
agreements with respect to Rate Hedging Obligations) and all of the Letters of
Credit shall have expired, been cancelled or terminated.
(O) DEPOSIT ACCOUNTS. The Borrower shall and shall cause each of the
Specified Subsidiaries to maintain a cash management system for the Borrower and
the other members of the Borrower Corporate Group acceptable to the Agent,
including, without limitation, maintenance of Collection Accounts with such
financial institutions which have executed and delivered Collection Account
Agreements to the Agent.
(P) SEPARATE CORPORATE EXISTENCE. The Borrower shall take all reasonable
steps (including, without limitation, all steps which the Agent may from time to
time reasonably request) to maintain its and its Specified Subsidiaries'
identity as separate legal entities and to make it apparent to third parties
that Borrower and such Specified Subsidiaries are each an entity with assets and
liabilities distinct from those of AMC and any of AMC's Affiliates which are not
members of the Borrower Corporate Group (each of AMC and such other Persons are
referred to in this SECTION 6.2(P), as the "PARENT"). Without limiting the
generality of the foregoing, the Borrower shall:
(i) require that all full-time employees of the Borrower and each
of the Specified Subsidiaries identify themselves as such and not as
employees of its Parent (including, without limitation, by means of
providing appropriate employees with business or identification cards
identifying such employees solely as Borrower's or the Specified
Subsidiary's employees, as applicable);
(ii) compensate all employees, consultants, investment bankers,
accountants, lawyers and agents directly, from Borrower's or such Specified
Subsidiary's applicable bank accounts, for services provided to Borrower or
such Specified Subsidiary by such employees, consultants, investment
bankers and agents and, to the extent any employee, consultant, investment
banker or agent of Borrower or any Specified Subsidiary is also an
employee, consultant, investment banker or agent of Parent, allocate the
compensation of such employee, consultant, investment banker or agent
between Borrower or the Specified Subsidiary, as applicable, and the Parent
on the basis of actual use of the services so
-88-
<PAGE>
rendered to the extent practicable and, to the extent such allocation is
not practical, on a basis reasonably related to actual use of such
services;
(iii) allocate all overhead expenses (including, without limitation,
telephone and other utility charges and lease and office expenses) for
items shared between Borrower or any Specified Subsidiary and Parent on the
basis of actual use to the extent practicable and, to the extent such
allocation is not practicable, on a basis reasonably related to actual use;
(iv) cause the Borrower and each Specified Subsidiary to be named as
an insured on the insurance policy covering its property, or enter into an
agreement with the holder of such policy whereby in the event of a loss in
connection with such property, proceeds are paid to the Borrower or
applicable Specified Subsidiary;
(v) maintain the Borrower's and the Specified Subsidiaries' books
and records complete and separate from those of the Parent;
(vi) ensure that any of Borrower's or AMC's consolidated financial
statements or other public information for the Borrower and its Affiliates
on a consolidated basis contain appropriate disclosures concerning the
Borrower's separate existence;
(vii) not maintain bank accounts or other depository accounts to
which the Parent is an account party, into which the Parent makes deposits
or from which the Parent has the power to make withdrawals;
(viii) not permit the Parent to pay any of the Borrower's operating
expenses (except when paid and charged pursuant to an allocation based upon
actual use, to the extent practicable and, to the extent such allocation is
not practicable, on a basis reasonably related to actual use); and
(ix) not pay dividends or make distributions, loans or other
advances to Parent more frequently than once during any fiscal quarter,
and, in each case, as duly authorized by its board of directors and in
accordance with applicable corporation law.
6.3 NEGATIVE COVENANTS.
(A) INDEBTEDNESS. Neither AMC, Borrower nor any member of the Borrower
Corporate Group shall directly or indirectly create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to any Indebtedness,
except:
(i) with respect to AMC, the AMC Subordinated Debt;
(ii) with respect to the Borrower, and any member of the Borrower
Corporate Group:
(1) the Obligations;
-89-
<PAGE>
(2) the Transaction Costs;
(3) Indebtedness in respect of taxes, assessments, governmental
charges and claims for labor, materials or supplies, to the extent that
payment thereof is not required pursuant to SECTION 6.2(D);
(4) Indebtedness incurred for ordinary administrative expenses,
franchise taxes, accounting expenses, legal expenses, employee expenses,
lease and office expenses, consultant expenses, investment banker expenses
incurred by AMC on behalf of one or members of the Borrower Corporate Group
(the allocation and payment of which complies with the terms of
SECTION 6.2(P) above) which Indebtedness shall not exceed an aggregate of
$450,000 in any fiscal year; PROVIDED, HOWEVER, in the twelve (12) month
period beginning six (6) months prior to and ending six (6) months after an
initial public offering by the Borrower or AMC, such Indebtedness shall not
exceed in the aggregate $1,000,000;
(5) Permitted Existing Indebtedness of any member of the Borrower
Corporate Group, and any extension, renewal, refunding or refinancing
thereof, PROVIDED THAT any such extension, renewal, refunding or
refinancing is in an aggregate principal amount not greater than the
principal amount of and interest, fees and expenses accrued on, such
Permitted Existing Indebtedness outstanding at the time thereof and is on
terms (including, without limitation, maturity, amortization, interest
rate, premiums, fees, covenants, events of default, and remedies) not
materially less favorable to the applicable member of the Borrower
Corporate Group or materially adverse to the Lenders than the terms of such
Permitted Existing Indebtedness;
(6) unsecured Subordinated Indebtedness (including Acquisition
Subordinated Debt), the terms (including, without limitation,
subordination, default, standstill, sinking fund, maturity, amortization,
interest rate, premiums, fees, covenants, the entity (or entities) which
issue the Subordinated Indebtedness, events of default, and remedies) of
which are acceptable to the Lenders when issued, but not any increase in
the principal amount thereof and not any refinancing, modification,
refunding or extension of maturity thereof, in whole or in part, unless
such refinancing, modification, refunding or extension is not materially
less favorable to the applicable member of the Borrower Corporate Group,
including, without limitation, with respect to amount, maturity,
amortization, interest rate, premiums, fees, covenants, subordination
terms, events of default and remedies or materially adverse to the Lenders
than the terms of the original approved Subordinated Indebtedness. Without
limiting the foregoing with respect to Subordinated Indebtedness that is
not Acquisition Subordinated Debt, (i) the scope and nature of covenants
and defaults which the Agent and the Lenders may deem acceptable will be
determined taking into account the Person(s) to which such Indebtedness is
issued and the relative size of the Subordinated Indebtedness compared to
the size of the Loans; (ii) financial covenants, if any, contained in the
agreement governing such Subordinated Indebtedness shall be less
restrictive than those contained in this Agreement, (iv) such Subordinated
Indebtedness shall be unsecured; (v) there shall be no mandatory
prepayments or redemptions of such Subordinated Indebtedness of any type;
PROVIDED, HOWEVER, those interest payments permissible as Restricted Junior
Payments pursuant to
-90-
<PAGE>
SECTION 6.3(F)(iii) may be paid in accordance therewith; (vi) none of the
Subordinated Indebtedness shall mature prior to December 31, 2003; (vii)
the agreement governing such Subordinated Indebtedness shall not contain a
cross-default to this Agreement or other Indebtedness (but may contain a
cross-acceleration clause to Indebtedness in excess of a threshold amount
to be determined based upon the size of the Subordinated Indebtedness); and
(viii) the agreement governing such Subordinated Indebtedness shall contain
no limitation on the sale of assets of any member of the Borrower Corporate
Group provided that any such sale does not involve a transfer of all or
substantially all of the assets of the Borrower or one of the Specified
Subsidiaries, any such sale is made in good faith on an arm's length basis
and the net proceeds of such sale are applied to repay or retire
Obligations under this Agreement.
(7) Indebtedness constituting Contingent Obligations permitted by
SECTION 6.3(E);
(8) Indebtedness arising from intercompany loans borrowed by any
Specified Subsidiary from the Borrower provided:
(a) with respect to intercompany revolving loans from the Borrower to
the Specified Subsidiaries: (i) the aggregate principal amount of all
revolving loans made from the Borrower to any Specified Subsidiary PLUS the
aggregate L/C Obligations incurred by the Borrower on behalf of such
Specified Subsidiary shall not exceed the sum of (x) such Specified
Subsidiary's Borrowing Base, (y) that portion of the Term Loans which the
Borrower has indicated in writing are allocable to the Specified Subsidiary
and (z) the Acquisition Loans borrowed in connection with the Acquisition
of such Specified Subsidiary; and (ii) each such intercompany revolving
loans shall be evidenced by a demand intercompany note in substantially the
form of EXHIBIT L attached hereto which has been pledged to the Agent for
the benefit of itself and the Holders of Secured Obligations (an
"INTERCOMPANY NOTE"); and
(b) all such intercompany loans shall be secured by a lien on all of
the assets of the Specified Subsidiaries pursuant to a security agreement
in substantially the form of EXHIBIT M with the schedules thereto completed
in form and substance acceptable to the Agent (an "INTERCOMPANY SECURITY
AGREEMENT"), the lien under which Intercompany Security Agreement shall be
subject to the subordination provisions contained in SECTION 9.15 below;
(c) prior to or within ten (10) days after the making of any such
intercompany loan, the Borrower shall have filed UCC-1 financing statements
naming Target as debtor, the Borrower as secured party and the Agent as
assignee in all jurisdictions requested by the Agent (the "INTERCOMPANY
FINANCING STATEMENTS"; together with the Intercompany Note and the
Intercompany Security Agreement, the "INTERCOMPANY DOCUMENTS"), such UCC-1
financing statements to be in substantially the form of EXHIBIT N; and
(9) Indebtedness of the Borrower consisting of unsecured loans made
to it from any member of the Consolidated AMC Group, including, without
limitation, in connection with any redemption of the Gatti Preferred Stock
otherwise permitted pursuant to the terms of this Agreement;
-91-
<PAGE>
(10) unsecured Indebtedness with respect to management fees, to the
extent that payment thereof would not be prohibited by SECTION 6.3(F)(i);
(11) Indebtedness in respect of Interest Rate Agreements permitted
under SECTION 6.3(R);
(12) secured purchase money Indebtedness (including Capitalized
Leases) incurred by any of the Specified Subsidiaries after the Closing
Date to finance the acquisition of fixed assets, if (a) at the time of such
incurrence, no Default or Unmatured Default has occurred and is continuing
or would result from such incurrence, (b) such Indebtedness has a scheduled
maturity and is not due on demand, (c) such Indebtedness does not exceed
$150,000 in the aggregate outstanding at any time for Specified Subsidiary
and $1,000,000 in the aggregate outstanding at any time for all Specified
Subsidiaries, and (d) any Lien securing such Indebtedness is permitted
under SECTION 6.3(C);
(13) Indebtedness with respect to surety, appeal and performance
bonds obtained by the Borrower or any member of the Borrower Corporate
Group in the ordinary course of business;
(14) unsecured Indebtedness and other liabilities incurred in the
ordinary course of business and consistent with past practice, but not
incurred through the borrowing of money or the obtaining of credit (other
than customary trade terms); and
(15) unsecured Indebtedness with respect to overpayment liabilities
under claims for CHAMPUS, Medicaid or Medicare in the aggregate not to
exceed the amount reflected on the applicable Person's books and records
and which is reflected in the calculations of the Adjusted Amount of
Eligible Receivables.
(B) SALES OF ASSETS. Neither Borrower nor any member of the Borrower
Corporate Group shall sell, assign, transfer, lease, convey or otherwise dispose
of any property, whether now owned or hereafter acquired, or any income or
profits therefrom, or enter into any agreement to do so, unless:
(i) such sale is in connection with sales of Inventory in the
ordinary course of business;
(ii) (w) such sale, assignment, transfer, lease, conveyance or
disposition does not involve Inventory or Receivables, (x) the aggregate
net book value of assets sold in connection with all such sales by the
Borrower and each other member of the Borrower Corporate Group in the prior
12-month period does not exceed $500,000, (y) such sale, assignment,
transfer, lease, conveyance or disposition is made in connection with the
anticipated purchase by the Borrower or the applicable Specified Subsidiary
of replacement assets, and (z) all mandatory prepayments required in
connection therewith shall have been made as and when provided in SECTION
2.5(B)(i)(a)(3);
-92-
<PAGE>
(iii) the aggregate net book value of such assets, together with the
net book value of all other assets sold, assigned, transferred, leased,
conveyed or otherwise disposed of and not replaced in accordance with the
provisions of CLAUSE (ii) above (other than sales and leases of Inventory
in the ordinary course of business) since the Closing Date does not exceed
$1,000,000 and all mandatory prepayments required in connection therewith
shall have been made as and when provided in SECTION 2.5(B)(i)(a);
(iv) such sale, assignment, transfer, lease, conveyance or other
disposition occurs pursuant to a merger (if such merger is not otherwise
prohibited by this Agreement) of one Specified Subsidiary into Borrower or
another Specified Subsidiary (provided, in connection therewith the
applicable parties shall be in full compliance with the terms of the
Security Agreement);
(v) such sale is in connection with the issuance by the Borrower or
any Specified Subsidiary of any Capital Stock (y) to employees, directors,
investors or Affiliates and (z) in connection with a Permitted Acquisition;
PROVIDED in connection therewith no Change in Control shall occur and
PROVIDED, FURTHER all mandatory prepayments required in connection
therewith shall have been made as and when provided in SECTION
2.5(B)(i)(a).
(C) LIENS. Neither the Borrower nor member of the Borrower Corporate
Group shall directly or indirectly create, incur, assume or permit to exist any
Lien on or with respect to any of their respective property or assets,
including, without limitation with respect to its Capital Stock, except:
(i) Liens created by the Loan Documents;
(ii) Permitted Existing Liens;
(iii) Customary Permitted Liens;
(iv) purchase money Liens (including the interest of a lessor under
a Capitalized Lease and Liens to which any property is subject at the time
of the Specified Subsidiary's acquisition thereof) securing Indebtedness
permitted under SECTION 6.3(A)(ii); PROVIDED that such Liens shall not
apply to any property of any of the Specified Subsidiaries other than that
purchased or subject to such Capitalized Lease; and
(v) Liens pursuant to the Intercompany Documents.
In addition, neither Borrower nor any member of the Borrower Corporate Group nor
any of its stockholders shall become a party to any agreement, note, indenture
or other instrument, or take any other action, which would prohibit the creation
of a Lien on any of its properties or other assets or its Capital Stock in favor
of the Agent for the benefit of itself and the Holders of Secured Obligations,
as additional collateral for the Obligations; provided that any agreement, note,
indenture or other instrument in connection with secured purchase money
indebtedness (including Leases) permitted pursuant to the terms of this
Agreement may prohibit the creation of a Lien in favor of the Agent for the
benefit of itself and the Holders of the Secured Obligations on the items of
property obtained with the proceeds of such purchase money indebtedness.
-93-
<PAGE>
(D) INVESTMENTS. Except to the extent permitted pursuant to PARAGRAPH (G)
below, neither Borrower nor any other member of the Borrower Corporate Group
shall directly or indirectly make or own any Investment, except:
(i) Investments in Cash Equivalents;
(ii) Permitted Existing Investments in an amount not greater than
the amount thereof on the Closing Date;
(iii) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in
the ordinary course of business;
(iv) Investments consisting of (a) bank and money market accounts
(other than those subject to a Collection Account Agreement) maintained by
the Borrower or any Specified Subsidiary with financial institutions
provided not more than $10,000 shall be maintained in any such account at
any one time and not more than $150,000 shall be maintained in all such
accounts at any one time; and (b) deposit accounts maintained by the
Borrower in connection with its cash management system provided funds
deposited in such deposit accounts subject to the terms of a Collection
Account Agreement;
(v) Investments by the Borrower in any Target in connection with
any Permitted Acquisition; and
(vi) Investments consisting of (a) loans to management of AMC or
members of the Borrower Corporate Group at any time not to exceed $100,000
for any member of the Borrower Corporate Group and $300,000 in the
aggregate for all members of the Borrower Corporate Group; and (b)
Investments with or in any other Persons in an aggregate outstanding
principal amount at any time outstanding for all members of the Borrower
Corporate Group of $3,000,000; PROVIDED, HOWEVER, to the extent AMC infuses
capital ("CONTRIBUTION") in the Borrower which the Borrower immediately
utilizes to make an equity Investment, then the Borrower may make such
Investment in the amount of AMC's Contribution.
(E) CONTINGENT OBLIGATIONS. Neither Borrower nor any member of the
Borrower Corporate Group shall directly or indirectly create or become or be
liable with respect to any Contingent Obligation, except: (i) recourse
obligations resulting from endorsement of negotiable instruments for collection
in the ordinary course of business; (ii) Permitted Existing Contingent
Obligations and any extensions, renewals or replacements thereof, provided that
any such extension, renewal or replacement is not greater than the Indebtedness
under, and shall be on terms no less favorable to the Borrower or such member of
the Borrower Corporate Group, as applicable, than the terms of, the Permitted
Existing Contingent Obligation being extended, renewed or replaced; (iii)
obligations, warranties, and indemnities, not relating to Indebtedness of any
Person, which have been or are undertaken or made in the ordinary course of
business and not for the benefit of or in favor of an Affiliate of the Borrower
or such member of the Borrower Corporate Group; (iv) Contingent Obligations
arising under the Transaction Documents; (v) additional Contingent Obligations
which do not exceed $50,000 with respect to any member of
-94-
<PAGE>
the Borrower Corporate Group individually or $250,000 in the aggregate at any
time for all members of the Borrower Corporate Group; and (vi) Contingent
Obligations with respect to surety, appeal and performance bonds obtained by any
member of Borrower Corporate Group in the ordinary course of business.
(F) RESTRICTED JUNIOR PAYMENTS. Neither Borrower nor any member of the
Borrower Corporate Group shall declare or make any Restricted Junior Payment,
except:
(i) payment of management fees, investment fees, professional
services fees, expense reimbursements or other amounts to AMC and/or GTCR
required to be paid pursuant to the Services Agreement but not to exceed
(y) $12,500 for each fiscal quarter until the year following the first year
in which AMC achieves consolidated revenues of at least $30,000,000; and
(z) thereafter $25,000 per fiscal quarter;
(ii) the Borrower may make distributions to AMC in any fiscal year,
from funds legally available for such purpose, in an aggregate amount not
to exceed the amount calculated pursuant to SCHEDULE 6.3(F)(ii) minus any
amounts paid directly by the Borrower or any of its Subsidiaries to any
Governmental Authority with respect to the Consolidated AMC Group's tax
liability;
(iii) annual mandatory payments of interest, if any, due on the
Permitted Subordinated Indebtedness (as permitted under
SECTION 6.3(A)(ii)(6)) (other than Acquisition Subordinated Debt) unless
such payments are prohibited by the terms of such Indebtedness or the
subordination agreement or intercreditor agreement related thereto;
(iv) cash dividends or distributions on the Capital Stock of the
Borrower to fund actual out-of-pocket ordinary administrative expenses,
franchise taxes, accounting expenses, legal expenses, employee expenses,
lease and office expenses, consultant expenses, investment banker expenses
incurred by AMC on behalf of one or members of the Borrower Corporate Group
(the allocation and payment of which complies with the terms of
SECTION 6.2(P) above) which dividends shall not exceed $450,000 in the
aggregate in any fiscal year; PROVIDED, HOWEVER, in the twelve (12) month
period beginning six (6) months prior to and ending six (6) months after an
initial public offering by the Borrower or AMC such dividends shall not
exceed in the aggregate $1,000,000;
(v) cash dividends or distributions on the Capital Stock of the
Borrower in an amount equal to payments made in connection with the
mandatory repurchase of AMC Capital Stock from any Person having rights to
put such Capital Stock to AMC in connection with termination of such
Person's employment or management arrangements with AMC MINUS the aggregate
of amounts received by AMC from the resale of such Capital Stock and cash
capital contributions made to AMC for the purpose of effecting such
repurchase, if and only if (x) the net amount of such payments, together
with the aggregate amount of all other Restricted Junior Payments made
under this clause (v) in any twelve-month period does not exceed $1,000,000
and (z) prior to making any such Restricted Junior Payment, the Borrower
shall have delivered PRO FORMA consolidated projections for the period from
the date of the proposed Restricted Junior Payment through the Termination
Date, certified by the Borrower's chief financial officer or chief
-95-
<PAGE>
executive officer, which projections shall reflect, to the reasonable
satisfaction of the Agent and the Required Lenders, that, after taking into
account the effect of such Restricted Junior Payment, no Default shall be
anticipated to occur during such period;
(vi) annual mandatory Contingent Purchase Price Payments in an
amount not to exceed the amount which would be payable under the applicable
Acquisition Agreements entered into at the time of the applicable
Acquisition, without taking into account any amendment, modification,
supplement or restatement of any such agreement or the adjustment of any
such amount pursuant to the terms of any such Agreement resulting from a
change of facts and circumstances after the Acquisition Closing Date with
respect thereto (unless the Agent and the Lenders shall have consented to
the terms thereof) the effect of which is to increase the amount or
accelerate the time of payment of any such Contingent Purchase Price
Payment;
(vii) Restricted Junior Payments from any member of the Borrower
Corporate Group to the Borrower;
(viii) annual mandatory payments of interest and principal, if any,
due on the Acquisition Subordinated Debt unless such payments are
prohibited by the terms of such Indebtedness or the subordination agreement
or intercreditor agreement related thereto; and
(ix) cash dividends or distributions on the Capital Stock of the
Borrower as follows:
(A) On or after the date on which the Agent receives the financial
statements for the Borrower Corporate Group required to be delivered
pursuant to Section 6.1(A)(ii) for the four quarters ending June 30, 1997
(the "Dividend Release Date"), from funds legally available for such
purpose, in an amount which, when aggregated with any amounts paid under
clause (B) below does not exceed $700,000 in the aggregate; and
(B) On or after the Closing Date and prior to the Dividend Release
Date, from funds legally available for such purpose, in an amount which,
when aggregated with any amounts paid under clause (A) above does not
exceed $700,000 in the aggregate, if the Borrower's consolidated EBITA for
the four quarters ending June 30, 1996 as reflected in the financial
statements for the Borrower Corporate Group required to be delivered
pursuant to Section 6.1(A)(ii) for such four quarters is at least
$4,250,000;
PROVIDED, HOWEVER, that (a) the Restricted Junior Payments described in
CLAUSES (i) through (vi), (viii), and (ix) above shall not be permitted if
either a Default shall have occurred and be continuing at the date of
declaration or payment thereof or would result therefrom; (b) the Restricted
Junior Payments described in CLAUSES (vi) AND (viii) above shall not be
permitted unless after taking into account such payments, the Fixed Charge
Coverage Ratio (calculated by including for purposes of clause (ii)(a) thereof
interest payments in the calculation of Interest Expense) shall be at least 1.20
to 1.00; and (c) the Restricted Junior Payments in CLAUSES (iii), (vi), (viii)
AND (ix) shall not be permitted to be made until after the Agent's and the
Lenders' receipt of the financial statements delivered pursuant to
SECTION 6.1(A)(iii) (or, in the case of
-96-
<PAGE>
clause (ix), SECTION 6.1A(ii)) for the immediately preceding year, which
financial statements shall reflect that no Default or Unmatured Default shall
exist prior to or after taking into account the effect of any such payments.
(G) CONDUCT OF BUSINESS; SUBSIDIARIES; ACQUISITIONS. Neither the
Borrower nor any of the other members of the Borrower Corporate Group shall
engage in any business other than the businesses engaged in by such Borrower or
Subsidiary on the date hereof (or on the date of the applicable Acquisition of
such Person) and any business or activities which are substantially similar,
related or incidental thereto. The Borrower shall not engage in any business
other than that of a holding company of the Capital Stock of the Specified
Subsidiaries. AMC shall not engage in any business other than that of a holding
company of the Capital Stock of the Borrower and the rendering of services of
the type described in the Services Agreement; PROVIDED, HOWEVER, (i) AMC may
make equity investments in Good Samaritan Supply Services Inc., a Minnesota
corporation and (ii) AMC may issue AMC Subordinated Debt and act as a holding
company of the Capital Stock of Subsidiaries other than the Borrower only upon
the written consent of the Agent, which consent will not be unreasonably
withheld. No member of the Borrower Corporate Group shall sell to or provide
services to any Person that (i) has not obtained or maintained in good standing
all required Health Facility Licenses; (ii) has not obtained and maintained
Accreditation from JCAHO for its facilities, if applicable; (iii) has not
obtained and maintained CHAMPUS Certification (if applicable), Medicaid
Certification and Medicare Certification; or (iv) has not entered into and
maintained in good standing its Provider Agreements. Except in connection with
a Permitted Acquisition, neither the Borrower nor any other member of the
Borrower Corporate Group shall create, capitalize or acquire any Subsidiary
after the date hereof. Neither Borrower nor any member of the Borrower
Corporate Group shall enter into any transaction or series of transactions in
which it acquires all or any significant portion of the assets of another Person
unless such purchase meets the following requirements (each such purchase
constituting a "PERMITTED ACQUISITION"):
(1) no Default shall have occurred and be continuing or would result
from such transaction or transactions or the incurrence of any Obligations
in connection therewith;
(2) prior to each such purchase, the Borrower shall deliver to the
Agent a certificate from a Financial Officer acceptable to the Agent
demonstrating to the satisfaction of the Agent and the Required Lenders
that after giving effect to such transaction or transactions and the
incurrence of any Indebtedness permitted by SECTION 6.3(A), if any, in
connection therewith on a pro forma basis as if such acquisition and such
incurrence of Indebtedness had occurred on the first day of the
twelve-month period ending on the last day of the Borrower's most recently
completed fiscal quarter (or if shorter the period from the commencement of
this Agreement), the Borrower would have been in compliance with all
provisions of SECTION 6.4 at all times during such twelve-month period;
(3) if such transaction or transactions involve the incurrence of
Indebtedness pursuant to this Agreement, the Borrower shall have complied
with all of the terms and conditions in connection therewith under
SECTION 4.3; and
-97-
<PAGE>
(4) the purchase is consummated pursuant to a negotiated acquisition
agreement on a non-hostile basis and involves the purchase of a business
line similar, related or incidental to that of the Borrower and its
Subsidiaries as of the Closing Date.
(H) TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. None of the members of
the Borrower Corporate Group shall directly or indirectly (i) except as
permitted in SECTION 6.3(F), pay any management fees or other similar fees or
compensation to AMC, GTCR or any other holder or holders of AMC's or any member
of the Borrower Corporate Group's Capital Stock, other than wages, salaries,
bonuses and advances for expenses incurred in the ordinary course and consistent
with past practices of employees who are also stockholders of any member of the
Borrower Corporate Group in the ordinary course and consistent with past
practices of such Person or (ii) enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with AMC, GTCR or any holder or
holders of any of the Capital Stock of any member of the Borrower Corporate
Group or any Affiliate thereof which is not a Subsidiary of the Borrower, on
terms that are less favorable to the applicable member of the Borrower Corporate
Group than those that might be obtained in an arm's length transaction at the
time from Persons who are not such a holder or Affiliate.
(I) RESTRICTION ON FUNDAMENTAL CHANGES. Neither the Borrower nor any
member of the Borrower Corporate Group shall enter into any merger or
consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution), or convey, lease, sell, transfer or otherwise dispose of, in one
transaction or series of transactions, all or substantially all of any such
Person's business or property, whether now or hereafter acquired, except (i)
transactions permitted under SECTIONS 6.3(B) or 6.3(G) and (ii) merger of any
member of the Borrower Corporate Group with and into the Borrower, with the
Borrower as the surviving corporation in the merger.
(J) SALES AND LEASEBACKS. Neither the Borrower nor any other member of
the Borrower Corporate Group shall become liable, directly, by assumption or by
Contingent Obligation, with respect to any lease, whether an Operating Lease or
a Capitalized Lease, of any property (whether real or personal or mixed) (i)
which it or one of the members of the Borrower Corporate Group sold or
transferred or is to sell or transfer to any other Person, or (ii) which it or
one of the members of the Borrower Corporate Group intends to use for
substantially the same purposes as any other property which has been or is to be
sold or transferred by it or one the members of the Borrower Corporate Group to
any other Person in connection with such lease, unless in either case the sale
involved is not prohibited under SECTION 6.3(B) and the lease involved is not
prohibited under SECTION 6.3(A).
(K) MARGIN REGULATIONS. No member of the Borrower Corporate Group shall
use all or any portion of the proceeds of any credit extended under this
Agreement to purchase or carry Margin Stock.
(L) ERISA. No member of the Borrower Corporate Group shall participate in
any prohibited transaction described in Sections 406 of ERISA or 4975 of the
Code for which a statutory or class exemption is not available or a private
exemption has not been previously obtained from the DOL.
-98-
<PAGE>
(M) ISSUANCE OF CAPITAL STOCK. Except as permitted in SECTION 6.3(B),
neither the Borrower nor any of the members of the Borrower Corporate Group
shall issue any Capital Stock.
(N) CORPORATE DOCUMENTS. No member of the Borrower Corporate Group shall
amend, modify or otherwise change any of the terms or provisions in any of their
respective corporate documents (other than the by-laws and, in the case of by-
laws, any of the material terms or provisions thereof) as in effect on the date
hereof or on the Acquisition Closing Date with respect to any Specified
Subsidiary added after the date hereof, including, without limitation, any of
the terms of the Gatti Preferred Stock, in any manner adverse to the interests
of the Lenders without the prior written consent of the Required Lenders (which
consent shall not be unreasonably withheld).
(O) OTHER INDEBTEDNESS. Except as permitted in SECTION 6.3(S), neither
Borrower nor any other member of the Borrower Corporate Group shall amend,
supplement or otherwise modify the terms of any Indebtedness (other than the
Obligations) permitted under SECTION 6.3(A) in any way that would be materially
less advantageous to the Borrower or such member of the Borrower Corporate Group
(except modifications to the terms of intercompany indebtedness from a Specified
Subsidiary to the Borrower which modifications are beneficial to the Borrower)
or materially adverse to the Lenders, including, without limitation, with
respect to amount, maturity, amortization, interest rate, premiums, fees,
covenants, events of default and remedies. Except for payments made in the
ordinary course with respect to the Borrower's trade indebtedness and except as
permitted in SECTION 6.3(F)(iii), neither Borrower nor any member of the
Borrower Corporate Group shall purchase, redeem, prepay or repay any principal
of, premium, if any, interest or other amount payable in respect of any
Indebtedness (other than the Obligations) permitted under SECTION 6.3(A).
(P) FISCAL YEAR. No member of the Borrower Corporate Group shall change
its fiscal year for accounting or tax purposes from a period consisting of the
12-month period ending on December 31 of each calendar year.
(Q) SUBSIDIARY COVENANTS. The Borrower will not permit any of its
Subsidiaries to, create or otherwise become effective any consensual encumbrance
or restriction of any kind on the ability of any such Subsidiary to pay
dividends or make any other distribution on its stock, or make any other
Restricted Junior Payment, pay any Indebtedness or other Obligation owed to the
Borrower or any other such Subsidiary, make loans or advances or other
Investments in the Borrower or any other such Subsidiary, or sell, transfer or
otherwise convey any of its property to the Borrower or any other such
Subsidiary.
(R) RATE HEDGING OBLIGATIONS. Neither the Borrower nor any other member
of the Borrower Corporate Group shall enter into any interest rate, commodity or
foreign currency exchange, swap, collar, cap or similar agreements other than
interest rate, foreign currency or commodity exchange, swap, collar, cap or
similar agreements other than those entered into pursuant to SECTION 6.2(L)
hereof or pursuant to which any member of the Borrower Corporate Group has
hedged its actual interest rate, foreign currency or commodity exposure (such
hedging agreements are sometimes referred to herein as "INTEREST RATE
AGREEMENTS").
-99-
<PAGE>
(S) SUBORDINATED INDEBTEDNESS. No member of the Borrower Corporate Group
shall amend, supplement or modify the terms of any Permitted Subordinated
Indebtedness, or make any payment required as a result of an amendment or change
thereto other than amendments, supplements or modifications which (i) decrease
the rate of interest payable on the Permitted Subordinated Indebtedness, (ii)
provide for the payment in kind in lieu of cash of any portion of the interest
on the Permitted Subordinated Indebtedness, (iii) provide for the extension of
the maturity date with respect to any principal or interest payment to be made
under the instruments evidencing Permitted Subordinated Indebtedness, (iv)
provide more flexibility to the applicable member of the Borrower Corporate
Group in connection with any financial covenants, (v) waive any defaults
existing in connection with the Permitted Subordinated Indebtedness, and (vi) do
not adversely affect in any respect the interests of the Agent or the Holders of
the Secured Obligations.
(T) CHANGE OF DEPOSIT ACCOUNTS. The Borrower shall not, and shall not
permit any other member of the Borrower Corporate Group to, establish any
deposit account with any bank or other financial institution other than those
which have entered into a Collection Account Agreement in form and substance
acceptable to the Agent.
6.4 FINANCIAL COVENANTS. The Borrower shall and shall cause each of the
members of the Borrower Corporate Group to be operated in a manner so as to
comply with the following:
(A) DEFINED TERMS FOR FINANCIAL COVENANTS.
The following terms used in this Agreement shall have the following meanings
(such meanings to be applicable, except to the extent otherwise indicated in a
definition of a particular term, both to the singular and the plural forms of
the terms defined):
"CAPITAL EXPENDITURES" means, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities and including
Capitalized Leases and Permitted Purchase Money Indebtedness and including all
related Transaction Costs) by the Borrower and its consolidated Subsidiaries
during such period that, in conformity with Agreement Accounting Principles, are
required to be included in or reflected by the property, plant, equipment or
similar fixed asset accounts reflected in the consolidated balance sheet of the
Borrower and its consolidated Subsidiaries other than with respect to the
acquisition by a Specified Subsidiary of inventory and equipment in the ordinary
course of business or with respect to the Specified Acquisitions.
"EBITA" means, for any period, on a consolidated basis for Borrower and its
consolidated Subsidiaries, the sum, without duplication, of the amounts for such
period of (i) Net Income, PLUS (ii) charges against income for foreign, federal,
state and local taxes, PLUS (iii) Interest Expense (other than Fees), PLUS (iv)
Fees, PLUS (v) Restricted Junior Payments consisting of management fees paid
pursuant to SECTION 6.3(F)(i), PLUS (vi) amortization expense, including,
without limitation, amortization of goodwill and other intangible assets, PLUS
(vii) other non-cash charges classified as long-term deferrals in accordance
with Agreement Accounting Principles, PLUS (vii) the write-off of deferred
financing costs associated with repayment of Indebtedness prior to the Closing
Date to the Lenders, MINUS (ix) interest income, MINUS (x) extraordinary gains
(and any unusual gains arising in or outside of the ordinary course of business
not included
-100-
<PAGE>
in extraordinary gains determined in accordance with Agreement Accounting
Principles which have been included in the determination of Net Income).
"FEES" means fees (including agency and unused commitment fees) and
discounts with respect to (i) Letters of Credit and (ii) Indebtedness evidenced
by this Agreement.
"INTEREST EXPENSE" means, for any period, total interest expense of
Borrower and its consolidated Subsidiaries, other than in respect of Fees,
whether paid, deferred or accrued (including the interest component of
Capitalized Leases), but excluding interest expense not payable in cash
(including amortization of discount), all as determined in conformity with
Agreement Accounting Principles.
"NET INCOME" means, for any period, the net earnings (or loss) after taxes
of Borrower and its consolidated Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with
Agreement Accounting Principles.
"RENTALS" of a Person means the aggregate fixed amounts payable by such
Person under any lease of real or personal property having an original term
(including any required renewals or any renewals at the option of the lessor or
lessee) of one year or more but does not include any amounts payable under
Capitalized Leases of such Person.
(B) INTEREST EXPENSE COVERAGE RATIO. Maintain a ratio (the "INTEREST
EXPENSE COVERAGE RATIO") of (i) EBITA to (ii) Interest Expense for the
applicable period of at least:
- --------------------------------------------------------------------------------
Applicable Period Applicable Interest
Coverage Ratio
- --------------------------------------------------------------------------------
From the Closing Date and each fiscal quarter thereafter 2.00 to 1.0
- --------------------------------------------------------------------------------
In each case the Interest Expense Coverage Ratio shall be determined as of the
last day of each fiscal quarter for the four-quarter period ending on such day.
(C) FIXED CHARGE COVERAGE RATIO. Maintain a ratio of: (i) the sum,
without duplication, of the amounts of (a) EBITA, PLUS (b) depreciation expense,
PLUS (c) Rentals, MINUS (d) Capital Expenditures, MINUS (e) Contingent Purchase
Price Payments to (ii) the sum, without duplication, of the amounts of (a)
Interest Expense, PLUS (b) Fees, PLUS (c) Rentals, PLUS (d) Restricted Junior
Payments consisting of management fees paid pursuant to SECTION 6.3(F)(i), PLUS
(e) Restricted Junior Payments consisting of tax related payments paid pursuant
to SECTION 6.3(F)(ii) and any amounts paid directly by the Borrower or any of
its Subsidiaries to any Governmental Authority with respect to the Consolidated
AMC Group's tax liability, PLUS (f) scheduled amortization of the principal
portion of the Term Loans and Acquisition Loans and scheduled amortization of
the principal portion of all other Indebtedness of Borrower (including without
limitation, Acquisition Subordinated Debt) and its consolidated Subsidiaries
during such period of at least:
-101-
<PAGE>
- --------------------------------------------------------------------------------
Applicable Period Applicable Fixed
Charge Coverage
Ratio
- --------------------------------------------------------------------------------
From the Closing Date through each fiscal
quarter thereafter 1.15 to 1.0
- --------------------------------------------------------------------------------
In each case the Fixed Charge Coverage Ratio shall be determined as of the last
day of each fiscal quarter for the four-quarter period ending on such day.
(D) MINIMUM EBITA. Shall not permit EBITA for the applicable period to be
less than:
- --------------------------------------------------------------------------------
Applicable Period Minimum EBITA
- --------------------------------------------------------------------------------
From July 1, 1995 through the fiscal period
ending June 30, 1996 $4,250,000
- --------------------------------------------------------------------------------
From the fiscal period beginning July 1, 1996
through the fiscal period ending June 30, 1997 $6,000,000
- --------------------------------------------------------------------------------
From the fiscal period beginning July 1, 1997
through the fiscal period ending June 30, 1998 $8,000,000
- --------------------------------------------------------------------------------
From the fiscal period beginning July 1, 1998
through the fiscal period ending June 30, 1999 $9,500,000
- --------------------------------------------------------------------------------
From the fiscal period beginning July 1, 1999
through the fiscal period ending June 30, 2000 $11,500,000
- --------------------------------------------------------------------------------
From the fiscal period beginning July 1, 2000
through the fiscal period ending June 30, 2001 $13,000,000
- --------------------------------------------------------------------------------
(E) MAXIMUM LEVERAGE RATIO. Shall not permit the ratio ("LEVERAGE RATIO")
of (i) Indebtedness of Borrower and its consolidated Subsidiaries for borrowed
money (excluding from the calculation thereof any Contingent Obligations or Rate
Hedging Obligations) to (ii) the sum of (a) EBITA PLUS (b) depreciation expenses
MINUS (c) Capital Expenditures for the applicable period to be greater than:
- --------------------------------------------------------------------------------
Applicable Period Applicable Leverage
Coverage Ratio
- --------------------------------------------------------------------------------
From the Closing Date through the fiscal quarter
ended March 31, 1998 5.0 to 1.0
- --------------------------------------------------------------------------------
For the fiscal quarter ending June 30, 1998 4.75 to 1.0
- --------------------------------------------------------------------------------
For the fiscal quarter ending September 30, 1998 4.5 to 1.0
- --------------------------------------------------------------------------------
-102-
<PAGE>
- --------------------------------------------------------------------------------
For the fiscal quarter ending December 31,1998 4.25 to 1.0
- --------------------------------------------------------------------------------
For the fiscal quarter ended March 31, 1999 4.00 to 1.00
- --------------------------------------------------------------------------------
Each fiscal quarter for the period commencing with the
fiscal quarter ended June 30, 1999 through the fiscal
quarter ended September 30, 1999 3.75 to 1.00
- --------------------------------------------------------------------------------
Each fiscal quarter for the period commencing with the
fiscal quarter ending December 31, 1999 through the fiscal
quarter ending March 31, 2000 3.5 to 1.00
- --------------------------------------------------------------------------------
Each fiscal quarter thereafter 3.0 to 1.00
- --------------------------------------------------------------------------------
The Leverage Ratio shall be calculated, in each case, as of the last day of each
fiscal quarter based upon (A) for Indebtedness, Indebtedness as of the last day
of each such fiscal quarter; and (B) for EBITA, depreciation and Capital
Expenditures, the actual amount for the four-quarter period ending on such day.
(F) CALCULATIONS FOR ACQUISITION. For purposes of calculating the
Leverage Ratio, EBITA, depreciation expense and capital expenditures for any
period shall be calculated on a pro forma basis as if any Specified Subsidiary
acquired by the Borrower or a Specified Subsidiary during such period had been
acquired by the Borrower or a Specified Subsidiary on the first day of such four
(4) quarter period.
ARTICLE VII: DEFAULTS
7.1 DEFAULTS. Each of the following occurrences shall constitute a
Default under this Agreement:
(a) FAILURE TO MAKE PAYMENTS WHEN DUE. The Borrower shall (i) fail to pay
when due any of the Obligations consisting of principal with respect to the
Loans or (ii) shall fail to pay within three (3) Business Days of the date when
due any of the other Obligations under this Agreement or the other Loan
Documents.
(b) BREACH OF CERTAIN COVENANTS. The Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on it under:
(i) Sections 6.1(C), 6.1(D), 6.1(E), 6.1(F), 6.1(G), 6.1(H),
6.1(I), 6.1(K), 6.2(B) or 6.2(F) and such failure shall continue unremedied
for fifteen (15) days;
(ii) Section 6.1(A), 6.1(B) or 6.1(J) and such failure shall
continue unremedied for five (5) Business Days;
(iii) Section 6.3 and such failure shall continue unremedied for five
(5) Business Days but only if such failure was unintentional and
inadvertent and is capable of being
-103-
<PAGE>
and is reasonably likely to be cured or remedied within such five (5)
Business Day period; or
(iv) Section 6.3 (to the extent such failure is not subject to
CLAUSE (iii) above), 6.4(B), 6.4(C) or 6.4(D).
(c) BREACH OF REPRESENTATION OR WARRANTY. Any representation or warranty
made or deemed made by Borrower or any member of the Borrower Corporate Group to
the Agent or any Lender herein or by the Borrower or any of their respective
Subsidiaries in any of the other Loan Documents or in any statement or
certificate at any time given by any such Person pursuant to any of the Loan
Documents shall be false or misleading in any material respect on the date as of
which made (or deemed made).
(d) OTHER DEFAULTS. Borrower shall default in the performance of or
compliance with any term contained in this Agreement (other than as covered by
PARAGRAPHS (a), (b) or (c) of this SECTION 7.1), or AMC, Borrower or any of
their respective Subsidiaries shall default in the performance of or compliance
with any term contained in any of the other Loan Documents, and such default
shall continue for thirty (30) days after the occurrence thereof.
(e) DEFAULT AS TO OTHER INDEBTEDNESS; OPERATING LEASES. The Borrower or
any member of the Borrower Corporate Group shall fail to make any payment when
due (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) with respect to any Indebtedness (other than the Obligations), which
Indebtedness has an outstanding principal balance in excess of $100,000; or any
breach, default or event of default shall occur, or any other condition shall
exist under any instrument, agreement or indenture pertaining to any such
Indebtedness, if the effect thereof is to cause an acceleration, mandatory
redemption, a requirement that Borrower or such member of the Borrower Corporate
Group offer to purchase such Indebtedness or other required repurchase of such
Indebtedness, or permit the holder(s) of such Indebtedness to accelerate the
maturity of any such Indebtedness or require a redemption or other repurchase of
such Indebtedness; or any such Indebtedness shall be otherwise declared to be
due and payable (by acceleration or otherwise) or required to be prepaid,
redeemed or otherwise repurchased by Borrower or any member of the Borrower
Corporate Group (other than by a regularly scheduled required prepayment) prior
to the stated maturity thereof.
(f) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) An involuntary case shall be commenced against the Borrower or
any of its Subsidiaries and the petition shall not be dismissed, stayed,
bonded or discharged within sixty (60) days after commencement of the case;
or a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Borrower or any of the Borrower's
Subsidiaries in an involuntary case, under any applicable bankruptcy,
insolvency or other similar law now or hereinafter in effect; or any other
similar relief shall be granted under any applicable federal, state, local
or foreign law.
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the Borrower
or any of its Subsidiaries or over all or a
-104-
<PAGE>
substantial part of the property of the Borrower or any of its Subsidiaries
shall be entered; or an interim receiver, trustee or other custodian of the
Borrower or any of its Subsidiaries or of all or a substantial part of the
property of the Borrower or any of its Subsidiaries shall be appointed or a
warrant of attachment, execution or similar process against any substantial
part of the property of the Borrower or any of its Subsidiaries shall be
issued and any such event shall not be stayed, dismissed, bonded or
discharged within sixty (60) days after entry, appointment or issuance.
(g) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. Borrower or any
of its Subsidiaries shall (i) commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (ii)
consent to the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such law, (iii)
consent to the appointment of or taking possession by a receiver, trustee or
other custodian for all or a substantial part of its property, (iv) make any
assignment for the benefit of creditors or (v) take any corporate action to
authorize any of the foregoing.
(h) JUDGMENTS AND ATTACHMENTS. Any money judgment(s) (other than a money
judgment covered by insurance as to which the insurance company has not
disclaimed or reserved the right to disclaim coverage), writ or warrant of
attachment, or similar process against Borrower or any of its Subsidiaries or
any of their respective assets involving in any single case in excess of
$100,000 with respect to any of Borrower or any of its Subsidiaries or in excess
of $500,000 in the aggregate with respect to Borrower and its Subsidiaries is
(are) entered and shall remain undischarged, unvacated, unbonded or unstayed for
a period of sixty (60) days or in any event later than fifteen (15) days prior
to the date of any proposed sale thereunder.
(i) DISSOLUTION. Any order, judgment or decree shall be entered against
Borrower or any member of the Borrower Corporate Group decreeing its involuntary
dissolution or split up and such order shall remain undischarged and unstayed
for a period in excess of sixty (60) days; or the Borrower or any member of the
Borrower Corporate Group shall otherwise dissolve or cease to exist except as
specifically permitted by this Agreement.
(j) LOAN DOCUMENTS; FAILURE OF SECURITY. At any time, for any reason, (i)
any Loan Document as a whole that materially affects the ability of the Agent,
or any of the Lenders to enforce the Obligations or enforce their rights against
any guarantor or the Collateral ceases to be in full force and effect or AMC,
the Borrower or any of their respective Subsidiaries party thereto seeks to
repudiate its obligations thereunder and the Liens intended to be created
thereby are, or AMC, the Borrower or any such Subsidiary seeks to render such
Liens, invalid and unperfected, or (ii) Liens on Collateral with a fair market
value in excess of $50,000 for the Borrower or Specified Subsidiary or in excess
of $250,000 in the aggregate for all members of the Borrower Corporate Group in
favor of the Agent contemplated by the Loan Documents shall, at any time, for
any reason, be invalidated or otherwise cease to be in full force and effect, or
such Liens shall not have the priority contemplated by this Agreement or the
Loan Documents.
(k) TERMINATION EVENT. Any Termination Event occurs which the Required
Lenders believe is reasonably likely to subject the Borrower or any member of
the Controlled Group to liability in excess of $100,000 or all members of the
Controlled Group in the aggregate to liability in excess of $500,000.
-105-
<PAGE>
(l) WAIVER APPLICATION. The plan administrator of any Benefit Plan
applies under Section 412(d) of the Code for a waiver of the minimum funding
standards of Section 412(a) of the Code and the Agent believes that the
substantial business hardship upon which the application for the waiver is based
is reasonably likely to subject any member of the Borrower Corporate Group to
liability in excess of $100,000 or all members of the Borrower Corporate Group
in the aggregate to liability in excess of $500,000.
(m) CHANGE OF CONTROL OR MANAGEMENT. (i) A Change of Control shall occur
or (ii) for any reason Timothy L. Burfield ceases to be an officer of the
Borrower with day-to-day managerial responsibilities with respect to the
Borrower and the members of the Borrower Corporate Group consistent with those
presently held by him and anticipated to be carried out by him and he is not
replaced within sixty (60) days by an individual or individuals reasonably
satisfactory to the Agent and the Required Lenders.
(n) INTEREST RATE AGREEMENTS. Nonpayment by the Borrower of any
obligation under any Interest Rate Agreements entered into with any Lender or
the breach by the Borrower of any term, provision or condition contained in any
such Interest Rate Agreements, in each case following the expiration of any cure
periods with respect to such nonpayment or breach.
(o) ENVIRONMENTAL MATTERS. The Borrower or any member of the Borrower
Corporate Group shall be the subject of any proceeding or investigation
pertaining to (i) the release by any member of the Borrower Corporate Group of
any contaminant (including, without limitation, any medical waste) into the
environment, (ii) the liability of any member of the Borrower Corporate Group
arising from the release by any other Person of any contaminant (including,
without limitation, any medical waste) into the environment, or (iii) any
violation of any Environmental, Health or Safety Requirements of Law (including,
without limitation, those applicable to the disposal of medical waste) by any
member of the Borrower Corporate Group, which, in any case, is reasonably likely
to subject any member of the Borrower Corporate Group to liability in excess of
$100,000 or all of the members of the Borrower Corporate Group in the aggregate
to liability in excess of $500,000.
(p) GUARANTOR REVOCATION. Any guarantor of the Obligations shall
terminate or revoke any of its obligations under the applicable guarantee
agreement or breach any of the terms of such guarantee agreement.
(q) FAILURE OF SUBORDINATION. (1) The subordination provisions of the
documents and instruments evidencing any Permitted Subordinated Indebtedness
shall, at any time, be invalidated or otherwise cease to be in full force and
effect; or (2) any violation or breach of the terms of any subordination or
intercreditor agreement relating to any Permitted Subordinated Indebtedness
shall occur by any member of the Borrower Corporate Group; or (3) any violation
or breach of the terms of any other subordination or intercreditor agreement
relating to any Permitted Subordinated Indebtedness shall occur by any Person
other than a member of the Borrower Corporate Group and (a) such violation or
breach continued unremedied for fifteen (15) Business Days or (b) the Agent or
the Required Lenders have determined that such violation or breach is reasonably
likely to impair or otherwise be materially disadvantageous to the position of
the Lenders.
-106-
<PAGE>
(r) ACCREDITATION; LICENSING. Any member of the Borrower Corporate Group
shall fail to maintain its Accreditation or Health Facility License.
(s) CHAMPUS/MEDICARE/MEDICAID ELIGIBILITY. Any member of the Borrower
Corporate Group eligible as of the Closing Date, or which thereafter becomes
eligible, to participate in CHAMPUS, Medicare and/or Medicaid programs shall
receive notice of termination of its eligibility to, or shall otherwise become
ineligible thereunder for any reason to, participate in the CHAMPUS, Medicare or
Medicaid programs or to accept assignments or rights to reimbursement under
CHAMPUS Regulations, Medicare Regulations or Medicaid Regulations.
(t) PARTICIPATION IN MANAGED CARE PROGRAMS. Any Specified Subsidiary
eligible as of the Closing Date, or which thereafter becomes eligible, to
participate in any managed care program or other program from which any
Specified Subsidiary derives more than fifteen percent (15%) of its Receivables,
shall become ineligible thereunder for any reason and such Specified
Subsidiary's eligibility shall not have been reinstated within five (5) Business
Days.
(u) CONTRACTUAL ALLOWANCE UNDERSTATEMENT. Any Specified Subsidiary shall
understate by any material amount its Contractual Allowances or shall overstate
by any material amount its Adjusted Amount of Eligible Receivables.
(v) PLEDGE OF CAPITAL STOCK. At any time the Agent shall fail to have a
first perfected possessory pledge with respect to (i) less than all of the
Borrower's Capital Stock owned by AMC; (ii) less than 80% of the combined voting
power of the Borrower's outstanding Capital Stock ordinarily having the right to
vote at an election of directors; (iii) less than all of the Specified
Subsidiaries' Capital Stock owned by the Borrower; or (iv) less than 80% of the
combined voting power of each of the Specified Subsidiaries' outstanding Capital
Stock ordinarily having the right to vote at an election of directors.
(w) MATERIAL ADVERSE CHANGE. Since June 30, 1995, there shall have
occurred any event which could have a Material Adverse Effect.
A Default shall be deemed "continuing" until cured or until waived in
writing in accordance with SECTION 8.3(a).
ARTICLE VIII: ACCELERATION, DEFAULTING LENDERS;
WAIVERS, AMENDMENTS AND REMEDIES
8.1 TERMINATION OF COMMITMENTS; ACCELERATION. If any Default described in
SECTION 7.1(f) or 7.1(g) occurs with respect to the Borrower or any Specified
Subsidiary, the obligations of the Lenders to make Loans hereunder and the
obligation of the Agent or any other Issuing Lender to issue Letters of Credit
hereunder shall automatically terminate and the Obligations shall immediately
become due and payable without any election or action on the part of the Agent,
any Lender or any Issuing Lender. If any other Default occurs, the Required
Lenders may terminate or suspend the obligations of the Lenders to make Loans
hereunder and the obligation of the Agent and the Issuing Lenders to issue
Letters of Credit hereunder, or declare the Obligations to be due and payable,
or both, whereupon the Obligations shall become immediately due and
-107-
<PAGE>
payable, without presentment, demand, protest or notice of any kind, all of
which the Borrower hereby expressly waive.
8.2 DEFAULTING LENDER. In the event that any Lender fails to fund its Pro
Rata Share of any Advance requested or deemed requested by the Borrower which
such Lender is obligated to fund under the terms of this Agreement (the funded
portion of such Advance by the non-defaulting Lender(s) being hereinafter
referred to as a "NON PRO RATA LOAN"), until the earlier of such Lender's cure
of such failure and the termination of the Revolving Loan Commitments, the
proceeds of all amounts thereafter repaid to the Agent by the Borrower and
otherwise required to be applied to such Lender's share of all other Obligations
pursuant to the terms of this Agreement shall be advanced to the Borrower by the
Agent on behalf of such Lender to cure, in full or in part, such failure by such
Lender, but shall nevertheless be deemed to have been paid to such Lender in
satisfaction of such other Obligations. Notwithstanding anything in this
Agreement to the contrary:
(i) the foregoing provisions of this SECTION 8.2 shall apply
only with respect to the proceeds of payments of Obligations and shall
not affect the conversion or continuation of Loans pursuant to SECTION
2.10;
(ii) any such Lender shall be deemed to have cured its failure
to fund its Pro Rata Share of any Advance at such time as an amount
equal to such Lender's original Pro Rata Share of the requested
principal portion of such Advance is fully funded to the Borrower,
whether made by such Lender itself or by operation of the terms of
this SECTION 8.2, and whether or not the Non Pro Rata Loan with
respect thereto has been repaid, converted or continued;
(iii) amounts advanced to the Borrower to cure, in full or in
part, any such Lender's failure to fund its Pro Rata Share of any
Advance ("CURE LOANS") shall bear interest at the rate applicable to
Floating Rate Loans in effect from time to time, and for all other
purposes of this Agreement shall be treated as if they were Floating
Rate Loans;
(iv) regardless of whether or not a Default has occurred or is
continuing, and notwithstanding the instructions of the Borrower as to
its desired application, all repayments of principal which, in
accordance with the other terms of this Agreement, would be applied to
the outstanding Floating Rate Loans shall be applied FIRST, ratably to
all Floating Rate Loans constituting Non Pro Rata Loans, SECOND,
ratably to Floating Rate Loans other than those constituting Non Pro
Rata Loans or Cure Loans and, THIRD, ratably to Floating Rate Loans
constituting Cure Loans;
(v) for so long as and until the earlier of any such Lender's
cure of the failure to fund its Pro Rata Share of any Advance and the
termination of the Revolving Loan Commitments, the term "Required
Lenders" for purposes of this Agreement shall mean Lenders (excluding
all Lenders whose failure to fund their respective Pro Rata Shares of
such Advance have not been so cured) whose Pro
-108-
<PAGE>
Rata Shares represent equal to or greater than sixty-six and two thirds
percent (66-2/3%) of the aggregate Pro Rata Shares of such Lenders; and
(vi) for so long as and until any such Lender's failure to fund
its Pro Rata Share of any Advance is cured in accordance with SECTION
8.2(II), (A) such Lender shall not be entitled to any commitment fees
with respect to its Revolving Loan Commitment, or Acquisition Loan
Commitment and (B) such Lender shall not be entitled to any letter of
credit fees, which commitment fees and letter of credit fees shall
accrue in favor of the Lenders which have funded their respective Pro
Rata Share of such requested Advance, shall be allocated among such
performing Lenders ratably based upon their relative Revolving Loan
Commitments, and shall be calculated based upon the average amount by
which the aggregate Revolving Loan Commitments of such performing
Lenders exceeds the sum of (I) the outstanding principal amount of the
Loans owing to such performing Lenders, PLUS (II) the outstanding
Reimbursement Obligations owing to such performing Lenders, PLUS (III)
the aggregate participation interests of such performing Lenders
arising pursuant to SECTION 2.21 with respect to undrawn and
outstanding Letters of Credit.
8.3 AMENDMENTS.
(a) GENERAL PROVISIONS. Subject to the provisions of this ARTICLE VIII,
the Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders, or the Borrower hereunder or waiving
any Default hereunder; PROVIDED, HOWEVER, that no such supplemental agreement
shall, without the consent of each Lender affected thereby:
(i) Postpone or extend the Termination Date, the Term Loan Termination
Date, the Conversion Date or any other date fixed for any payment of
principal of, or interest on, the Loans, the Reimbursement Obligations or
any fees or other amounts payable to such Lender (except with respect to
any modifications of the provisions relating to prepayments of Loans and
other Obligations).
(ii) Reduce the principal amount of any Loans or L/C Obligations,
reduce the amount of any required payment on the Loans (except with respect
to any modifications of the provisions relating to prepayments of Loans and
other Obligations approved by the Acquisition Approval Lenders) or reduce
the rate or extend the time of payment of interest or fees thereon.
(iii) Reduce the percentage specified in the definition of Required
Lenders or any other percentage of Lenders specified to be the applicable
percentage in this Agreement to act on specified matters.
(iv) Increase the amount of the Revolving Loan Commitment, or
Acquisition Loan Commitment of any Lender hereunder (except with respect to
an increase in the amount, or other modification to the terms or
components, of the Borrowing Base).
-109-
<PAGE>
(v) Permit Borrower to assign its rights under this Agreement.
(vi) Amend this SECTION 8.3.
(vii) Release all or substantially all of the Collateral.
(viii) Release any Subsidiary Guaranty.
(ix) Waive any condition precedent to an Acquisition Loan under
SECTION 4.3.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. No amendment of any
provision of this Agreement relating to any Issuing Lender shall be effective
without the written consent of such Issuing Lender. The Agent may waive payment
of the fee required under SECTION 12.3(B) without obtaining the consent of any
of the Lenders.
(b) ITEMS NOT REQUIRING CONSENT. Nothing in this Agreement shall require
the consent of any Lender to the execution by the Agent of documentation
acceptable to the Agent evidencing the release of the Agent's liens on any
Collateral sold in a transaction permitted by SECTION 6.3(B)(ii) or SECTION
6.3(B)(iii) or otherwise consented to by the requisite group of Lenders so long
as all mandatory prepayments in connection therewith shall have been made
pursuant to SECTION 2.5(B)(i).
8.4 PRESERVATION OF RIGHTS. No delay or omission of the Lenders, the
Issuing Lenders or the Agent to exercise any right under the Loan Documents
shall impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Loan or the issuance of a Letter of
Credit notwithstanding the existence of a Default or the inability of the
Borrower to satisfy the conditions precedent to such Loan or issuance of such
Letter of Credit shall not constitute any waiver or acquiescence. Any single or
partial exercise of any such right shall not preclude other or further exercise
thereof or the exercise of any other right, and no waiver, amendment or other
variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Lenders required
pursuant to SECTION 8.3, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Agent, the
Lenders and the Issuing Lenders until the Obligations have been paid in full.
ARTICLE IX: GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the Borrower contained in this Agreement shall survive delivery of the Notes and
the making of the Loans herein contemplated.
9.2 GOVERNMENTAL REGULATION. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower and neither the Agent nor any Issuing Lender shall be obligated to
issue any Letter of Credit for the account of
-110-
<PAGE>
the Borrower or any other Person in violation of any limitation or prohibition
provided by any applicable statute or regulation.
9.3 PERFORMANCE OF OBLIGATIONS. The Borrower agrees that the Agent may,
but shall have no obligation, after the occurrence and during the continuance of
a Default to: pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against any Collateral and make
any other payment or perform any act required of Borrower or any member of the
Borrower Corporate Group under any Loan Document or take any other action which
the Agent in its discretion deems necessary or desirable to protect or preserve
the Collateral, including, without limitation, any action to (y) effect any
repairs or obtain any insurance called for by the terms of any of the Loan
Documents and to pay all or any part of the premiums therefor and the costs
thereof and (z) pay any rents payable by any member of the Borrower Corporate
Group which are more than 30 days past due, or as to which the landlord has
given notice of termination, under any lease. The Agent shall use its best
efforts to give the Borrower notice of any action taken under this SECTION 9.3
prior to the taking of such action or promptly thereafter provided the failure
to give such notice shall not affect the Borrower's obligations in respect
thereof. The Borrower agrees to pay the Agent, upon demand, the principal
amount of all funds advanced by the Agent under this SECTION 9.3, together with
interest thereon at the rate from time to time applicable to Floating Rate Loans
from the date of such advance until the outstanding principal balance thereof is
paid in full. If the Borrower fails to make payment in respect of any such
advance under this SECTION 9.3 within one (1) Business Day after the date the
Borrower receives written demand therefor from the Agent, the Agent shall
promptly notify each Lender and each Lender agrees that it shall thereupon make
available to the Agent, in Dollars in immediately available funds, the amount
equal to such Lender's Pro Rata Share of such advance. If such funds are not
made available to the Agent by such Lender within one (1) Business Day after the
Agent's demand therefor, the Agent will be entitled to recover any such amount
from such Lender together with interest thereon at the Effective Federal Funds
Rate for each day during the period commencing on the date of such demand and
ending on the date such amount is received. The failure of any Lender to make
available to the Agent its Pro Rata Share of any such unreimbursed advance under
this SECTION 9.3 shall neither relieve any other Lender of its obligation
hereunder to make available to the Agent such other Lender's Pro Rata Share of
such advance on the date such payment is to be made nor increase the obligation
of any other Lender to make such payment to the Agent. All outstanding
principal of, and interest on, advances made under this SECTION 9.3 shall
constitute Obligations secured by the Collateral until paid in full by the
Borrower.
9.4 HEADINGS. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.
9.5 ENTIRE AGREEMENT. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Agent and the Lenders and supersede all
prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof.
9.6 SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other. The failure of any Lender to
perform any of its obligations hereunder shall not relieve any
-111-
<PAGE>
other Lender from any of its obligations hereunder. This Agreement shall not be
construed so as to confer any right or benefit upon any Person other than the
parties to this Agreement and their respective successors and assigns.
9.7 EXPENSES; INDEMNIFICATION.
(A) EXPENSES. The Borrower shall reimburse the Agent and/or First Chicago
Capital Markets, Inc. for any reasonable costs, internal charges and out-of-
pocket expenses (including attorneys' and paralegals' fees and time charges of
attorneys and paralegals for the Agent, which attorneys and paralegals may be
employees of the Agent and/or First Chicago Capital Markets, Inc., provided such
reimbursements shall be subject to the terms of any written agreements, if any,
entered into with such attorneys regarding their fees) paid or incurred by the
Agent and/or First Chicago Capital Markets, Inc. in connection with the
preparation, negotiation, execution, delivery, syndication, review, amendment,
modification, and administration of the Loan Documents and any proposal letters
or commitment letters issued in connection therewith, including without
limitation, the commitment letter and accompanying letter agreement dated
January 12, 1996 executed in contemplation of entering into this Agreement. The
Borrower also agrees to reimburse the Agent, the Lenders and the Issuing Lenders
for any reasonable costs, internal charges and out-of-pocket expenses (including
attorneys' and paralegals' fees and time charges of attorneys and paralegals for
the Agent and the Lenders, which attorneys and paralegals may be employees of
the Agent, the Lenders or the Issuing Lenders) paid or incurred by the Agent,
any Lender or any Issuing Lender in connection with any restructuring or
"workout" relating to this Agreement and the Obligations, the collection of the
Obligations and enforcement of the Loan Documents. In addition to expenses set
forth above, the Borrower agrees to reimburse the Agent, promptly after the
Agent's request therefor, for each audit, collateral analysis or other business
analysis performed by or for the benefit of the Lenders in connection with this
Agreement or the other Loan Documents in an amount equal to the Agent's then
customary charges for each person employed to perform such audit or analysis,
plus all costs and expenses (including without limitation, travel expenses)
incurred by the Agent in the performance of such audit or analysis; PROVIDED,
HOWEVER the Borrower shall be obligated to reimburse the Agent for not more than
two (2) such audits in any twelve-month period if such audits were conducted
other than in connection with a proposed Acquisition and at a time when no
Default has occurred and is continuing; PROVIDED, FURTHER, it is expressly
understood that the Borrower shall reimburse the Agent for all such audits
(1) conducted in connection with a proposed Acquisition or (2) conducted at a
time when a Default has occurred and is continuing. The Agent shall provide
Borrower with a detailed statement of all reimbursements requested under this
Section.
(B) INDEMNITY. The Borrower further agrees, jointly and severally, to
defend, protect, indemnify, and hold harmless the Agent, First Chicago Capital
Markets, Inc., each and all of the Lenders, each and all of the Issuing Lenders
and each of their respective Affiliates, and each of the Agent's, First Chicago
Capital Markets, Inc., Lender's, Issuing Lender's or Affiliate's respective
officers, directors, employees, attorneys and agents (including, without
limitation, those retained in connection with the satisfaction or attempted
satisfaction of any of the conditions set forth in ARTICLE IV) (collectively,
the "INDEMNITEES") from and against any and all liabilities, obligations, losses
damages, penalties, actions, judgments, suits, claims, costs, expenses of any
kind or nature whatsoever (including, without limitation, the fees and
disbursements of counsel
-112-
<PAGE>
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such Indemnitees in any
manner relating to or arising out of:
(i) this Agreement, the other Loan Documents (including without
limitation, the commitment letter and accompanying letter agreement dated
January 12, 1996 executed in contemplation of entering into this Agreement)
or any of the Transaction Documents, or any act, event or transaction
related or attendant thereto or to the Specified Acquisitions or any other
Permitted Acquisition, the making of the Loans, and the issuance of and
participation in Letters of Credit hereunder, the management of such Loans
or Letters of Credit, the use or intended use of the proceeds of the Loans
or Letters of Credit hereunder, or any of the other transactions
contemplated by the Transaction Documents; or
(ii) any liabilities, obligations, responsibilities, losses, damages,
personal injury, death, punitive damages, economic damages, consequential
damages, special damages, incidental damages, treble damages, intentional,
willful or wanton injury, damage or threat to the environment, natural
resources or public health or welfare, costs and expenses (including,
without limitation, attorney, expert and consulting fees and costs of
investigation, feasibility or remedial action studies), fines, penalties
and monetary sanctions, interest, direct or indirect, known or unknown,
absolute or contingent, past, present or future relating to violation of
any Environmental, Health or Safety Requirements of Law (including, without
limitation, those applicable to the disposal of medical waste) arising from
or in connection with the past, present or future operations of AMC, the
Borrower, any of their respective Subsidiaries or any of their respective
predecessors in interest, or, the past, present or future environmental,
health or safety condition of any respective property of AMC, the Borrower
or any of their respective Subsidiaries, the presence of
asbestos-containing materials at any respective property of AMC, the
Borrower or their respective Subsidiaries or the release or threatened
release of any contaminant (including, without limitation, any medical
waste) into the environment (collectively, the "INDEMNIFIED MATTERS");
PROVIDED, however, the indemnity set forth in this CLAUSE (ii) shall not
apply to any losses or costs incurred by any Indemnitee to the extent such
losses or costs arise solely from the actions of the Agent, any Lender or
any Issuing Lender; PROVIDED, further, however, the indemnity set forth in
this clause (ii) shall otherwise remain in full force and effect,
including, without limitation, with respect to hazardous substances and
hazardous wastes which are discovered or released at any premises after the
Agent acquires possession to the premises, but which were not actually
introduced at the premises by the Agent, with respect to the continuing
migration or release of hazardous substances or hazardous wastes previously
introduced at or near the premises and with respect to all substances which
may be hazardous wastes or hazardous substances and which are situated at
the premises prior to the Agent taking possession but are removed by the
Agent subsequent to such date;
PROVIDED, HOWEVER, Borrower shall not have any obligation to an Indemnitee
hereunder with respect to Indemnified Matters to the extent caused by or
resulting from (y) a dispute among the Lenders or a dispute between any Lender
and the Agent, or (z) the willful misconduct or Gross Negligence of such
Indemnitee or breach of contract by such Indemnitee with respect to the Loan
-113-
<PAGE>
Documents, in each case, as determined by the final non-appealed judgment of a
court of competent jurisdiction. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified Matters
incurred by the Indemnitees. In addition, no settlement shall be entered into
by the Borrower or any member of the Borrower Corporate Group with respect to
any claim, litigation, arbitration or other proceeding relating to or arising
out of the transaction evidenced by this Agreement, the other Loan Documents or
in connection with the Specified Acquisitions or the other Permitted
Acquisitions (whether or not the Agent, any Lender or any Issuing Lender is a
party thereto) unless such settlement releases all Indemnitees from any and all
liability with respect thereto.
(C) WAIVER OF CERTAIN CLAIMS. The Borrower agrees to assert no claim
against any of the Indemnitees on any theory of liability for special or
punitive damages. In any action in which a jury is participating to resolve the
dispute, the Borrower agrees to assert no claim against any of the Indemnitees
on any theory of liability for consequential or indirect damages. In any court
trial, except as expressly provided below, the Borrower agrees to assert no
claim against any of the Indemnitees on any theory of liability for
consequential or incidental damages; PROVIDED, HOWEVER, in the event that the
Borrower, in any such matter is able to establish, as determined by the court in
its written opinion or findings, that any Indemnitee acted with Gross
Negligence, in bad faith or engaged in willful misconduct, then the agreement of
the Borrower not to assert any claim on any theory of liability for
consequential or incidental damages shall be of no further force and effect with
result to damages incurred as a result of such Gross Negligence, bad faith or
willful misconduct.
(D) SURVIVAL OF AGREEMENTS. The obligations and agreements of the
Borrower under this SECTION 9.7 shall survive the termination of this Agreement.
9.8 NUMBERS OF DOCUMENTS. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Agent with sufficient counterparts
so that the Agent may furnish one to each of the Lenders.
9.9 ACCOUNTING; CHANGES IN AGREEMENT ACCOUNTING PRINCIPLES. Except as
provided to the contrary herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with Agreement Accounting Principles. If any changes in generally
accepted accounting principles are hereafter required or permitted and are
adopted by the Borrower or any member of the Borrower Corporate Group with the
agreement of its independent certified public accountants and such changes
result in a change in the method of calculation of any of the financial
covenants, restrictions or standards herein or in the related definitions or
terms used therein ("ACCOUNTING CHANGES"), the parties hereto agree, at the
Borrower's request, to enter into negotiations, in good faith, in order to amend
such provisions in a credit neutral manner so as to reflect equitably such
changes with the desired result that the criteria for evaluating the Borrower's
and the Borrower Corporate Group's financial condition shall be the same after
such changes as if such changes had not been made; PROVIDED, HOWEVER, until such
provisions are amended in a manner reasonably satisfactory to the Agent and the
Required Lenders, no Accounting Change shall be given effect in such
calculations and all financial statements and reports required to be delivered
hereunder shall be prepared in
-114-
<PAGE>
accordance with Agreement Accounting Principles without taking into account such
Accounting Changes. In the event such amendment is entered into, all references
in this Agreement to Agreement Accounting Principles shall mean generally
accepted accounting principles as of the date of such amendment.
9.10 SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
9.11 NONLIABILITY OF LENDERS. The relationship between the Borrower, on
the one hand, and the Lenders, the Issuing Lenders and the Agent, on the other,
shall be solely that of borrower and lender. Neither the Agent nor any Lender
nor any Issuing Lender shall have any fiduciary responsibilities to the
Borrower. Neither the Agent nor any Lender nor any Issuing Lender undertakes
any responsibility to the Borrower to review or inform the Borrower of any
matter in connection with any phase of the any of Borrower's or any other member
of the Borrower Corporate Group's business or operations.
9.12 GOVERNING LAW. THE AGENT HEREBY ACCEPTS THIS AGREEMENT, ON BEHALF OF
ITSELF, THE LENDERS AND THE ISSUING LENDERS, AT CHICAGO, ILLINOIS BY
ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE BETWEEN BORROWER AND THE
AGENT, ANY LENDER, ANY ISSUING LENDER OR ANY OTHER HOLDER OF SECURED OBLIGATIONS
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE,
SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, EXCEPT
TO THE EXTENT THE LAWS OF ANOTHER JURISDICTION GOVERN THE PERFECTION (AND EFFECT
OF THE PERFECTION OR NONPERFECTION OF THE AGENT'S LIENS ON THE COLLATERAL).
9.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH OF
THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS WHETHER
ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY
BY STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, BUT THE PARTIES HERETO
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF CHICAGO, ILLINOIS. EACH OF THE PARTIES HERETO WAIVES IN ALL
DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
-115-
<PAGE>
(B) OTHER JURISDICTIONS. THE BORROWER AGREES THAT THE AGENT, ANY LENDER,
ANY ISSUING LENDER OR ANY HOLDER OF SECURED OBLIGATIONS SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE BORROWER OR ANY OF ITS PROPERTY IN A COURT IN ANY LOCATION
TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION OVER THE BORROWER OR
(2) REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. THE
BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY
PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF SUCH PERSON. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING DESCRIBED
IN THIS SUBSECTION.
(C) SERVICE OF PROCESS. THE BORROWER WAIVES PERSONAL SERVICE OF ANY
PROCESS UPON IT. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
IN ANY JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. THE BORROWER WAIVES THE POSTING OF ANY BOND OTHERWISE
REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS OR
PROCEEDING TO REALIZE ON THE COLLATERAL (INCLUDING, WITHOUT LIMITATION, THE REAL
PROPERTY, COLLATERAL, IF ANY) OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO
ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR TO
ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR
PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
-116-
<PAGE>
(F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER PARTY
HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE PROVISIONS OF
THIS SECTION 9.13, WITH ITS COUNSEL.
9.14 NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
9.15 SUBORDINATION OF INTERCOMPANY INDEBTEDNESS. The Borrower agrees that
any and all claims of the Borrower against any Specified Subsidiary, any
endorser or any other guarantor of all or any part of the Secured Obligations,
or against any of their respective properties, including without limitation
pursuant to any intercompany note or intercompany security agreement executed
pursuant to SECTION 6.3(A)(ii)(8), shall be subordinate and subject in right of
payment to the prior payment, in full and in cash, of all Secured Obligations.
Notwithstanding any right of the Borrower to ask, demand, sue for, take or
receive any payment from any Specified Subsidiary, all rights, liens and
security interests of the Borrower, whether now or hereafter arising and
howsoever existing, in any assets of any Specified Subsidiary (whether
constituting part of Collateral given to any Holder of Secured Obligations or
the Agent to secure payment of all or any part of the Secured Obligations or
otherwise) shall be and are subordinated to the rights of the Holders of Secured
Obligations and the Agent in those assets. The Borrower shall have no right to
possession of any such asset or to foreclose upon any such asset, whether by
judicial action or otherwise, unless and until all of the Secured Obligations
shall have been fully paid and satisfied and all financing arrangements between
the Borrower and each Specified Subsidiary and the Holders of Secured
Obligations have been terminated. If all or any part of the assets of any
Specified Subsidiary, or the proceeds thereof, are subject to any distribution,
division or application to the creditors of such Specified Subsidiary, whether
partial or complete, voluntary or involuntary, and whether by reason of
liquidation, bankruptcy, arrangement, receivership, assignment for the benefit
of creditors or any other action or proceeding, or if the business of any
Specified Subsidiary is dissolved or if substantially all of the assets of any
Specified Subsidiary are sold, then, and in any such event, any payment or
distribution of any kind or character, either in cash, securities or other
property, which shall be payable or deliverable upon or with respect to any
indebtedness of any such Specified Subsidiary to the Borrower ("INTERCOMPANY
INDEBTEDNESS") shall be paid or delivered directly to the Agent for application
on any of the Secured Obligations, due or to become due, until such Secured
Obligations shall have first been fully paid and satisfied. The Borrower
irrevocably authorizes and empowers the Agent to demand, sue for, collect and
receive every such payment or distribution and give acquittance therefor and to
make and present for and on behalf of the Borrower such proofs of claim and take
such other action, in the Agent's own name or in the name of the Borrower or
otherwise, as the Agent may deem necessary or advisable for the enforcement of
this SECTION 9.15. The Agent may vote such proofs of claim in any such
proceeding, receive and collect any and all dividends or other payments or
disbursements made thereon in whatever form the same may be paid or issued and
apply the same on account of any of the Secured Obligations. Should any
payment, distribution, security or instrument or proceeds thereof be received by
the Borrower upon or with respect to the Intercompany Indebtedness prior to the
satisfaction of all of the Secured Obligations (other than contingent indemnity
obligations)
-117-
<PAGE>
and the termination of all financing arrangements between the Borrower and each
Specified Subsidiary and the Holders of Secured Obligations, the Borrower shall
receive and hold the same in trust, as trustee, for the benefit of the Holders
of Secured Obligations and shall forthwith deliver the same to the Agent, for
the benefit of the Holders of Secured Obligations, in precisely the form
received (except for the endorsement or assignment of the Borrower where
necessary), for application to any of the Secured Obligations, due or not due,
and, until so delivered, the same shall be held in trust by the Borrower as the
property of the Holders of Secured Obligations. If the Borrower fails to make
any such endorsement or assignment to the Agent, the Agent or any of its
officers or employees are irrevocably authorized to make the same. The Borrower
agrees that until the Secured Obligations (other than the contingent indemnity
obligations) have been paid in full (in cash) and satisfied and all financing
arrangements between the Borrower, the Specified Subsidiaries and the Holders of
Secured Obligations have been terminated, the Borrower will not assign or
transfer to any Person any claim the Borrower has or may have against any
Applicable Subsidiary.
ARTICLE X: THE AGENT AS THE LENDERS' CONTRACTUAL
REPRESENTATIVE
10.1 APPOINTMENT; NATURE OF RELATIONSHIP. The First National Bank of
Chicago is hereby appointed by the Lenders (each reference in this Article X to
a Lender being in its capacity either as a Lender or an Issuing Lender, or both)
as the Agent hereunder and under each other Loan Document, and each of the
Lenders irrevocably authorizes the Agent to act as the contractual
representative of such Lender with the rights and duties expressly set forth
herein and in the other Loan Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained in this ARTICLE
X. Notwithstanding the use of the defined term "Agent," it is expressly
understood and agreed that the Agent shall have not have any fiduciary
responsibilities to any Lender by reason of this Agreement and that the Agent is
merely acting as the representative of the Lenders with only those duties as are
expressly set forth in this Agreement and the other Loan Documents. In its
capacity as the Lenders' contractual representative, the Agent (i) does not
hereby assume any fiduciary duties to any of the Lenders, (ii) is a
"representative" of the Lenders within the meaning of Section 9-105 of the
Uniform Commercial Code and (iii) is acting as an independent contractor, the
rights and duties of which are limited to those expressly set forth in this
Agreement and the other Loan Documents. Each of the Lenders hereby agrees to
assert no claim against the Agent on any agency theory or any other theory of
liability for breach of fiduciary duty, all of which claims each Lender hereby
waives.
10.2 POWERS. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto;
PROVIDED, HOWEVER, the Agent shall not be entitled to commence any judicial or
non-judicial foreclosure with respect to any of the Collateral without the
consent of the Required Lenders and, subject to the provisions of SECTION 10.5,
if directions are received by the Agent from the Required Lenders in connection
therewith, the Agent will proceed with such foreclosure in accordance with the
directions of the Required Lenders. The Agent shall have no implied duties to
of fiduciary duties to the Lenders, or any obligation to the Lenders to take any
action hereunder or under any of the other Loan Documents
-118-
<PAGE>
except any action specifically provided by the Loan Documents to be required to
be taken by the Agent.
10.3 GENERAL IMMUNITY. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is found in a final judgment by a court of
competent jurisdiction to have arisen solely from (i) the Gross Negligence or
willful misconduct of such Person or (ii) breach of contract by such Person with
respect to the Loan Documents.
10.4 NO RESPONSIBILITY FOR LOANS, CREDITWORTHINESS, COLLATERAL, RECITALS,
ETC. Neither the Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into, or verify
(i) any statement, warranty or representation made in connection with any Loan
Document or any borrowing hereunder; (ii) the performance or observance of any
of the covenants or agreements of any obligor under any Loan Document; (iii) the
satisfaction of any condition specified in Article IV, except receipt of items
required to be delivered solely to the Agent; (iv) the existence or possible
existence of any Default or (v) the validity, effectiveness or genuineness of
any Loan Document or any other instrument or writing furnished in connection
therewith. The Agent shall not be responsible to any Lender for any recitals,
statements, representations or warranties herein, for the perfection or priority
of any of the Liens on any of the Collateral, or for the execution,
effectiveness, genuineness, validity, legality, enforceability, collectability,
or sufficiency of this Agreement or any of the other Loan Documents or the
transactions contemplated thereby, or for the financial condition of any
guarantor of any or all of the Obligations, AMC, the Borrower or any of their
respective Subsidiaries.
10.5 ACTION ON INSTRUCTIONS OF LENDERS. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders and on all holders of
Notes. The Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.
10.6 EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may execute any of its
duties as the Agent hereunder and under any other Loan Document by or through
employees, agents, and attorney-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.
10.7 RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or
-119-
<PAGE>
persons, and, in respect to legal matters, upon the opinion of counsel selected
by the Agent, which counsel may be employees of the Agent.
10.8 THE AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Revolving Loan Commitment (i) for any amounts not reimbursed by the Borrower for
which the Agent is entitled to reimbursement by the Borrower under the Loan
Documents, (ii) for any other expenses incurred by the Agent on behalf of the
Lenders, in connection with the preparation, execution, delivery, administration
and enforcement of the Loan Documents and (iii) for any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating to or arising
out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby, or the enforcement of any of
the terms thereof or of any such other documents, provided that no Lender shall
be liable for any of the foregoing to the extent any of the foregoing is found
in a final non-appealable judgment by a court of competent jurisdiction to have
arisen solely from the Gross Negligence or willful misconduct of the Agent.
10.9 RIGHTS AS A LENDER. With respect to its Revolving Loan Commitment,
its Acquisition Loan Commitment, Loans made by it, the Notes issued to it and
Letters of Credit issued by it as an Issuing Lender, the Agent shall have the
same rights and powers hereunder and under any other Loan Document as any Lender
and may exercise the same as through it were not the Agent, and the term
"Lender" or "Lenders" or "Issuing Lender" or "Issuing Lenders", as applicable,
shall, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Subsidiaries in which such Person is not
prohibited hereby from engaging with any other Person.
10.10 LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements prepared by AMC and the Borrower and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon the Agent or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement and the other Loan
Documents.
10.11 SUCCESSOR AGENT. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, and the Agent may be removed at
any time with or without cause by written notice received by the Agent from the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint, on behalf of the Borrower and the Lenders, a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders and shall have accepted such appointment within thirty days
after the retiring Agent's giving notice of resignation, then the retiring Agent
may appoint, on behalf of the Borrower and the Lenders, a successor Agent.
Notwithstanding anything herein to the contrary, so long as no Default has
occurred and is continuing, each such successor Agent
-120-
<PAGE>
shall be subject to approval by the Borrower, which approval shall not be
unreasonably withheld. Such successor Agent shall be a commercial bank having
capital and retained earnings of at least $50,000,000. Upon the acceptance of
any appointment as the Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder and under the other Loan
Documents. After any retiring Agent's resignation hereunder as Agent, the
provisions of this ARTICLE X shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as the
Agent hereunder and under the other Loan Documents.
10.12 COLLATERAL DOCUMENTS. Each Lender hereby authorizes the Agent to
enter into each of the Collateral Documents to which it is a party and to take
all action contemplated by such documents. Each Lender agrees that no Lender
shall have the right individually to seek to realize upon the security granted
by any Collateral Document, it being understood and agreed that such rights and
remedies may be exercised solely by the Agent for the benefit of the Holders of
Secured Obligations upon the terms of the Collateral Documents.
10.13 DELIVERY OF DOCUMENTS. The Agent agrees to deliver to each Lender,
promptly upon the Agent's receipt from the Borrower or any Specified Subsidiary,
copies of all notices, certificates and reports, including without limitation
reports delivered pursuant to SECTION 6.1, delivered pursuant to the
requirements contained in this Agreement or the other Loan Documents.
ARTICLE XI: SETOFF; RATABLE PAYMENTS
11.1 SETOFF. In addition to, and without limitation of, any rights of the
Lenders or Issuing Lenders under applicable law, if any Default occurs and is
continuing, any indebtedness from any Lender or Issuing Lender to the Borrower
(including all account balances, whether provisional or final and whether or not
collected or available) may be offset and applied toward the payment of the
Obligations owing to such Lender, such Issuing Lender and the other Obligations,
whether or not the Obligations, or any part hereof, shall then be due.
11.2 RATABLE PAYMENTS. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Loans (other than payments received pursuant to
SECTIONS 3.1, 3.2 or 3.4) in a greater proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligation or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in proportion to the obligations owing to them. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.
11.3 APPLICATION OF PAYMENTS. Except as set forth in SECTION 2.5, and
subject to the provisions of SECTION 8.2, the Agent shall, unless otherwise
specified at the direction of the Required Lenders which direction shall be
consistent with the last sentence of this SECTION 11.3,
-121-
<PAGE>
apply all payments and prepayments in respect of any Obligations and all
proceeds of Collateral in the following order:
(A) first, to pay interest on and then principal of any portion of
the Loans which the Agent may have advanced on behalf of any Lender for
which the Agent has not then been reimbursed by such Lender, or the
Borrower;
(B) second, to pay interest on and then principal of any advance made
under SECTION 9.3 for which the Agent has not then been paid by the
Borrower or reimbursed by the Lenders;
(C) third, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Agent;
(D) fourth, to the ratable payment of Obligations in respect of any
fees, expenses, reimbursements or indemnities then due to the Lenders and
Issuing Lenders;
(E) fifth, to the ratable payment of interest due in respect of Loans
and L/C Obligations;
(F) sixth, to the ratable payment or prepayment of principal
outstanding on Loans and Reimbursement Obligations in such order as the
Agent may determine in its sole discretion;
(G) seventh, to provide required cash collateral if any pursuant to
SECTION 2.24; and
(H) eighth, to the ratable payment of all other Secured Obligations,
including, without limitation, the Rate Hedging Obligations which are
Secured Obligations.
Unless otherwise designated (which designation shall only be applicable prior to
the occurrence of a Default) by the Borrower, all principal payments in respect
of Loans shall be applied FIRST, to the outstanding Revolving Loans and, SECOND,
to the outstanding Term Loans, in each case, FIRST, to repay outstanding
Floating Rate Loans, and THEN to repay outstanding Eurodollar Loans with those
Eurodollar Loans which have earlier expiring Eurodollar Interest Periods being
repaid prior to those which have later expiring Eurodollar Interest Periods.
The order of priority set forth in this SECTION 11.3 and the related provisions
of this Agreement are set forth solely to determine the rights and priorities of
the Agent, the Lenders, the Issuing Lenders and other Holders of Secured
Obligations as among themselves. The order of priority set forth in CLAUSES (D)
through (H) of this SECTION 11.3 may at any time and from time to time be
changed by the Required Lenders without necessity of notice to or consent of or
approval by the Borrower or any other Person. The order of priority set forth
in CLAUSES (A) through (C) of this SECTION 11.3 may be changed only with the
prior written consent of the Agent.
-122-
<PAGE>
11.4 RELATIONS AMONG LENDERS.
(a) Except with respect to the exercise of set-off rights of any Lender in
accordance with SECTION 11.1, the proceeds of which are applied in accordance
with this Agreement, and except as set forth in the following paragraph, each
Lender agrees that it will not take any action, nor institute any actions or
proceedings, against Borrower or any other obligor hereunder or with respect to
any Collateral or Loan Document, without the prior written consent of the
Required Lenders or, as may be provided in this Agreement or the other Loan
Documents, at the direction of the Agent.
(b) The Lenders are not partners or co-venturers, and no Lender shall be
liable for the acts or omissions of, or (except as otherwise set forth herein in
case of the Agent) authorized to act for, any other Lender. Notwithstanding the
foregoing, and subject to SECTION 11.2, any Lender shall have the right to
enforce on an unsecured basis the payment of the principal of and interest on
any Loan made by it after the date such principal or interest has become due and
payable pursuant to the terms of this Agreement.
ARTICLE XII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1 SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower, the
Agent and the Lenders and their respective successors and assigns, except that
(i) the Borrower shall not have the right to assign its rights or obligations
under the Loan Documents and (ii) any assignment by any Lender must be made in
compliance with SECTION 12.3 hereof. Notwithstanding clause (ii) of this
Section, any Lender may at any time, without the consent of Borrower or the
Agent, assign all or any portion of its rights under this Agreement and its
Notes to a Federal Reserve Bank; PROVIDED, HOWEVER, that no such assignment
shall release the transferor Lender from its obligations hereunder. The Agent
may treat the payee of any Note as the owner thereof for all purposes hereof
unless and until such payee complies with SECTION 12.3 hereof in the case of an
assignment thereof or, in the case of any other transfer, a written notice of
the transfer is filed with the Agent. Any assignee or transferee of a Note
agrees by acceptance thereof to be bound by all the terms and provisions of the
Loan Documents. Any request, authority or consent of any Person, who at the
time of making such request or giving such authority or consent is the holder of
any Note, shall be conclusive and binding on any subsequent holder, transferee
or assignee of such Note or of any Note or Notes issued in exchange therefor.
12.2 PARTICIPATIONS.
(A) PERMITTED PARTICIPANTS; EFFECT. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time sell
to one or more banks or other entities ("PARTICIPANTS") participating interests
in any Loan owing to such Lender, any Note held by such Lender, any Revolving
Loan Commitment of such Lender, any Acquisition Loan Commitment of such Lender,
any L/C Interest of such Lender or any other interest of such Lender under the
Loan Documents on a pro-rata or non pro-rata basis; provided that the amount of
such participation shall not be for less than $5,000,000. In the event of any
such sale by a
-123-
<PAGE>
Lender of participating interests to a Participant, such Lender's obligations
under the Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
such Lender shall remain the holder of any such Note for all purposes under the
Loan Documents, all amounts payable by the Borrower under this Agreement shall
be determined as if such Lender had not sold such participating interests, and
the Borrower and the Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under the Loan
Documents except that, for purposes of ARTICLE III hereof, the Participants
shall be entitled to the same rights as if they were Lenders.
(B) VOTING RIGHTS. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Loan Documents other than any amendment, modification or
waiver with respect to any Loan or Commitment in which such Participant has an
interest which:
(i) Postpones or extends the Termination Date, the Term Loan
Termination Date, the Conversion Date or any other date fixed for any
payment of principal of, or interest on, the Loans, the Reimbursement
Obligations or any fees or other amounts payable in which such Participant
has an interest (except with respect to any modifications of the provisions
relating to prepayments of Loans and other Obligations);
(ii) Reduces the principal amount of any Loans or L/C Obligations, or
reduces the rate or extends the time of payment of interest or fees
thereon;
(iii) Permits the Borrower to assign its rights under this Agreement;
(iv) Releases all or substantially all of the Collateral; or
(v) Release any Subsidiary Guarantee.
(C) BENEFIT OF SETOFF. The Borrower agrees that each Participant shall be
deemed to have the right of setoff provided in SECTION 11.1 hereof in respect to
its participating interest in amounts owing under the Loan Documents to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under the Loan Documents, provided that each Lender shall retain the
right of setoff provided in SECTION 11.1 hereof with respect to the amount of
participating interests sold to each Participant except to the extent such
Participant exercises its right of set off. The Lenders agree to share with
each Participant, and each Participant, by exercising the right of setoff
provided in SECTION 11.1 hereof, agrees to share with each Lender, any amount
received pursuant to the exercise of its right of setoff, such amounts to be
shared in accordance with SECTION 11.2 as if each Participant were a Lender.
12.3 ASSIGNMENTS.
(A) PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to one or
more banks or other entities ("PURCHASERS") all or a portion of its rights and
obligations under this Agreement (including, without limitation, its
Commitments, all Loans owing to it, all of its interest as an Issuing Lender
-124-
<PAGE>
with respect to Letters of Credit, all of its participation interests in
existing Letters of Credit, and its obligation to participate in additional
Letters of Credit hereunder) in accordance with the provisions of this SECTION
12.3. Each assignment shall be of a constant, and not a varying, ratable
percentage of all of the assigning Lender's rights and obligations under this
Agreement. Such assignment shall be substantially in the form of EXHIBIT F
hereto and shall not be permitted hereunder unless such assignment is either for
all of such Lender's rights and obligations under the Loan Documents or involves
loans and commitments in an aggregate amount of at least $5,000,000. The
consent of the Agent shall be required prior to an assignment becoming effective
with respect to a Purchaser which is not a Lender or an Affiliate thereof. Such
consent shall be set forth on the Notice of Assignment and shall not be
unreasonably withheld. In addition, the consent of the Borrower shall be
required (which consent shall not be unreasonably withheld) prior to an
assignment becoming effective if such assignment is at a time when no Default
has occurred and is continuing which consent, if required, shall be set forth on
the Notice of Assignment; PROVIDED, no consent of the Borrower shall be required
in connection with any assignment (i) made during the three (3) month period
following the Closing Date; or (ii) to another Lender or to an Affiliate of any
Lender.
(B) EFFECT; EFFECTIVE DATE. Upon (i) delivery to the Agent of a notice of
assignment, substantially in the form attached as APPENDIX I to EXHIBIT F hereto
(a "NOTICE OF ASSIGNMENT"), together with any consents required by SECTION
12.3(A) hereof, and (ii) payment of a $3,000 fee to the Agent for processing
such assignment, such assignment shall become effective on the effective date
specified in such Notice of Assignment. On and after the effective date of such
assignment, such Purchaser, if not already a Lender, shall for all purposes be a
Lender party to this Agreement and any other Loan Documents executed by the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and no
further consent or action by the Borrower, the Lenders or the Agent shall be
required to release the transferor Lender with respect to the percentage of the
Aggregate Revolving Loan Commitment, Aggregate Acquisition Loan Commitment,
Loans and Letter of Credit participations assigned to such Purchaser. Upon the
consummation of any assignment to a Purchaser pursuant to this SECTION 12.3(B),
the transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that replacement Notes are issued to such transferor Lender and
new Notes or, as appropriate, replacement Notes, are issued to such Purchaser,
in each case in principal amounts reflecting their Revolving Loan Commitment,
Acquisition Loan Commitment and their Term Loans, as adjusted pursuant to such
assignment.
(C) THE REGISTER. The Agent shall maintain at its address referred to in
SECTION 13.1 a copy of each assignment delivered to and accepted by it pursuant
to this SECTION 12.3 and a register (the "REGISTER") for the recordation of the
names and addresses of the Lenders and the Revolving Loan Commitment, and
Acquisition Loan Commitment of and principal amount of the Loans owing to, each
Lender from time to time and whether such Lender is an original Lender or the
assignee of another Lender pursuant to an assignment under this SECTION 12.3.
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower and each of the members of the Borrower
Corporate Group, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder 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.
-125-
<PAGE>
(D) MASTER ASSIGNMENT. Under the Agreement on the Closing Date, the
current Revolving Loan Commitments, Acquisition Loan Commitments and Term Loans
of the Lenders equal the amounts set forth opposite the Lenders' names on
EXHIBIT B. First Chicago and LaSalle National Bank (collectively, the
"ORIGINAL LENDERS") have indicated their desire to sell and assign a portion of
their interests in their Revolving Loan Commitments, outstanding Revolving
Loans, Acquisition Loan Commitments, outstanding Acquisition Loans, Term Loans
and other Obligations effective on the Commitment Increase Date and to increase
their Commitments as reflected on EXHIBIT B. Each of the additional Lenders
(the "ASSIGNEES") has indicated a willingness to purchase and assume an
undivided percentage interest in the Original Lenders' Revolving Loan
Commitments, outstanding Revolving Loans, Acquisition Loan Commitments,
outstanding Acquisition Loans, Term Loans and other Obligations in an amount and
percentage necessary so that, upon such purchase, each of the Assignees'
Revolving Loan Commitments (and the corresponding rights and obligations with
respect to Letters of Credit), Pro Rata Shares and Term Loans shall equal the
amounts set forth on EXHIBIT B under the headings relating to after Commitment
Increase Date and each such Assignees' and Original Lenders outstanding
Obligations shall be allocated ratably, according to its new Pro Rata Share. To
effect such assignment and assumption, the parties hereto agree as follows:
(a) ASSIGNMENT AND ASSUMPTION. The Original Lenders hereby sell and
assign to each of the Assignees, and each of the Assignees hereby purchases
and assumes from the Original Lenders effective as of the Commitment
Increase Date an interest in and to the Original Lenders' rights and
obligations under the Agreement such that after giving effect to such
assignment each of the Assignees shall have purchased and assumed pursuant
to this Agreement the percentage interest specified in EXHIBIT B hereto of
those rights and obligations of the Original Lenders under the Agreement
relating to the facilities listed in EXHIBIT B and under the other Loan
Documents. The Aggregate Revolving Loan Commitment purchased by each of
the Assignees hereunder together with its outstanding Revolving Loan
Commitment is set forth in EXHIBIT B hereto and includes the corresponding
obligation to purchase participations in Letters of Credit. The Aggregate
Acquisition Loan Commitment purchased by each of the Assignees hereunder
together with its outstanding Acquisition Loan Commitment is set forth on
EXHIBIT B hereto. The aggregate Term Loans purchased by each of the
Assignees hereunder together with its outstanding Term Loans is set forth
in EXHIBIT B.
(b) COMMITMENT INCREASE DATE. The effective date of the assignments,
the Commitment Increase Date, under this SECTION 12.3(D) shall be the
effective date of the Supplemental Commitment. In no event will the
Commitment Increase Date occur if the payments required to be made by each
of the Assignees to the Agent for the account of the Original Lenders under
paragraph (c) of this SECTION 12.3(D) are not made on the proposed
Commitment Increase Date. As of the Commitment Increase Date, each of the
Assignees shall have the rights and obligations of a Lender under the Loan
Documents with respect to the rights and obligations assigned to the
Assignees hereunder by the Original Lenders. The Agent hereby waives the
$3,000 processing fee required under SECTION 12.3(B) of the Agreement.
(c) PAYMENT OBLIGATIONS. On and after the Commitment Increase Date,
each of the Assignees shall be entitled to receive from the Agent all
payments of principal,
-126-
<PAGE>
interest and fees with respect to the interest assigned hereby. Each of
the Assignees shall advance funds directly to the Agent with respect to all
Revolving Loans and the Acquisition Loans and reimbursement payments made
on or after the Commitment Increase Date with respect to the interest
assigned hereby. In consideration for the sale and assignment of Loans
hereunder, the Assignees shall pay to the Agent for the account of
Original Lenders, pro rata on the Commitment Increase Date, an amount for
each Assignee equal to the principal amount and accrued interest and fees
of the portion of all Loans assigned to such Assignee hereunder. Each of
the Assignees will also promptly remit to the Agent for the ratable benefit
of the Original Lender any amounts of interest on Loans and fees received
from the Agent which relate to the portion of the Loans assigned to the
Assignees hereunder for periods prior to the Commitment Increase Date and
not previously paid by the Assignees to the Original Lenders. In the event
that any party hereto receives any payment to which any other party hereto
is entitled, then the party receiving such amount shall promptly remit it
to the Agent on behalf of the other party hereto.
(d) REPRESENTATIONS OF THE ORIGINAL LENDERS; LIMITATIONS ON THE
ORIGINAL LENDERS'S LIABILITY. The Original Lenders, respectively,
represent and warrant that with respect to its interest, it is the legal
and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim created by the
respective Original Lender. It is understood and agreed that the
assignment and assumption hereunder are made without recourse to the
Original Lenders and that the Original Lenders make no other representation
or warranty of any kind to the Assignees. Neither the Original Lenders nor
any of their respective, officers, directors, employees, agents or
attorneys shall be responsible for (i) the due execution, legality,
validity, enforceability, genuineness, sufficiency or collectability of any
Loan Document, (ii) any representation, warranty or statement made in or in
connection with any of the Loan Documents, (iii) the financial condition or
creditworthiness of the Borrower or any guarantor, (iv) the performance of
or compliance with any of the terms or provisions of any of the Loan
Documents, (v) inspecting any of the property, books or records of the
Borrower, or (vi) any mistake, error of judgment, or action taken or
omitted to be taken in connection with the Loans, Letters of Credit or the
Loan Documents.
(e) REPRESENTATIONS OF THE ASSIGNEES. Each of the Assignees (only as
to itself) (i) confirms that as of the Commitment Increase Date, it is a
Lender under the Agreement and has received a copy of the Agreement and the
other Loan Documents, together with copies of the financial statements
requested by such Assignee and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to
enter into the Agreement; (ii) agrees that it will, independently and
without reliance upon the Agent, First Chicago Capital Markets, Inc. the
Original Lenders or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Loan
Documents, and (iii) confirms that none of the funds, monies, assets or
other consideration being used to make the purchase and assumption
hereunder are "plan assets" as defined under ERISA and that its rights,
benefits and interests in and under the Loan Documents will not be "plan
assets" under ERISA.
-127-
<PAGE>
(f) INDEMNITY. Each of the Assignees severally agrees to indemnify
and hold harmless the Original Lenders against any and all losses, costs
and expenses (including, without limitation, reasonable attorneys' fees)
and liabilities incurred by it in connection with or arising in any manner
from such Assignee's non-performance of the obligations assumed under this
SECTION 12.3(D).
(g) SUBSEQUENT ASSIGNMENTS. After the Commitment Increase Date, each
of the Assignees shall have the right pursuant to SECTION 12.3 of the
Agreement to assign the rights which are assigned to such Assignee
hereunder to any entity or person, provided that (i) any such subsequent
assignment does not violate any of the terms and conditions of the Loan
Documents or any law, rule, regulation, order, writ, judgment, injunction
or decree and that any consent required under the terms of the Loan
Documents has been obtained and (ii) unless the prior written consent of
the Original Lenders is obtained, the Assignee is not thereby released from
its obligations to thereunder, if any remain unsatisfied, including,
without limitation, its obligations under paragraphs (c) and (f) hereof.
(h) NOTES. The Original Lenders and the Assignees request and direct
that the Agent prepare and cause the Borrower to execute and deliver
replacement Notes to the Original Lenders and the Assignees. The Original
Lenders each agree to deliver to the Agent its original Notes received by
it from the Borrower promptly after the Commitment Increase Date.
(i) CONDITIONS OF EFFECTIVENESS. The assignment shall not become
effective unless (a) each of the Lenders (including the Assignees) shall
have delivered to the Agent its Supplemental Commitment Certificate
pursuant to SECTION 2.27; (b) the Agent shall have received an executed
copy of the reaffirmation from AMC and the Specified Subsidiaries in the
form attached hereto as EXHIBIT U; and (c) each of the Assignees shall have
made the payments required of it under SECTION 12.3(D)(c) hereof .
12.4 CONFIDENTIALITY. Subject to SECTION 12.5, the Agent and the Lenders
shall hold all nonpublic information obtained pursuant to the requirements of
this Agreement in accordance with such Person's customary procedures for
handling confidential information of this nature and in accordance with safe and
sound banking practices and in any event may make disclosure reasonably required
by a prospective "Transferee" (as defined in SECTION 12.5) in connection with
the contemplated participation or assignment or as required or requested by any
Governmental Authority or representative thereof or pursuant to legal process
and shall require any such Transferee to agree (and require any of its
Transferees to agree) to comply with this SECTION 12.4. In no event shall the
Agent or any Lender be obligated or required to return any materials furnished
by or on behalf of AMC, Borrower or any member of the Consolidated AMC Group;
PROVIDED, HOWEVER, each prospective Transferee shall be required to agree that
if it does not become a participant or assignee it shall return all materials
furnished to it by or on behalf of any member of the Consolidated AMC Group in
connection with this Agreement.
12.5 DISSEMINATION OF INFORMATION. The Borrower authorizes each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "TRANSFEREE") and any
prospective Transferee any and all information in
-128-
<PAGE>
such Lender's possession concerning the Consolidated AMC Group and the
Collateral; PROVIDED that, prior to any such disclosure, such prospective
Transferee shall agree to preserve in accordance with SECTION 12.4 the
confidentiality of any confidential information described therein.
ARTICLE XIII: NOTICES
13.1 GIVING NOTICE. Except as otherwise permitted by SECTION 2.14 with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Documents shall be in
writing or by telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as may
be designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted (answerback confirmed in the case of telexes).
13.2 CHANGE OF ADDRESS. The Borrower, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
ARTICLE XIV: COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Borrower, the Agent and the Lenders
and each party as notified the Agent by telex or telephone, that it has taken
such action.
* * * * * * * *
Remainder of this Page Intentionally Blank
* * * * * * * *
-129-
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.
AMC REGIONAL HOLDINGS, INC.
By: /s/ Charles R. Wallace
-----------------------------
Title: Vice President-Finance
-----------------------
Address:
AMC Regional Holdings, Inc.
184 Shuman Boulevard
Suite 200
Naperville, Illinois 60563
Attention: Charles R. Wallace
Telecopy: 708/717-4196
Confirmation: 708/717-2820
THE FIRST NATIONAL BANK OF
CHICAGO, Individually and as
Agent
By: /s/ Barry Litwin
---------------------------
Title: Senior Vice President
---------------------
Address:
One First National Plaza
Suite 0173
Chicago, Illinois 60670-0173
Attention: Barry P. Litwin
Telecopy: 312/732-1117
Confirmation: 312/732-6166
<PAGE>
LASALLE NATIONAL BANK
By: /s/ Harold A. Steben
----------------------------
Title: Senior Vice President
----------------------
Address:
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Mark Pressler
Telecopy: 312/904-8284
Confirmation: 312/904-6242
<PAGE>
SCHEDULE 6.3(F)(ii)
Computation of Permissible Tax Payments
For purposes of this SECTION 6.3(F)(ii) in respect of taxes, the following
provisions shall be applicable:
As used herein the term "Affiliated Group" means the affiliated group as
defined in Section 1504 of the Internal Revenue Code of 1986, as amended (the
"Code").
1. DETERMINATION OF FEDERAL INCOME TAX LIABILITY.
For each fiscal year or part thereof (each, a "Determination Period")
with respect to which AMC files a consolidated federal or state income tax
return and the Borrower is a member of the Affiliated Group of which AMC is
the common parent corporation (the "AMC Group") AMC shall determine (i) the
federal income tax liability of the hypothetical Affiliated Group of which
Borrower would be the common parent corporation (the "Borrower Group") and
(ii) the state liabilities of each member of the Borrower Group on a
separate company or combined basis, as appropriate for such Determination
Period, on a stand-alone basis taking only the income of the members of the
Borrower Group into account, such determination to (i) include any benefit
resulting from ordinary losses, capital losses and tax credits of the
members of the Borrower Group from the current year or the carryforward of
ordinary losses, capital losses and tax credits of the Borrower group from
preceding years which would be utilizable under the Code or relevant state
law and (ii) take into account the deductibility of state income tax for
federal income tax purposes. The aggregate federal and state income tax
liability for all members of the Borrower Group determined in accordance
with this paragraph 1 with respect to any Determination Period is referred
to as the "Borrower Group Tax Liability".
2. PAYMENT OF EACH BORROWER'S TAX LIABILITY TO AMC.
Borrower shall be permitted to pay to AMC, subject to the provisions
of SECTION 6.3(F) the lesser of (i) the Borrower Group Tax Liability for
the relevant Determination Period (or reasonable estimates thereof) and
(ii) the sum of (x) the amount determined by multiplying (A) the federal
income tax liability of the AMC Affiliated Group for such Determination
Period, by (B) a fraction, the numerator of which is the federal income tax
liability of the Borrower Group for such Determination Period and the
denominator of which is the aggregate federal income tax liabilities of
each member of the AMC Affiliated Group having positive liability
(determined in the manner described in PARAGRAPH 1 hereof) for such
Determination Period, (y) with respect to each state in which members of
the Borrower Group file a combined state income tax return with members of
the AMC Group which are not also members of the Borrower Group, the amount
determined by multiplying (C) the relevant combined state tax liability of
the AMC Group for such Determination Period by (D) a fraction, the
numerator of which is the combined hypothetical state income tax liability
of the members of the Borrower Group (computed in a manner substantially
similar to that set forth in paragraph 1 for such Determination Period) and
the denominator of which is the combined state income tax liability of all
-i-
<PAGE>
members of the AMC Group having positive liability for such Determination
Period and (z) with respect to each state in which members of the Borrower
Group do not file such a combined return, the aggregate separate state
income tax liabilities of all of the members of the Borrower Group for such
Determination Period. Such payments shall be made at such times as shall
be requested by AMC, but not more frequently than quarterly. Except as
provided in PARAGRAPH 3 below, the Borrower shall not have any obligation
to AMC or to any other member of the Affiliated Group to pay any further
amounts on account of the AMC Group's tax liability, any such further
amounts being the sole responsibility of AMC and the other members of the
AMC Group. If as a result of estimated payments or otherwise, the Borrower
pays to AMC for any fiscal year an amount in excess of the amount
determined under PARAGRAPH 1, the Borrower shall cause AMC to refund to the
Borrower the amount of such excess no later than the date upon which AMC
files the applicable consolidated federal income tax return for the AMC
Group. If such amount is not so refunded it shall be deducted from amounts
which could otherwise be paid to AMC pursuant to SECTION 6.3(F) (whether in
the nature of management fees or tax payments).
3. ADJUSTMENTS TO THE BORROWER'S FEDERAL INCOME TAX LIABILITY.
In the event that there is an increase or decrease in the amount
determined under PARAGRAPH 2 for any fiscal year (whether by amended
return, examination by the Internal Revenue Service, carryback or net
operating loss or unused credits, or otherwise), the Borrower shall or
shall cause AMC, as the case may be, to promptly make a payment to the
other in the amount of such increase or decrease.
<PAGE>
EXECUTION COPY
AMENDMENT NO. 1
AND WAIVER NO. 3 TO
CREDIT AGREEMENT
Dated as of March 15, 1996
THIS AMENDMENT NO. 1 AND WAIVER NO. 3 TO CREDIT AGREEMENT ("AMENDMENT") is
made as of this 28th day of June, 1996 by and among AMC REGIONAL HOLDINGS, INC.,
a Delaware corporation (the "BORROWER"), the financial institutions listed on
the signature pages hereof (the "LENDERS") and THE FIRST NATIONAL BANK OF
CHICAGO, in its individual capacity as a Lender and in its capacity as the
contractual representative ("AGENT") under that certain Credit Agreement dated
as of March 15, 1996 by and among the Borrower, the Lenders and the Agent, as
modified by Wavier No. 1 thereto dated as of April 5, 1996 and Waiver No. 2
thereto dated as of May 8, 1996 (as so modified, and as further amended,
restated, supplemented or modified from time to time, the "CREDIT AGREEMENT").
WITNESSETH
WHEREAS, the Borrower, the Lenders and the Agent are parties to the Credit
Agreement;
WHEREAS, the Borrower has requested that the Agent and the Lenders enter
into an amendment to the Credit Agreement (i) permitting certain asset
acquisitions by Specified Subsidiaries on the terms and conditions set forth
herein and (ii) modifying certain of the financial covenants;
WHEREAS, the Borrower has requested that the Agent and the Lenders waive
deliveries of certain certificates of insurance and loss payable endorsements
for certain of its Subsidiaries;
WHEREAS, the Lenders and the Agent have agreed to enter into this Amendment
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Lenders and the Agent have agreed to the amendments and waivers with respect to
the Credit Agreement as set forth below. Capitalized terms used in this
Amendment which are not otherwise defined herein, shall have the meanings given
such terms in the Credit Agreement.
1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date hereof and
subject to the satisfaction of the conditions precedent set forth in SECTION 3
below, on and after the date hereof, the parties hereto agree as follows:
1.1 SECTION 4.3 of the Credit Agreement is amended as follows:
<PAGE>
(a) SECTION 4.3(n) OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE TERMS
THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
"RESERVED."
(b) SECTION 4.3 OF THE CREDIT AGREEMENT IS AMENDED BY ADDING THE FOLLOWING
PARAGRAPH AT THE END OF SUCH SECTION:
"NOTWITHSTANDING THE FOREGOING, THE LENDERS SHALL MAKE AN ADVANCE IN
CONNECTION WITH AN ACQUISITION LOAN AND SHALL BE DEEMED TO CONSENT TO
AN ASSET ACQUISITION IF (i) SUCH ASSET ACQUISITION IS CONSUMMATED BY
AN EXISTING SPECIFIED SUBSIDIARY; (ii) THE AGGREGATE PURCHASE PRICE IN
CONNECTION WITH SUCH ACQUISITION IS NO MORE THAN $500,000; (iii) THE
AGGREGATE PURCHASE PRICE FOR SUCH ASSET ACQUISITION TOGETHER WITH ALL
OTHER SUCH ASSET ACQUISITIONS CONSUMMATED IN THE IMMEDIATELY PRECEDING
TWELVE (12) MONTHS SHALL NOT EXCEED $2,000,000; (iv) LESS THAN FIFTY
PERCENT (50%) OF THE VALUE OF THE ASSETS BEING ACQUIRED SHALL BE
ATTRIBUTABLE TO INTANGIBLE ASSETS, INCLUDING, WITHOUT LIMITATION,
GOODWILL (AN ASSET ACQUISITION MEETING THE CRITERIA IN CLAUSES (i)
THROUGH (iv) BEING AN "ADD-ON ACQUISITION"); (v) THE LENDERS SHALL
HAVE RECEIVED THE ITEMS SET FORTH BELOW PRIOR TO THE CONSUMMATION OF
SUCH ADD-ON ACQUISITION; (vi) THE AGENT SHALL BE REASONABLY SATISFIED
WITH ALL DOCUMENTATION IN CONNECTION THEREWITH; AND (vii) THE BORROWER
SHALL BE IN COMPLIANCE WITH THE CRITERIA SET FORTH BELOW:
(A) THERE SHALL BE NO ACQUISITION SUBORDINATED DEBT INCURRED FOR THE
PURPOSE OF FINANCING ALL OR ANY PART OF SUCH ADD-ON ACQUISITION.
(B) THE ADD-ON ACQUISITION IS A PURCHASE OF ASSETS BY A SPECIFIED
SUBSIDIARY, IS CONSUMMATED PURSUANT TO A NEGOTIATED ACQUISITION
AGREEMENT ON A NON-HOSTILE BASIS ON TERMS AND CONDITIONS REASONABLY
ACCEPTABLE TO THE AGENT AND INVOLVES THE PURCHASE OF A BUSINESS LINE
SIMILAR TO THAT OF THE BORROWER'S SPECIFIED SUBSIDIARIES AS OF CLOSING
DATE. THE ACQUISITION AGREEMENT SHALL NOT CONTAIN ANY CONTINGENT
PURCHASE PRICE PAYMENTS AND THE AGENT AND THE LENDERS SHALL HAVE
RECEIVED A COPY OF THE FINAL ASSET PURCHASE AGREEMENT.
(C) PRIOR TO SUCH ADD-ON ACQUISITION, THE BORROWER SHALL DELIVER TO THE
AGENT FOR DISTRIBUTION TO THE LENDERS A DESCRIPTION OF THE ASSETS
BEING ACQUIRED AND THE PROPOSED TERMS OF THE ADD-ON ACQUISITION,
INCLUDING, WITHOUT LIMITATION, SUMMARY FINANCIAL INFORMATION,
PROPOSED SOURCES OF FINANCING FOR THE ADD-ON ACQUISITION (WHICH SHALL
INCLUDE AMOUNTS OF ACQUISITION LOANS OR REVOLVING LOANS AS THE CASE
MAY BE), BACKGROUND INFORMATION RELATING TO THE TRANSACTION, THE
BUSINESS PURPOSE OF THE ADD-ON ACQUISITION, AND THE LOCATION OF THE
ADD-ON ACQUISITION.
(D) ALL MATERIAL REGULATORY AND LEGAL APPROVALS FOR THE ADD-ON ACQUISITION
SHALL HAVE BEEN OBTAINED OR THE BORROWER HAS APPLIED AND IS PURSUING
IN GOOD FAITH ALL MATERIAL REGULATORY AND LEGAL APPROVALS.
(E) THERE SHALL BE AN ABSENCE OF INJUNCTION OR TEMPORARY RESTRAINING ORDER
WHICH, IN THE JUDGMENT OF THE AGENT WOULD PROHIBIT THE MAKING OF THE
ACQUISITION LOANS OR THE CONSUMMATION OF THE ADD-ON ACQUISITION.
-2-
<PAGE>
(F) WITHIN TEN (10) DAYS AFTER ANY SUCH ADD-ON ACQUISITION, THE BORROWER
AND THE SPECIFIED SUBSIDIARY SHALL HAVE TAKEN ALL ACTION REQUIRED
UNDER APPLICABLE LAW, OR REASONABLY REQUESTED BY THE AGENT, TO GRANT
TO THE AGENT, FOR THE BENEFIT OF THE HOLDERS OF SECURED OBLIGATIONS, A
VALID AND PERFECTED FIRST-PRIORITY SECURITY INTEREST IN ALL OF THE
ASSETS BEING ACQUIRED BY THE SPECIFIED SUBSIDIARY, SUBJECT TO
CUSTOMARY PERMITTED LIENS AND LIENS WHICH THE AGENT AGREES TO PERMIT
TO REMAIN OUTSTANDING, UNDER DOCUMENTATION CONSISTENT WITH THE
EXISTING DOCUMENTATION (INCLUDING WITHOUT LIMITATION, CONFIRMATION
THAT NO LIENS EXIST WITH RESPECT TO THE ASSETS BEING ACQUIRED EXCEPT
LIENS PERMITTED UNDER THE TERMS OF THIS AGREEMENT AND THE RELEVANT
SECURITY AGREEMENT). IF THE BORROWER FAILS TO SATISFY THE AGENT THAT
A VALID AND PERFECTED FIRST PRIORITY SECURITY INTEREST HAS BEEN
GRANTED TO THE AGENT WITH RESPECT TO THE ADD-0N ACQUISITION ASSETS,
THEN NOTWITHSTANDING ANY OTHER PROVISION OF THE CREDIT AGREEMENT OR
ANY OTHER LOAN DOCUMENT THE BORROWER MAY SATISFY THIS CLAUSE (F) BY
DEDUCTING FROM THE BORROWING BASE THE PURCHASE PRICE OF THE ASSETS FOR
SUCH ADD-ON ACQUISITION UNTIL SUCH TIME AS THE AGENT IS SATISFIED THAT
THE CONDITIONS OF THIS CLAUSE (F) AND THE OTHER LOAN DOCUMENTS ARE
SATISFIED; PROVIDED, HOWEVER, (I) THE AGGREGATE AMOUNT DEDUCTED FROM
THE BORROWING BASE PURSUANT HERETO MAY NOT EXCEED $2,000,000.00, (II)
AT THE TIME OF ANY PERMITTED ACQUISITION PURSUANT TO SECTION 4.3(a-r),
ALL SECURITY AGREEMENT AND OTHER LOAN DOCUMENTS WHICH NEED TO BE
AMENDED, MODIFIED OR SUPPLEMENTED TO REFLECT ADD-ON ACQUISITIONS SHALL
BE SO MODIFIED, AMENDED OR SUPPLEMENTED.
(G) THE ADD-ON ACQUISITION CONSTITUTES A PERMITTED ACQUISITION PURSUANT TO
SECTION 6.3(G).
(H) THE BORROWER AND THE SPECIFIED SUBSIDIARY SHALL TAKE WHATEVER
ADDITIONAL STEPS AND PROVIDE ANY ADDITIONAL DOCUMENTATION REASONABLY
REQUESTED BY THE AGENT WITH RESPECT TO SUCH ADD-ON ACQUISITION.
1.2 SECTION 6.1 (J) of the Credit Agreement is amended to delete the terms
thereof in their entirety and to substitute the following therefor:
AS SOON AS PRACTICABLE, AND IN ANY EVENT WITHIN FORTY-FIVE (45) DAYS
AFTER THE END OF EACH CALENDAR MONTH (AND MORE OFTEN IF REQUESTED BY
AGENT OR THE REQUIRED LENDERS), EACH OF THE SPECIFIED SUBSIDIARIES
SHALL PROVIDE TO THE BORROWER (WITH RESPECT TO SUCH SPECIFIED
SUBSIDIARY) A SUMMARY OF ITS ELIGIBLE INVENTORY, ELIGIBLE RECEIVABLES
AND AMOUNT OF INTERCOMPANY LOANS; AND THE BORROWER SHALL PROVIDE THE
AGENT WITH A BORROWING BASE CERTIFICATE, TOGETHER WITH SUCH SUPPORTING
DOCUMENTS AS THE AGENT DEEMS DESIRABLE, ALL CERTIFIED AS BEING TRUE
AND CORRECT BY THE CHIEF FINANCIAL OFFICER OR TREASURER OF THE
APPLICABLE PERSON.
1.3 SECTION 6.2(K) of the Credit Agreement is hereby amended to delete the
first sentence of such section in its entirety and to substitute the following
therefor:
THE BORROWER WILL NOT USE THE PROCEEDS OF THE REVOLVING LOANS TO
EFFECT SPECIFIED ACQUISITIONS THAT DO NOT CONSTITUTE ADD-ON
ACQUISITIONS. THE BORROWER MAY USE AN AGGREGATE OF $2,000,000 OF THE
PROCEEDS OF THE REVOLVING LOANS TO EFFECT ADD-ON ACQUISITIONS. THE
BORROWER MAY ALSO USE THE PROCEEDS OF THE REVOLVING LOANS TO
-3-
<PAGE>
PROVIDE FUNDS FOR THE WORKING CAPITAL NEEDS OF THE SPECIFIED
SUBSIDIARIES AND OTHER GENERAL CORPORATE PURPOSES.
1.4 SECTION 6.3(G)(2) of the Credit Agreement is hereby amended to add at
the end of such section the following:
PROVIDED, HOWEVER, NO SUCH CERTIFICATE SHALL BE REQUIRED IN CONNECTION
WITH ANY ADD-ON ACQUISITION;
1.5 SECTION 6.4(A) of the Credit Agreement is amended to delete the
definition of "Capital Expenditures" and substitute the following therefor:
"CAPITAL EXPENDITURES" MEANS, FOR ANY PERIOD, THE AGGREGATE OF ALL
EXPENDITURES (WHETHER PAID IN CASH OR ACCRUED AS LIABILITIES AND
INCLUDING CAPITALIZED LEASES AND PERMITTED PURCHASE MONEY INDEBTEDNESS
AND INCLUDING ALL RELATED TRANSACTION COSTS) BY THE BORROWER AND ITS
CONSOLIDATED SUBSIDIARIES DURING SUCH PERIOD THAT, IN CONFORMITY WITH
AGREEMENT ACCOUNTING PRINCIPLES, ARE REQUIRED TO BE INCLUDED IN OR
REFLECTED BY THE PROPERTY, PLANT, EQUIPMENT OR SIMILAR FIXED ASSET
ACCOUNTS REFLECTED IN THE CONSOLIDATED BALANCE SHEET OF THE BORROWER
AND ITS CONSOLIDATED SUBSIDIARIES; PROVIDED, HOWEVER, THERE SHALL BE
EXCLUDED THEREFROM: (i) ANY SUCH EXPENDITURES ARISING FROM ALLOCATION
OF THE PURCHASE PRICE OF PROPERTY, PLANT AND EQUIPMENT WITH RESPECT TO
ANY SPECIFIED ACQUISITIONS AND (ii) ANY SUCH EXPENDITURES ARISING FROM
THE PURCHASE OF OXYGEN TANKS, INTRAVENOUS PUMPS, MEDICAL CARTS OR
OTHER MEDICAL EQUIPMENT LEASED OR HELD FOR LEASE OR SALE TO A FACILITY
OR ITS PATIENTS AND ACQUIRED IN THE ORDINARY COURSE OF BUSINESS
CONSISTENT WITH PAST PRACTICES.
1.6 SECTION 6.4(C)(i) of the Credit Agreement is hereby amended to delete
the terms of such CLAUSE (i) in their entirety and to substitute the following
therefor:
(i) THE SUM, WITHOUT DUPLICATION, OF THE AMOUNTS OF (a) EBITA, PLUS
(b) RENTALS, MINUS (c) CONTINGENT PURCHASE PRICE PAYMENTS TO
1.7 SECTION 6.4 of the Credit Agreement is hereby amended to add the
following at the end of such section:
(G) MAXIMUM CAPITAL EXPENDITURES. SHALL NOT PERMIT CAPITAL
EXPENDITURES FOR EACH FISCAL YEAR TO EXCEED $750,000 MULTIPLIED BY THE
RATIO OF: (i) EBITA FOR THE FISCAL YEAR THEN MOST RECENTLY ENDED TO
(ii) EBITA FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996; PROVIDED,
HOWEVER CAPITAL EXPENDITURES FOR ANY FISCAL YEAR SHALL NOT INCREASE BY
MORE THAN FIFTY PERCENT (50%) OVER THE CAPITAL EXPENDITURES OF THE
IMMEDIATELY PRECEDING FISCAL YEAR.
1.8 The Credit Agreement is hereby amended to delete EXHIBIT A, EXHIBIT K
and EXHIBIT Q to the Credit Agreement in their entirety and to substitute
respectively EXHIBIT A, EXHIBIT K and EXHIBIT Q to this Amendment therefor.
2. WAIVER. Effective as of the date of the Amendment and subject to the
satisfaction of the conditions precedent set forth in SECTION 3 below, the
parties hereby agree that any default stemming
-4-
<PAGE>
from the Borrower's failure to deliver on the Closing Date certificates of
insurance and/or loss payable endorsements for Williamson, Sterling, Dixon and
Gatti with respect to insurance policies then in existence which have since
lapsed is hereby waived. The Borrower represents and warrants that no insurable
event has occurred under any such lapsed policy for which coverage is pending or
for which a claim may subsequently be submitted.
3. CONDITIONS OF EFFECTIVENESS. This Amendment shall not become effective
unless (a) this Amendment shall have been executed by the Borrower, the Agent
and the Required Lenders on or before June 28, 1996; and (b) the Agent shall
have received an executed copy of the reaffirmation from the Specified
Subsidiaries and AMC in the form attached hereto as ANNEX A.
4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Credit Agreement as previously executed and as
amended hereby, constitute legal, valid and binding obligations of the Borrower
and are enforceable against the Borrower in accordance with their terms.
(b) Upon the effectiveness of this Amendment, the Borrower hereby
reaffirms all covenants, representations and warranties made in the Credit
Agreement and the other Loan Documents to the extent the same are not amended or
waived hereby, agrees that all such covenants, representations and warranties
shall be deemed to have been remade as of the effective date of this Amendment.
(c) Except with respect the matters subject to the waiver in Section 2
above, no Default or Unmatured Default has occurred under the Credit Agreement.
5. REFERENCE TO THE EFFECT ON THE CREDIT AGREEMENT.
(a) Upon the effectiveness of SECTION 1 hereof, on and after the date
hereof, each reference in the Credit Agreement to "this Credit Agreement,"
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) Except as specifically modified above, the Credit Agreement and all
other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) Except as set forth in SECTION 2 hereof, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power of remedy of the Agent or the Lenders, nor constitute a waiver of any
provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith. The waiver set
forth in Section 2 above shall be effective only in the specific instance and
for the specific purpose for which it is given and does not affect or diminish
the Agent's or any of the Lender's right hereafter to require strict performance
by the Borrower and each of its Subsidiaries of each provision of the Credit
Agreement and the other Loan Documents. Except as expressly set forth in
Section 2, nothing herein shall constitute a waiver by the Agent or the Lenders
of any existing or hereafter arising Default nor shall the Agent's and the
Lenders' execution and delivery of this Waiver establish a course of dealing
among the Agent, the Lenders, the Borrower or any other obligor or in any other
-5-
<PAGE>
way obligate the Agent or any Lender to hereafter provide any further waivers
with respect to the Credit Agreement.
6. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the internal laws (as opposed to the conflict of law provisions)
of the State of Illinois.
7. HEADINGS. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
8. COUNTERPARTS. This Amendment may be executed by one or more of the
parties to the Amendment on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
9. NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the negotiation and drafting of this Amendment and the Credit Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Amendment and the Credit Agreement as hereby amended shall be construed as if
drafted jointly by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Amendment or the Credit Agreement.
[Remainder of this Page Intentionally Blank.]
-6-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and
year first above written.
AMC REGIONAL HOLDINGS, INC.
By /s/ Charles R. Wallace
----------------------------
Title: Vice President - Finance
-------------------------
THE FIRST NATIONAL BANK OF
CHICAGO, AS AGENT
By /s/ Michael P. Ciuchta
----------------------------
Title: Vice President
-------------------------
LENDERS:
THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Michael P. Ciuchta
----------------------------
Title: Vice President
-------------------------
LASALLE NATIONAL BANK
By /s/ Marc Pressler
----------------------------
Title: Vice President
-------------------------
Signature Page to Amendment No. 1 and Waiver No. 3 to the AMC Credit Agreement
<PAGE>
EXHIBIT A
TO
AMENDMENT NO. 1
AND WAIVER NO. 3 TO
CREDIT AGREEMENT
(attached)
-8-
<PAGE>
EXHIBIT A
TO
CREDIT AGREEMENT
TO: The First National Bank of Chicago, as Agent
One First National Plaza
Suite 0173
Chicago, IL 60670-0173
(All information as of , 19 )
------------ --
I. ADJUSTED AMOUNT OF ELIGIBLE RECEIVABLES
1. Adjusted Amount of All Receivables $
------------
2. Less:* Receivables (other than those
covered by item 3 below) aged
over 90 days from date of
original invoice ($ )
-----------
3. Less: During June through October,
receivables in connection
with the Illinois Acqui-
sitions consisting of
Perfected Government Receiv-
ables ("Illinois Acquisition
Receivables") aged over 120
days from date of original
invoice ($ )
-----------
4. Less: Cross-aged Receivables
(other than Perfected
Government Receivables)
(if 25% > 90 days or 120 days
during June through October
for Illinois Acquisition
Receivables) ($ )
-----------
5. Less: Cross-aged Perfected
Government Receivables
(if 70% > 180 days) ($ )
-----------
- --------------------
* All deductions to be made without duplication.
-9-
<PAGE>
6. Less: Receivables (other than
Perfected Government
Receivables) in excess
of 15% Concentration Ratio ($ )
-----------
7. Less: Affiliate Receivables ($ )
-----------
8. Less: Non-Complying Federal
Government Receivables
(other than Perfected
Government Receivables) ($ )
-----------
9. Less: Foreign Receivables ($ )
-----------
10. Less: Receivables subject to
offset or counterclaim ($ )
-----------
11. Less: Other Ineligible
Receivables ($ )
-----------
12. Less: Other Reserves ($ )
-----------
13. Total of Ineligible Receivables and
Reserves (Sum of Lines 2 through 12) ($ )
-----------
14. Adjusted Amount of Eligible Receivables
(Line 1 MINUS Line 13) $
------------
x .75
-------------
15. Availability from Eligible Receivables
(75% of Line 14) = $
------------
------------
II. ADJUSTED AMOUNT OF ELIGIBLE INVENTORY
16. Total Amount of Inventory (Lower of
FIFO or Market) $
------------
17. Less:** Obsolete and not currently
saleable Inventory ($ )
-----------
- --------------------
(1) All deductions to be made without duplication.
-10-
<PAGE>
18. Less: Inventory past manufacturer's
dating or subject to recall notice ($ )
-----------
19. Less: Packaging material, supplies, raw
materials, and work in process ($ )
-----------
20. Less: Ineligible Consigned Inventory
(> $100,000 uncovered by
Consignment Agreements) ($ )
-----------
21. Less: Goods in transit or at
non-permissible third party locations
(including $2,500 reserve for 1215
N. Alpine Road, Rockford, IL 61107) ($ )
-----------
22. Less: Retail Pharmacy ineligibles
(floor stock, edibles, toiletries,
perfumes, photo processing and
excluded rental/sale equipment) ($ )
-----------
23. Less: Other Ineligibles ($ )
-----------
24. Less: Obsolescence Reserve ($ )
-----------
25. Less: Other Reserves ($ )
-----------
26. Total of Ineligible Inventory and Reserves
(sum of Lines 17 through 25) ($ )
-----------
27. Adjusted Amount of Eligible Inventory
(Line 16 MINUS Line 26) $
------------
x .50
-------------
28. Availability from Eligible Inventory
By Reference to Gross Amount of
Eligible Inventory (50% of Line 27) = $
------------
------------
29. Inventory Availability $
------------
-11-
<PAGE>
III. OTHER ITEMS
30. Less: Letter of Credit Obligations ($ )
-----------
31. Less: Add-On Acquisition
Acquisition Price where Agent
unperfected ($ )
-----------
32. Borrowing Base (sum of lines 15 and 29
LESS line 30 and 31) $
------------
IV. CALCULATION OF MAXIMUM AVAILABLE AMOUNT
33. Aggregate Revolving Loan Commitments $
------------
34. Less: Letter of Credit Obligations ($ )
-----------
35. Less: Outstanding Revolving Loans ($ )
-----------
36. Amount available by reference to
commitment level (Line 33 MINUS
the sum of Lines 34 and 35) $
------------
------------
37. Borrowing Base (Line 32) $
------------
------------
38. Less: Outstanding Revolving Loans ($
-----------
39. Amount available by reference to
Borrowing Base (Line 37 MINUS
Line 38) $
------------
------------
40. Maximum Amount Available (Lesser of
Line 36 and Line 39) $
------------
------------
AMC REGIONAL HOLDINGS, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
-12-
<PAGE>
EXHIBIT K
TO
AMENDMENT NO. 1
AND WAIVER NO. 3 TO
CREDIT AGREEMENT
(attached)
-13-
<PAGE>
EXHIBIT Q
TO
AMENDMENT NO. 1
AND WAIVER NO. 3 TO
CREDIT AGREEMENT
(attached)
<PAGE>
ANNEX A
TO
AMENDMENT NO. 1 AND
WAIVER NO. 3 TO
CREDIT AGREEMENT
(attached)
-15-
<PAGE>
REAFFIRMATION OF AMERICAN MEDSERVE CORPORATION
AND THE SPECIFIED SUBSIDIARIES
The undersigned, AMERICAN MEDSERVE CORPORATION, a Delaware corporation
("AMC"), Gatti LTC Services, Inc., a Pennsylvania corporation formerly known as
Louis F. Gatti, Incorporated ("LTC"), Williamson Drug Company, Incorporated, a
Virginia corporation ("WILLIAMSON"), Nihan & Martin, Inc., a Delaware
corporation ("N&M"), Dixon Pharmacy, Inc., an Illinois corporation ("DIXON"),
Sterling Healthcare Services, Inc., a Delaware corporation ("STERLING"), Pharmed
Holdings, Inc., a Delaware corporation ("PHARMED", and together with LTC,
Williamson, N&M, Dixon and Sterling are sometimes hereinafter each referred to
as an "Existing Subsidiary" and collectively as the "EXISTING SUBSIDIARIES")
hereby acknowledge receipt of the Amendment No. 1 and Waiver No. 3 to the Credit
Agreement ("AMENDMENT") by and among AMC Regional Holdings, Inc., a Delaware
corporation (the "BORROWER"), the financial institutions listed on the signature
pages thereof (the "LENDERS") and The First National Bank of Chicago, in its
individual capacity as a Lender and in its capacity as the contractual
representative ("AGENT") under that certain Credit Agreement dated as of March
15, 1996 by and among the Borrower, the Lenders and the Agent, as modified by
Wavier No. 1 thereto dated as of April 5, 1996, and Waiver No. 2 dated as of May
8, 1996 (as so amended, and as further amended, restated, supplemented or
modified from time to time, the "CREDIT AGREEMENT"). Without in any way
establishing a course of dealing by the Agent or any Lender, each of AMC and the
Existing Subsidiaries, respectively reaffirms (i) with respect to AMC, its
pledge of the "Pledged Stock" (as defined in the Pledge Agreement as hereinafter
defined) pursuant to that certain Pledge Agreement ("PLEDGE AGREEMENT") dated as
of March 15, 1996, executed by AMC for the benefit of the Agent and the Holders
of Secured Obligations which Pledge Agreement remains in full force and effect;
and (ii) with respect to the Existing Subsidiaries, the Existing Subsidiaries
have each executed and delivered to the Agent each dated March 15, 1996, or with
respect to Pharmed, dated as of May 8, 1996 (a) those certain Guaranties
(collectively, the "EXISTING SUBSIDIARIES GUARANTIES"), pursuant to which each
Existing Subsidiary has guaranteed, among other things, the payment of the
Borrower's Secured Obligations under the Credit Agreement, which Existing
Subsidiaries Guaranties remain in full force and effect, (b) those certain
Security Agreements (the "EXISTING SUBSIDIARIES SECURITY AGREEMENTS"), pursuant
to which each Existing Subsidiary has granted to the Agent, for the benefit of
the Agent and the Holders of Secured Obligations, a lien on and security
interest in substantially all of the respective Existing Subsidiary's assets,
including all of the respective Existing Subsidiary's accounts receivable and
inventory and all proceeds thereof, including, without limitation, funds
deposited into the Accounts (collectively, the "EXISTING SUBSIDIARIES
COLLATERAL"), which Existing Subsidiaries Security Agreements remain in full
force and effect, (c) those certain intercompany promissory notes (the "EXISTING
SUBSIDIARIES INTERCOMPANY NOTES"), evidencing the Borrower's loans and extension
of other financial accommodations to the Existing Subsidiaries, which Existing
Subsidiaries Intercompany Notes remain in full force and effect, and (d) those
certain Security Agreements (the "EXISTING SUBSIDIARIES INTERCOMPANY SECURITY
AGREEMENTS" and, together with the Existing Subsidiaries Guaranties, the
Existing Subsidiaries Security Agreements and the Existing Subsidiaries
Intercompany Notes, the "EXISTING SUBSIDIARIES DOCUMENTS"), pursuant to which
the respective Existing Subsidiary has granted to the Borrower a lien on and
security interest in the respective Existing Subsidiaries Collateral, which
Existing Subsidiaries Intercompany Security Agreements remain in full force and
effect; (iii) with respect to Sterling, its pledge of the "Pledged Stock" (as
defined in the Sterling Pledge Agreement as hereinafter defined) that certain
Pledge Agreement dated as of May 8, 1996 (the "STERLING PLEDGE AGREEMENT")
executed by Sterling for the benefit of the Agent and the Holders of Secured
Obligations, which Sterling Pledge Agreement remains in full force and effect;
and (iv) the other documents, instruments and agreements executed by AMC and the
Existing Subsidiaries in connection with the Credit Agreement,
-16-
<PAGE>
all of which other documents, instruments and agreements remain in full force
and effect. Each of the representations, warranties and covenants set forth in
the Pledge Agreement, Existing Subsidiaries Documents, Sterling Pledge Agreement
and other documents, instruments and agreements executed by AMC and the Existing
Subsidiaries are hereby ratified and reaffirmed.
AMERICAN MEDSERVE CORPORATION,
GATTI LTC SERVICES, INC.,
WILLIAMSON DRUG COMPANY,
INCORPORATED,
NIHAN & MARTIN, INC.,
DIXON PHARMACY, INC.,
STERLING HEALTHCARE SERVICES,
INC., and
PHARMED HOLDINGS, INC.
By:
---------------------------
Name: Charles R. Wallace
Title: Vice President
Signature Page to Reaffirmation
<PAGE>
AMENDMENT NO. 2
AND WAIVER NO. 4 TO
CREDIT AGREEMENT
Dated as of March 15, 1996
THIS AMENDMENT NO. 2 AND WAIVER NO. 4 TO CREDIT AGREEMENT ("AMENDMENT") is
made as of this 1st day of August, 1996 by and among AMC REGIONAL HOLDINGS,
INC., a Delaware corporation (the "BORROWER"), the financial institutions listed
on the signature pages hereof (the "LENDERS") and THE FIRST NATIONAL BANK OF
CHICAGO, in its individual capacity as a Lender and in its capacity as the
contractual representative ("AGENT") under that certain Credit Agreement dated
as of March 15, 1996 by and among the Borrower, the Lenders and the Agent, as
modified and amended by Wavier No. 1 thereto dated as of April 5, 1996, Waiver
No. 2 thereto dated as of May 8, 1996, and Amendment No. 1 and Waiver No. 3
dated as of June 28, 1996 (as so modified and amended, and as further amended,
restated, supplemented or modified from time to time, the "CREDIT AGREEMENT").
WITNESSETH
WHEREAS, the Borrower, the Lenders and the Agent are parties to the Credit
Agreement;
WHEREAS, the Borrower has requested that the Agent and the Lenders enter
into an amendment to the Credit Agreement permitting certain indebtedness of
American Medserve Corporation ("AMC") to LaSalle National Bank;
WHEREAS, the Lenders and the Agent have agreed to enter into this Amendment
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Lenders and the Agent have agreed to the amendments and waivers with respect to
the Credit Agreement as set forth below. Capitalized terms used in this
Amendment which are not otherwise defined herein, shall have the meanings given
such terms in the Credit Agreement.
1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date hereof and
subject to the satisfaction of the conditions precedent set forth in SECTION 3
below, on and after the date hereof, the parties hereto agree as follows:
1.1 SECTION 1.1 of the Credit Agreement is amended to add the following at
the end of the definition of Asset Sale:
NOTHWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE TERM ASSET SALE
SHALL NOT INCLUDE THE ISSUANCE BY AMC OF STOCK TO GOLDER, THOMA,
CRESSEY, RAUNER FUND IV, L.P. PURSUANT TO THE REIMBURSEMENT AND
CONVERSION RIGHTS AGREEMENT DATED AS OF
<PAGE>
AUGUST 1, 1996 BETWEEN AMC AND GOLDER, THOMA, CRESSEY, RAUNER FUND IV,
L.P. AS IN EFFECT AS OF SUCH DATE.
1.2 Section 6.3(A)(i) the Credit Agreement is amended to delete the
semicolon at the end of such clause and add the following to the end of such
section:
", THAT CERTAIN LOAN TO AMC FROM LASALLE NATIONAL BANK PURSUANT TO
THAT CERTAIN TERM NOTE DATED AS OF AUGUST 1, 1996 IN AN AGGREGATE
PRINCIPAL AMOUNT NOT TO EXCEED $5,000,000.00 AND THOSE CERTAIN
CONTINGENT INDEMNITY OBLIGATIONS RELATING TO GOLDER, THOMA, CRESSEY,
RAUNER FUND IV, L.P.'S GUARANTY OF SUCH TERM NOTE WHICH ARISE OUT OF
THAT CERTAIN REIMBURSEMENT AND CONVERSION RIGHTS OF AGREEMENT DATED AS
OF AUGUST 1, 1996 BETWEEN AMC AND GOLDER, THOMA, CRESSEY, RAUNER FUND
IV, L.P. WHICH REIMBURSEMENT OBLIGATIONS MAY BE SATISFIED UNDER
CERTAIN CIRCUMSTANCES, EITHER THROUGH THE PAYMENT OF MONEY BY AMC OR
THE ISSUANCE OF CAPITAL STOCK OF AMC TO GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.; PROVIDED, HOWEVER, IT IS EXPRESSLY UNDERSTOOD AND
AGREED THAT NO PAYMENTS SHALL BE PERMITTED TO BE MADE FROM THE
BORROWER OR ANY OF ITS SUBSIDIARIES TO OR ON BEHALF OF AMC IN
CONNECTION WITH SUCH TERM NOTE OR CONTINGENT INDEMNITY OBLIGATIONS;"
1.3 SECTION 6.3(G) is amended to delete clauses (i) and (ii) contained in
the proviso to the third sentence thereof in their entirety and shall be
substituted with the following:
(I) AMC MAY MAKE EQUITY INVESTMENTS IN THE BORROWER AND IN GOOD SAMARITAN
SUPPLY SERVICES INC., A MINNESOTA CORPORATION AND (ii) AMC MAY (a) INCUR
THE INDEBTEDNESS PERMITTED UNDER SECTION 6.3 (A)(i) AND (b) ISSUE AMC
SUBORDINATED DEBT AND ACT AS HOLDING COMPANY OF THE CAPITAL STOCK OF
SUBSIDIARIES OTHER THAN THE BORROWER ONLY UPON THE WRITTEN CONSENT OF THE
AGENT, WHICH CONSENT WILL NOT BE UNREASONABLY WITHHELD.
2. WAIVER. [Intentionally Blank]
3. CONDITIONS OF EFFECTIVENESS. This Amendment shall not become effective
unless:
(a) this Amendment shall have been executed by the Borrower, the Agent and
the Required Lenders and the Agent shall have received five (5)
signature pages from each of the foregoing parties; and
(b) the Agent shall have received an executed copy of the reaffirmation
from the Specified Subsidiaries and AMC in the form attached hereto as
ANNEX A.
4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Credit Agreement as previously executed and as
amended hereby, constitute legal, valid and binding obligations of the Borrower
and are enforceable against the Borrower in accordance with their terms.
-2-
<PAGE>
(b) Upon the effectiveness of this Amendment, the Borrower hereby
reaffirms all covenants, representations and warranties made in the Credit
Agreement and the other Loan Documents to the extent the same are not amended or
waived hereby, agrees that all such covenants, representations and warranties
shall be deemed to have been remade as of the effective date of this Amendment.
(c) Except with respect the matters subject to the waiver in SECTION 2
above, no Default or Unmatured Default has occurred under the Credit Agreement.
5. REFERENCE TO THE EFFECT ON THE CREDIT AGREEMENT.
(a) Upon the effectiveness of SECTION 1 hereof, on and after the date
hereof, each reference in the Credit Agreement to "this Credit Agreement,"
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) Except as specifically modified above, the Credit Agreement and all
other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) Except as set forth in SECTION 2 hereof, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power of remedy of the Agent or the Lenders, nor constitute a waiver of any
provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith. The waiver set
forth in Section 2 above shall be effective only in the specific instance and
for the specific purpose for which it is given and does not affect or diminish
the Agent's or any of the Lender's right hereafter to require strict performance
by the Borrower and each of its Subsidiaries of each provision of the Credit
Agreement and the other Loan Documents. Except as expressly set forth in
Section 2, nothing herein shall constitute a waiver by the Agent or the Lenders
of any existing or hereafter arising Default nor shall the Agent's and the
Lenders' execution and delivery of this Amendment establish a course of dealing
among the Agent, the Lenders, the Borrower or any other obligor or in any other
way obligate the Agent or any Lender to hereafter provide any further waivers
with respect to the Credit Agreement.
6. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the internal laws (as opposed to the conflict of law provisions)
of the State of Illinois.
7. HEADINGS. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
8. COUNTERPARTS. This Amendment may be executed by one or more of the
parties to the Amendment on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
9. NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the negotiation and drafting of this Amendment and the Credit Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Amendment and the Credit Agreement as hereby amended shall be construed as if
drafted jointly by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Amendment or the Credit Agreement.
-3-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and
year first above written.
AMC REGIONAL HOLDINGS, INC.
By /s/ Charles R. Wallace
----------------------------
Title: Vice President, Treasurer
and Assistant Secretary
-------------------------
THE FIRST NATIONAL BANK OF
CHICAGO, AS AGENT
By /s/ Michael P. Ciuchta
----------------------------
Title: Vice President
-------------------------
LENDERS:
THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Michael P. Ciuchta
----------------------------
Title: Vice President
-------------------------
LASALLE NATIONAL BANK
By /s/ Marc Pressler
----------------------------
Title: Vice President
-------------------------
Signature Page to Amendment No. 2 and Waiver No. 4 to the AMC Credit Agreement
<PAGE>
REAFFIRMATION OF AMERICAN MEDSERVE CORPORATION
AND THE SPECIFIED SUBSIDIARIES
The undersigned, AMERICAN MEDSERVE CORPORATION, a Delaware corporation
("AMC"), Gatti LTC Services, Inc., a Pennsylvania corporation formerly known as
Louis F. Gatti, Incorporated ("LTC"), Williamson Drug Company, Incorporated, a
Virginia corporation ("WILLIAMSON"), Nihan & Martin, Inc., a Delaware
corporation ("N&M"), Dixon Pharmacy, Inc., an Illinois corporation ("DIXON"),
Sterling Healthcare Services, Inc., a Delaware corporation ("STERLING"), Pharmed
Holdings, Inc., a Delaware corporation ("PHARMED"), Royal Care Holdings, Inc., a
Delaware corporation ("ROYAL CARE"), Pharmacy Associates of Glens Falls, Inc. a
New York corporation ("GLENS FALLS") and Specialized Patient Care Services,
Inc., an Alabama corporation ("SPCS", and together with LTC, Williamson, N&M,
Dixon, Sterling, Pharmed, Royal Care, and Glens Falls are sometimes hereinafter
each referred to as an "Existing Subsidiary" and collectively as the "EXISTING
SUBSIDIARIES") hereby acknowledge receipt of Amendment No. 2 and Waiver No. 4 to
the Credit Agreement ("AMENDMENT") by and among AMC Regional Holdings, Inc., a
Delaware corporation (the "BORROWER"), the financial institutions listed on the
signature pages thereof (the "LENDERS") and The First National Bank of Chicago,
in its individual capacity as a Lender and in its capacity as the contractual
representative ("AGENT") under that certain Credit Agreement dated as of March
15, 1996 by and among the Borrower, the Lenders and the Agent, as modified and
amended by Wavier No. 1 thereto dated as of April 5, 1996, Waiver No. 2 thereto
dated as of May 8, 1996, and Amendment No. 1 and Waiver No. 3 dated as of June
28, 1996 (as so modified and amended, and as further amended, restated,
supplemented or modified from time to time, the "CREDIT AGREEMENT"). Without in
any way establishing a course of dealing by the Agent or any Lender, each of AMC
and the Existing Subsidiaries, respectively reaffirms (i) with respect to AMC,
its pledge of the "Pledged Stock" (as defined in the Pledge Agreement as
hereinafter defined) pursuant to that certain Pledge Agreement ("PLEDGE
AGREEMENT") dated as of March 15, 1996, executed by AMC for the benefit of the
Agent and the Holders of Secured Obligations which Pledge Agreement remains in
full force and effect; and (ii) with respect to the Existing Subsidiaries, the
Existing Subsidiaries have each executed and delivered to the Agent each dated
March 15, 1996, or with respect to Pharmed, dated as of May 8, 1996 or with
respect to Royal Care, Glens Falls and SPCS, each dated as of August 5, 1996 (a)
those certain Guaranties (collectively, the "EXISTING SUBSIDIARIES
GUARANTIES"), pursuant to which each Existing Subsidiary has guaranteed, among
other things, the payment of the Borrower's Secured Obligations under the Credit
Agreement, which Existing Subsidiaries Guaranties remain in full force and
effect, (b) those certain Security Agreements (the "EXISTING SUBSIDIARIES
SECURITY AGREEMENTS"), pursuant to which each Existing Subsidiary has granted to
the Agent, for the benefit of the Agent and the Holders of Secured Obligations,
a lien on and security interest in substantially all of the respective Existing
Subsidiary's assets, including all of the respective Existing Subsidiary's
accounts receivable and inventory and all proceeds thereof, including, without
limitation, funds deposited into the Accounts (collectively, the "EXISTING
SUBSIDIARIES COLLATERAL"), which Existing Subsidiaries Security Agreements
remain in full force and effect, (c) those certain intercompany promissory notes
(the "EXISTING SUBSIDIARIES INTERCOMPANY NOTES"), evidencing the Borrower's
loans and extension of other financial accommodations to the Existing
Subsidiaries, which Existing Subsidiaries Intercompany Notes remain in full
force and effect, and (d) those certain Security Agreements (the "EXISTING
SUBSIDIARIES INTERCOMPANY SECURITY AGREEMENTS" and, together with the Existing
Subsidiaries Guaranties, the Existing Subsidiaries Security Agreements and the
Existing Subsidiaries Intercompany Notes, the "EXISTING SUBSIDIARIES
DOCUMENTS"), pursuant to which the respective Existing Subsidiary has
-5-
<PAGE>
granted to the Borrower a lien on and security interest in the respective
Existing Subsidiaries Collateral, which Existing Subsidiaries Intercompany
Security Agreements remain in full force and effect; (iii) with respect to
Sterling, its pledge of the "Pledged Stock" (as defined in the Sterling Pledge
Agreement as hereinafter defined) that certain Pledge Agreement dated as of
May 8, 1996 (the "STERLING PLEDGE AGREEMENT") executed by Sterling for the
benefit of the Agent and the Holders of Secured Obligations, which Sterling
Pledge Agreement remains in full force and effect; (iv) with respect to Royal
Care, its pledge of the "Pledged Stock" (as defined in the Sterling Pledge
Agreement as hereinafter defined) that certain Pledge Agreement dated as of
August 5, 1996 (the "ROYAL CARE PLEDGE AGREEMENT") executed by Royal Care for
the benefit of the Agent and the Holders of Secured Obligations, which Royal
Care Pledge Agreement remains in full force and effect; and (iv) the other
documents, instruments and agreements executed by AMC and the Existing
Subsidiaries in connection with the Credit Agreement, all of which other
documents, instruments and agreements remain in full force and effect. Each of
the representations, warranties and covenants set forth in the Pledge Agreement,
Existing Subsidiaries Documents, Sterling Pledge Agreement, Royal Care Pledge
Agreement and other documents, instruments and agreements executed by AMC and
the Existing Subsidiaries are hereby ratified and reaffirmed.
AMERICAN MEDSERVE CORPORATION,
GATTI LTC SERVICES, INC.,
WILLIAMSON DRUG COMPANY,
INCORPORATED,
NIHAN & MARTIN, INC.,
DIXON PHARMACY, INC.,
STERLING HEALTHCARE SERVICES,
INC.,
PHARMED HOLDINGS, INC.,
ROYAL CARE HOLDINGS, INC.,
PHARMACY ASSOCIATES OF GLENS
FALLS, INC., and
SPECIALIZED PATIENT CARE SERVICES,
INC.
By:
------------------------------
Name: Charles R. Wallace
Title: Vice President
Signature Page to Reaffirmation
<PAGE>
CREDIT AGREEMENT
DATED AS OF JUNE 21, 1996
AMONG
GOOD SAMARITAN SUPPLY SERVICES, INC.,
AS BORROWER,
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS
AND
LASALLE NATIONAL BANK,
AS THE AGENT
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Certain Defined Terms . . . . . . . . . . . . . . . . . . . 1
1.2. Subsidiary References . . . . . . . . . . . . . . . . . . . 35
1.3. Schedule References; Supplemental Disclosure. . . . . . . . 35
ARTICLE II. THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . 36
2.1. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.2. Revolving Loans . . . . . . . . . . . . . . . . . . . . . . 38
2.3. Ratable Loans . . . . . . . . . . . . . . . . . . . . . . . 38
2.4. Rate Options for All Advances . . . . . . . . . . . . . . . 38
2.5. Optional Payments - Mandatory Prepayments . . . . . . . . . 39
(A) Optional Payments . . . . . . . . . . . . . . . . 39
(B) Mandatory Prepayments . . . . . . . . . . . . . . 39
2.6. Reduction of Commitments. . . . . . . . . . . . . . . . . . 42
2.7. Method of Borrowing . . . . . . . . . . . . . . . . . . . . 42
2.8. Borrowing Notice; Determination of Applicable Margins . . . 42
2.9. Minimum Amount of Each Advance. . . . . . . . . . . . . . . 44
2.10. Method of Selecting Types and Interest Periods for
Conversion and Continuation of Advances . . . . . . . . . 44
(A) Right to Convert. . . . . . . . . . . . . . . . . 44
(B) Automatic Conversion and Continuation . . . . . . 44
(C) No Conversion Post-Default or Post-Unmatured
Default . . . . . . . . . . . . . . . . . . . . 44
(D) Conversion/Continuation Notice. . . . . . . . . . 45
2.11. Default Rate. . . . . . . . . . . . . . . . . . . . . . . . 45
2.12. Collections, and Concentration Account Arrangements . . . . 45
2.13. Method of Payment . . . . . . . . . . . . . . . . . . . . . 47
2.14. Notes, Telephonic Notices . . . . . . . . . . . . . . . . . 47
2.15. Promise to Pay; Interest and Fees; Interest Payment Dates;
Interest and Fee Basis; Taxes; Loan and Control
Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 47
(A) Promise to Pay. . . . . . . . . . . . . . . . . . 47
(B) Interest Payment Dates. . . . . . . . . . . . . . 47
(C) Fees. . . . . . . . . . . . . . . . . . . . . . . 48
(D) Interest and Fee Basis. . . . . . . . . . . . . . 48
(E) Taxes . . . . . . . . . . . . . . . . . . . . . . 49
(F) Loan Account. . . . . . . . . . . . . . . . . . . 51
(G) Control Account . . . . . . . . . . . . . . . . . 52
(H) Entries Binding . . . . . . . . . . . . . . . . . 52
2.16. Notification of Advances, Interest Rates, Prepayments and
Aggregate Revolving Loan Commitment Reductions. . . . . . 52
2.17. Lending Installations . . . . . . . . . . . . . . . . . . . 52
2.18. Non-Receipt of Funds by the Agent . . . . . . . . . . . . . 52
i
<PAGE>
2.19. Termination Date. . . . . . . . . . . . . . . . . . . . . . 53
2.20. Replacement of Certain Lenders. . . . . . . . . . . . . . . 53
2.21. Letter of Credit Facility . . . . . . . . . . . . . . . . . 54
2.22. Letter of Credit Participation. . . . . . . . . . . . . . . 55
2.23. Reimbursement Obligation. . . . . . . . . . . . . . . . . . 55
2.24. Cash Collateral . . . . . . . . . . . . . . . . . . . . . . 56
2.25. Letter of Credit Fees . . . . . . . . . . . . . . . . . . . 56
2.26. Indemnification; Exoneration. . . . . . . . . . . . . . . . 57
ARTICLE III. CHANGE IN CIRCUMSTANCES . . . . . . . . . . . . . . . . . . 58
3.1. Yield Protection. . . . . . . . . . . . . . . . . . . . . . 58
3.2. Changes in Capital Adequacy Regulations . . . . . . . . . . 59
3.3. Availability of Types of Advances . . . . . . . . . . . . . 59
3.4. Funding Indemnification . . . . . . . . . . . . . . . . . . 59
3.5 Lender Statements; Survival of Indemnity. . . . . . . . . . 60
ARTICLE IV. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . 60
4.1. Initial Advances and Letters of Credit. . . . . . . . . . . 60
4.2. Each Advance and Letter of Credit . . . . . . . . . . . . . 61
4.3. Conditions for Acquisition Loans and Addition of
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE V. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . 62
5.1. Organization; Corporate Powers. . . . . . . . . . . . . . . 62
5.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.3. No Conflict; Governmental Consents. . . . . . . . . . . . . 63
5.4. Financial Statements. . . . . . . . . . . . . . . . . . . . 64
5.5. No Material Adverse Change. . . . . . . . . . . . . . . . . 64
5.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
(A) Tax Examinations. . . . . . . . . . . . . . . . . 64
(B) Payment of Taxes and Claims . . . . . . . . . . . 64
5.7. Litigation; Loss Contingencies and Violations . . . . . . . 64
5.8. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 65
5.9. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.10. Accuracy of Information . . . . . . . . . . . . . . . . . . 66
5.11. Securities Activities . . . . . . . . . . . . . . . . . . . 66
5.12. Material Agreements; Licenses . . . . . . . . . . . . . . . 66
5.13. Compliance with Laws. . . . . . . . . . . . . . . . . . . . 66
5.14. Assets and Properties; Government Approvals; Validity of
Receivables on Borrowing Base Certificate . . . . . . . . 67
5.15. Statutory Indebtedness Restrictions . . . . . . . . . . . . 68
5.16. Post-Retirement Benefits. . . . . . . . . . . . . . . . . . 68
5.17. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.18. Contingent Obligations. . . . . . . . . . . . . . . . . . . 68
5.19. Restricted Junior Payments. . . . . . . . . . . . . . . . . 68
5.20. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . 69
ii
<PAGE>
5.21. The Acquisitions. . . . . . . . . . . . . . . . . . . . . . 69
5.22. Environmental Matters . . . . . . . . . . . . . . . . . . . 70
5.23. Healthcare Regulatory Matters . . . . . . . . . . . . . . . 70
ARTICLE VI. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.1. Reporting . . . . . . . . . . . . . . . . . . . . . . . . . 71
(A) Financial Reporting . . . . . . . . . . . . . . . 71
(B) Notice of Default . . . . . . . . . . . . . . . . 73
(C) Lawsuits. . . . . . . . . . . . . . . . . . . . . 73
(D) Insurance . . . . . . . . . . . . . . . . . . . . 73
(E) ERISA Notices . . . . . . . . . . . . . . . . . . 73
(F) Labor Matters . . . . . . . . . . . . . . . . . . 74
(G) Other Indebtedness. . . . . . . . . . . . . . . . 74
(H) Other Reports; SEC Filings, Notices and Other
Public Information. . . . . . . . . . . . . . . . 75
(I) Environmental Notices . . . . . . . . . . . . . . 75
(J) Borrowing Base Certificate. . . . . . . . . . . . 75
(K) Other Information . . . . . . . . . . . . . . . . 76
(L) Healthcare Notices. . . . . . . . . . . . . . . . 76
(M) Reports in Connection with Acquisition
Agreements. . . . . . . . . . . . . . . . . . . . 77
(N) Financial Information regarding the Society . . . 77
6.2. Affirmative Covenants . . . . . . . . . . . . . . . . . . . 77
(A) Corporate Existence, Etc. . . . . . . . . . . . . 77
(B) Corporate Powers; Conduct of Business . . . . . . 77
(C) Compliance with Laws, Etc . . . . . . . . . . . . 77
(D) Payment of Taxes and Claims; Tax Consolidation. . 77
(E) Insurance . . . . . . . . . . . . . . . . . . . . 78
(F) Inspection of Property; Books and Records;
Discussions . . . . . . . . . . . . . . . . . . . 78
(G) Insurance and Condemnation Proceeds . . . . . . . 78
(H) ERISA Compliance. . . . . . . . . . . . . . . . . 79
(I) Maintenance of Property . . . . . . . . . . . . . 79
(J) Environmental Compliance. . . . . . . . . . . . . 80
(K) Use of Proceeds . . . . . . . . . . . . . . . . . 80
(L) Healthcare Regulatory Matters . . . . . . . . . . 80
(M) Deposit Accounts. . . . . . . . . . . . . . . . . 81
(N) Future Liens on Real Property . . . . . . . . . . 81
(O) Subsidiary Guarantee; Subsidiary Security
Agreement . . . . . . . . . . . . . . . . . . . . 81
(P) Separate Corporate Existence. . . . . . . . . . . 81
(Q) Waiver under Shareholders Agreement . . . . . . . 83
6.3. Negative Covenants. . . . . . . . . . . . . . . . . . . . . 83
(A) Indebtedness. . . . . . . . . . . . . . . . . . . 83
(B) Sales of Assets . . . . . . . . . . . . . . . . . 85
(C) Liens . . . . . . . . . . . . . . . . . . . . . . 85
(D) Investments . . . . . . . . . . . . . . . . . . . 86
(E) Contingent Obligations. . . . . . . . . . . . . . 88
iii
<PAGE>
(F) Restricted Junior Payments. . . . . . . . . . . . 88
(G) Conduct of Business; Subsidiaries . . . . . . . . 89
(H) Acquisitions. . . . . . . . . . . . . . . . . . . 89
(I) Transactions with Shareholders and Affiliates . . 94
(J) Restriction on Fundamental Changes. . . . . . . . 94
(K) Sales and Leasebacks. . . . . . . . . . . . . . . 94
(L) Margin Regulations. . . . . . . . . . . . . . . . 95
(M) ERISA . . . . . . . . . . . . . . . . . . . . . . 95
(N) Issuance of Capital Stock . . . . . . . . . . . . 95
(O) Corporate Documents . . . . . . . . . . . . . . . 95
(P) Other Indebtedness. . . . . . . . . . . . . . . . 95
(Q) Fiscal Year . . . . . . . . . . . . . . . . . . . 95
(R) Subsidiary Covenants. . . . . . . . . . . . . . . 95
(S) Rate Hedging Obligations. . . . . . . . . . . . . 96
(T) Change of Deposit Accounts. . . . . . . . . . . . 96
6.4. Financial Covenants . . . . . . . . . . . . . . . . . . . . 96
(A) Defined Terms for Financial Covenants . . . . . . 96
(B) Interest Expense Coverage Ratio . . . . . . . . . 97
(C) Fixed Charge Coverage Ratio . . . . . . . . . . . 98
(D) Minimum EBITDA. . . . . . . . . . . . . . . . . . 98
(E) Maximum Leverage Ratio. . . . . . . . . . . . . . 99
(F) Calculations for Acquisition. . . . . . . . . . . 99
ARTICLE VII. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . 99
7.1. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 99
ARTICLE VIII. ACCELERATION, DEFAULTING LENDERS; WAIVERS,
AMENDMENTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . .104
8.1. Termination of Commitments; Acceleration. . . . . . . . . .104
8.2. Defaulting Lender . . . . . . . . . . . . . . . . . . . . .104
8.3. Amendments. . . . . . . . . . . . . . . . . . . . . . . . .105
8.4. Preservation of Rights. . . . . . . . . . . . . . . . . . .106
ARTICLE IX. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . .107
9.1. Survival of Representations . . . . . . . . . . . . . . . .107
9.2. Governmental Regulation . . . . . . . . . . . . . . . . . .107
9.3. Performance of Obligations. . . . . . . . . . . . . . . . .107
9.4. Headings . . . . . . . . . . . . . . . . . . . . . . . . .108
9.5. Entire Agreement. . . . . . . . . . . . . . . . . . . . . .108
9.6. Several Obligations; Benefits of this Agreement . . . . . .108
9.7. Expenses; Indemnification . . . . . . . . . . . . . . . . .108
(A) Expenses. . . . . . . . . . . . . . . . . . . . .108
(B) Indemnity . . . . . . . . . . . . . . . . . . . .109
(C) Waiver of Certain Claims. . . . . . . . . . . . .110
(D) Survival of Agreements. . . . . . . . . . . . . .110
iv
<PAGE>
9.8. Numbers of Documents. . . . . . . . . . . . . . . . . . . .110
9.9. Accounting; Changes in Agreement Accounting Principles. . .111
9.10. Severability of Provisions. . . . . . . . . . . . . . . . .111
9.11. Nonliability of Lenders . . . . . . . . . . . . . . . . . .111
9.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . .111
9.13. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY
TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . .112
(A) CONSENT TO JURISDICTION . . . . . . . . . . . . .112
(B) SERVICE OF PROCESS. . . . . . . . . . . . . . . .112
(C) WAIVER OF JURY TRIAL. . . . . . . . . . . . . . .112
(D) WAIVER OF BOND. . . . . . . . . . . . . . . . . .113
(E) ADVICE OF COUNSEL . . . . . . . . . . . . . . . .113
9.14. No Strict Construction. . . . . . . . . . . . . . . . . . .113
9.15. Subordination of Intercompany Indebtedness. . . . . . . . .113
ARTICLE X. THE AGENT AS THE LENDERS' CONTRACTUAL
REPRESENTATIVE 114
10.1. Appointment; Nature of Relationship . . . . . . . . . . . .114
10.2. Powers. . . . . . . . . . . . . . . . . . . . . . . . . . .115
10.3. General Immunity. . . . . . . . . . . . . . . . . . . . . .115
10.4. No Responsibility for Loans, Creditworthiness,
Collateral, Recitals, Etc . . . . . . . . . . . . . . . .115
10.5. Action on Instructions of Lenders . . . . . . . . . . . . .116
10.6. Employment of Agents and Counsel. . . . . . . . . . . . . .116
10.7. Reliance on Documents; Counsel. . . . . . . . . . . . . . .116
10.8. The Agent's Reimbursement and Indemnification . . . . . . .116
10.9. Rights as a Lender. . . . . . . . . . . . . . . . . . . . .116
10.10. Lender Credit Decision. . . . . . . . . . . . . . . . . . .117
10.11. Successor Agent . . . . . . . . . . . . . . . . . . . . . .117
10.12. Collateral Documents. . . . . . . . . . . . . . . . . . . .117
10.13. Delivery of Documents . . . . . . . . . . . . . . . . . . .117
ARTICLE XI. SETOFF; RATABLE PAYMENTS. . . . . . . . . . . . . . . . . .118
11.1. Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . .118
11.2. Ratable Payments. . . . . . . . . . . . . . . . . . . . . .118
11.3. Application of Payments . . . . . . . . . . . . . . . . . .118
11.4. Relations Among Lenders . . . . . . . . . . . . . . . . . .119
ARTICLE XII. BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS . . . . .120
12.1. Successors and Assigns. . . . . . . . . . . . . . . . . . .120
12.2. Participations. . . . . . . . . . . . . . . . . . . . . . .120
(A) Permitted Participants; Effect. . . . . . . . . .120
(B) Voting Rights . . . . . . . . . . . . . . . . . .120
(C) Benefit of Setoff . . . . . . . . . . . . . . . .121
12.3. Assignments . . . . . . . . . . . . . . . . . . . . . . . .121
(A) Permitted Assignments . . . . . . . . . . . . . .121
v
<PAGE>
(B) Effect; Effective Date. . . . . . . . . . . . . .122
(C) The Register. . . . . . . . . . . . . . . . . . .122
12.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . .122
12.5. Dissemination of Information. . . . . . . . . . . . . . . .123
ARTICLE XIII. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . .123
13.1. Giving Notice . . . . . . . . . . . . . . . . . . . . . . .123
13.2. Change of Address . . . . . . . . . . . . . . . . . . . . .123
ARTICLE XIV. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . .123
EXHIBITS
- --------
EXHIBIT A - Form of Borrowing Base Certificate
EXHIBIT B - Revolving Loan Commitments, Term Loan Commitments and
Acquisition Loan Commitments
EXHIBIT C1 - Form of Revolving Note
EXHIBIT C2 - Form of Term Note
EXHIBIT C3 - Form of Acquisition Loan Note
EXHIBIT D - Form of Subsidiary Security Agreement
EXHIBIT E - Form of Subsidiary Pledge Agreement
EXHIBIT F - Form of Assignment Agreement
EXHIBIT G - Form of Subsidiary Guarantee
EXHIBIT H - Money Transfer Instructions
EXHIBIT I - List of Closing Documents
EXHIBIT J - Form of Officer's Certificate
EXHIBIT K - Form of Compliance Certificate
EXHIBIT L - Form of Contribution Agreement
EXHIBIT M - Form of Assignment of Representations
EXHIBIT N - Form of Acquisition Consent Certificate
EXHIBIT O - Sample List of Acquisition Closing Documents
EXHIBIT P - Form of Subsidiary Depositary Agreement
EXHIBIT Q - Form of Subsidiary Lock Box Agreement
EXHIBIT R - Form of Borrower Pledge Agreement
vi
<PAGE>
SCHEDULES
- ---------
SCHEDULE 1.1.1 - Permitted Existing Contingent Obligations
SCHEDULE 1.1.2 - Permitted Existing Indebtedness
SCHEDULE 1.1.3 - Permitted Existing Investments
SCHEDULE 1.1.4 - Permitted Existing Liens
SCHEDULE 5.3 - Conflicts; Governmental Consents
SCHEDULE 5.7 - Litigation; Loss Contingencies
SCHEDULE 5.8 - Corporate Structure; Subsidiaries
SCHEDULE 5.9 - Erisa Matters
SCHEDULE 5.14 - Accreditations, Permits, Cons, Health Facility Licenses
SCHEDULE 5.17 - Insurance
SCHEDULE 5.18 - Contingent Obligations
SCHEDULE 5.20 - Labor Matters; Compensation Agreements
SCHEDULE 5.22 - Environmental Matters
SCHEDULE 5.23 - Healthcare Regulatory Matters
SCHEDULE 6.3(I) - Transactions with Affiliates
vii
<PAGE>
CREDIT AGREEMENT
This Credit Agreement dated as of June 21, 1996 is entered into among
Good Samaritan Supply Services, Inc., a South Dakota corporation, the
institutions from time to time a party hereto as Lenders, whether by execution
of this Agreement or an Assignment pursuant to SECTION 12.3 (an "ASSIGNMENT"),
and LaSalle National Bank, in its capacity as the contractual representative for
itself and the other Lenders. The parties hereto agree as follows:
ARTICLE I. DEFINITIONS
1.1 Certain Defined Terms. In addition to the terms defined above, the
following terms used in this Agreement shall have the following meanings,
applicable both to the singular and the plural forms of the terms defined:
As used in this Agreement:
"ACCOUNT DEBTOR" means and includes the account debtor or obligor with
respect to any of the Receivables and/or the prospective purchaser with respect
to any contract right, and/or any party which enters into or proposes to enter
into any contract or other arrangement with a Loan Party.
"ACCREDITATION" means certification by a generally recognized independent
agency or other organization such as the JCAHO or other similar agency or
organization that a facility fully complies with the standards set by such
agency or organization for operation of such a facility.
"ACQUISITION" means any transaction, or any series of related transactions,
consummated on or after the Closing Date, by which any Loan Party (i) acquires
any going business or all or substantially all of the assets of any Person or
division thereof, whether through purchase of assets, merger or otherwise or
(ii) directly or indirectly acquires (in one transaction or as the most recent
transaction in a series of transactions) at least a majority (in number of vote)
of the securities of a corporation which have ordinary voting power for the
election of directors (other than securities having such power only by reason of
the happening of a contingency), a majority (by percentage of voting power) of
the membership, ownership or other equity interests in a limited liability
company or a majority (by percentage of voting power) of the outstanding
partnership interests of a partnership (any such target business, assets,
corporation, partnership or the like being herein referred to as a "TARGET").
"ACQUISITION APPROVAL LENDERS" means Lenders whose Pro Rata Shares, in the
aggregate, are equal to or greater than eighty percent (80%); PROVIDED, HOWEVER,
that, in the event any of the Lenders shall have failed to fund its Pro Rata
Share of any Revolving Loan, Term Loan or Acquisition Loan requested by the
Borrower which such Lenders are obligated to fund under the terms of this
Agreement and any such failure has not been cured, then for so long as such
failure continues, "ACQUISITION APPROVAL LENDERS" means Lenders (excluding all
Lenders whose failure to fund their respective Pro Rata Shares of such Revolving
Loan, Term Loan or
1
<PAGE>
Acquisition Loan has not been so cured) whose Pro Rata Shares represent eighty
percent (80%) or more of the aggregate Pro Rata Shares of the remaining Lenders.
"ACQUISITION APPROVAL PACKAGE" means, with respect to any proposed
Acquisition, those documents and financial statements prepared or supplied by
the Borrower in connection with the Acquisition, including without limitation,
an information package regarding the operations and prospects of the Target, the
financial background of the Target, the required documents itemized in SECTION
6.3(H), and such other information as is relevant for the specifics of the
particular Target to inform the Lenders about its business, financial condition,
projections, operations, performance and properties of the Target, and
anticipated integration of the Target into the Borrower Corporate Group.
"ACQUISITION CLOSING DATE" means the date of the consummation of any
Permitted Acquisition of any Target under the terms of this Agreement.
"ACQUISITION CONSENT CERTIFICATE" is defined in SECTION 6.3(H) below.
"ACQUISITION DOCUMENTS" means all documents, instruments and agreements
entered into by any Loan Party in connection with Permitted Acquisitions.
"ACQUISITION LOAN" is defined in SECTION 2.1(b) below.
"ACQUISITION LOAN AVAILABILITY" means at any particular time prior to the
Conversion Date, the amount by which the Aggregate Acquisition Loan Commitment
at such time exceeds the aggregate outstanding principal amount of all
Acquisition Loans.
"ACQUISITION LOAN COMMITMENT" means, with respect to any Lender, the
obligation of such Lender to make one or more Acquisition Loans on an
Acquisition Closing Date pursuant to the terms and conditions of this Agreement,
and which shall not exceed its Acquisition Loan Commitment as set forth on
EXHIBIT B opposite such Lender's name under the heading, "Acquisition Loan
Commitment" or as indicated in the Assignment by which it became a Lender, in
each case as modified from time to time pursuant to the terms of this Agreement.
"ACQUISITION LOAN NOTE" means a promissory note, in substantially the form
of EXHIBIT C3 hereto, duly executed by the Borrower and payable to the order of
a Lender in the amount of its Acquisition Loan Commitment, including any
amendment, restatement, modification, renewal or replacement of such Acquisition
Loan Note.
"ACQUISITION LOAN TARGET DATE" means the date on which the Borrower shall
have had a positive Net Income (as defined in SECTION 6.4(A)) for each of the
preceding three consecutive calendar months (provided that each calendar month
shall end on or after April 30, 1996) for which financial statements have been
delivered to the Lenders.
2
<PAGE>
"ACQUISITION SUBORDINATED DEBT" is defined in SECTION 6.3(H)(iii) below and
shall in any event include the Note dated June 1, 1996 in the original principal
amount of $1,022,700 issued by the Borrower to Amber Enterprises, Inc.
"ADDITIONAL EQUITY INVESTMENT" means each purchase by AMC from the Borrower
after the date hereof of additional common shares of the Borrower pursuant to
the terms of the Share Purchase Agreement, PROVIDED that the aggregate amount of
the Additional Equity Investments shall not exceed $2,000,000.
"ADJUSTED AMOUNT OF ELIGIBLE INVENTORY" means the Eligible Inventory of the
Borrower Corporate Group valued at the lower of cost determined on a first-in-
first-out basis (determined in accordance with Agreement Accounting Principles,
consistently applied) or market value less (i) the value of reserves which have
been recorded by the Borrower Corporate Group with respect to obsolete, dated,
slow-moving or excess Inventory and (ii) such other reserves as the Agent elects
to establish in accordance with its reasonable credit judgment (which credit
judgment shall be exercised in a manner that is not arbitrary or capricious).
"ADJUSTED AMOUNT OF ELIGIBLE RECEIVABLES" means the face amount outstanding
under the Borrower Corporate Group's Eligible Receivables, determined in
accordance with Agreement Accounting Principles consistently applied, adjusted
to reflect the amount that the Borrower reasonably calculates it expects to
receive with respect to the services performed or Inventory sold, including
adjustments or reductions that the Borrower reasonably believes may be required
by any Applicable Carrier or other Payor with respect to the reimbursable amount
for such services or Inventory, such adjustments being reasonably based upon the
Borrower Corporate Group's past claims history, agreements with such Applicable
Carrier or other Payor, communications with such Applicable Carrier or other
Payor regarding the reimbursable amount and/or coverage and eligibility for
reimbursement (such adjustments being referred to herein as the "CONTRACTUAL
ALLOWANCES"), less (i) all finance charges, service charges, late fees and other
fees, (ii) the value of any accrual which has been recorded by the Borrower with
respect to downward price adjustments, and (iii) such other reserves as the
Agent elects to establish in accordance with its reasonable credit judgment
(which credit judgment shall be exercised in a manner that is not arbitrary or
capricious).
"ADVANCE" means a borrowing hereunder consisting of the aggregate amount of
the several Loans made by the Lenders to the Borrower of the same Type and, in
the case of Eurodollar Advances, for the same Interest Period.
"AFFECTED LENDER" is defined in SECTION 2.20 hereof.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person is the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act)
of greater than twenty percent (20%) of any class of voting securities (or other
voting interests) of the controlled Person or possesses, directly or indirectly,
3
<PAGE>
the power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, by contract or otherwise.
"AGENT" means LaSalle National Bank in its capacity as contractual
representative for itself and the Lenders pursuant to ARTICLE X hereof and any
successor Agent appointed pursuant to ARTICLE X hereof.
"AGGREGATE ACQUISITION LOAN COMMITMENT" means the aggregate of the
Acquisition Loan Commitments of all the Lenders, as modified from time to time
pursuant to the terms hereof or to give effect to any applicable Assignment.
The initial Aggregate Acquisition Loan Commitment is Five Million and 00/100
Dollars ($5,000,000).
"AGGREGATE REVOLVING LOAN COMMITMENT" means the aggregate of the Revolving
Loan Commitments of all the Lenders, as modified from time to time pursuant to
the terms hereof or to give effect to any applicable Assignment. The initial
Aggregate Revolving Loan Commitment is Five Million and 00/100 Dollars
($5,000,000).
"AGGREGATE TERM LOAN COMMITMENT" means the aggregate of the Term Loan
Commitments of all the Lenders, as modified from time to time pursuant to the
terms hereof or to give effect to any applicable Assignment. The initial
Aggregate Term Loan Commitment is Five Million and 00/100 Dollars ($5,000,000).
"AGREEMENT" means this Credit Agreement, as it may be amended, restated or
otherwise modified and in effect from time to time.
"AGREEMENT ACCOUNTING PRINCIPLES" means generally accepted accounting
principles as in effect as of the Closing Date, applied in a manner consistent
with that used in preparing the audited financial statements of the Borrower, or
with respect to a Target, in preparing the financial statements of such Target
for the fiscal year immediately preceding the Acquisition of it by the Borrower
delivered to the Agent and the Lenders pursuant to the provisions of
SECTION 6.3(H).
"ALTERNATE BASE RATE" means, for any day, a fluctuating rate of interest
per annum equal to the higher of (i) the Prime Rate for such day and (ii) the
sum of (a) the Federal Funds Effective Rate for such day and (b) one-half of one
percent (1/2%) per annum.
"AMC" means American Medserve Corporation, a Delaware corporation, and its
successors and assigns, including a debtor-in-possession on behalf of AMC.
"APPLICABLE CARRIER" means, with respect to any Person: (a) a private
insurance company, health maintenance organization, preferred provider
organization or other health plan acceptable to the Agent and the Required
Lenders, which in each case provides reimbursement to the applicable patient for
the services performed by or Inventory sold by the applicable Person; (b) a
Payor for whom Interplan is a paying agent; or (c) Interplan.
4
<PAGE>
"APPLICABLE EURODOLLAR MARGIN" as at any date of determination, shall be
the rate per annum then applicable to Eurodollar Loans determined in accordance
with the provisions of SECTION 2.8(b).
"APPLICABLE FLOATING RATE MARGIN" as at any date of determination, shall be
the rate per annum then applicable to Base Rate Loans determined in accordance
with the provisions of SECTION 2.8(b).
"APPLICABLE LETTER OF CREDIT FEE" as at any date of determination, shall be
the rate per annum then applicable in the determination of the amount payable
under SECTION 2.25 with respect to Letters of Credit, determined in accordance
with the provisions of SECTION 2.8(b).
"APPLICABLE MARGIN(S)" shall have the meaning ascribed to that term in
SECTION 2.8(b).
"ASSET SALE" means, with respect to any Person, (i) the sale, lease,
conveyance, disposition or other transfer by such Person of any of its assets
(including by way of a sale-leaseback transaction and including the sale or
other transfer of any of the Capital Stock of any Subsidiary of such Person) or
(ii) the issuance, sale, conveyance, disposition or other transfer by such
Person of any Capital Stock of such Person or ownership, membership or other
equity interests in such Person; PROVIDED, HOWEVER, that notwithstanding the
foregoing, the term "ASSET SALE" shall not include the sale, lease, conveyance,
disposition or other transfer of any assets in the ordinary course of business.
"ASSIGNMENT" is defined in the preamble to this Agreement.
"AUTHORIZED OFFICER" means, with respect to any Person, any of such
Person's chief executive officer, chief financial officer, treasurer or
controller, acting singly.
"BENEFIT PLAN" means a defined benefit plan as defined in Section 3(35) of
ERISA (other than a Multiemployer Plan) in respect of which the Borrower or any
other member of the Controlled Group is, or within the immediately preceding six
(6) years was, an "employer" as defined in Section 3(5) of ERISA.
"BORROWER" means Good Samaritan Supply Services, Inc., a South Dakota
corporation, and its successors and assigns, including a debtor-in-possession on
behalf of the Borrower.
"BORROWING BASE" means, as of any date of calculation, an amount, as set
forth on the most current Borrowing Base Certificate delivered to the Agent by
the Borrower, equal to: (i) seventy percent (70%) of the Adjusted Amount of
Eligible Receivables of the Borrower Corporate Group, plus (ii) fifty percent
(50%) of the Adjusted Amount of Eligible Inventory of the Borrower Corporate
Group. The Agent shall give the Borrower commercially reasonable notice, taking
into account all facts and circumstances known by the Agent at such time, of any
change in the criteria (or the application thereof) to determine the eligibility
of any Receivables or Inventory or to the establishment by the Agent of any
reserves which, in any such case, might reasonably be expected to materially
decrease the amount of the Borrowing Base.
5
<PAGE>
"BORROWING BASE CERTIFICATE" means a certificate of the Borrower, in
substantially the form of EXHIBIT A attached hereto and made a part hereof,
setting forth the Borrowing Base of the Borrower Corporate Group and the
component calculations thereof.
"BORROWER CORPORATE GROUP" means, as of any given time, the Borrower and
all of the Borrower's direct and indirect Subsidiaries.
"BORROWING DATE" means a date on which an Advance is made hereunder.
"BORROWING NOTICE" is defined in SECTION 2.8 hereof.
"BUSINESS ACTIVITY REPORT" means (A) a Notice of Business Activities Report
from the State of Minnesota, Department of Revenue, or (B) any similar report
required by any other State relating to the ability of any Loan Party to enforce
its accounts receivable claims against account debtors located in any such
state.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Loans bearing interest at the Eurodollar Rate, a day (other than a
Saturday or Sunday) on which banks are open for business in Chicago and on which
dealings in United States dollars are carried on in the London interbank market
and (ii) for all other purposes a day (other than a Saturday or Sunday) on which
banks are open for business in Chicago, Illinois.
"CAPITAL EXPENDITURES" is defined in SECTION 6.4(A) hereof.
"CAPITALIZED LEASE " of a Person means any lease of property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be capitalized
on a balance sheet of such Person prepared in accordance with Agreement
Accounting Principles.
"CAPITAL STOCK", with respect to any Person, means any capital stock of
such Person, regardless of class or designation, and all warrants, options,
purchase rights, conversion or exchange rights, voting rights, calls or claims
of any character with respect thereto.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; (ii) domestic and
Eurodollar certificates of deposit and time deposits, bankers' acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, or its branches or agencies and having capital and surplus in an
aggregate amount not less than $500,000,000 (fully protected against currency
fluctuations for any such deposits with a term of more than ten (10) days);
(iii) shares of money market, mutual or similar funds having net assets
6
<PAGE>
in excess of $500,000,000 and the investments of which are limited to investment
grade securities (i.e., securities rated at least Baa by Moody's Investors
Service, Inc. or at least BBB by Standard & Poor's Corporation or carrying an
equivalent rating, by a nationally recognized rating agency if both of the
aforementioned rating agencies cease publishing investment ratings) and
(iv) commercial paper of United States and foreign banks and bank holding
companies and their subsidiaries and United States and foreign finance,
commercial industrial or utility companies (other than any member of the
Borrower Corporate Group or any Affiliate thereof) which, at the time of
acquisition, are rated A-1 (or better) by Standard & Poor's Corporation or P-1
(or better) by Moody's Investors Services, Inc. or carrying an equivalent rating
by a nationally recognized rating agency if both of the aforementioned rating
agencies cease publishing investment ratings; PROVIDED, that the maturities of
such Cash Equivalents shall not exceed 365 days.
"CASH FLOW PERIOD" means the four consecutive fiscal quarters ending
December 31, 1996 and thereafter, as separate periods, each period of four
consecutive fiscal quarters ending on December 31 of each calendar year.
"CHAMPUS" means the Civilian Health and Medical Program of the Uniformed
Services established pursuant to 10 U.S.C. Sections 1071 ET SEQ. and any
Governmental Authority succeeding to the functions thereof.
"CHAMPUS CERTIFICATION" means certification by CHAMPUS or an agency or
entity under contract with CHAMPUS that the applicable facility fully complies
with all conditions of participation set forth in CHAMPUS Regulations.
"CHAMPUS RECEIVABLES" means a Receivable with respect to which the Account
Debtor is a Governmental Authority or agent thereof obligated thereunder
pursuant to CHAMPUS Regulations.
"CHAMPUS REGULATIONS" means, collectively, all federal statutes affecting
the medical benefits program for specified categories of individuals qualified
for CHAMPUS benefits by virtue of their relationship to the U.S. Army, Navy, Air
Force, Marine Corps, Coast Guard, Commissioned Corps of the U.S. Public Health
Service and Commissioned Corps of the National Oceanic and Atmospheric
Administration established by 5 U.S.C. Section 301 and 10 U.S.C. Sections 1079
and 1086, together with all applicable provisions of 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), as each may be amended,
supplemented, or otherwise modified from time to time.
"CHANGE" is defined in SECTION 3.2 hereof.
"CHANGE OF CONTROL" means an event or series of events by which:
(a) except in respect of a transaction permitted pursuant to the terms of
SECTION 6.3(J) (other than SECTION 6.3(B)(v)), (i) the Borrower ceases to be
the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act) of more than fifty percent (50%) of the
7
<PAGE>
combined voting power of each of its Subsidiaries' outstanding Capital Stock
ordinarily having the right to vote at an election of directors or (ii) the
Borrower ceases to have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the board of
directors of each of its Subsidiaries;
(b) AMC ceases to be the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act), directly or indirectly, of at least thirty-
five percent (35%) of the combined voting power of the Borrower's outstanding
Capital Stock ordinarily having the right to vote at an election of directors;
(c) AMC ceases to have the right or ability by voting power, contract or
otherwise to elect or designate for election not less than forty percent (40%)
of the board of directors of the Borrower; or
(d) AMC and the Foundation cease to be the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of at
least eighty percent (80%) of the combined voting power of the Borrower's
outstanding Capital Stock ordinarily having the right to vote at an election of
directors.
"CLOSING DATE" means June 21, 1996, or such other date as shall be mutually
agreeable to the Borrower, the Agent and the Lenders.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, including any rules or regulations promulgated thereunder.
"COLLATERAL" means all property and interests in property now owned or
hereafter acquired by any Loan Party in or upon which a security interest, lien
or mortgage is granted to the Agent, for the benefit of the Holders of Secured
Obligations, or to the Agent, for the benefit of the Lenders, whether under any
Security Agreement, under any of the other Collateral Documents or under any of
the other Loan Documents.
"COLLATERAL DOCUMENTS" means all agreements, instruments and documents
executed in connection with this Agreement, including, without limitation, the
Pledge Agreements, the Subsidiary Guarantees, the Security Agreements, the Lock
Box Agreements, the Depositary Agreements, the Concentration Account Agreement,
the Restricted Account Agreements and all other security agreements, loan
agreements, notes, guarantees, subordination agreements, pledges, powers of
attorney, consents, assignments, contracts, fee letters, notices, leases and
financing statements, whether heretofore, now or hereafter executed by or on
behalf of any Loan Party and delivered to the Agent or any of the Lenders,
together with all agreements and documents referred to therein or contemplated
thereby.
"COLLECTION ACCOUNT" means each lock box account maintained by the Borrower
or any other Loan Party, subject to the Lock Box Agreement, for the collection
of Receivables and other proceeds of Collateral.
8
<PAGE>
"COLORADO ACQUISITION" means the acquisition by the Borrower of
substantially all of the assets of Professional Pharmacy Services, Inc. pursuant
to and in accordance with that certain Asset Purchase Agreement dated November
15, 1995 between Professional Pharmacy Services, Inc. and the Borrower, as
amended by Side Letter dated January 29, 1996.
"COMMITMENTS" means the Revolving Loan Commitments, the Term Loan
Commitments and/or the Acquisition Loan Commitments, as applicable in the
context used.
"COMMISSION" means the Securities and Exchange Commission and any Person
succeeding to the functions thereof.
"CON" means a Certificate of Need or other license or Permit issued by a
health facilities planning board or similar agency or body required for the
construction or expansion of, investment in, or transfer of ownership relating
to a health facility.
"CONCENTRATION ACCOUNT" means each account maintained at LaSalle into which
collections of Receivables and other cash proceeds of Collateral are transferred
pursuant to the terms of a Lock Box Agreement or otherwise and as described in
SECTION 2.12.
"CONCENTRATION ACCOUNT AGREEMENT" means an agreement executed and delivered
by the Borrower and/or any other member of Borrower Corporate Group, LaSalle and
the Agent with respect to the Concentration Accounts in form and substance
acceptable to the Agent, as it may be amended, restated or otherwise modified
from time to time.
"CONCENTRATION ACCOUNT BLOCKAGE DATE" means the date, following the
occurrence of a Default on which the Agent or the Required Lenders, in the
Agent's or the Required Lenders' sole discretion, instruct(s) LaSalle as
described in the Concentration Account Agreement to remit, during the
continuance of such Default, all amounts deposited in the Concentration Accounts
to the Agent or as the Agent shall direct.
"CONTINGENT OBLIGATION", as applied to any Person, means any Contractual
Obligation, contingent or otherwise, of that Person with respect to any
Indebtedness of another or other monetary obligation or liability of another,
including, without limitation, any such Indebtedness, obligation or liability of
another directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), co-made or discounted
or sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable, including Contractual Obligations
(contingent or otherwise) arising through any agreement to purchase, repurchase,
or otherwise acquire such Indebtedness, obligation or liability or any security
therefor, or to provide the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, or other financial condition, or to
make payment other than for value received.
"CONTINGENT PURCHASE PRICE PAYMENTS" means any deferred purchase price
payments, earnouts, or performance based payments made in connection with any
Permitted Acquisition.
9
<PAGE>
"CONTRACTUAL ALLOWANCES" is defined in the definition of Adjusted Amount of
Eligible Receivables above.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of
any equity or debt securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument, in any case in writing, to which that
Person is a party or by which it or any of its properties is bound, or to which
it or any of its properties is subject.
"CONTROLLED GROUP" means the group consisting of (i) any corporation which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower; (ii) a partnership or other trade
or business (whether or not incorporated) which is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower; and (iii) a member
of the same affiliated service group (within the meaning of Section 414(m) of
the Code) as the Borrower, any corporation described in CLAUSE (i) above or any
partnership or trade or business described in CLAUSE (ii) above.
"CONTROLLED SUBSTANCES LICENSES" means any state licenses, permits,
approvals, registrations or other authorizations required to distribute
controlled substances.
"CONVERSION/CONTINUATION NOTICE" is defined in SECTION 2.10(D) hereof.
"CONVERSION DATE" means the earlier of (i) June 21, 1998, (ii) the date on
which (x) the Borrower has obtained Term Loans in an aggregate principal amount
equal to $5,000,000 (whether or not any portion of the Term Loans have been
repaid) and (y) the aggregate principal amount outstanding of Acquisition Loans
is $5,000,000 and (iii) the date on which the Commitments are terminated
pursuant to Section 2.6 or Section 8.1.
"CURE LOANS" is defined in SECTION 8.2(iii) hereof.
"CURRENT ASSETS" is defined in SECTION 6.4(A) hereof.
"CUSTOMARY PERMITTED LIENS" means:
(i) statutory Liens of landlords and Liens of suppliers,
mechanics, carriers, materialmen, warehousemen or workmen and other similar
Liens imposed by law created in the ordinary course of business for amounts
not yet due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with Agreement
Accounting Principles;
(ii) Liens (other than Environmental Liens and Liens in favor of
the PBGC) incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance or other
types of social security benefits or to
10
<PAGE>
secure the performance of bids, tenders, sales, contracts (other than for
the repayment of borrowed money), surety, appeal and performance bonds;
PROVIDED that (A) all such Liens do not in the aggregate materially detract
from the value of the applicable Person's or its Subsidiary's assets or
property taken as a whole or materially impair the use thereof in the
operation of the businesses taken as a whole, and (B) all Liens securing
bonds to stay judgments or in connection with appeals do not secure at any
time an aggregate amount for all Loan Parties exceeding $100,000;
(iii) Liens arising with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar charges or encumbrances on the use
of real property which do not interfere with the ordinary conduct of the
business of any Loan Party;
(iv) Liens of attachment or judgment with respect to judgments,
writs or warrants of attachment, or similar process against any Loan Party
which do not constitute a Default under SECTION 7.1(h);
(v) Liens arising from leases or subleases granted to others which
do not interfere in any material respect with the respective business of
any Loan Party;
(vi) Liens (other than Environmental Liens and Liens in favor of
the PBGC) arising in the ordinary course of business securing the payment
of taxes, assessments, or governmental charges or other claims, either not
yet due or the validity of which is being contested in good faith by
appropriate proceedings, and as to which Borrower shall, if appropriate
under Agreement Accounting Principles, have set aside on its books and
records adequate reserves to the extent that (a) the amounts secured are
not prohibited by the terms of SECTION 6.2(C) and (b) the aggregate amount
of such claims or taxes together with all amounts secured by Liens pursuant
to CLAUSE (vii) below does not exceed $100,000 in the aggregate for all
Loan Parties;
(vii) Liens arising in the ordinary course of business for amounts
not yet due or payable to the extent that (a) such Liens do not involve any
deposits or advances for borrowed money or the deferred purchase price of
property or services and (b) the aggregate amount secured by such Liens
together with all amounts secured by Liens pursuant to CLAUSE (vi) above
does not exceed $100,000 in the aggregate for all Loan Parties; and
(viii) any interest or title of the lessor in the property subject to
any operating lease entered into by any Loan Party in the ordinary course
of business.
"DEA LICENSE" means an authorization or license to distribute
pharmaceuticals issued by the Federal Drug Enforcement Agency.
"DECISION PERIOD" is defined in SECTION 6.2(G) hereof.
11
<PAGE>
"DECISION RESERVE" is defined in SECTION 6.2(G) hereof.
"DEFAULT" means an event described in ARTICLE VII hereof.
"DEFAULT RATE" is defined in SECTION 2.11 hereof.
"DEPOSITARY ACCOUNT" means each depositary account maintained by the
Borrower or any other Loan Party pursuant to a Depositary Agreement for the
collection of Medicare Receivables and Medicaid Receivables.
"DEPOSITARY AGREEMENT(S)" means, individually or collectively, as
applicable, the Depositary Agreement executed by and among the Borrower, First
Bank National Association and the Agent relating to the establishment and
maintenance of a lock box and lock box account for the collection of Medicare
Receivables and Medicaid Receivables and any written agreement between any other
Loan Party, the Agent and a bank at which such Loan Party maintains a Depositary
Account, which Subsidiary Depositary Agreement shall be in substantially the
form of Exhibit P attached hereto, in each case as amended, restated or
otherwise modified from time to time.
"DOL" means the United States Department of Labor and any Person succeeding
to the functions thereof.
"EBITDA" is defined in SECTION 6.4(A) hereof.
"ELIGIBLE INVENTORY" means Inventory which is held for sale or lease or
furnished under any contract of service which is at all times and shall continue
to be acceptable to the Agent in all respects. Standards of eligibility may be
fixed and revised from time to time by the Agent in the Agent's reasonable
business judgment (which credit judgment shall be exercised in a manner that is
not arbitrary or capricious). In general, without limiting the foregoing, the
following Inventory is not Eligible Inventory:
(i) (to the extent not provided for by reserves described in the
definition of the Adjusted Amount of Eligible Inventory) Inventory which is
obsolete, not in good condition, not either currently usable or currently
saleable in the ordinary course of business or does not meet all material
standards imposed by any Governmental Authority having regulatory authority
over such item of Inventory, its use or its sale;
(ii) Inventory which the Agent determines, in the exercise of its
reasonable discretion (which discretion shall not be exercised in a manner
that is arbitrary or capricious), to be unacceptable because it is beyond
the manufacturer's dating or because a recall notice has been issued with
respect thereto;
(iii) Inventory consisting of packaging material, supplies, raw
materials and work in process;
12
<PAGE>
(iv) except to the extent provided in CLAUSE (viii) below,
Inventory (a) which is consigned to a third party for sale or (b) which is
on consignment from a third party to a Loan Party for sale;
(v) Inventory which consists of goods in transit;
(vi) Inventory which is subject to a Lien in favor of any Person
other than the Agent;
(vii) Inventory with respect to which the Agent does not have a
first and valid fully perfected security interest;
(viii) unless subject to a consignment agreement as set forth in
Exhibit D to the Security Agreement and a financing statement as set forth
therein, Inventory maintained by the Loan Parties at any health care
facility (a) for such facility's emergency use (including in such health
care facility's "stat boxes" or emergency kits) or (b) for dispensing to a
patient at such health care facility or for any other purpose (whether or
not consigned to such health care facility for sale) to the extent that the
aggregate value (valued at the lower of cost determined on a first-in-
first-out basis) of such Inventory maintained by all of the Loan Parties at
all such health care facilities exceeds $10,000;
(ix) unless covered by clause (viii) above, Inventory which is not
located either (a) on a Loan Party's owned premises in the United States
listed on Schedule 2 to its Security Agreement or (b) (1) on a Loan Party's
leased premises in the United States listed on Schedule 2-A to its Security
Agreement, (2) in warehouses or with other bailees in the United States, in
each case as listed on Schedule 2-A to its Security Agreement or (3) in
other leased premises, warehouses or with other bailees in the United
States not listed on Schedule 2-A to its Security Agreement permitted to be
established under its Security Agreement or established in connection with
a Permitted Acquisition, in each case under the immediately preceding
clauses (1) through (3) in connection with which the Agent shall have
received landlord, mortgagee, bailee and/or warehousemen's access and lien
waiver agreements, as applicable, in each case in form and substance
acceptable to the Agent.
(x) Inventory which is evidenced by a Receivable;
(xi) Inventory which is a retail pharmacy or other retail facility
consisting of general sundries or floor stock (including school supplies,
stationery, sun glasses and small gift items but excluding greeting cards,
wrapping paper, paperback books, magazines, weekly newspapers), edible
Inventory (including candy, gum and beverages), toiletries (including
shaving creams, razor blades, deodorants, hygiene products), cosmetics,
perfumes, colognes, and Inventory consisting of photo processing items;
(xii) Inventory consisting of medical equipment for rental and/or
sale to customers; provided that notwithstanding the provisions of this
clause (xii), there shall be
13
<PAGE>
included as "Eligible Inventory" the medical equipment held for sale by the
Loan Parties with respect to their respective "home health care" units
which otherwise constitutes Eligible Inventory including, without
limitation, supports, chairs, portable commodes, wheelchairs and hospital
beds; and
(xiii) Inventory which is not in conformity in all material respects
with the representations and warranties made to the Agent with respect
thereto whether contained in this Agreement or a Security Agreement.
Without limiting the foregoing, (1) Inventory of any Loan Party which is
acquired pursuant to a Permitted Acquisition shall not be deemed Eligible
Inventory unless and until the Agent and the Required Lenders, after concluding
any due diligence they reasonably deem necessary, shall be satisfied as to the
condition thereof and that such Inventory would otherwise meet the standards of
eligibility set forth herein (including, without limitation, perfection of the
Agent's security interests in such Inventory) but for the fact that it was
acquired by the applicable Loan Party outside of the ordinary course of
business, (2) Inventory acquired pursuant to such Permitted Acquisition may be
deemed Eligible Inventory from and after such Permitted Acquisition if the
foregoing determinations have been made to the Agent's and the Required Lenders'
satisfaction and (3) Inventory acquired by the Borrower from Amber Enterprises,
Inc. pursuant to the Omaha Asset Purchase Agreement shall be deemed Eligible
Inventory if and to the extent that such Inventory would otherwise meet the
standards of eligibility set forth herein (including, without limitation,
perfection of the Agent's security interest in such Inventory) but for the fact
that it was acquired by the Borrower outside of the ordinary course of business.
"ELIGIBLE RECEIVABLES" means Receivables created in the ordinary course of
business arising out of the sale of goods or rendition of services, which
Receivables are and at all times shall continue to be acceptable to the Agent in
all respects. Standards of eligibility may be fixed and revised from time to
time by the Agent in the Agent's reasonable credit judgment (which credit
judgment shall be exercised in a manner that is not arbitrary or capricious).
In general, without limiting the foregoing, the following Receivables are not
Eligible Receivables:
(i) Receivables (other than Perfected Government Receivables) with
respect to which the Account Debtor is not an Applicable Carrier;
(ii) Receivables (other than Perfected Government Receivables)
which remain unpaid one hundred twenty (120) days after the date of the
original applicable invoice;
(iii) Perfected Government Receivables which remain unpaid one
hundred eighty (180) days after the date of the original applicable
invoice;
(iv) all Receivables (other than Perfected Government Receivables)
owing by a single Account Debtor (including a Receivable which remains
unpaid fewer than the number of days set forth in clause (ii) above) if
twenty-five percent (25%) of the balance owing by such Account Debtor to
all members of the Borrower Corporate Group, calculated without taking into
account any credit balances of such Account Debtor, (y)
14
<PAGE>
remains unpaid one hundred twenty (120) days after the date of the original
applicable invoice or (z) has otherwise become, or has been determined by
the Agent to be, ineligible;
(v) Perfected Government Receivables owing by a single Account
Debtor (including a Receivable which remains unpaid fewer than the
applicable number of days set forth in clause (iii) above) if seventy
percent (70%) of the balance owing by such Account Debtor to all members of
the Borrower Corporate Group, calculated without taking into account any
credit balances of such Account Debtor, (y) remains unpaid one hundred
eighty (180) days after the date of the original applicable invoice or (z)
has otherwise become, or has been determined by the Agent to be,
ineligible;
(vi) (x) Receivables, other than Perfected Government Receivables
and Receivables from the Society, from any single Account Debtor and its
Affiliates which otherwise constitute Eligible Receivables comprising more
than fifteen percent (15%) of all Eligible Receivables of all members of
the Borrower Corporate Group but only to the extent that such Receivables
exceed such fifteen percent amount and (y) Receivables from the Society
which otherwise constitute Eligible Receivables comprising more than fifty
percent (50%) of all Eligible Receivables of the Borrower Corporate Group
but only to the extent such Receivables exceed such fifty percent amount;
(vii) Receivables (other than Receivables from the Society) with
respect to which the Account Debtor is a director, officer, employee,
Subsidiary or Affiliate of any member of the Borrower Corporate Group;
(viii) Receivables, other than Perfected Government Receivables
consisting of Medicare Receivables or Medicaid Receivables, with respect to
which the Account Debtor is any federal Governmental Authority, the United
States of America or any state thereof, or, in each case, any department,
agency, instrumentality or municipality thereof, unless with respect to any
such Receivable, the applicable Loan Party has complied to the Agent's
satisfaction with the provisions of the Federal Assignment of Claims Act or
other applicable statutes, including, without limitation, executing and
delivering to the Agent all statements of assignment and/or notifications
which are in form and substance acceptable to the Agent and which are
deemed necessary by the Agent to effectuate the assignment to the Agent on
behalf of the Lenders of such Receivables;
(ix) Receivables not denominated in U.S. dollars or with respect to
which the Account Debtor is not a resident of the United States unless the
Account Debtor has supplied the applicable Loan Party with an irrevocable
letter of credit, issued by a financial institution satisfactory to the
Agent, sufficient to cover such Receivable in form and substance
satisfactory to the Agent;
(x) Receivables with respect to which the Account Debtor (a) has
asserted or is reasonably likely to assert a counterclaim, including,
without limitation, any periodic reconciliation of such Receivable by such
patient or Payor with respect thereto (other
15
<PAGE>
than in respect of Contractual Allowances), (b) has a right of setoff or
(c) has a receivable owing from the applicable Loan Party but only to the
extent of such counterclaim, setoff or receivable;
(xi) Receivables for which the prospect of payment or performance
by the Account Debtor is or will be impaired (including, without
limitation, as a result of the deterioration of the funding sources or
funding status of any Governmental Authority in connection with any
Government Receivables) as determined by the Agent in the exercise of its
reasonable credit judgment (which credit judgment shall not be exercised in
a manner that is arbitrary or capricious);
(xii) Receivables with respect to which the Agent does not have a
first and valid fully perfected and enforceable security interest
(including, without limitation, such Receivables arising from the
assignment to the applicable Loan Party of any Insurance Claims);
(xiii) Receivables with respect to which the applicable Account
Debtor is the subject of bankruptcy or a similar insolvency proceeding, has
been dissolved or has made an assignment for the benefit of creditors or
whose assets have been conveyed to a receiver or trustee;
(xiv) Receivables with respect to which the Account Debtor's
obligation to pay the Receivable is conditional upon the Account Debtor's
approval or is otherwise subject to any repurchase obligation or return
right, as with sales made on a bill-and-hold, guaranteed sale, sale-and-
return, sale on approval (except with respect to (a) Receivables in
connection with which Account Debtors are entitled to return Inventory on
the basis of the quality of such Inventory or (b) Perfected Government
Receivables in connection with which the patient or applicable health care
facility is entitled to return the unused portion or non-dispensed portion
of such Inventory in the ordinary course and pursuant to requirements of
the applicable Government Authority) or consignment basis;
(xv) Receivables with respect to which the Account Debtor is
located in Minnesota or any other jurisdiction which adopts a statute or
other requirement with respect to which any Person that obtains business
from within such jurisdiction or is otherwise subject to such
jurisdiction's tax law requiring such Person to file a Business Activity
Report or make any other required filings in a timely manner in order to
enforce its claims in such jurisdiction's courts or arising under such
jurisdiction's laws; provided, however, such Receivables shall nonetheless
be eligible if the applicable Loan Party has filed a Business Activity
Report (or other applicable report) with the applicable state office or is
qualified to do business in such jurisdiction and, at the time the
Receivable was created, was qualified to do business in such jurisdiction
or had on file with the applicable state office a current Business Activity
Report (or other applicable report);
16
<PAGE>
(xvi) Receivables with respect to which the Account Debtor's
obligation does not constitute its legal, valid and binding obligation,
enforceable against it in accordance with its terms;
(xvii) Receivables with respect to which the applicable Loan Party
has not yet dispensed or shipped the applicable goods or performed the
applicable service;
(xviii) Receivables which the Agent, exercising reasonable discretion
(which discretion shall not be exercised in a manner that is arbitrary or
capricious), has determined to be unacceptable to it;
(xix) any Receivable which is not in conformity in all material
respects with the representations and warranties made in the Loan Documents
with respect thereto whether contained in this Agreement or a Security
Agreement;
(xx) Receivables in connection with which the applicable Loan Party
has not complied with all material requirements contained in the charter
and by-laws or other organizational or governing documents of the
applicable Loan Party, and any law, rule or regulation, or determination of
an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon the applicable Loan Party or any of its
property or to which the applicable Loan Party or any of its property is
subject, including, without limitation, all laws, rules, regulations and
orders of any Governmental Authority or judicial authority relating to
truth in lending, billing practices, fair credit reporting, equal credit
opportunity, debt collection practices and consumer debtor protection,
applicable to such Receivable (or any related contracts) or affecting the
collectability of such Receivables to the extent that (x) such
noncompliance may result in such Receivable being deemed invalid or
uncollectible, (y) such noncompliance impairs the Agent's ability to
realize on its security interest therein or (z) such noncompliance impairs
the value of such Receivable;
(xxi) Receivables in connection with which the applicable Loan
Party or any other party to such Receivable is in default in the
performance or observance of any of the terms thereof in any material
respect; and
(xxii) Receivables with respect to which (a) the applicable Loan
Party has not received an enforceable assignment of the applicable
patient's claim or (b) the applicable Loan Party's right to receive payment
from the Applicable Carrier or other Payor is not mature.
Without limiting the foregoing, (i) Receivables of any Loan Party which are
acquired pursuant to a Permitted Acquisition shall not be deemed Eligible
Receivables unless and until the Agent and the Required Lenders, after
concluding any due diligence they reasonably deem necessary, shall be satisfied
as to the quality and creditworthiness thereof and that such Receivables would
otherwise meet the standards of eligibility set forth herein (including, without
limitation, perfection and priority of the Agent's security interests in such
Receivables) but for the fact that
17
<PAGE>
they were acquired by the Loan Party outside of the ordinary course of business
and (ii) Receivables acquired pursuant to such Permitted Acquisition may be
deemed Eligible Receivables from and after such Permitted Acquisition if the
foregoing determinations have been made to the Agent's and the Required Lenders'
satisfaction.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all
Requirements of Law that are federal, state and local laws, ordinances, rules,
regulations, Permits, licenses or other binding determination of any
Governmental Authority relating to, imposing liability or standards concerning,
or otherwise addressing the environment (including, without limitation, those
applicable to the disposal of medical waste), health and/or protection of worker
health or safety, including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., the
Occupational Safety and Health Act of 1970, 29 U.S.C. Sections 651 et seq, the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901 ET SEQ.,
and the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Sections
136 et seq, public health codes and Health License requirements, in each case
including any amendments thereto, any successor statutes, and any regulations
promulgated thereunder, and any state or local equivalent thereof.
"ENVIRONMENTAL LIEN" means a lien in favor of any governmental entity for
(a) any liability under Environmental, Health or Safety Requirements of Law, or
(b) damages arising from, or costs incurred by such governmental entity in
response to, a release or threatened release of a contaminant (including,
without limitation, any medical waste) into the environment.
"ENVIRONMENTAL PROPERTY TRANSFER ACT" means any applicable requirement of
law that conditions, restricts, prohibits or requires any notification or
disclosure triggered by the closure of any property or the transfer, sale or
lease of any property or deed or title for any property for environmental
reasons, including, but not limited to, any so-called "Industrial Site Recovery
Act" or "Responsible Property Transfer Act."
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time including (unless the context otherwise requires) any
rules or regulations promulgated thereunder.
"EURODOLLAR ADVANCE" means an Advance which bears interest at the
Eurodollar Rate.
"EURODOLLAR BASE RATE" means, with respect to a Eurodollar Loan for the
relevant Interest Period, the rate determined by the Agent to be the rate at
which deposits in U.S. dollars are offered by LaSalle to first-class banks in
the London interbank market at approximately 11 a.m. (London time) two Business
Days prior to the first day of such Interest Period, in the approximate amount
of LaSalle's relevant Eurodollar Loan and having a maturity approximately equal
to such Interest Period, as adjusted for Reserves.
"EURODOLLAR LOAN" means a Loan, or portion thereof, which bears interest at
the Eurodollar Rate.
18
<PAGE>
"EURODOLLAR RATE" means, with respect to a Eurodollar Loan for the relevant
Interest Period, the Eurodollar Base Rate applicable to such Interest Period
PLUS the Applicable Eurodollar Margin as in effect on the first day of such
Interest Period. The Eurodollar Rate shall be rounded to the next higher
multiple of 1/16 of 1% if the rate is not such a multiple.
"EXCESS CASH FLOW" means, for any Cash Flow Period, an amount equal to the
Borrower Corporate Group's consolidated (i) earnings before interest expense,
tax expense, depreciation and amortization for such period, PLUS (ii) the net
reduction, if any, in Working Capital during such period, MINUS, (iii) the net
increase, if any, in Working Capital during such period, MINUS (iv) current (not
deferred) income taxes, whether paid in cash or accrued, MINUS (v) Capital
Expenditures, whether paid in cash or accrued during such period, MINUS (vi)
Interest Expense for such period, MINUS (vii) scheduled amortization of the
principal portion of the Term Loans and the Acquisition Loans and scheduled
amortization of the principal portion of all other Indebtedness of Borrower
Corporate Group during such period, MINUS (viii) the aggregate amount (without
duplication) of (x) cash dividends and/or cash redemptions paid during such
period with respect to all of the Loan Parties' Capital Stock and permitted
pursuant to SECTION 6.3(F), (y) Restricted Junior Payments (other than
Contingent Purchase Price Payments) paid during such period pursuant to SECTION
6.3(F) and (z) Contingent Purchase Price Payments required to be paid with
respect to such period (but only to the extent thereafter actually paid) and
permitted pursuant to SECTION 6.3(F), MINUS (ix) all prepayments of Loans made
(other than ordinary course repayments of the Revolving Loans), PLUS or MINUS
(x) reductions or increases in long-term assets, as calculated in accordance
with Agreement Accounting Principles and not otherwise accounted for herein
(excluding therefrom reductions resulting in Net Cash Proceeds for which the
Lenders have received a mandatory prepayment pursuant to SECTION 2.5(B)(i)(a)),
PLUS or MINUS (xi) increases or decreases in long-term liabilities, as
calculated in accordance with Agreement Accounting Principles and not otherwise
accounted for herein. All such amounts shall be calculated assuming that each
Loan Party has conducted their respective businesses in the ordinary course and
in accordance with past practices.
"EXCLUDED INSURANCE PROCEEDS" is defined in SECTION 6.2(G) hereof.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, an interest rate per
annum, equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"FEES" is defined in SECTION 6.4(A) hereof.
"FIXED CHARGE COVERAGE RATIO" is defined in SECTION 6.4(A) hereof.
19
<PAGE>
"FLOATING RATE" means, for any day, a rate per annum, equal to (i) the
Alternate Base Rate for such day PLUS (ii) the Applicable Floating Rate Margin,
changing when and as the Alternate Base Rate and/or the Applicable Floating Rate
Margin changes.
"FLOATING RATE ADVANCE" means an Advance which bears interest at the
Floating Rate.
"FLOATING RATE LOAN " means a Loan, or portion thereof, which bears
interest at the Floating Rate.
"FOUNDATION" means The Evangelical Lutheran Good Samaritan Foundation, a
not-for-profit corporation organized under the laws of the State of Minnesota,
and its successors and assigns.
"GOVERNMENT RECEIVABLES" means, collectively, Medicaid Receivables,
Medicare Receivables, and CHAMPUS Receivables, and other Receivables from a
Governmental Authority payable to the Borrower or a Subsidiary under government
health care reimbursement and/or payment programs.
"GOVERNMENTAL ACTS" is defined in SECTION 2.26(A) hereof.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, HCFA, HHS, the Office
of CHAMPUS and any other entity responsible for administering payment of any
Government Receivables, including, without limitation in connection with the
black lung program, the railroad retirement assistance program or veterans
programs.
"GROSS NEGLIGENCE" means recklessness, the absence of the slightest care or
the complete disregard of consequences. Gross Negligence does not mean the
absence of ordinary care or diligence, or an inadvertent act or inadvertent
failure to act. To the extent the term "gross negligence" is used with respect
to any Person in any of the other Loan Documents, it shall have the meaning set
forth herein.
"HCFA" means the Healthcare Financing Administration of HHS and any Person
succeeding to the functions thereof.
"HEALTH LICENSE" means a license or other similar authorization issued by a
federal or state health agency or similar agency or body, including, without
limitation, a Controlled Substances License, a DEA License and a Pharmacy
License.
"HHS" means the Department of Health and Human Services and any Person
succeeding to the functions thereof.
"HOLDERS OF SECURED OBLIGATIONS" is defined as set forth in the Security
Agreements.
20
<PAGE>
"INCOME TAX" OR "INCOME TAXES" means all federal, state, local, and foreign
taxes (i) based upon, measured by, or calculated with respect to, gross or net
income (including, but not limited to, any capital gains taxes, franchise taxes,
branch profits taxes, minimum taxes and any taxes on items of tax preference)
and (ii) any tax based on, measured by, or calculated with respect to multiple
bases (including, but not limited to, franchise or occupation taxes) if one or
more of the bases on which such tax may be based, measured by, or computed with
respect to, is described in (i) above. With respect to the Agent or a Lender,
"Income Tax" or "Income Taxes" shall include United States federal withholding
taxes under Code Sections 881 and 1442 (or any successor provisions thereto)
imposed on the Lender or the Agent unless the Lender or the Agent, as the case
may be, was not subject to such withholding taxes (either under an applicable
tax treaty concluded by the United States or under the provisions of Code
Sections 881 and 1442) on the later of (i) the Closing Date or (ii) the date on
which the Lender became a Lender or such Agent became the Agent.
"INDEBTEDNESS" of any Person means (i) any indebtedness of such Person,
contingent or otherwise, in respect of borrowed money including all principal,
interest, fees and expenses with respect thereto (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, acceptances, debentures or other
instruments or letters of credit (or reimbursement obligations with respect
thereto, including Reimbursement Obligations under the Letters of Credit) or
representing the balance deferred and unpaid of the purchase price of any
property (including pursuant to Capitalized Leases) or services, if and to the
extent any of the foregoing indebtedness would appear as a liability upon a
balance sheet of such Person prepared in accordance with Agreement Accounting
Principles (except that any such balance that constitutes a trade payable and/or
an accrued liability arising in the ordinary course of business payable in
accordance with customary and usual terms and as to which no interest or other
charge is payable shall not be considered Indebtedness); (ii) to the extent not
otherwise included, (a) interest accruing after the commencement of any
bankruptcy, insolvency, receivership or similar proceedings and other interest
that would have accrued but for the commencement of such proceedings, (b) any
Capitalized Lease Obligations, (c) the maximum fixed repurchase price of any
Redeemable Stock, (d) obligations, whether or not assumed, secured by Liens or
payable out of the proceeds or production from property now or hereafter owned
or acquired by such Person, (e) Contingent Obligations (exclusive of whether
such items would appear upon such balance sheet) and (f) Rate Hedging
Obligations. For purposes of the preceding sentence, the maximum fixed
repurchase price of any Redeemable Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Redeemable Stock
as if such Redeemable Stock were repurchased on any date on which Indebtedness
shall be required to be determined pursuant to this Agreement, PROVIDED that if
such Redeemable Stock is not then permitted to be repurchased, the repurchase
price shall be the book value of such Redeemable Stock. The amount of
Indebtedness of any Person at any date shall be without duplication (i) the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability of any such Contingent Obligations at such date
and (ii) in the case of Indebtedness of others secured by a Lien to which the
property or assets owned or held by such Person is subject, the lesser of the
21
<PAGE>
fair market value at such date of any asset subject to a Lien securing the
Indebtedness of others and the amount of the Indebtedness secured.
"INDEMNITY MATTERS" is defined in SECTION 9.7(B) hereof.
"INDEMNITEES" is defined in SECTION 9.7(B) hereof.
"INSURANCE CLAIMS" shall mean all now owned or hereafter acquired claims,
rights and interests of any Loan Party arising from a patient's assignment of
his or her claim against an insurance company, proponent of a health plan or
other Person, for services performed for, or Inventory sold to, such patient by
such Loan Party; PROVIDED Insurance Claims shall not be construed to include any
claims governed by CHAMPUS, CHAMPUS Regulations, Medicare Regulations or
Medicaid Regulations.
"INTEREST EXPENSE" is defined in SECTION 6.4(A) hereof.
"INTEREST EXPENSE COVERAGE RATIO" is defined in SECTION 6.4(B) hereof.
"INTEREST PERIOD" means, with respect to a Eurodollar Loan, a period of one
(1), two (2), three (3) or six (6) months commencing on a Business Day selected
by the Borrower pursuant to this Agreement. Such Interest Period shall end on
(but exclude) the day which corresponds numerically to such date one, two, three
or six months thereafter; provided, however, that if there is no such
numerically corresponding day in such next, second, third or sixth succeeding
month, such Interest Period shall end on the last Business Day of such next,
second, third or sixth succeeding month. If an Interest Period would otherwise
end on a day which is not a Business Day, such Interest Period shall end on the
next succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.
"INTEREST RATE AGREEMENTS" is defined in SECTION 6.3(S) hereof.
"INTERPLAN" shall mean a paying agent for certain out-of-state Blue Cross
and/or Blue Shield claims.
"INVENTORY" shall mean any and all goods, including, without limitation,
goods in transit, wheresoever located, whether now owned or hereafter acquired
by any of the Loan Parties, which are held for sale or lease, furnished under
any contract of service or held as raw materials, work in process or supplies,
and all materials used or consumed in any of the businesses of the applicable
Loan Party, and shall include such property the sale or other disposition of
which has given rise to Receivables and which has been returned to or
repossessed or stopped in transit by any Loan Party.
"INVESTMENT" means, with respect to any Person, (i) any purchase or other
acquisition by that Person of stock, partnership interest, membership, ownership
or other equity interests, notes, debentures or other securities, or of a
beneficial interest in stock, partnership interest,
22
<PAGE>
membership, ownership or other equity interests, notes, debentures or other
securities, issued by any other Person, (ii) any purchase by that Person of all
or substantially all of the assets of a business conducted by another Person,
and (iii) any loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, accounts receivable,
advances to employees and similar items made or incurred in the ordinary course
of business) or capital contribution by that Person to any other Person,
including all Indebtedness to such Person arising from a sale of property by
such Person other than in the ordinary course of its business.
"IRS" means the Internal Revenue Service and any Person succeeding to the
functions thereof.
"JCAHO" means the Joint Commission for Accreditation of Healthcare
Organizations or any Person succeeding to the functions thereof.
"KNOWLEDGE" means as applied to any Person generally, the actual knowledge,
after due inquiry, of any fact or circumstance or any fact or circumstance which
such Person should have known, with respect to any of the (A) chairman of the
board of directors, chief executive officer, chief financial officer, treasurer
and/or controller of such Person (or persons performing the functions typically
performed by persons with such titles) and (B) the senior corporate executive
officers and chairman of the board of each Subsidiary of such Person; provided,
however, with respect to Requirements of Law and other matters regulated by any
Governmental Authority the list of Persons in clauses (A) and (B) shall include
the persons primarily responsible for monitoring and ensuring compliance with
such Requirements of Law and other regulatory matters or Persons succeeding to
their respective duties as employees of the such Person as of the Closing Date.
"ISSUING LENDER" is defined in SECTION 2.21 hereof.
"L/C DRAFT" means a draft drawn on any Issuing Lender pursuant to a Letter
of Credit.
"L/C INTEREST" shall have the meaning ascribed to such term in SECTION
2.22.
"L/C OBLIGATIONS" means, without duplication, an amount equal to the sum of
(i) the aggregate of the amount then available for drawing under the Letters of
Credit, (ii) the face amounts of all outstanding L/C Drafts, which L/C Drafts
have been accepted by the applicable Issuing Lender, (iii) the aggregate
outstanding amount of all Reimbursement Obligations and (iv) the aggregate face
amount of all Letters of Credit requested but not yet issued (unless the request
for an unissued Letter of Credit has been denied).
"LASALLE" means LaSalle National Bank, in its individual capacity, and its
successors.
"LENDERS" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns. Unless the context
otherwise requires, references in this Agreement to a Lender or to the Lenders
shall be to such lending institutions in their capacity as a Lender or an
Issuing Lender hereunder.
23
<PAGE>
"LENDING INSTALLATION" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"LETTER OF CREDIT" means the letters of credit to be issued by one or more
of the Issuing Lenders pursuant to SECTION 2.21 hereof.
"LEVERAGE RATIO" shall have the meaning ascribed to that term in SECTION
6.4(E) hereof.
"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, the interest of a vendor or lessor
under any conditional sale, Capitalized Lease or other title retention
agreement).
"LOAN(S)" means (i) with respect to a Lender, such Lender's portion of any
Advance made pursuant to SECTION 2.1 or SECTION 2.2, as applicable, (ii) with
respect to the Borrower, Advances made to the Borrower pursuant to SECTION 2.1
or SECTION 2.2, as applicable, and (iii) collectively, all Term Loans,
Acquisition Loans and Revolving Loans, whether made or continued as or converted
to Floating Rate Loans or Eurodollar Loans.
"LOAN ACCOUNT" is defined in SECTION 2.15(F) hereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Subsidiary
Guarantees, the Security Agreements, the Pledge Agreements, the other Collateral
Documents and all other documents, instruments and agreements executed by or on
behalf of any member of the Borrower Corporate Group in connection herewith or
therewith or contemplated hereby or thereby, as the same may be amended,
restated or otherwise modified and in effect from time to time.
"LOAN PARTIES" shall mean and include the Borrower and each other member of
the Borrower Corporate Group and "LOAN PARTY" shall mean any of the foregoing.
"LOCK BOX" means each lock box and lock box account maintained by the
Borrower or any other Loan Party, subject to a Lock Box Agreement, for the
collection of Receivables (other than Medicare Receivables and Medicaid
Receivables) and other proceeds of Collateral.
"LOCK BOX AGREEMENT(S)" means, individually or collectively, as applicable,
the Lock Box Agreement executed between the Borrower and LaSalle relating to the
establishment and maintenance of a lock box and lock box account at LaSalle for
the collection of Receivables (other than Medicare Receivables and Medicaid
Receivables) and other proceeds of Collateral, and any written agreement between
any other Loan Party and LaSalle, as the bank at which such Loan Party maintains
a Lock Box, which Subsidiary Lock Box Agreement shall be in substantially the
form attached hereto as Exhibit Q, in each case as amended, restated or
otherwise modified from time to time.
24
<PAGE>
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (a) the
business, financial condition, operations, performance or properties of the
Borrower and its Subsidiaries, taken as a whole, (b) the ability of any Loan
Party to perform any of its respective obligations in any material respect under
the Loan Documents, or (c) the ability of the Lenders or the Agent to enforce in
any material respect the Obligations or their rights with respect to the
Collateral.
"MAXIMUM REVOLVING CREDIT AMOUNT" means, at any particular time, (i) the
lesser of (A) the Revolving Credit Commitments at such time and (B) the
Borrowing Base at such time, LESS (ii) the amount of any Decision Reserve in
effect at such time.
"MEDICAID CERTIFICATION" means, with respect to any Person or health care
facility, certification by HCFA or a state agency or entity under contract with
HCFA that such Person or facility, as applicable, fully complies with all the
conditions of participation set forth in Medicaid Regulations.
"MEDICAID RECEIVABLE" means a Receivable with respect to which the Account
Debtor is a Governmental Authority or agent thereof obligated thereunder
pursuant to Medicaid Regulations.
"MEDICAID REGULATIONS" means, collectively, (i) all federal statutes
(whether set forth in Title XIX of the Social Security Act (42 U.S.C. Sections
1396 ET SEQ.) or elsewhere) affecting the medical assistance program established
by Title XIX of the Social Security Act; (ii) all applicable provisions of all
federal rules, regulations, manuals, orders and administrative, reimbursement
and other guidelines of all Governmental Authorities (whether or not having the
force of law) promulgated pursuant to or in connection with the statutes
described in CLAUSE (i) above; (iii) all state statutes enacted and all state
plans for medical assistance and state plan amendments filed by the state with
HCFA in connection with the statutes and provisions described in CLAUSES (i) and
(ii) above; and (iv) all applicable provisions of all rules, regulations,
manuals, orders and administrative, reimbursement, and other guidelines of all
Governmental Authorities (whether or not having the force of law) promulgated
pursuant to or in connection with any of the foregoing, in each case as may be
amended, supplemented or otherwise modified from time to time.
"MEDICARE CERTIFICATION" means, with respect to any Person or health care
facility, certification by HCFA or a state agency or entity under contract with
HCFA that such Person or facility, as applicable, fully complies with all the
conditions of participation set forth in Medicare Regulations.
"MEDICARE RECEIVABLE" means a Receivable with respect to which the Account
Debtor is a Governmental Authority or agent thereof obligated thereunder
pursuant to Medicare Regulations.
"MEDICARE REGULATIONS" means, collectively, all federal statutes (whether
set forth in Title XVIII of the Social Security Act (42 U.S.C. Sections 1395 ET
SEQ.) or elsewhere) affecting the health insurance program for the aged and
disabled established by Title XVIII of the Social
25
<PAGE>
Security Act, together with all applicable provisions of all rules, regulations,
manuals, orders and administrative, reimbursement and other guidelines of all
Governmental Authorities (including, without limitation, HHS, HCFA, the Office
of the Inspector General for HHS, or any Person succeeding to the functions of
any of the foregoing) promulgated pursuant to or in connection with any of the
foregoing (whether or not having the force of law), as each may be amended,
supplemented or otherwise modified from time to time.
"MULTIEMPLOYER PLAN" means a Plan as defined in Section 4001(a)(3) of ERISA
to which the Borrower or any member of the Controlled Group is, or ever has,
contributed or to which the Borrower or any member of the Controlled Group has,
or ever has had, an obligation to contribute.
"NET CASH PROCEEDS" means, with respect to any Asset Sale of any Person,
(a) cash (freely convertible into U.S. dollars) received by such Person or any
Subsidiary of such Person from such Asset Sale (including cash received as
consideration for the assumption or incurrence of liabilities incurred in
connection with or in anticipation of such Asset Sale), after (i) provision for
all income or other taxes measured by or resulting from such Asset Sale, (ii)
payment of all brokerage commissions and other fees and expenses related to such
Asset Sale, (iii) all amounts used to repay Indebtedness secured by a Lien on
any asset disposed of in such Asset Sale or which is or may be required (by the
express terms of the instrument governing such Indebtedness) to be repaid in
connection with such Asset Sale (including payments made to obtain or avoid the
need for the consent of any holder of such Indebtedness), and (iv) deduction of
appropriate amounts to be provided by such Person or a Subsidiary of such Person
as a reserve, in accordance with Agreement Accounting Principles, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by such Person or a Subsidiary of such Person after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold or disposed of in
such Asset Sale; and (b) cash payments in respect of any Indebtedness, Capital
Stock or other consideration received by such Person or any Subsidiary of such
Person from such Asset Sale upon receipt of such cash payments by such Person or
such Subsidiary.
"NET INCOME" is defined in SECTION 6.4(A) hereof.
"NON-CONTROLLED AFFILIATE" means each Affiliate of the Borrower and each
Affiliate of any such Affiliate which is not a member of the Borrower Corporate
Group.
"NON PRO RATA LOAN" is defined in SECTION 8.2 hereof.
"NOTES" means the Revolving Notes, the Acquisition Loan Notes and the Term
Notes.
"NOTICE OF ASSIGNMENT" is defined in SECTION 12.3(B) hereof.
"OBLIGATIONS" means all Loans, advances, debts, liabilities, obligations,
covenants and duties owing by the Borrower or any other Loan Party to the Agent,
any Issuing Lender, any
26
<PAGE>
Lender, or any Indemnitee, of any kind or nature, present or future, arising
under this Agreement, the Notes or any other Loan Document, whether or not
evidenced by any note, guaranty or other instrument, whether or not for the
payment of money, whether arising by reason of an extension of credit, loan,
guaranty, indemnification, or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The term
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and disbursements, paralegals' fees (in each case whether or not allowed),
and any other sum chargeable to the Borrower or any Loan Party under this
Agreement or any other Loan Document.
"OMAHA ACQUISITION" means the acquisition by the Borrower of substantially
all of the assets of Amber Enterprises, Inc. pursuant to and in accordance with
the Omaha Asset Purchase Agreement.
"OMAHA ASSET PURCHASE AGREEMENT" means the Asset Purchase Agreement dated
as of May 14, 1996 by and between the Borrower and Amber Enterprises, Inc.
(d/b/a Unidose LTC Pharmacy), as said Asset Purchase Agreement may be amended,
supplemented or modified from time to time with the prior written consent of the
Agent and the Required Lenders.
"OTHER TAXES" is defined in SECTION 2.15(E)(ii) hereof.
"OVER-ADVANCE" is defined in SECTION 2.18 hereof.
"PARENT PLEDGE AGREEMENT" means each of (i) the Parent Pledge Agreement
executed by AMC to the Agent for the benefit of itself and the Holders of
Secured Obligations and (ii) the Parent Pledge Agreement executed by the
Foundation to the Agent for the benefit of itself and the Holders of Secured
Obligations, in each case as the same may from time to time be amended,
modified, supplemented or restated.
"PARTICIPANTS" is defined in SECTION 12.2(A) hereof.
"PAYMENT DATE" means the first Business Day of each calendar month.
"PAYOR" shall mean an insurance company, a proponent of a healthcare plan
and other Persons reasonably acceptable to the Agent and the Required Lenders.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PERFECTED GOVERNMENT RECEIVABLES" means Receivables with respect to which
the Account Debtor is any federal, state or municipal Governmental Authority or
any agency or instrumentality thereof in connection with which the Agent has
received an opinion of counsel, from a firm and in form and substance
satisfactory to the Agent, with respect to perfection of the Agent's security
interest with respect thereto.
27
<PAGE>
"PERMITS" means any permit, approval, authorization, license, variance, or
permission required from a Governmental Authority or other Person under an
applicable Requirement of Law, and shall include, without limitation,
Accreditations, CONs, Health Licenses, CHAMPUS Certifications, Medicaid
Certifications, and Medicare Certifications.
"PERMITTED ACQUISITION" is defined in SECTION 6.3(H) hereof and, in any
event, shall include the Omaha Acquisition.
"PERMITTED EXISTING CONTINGENT OBLIGATIONS" means those Contingent
Obligations of any Loan Party identified as such on SCHEDULE 1.1.1 to this
Agreement.
"PERMITTED EXISTING INDEBTEDNESS" means the Indebtedness of each Loan Party
identified as such on SCHEDULE 1.1.2 to this Agreement.
"PERMITTED EXISTING INVESTMENTS" means the Investments of each Loan Party
identified as such on SCHEDULE 1.1.3 to this Agreement.
"PERMITTED EXISTING LIENS" means the Liens on assets of any Loan Party
identified as such on SCHEDULE 1.1.4 to this Agreement.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" means the Indebtedness permitted
pursuant to SECTION 6.3(A)(viii).
"PERMITTED SUBORDINATED INDEBTEDNESS" means Subordinated Indebtedness, if
any, permitted pursuant to SECTION 6.3(A)(iii) and shall include Acquisition
Subordinated Debt, if any, permitted pursuant to SECTION 6.3(A)(iv).
"PERSON" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"PHARMACY LICENSES" means any state licenses, permits, approvals,
registrations or other authorizations required to operate a pharmacy.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA in
respect of which the Borrower or any member of the Controlled Group is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"PLEDGE AGREEMENT(S)" means individually or collectively, as applicable,
(a) each of the Parent Pledge Agreements executed by AMC and the Foundation in
favor of the Agent, for the benefit of itself and the Holders of Secured
Obligations, pursuant to which AMC and the Foundation, respectively, pledge all
of the Capital Stock of the Borrower held by it; (b) a Pledge Agreement executed
by the Borrower in favor of the Agent, for the benefit of itself and the Holders
of Secured Obligations, pursuant to which the Borrower pledges all of the
Capital Stock owned by the Borrower in each of its Subsidiaries, as now owned or
hereafter owned or acquired,
28
<PAGE>
which Pledge Agreement shall be in substantially the form of Exhibit R attached
hereto; and (c) any Pledge Agreement executed from time to time by a Subsidiary
of the Borrower in favor of the Agent, for the benefit of itself and the Holders
of Secured Obligations, pursuant to which such Subsidiary pledges all of the
Capital Stock owned by such Subsidiary in each of its Subsidiaries, in each case
as now owned or hereafter owned or acquired by the respective pledgor to the
Agent as collateral security for the Secured Obligations, which Subsidiary
Pledge Agreement shall be in substantially the form of Exhibit E attached
hereto, in each case as the same may from time to time be amended, modified,
supplemented or restated.
"PRIME RATE" means the prime rate of interest announced by LaSalle from
time to time (which is not necessarily LaSalle's lowest or most favorable rate
of interest at any particular time), changing when and as said prime rate
changes.
"PRO RATA SHARE" means, with respect to any Lender, the percentage obtained
by dividing (A) the sum of such Lender's Term Loan Commitment, Acquisition Loan
Commitment and/or Revolving Credit Commitment, as the context requires, at such
time (in each case, as adjusted from time to time in accordance with the
provisions of this Agreement or to give effect to any applicable Assignment) by
(B) the sum of the Aggregate Term Loan Commitment, the Aggregate Acquisition
Loan Commitment and/or the Aggregate Revolving Loan Commitment at such time;
PROVIDED, HOWEVER, if the Term Loan Commitments, Revolving Loan Commitments
and/or Acquisition Loan Commitments are terminated pursuant to the terms of this
Agreement, then "Pro Rata Share" shall be determined by reference to the
outstanding principal amounts of the Term Loans, Revolving Loans and/or
Acquisition Loans, as applicable.
"PROVIDER AGREEMENT" means, with respect to any health care facility to
which any Loan Party provides services or sells Inventory, the agreement between
such health care facility and CHAMPUS, the state agency administering the
Medicaid program and/or HCFA under which such health care facility agrees to
provide services for CHAMPUS patients, Medicaid patients and/or Medicare
patients, as applicable, in accordance with the terms of such agreement and the
applicable CHAMPUS Regulations, Medicaid Regulations and/or Medicare
Regulations.
"PURCHASERS" is defined in SECTION 12.3(A) hereof.
"RATE HEDGING OBLIGATIONS" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or cross-
currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"RATE OPTION" means the Eurodollar Rate or the Floating Rate.
29
<PAGE>
"RECEIVABLE(S)" means and includes, with respect to any Person, all of such
Person's presently existing and hereafter arising or acquired accounts, accounts
receivable, including, without limitation, Government Receivables, and all
present and future rights of such Person to payment for goods sold or leased or
for services rendered (except those evidenced by instruments or chattel paper),
whether or not they have been earned by performance, and all rights in any
merchandise or goods which any of the same may represent, and all rights, title,
security and guaranties with respect to each of the foregoing, including,
without limitation, any right of stoppage in transit.
"REDEEMABLE STOCK" means any Capital Stock which by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, in whole or in part, prior to December 31, 2003 or is, by its terms
or upon the happening of any event, redeemable at the option of the holder
thereof, in whole or in part, prior to December 31, 2003.
"REGISTER" is defined in SECTION 12.3(C) hereof.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"REIMBURSEMENT OBLIGATION" is defined in SECTION 2.23 hereof.
"RENTALS" is defined in SECTION 6.4(A) hereof.
"REPLACEMENT LENDER" is defined in SECTION 2.20 hereof.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, PROVIDED, HOWEVER, that a failure to meet the
minimum funding standards of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"REQUIRED LENDERS" means Lenders whose Pro Rata Shares, in the aggregate,
are equal to or greater than sixty-six and two-thirds percent (66-2/3%);
PROVIDED, HOWEVER, that, in the
30
<PAGE>
event any of the Lenders shall have failed to fund its Pro Rata Share of any
Revolving Loan, Term Loan or Acquisition Loan requested by the Borrower which
such Lenders are obligated to fund under the terms of this Agreement and any
such failure has not been cured, then for so long as such failure continues,
"REQUIRED LENDERS" means Lenders (excluding all Lenders whose failure to fund
their respective Pro Rata Shares of such Revolving Loan, Term Loan or
Acquisition Loan have not been so cured) whose Pro Rata Shares represent sixty-
six and two-thirds percent (66-2/3%) or more of the aggregate Pro Rata Shares of
the remaining Lenders.
"REQUIREMENTS OF LAW" means, as to any Person, the charter and by-laws or
other organizational or governing documents of such Person, and any law, rule or
regulation, or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject including,
without limitation, the Securities Act, the Securities Exchange Act, Regulations
G, U and X, ERISA, the Fair Labor Standards Act, the Worker Adjustment and
Retraining Notification Act, Americans with Disabilities Act of 1990, the Social
Security Act, CHAMPUS Regulations, Medicaid Regulations, Medicare Regulations,
any CON, and any certificate of occupancy, zoning ordinance, building,
environmental or land use requirement or Permit or environmental, labor,
employment, occupational safety or health law, rule or regulation, including
Environmental, Health or Safety Requirements of Law (including, without
limitation, those applicable to the disposal of medical waste).
"RESERVES" shall mean the maximum reserve requirement, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) with respect
to "Eurocurrency liabilities" or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on Eurodollar
Loans is determined or category of extensions of credit or other assets which
includes loans by a non-United States office of any Lender to United States
residents.
"RESTRICTED ACCOUNT" is defined in SECTION 2.12(e) hereof.
"RESTRICTED ACCOUNT AGREEMENT" is defined in SECTION 2.12(e) hereof.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of Capital Stock of
any Loan Party now or hereafter outstanding, except (A) a dividend payable to
the Borrower or (B) a dividend payable solely in shares of stock of the
Borrower, (ii) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of Capital Stock of any Loan Party now or hereafter outstanding, (iii)
any payment or prepayment of principal of, premium, if any, or interest, fees or
other charges on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with
respect to any Permitted Subordinated Indebtedness, (iv) any payment made to
redeem, purchase, repurchase or retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any class of
Capital Stock of any Loan Party now or hereafter outstanding, (v) any payment of
a claim for the rescission of the purchase or sale of, or for material damages
arising from the purchase or sale of any Permitted Subordinated
31
<PAGE>
Indebtedness or any shares of the capital stock of any Loan Party or of a claim
for reimbursement, indemnification or contribution arising out of or related to
any such claim for damages or rescission, (vi) any payment of management fees,
investment fees, professional services fees, expense reimbursements or any other
amounts by any Loan Party to any Non-Controlled Affiliate of any Loan Party and
(vii) any Contingent Purchase Price Payments.
"REVOLVING CREDIT AVAILABILITY" means, at any particular time, the amount
by which the Maximum Revolving Credit Amount at such time exceeds the Revolving
Credit Obligations at such time.
"REVOLVING CREDIT OBLIGATIONS" means, at any particular time (i) the
aggregate outstanding principal amount of all of the Revolving Loans at such
time, PLUS (ii) the aggregate L/C Obligations at such time.
"REVOLVING LOAN(S)" is defined in Section 2.2 hereof.
"REVOLVING LOAN COMMITMENT" means, with respect to any Lender, the
obligation of such Lender to make Revolving Loans and to purchase participations
in Letters of Credit on the terms and conditions of this Agreement, and which
shall not exceed the aggregate principal amount set forth on EXHIBIT B opposite
such Lender's name under the heading "Revolving Loan Commitment" or as indicated
in the Assignment by which it became a Lender, in each case as modified from
time to time pursuant to the terms of this Agreement or to give effect to any
applicable Assignment.
"REVOLVING NOTE" means a promissory note, in substantially the form of
EXHIBIT C1 hereto, duly executed by the Borrower and payable to the order of a
Lender in the amount of its Revolving Loan Commitment, including any amendment,
restatement, modification, renewal or replacement of such Revolving Note.
"RISK BASED CAPITAL GUIDELINES" is defined in SECTION 3.2 hereof.
"SECURED OBLIGATIONS" means, collectively, (i) the Obligations and (ii) all
Rate Hedging Obligations owing to one or more Lenders under one or more Interest
Rate Agreements.
"SECURITY AGREEMENT(S)" means (i) that certain Security Agreement dated as
of the date hereof executed by the Borrower as of the date of this Agreement in
favor of the Agent for the benefit of the Agent and the Holders of Secured
Obligations, and (ii) each Security Agreement executed from time to time by any
other Loan Party in favor of the Agent for the benefit of the Agent and the
Holders of Secured Obligations in connection with this Agreement, which
Subsidiary Security Agreement shall be in substantially the form of EXHIBIT D
attached hereto, in each case as amended, restated or otherwise modified from
time to time.
"SHAREHOLDERS AGREEMENT" means the Shareholders Agreement dated as of
April 30, 1996 by and among the Borrower, AMC and the Foundation, as in effect
on the date hereof and
32
<PAGE>
as it may hereafter be amended, supplemented or modified from time to time with
the prior written consent of the Agent and the Required Lenders.
"SHARE PURCHASE AGREEMENT" means the Share Purchase Agreement dated as of
April 30, 1996 by and between the Company and AMC, as it may hereafter be
amended, supplemented or modified from time to time with the prior written
consent of the Agent and the Required Lenders.
"SINGLE EMPLOYMENT PLAN" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"SOCIAL SECURITY ACT" means the Social Security Act, 42 U.S.C. Sections 301
ET SEQ., any amendments thereto, any successor statutes, and any regulations or
guidance promulgated thereunder.
"SOCIETY" means the Evangelical Lutheran Good Samaritan Society, a non-
profit corporation organized under the laws of the State of North Dakota, and
its successors and assigns.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of any Loan Party, the
payment of which is subordinated to payment of the Secured Obligations to the
written satisfaction of the Required Lenders.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "SUBSIDIARY"
shall mean a Subsidiary of the Borrower.
"SUBSIDIARY GUARANTEES" means each of the Guarantees executed from time to
time by any Loan Party in favor of the Agent for the benefit of the Agent and
the Holders of Secured Obligations in connection with this Agreement, which
Guarantees shall be in substantially the form of EXHIBIT G attached hereto, in
each case as amended, restated or otherwise modified from time to time.
"TARGET" is defined in the definition of Acquisition above.
"TAXES" is defined in SECTION 2.15(E)(i) hereof.
"TERM LOAN(S)" is defined in SECTION 2.1(a) hereof.
33
<PAGE>
"TERM LOAN AVAILABILITY" means at any particular time prior to the
Conversion Date, the amount by which the Aggregate Term Loan Commitments exceeds
the aggregate principal amount of all of the Term Loans made from time to time
pursuant to SECTION 2.1(a).
"TERM LOAN COMMITMENT" means, with respect to any Lender, the obligation of
such Lender to make one or more Term Loans on the Closing Date and/or on an
Acquisition Closing Date pursuant to the terms and conditions of this Agreement,
and which shall not exceed its Term Loan Commitment as set forth on EXHIBIT B
opposite such Lender's name under the heading, "Term Loan Commitment" or as
indicated in the Assignment by which it became a Lender, in each case as
modified from time to time pursuant to the terms of this Agreement.
"TERM LOAN TERMINATION DATE" means June 21, 2001.
"TERM NOTE" means a promissory note, in substantially the form of
EXHIBIT C2 hereto, duly executed by the Borrower and payable to the order of a
Lender in the amount of its Term Loan Commitment, including any amendment,
restatement, modification, renewal or replacement of such Term Note.
"TERMINATION DATE" means the earlier of (a) June 21, 2001 and (b) the date
of termination of the Commitments pursuant to SECTION 2.6 or SECTION 8.1.
"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Borrower or any member of the
Controlled Group from a Benefit Plan during a plan year in which the Borrower or
such Controlled Group member was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the cessation of operations which results in the
termination of employment of twenty percent (20%) of Benefit Plan participants
who are employees of the Borrower or any member of the Controlled Group; (iii)
the imposition of an obligation on the Borrower or any member of the Controlled
Group under Section 4041 of ERISA to provide affected parties written notice of
intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to
terminate a Benefit Plan; (v) any event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Benefit Plan; or (vi) the partial or complete
withdrawal of the Borrower or any member of the Controlled Group from a
Multiemployer Plan.
"TRANSACTION COSTS" means the fees, costs and expenses payable by the
Borrower and/or any other Loan Party in connection with the execution, delivery
and performance of the Transaction Documents and the consummation of the
Permitted Acquisitions.
"TRANSACTION DOCUMENTS" means the Loan Documents and the Acquisition
Documents.
"TRANSFEREE" is defined in SECTION 12.4 hereof.
"TYPE" means, with respect to any Loan, its nature as a Floating Rate Loan
or a Eurodollar Loan.
34
<PAGE>
"UNFUNDED LIABILITIES" means the amount (if any) by which the present value
of all vested nonforfeitable benefits under all Single Employer Plans exceeds
the fair market value of all such Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plans, and (ii) in
the case of Multiemployer Plans, the withdrawal liability that would be incurred
by the Controlled Group if all members of the Controlled Group completely
withdrew from all Multiemployer Plans.
"UNMATURED DEFAULT" means an event which, but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary in which all voting shares, or
other ownership interests having voting powers, are owned by the Borrower and/or
one or more Wholly-Owned Subsidiaries of the Borrower.
"WORKING CAPITAL" means, as at any date of determination, the excess, if
any, consolidated in each case for the Borrower Corporate Group of (i)
consolidated current assets, except cash and Cash Equivalents, over (ii) the
consolidated current liabilities, except current maturities of long-term debt
and Revolving Credit Obligations as of such date and all accrued interest as of
such date.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms. Any accounting terms used in this
Agreement which are not specifically defined herein shall have the meanings
customarily given them in accordance with the Agreement Account Principles.
1.2. SUBSIDIARY REFERENCES. The existence throughout this Agreement of
references to the Borrower's Subsidiaries is for a matter of convenience only
and shall not in any way be construed as consent by the Agent or any Lender to
the establishment, maintenance or Acquisition of any Subsidiary.
1.3. SCHEDULE REFERENCES; SUPPLEMENTAL DISCLOSURE. The parties to this
Agreement acknowledge and agree that the Schedules hereto have been prepared
without reference to factual changes which may result from consummation of any
Permitted Acquisition. The Borrower shall be permitted to revise the Schedules
in connection with Permitted Acquisitions after the Closing Date provided such
changes are reasonably acceptable to the Agent and the Required Lenders. At any
time at the request of the Agent and at such additional times as the Borrower
determines, the Borrower shall supplement each schedule or representation herein
or in the other Loan Documents with respect to any matter hereafter arising
which, if existing or occurring at the date of this Agreement, would have been
required to be set forth or described in such schedule or as an exception to
such representation or which is necessary to correct any information in such
schedule or representation which has been rendered inaccurate thereby. If any
such supplement to such schedule or representation discloses the existence or
occurrence of events, facts or circumstances which are restricted or prohibited
by the terms of this Agreement or any other Loan Document or otherwise
constitute or result in a Material Adverse Effect, such
35
<PAGE>
supplement to such schedule or representation shall not be deemed an
amendment thereof unless expressly consented to in writing by the Agent and
the Required Lenders, and no such amendments, except as the same may be
consented to in a writing which expressly includes a waiver, shall be or be
deemed a waiver by the Agent or any Lender of any Default disclosed therein.
Any items disclosed in any such supplemental disclosures shall be included in
the calculation of any baskets, limits or similar restrictions contained in
this Agreement or any other Loan Document.
ARTICLE II. THE CREDITS
2.1. LOANS. (a) TERM LOANS. Subject to the terms and conditions set
forth in this Agreement (including the conditions precedent set forth in
SECTION 4.3), each Lender hereby severally and not jointly agrees to make
from time to time on the Closing Date and on an Acquisition Closing Date, a
term loan, in Dollars, to the Borrower (individually, a "TERM LOAN" and
collectively, the "TERM LOANS") from time to time in an amount not to exceed
such Lender's Pro Rata Share of Term Loan Availability at such time;
PROVIDED, HOWEVER, at no time shall the aggregate principal amount of Term
Loans made pursuant to this SECTION 2.1(a) exceed the Aggregate Term Loan
Commitment. On and after the Conversion Date, the Term Loans shall be repaid
in accordance with SECTION 2.1(e). All Term Loans shall be made by the
Lenders simultaneously and proportionately to their respective Pro Rata
Shares, it being understood that no Lender shall be responsible for any
failure by any other Lender to perform its obligation to make any Term Loan
hereunder nor shall the Term Loan Commitment of any Lender be increased or
decreased as a result of any such failure. Any Term Loans repaid hereunder
may not be reborrowed.
(b) ACQUISITION LOANS. Subject to the terms and conditions set forth
in this Agreement (including the conditions precedent set forth in SECTION
4.3), each Lender hereby severally and not jointly agrees to make, from time
to time on and after the Acquisition Loan Target Date and on or prior to the
Conversion Date, on an Acquisition Closing Date, revolving loans, in Dollars,
to the Borrower which shall convert into term loans (individually, an
"ACQUISITION LOAN" and collectively, the "ACQUISITION LOANS") from time to
time in an amount not to exceed such Lender's Pro Rata Share of Acquisition
Loan Availability at such time; PROVIDED, HOWEVER, (i) no Acquisition Loan
shall be made hereunder unless and until the Borrower has obtained Term Loans
in an aggregate principal amount equal to $5,000,000, (ii) no Acquisition
Loan shall be made hereunder unless, as of the applicable Acquisition Closing
Date, the sum of (x) EBITDA (as defined in SECTION 6.4 (A)) for the twelve
calendar months most recently completed for which financial statements have
been delivered pursuant to SECTION 6.1(A)(i) (or, if the number of calendar
months from April 1, 1996 through the last month for which such financial
statements are available is less than twelve months, then the EBITDA for such
period from April 1, 1996 through such month for which financial statements
are available, times a fraction the numerator of which is twelve and the
denominator of which is the number of calendar months from April 1, 1996
through such month for which financial statements are available) on a
consolidated basis for the Borrower and its consolidated Subsidiaries (other
than any Target proposed to be acquired with the proceeds of such Acquisition
Loan), including any Subsidiary acquired by the Borrower or another
Subsidiary during the applicable period on a pro
36
<PAGE>
forma basis as if such Subsidiary had been acquired on the first day of such
period, PLUS (y) EBITDA (determined in a manner consistent with the
calculation of EBITDA of the Borrower and its Subsidiaries, as defined in
Section 6.4(A)) of the Target proposed to be acquired with the proceeds of
such Acquisition Loan for the most recent twelve month period for which
financial statements meeting the requirements of Section 6.3(H)(ii) have been
delivered to the Agent and the Lenders, shall not be less than $1,750,000 and
(iii) at no time shall the aggregate outstanding Acquisition Loans exceed the
Aggregate Acquisition Loan Commitment. Subject to the terms and conditions
set forth in this Agreement (including the conditions precedent set forth in
SECTION 4.3), the Borrower may borrow, repay and reborrow Acquisition Loans
at any time on or prior to the Conversion Date in connection with any
Acquisition approved by the Acquisition Approval Lenders under SECTION
6.3(H). On the Conversion Date, the Acquisition Loans shall automatically
convert to term loans and be repaid in accordance with SECTION 2.1(e). All
Acquisition Loans shall be made by the Lenders simultaneously and
proportionately to their respective Pro Rata Shares, it being understood that
no Lender shall be responsible for any failure by any other Lender to perform
its obligation to make any Acquisition Loan hereunder nor shall the
Acquisition Loan Commitment of any Lender be increased or decreased as a
result of any such failure.
(c) TERM LOAN ON CLOSING DATE. The Borrower hereby requests a Term
Loan in the principal amount of $2,500,000 to be made to it on the Closing
Date, such funds to be disbursed in accordance with the written instructions
of the Borrower delivered to the Agent on or prior to the Closing Date.
(d) [Reserved].
(e) REPAYMENT OF THE TERM LOANS AND ACQUISITION LOANS. The
outstanding principal balance of the Term Loans and the Acquisition Loans on
the Conversion Date shall be repayable in consecutive monthly installments
payable on the first Business Day of each calendar month commencing on the
first such date to occur after the Conversion Date and continuing thereafter
until the Term Loan Termination Date, and the Term Loans and the Acquisition
Loans shall be permanently reduced by the ratable portion (based upon the
outstanding principal balance of the Term Loans and the outstanding principal
balance of the Acquisition Loans) of each installment on the date payment
thereof is required to be made hereunder. The installments shall be in the
aggregate amount equal to the applicable percentage of the aggregate
principal balance of the Term Loans and the Acquisition Loans outstanding on
the Conversion Date set forth below:
INSTALLMENT DATE APPLICABLE PERCENTAGE
The first Business Day of each calendar
month occurring after the Conversion Date
but on or prior to the two-year anniversary
of the Conversion Date 1.25%
37
<PAGE>
The first Business Day of each calendar month
occurring after the two-year anniversary of the
Conversation Date but on or prior to the four-
year anniversary of the Conversion Date 1.67%
The first Business Day of each calendar month
occurring after the four-year anniversary of the
Conversion Date but before the Term Loan
Termination Date 2.50%
In addition, and notwithstanding the foregoing, the then outstanding principal
balance of the Term Loans and Acquisition Loans shall be due and payable on the
Term Loan Termination Date. After the Conversion Date, amounts repaid with
respect to the Acquisition Loans may not be reborrowed.
In addition to the scheduled payments on the Term Loans and Acquisition
Loans, the Borrower may make the voluntary prepayments described in SECTION
2.5(A) and shall make the mandatory prepayments prescribed in SECTION 2.5(B),
for credit against such scheduled payments on the Term Loans or the Acquisition
Loans, respectively, pursuant to SECTION 2.5(B).
2.2. REVOLVING LOANS. Upon the satisfaction of the conditions
precedent set forth in SECTIONS 4.1 and 4.2 hereof, from and including the
date of this Agreement and prior to the Termination Date, each Lender
severally agrees, on the terms and conditions set forth in this Agreement, to
make revolving loans (individually, a "REVOLVING LOAN" and collectively
"REVOLVING LOANS") to the Borrower from time to time in an amount not to
exceed such Lender's Pro Rata Share of Revolving Credit Availability at such
time; PROVIDED, HOWEVER, at no time shall the Revolving Credit Obligations
exceed the Maximum Revolving Credit Amount. Subject to the terms of this
Agreement, the Borrower may borrow, repay and reborrow at any time prior to
the Termination Date. The initial Revolving Loans to the Borrower shall be
Floating Rate Loans and thereafter may be continued as Floating Rate Loans or
converted into Eurodollar Loans in the manner provided in SECTION 2.10 and
subject to the other conditions and limitations therein set forth and set
forth in ARTICLE II. On the Termination Date, the Borrower shall repay in
full the outstanding principal balance of its Revolving Loans.
2.3 RATABLE LOANS. (i) Each Advance under SECTION 2.1(a) shall consist
of Term Loans made by each Lender ratably in proportions to such Lender's
respective Pro Rata Share of the Aggregate Term Loan Commitment. (ii) Each
Advance under SECTION 2.1(b) shall consist of Acquisition Loans made by each
Lender ratably in proportion to such Lender's respective Pro Rata Share of the
Aggregate Acquisition Loan Commitment. (iii) Each Advance under SECTION 2.2
shall consist of Revolving Loans made by each Lender ratably in proportion to
such Lender's respective Pro Rata Share of the Aggregate Revolving Loan
Commitment.
2.4. RATE OPTIONS FOR ALL ADVANCES. The Advances may be Floating Rate
Advances or Eurodollar Advances, or a combination thereof, selected by the
Borrower in accordance with SECTION 2.10; provided, however, notwithstanding
anything herein to the contrary, the Borrower
38
<PAGE>
may not elect to make a Revolving Loan as a Eurodollar Advance or convert a
Revolving Loan to a Eurodollar Advance prior to the date on which the
Borrower has made a Term Loan or an Acquisition Loan hereunder. The Borrower
may select, in accordance with SECTION 2.10, Rate Options and Interest
Periods applicable to portions of the Revolving Loans, Acquisition Loans and
the Term Loans; PROVIDED that there shall be no more than five (5) Interest
Periods in effect with respect to all of the outstanding Eurodollar Loans of
the Borrower at any time.
2.5. OPTIONAL PAYMENTS - MANDATORY PREPAYMENTS.
(A) OPTIONAL PAYMENTS. The Borrower may from time to time repay or
prepay, without penalty or premium, all or any part of outstanding
Floating Rate Advances. Subject to payment of all amounts payable
pursuant to SECTION 3.4, a Eurodollar Advance may be voluntarily repaid
or prepaid prior to the last day of the applicable Interest Period.
Unless the aggregate outstanding principal balance of the Borrower's
Term Loans and, after the Conversion Date, the Acquisition Loans are to
be prepaid in full, voluntary prepayments of the Term Loans and the
Acquisition Loans shall be in an aggregate minimum amount of $250,000
and integral multiples of $100,000 in excess of that amount. Each
voluntary prepayment of the Term Loans and/or the Acquisition Loans
shall be applied (i) prior to the Conversion Date, first, to the
Acquisition Loans outstanding and then to the Term Loans in the inverse
order of maturity; and (ii) after the Conversion Date, to the unpaid
installments of the Term Loans and Acquisition Loans in the inverse
order of maturity.
(B) MANDATORY PREPAYMENTS.
(i) MANDATORY PREPAYMENTS OF TERM LOANS AND ACQUISITION LOANS.
(a) Except as expressly provided in CLAUSES (1) through (3) below,
upon the consummation of any Asset Sale by any Loan Party, the Net Cash
Proceeds of which (when aggregated with all other Asset Sales in the
immediately 12-month period) are greater than $200,000 in any 12-month
period, within three (3) Business Days after the applicable Loan Party's
(i) receipt of any Net Cash Proceeds from any such Asset Sale, or
(ii) conversion to cash or Cash Equivalents of non-cash proceeds (whether
principal or interest and including securities, release of escrow
arrangements or lease payments) received from any such Asset Sale, the
Borrower shall make or cause to be made a mandatory prepayment of the
Obligations in an amount equal to (x) fifty percent (50%) of such Net Cash
Proceeds in the case of an Asset Sale in connection with the Borrower's
issuance of Capital Stock or public offering of Capital Stock and (y) one
hundred percent (100%) of such Net Cash Proceeds or such proceeds converted
from non-cash to cash or Cash Equivalents of all other Asset Sales;
PROVIDED, HOWEVER, that no mandatory prepayment shall be required:
(1) in the case of Asset Sales conducted pursuant to the terms
of SECTION 6.3(B)(i);
39
<PAGE>
(2) in connection with an Asset Sale comprised of a sale,
conveyance, disposition or other transfer of any Capital Stock of the
Borrower pursuant to the terms of SECTION 6.3(B)(v), provided the Net
Cash Proceeds therefrom are received when no Default has occurred and
is continuing;
(3) if, within sixty (60) days after the consummation of any
Asset Sale (other than with respect to Receivables or Inventory) by a
Loan Party that is made in connection with the anticipated purchase by
such Loan Party of replacement assets of a like kind, the Net Cash
Proceeds thereof have been used by such Loan Party for the replacement
of the assets sold by assets of a like kind and such Loan Party shall
have delivered to the Agent written evidence of the use of the Net
Cash Proceeds for such purchase; PROVIDED, FURTHER if such Loan Party
shall not have provided evidence of such use or if less than all of
the Net Cash Proceeds are used for such replacement, then a mandatory
prepayment will be required to be made on the sixtieth (60th) day
after the consummation of such Asset Sale in the amount of such Net
Cash Proceeds (or unutilized portion thereof).
(b) Simultaneously with the delivery of the annual audited financial
statements for the Borrower Corporate Group required to be delivered
pursuant to SECTION 6.1(a)(iii) for each Cash Flow Period, the Borrower
shall calculate Excess Cash Flow for such Cash Flow Period and shall make a
mandatory prepayment, payable no later than ten (10) days after such
financial statements are required to be delivered pursuant to
SECTION 6.1(a)(iii) hereof, in an amount equal to (i) one hundred percent
(100%) of such Excess Cash Flow if the Leverage Ratio reflected in such
audited financial statements was greater than or equal to 3.5 to 1.0 and
(ii) seventy-five percent (75%) of such Excess Cash Flow if the Leverage
Ratio reflected in such audited financial statements was less than 3.5 to
1.0.
(c) Within two (2) Business Days after receipt by any Loan Party of
any Net Cash Proceeds of Indebtedness permitted by SECTION 6.3(A)(iii)
(other than Subordinated Indebtedness issued to an Affiliate, if such cash
proceeds are received at a time when no Default has occurred and is
continuing), at the request of the Agent or the Required Lenders, the
Borrower shall make or cause to be made a mandatory prepayment in an amount
equal to one-hundred percent (100%) of such proceeds of Indebtedness.
(d) Nothing in this SECTION 2.5(B)(i) shall be construed to
constitute the Lenders' consent to any transaction referred to in
CLAUSES (a) and (c) above which is not expressly permitted by or is
prohibited by the terms of this Agreement.
(e) Each mandatory prepayment required by CLAUSES (a), (b) and (c) of
this SECTION 2.5(B) shall be referred to herein as a "DESIGNATED
PREPAYMENT". Designated Prepayments (other than Designated Prepayments
resulting from Asset Sales which are public offerings of the stock of the
Borrower) shall be allocated and applied to the Obligations as follows:
40
<PAGE>
(i) (x) prior to the Conversion Date, to the unpaid
installments of the Term Loans in the inverse order of maturity, until
the Term Loans are paid in full,
(y) after the Conversion Date, ratably to the unpaid
installments of the Term Loans and Acquisition Loans in the inverse
order of maturity, until the Term Loans and Acquisition Loans are
repaid in full;
and thereafter
(ii) first, to repay Revolving Loans (but shall reduce Revolving
Loan Commitments only at the option of the Borrower); second,
following the payment in full of the Revolving Loans, if such
prepayment is made prior to the Conversion Date, to repay the
Acquisition Loans (but shall reduce the Acquisition Loan Commitments
only at the option of the Borrower); and third, following the payment
in full of the Revolving Loans and Acquisition Loans, the amount of
each Designated Prepayment shall be applied first to interest on the
Reimbursement Obligations, then to principal on the Reimbursement
Obligations, then to fees on account of Letters of Credit and then, to
the extent any L/C Obligations are contingent, deposited with the
Agent as cash collateral in respect of such L/C Obligations.
Designated Prepayments resulting from Asset Sales which are public
offerings of the stock of the Borrower shall be allocated and applied to
the Obligations as follows: the amount of each Designated Prepayment shall
be applied first to repay Revolving Loans (but shall reduce Revolving Loan
Commitments only at the option of the Borrower); second, following the
payment in full of the Revolving Loans if such prepayment is made prior to
the Conversion Date, to repay the Acquisition Loans (but shall reduce the
Acquisition Loan Commitments only at the option of the Borrower); or if
such prepayment is made after the Conversion Date to the unpaid
installments of the Term Loans and the Acquisition Loans in the inverse
order of maturity.
(f) On the date any Designated Prepayment is received by the Agent,
such prepayment shall be applied first to Floating Rate Loans and to any
Eurodollar Loans maturing on such date. The Agent shall hold the remaining
portion of such Designated Prepayment as cash collateral in an interest
bearing deposit account and shall apply funds from such account to
subsequently maturing Eurodollar Loans in order of maturity; PROVIDED,
HOWEVER, that if a Default has occurred and is continuing such funds shall
be applied as provided herein.
(ii) MANDATORY PREPAYMENTS OF REVOLVING LOANS. In addition to repayments
under SECTION 2.5(B)(i), if the Revolving Credit Obligations are greater than
the Maximum Revolving Credit Amount, the Borrower shall immediately make a
mandatory prepayment of the Revolving Credit Obligations, to be applied to repay
the Revolving Loans, in an amount equal to such excess. In addition, to the
extent the Maximum Revolving Credit Amount is at any time less
41
<PAGE>
than the amount of L/C Obligations outstanding at any time, the Borrower
shall deposit cash collateral with the Agent in an amount equal to the amount
by which the L/C Obligations exceed such Maximum Revolving Credit Amount.
2.6. REDUCTION OF COMMITMENTS. The Borrower may permanently reduce the
Aggregate Revolving Loan Commitment, the Aggregate Term Loan Commitment or the
Aggregate Acquisition Loan Commitment in whole or in part ratably among the
Lenders, in an aggregate minimum amount of $250,000 and integral multiples of
$100,000 in excess of that amount, upon at least three Business Days' written
notice to the Agent, which notice shall specify the amount of any such reduction
and whether such reduction relates to the Aggregate Revolving Loan Commitment,
the Aggregate Term Loan Commitment or the Aggregate Acquisition Loan Commitment
(each such notice, a "REDUCTION NOTICE"); PROVIDED, HOWEVER, that the amount of
the Aggregate Revolving Loan Commitment may not be reduced below the aggregate
principal amount of the outstanding Revolving Credit Obligations. All accrued
commitment fees with respect to the portion of the Aggregate Revolving Loan
Commitment, the Aggregate Term Loan Commitment or Aggregate Acquisition Loan
Commitment being terminated shall be payable on the effective date of any
termination of the obligations of the Lenders to make Revolving Loans, Term
Loans or Acquisition Loans, as applicable, hereunder.
2.7. METHOD OF BORROWING. Not later than 2:00 p.m. (Chicago time) on
each Borrowing Date, each Lender shall make available its Revolving Loan(s),
Term Loan(s) or Acquisition Loan(s), as applicable, in funds immediately
available in Chicago to the Agent at its address specified pursuant to
ARTICLE XIII hereof. Subject to the fulfillment of the conditions precedent
set forth in SECTIONS 4.1, 4.2 and 4.3, the Agent will promptly make the
funds so received from the Lenders available to the Borrower at the Agent's
aforesaid address. The failure of any Lender to deposit the amount described
above with the Agent on the applicable Borrowing Date shall not relieve any
other Lender of its obligations hereunder to make its Loan on such date.
2.8. BORROWING NOTICE; DETERMINATION OF APPLICABLE MARGINS; MAKING OF
LOANS.
(a) BORROWING NOTICE. The Borrower shall select the Type of Advance
and, in the case of each Eurodollar Advance, the Interest Period applicable
to each of its Advances from time to time. The Borrower shall give the Agent
irrevocable notice (a "BORROWING NOTICE") not later than 11:00 a.m. (Chicago
time) on the Borrowing Date of each Floating Rate Advance and three Business
Days before the Borrowing Date for each Eurodollar Advance, specifying: (i)
the Borrowing Date (which shall be a Business Day and, in the case of a Term
Loan or an Acquisition Loan, an Acquisition Closing Date) of such Advance;
(ii) the aggregate amount of such Advance; (iii) the Type of Advance
selected; (iv) in the case of each Eurodollar Advance, the Interest Period
applicable thereto; (v) the amount of such Advance which is a Revolving
Credit Loan, Term Loan and/or Acquisition Loan; and (vi) instructions for
disbursement of such Advance. The Borrower shall select Interest Periods so
that, to the best of the Borrower's knowledge, it will not be necessary to
prepay all or any portion of any Eurodollar Advance prior to the last day of
the applicable Interest Period in order to make mandatory prepayments as
required pursuant to the terms hereof. Each Floating Rate Advance and all
Obligations other
42
<PAGE>
than Loans shall bear interest from and including the date of the making of
such Advance to (but not including) the date of repayment thereof at the
Floating Rate, changing when and as such Floating Rate changes. Changes in
the rate of interest on that portion of any Advance maintained as a Floating
Rate Loan will take effect simultaneously with each change in the Alternate
Base Rate and/or Applicable Floating Rate Margin. Each Eurodollar Advance
shall bear interest from and including the first day of the Interest Period
applicable thereto to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such Eurodollar
Advance. Each request for an Advance shall be deemed a representation and
warranty by the Borrower that all conditions precedent to such Advance under
Article IV are satisfied as of the date of such request and as of the date of
such Advance.
(b) DETERMINATION OF APPLICABLE MARGINS AND APPLICABLE LETTER OF CREDIT
FEE.
(i) DEFINITIONS. As used in this Section 2.8(b) and in this Agreement,
the following terms shall have the following meanings:
"APPLICABLE LETTER OF CREDIT FEE" and "APPLICABLE MARGINS" shall mean
the Applicable Letter of Credit Fee, the Applicable Floating Rate Margin
and/or Applicable Eurodollar Margin, as the case may be. The Applicable
Letter of Credit Fee and Applicable Margins shall be determined, in
accordance with the provisions of this SECTION 2.8(b), by reference to the
following:
Applicable Applicable Applicable
Leverage Ratio Eurodollar Floating Rate Letter of
Margin Margin Credit Fee
- -------------------------------------------------------------------------------
Greater than or equal to 2.75% 1.50% 2.75%
4.00 to 1.00
Less than 4.00 to 1.00 and 2.50% 1.25% 2.50%
greater than or equal to
3.00 to 1.00
Less than 3.00 to 1.00 2.25% 1.00% 2.25%
- -------------------------------------------------------------------------------
PROVIDED, HOWEVER, that notwithstanding the foregoing, prior to the time that
any Term Loan or Acquisition Loan is made, the Applicable Floating Rate Margin
shall be 0.50%.
(ii) DETERMINATION OF APPLICABLE MARGINS AND APPLICABLE LETTER OF CREDIT
FEE.
(A) The Applicable Margin in respect of any Loan and the Applicable
Letter of Credit Fee payable under SECTION 2.25 shall be determined by
reference to the tables set forth in CLAUSE (i) above, as applicable, on the
basis of the Leverage Ratio (calculated on a rolling four quarter basis)
determined by reference to (1) the most recent financial statements delivered
pursuant to SECTION 6.1(A)(iI) or 6.1(A)(iii) or (2) the PRO FORMA financial
statements delivered in connection with an Acquisition pursuant to SECTION
6.3(H).
43
<PAGE>
(B) Upon receipt of the financial statements with respect to the Borrower
Corporate Group delivered pursuant to SECTION 6.1(A)(ii) or SECTION 6.1(A)(iii),
as applicable, the Applicable Margins for all outstanding Loans and the
Applicable Letter of Credit Fee shall be adjusted, such adjustment being
effective on the tenth (10th) Business Day after receipt of such financial
statements and the Compliance Certificate to be delivered in connection
therewith; PROVIDED, HOWEVER, if the Borrower shall not have timely delivered
such financial statements in accordance with SECTION 6.1(A)(ii) or SECTION
6.1(A)(iii), as applicable, beginning with the date upon which such financial
statements should have been delivered and continuing until such financial
statements are delivered, it shall be assumed for purposes of determining the
Applicable Margins and the Applicable Letter of Credit Fee that the Leverage
Ratio was greater than 4.00 to 1.0. Notwithstanding the provisions set forth
above, upon receipt of the PRO FORMA financial statements with respect to the
Borrower Corporate Group delivered pursuant to SECTION 6.3(H) in connection with
an Acquisition, the Applicable Margins for all outstanding Loans and the
Applicable Letter of Credit Fee shall be adjusted, such adjustment being
effective on the Acquisition Closing Date with respect to such Acquisition, by
reference to such PRO FORMA financial statements.
2.9. MINIMUM AMOUNT OF EACH ADVANCE. Each Eurodollar Advance shall be
in the minimum amount of $1,000,000 (and in multiples of $500,000 in excess
thereof), and each Floating Rate Advance shall be in the minimum amount of
$100,000 (and in multiples of $100,000 in excess thereof); PROVIDED, HOWEVER,
that any Floating Rate Advance may be in the amount of the unused Aggregate
Revolving Loan Commitment, the unused Aggregate Acquisition Loan Commitment
and/or the unused Aggregate Term Loan Commitment.
2.10. METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR CONVERSION AND
CONTINUATION OF ADVANCES.
(A) RIGHT TO CONVERT. The Borrower may elect from time to time,
subject to the provisions of SECTION 2.4, this SECTION 2.10 and SECTION 3.3
to convert all or any part of its Loan of any Type into any other Type or
Types of Loans; PROVIDED that any conversion of any Eurodollar Advance shall
be made on, and only on, the last day of the Interest Period applicable
thereto.
(B) AUTOMATIC CONVERSION AND CONTINUATION. Floating Rate Loans shall
continue as Floating Rate Loans unless and until such Floating Rate Loans are
converted into Eurodollar Loans. Each Eurodollar Loan shall continue as a
Eurodollar Loan until the end of the then applicable Interest Period
therefor, at which time such Eurodollar Loan shall be automatically converted
into a Floating Rate Loan unless the Borrower shall have given the Agent
notice in accordance with SECTION 2.10(D) requesting that, at the end of such
Interest Period, such Eurodollar Loan continue as a Eurodollar Loan.
(C) NO CONVERSION POST-DEFAULT OR POST-UNMATURED DEFAULT.
Notwithstanding anything to the contrary contained in SECTION 2.10(A) or
SECTION 2.10(B), no Loan may be converted into or continued as a Eurodollar
Loan (except with the consent of the Required Lenders) when any Default or
Unmatured Default has occurred and is continuing.
44
<PAGE>
(D) CONVERSION/CONTINUATION NOTICE. The Borrower shall give the Agent
irrevocable notice (a "CONVERSION/CONTINUATION NOTICE") of each conversion of a
Floating Rate Loan into a Eurodollar Loan or continuation of a Eurodollar Loan
not later than 11:00 a.m. (Chicago time) three Business Days prior to the date
of the requested conversion or continuation, specifying: (1) the requested date
(which shall be a Business Day) of such conversion or continuation; (2) the
amount and Type of the Loan to be converted or continued; and (3) the amount of
Eurodollar Loan(s) into which such Loan is to be converted or continued and the
duration of the Interest Period(s) applicable thereto.
2.11. DEFAULT RATE. After the occurrence and during the continuance of a
Default, at the option of the Agent or at the direction of the Required Lenders,
the interest rate(s) applicable to the Obligations shall be increased by two
percent (2.0%) per annum above the Floating Rate or Eurodollar Rate, as
applicable (the "Default Rate").
2.12. COLLECTIONS, AND CONCENTRATION ACCOUNT ARRANGEMENTS. (a) The
Borrower agrees that it shall not maintain any lock box arrangement with any
Person, other than pursuant to the Lock Box Agreement and the Depositary
Agreement.
(b) The Borrower shall establish on or before the Closing Date a separate
irrevocable lock box arrangement with LaSalle pursuant to the Lock Box Agreement
to collect proceeds of Receivables (other than Medicare Receivables and Medicaid
Receivables). On or before August 15, 1996, the Borrower shall notify each
account debtor in respect of the Receivables (other than Medicare Receivables
and Medicaid Receivables) to make all payments in respect of such Receivables
directly to the Lock Box. From and after August 15, 1996, the Borrower shall
use its best efforts to cause all proceeds of such Receivables to be collected
through the Lock Box and deposited in the Collection Account or deposited
directly into the Collection Account, and if Collateral is sold, the Borrower
shall cause the purchaser to deposit the proceeds therefor directly into the
Collection Account for the benefit of the Agent and the Holders of Secured
Obligations. The Borrower acknowledges that it shall have no control whatsoever
over any proceeds so held. Any collections received by the Borrower and not so
deposited, shall be deemed to have been received by the Borrower as the Agent's
trustee and, upon the Borrower's receipt thereof, the Borrower shall immediately
transfer all such amounts into the Collection Account in their original form.
(c) On or before August 15, 1996, the Borrower shall establish a separate
irrevocable lock box arrangement pursuant to a Depositary Agreement with a bank
other than the Agent or a Lender (the "DEPOSITARY BANK") to collect proceeds of
Medicare Receivables and Medicaid Receivables. The Borrower shall notify each
account debtor in respect of Medicare Receivables and Medicaid Receivables to
make all payments in respect of such Receivables to the Depositary Account.
From and after August 15, 1996, the Borrower shall use its best efforts to cause
all proceeds of Medicare Receivables and Medicaid Receivables to be collected
through the Depositary Account and deposited into an account with the Depositary
Bank. The Borrower shall instruct the Depositary Bank that on each Business
Day, the Depositary Bank shall transfer
45
<PAGE>
all collected funds in the Depositary Account to the Collection Account held by
LaSalle. The Agent shall have no control whatsoever over the Depositary
Account.
(d) The Collection Account shall constitute collateral for the
Obligations, which shall not be invested and from which the Borrower may not
withdraw funds. The Agent may, and the Borrower hereby authorizes the Agent to,
apply, on the date of the receipt of any immediately available funds and on the
second Business Day following the deposit of any check into the Collection
Account, such proceeds to the repayment of Revolving Credit Loans. At any time
that no Revolving Loans shall be outstanding and no Default shall have occurred
and be continuing, the Agent shall deposit any amounts on deposit in the
Collection Account in one or more Concentration Accounts, as the Borrower shall
direct.
(e) The Borrower shall maintain one or more accounts with LaSalle as
operating accounts (the "CONCENTRATION ACCOUNTS"). The Concentration Accounts
shall constitute collateral for the Obligations, which shall not be invested and
from which the Borrower may withdraw funds. The terms and conditions of each
Concentration Account shall be in accordance with LaSalle's usual and customary
deposit account arrangements. From and after August 15, 1996, the Borrower will
not, nor permit any Loan Party to, establish or maintain, or permit any of its
funds to be held in, any bank or deposit account (general or special) other than
the Depositary Accounts, the Concentration Accounts and the Collection Accounts;
PROVIDED that the Borrower and the other Loan Parties may have an aggregate
amount of not greater than $50,000 on deposit in accounts (each, a "RESTRICTED
ACCOUNT") maintained with banks which have entered into an agreement with the
Agent, in form and substance acceptable to the Agent (a "RESTRICTED ACCOUNT
AGREEMENT"), providing for each such bank, upon notice from the Agent of the
occurrence of a Default, to transfer all funds maintained in such account to the
Agent for deposit to a Concentration Account; and PROVIDED FURTHER that the
Borrower and the other Loan Parties may have an aggregate amount of not greater
than $10,000 on deposit in accounts other than Depositary Accounts,
Concentration Accounts and Restricted Accounts. The Borrower shall maintain
from time to time balances in the Concentration Accounts such that the average
daily demand deposit balances shall be sufficient to cover all service costs of
LaSalle (which shall be LaSalle's reasonable and customary service costs),
PROVIDED, HOWEVER, that if at any time the balances maintained by the Borrower
shall be deficient, LaSalle shall, and the Borrower hereby authorizes LaSalle
to, charge on a monthly basis any Concentration Account for such deficiency.
Following the occurrence and during the continuance of a Default, all amounts in
the Concentration Accounts may be applied by the Agent, whenever the Agent so
directs, to pay Obligations.
(f) Following the Concentration Account Blockage Date and during the
continuance of a Default giving rise thereto, all deposits in or to the
Concentration Accounts, all payments received by the Agent, all collections of
Receivables included in the Collateral received by the Agent, and all proceeds
of other Collateral received by the Agent, whether through payment or otherwise,
will be the sole property of the Agent for the benefit of the Holders of Secured
Obligations and will be deemed held or received by the Agent for application to
the Obligations pursuant to the terms of this Agreement.
46
<PAGE>
2.13. METHOD OF PAYMENT. All payments of principal, interest and fees
hereunder, including without limitation payments with respect to Reimbursement
Obligations and fees with respect to Letters of Credit, shall be made, without
setoff, deduction or counterclaim, in immediately available funds to the Agent
at the Agent's address specified pursuant to ARTICLE XIII, or at any other
Lending Installation of the Agent specified in writing by the Agent to the
Borrower, by 2:00 p.m. (Chicago time) on the date when due and shall be made
ratably among the Lenders (unless such amount is not to be shared ratably in
accordance with the terms hereof). Each payment delivered to the Agent for the
account of any Lender shall be delivered promptly by the Agent to such Lender in
the same type of funds which the Agent received at its address specified
pursuant to ARTICLE XIII or at any Lending Installation specified in a notice
received by the Agent from such Lender. The Agent is hereby authorized to
charge any account of the Borrower maintained with LaSalle for each payment of
principal, interest and fees as it becomes due hereunder.
2.14 NOTES, TELEPHONIC NOTICES. Each Lender is hereby authorized to
record the principal amount of each of its Loans to the Borrower and each
repayment with respect to its Loans on the schedule attached to its respective
Note; PROVIDED, HOWEVER, that the failure to so record shall not affect the
Borrower's obligations under any such Note. The Borrower hereby authorizes the
Lenders and the Agent to extend Advances, effect selections of Types of Advances
and to transfer funds based on telephonic notices made by any person or persons
the Agent or any Lender in good faith believes to be acting on behalf of the
Borrower. The Borrower agrees to deliver promptly to the Agent a written
confirmation signed by an Authorized Officer, if such confirmation is requested
by the Agent or any Lender, of each telephonic notice. If the written
confirmation differs in any material respect from the action taken by the Agent
and the Lenders, (i) the telephonic notice shall govern absent manifest error
and (ii) the Agent or the Lender, as applicable, shall promptly notify the
Authorizing Officer who provided such confirmation of such difference.
2.15. PROMISE TO PAY; INTEREST AND FEES; INTEREST PAYMENT DATES; INTEREST
AND FEE BASIS; TAXES; LOAN AND CONTROL ACCOUNTS.
(A) PROMISE TO PAY. The Borrower hereby unconditionally promises to pay
when due the principal amount of each Loan which is made to it, and to pay all
unpaid interest accrued thereon, in accordance with the terms of this Agreement
and Notes.
(B) INTEREST PAYMENT DATES. Interest accrued on each Floating Rate Loan
shall be payable on each Payment Date, commencing with the first such date to
occur after the date hereof and at maturity (whether by acceleration or
otherwise). Interest accrued on each Eurodollar Loan shall be payable on the
last day of its applicable Interest Period, on any date on which the Eurodollar
Loan is prepaid, whether by acceleration or otherwise, and at maturity.
Interest accrued on each Eurodollar Loan having an Interest Period longer than
three months shall also be payable on the last day of each three-month interval
during such Interest Period. Interest accrued on the principal balance of all
other Obligations shall be payable in arrears (i) on each Payment Date,
commencing on the first such day following the incurrence of such
47
<PAGE>
Obligation, (ii) upon repayment thereof in full or in part, and (iii) if not
theretofore paid in full, at the time such Obligation becomes due and payable
(whether by acceleration or otherwise).
(C) FEES.
(i) The Borrower shall pay to the Agent, for the account of the
Lenders, in accordance with their Pro Rata Shares of the Aggregate
Revolving Loan Commitment, a commitment fee accruing at the rate of one-
half of one percent (0.50%) per annum from and after the date of this
Agreement until the Termination Date on the amount by which (A) the
Aggregate Revolving Loan Commitment in effect from time to time exceeds (B)
the Revolving Credit Obligations in effect from time to time. All such
commitment fees payable under this CLAUSE (C)(I) shall be payable quarterly
in arrears on the first Business Day of each March, June, September and
December occurring after the Closing Date and, in addition, on the
Termination Date.
(ii) In addition, the Borrower shall pay to the Agent, for the
account of the Lenders, in accordance with their Pro Rata Shares of the
Aggregate Term Loan Commitment, a commitment fee accruing at the rate of
one-half of one percent (0.50%) per annum from and after the date of this
Agreement until the Conversion Date on the unborrowed amount of the
Aggregate Term Loan Commitment in effect from time to time. All such
commitment fees payable under this CLAUSE (C)(II) shall be payable
quarterly in arrears on the first Business Day of each March, June,
September and December occurring after the date of this Agreement and, in
addition, on the Conversion Date.
(iii) In addition, the Borrower shall pay to the Agent, for the
account of the Lenders, in accordance with their Pro Rata Shares of the
Aggregate Acquisition Loan Commitment, a commitment fee accruing at the
rate of one-half of one percent (0.50%) per annum from and after the date
of this Agreement until the Conversion Date on the amount by which (A) the
Aggregate Acquisition Loan Commitment in effect from time to time exceeds
(B) the aggregate principal amount of Acquisition Loans outstanding from
time to time. All such commitment fees payable under this CLAUSE (C)(III)
shall be payable quarterly in arrears on the first Business Day of each
March, June, September and December occurring after the date of this
Agreement and, in addition, on the Conversion Date.
(iv) The Borrower shall pay to LaSalle, for its own account, an
origination fee, as set forth in that certain letter agreement dated June
21, 1996 between the Borrower and LaSalle.
(D) INTEREST AND FEE BASIS. Interest and fees shall be calculated for
actual days elapsed on the basis of a 360-day year. Interest shall be payable
for the day an Obligation is incurred but not for the day of any payment on the
amount paid if payment is received prior to 2:00 p.m. (Chicago time) at the
place of payment. If any payment of principal of or interest on a Loan or any
payment of any other Obligations shall become due on a day which is not a
Business
48
<PAGE>
Day, such payment shall be made on the next succeeding Business Day
and, in the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
(E) TAXES.
(i) Any and all payments by the Borrower hereunder shall be made
free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto including those arising after the date
hereof as a result of the adoption of or any change in any law, treaty,
rule, regulation, guideline or determination of a Governmental Authority
or any change in the interpretation or application thereof by a
Governmental Authority but excluding, in the case of each Lender and the
Agent, any Income Taxes imposed on the Lender or the Agent by the United
States of America or any Governmental Authority of the jurisdiction under
the laws of which such Lender or the Agent, as the case may be, is
organized or maintains a Lending Installation (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings, and liabilities which
the Agent or a Lender determines to be applicable to this Agreement, the
other Loan Documents, the Commitments, the Loans or the Letters of Credit
being hereinafter referred to as "TAXES"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the other Loan Documents 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 2.15(E)) 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. If a withholding tax of the United States
of America or any other Governmental Authority shall be or become
applicable (y) after the date of this Agreement, to such payments by the
Borrower made to the Lending Installation or any other office that a Lender
may claim as its Lending Installation, or (z) after such Lender's selection
and designation of any other Lending Installation, to such payments made to
such other Lending Installation, such Lender shall use reasonable efforts
to make, fund and maintain its Loans through another Lending Installation
of such Lender in another jurisdiction so as to reduce the Borrower's
liability hereunder, if the making, funding or maintenance of such Loans
through such other Lending Installation of such Lender does not, in the
judgment of such Lender, otherwise adversely affect such Loans, the
obligations under the Commitments or such Lender.
(ii) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges,
or similar levies which arise from any payment made hereunder, from the
issuance of Letters of Credit hereunder, or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, the other
Loan Documents, the Commitments, the Loans or the Letters of Credit
(hereinafter referred to as "OTHER TAXES").
49
<PAGE>
(iii) The Borrower will indemnify each Lender and the Agent for
the full amount of Taxes and Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed by any Governmental Authority on amounts
payable under this SECTION 2.15(E)) 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 or Other Taxes were correctly or legally asserted. This
indemnification shall be made within thirty (30) days after the date such
Lender or the Agent (as the case may be) makes written demand therefor. A
certificate as to any additional amount payable to any Lender or the Agent
under this SECTION 2.15(E) submitted to the Borrower and the Agent (if a
Lender is so submitting) by such Lender or the Agent shall show in
reasonable detail the amount payable and the calculations used to determine
such amount and shall, absent manifest error, be final, conclusive and
binding upon all parties hereto. With respect to such deduction or
withholding for or on account of any Taxes and to confirm that all such
Taxes have been paid to the appropriate Governmental Authorities, the
Borrower shall promptly (and in any event not later than thirty (30) days
after receipt) furnish to each Lender and the Agent such receipts or other
appropriate documentation evidencing payment thereof.
(iv) Within thirty (30) days after the date of any payment of Taxes
or Other Taxes by the Borrower, the Borrower will furnish to the Agent the
original or a certified copy of a receipt or other appropriate
documentation evidencing payment thereof.
(v) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower
contained in this SECTION 2.15(E) shall survive the payment in full of
principal and interest hereunder, the termination of the Letters of Credit
and the termination of this Agreement.
(vi) Without limiting the obligations of the Borrower under this
SECTION 2.15(E), each Lender that is not created or organized under the
laws of the United States of America or a political subdivision thereof
shall deliver to the Borrower and the Agent on or before the Closing Date,
or, if later, the date on which such Lender becomes a Lender pursuant to
SECTION 12.3 hereof, a true and accurate certificate executed in duplicate
by a duly authorized officer of such Lender, in a form satisfactory to the
Borrower and the Agent, to the effect that such Lender is capable under the
provisions of an applicable tax treaty concluded by the United States of
America (in which case the certificate shall be accompanied by two executed
copies of Form 1001 of the IRS) or under Section 1442 of the Code (in which
case the certificate shall be accompanied by two copies of Form 4224 of the
IRS) of receiving payments of interest hereunder without deduction or
withholding of United States federal income tax. Each such Lender further
agrees to deliver to the Borrower and the Agent from time to time a true
and accurate certificate executed in duplicate by a duly authorized officer
of such Lender substantially in a form satisfactory to the Borrower and the
Agent, before or promptly upon the occurrence of any event requiring a
change in the most recent certificate previously delivered by it to the
Borrower and the Agent pursuant to this SECTION 2.15(E)(vi).
50
<PAGE>
Further, each Lender which delivers a certificate accompanied by Form 1001
of the IRS covenants and agrees to deliver to the Borrower and the Agent
within fifteen (15) days prior to January 1, 1997, and every third (3rd)
anniversary of such date thereafter (or such earlier date as provided for
by the Code or the applicable regulations promulgated thereunder) on which
this Agreement is still in effect, another such certificate and two
accurate and complete original signed copies of Form 1001 (or any successor
form or forms required under the Code or the applicable regulations
promulgated thereunder), and each Lender that delivers a certificate
accompanied by Form 4224 of the IRS covenants and agrees to deliver to the
Borrower and the Agent within fifteen (15) days prior to the beginning of
each subsequent taxable year (or such earlier date as provided for by the
Code or the applicable regulations promulgated thereunder) of such Lender
during which this Agreement is still in effect, another such certificate
and two accurate and complete original signed copies of IRS Form 4224 (or
any successor form or forms required under the Code or the applicable
regulations promulgated thereunder). Each such certificate shall certify
as to one of the following:
(a) that such Lender is capable of receiving payments of
interest hereunder without deduction or withholding of United States
of America federal income tax;
(b) that such Lender is not capable of receiving payments of
interest hereunder without deduction or withholding of United States
of America federal income tax as specified therein but is capable of
recovering the full amount of any such deduction or withholding from a
source other than the Borrower and will not seek any such recovery
from the Borrower; or
(c) that, as a result of the adoption of or any change in any
law, treaty, rule, regulation, guideline or determination of a
Governmental Authority or any change in the interpretation or
application thereof by a Governmental Authority after the date such
Lender became a party hereto, such Lender is not capable of receiving
payments of interest hereunder without deduction or withholding of
United States of America federal income tax as specified therein and
that it is not capable of recovering the full amount of the same from
a source other than the Borrower.
Each Lender shall promptly furnish to the Borrower and the Agent such
additional documents as may be reasonably required by the Borrower or the
Agent to establish any exemption from or reduction of any Taxes or Other
Taxes required to be deducted or withheld and which may be obtained without
undue expense to such Lender.
(F) LOAN ACCOUNT. Each Lender shall maintain in accordance with its
usual practice an account or accounts (a "LOAN ACCOUNT") evidencing the
Obligations of the Borrower to such Lender resulting from each Loan owing to
such Lender from time to time, including the amount of principal and interest
payable and paid to such Lender from time to time hereunder and under the Notes.
51
<PAGE>
(G) CONTROL ACCOUNT. The Register maintained by the Agent pursuant to
SECTION 12.3 shall include a control account, and a subsidiary account for the
Borrower and each Lender, in which accounts (taken together) shall be recorded
(i) the date and amount of each Advance made hereunder, the Type of Loan
comprising such Advance and any Interest Period applicable thereto, (ii) the
effective date and amount of each assignment and acceptance delivered to and
accepted by it and the parties thereto pursuant to SECTION 12.3, (iii) the
amount of any principal or interest due and payable or to become due and payable
from the Borrower to each Lender hereunder or under the Notes, (iv) the amount
of any sum received by the Agent from the Borrower hereunder and each Lender's
share thereof, and (v) all other appropriate debits and credits as provided in
this Agreement, including, without limitation, all fees, charges, expenses and
interest.
(H) ENTRIES BINDING. The entries made in the Register and each Loan
Account shall be conclusive and binding for all purposes, absent manifest error,
unless the Borrower objects to information contained in the Register and each
Loan Account within thirty (30) days of the Borrower's receipt of such
information.
2.16. NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND AGGREGATE
REVOLVING LOAN COMMITMENT REDUCTIONS. Promptly after receipt thereof, the
Agent will notify each Lender of the contents of each Reduction Notice,
Borrowing Notice, Continuation/Conversion Notice, and repayment or prepayment
notice received by it hereunder. The Agent will notify each Lender of the
interest rate applicable to each Eurodollar Loan promptly upon determination of
such interest rate and will give each Lender prompt notice of each change in the
Alternate Base Rate.
2.17. LENDING INSTALLATIONS. Each Lender may book its Loans at any Lending
Installation selected by such Lender and may change its Lending Installation
from time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Notes shall be deemed held by each Lender for the benefit
of such Lending Installation. Each Lender may, by written or facsimile notice
to the Agent and the Borrower, designate a Lending Installation through which
Loans will be made by it and for whose account Loan payments are to be made.
Any Lender claiming any additional amounts payable pursuant to SECTION 2.15(E)
OR ARTICLE III agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Lending Installation if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts that may thereafter accrue and
would not, in the sole judgment of such Lender, be otherwise disadvantageous to
such Lender.
2.18. NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Borrower or a Lender,
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that the Borrower
or Lender does not intend to make such payment, the Agent may assume that such
payment has been made. The Agent may, but shall not be obligated to, make the
amount of such
52
<PAGE>
payment available to the intended recipient in reliance upon such assumption.
If such Lender or the Borrower, as the case may be, has not in fact made
such payment to the Agent, the recipient of such payment shall, on demand by
the Agent, repay to the Agent the amount so made available together with
interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Agent until the date the Agent
recovers such amount at a rate per annum equal to (i) in the case of payment
which was assumed to have been made by a Lender, the Federal Funds Effective
Rate for such day or (ii) in the case of payment which was assumed to have
been made by the Borrower, the interest rate applicable to the relevant Loan.
If and to the extent any Lender shall not have made available the proceeds
of its Loan to the Agent on the date of any Advance, LaSalle may in its sole
discretion make a Loan (the "OVER-ADVANCE") to repay the Agent forthwith on
demand a corresponding amount and the Lender which failed to make available
the proceeds of its Loan agrees to repay LaSalle forthwith on demand a
corresponding amount together with interest thereon, for each day from the
date such amount is made available to the Borrower until the date such amount
is repaid to LaSalle at the interest rate applicable during such period to
the Advance and the principal amount repaid by such Lender shall constitute
such Lender's Loan for purposes of this Agreement. In the event any Lender
fails to make available the proceeds of its Loan to the Agent on the date of
any Advance and LaSalle elects to make an Over-Advance, LaSalle's and such
other Lender's relevant Commitments shall be temporarily increased and
decreased, respectively, by the amount of the Over-Advance and any payments
allocable to such other Lender shall be paid to LaSalle until the principal
of and interest on the Over-Advance shall be paid in full. The failure of any
Lender to make any Advance to be made by it shall not relieve any other
Lender of its obligation, if any, hereunder to make its Loan on the date of
such Advance. No Lender shall be responsible for the failure of any other
Lender to make a Loan to be made by such Lender on the date of any such
Advance. The Agent shall promptly give the Borrower notice of any Lender's
failure to make its Loan.
2.19. TERMINATION DATE. Notwithstanding the occurrence of the Termination
Date or the Term Loan Termination Date, this Agreement shall remain effective
and all of the rights and remedies under this Agreement and the other Loan
Documents shall survive and the Agent shall be entitled to retain its security
interest in and to all existing and future Collateral for the benefit of itself
and the Holders of Secured Obligations until all of the Obligations (other than
contingent indemnity obligations) shall have been fully and indefeasibly paid
and satisfied, all financing arrangements among the Borrower, the Agent and the
Lenders shall have been terminated (other than under Interest Rate Agreements)
and all of the Letters of Credit shall have expired, been canceled or
terminated.
2.20. REPLACEMENT OF CERTAIN LENDERS. In the event a Lender ("AFFECTED
LENDER") shall have: (i) failed to fund its Pro Rata Share of any Advance
requested by the Borrower which such Lender is obligated to fund under the terms
of this Agreement and which failure has not been cured, (ii) requested
compensation from the Borrower under SECTIONS 2.15(E), 3.1 or 3.2 to recover
Taxes, Other Taxes or other additional costs incurred by such Lender which are
not being incurred generally by the other Lenders, (iii) delivered a notice
pursuant to SECTION 3.3 claiming that such Lender is unable to extend Eurodollar
Loans to the Borrower for reasons not generally applicable to the other Lenders
or (iv) invoked SECTION 9.2, then, in any such case, the
53
<PAGE>
Borrower or the Agent may make written demand on such Affected Lender (with a
copy to the Agent in the case of a demand by the Borrower and a copy to the
Borrower in the case of a demand by the Agent) for the Affected Lender to
assign, and such Affected Lender shall use its best efforts to assign
pursuant to one or more duly executed Assignments in substantially the form
of EXHIBIT F five (5) Business Days after the date of such demand, to one or
more financial institutions which complies with the provisions of SECTION
12.3(A) (and, if selected by the Borrower is reasonably acceptable to the
Agent) which the Borrower or the Agent, as the case may be, shall have
engaged for such purpose ("REPLACEMENT LENDER"), all of such Affected
Lender's rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, its Revolving Loan Commitment, its
Term Loan Commitment, its Acquisition Loan Commitment, all Loans owing to it,
all of its participation interests in existing Letters of Credit, and its
obligation to participate in additional Letters of Credit hereunder) in
accordance with SECTION 12.3. If the Affected Lender is also an Issuing
Lender, then prior to or simultaneously with the assignment to the
Replacement Lender, all Letters of Credit issued by the Affected Lender shall
be replaced by Letters of Credit issued by the Agent, the Replacement Lender
or another Issuing Lender. The Agent hereby agrees, upon the occurrence of
such events with respect to an Affected Lender and upon the written request
of the Borrower, to use its reasonable efforts to obtain the commitments from
one or more financial institutions to act as a Replacement Lender. The Agent
is hereby authorized to execute one or more of such assignment agreements as
attorney-in-fact for any Affected Lender failing to execute and deliver the
same within five (5) Business Days after the date of such demand. Further,
with respect to such assignment the Affected Lender shall have concurrently
received, in cash, all amounts due and owing to the Affected Lender hereunder
or under any other Loan Document, including, without limitation, the
aggregate outstanding principal amount of the Loans owed to such Lender,
together with accrued interest thereon through the date of such assignment,
amounts payable under SECTION 2.15(E), 3.1, and 3.2 with respect to such
Affected Lender and compensation payable under SECTION 2.15(C) through the
date of such assignment in the event of any replacement of any Affected
Lender under CLAUSE (ii) or CLAUSE (iii) of this SECTION 2.20; PROVIDED, upon
such Affected Lender's replacement, such Affected Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of SECTIONS
2.15(E), 2.26, 3.1, 3.2, 3.4, and 9.7, as well as to any fees accrued for its
account hereunder and not yet paid, and shall continue to be obligated under
SECTION 10.8 with respect to matters arising out of events which occurred
prior to the date of replacement of such Affected Lender. Upon the
replacement of any Affected Lender pursuant to this SECTION 2.20, the
provisions of SECTION 8.2 shall continue to apply with respect to Loans which
are then outstanding with respect to which the Affected Lender failed to fund
its Pro Rata Share and which failure has not been cured.
2.21. LETTER OF CREDIT FACILITY. Upon receipt of duly executed
applications therefor, and such other documents, instructions and agreements as
such Issuing Lender may require, and subject to the provisions of ARTICLE IV,
the Agent shall or any other Lender, in its sole discretion, may, issue letters
of credit for the account of the Borrower, and for which a Subsidiary may be a
co-applicant (the Agent and each such other Lender in such capacity being
referred to as an ("ISSUING LENDER"), on terms as are satisfactory to such
Issuing Lender; PROVIDED, HOWEVER, that no Letter of Credit will be issued for
the account of the Borrower by an Issuing Lender if (i) on the date of issuance,
before or after taking such Letter of Credit into account the aggregate of all
54
<PAGE>
Revolving Credit Obligations exceeds the Maximum Revolving Credit Amount at
such time; or (ii) the aggregate outstanding amount of the L/C Obligations
exceeds $500,000; and PROVIDED, FURTHER, that no Letter of Credit shall be
issued which has an expiration date later than the date which is five (5)
Business Days immediately preceding the Termination Date. If the Borrower
applies for a Letter of Credit from any Lender other than the Agent, the
Borrower shall simultaneously notify the Agent of the proposed amount and
expiration date of such Letter of Credit. The Agent shall promptly notify
the Borrower and the Lender to which such application has been made whether
issuance of such Letter of Credit would comply with the terms of this SECTION
2.21.
2.22. LETTER OF CREDIT PARTICIPATION. Immediately upon the
issuance of each additional Letter of Credit hereunder, each Lender shall be
deemed to have automatically, irrevocably and unconditionally purchased and
received from the applicable Issuing Lender an undivided interest and
participation in and to such Letter of Credit, the obligations of the
Borrower (and the applicable Subsidiary, if any, which is the co-applicant)
in respect thereof, and the liability of the applicable Issuing Lender
thereunder (collectively, an "L/C INTEREST") in an amount equal to the amount
available for drawing under such Letter of Credit multiplied by such Lender's
Pro Rata Share. The Agent will notify each Lender (or in the case of an
Issuing Lender other than the Agent, such Issuing Lender shall notify the
Agent who in turn will notify each Lender) promptly (a) upon the issuance of
any Letter of Credit and (b) upon presentation to it of an L/C Draft or upon
any other draw under a Letter of Credit. On or before the Business Day on
which the applicable Issuing Lender makes payment of each such L/C Draft or,
in the case of any other draw on a Letter of Credit, on demand of the
applicable Issuing Lender (which demand shall not require payment prior to
the Business Day such payment is required to be made by the Issuing Lender
under the Letter of Credit), each Lender shall make payment to the Agent for
the account of the applicable Issuing Lender in immediately available funds
in an amount equal to such Lender's Pro Rata Share of the Aggregate Revolving
Loan Commitment of the amount of such payment or draw. The obligation of
each Lender to reimburse the Agent for the account of the applicable Issuing
Lender under this SECTION 2.22 shall be unconditional, continuing,
irrevocable and absolute. In the event that any Lender fails to make payment
to the Agent for the account of the applicable Issuing Lender of any amount
due under this SECTION 2.22, the Agent shall be entitled to receive, retain
and apply against such obligation the principal and interest otherwise
payable to such Lender hereunder until the Agent receives such payment from
such Lender on behalf of the applicable Issuing Lender or such obligation is
otherwise fully satisfied; PROVIDED, HOWEVER, that nothing contained in this
sentence shall relieve such Lender of its obligation to reimburse the Agent
on behalf of the applicable Issuing Lender for such amount in accordance with
this SECTION 2.22.
2.23. REIMBURSEMENT OBLIGATION. The Borrower agrees
unconditionally, irrevocably and absolutely to pay immediately to the Agent,
for the account of the applicable Issuing Lender or the account of the
Lenders, as the case may be, the amount of each advance which may be drawn
under or pursuant to a Letter of Credit issued for its account or an L/C
Draft related thereto (such obligation of the Borrower to reimburse the
Issuing Lender or the Agent for an advance made under a Letter of Credit or
L/C Draft being hereinafter referred to as a "REIMBURSEMENT OBLIGATION" with
respect to such Letter of Credit or L/C Draft). If the
55
<PAGE>
Borrower at any time fails to repay a Reimbursement Obligation pursuant to
this SECTION 2.23, the Borrower shall be deemed to have elected to borrow a
Revolving Loan from the Lenders (any such Loan to be evidenced by the
Revolving Credit Notes and for all purposes under and on and subject to the
terms of this Agreement and the Loan Documents, although without regard to
the conditions precedent to making an Advance and any requirement of this
Agreement that an Advance be in a minimum amount), as of the date of the
advance giving rise to the Reimbursement Obligation, consisting of a Floating
Rate Advance equal in amount to the amount of the unpaid Reimbursement
Obligation, the proceeds of which Advance shall be used to repay such
Reimbursement Obligation. If, for any reason, the Borrower fails to repay a
Reimbursement Obligation on the day such Reimbursement Obligation arises,
then such Reimbursement Obligation shall bear interest from and after such
day, until paid in full, at the interest rate applicable to Revolving Loans
consisting of Floating Rate Loans.
2.24. CASH COLLATERAL. Notwithstanding anything to the contrary
herein or in any application for a Letter of Credit, after the occurrence and
during the continuance of Default, the Borrower shall, upon the Agent's
demand, deliver to the Agent for the benefit of the Lenders, cash, or other
collateral of a type satisfactory to the Required Lenders, having a value, as
determined by such Lenders, equal to the aggregate outstanding L/C
Obligations. In addition, to the extent the Maximum Revolving Credit Amount
is at any time less than the amount of L/C Obligations outstanding at any
time, the Borrower shall deposit cash collateral with the Agent in an amount
equal to the amount by which the L/C Obligations exceed such Maximum
Revolving Credit Amount. Any such collateral shall be held by the Agent in a
separate account appropriately designated as a cash collateral account in
relation to this Agreement and the Letters of Credit and retained by the
Agent for the benefit of the Lenders as collateral security for the
Borrower's obligations in respect of this Agreement and each of the Letters
of Credit and L/C Drafts. Such amounts shall be applied to reimburse the
Agent or each Issuing Lender, as applicable, for drawings or payments under
or pursuant to Letters of Credit or L/C Drafts, or if no such reimbursement
is required, to payment of such of the other Obligations as the Agent shall
determine. If no Default or Unmatured Default shall be continuing, amounts
remaining in any cash collateral account established pursuant to this SECTION
2.24 which are not to be applied to reimburse the Agent for amounts actually
paid or to be paid by the Agent in respect of a Letter of Credit or L/C
Draft, shall be returned to the Borrower (after deduction of the Agent's
expenses incurred in connection with such cash collateral account).
2.25. LETTER OF CREDIT FEES. The Borrower agrees to pay (i)
monthly, in arrears, to the Agent for the ratable benefit of the Lenders,
except as set forth in SECTION 8.2, a letter of credit fee in the amount of
the Applicable Letter of Credit Fee rate per annum on the aggregate amount
available for drawing under all of the Letters of Credit issued for the
Borrower's account and (ii) to the Issuing Lender directly for its benefit as
issuing bank, all customary fees (including fronting fees) and other
issuance, amendment, document examination, negotiation and presentment
expenses and related charges in connection with the issuance, amendment,
presentation of L/C Drafts, and the like customarily charged by such Issuing
Lender with respect to standby and commercial Letters of Credit issued by it
for the Borrower's account, including, without limitation standard
commissions with respect to commercial Letters of Credit, payable at the time
of invoice of such amounts.
56
<PAGE>
2.26. INDEMNIFICATION; EXONERATION. (a) In addition to amounts
payable as elsewhere provided in this Agreement, the Borrower hereby agrees
to protect, indemnify, pay and save harmless the Agent, each Lender and each
Issuing Lender from and against any and all liabilities and costs which the
Agent, any Lender or any Issuing Lender may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of Credit
other than, in the case of the Issuing Lender thereof, as a result of its
Gross Negligence or willful misconduct as determined by the final judgment of
a court of competent jurisdiction, or (ii) the failure of the Issuing Lender
of such Letter of Credit to honor a drawing under such Letter of Credit as a
result of any act or omission, whether rightful or wrongful, of any present
or future de jure or de facto Governmental Authority (all such acts or
omissions herein called "GOVERNMENTAL ACTS").
(b) As among the Borrower, the Lenders, the Issuing Lenders and the
Agent, the Borrower assumes all risks of the acts and omissions of, or misuse
of such Letter of Credit by, the beneficiary of any Letter of Credit. In
furtherance and not in limitation of the foregoing, subject to the provisions
of the Letter of Credit applications and Letter of Credit reimbursement
agreements executed by the Borrower at the time of request for any Letter of
Credit, the Issuing Lender of a Letter of Credit, the Agent and the Lenders
shall not be responsible (in the absence of Gross Negligence or willful
misconduct in connection therewith as determined by the final judgment of a
court of competent jurisdiction): (i) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any party
in connection with the application for and issuance of the Letters of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (ii) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (iii) for failure of the beneficiary of a Letter
of Credit to comply duly with conditions required in order to draw upon such
Letter of Credit; (iv) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex,
or other similar form of teletransmission or otherwise; (v) for errors in
interpretation of technical trade terms; (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any Letter of Credit or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of a Letter of Credit or the proceeds of
any drawing under such Letter of Credit; and (viii) for any consequences
arising from causes beyond the control of the Agent, the Issuing Lender of
the Letter of Credit and the Lenders including, without limitation, any
Governmental Acts. None of the above shall affect, impair, or prevent the
vesting of any Issuing Lender's rights or powers under this SECTION 2.26.
(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by the
Issuing Lender under or in connection with Letters of Credit issued on behalf
of the Borrower or any related certificates shall not, in the absence of
Gross Negligence or willful misconduct as determined by the final judgment of
a court of competent jurisdiction, put the Issuing Lender, the Agent or any
Lender under any resulting liability to the Borrower or relieve the Borrower
of any of its obligations hereunder to any such Person.
57
<PAGE>
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained
in this SECTION 2.26 shall survive the payment in full of principal and
interest hereunder, the termination of the Letters of Credit and the
termination of this Agreement.
ARTICLE III. CHANGE IN CIRCUMSTANCES
3.1. YIELD PROTECTION. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether
or not having the force of law) adopted after the date of this Agreement and
having general applicability to all banks within the jurisdiction in which
such Lender operates (excluding, for the avoidance of doubt, the effect of
and phasing in of capital requirements or other regulations or guidelines
passed prior to the date of this Agreement), or any interpretation or
application thereof by any governmental authority charged with the
interpretation or application thereof, or the compliance of any Lender
therewith,
(i) subjects any Lender (each reference in this SECTION 3.1 to a
Lender being in its capacity either as a Lender or an Issuing Lender, or
both) or any applicable Lending Installation to any tax, duty, charge or
withholding on or from payments due from the Borrower, or changes the basis
of taxation of payments to any Lender in respect of its Commitments, its
Loans, its L/C Interests, the Letters of Credit or other amounts due it
hereunder (excluding for purposes of this Section 3.1(i), any Income Taxes
imposed on any Lender or applicable Lending Installation by the United States
of America or any Governmental Authority of the jurisdiction under the laws
of which such Lender is organized or maintains a Lending Installation), or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any
Lender or any applicable Lending Installation (other than reserves and
assessments taken into account in determining the interest rate applicable to
Eurodollar Loans) with respect to its Commitments, its Loans, L/C Interests
or the Letters of Credit, or
(iii) imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending Installation of
making, funding or maintaining the Commitments, the Loans, the L/C Interests
or the Letters of Credit or reduces any amount received by any Lender or any
applicable Lending Installation in connection with Commitments, Loans, L/C
Interests or Letters of Credit, or requires any Lender or any applicable
Lending Installation to make any payment calculated by reference to the
amount of Commitments, Loans, L/C Interests or Letters of Credit held or
interest received by it or by reference to the Letters of Credit, by an
amount deemed material by such Lender;
and the result of any of the foregoing is to increase the cost to that Lender
of making, renewing or maintaining its Commitments, Loans, L/C Interests or
Letters of Credit or to reduce any amount received under this Agreement,
then, within 15 days after receipt by the Borrower of written demand by such
Lender pursuant to SECTION 3.5, the Borrower shall pay such Lender that
portion of such increased expense incurred or reduction in an amount received
which such
58
<PAGE>
Lender determines is attributable to making, funding and maintaining its
Commitments, Loans, L/C Interests or Letters of Credit.
3.2. CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Lender (each
reference in this SECTION 3.2 to a Lender being in its capacity either as a
Lender or an Issuing Lender, or both) determines (i) the amount of capital
required or expected to be maintained by such Lender, any Lending
Installation of such Lender or any corporation controlling such Lender is
increased as a result of a "Change" (as defined below), and (ii) such
increase in capital will result in an increase in the cost to such Lender of
maintaining its Loans, L/C Interests, the Letters of Credit or its obligation
to make Loans hereunder, then, within 15 days after receipt by the Borrower
of written demand by such Lender pursuant to SECTION 3.5, the Borrower shall
pay such Lender the amount necessary to compensate for any shortfall in the
rate of return on the portion of such increased capital which such Lender
determines is attributable to this Agreement, its Loans, its L/C Interests,
the Letters of Credit or its obligation to make Loans hereunder (after taking
into account such Lender's policies as to capital adequacy). "CHANGE" means
(i) any change after the date of this Agreement in the "Risk-Based Capital
Guidelines" (as defined below) excluding, for the avoidance of doubt, the
effect of any phasing in of such Risk Based Capital Guidelines or any other
capital requirements passed prior to the date hereof, or (ii) any adoption of
or change in any other law, governmental or quasi-governmental rule,
regulation, policy, guideline, interpretation, or directive (whether or not
having the force of law) after the date of this Agreement and having general
applicability to all banks and financial institutions within the jurisdiction
in which such Lender operates which affects the amount of capital required or
expected to be maintained by any Lender or any Lending Installation or any
corporation controlling any Lender. "RISK-BASED CAPITAL GUIDELINES" means
(i) the risk-based capital guidelines in effect in the United States on the
date of this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by regulatory authorities
outside the United States implementing the July 1988 report of the Basle
Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted
prior to the date of this Agreement.
3.3. AVAILABILITY OF TYPES OF ADVANCES. If (i) any Lender determines
that maintenance of its Eurodollar Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation or directive, whether or
not having the force of law, or (ii) the Required Lenders determine that (x)
deposits of a type and maturity appropriate to match fund Eurodollar Advances
are not available or (y) the interest rate applicable to a Type of Advance
does not accurately reflect the cost of making or maintaining such an
Advance, then the Agent shall suspend the availability of the affected Type
of Advance until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist, and, in the case of
any occurrence set forth in clause (i), require any Advances of the affected
Type to be repaid or converted into Advances of another Type.
3.4. FUNDING INDEMNIFICATION. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment, or otherwise, or a Eurodollar
Advance is not made on the date specified by the
59
<PAGE>
Borrower for any reason other than default by the Lenders, the Borrower will
indemnify each Lender for any loss or cost incurred by it resulting
therefrom, including, without limitation, any loss or cost in liquidating or
employing deposits acquired to fund or maintain the Eurodollar Advance.
3.5 LENDER STATEMENTS; SURVIVAL OF INDEMNITY. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Eurodollar Loans to reduce any liability of
the Borrower to such Lender under SECTIONS 3.1 and 3.2 or to avoid the
unavailability of a Type of Advance under SECTION 3.3, so long as such
designation is not disadvantageous to such Lender. Each Lender requiring
compensation pursuant to SECTION 2.15(E) or this ARTICLE III shall use its
best efforts to notify the Borrower and the Agent in writing of any Change,
law, policy, rule, guideline or directive giving rise to such demand for
compensation as soon as practicable but not later than ninety (90) days
following the date upon which the responsible account officer of such Lender
knows or should have known of such Change, law, policy, rule, guideline or
directive. Any demand for compensation pursuant to this ARTICLE III shall be
in writing and shall state the amount due, if any, under SECTION 3.1, 3.2 or
3.4 and shall set forth in reasonable detail the calculations upon which such
Lender determined such amount. Such written demand shall be rebuttably
presumed correct for all purposes. Notwithstanding anything in this
Agreement to the contrary, the Borrower shall not be obligated to pay any
amount or amounts under SECTION 2.15(E) or this Article III to the extent
such amount or amounts result from a Change, law, policy, rule, guideline or
directive which took effect more than ninety (90) days prior to the date of
delivery of the notice described above, provided that the foregoing shall not
limit the right of any Lender to demand or receive such compensation to the
extent such compensation relates to the retroactive application of any
Change, law, policy, rule, guideline or directive if such notice is given
within 90 days after the implementation of such Change, law, policy, rule,
guideline or directive. Determination of amounts payable under such Sections
in connection with a Eurodollar Loan shall be calculated as though each
Lender funded its Eurodollar Loan through the purchase of a deposit of the
type and maturity corresponding to the deposit used as a reference in
determining the Eurodollar Rate applicable to such Loan, whether in fact that
is the case or not. The obligations of the Borrower under SECTIONS 3.1, 3.2
and 3.4 shall survive payment of the Obligations and termination of this
Agreement. The obligations of the Borrower under SECTIONS 3.1, 3.2 and 3.4
shall survive the replacement of a Lender pursuant to SECTION 2.20 or the
assignment by a Lender of all of its rights and obligations under the
Agreement pursuant to SECTION 12.3.
ARTICLE IV. CONDITIONS PRECEDENT
4.1. INITIAL ADVANCES AND LETTERS OF CREDIT. The Lenders shall not
be required to make the initial Loans under this Agreement or issue any
Letters of Credit or purchase any participations therein unless the Agent has
received (with sufficient copies for each of the Lenders) the following:
(1) A certificate, signed by a financial officer
acceptable to the Agent, stating that on the Closing Date no
Default or Unmatured Default has occurred and is continuing;
60
<PAGE>
(2) Copies of the Certificate of Incorporation of the
Borrower, together with all amendments, and a certificate of good
standing, in each case certified by the appropriate governmental
officer in its jurisdiction of incorporation and good standing
certificates from each otherjurisdiction where the ownership of its
assets or conduct of its business dictates that it should be qualified;
(3) Copies, certified by the Secretary or
Assistant Secretary of the Borrower, of its By-Laws and of its
Board of Directors' resolutions (and resolutions of other bodies,
if any are deemed necessary by counsel for any Lender) authorizing
the execution of the Loan Documents;
(4) An incumbency certificate, executed by the
Secretary or Assistant Secretary of the Borrower, which shall
identify by name and title and bear the signature of the officers
of the Borrower authorized to sign the Loan Documents and to make
borrowings hereunder, upon which certificate the Lenders shall be
entitled to rely until informed of any change in writing by the
Borrower;
(5) A written opinion of the Borrower's
counsel, addressed to the Agent and the Lenders in form and
substance acceptable to the Agent;
(6) Notes payable to the order of each of the Lenders;
(7) Such other documents as the Agent or any
Lender or its counsel may have reasonably requested, including,
without limitation, all of the documents reflected on the List of
Closing Documents attached as EXHIBIT I to this Agreement (unless
designated thereon to be received after the Closing Date).
4.2. EACH ADVANCE AND LETTER OF CREDIT. The Lenders shall not be
required to make any Advance, issue any Letter of Credit or purchase any
participation therein, unless on the applicable Borrowing Date, or in the
case of a Letter of Credit, the date on which the Letter of Credit is to be
issued:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in ARTICLE V are
true and correct as of such Borrowing Date except for changes in the
Schedules to this Agreement reflecting transactions permitted by this
Agreement as such Schedules have been amended pursuant to the terms of
SECTION 1.3 hereof.
Each Borrowing Notice with respect to each such Advance and the letter of
credit application with respect to a Letter of Credit shall constitute a
representation and warranty by the Borrower that the conditions contained in
SECTIONS 4.2(i) and (ii) have been satisfied. The Agent may require a duly
completed officer's certificate in substantially the form of EXHIBIT J hereto
and/or a duly completed compliance certificate in substantially the form of
EXHIBIT K hereto as a condition to making an Advance.
61
<PAGE>
4.3. CONDITIONS FOR ACQUISITION LOANS AND ADDITION OF SUBSIDIARIES.
In addition to satisfying the conditions precedent set forth in SECTIONS
4.1 and 4.2, the Lenders shall not be required to make any Advance in
connection with an Acquisition Loan or a Term Loan (other than the Term Loan
to be made on the Closing Date pursuant to SECTION 2.1(c)), unless (i) the
Agent and the Acquisition Approval Lenders shall have consented to the
proposed Acquisition of such Target pursuant to SECTION 6.3(H), (ii) the
Acquisition constitutes a Permitted Acquisition pursuant to SECTION 6.3(H),
and (iii) the Agent shall have been provided with the certificates, opinions,
agreements and other documents required to be delivered pursuant to SECTION
6.3(H)(xii) for distribution to the Lenders.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this
Agreement and to make the Loans and the other financial accommodations to the
Borrower and to issue the Letters of Credit described herein, the Borrower
hereby represents and warrants as follows to each Lender and the Agent as of
the Closing Date and thereafter on each date as required by SECTION 4.2:
5.1 ORGANIZATION; CORPORATE POWERS. Each Loan Party (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, (ii) is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each jurisdiction in which failure to be so qualified and in good standing
will have or is reasonably likely to have a Material Adverse Effect, (iii)
has filed and maintained in effect (unless exempt from the requirements for
filing) a current Business Activity Report with the appropriate governmental
authority in the States in which failure to file and maintain such a report
(y) has or is reasonably likely to have a Material Adverse Effect or (z)
impair the enforceability of Receivables in excess of $100,000 in the
aggregate for the Borrower and all of its Subsidiaries and (iv) has all
requisite corporate power and authority to own, operate and encumber its
property and to conduct its business as presently conducted and as proposed
to be conducted in connection with and following the consummation of the
transactions contemplated by this Agreement (including, without limitation,
any Acquisitions, if any, permitted under the terms of this Agreement).
5.2. AUTHORITY.
(A) Each of the Transaction Documents to which any Loan Party is a
party has been duly executed, delivered or filed, as the case may be, by it
and constitutes its legal, valid and binding obligation, enforceable against
it in accordance with its terms (except as enforceability may be limited by
bankruptcy, insolvency, or similar laws affecting the enforcement of
creditor's rights generally and by general principles of equity), is in full
force and effect, and no material term or condition thereof has been amended,
modified or waived from the terms and conditions contained in the Transaction
Documents delivered to the Agent pursuant to SECTIONS 4.1 OR 6.3(H) without
the prior written consent of the Required Lenders. Each Loan Party has
performed and complied with all the terms, provisions, agreements and
conditions set forth in each of the Loan Documents and required to be
performed or complied with by such parties
62
<PAGE>
thereunder, and no unmatured default, default or breach of any covenant by
any Loan Party exists thereunder. Each Loan Party has, and, to such Person's
Knowledge, all other parties to each of the Acquisition Documents have,
performed and complied in all material respects with all the terms,
provisions, agreements and conditions set forth in the Acquisition Documents
and required to be performed or complied with by such parties thereunder, and
no unmatured default, default or material breach of any covenant by any Loan
Party and, to the Knowledge of the Borrower, no unmatured default, default or
material breach of any covenant by any other party to the Acquisition
Documents exists thereunder.
(B) Each Loan Party has the requisite corporate power and authority (i)
to execute, deliver and perform each of the Transaction Documents executed by
it in connection with Permitted Acquisitions or which have been executed by
it as required by this Agreement and (ii) to file the Transaction Documents
which must be filed by it in connection with Permitted Acquisitions or which
have been filed by it as required by this Agreement with any Governmental
Authority.
(C) The execution, delivery, performance and filing, as the case may
be, of each of the Transaction Documents which must be executed or filed by
any Loan Party in connection with the Permitted Acquisitions or which have
been executed or filed as required by this Agreement and to which any Loan
Party is a party, and the consummation of the transactions contemplated
thereby, including, without limitation consummation of the Permitted
Acquisitions, have been duly approved by the respective boards of directors
and, if necessary, the shareholders of such Loan Party, and such approvals
have not been rescinded. No other corporate action or proceedings on the
part of any Loan Party is necessary to consummate such transactions,
including, without limitation, the Permitted Acquisitions.
5.3. NO CONFLICT; GOVERNMENTAL CONSENTS. Except as set forth on
SCHEDULE 5.3 to this Agreement, the execution, delivery and performance of
each of the Loan Documents and other Transaction Documents to which any Loan
Party is a party do not and will not (i) conflict with the certificate or
articles of incorporation or by-laws of any Loan Party, (ii) to the
Borrower's Knowledge constitute a violation of or breach under any
Contractual Obligation of any Loan Party or conflict with, result in a breach
of or constitute (with or without notice or lapse of time or both) a default
under any Requirement of Law (including, without limitation, any
Environmental Property Transfer Act) or Contractual Obligation of any Loan
Party, or require termination of any Contractual Obligation, except such
interference, breach, default or termination which individually or in the
aggregate would not reasonably be likely to have a Material Adverse Effect,
(iii) with respect to the Loan Documents and, to the Borrower's Knowledge,
with respect to the other Transaction Documents, result in or require the
creation or imposition of any Lien whatsoever upon any of the property or
assets of any Loan Party, other than Liens permitted by the Loan Documents,
or (iv) require any approval of any Loan Party's shareholders except such as
have been obtained. Except as set forth on SCHEDULE 5.3 to this Agreement,
the execution, delivery and performance of each of the Transaction Documents
to which any Loan Party is a party do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by any Governmental Authority, including under any Environmental
Property Transfer Act, except (i) filings, consents or notices which
63
<PAGE>
have been made, obtained or given, or which, if not made, obtained or given,
individually or in the aggregate would not reasonably be likely to have a
Material Adverse Effect, and (ii) filings necessary to create or perfect
security interests in the Collateral.
5.4. FINANCIAL STATEMENTS. Complete and accurate copies of the
following financial statements and the following related information have
been delivered to the Agent:
(1) the unaudited financial statements of the Borrower as
of December 31, 1995; and
(2) the unaudited financial statements of the Borrower for
the three-month period ending March 31, 1996.
5.5. NO MATERIAL ADVERSE CHANGE. Since December 31, 1995, there
has occurred no change in the business, properties, prospects, condition
(financial or otherwise) or results of operations of Borrower and its
Subsidiaries which has had or is reasonably likely to have a Material Adverse
Effect.
5.6. TAXES.
(A) TAX EXAMINATIONS. All deficiencies which have been asserted
against any Loan Party as a result of any federal, state, local or foreign
tax examination for each taxable year in respect of which an examination has
been conducted have been fully paid or finally settled or are being contested
in good faith, and as of the Closing Date no issue has been raised by any
taxing authority in any such examination which, by application of similar
principles, reasonably can be expected to result in assertion by such taxing
authority of a material deficiency for any other year not so examined which
has not been reserved for in the applicable consolidated financial statements
to the extent, if any, required by Agreement Accounting Principles. Except
as permitted pursuant to SECTION 6.2(D), no Loan Party anticipates any
material tax liability with respect to the years which have not been closed
pursuant to applicable law.
(B) PAYMENT OF TAXES AND CLAIMS. All tax returns and reports of
each Loan Party required to be filed have been timely filed, and all taxes,
assessments, fees and other governmental charges thereupon and upon their
respective property, assets, income and franchises which are shown in such
returns or reports to be due and payable have been paid, except those items
which are being contested in good faith and have been reserved for in
accordance with Agreement Accounting Principles. No Loan Party has any
Knowledge of any proposed tax assessment against any Loan Party that will
have or is reasonably likely to have a Material Adverse Effect.
5.7. LITIGATION; LOSS CONTINGENCIES AND VIOLATIONS. Except as set
forth in Schedules 5.7 and 5.18 to this Agreement, there is no action, suit,
proceeding, investigation of which the Borrower has Knowledge or arbitration
before or by any Governmental Authority or private arbitrator pending or, to
the Knowledge of the Borrower, threatened against any Loan Party or any
property of any of them (i) challenging the validity or the enforceability of
any material
64
<PAGE>
provision of the Transaction Documents or (ii) which will have or is
reasonably likely to have a Material Adverse Effect. There is no material
loss contingency within the meaning of Agreement Accounting Principles which
has not been reflected in the consolidated financial statements of the
Borrower and its Subsidiaries prepared and delivered pursuant to Section
6.1(A) for the fiscal period during which such material loss contingency was
incurred. No Loan Party is (A) in violation of any applicable Requirements
of Law which violation will have or is reasonably likely to have a Material
Adverse Effect, or (B) subject to or in default with respect to any final
judgment, writ, injunction, restraining order or order of any nature, decree,
rule or regulation of any court or Governmental Authority which will have or
is reasonably likely to have a Material Adverse Effect.
5.8. SUBSIDIARIES. SCHEDULE 5.8 to this Agreement (i) contains a
description of the corporate structure and capitalization of the Borrower,
and its Subsidiaries and any other Person in which the Borrower or any of its
Subsidiaries holds an equity interest (both narratively and in chart form);
and (ii) accurately sets forth (A) the correct legal name, the jurisdiction
of incorporation and the jurisdictions in which each such Person is qualified
to transact business as a foreign corporation, (B) the authorized, issued and
outstanding shares of each class of Capital Stock of the Borrower and each of
its Subsidiaries and the owners of such shares (and on a fully-diluted basis
after the exercise of all options, warrants, or other equity interests), and
(C) a summary of the direct and indirect partnership, joint venture, or other
equity interests, if any, of the Borrower and each of their respective
Subsidiaries in any Person that is not a corporation. Except as set forth in
the Share Purchase Agreement and the Shareholders Agreement, none of the
issued and outstanding Capital Stock of the Borrower or any of its
Subsidiaries is subject to any vesting, redemption, or repurchase agreement
(other than obligations pursuant to Subsidiaries' shareholder agreements to
purchase shares of certain minority shareholders upon termination of their
employment) and there are no warrants or options outstanding with respect to
such Capital Stock. The outstanding Capital Stock of the Borrower and each
of its Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and is not margin stock (as defined in Regulation U). Except
as set forth on SCHEDULE 5.8, the Borrower does not have any Subsidiaries.
5.9. ERISA. Except as set forth on SCHEDULE 5.9, no Loan Party is now
maintaining or contributing to or has ever maintained or contributed to any
Benefit Plan. No Loan Party is now contributing to or has ever contributed
to or been obligated to contribute to any Multiemployer Plan. No Loan Party
maintains or contributes to any employee welfare benefit plan within the
meaning of Section 3(l) of ERISA which provides benefits to employees after
termination of employment other than as required by Section 601 of ERISA.
Each Plan maintained or contributed to by any Loan Party which is intended to
be qualified under Section 401(a) of the Code as currently in effect is so
qualified, and each trust related to any such Plan is exempt from federal
income tax under Section 501(a) of the Code as currently in effect. Each
Loan Party is in compliance in all material respects with the
responsibilities, obligations and duties imposed on it by ERISA and the Code
with respect to all Plans maintained or contributed to by any Loan Party. No
Loan Party nor, to the Knowledge of the Borrower, any fiduciary of any Plan
has engaged in a nonexempt prohibited transaction described in Sections 406
of ERISA or 4975 of the Code which could reasonably be expected to subject
the Loan Parties to liability in excess of $100,000,
65
<PAGE>
individually or in the aggregate. Neither the Borrower nor any member of the
Controlled Group has taken or failed to take any action which would
constitute or result in a Termination Event, which action or inaction could
reasonably be expected to subject Borrower and the other members of the
Controlled Group to liability in excess of $100,000, individually or in the
aggregate. No Loan Party is subject to any liability under Sections 4063,
4064, 4069, 4204 or 4212(c) of ERISA and no other member of the Controlled
Group is subject to any liability under Sections 4063, 4064, 4069, 4204 or
4212(c) of ERISA which could reasonably be expected to subject Borrower and
the other members of the Controlled Group to liability in excess of $100,000,
individually or in the aggregate. No Loan Party has, by reason of the
transactions contemplated hereby, any obligation to make any payment to any
employee pursuant to any Plan or existing contract or arrangement.
5.10. ACCURACY OF INFORMATION. The written information, exhibits and
reports (other than projections from time to time delivered to the Agent)
furnished by the Borrower and any other Loan Party to the Agent or to any
Lender in connection with the negotiation of, or compliance with, the Loan
Documents, the representations and warranties of the Borrower and each other
Loan Party contained in the Loan Documents, and all certificates and
documents delivered to the Agent and the Lenders pursuant to the terms
thereof do not contain as of the date furnished any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
5.11. SECURITIES ACTIVITIES. No Loan Party is engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(as defined in Regulation U).
5.12 MATERIAL AGREEMENTS; LICENSES. No Loan Party is a party to any
agreement or instrument or subject to any charter or other corporate
restriction which will have or is reasonably likely to have a Material
Adverse Effect. No Loan Party has received notice or has Knowledge that (i)
it is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual Obligation
applicable to it, or (ii) any condition exists which, with the giving of
notice or the lapse of time or both, would constitute a default with respect
to any such Contractual Obligation, in each case, except where such default
or defaults, if any, will not have or are not reasonably likely to have a
Material Adverse Effect. Since December 31, 1995, no Permit, agreement or
other license or authorization which, in the judgment of the Required
Lenders, is material to the business, operations or employee relations of any
Loan Party has been suspended, terminated, modified, revoked, breached or
declared to be in default.
5.13 COMPLIANCE WITH LAWS. Each of the Loan Parties is in compliance
with all Requirements of Law applicable to it and its respective businesses,
in each case where the failure to so comply individually or in the aggregate
(a) will have or is reasonably likely to have a Material Adverse Effect or
(b) has resulted in or is reasonably likely to result in any restriction or
revocation of any Loan Party's Health License or the loss by any Loan Party
which as of the Closing Date or at any time thereafter becomes eligible to
participate in CHAMPUS, Medicare or Medicaid of such Loan Party's eligibility
to participate in CHAMPUS, Medicare or Medicaid
66
<PAGE>
or to accept assignments or rights to reimbursement under CHAMPUS
Regulations, Medicaid Regulations or Medicare Regulations.
5.14 ASSETS AND PROPERTIES; GOVERNMENT APPROVALS; VALIDITY OF RECEIVABLES
ON BORROWING BASE CERTIFICATE.
(a) Each Loan Party has good and marketable title to substantially
all of its assets and properties (tangible and intangible, real or personal)
owned by it or a valid leasehold interest in all of its leased assets and all
such assets and property are free and clear of all Liens, except Liens
securing the Obligations and Liens permitted under SECTION 6.3(C).
Substantially all of the assets and properties owned by, leased to or used by
each Loan Party are in adequate operating condition and repair, ordinary wear
and tear excepted. Except for Liens granted to the Agent for the benefit of
the Agent and the Holders of Secured Obligations, neither this Agreement nor
any other Transaction Document, nor any transaction contemplated under any
such agreement, will affect any right, title or interest of any Loan Party in
and to any of such assets in a manner that would have or is reasonably likely
to have a Material Adverse Effect.
(b) Each of the Loan Parties: (i) maintains eligibility for
reimbursement from CHAMPUS, Medicare, Medicaid and other federal health care
programs, required with respect to such Loan Party's Eligible Receivables;
(ii) maintains eligibility for reimbursement from Applicable Carriers; and
(iii) except as disclosed on Schedule 5.14, owns, is licensed or otherwise
has the lawful right to use, or has all Permits and other governmental
approvals, patents, trademarks, trade names, copyrights, technology, know-how
and processes used in or necessary for the conduct of their businesses as
currently conducted which are material to their business, financial
condition, operations, performance or properties. SCHEDULE 5.14 describes
(A) all Accreditations, Permits, CONs, Health Licenses, CHAMPUS
Certifications, Medicare Certifications, and Medicaid Certifications in
effect as of the Closing Date with respect to any Loan Party, (B) those
patents, trademarks, trade names, and copyrights which are deemed, by the
applicable Person, to be material to the continued operations of any Loan
Party, and (C) all pending patent and trademark applications and Permits of
each Loan Party. Except as set forth on SCHEDULE 5.14, (1) no Loan Party,
and no facilities operated by any Loan Party, is subject to any ongoing or,
to such Loan Party's Knowledge, threatened review by any Governmental
Authority or other Person, the outcome of which might result in the loss of
any Permit and (2) no claims are pending or, to the Knowledge of any Loan
Party, threatened, that any such Person is infringing or otherwise adversely
affecting the rights of any Person with respect to such Permits and other
governmental approvals, patents, trademarks, trade names, licenses,
copyrights, technology, know-how and processes, except for such claims and
infringements as do not give rise to any liability on the part of any Loan
Party which has or is reasonably likely to have a Material Adverse Effect.
(c) The consummation of the transactions contemplated by the
Acquisition Documents and/or the Loan Documents will not impair the ownership
of or rights under (or the license or other right to use, as the case may be)
any Permits and governmental approvals, patents, trademarks, trade names,
licenses, copyrights, technology, know-how or processes of
67
<PAGE>
any Loan Party in any manner which has or is reasonably likely to have a
Material Adverse Effect.
(d) The Eligible Receivables listed or referred to in any Borrowing
Base Certificate delivered by the Borrower hereunder, to the Borrower's
Knowledge, (i) are genuine, are in all respects what they purport to be, and
are not evidenced by a judgment, (ii) have arisen in the ordinary course of
the applicable Loan Party's business and reflect BONA FIDE obligations for
the payment of goods and services provided by such Loan Party, and (iii) will
not be subject to any deduction, offset, counterclaim, return privilege or
other condition (except as has already been reflected in the adjustments made
in determining the Adjusted Amount of Eligible Receivables reflected
therein), other than in accordance with the provisions of the applicable
Payor agreement, if any, with respect to the Account Debtor obligated on such
Receivable and reflected in the Borrowing Base Certificate.
5.15. STATUTORY INDEBTEDNESS RESTRICTIONS. No Loan Party is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, or the Investment Company Act of
1940, or any other federal or state statute or regulation which limits its
ability to incur indebtedness or its ability to consummate the transactions
contemplated hereby or in connection with Permitted Acquisitions.
5.16. POST-RETIREMENT BENEFITS. No Loan Party has any expected cost of
post-retirement medical and insurance benefits payable by it to its employees
and former employees, as estimated in accordance with Financial Accounting
Standards Board Statement No. 106, except such as are reflected on the
financial statements delivered pursuant to this Agreement.
5.17. INSURANCE. SCHEDULE 5.17 to this Agreement accurately sets forth
as of the Closing Date all insurance policies and programs currently in
effect with respect to the respective properties, assets and businesses of
each Loan Party, specifying for each such policy and program, (i) the amount
thereof, (ii) the risks insured against thereby, (iii) the name of the
insurer and each insured party thereunder, (iv) the policy or other
identification number thereof, (v) the expiration date thereof, (vi) the
annual premium with respect thereto and (vii) describes any reserves,
relating to any self-insurance program that is in effect. Such insurance
policies and programs reflect coverage that is reasonably consistent with
prudent industry practice.
5.18. CONTINGENT OBLIGATIONS. Except as set forth on SCHEDULE 5.18 to
this Agreement, no Loan Party has any Contingent Obligation, contingent
liability, long-term lease or commitment, not reflected in its audited
financial statements delivered to the Agent on or prior to the Closing Date
or otherwise disclosed to the Agent in the other Schedules to this Agreement,
which will have or is reasonably likely to have a Material Adverse Effect.
5.19. RESTRICTED JUNIOR PAYMENTS. No Loan Party has directly or
indirectly declared, ordered, paid or made or set apart any sum or properties
for any Restricted Junior Payment or agreed to do so, except as permitted
pursuant to SECTION 6.3(F) of this Agreement.
68
<PAGE>
5.20. LABOR MATTERS.
(A) There are on the Closing Date no collective bargaining
agreements, other labor agreements or Multiemployer Plans covering any of the
employees of any Loan Party. As of the Closing Date, no attempt to organize
the employees of any Loan Party, no labor disputes, strikes or walkouts
affecting the operations of any Loan Party, is pending, or, to such Loan
Party's Knowledge, threatened, planned or contemplated.
(B) Set forth in SCHEDULE 5.20 to this Agreement is a list, as of the
Closing Date, of all material consulting agreements, executive compensation
plans, deferred compensation agreements, employee pension plans or retirement
plans, employee profit sharing plans, employee stock purchase and stock
option plans, severance plans, group life insurance, hospitalization
insurance or other plans or arrangements of the Borrower providing for
benefits for employees of the Borrower.
5.21. THE ACQUISITIONS. As of the Closing Date with respect to the
Omaha Acquisition and as of the Acquisition Closing Date with respect to any
other Acquisition:
(a) the Acquisition Documents with respect to such Acquisition are in
full force and effect, no material breach or default of any term or provision
of any of such Acquisition Documents by the Borrower or any Loan Party or, to
the Knowledge of the Borrower, the other parties thereto has occurred (except
for such defaults, if any, consented to in writing by the Agent and the
Acquisition Approval Lenders);
(b) the representations and warranties of each Loan Party, and, to
their Knowledge, each other Person a party thereto, contained in the
Acquisition Documents, are true and correct in all material respects;
(c) except as otherwise provided in the Acquisition Documents, all
conditions precedent to and all consents necessary to permit, the applicable
Acquisition pursuant to the Acquisition Documents related thereto have been
satisfied, unless (i) the failure to satisfy such conditions could not
materially adversely affect the Agent or the Lenders or materially impair the
rights of the Loan Parties, the Agent or the Lenders thereunder or (ii) are
waived with the prior written consent of the Agent and the Acquisition
Approval Lenders;
(d) the Acquisition has been consummated, and whether by merger,
stock acquisition or asset acquisition, the assets of the Target are owned by
the Borrower or a Subsidiary of the Borrower, free and clear of any Liens,
other than Liens permitted pursuant to the terms of this Agreement;
(e) no Loan Party has assumed any liabilities in connection with such
Acquisition other than disclosed liabilities set forth in the Acquisition
Documents presented to the Agent and the Lenders pursuant to SECTION 6.3(H)
or SECTION 4.1; and
69
<PAGE>
(f) no action has been taken by any competent authority which
restrains, prevents or imposes any material adverse condition upon, or seeks
to restrain, prevent or impose any material adverse condition upon, any
Acquisition.
5.22 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 5.22 to
this Agreement or except as would not reasonably be likely to subject the
Loan Parties to liability in excess of $100,000, individually or in the
aggregate, the operations of each Loan Party comply in all material respects
with Environmental, Health or Safety Requirements of Law (including, without
limitation, those applicable to the disposal of medical waste) and neither
any Loan Party nor any of their respective present property or operations,
or, to their Knowledge, any of their respective past property or operations,
are subject to or the subject of any investigation of which any Loan Party
has Knowledge, judicial or administrative proceeding, order, judgment,
decree, settlement or other agreement respecting (a) any violation of
Environmental, Health or Safety Requirements of Law (including, without
limitation, those applicable to the disposal of medical waste), (b) any
remedial action or (c) any claims or liabilities arising from the release or
threatened release of a contaminant (including, without limitation, any
medical waste) into the environment. Except as disclosed on SCHEDULE 5.22 to
this Agreement or except as would not reasonably be likely to subject the
Loan Parties to liability in excess of $100,000, individually or in the
aggregate, there is not now nor, to the best of any of such Persons'
Knowledge, has there ever been on or in the property of any Loan Party any
landfill, waste pile, underground storage tanks, aboveground storage tanks,
surface impoundment or hazardous waste storage facility of any kind, any
polychlorinated biphenyls (PCBs) used in hydraulic oils, electric
transformers or other equipment, or any asbestos containing material. No
Loan Party has any material Contingent Obligation in connection with any
release or threatened release of a contaminant (including, without
limitation, any medical waste) into the environment which could reasonably be
likely to subject the Loan Parties to liability in excess of $100,000,
individually or in the aggregate.
5.23. HEALTHCARE REGULATORY MATTERS. (i) Except as disclosed on
SCHEDULE 5.23, to the Knowledge of the Borrower, each facility to which any
Loan Party sells Inventory or provides services has obtained and maintains in
good standing all required Health Licenses.
(ii) The Adjusted Amount of Eligible Receivables listed on each
Borrowing Base Certificate have been and will continue to be appropriately
adjusted to reflect current reimbursement policies of third party payors and
Applicable Carriers, including, without limitation, CHAMPUS, Medicare,
Medicaid, Blue Cross/Blue Shield, private insurers, health maintenance
organizations, preferred provider organizations, alternative delivery
systems, and/or managed care systems. The Adjusted Amount of Eligible
Receivables, adjusted as set forth above, relating to such third party payors
do not and shall not exceed amounts the Borrower reasonably believes the
applicable Loan Parties are entitled to receive under any capitation
arrangement, fee schedule, discount formula, cost-based reimbursement, or
other adjustment or limitation to the usual charges of such Loan Party.
70
<PAGE>
ARTICLE VI. COVENANTS
The Borrower covenants and agrees that so long as any Commitments are
outstanding and thereafter until payment in full of all of the Obligations
(other than contingent indemnity obligations), unless the Required Lenders
shall otherwise give prior written consent:
6.1. REPORTING. The Borrower shall:
(A) FINANCIAL REPORTING. Furnish to the Agent and each Lender or
cause to be furnished to the Agent and each Lender:
(i) MONTHLY REPORTS. As soon as practicable, and in any event within
forty-five (45) days after the end of each calendar month, the consolidated
balance sheet of the Borrower and its Subsidiaries as at the end of such
period and the related consolidated statements of income and statement of
cash flow of the Borrower and its Subsidiaries for such calendar month and
for the period from the beginning of the then current fiscal year to the end
of such calendar month, certified by the chief financial officer of the
Borrower as fairly presenting the consolidated financial position of the
Borrower and its Subsidiaries at the dates indicated and the results of their
operations and cash flow for the periods indicated in accordance with
Agreement Accounting Principles, subject to normal year-end adjustments.
(ii) QUARTERLY REPORTS. (a) As soon as practicable, and in any event
within forty-five (45) days after the end of each fiscal quarter in each
fiscal year, the consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such period and the related consolidated
statements of income and cash flow of the Borrower and its Subsidiaries for
such fiscal quarter and for the period from the beginning of the then current
fiscal year to the end of such fiscal quarter and a comparison of the
statement of earnings and cash flow to the budget and to the prior year,
certified by the chief financial officer of the Borrower as fairly presenting
the consolidated financial position of the Borrower and its Subsidiaries as
at the dates indicated and the results of their operations and cash flow for
the periods indicated in accordance with Agreement Accounting Principles,
subject to normal year-end adjustments.
(b) As soon as practicable, and in any event within forty-five (45)
days after the end of the last fiscal quarter in each fiscal year, the
preliminary annual unaudited consolidated balance sheets of the Borrower and
its Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income, stockholders' equity and cash flow of the
Borrower and its Subsidiaries for such fiscal year, setting forth in each
case in comparative form the corresponding actual and forecasted figures for
the previous fiscal year, subject to revisions based on the annual reports
delivered pursuant to CLAUSE (iii) below, along with consolidating schedules
in form and substance sufficient to calculate the financial covenants set
forth in SECTION 6.4.
(iii) ANNUAL REPORTS. As soon as practicable, and in any event within
one hundred twenty (120) days after the end of each fiscal year (or, in the
case of the fiscal year ended December 31, 1995, on or before August 31,
1996), (a) the consolidated balance sheet of the
71
<PAGE>
Borrower and its Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income, stockholders' equity and cash flow
for such fiscal year, and in comparative form the corresponding figures for
the previous fiscal year, and (b) an audit report on the items listed in
CLAUSE(a) hereof of independent certified public accountants of recognized
national standing, which audit report shall be unqualified and shall state
that such financial statements fairly present the consolidated financial
position of the Borrower and its Subsidiaries as at the dates indicated and
the results of their operations and cash flow for the periods indicated in
conformity with Agreement Accounting Principles and that the examination by
such accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing standards. The
deliveries made pursuant to this CLAUSE (iii) shall be, accompanied by (y)
any management letter prepared by the above-referenced accountants and (z) a
certificate of such accountants that, in the course of their examination
necessary for their certification of the foregoing, they have obtained no
knowledge of any Default or Unmatured Default, or if, in the opinion of such
accountants, any Default or Unmatured Default shall exist, stating the nature
and status thereof.
(iv) MANAGEMENT DISCUSSION AND ANALYSIS. Together with each delivery
of the financial statements delivered pursuant to clauses (ii) or (iii), the
Borrower shall deliver management's discussion and analysis of the financial
condition, changes in financial condition and results of operations of the
Borrower and its Subsidiaries, providing (i) a discussion of material changes
in results from operations and in financial condition from period to period
and the causes for such changes, (ii) a description of any unusual or
infrequent events or transactions or any significant economic changes that
materially affected the operations or financial results of the Borrower and
its Subsidiaries for such period, and (iii) a description of any trends or
uncertainties which have had or could reasonably be expected to have a
materially favorable or unfavorable impact on the revenues and net income, or
otherwise on the operations or financial results of the Borrower and its
Subsidiaries.
(v) OFFICER'S CERTIFICATE. Together with each delivery of any
financial statement (a) pursuant to CLAUSES (i), (ii) and (iii) of this
SECTION 6.1(A), an Officer's Certificate of the president or treasurer of the
Borrower, substantially in the form of EXHIBIT J attached hereto and made a
part hereof, stating that no Default or Unmatured Default exists, or if any
Default or Unmatured Default exists, stating the nature and status thereof
and (b) pursuant to CLAUSES (ii) and (iii) of this SECTION 6.1(A), a
Compliance Certificate, substantially in the form of EXHIBIT K attached
hereto and made a part hereof, signed by the Borrower's chief financial
officer or treasurer, setting forth calculations for the period then ended
for SECTION 2.5(B), if applicable, and which demonstrate compliance, when
applicable, with the provisions of SECTION 6.4 (and, in the case of SECTION
6.4(C), setting forth the calculation of the Fixed Charge Coverage Ratio
including Acquisition Subordinated Indebtedness in the calculation of clause
(ii)(f) of the definition of Fixed Charge Coverage Ratio and, if applicable,
the calculation of Fixed Charge Coverage Ratio excluding Acquisition
Subordinated Indebtedness in the calculation of clause (ii)(f) of such
definition).
(vi) BUDGETS; BUSINESS PLANS; FINANCIAL PROJECTIONS. As soon as
practicable and in any event not later than the forty-fifth (45th) day prior
to the beginning of each fiscal year, a copy of the plan and forecast
(including a projected balance sheet, income statement and funds flow
72
<PAGE>
statement) of the Borrower and its Subsidiaries for the upcoming fiscal year
prepared in such detail as shall be reasonably satisfactory to the Agent.
(B) NOTICE OF DEFAULT. Promptly upon the Borrower having Knowledge
(i) of any condition or event which constitutes a Default or Unmatured
Default, or becoming aware that any Lender or the Agent has given any written
notice with respect to a claimed Default or Unmatured Default under this
Agreement, or (ii) that any Person has given any written notice to Borrower
or any other Loan Party or taken any other action with respect to a claimed
default or event or condition of the type referred to in SECTION 7.1(e),
deliver to the Agent and each of the Lenders an Officer's Certificate
specifying (A) the nature and period of existence of any such claimed
default, Default, Unmatured Default, condition or event, (B) the notice given
or action taken by such Person in connection therewith, and (C) what action
the applicable Person has taken, is taking and proposes to take with respect
thereto.
(C) LAWSUITS. (i) Promptly upon any Loan Party obtaining Knowledge
of the institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting any Loan Party
or any property of any Loan Party not previously disclosed pursuant to
SECTION 5.7, which action, suit, proceeding, governmental investigation or
arbitration exposes, or in the case of multiple actions, suits, proceedings,
governmental investigations or arbitrations arising out of the same general
allegations or circumstances which expose, the Borrower or any other Loan
Party to liability in an amount aggregating $100,000 or more (exclusive of
claims covered by applicable insurance policies unless the insurers of such
claims have disclaimed coverage or reserved the right to disclaim coverage on
such claims and exclusive of claims covered by the indemnity of a financially
responsible indemnitor in favor of the applicable Person unless the
indemnitor has disclaimed or reserved the right to disclaim indemnity
thereof), give written notice thereof to the Agent and each of the Lenders
and provide such other information as may be reasonably available to enable
each Lender and the Agent and its counsel to evaluate such matters; and (ii)
in addition to the requirements set forth in CLAUSE (i) of this SECTION
6.1(C) upon request of the Agent or the Required Lenders, promptly give
written notice of the status of any action, suit, proceeding, governmental
investigation or arbitration covered by a report delivered pursuant to CLAUSE
(i) above and provide such other information as may be reasonably available
to it that would not violate any attorney-client privilege by disclosure to
the Lenders to enable each Lender and the Agent and its counsel to evaluate
such matters.
(D) INSURANCE. As soon as practicable and in any event within ninety
(90) days of the end of each fiscal year commencing with fiscal year ending
December 31, 1996, deliver to the Agent and each of the Lenders (i) a report
in form and substance reasonably satisfactory to the Agent and the Lenders
outlining all material insurance coverage maintained as of the date of such
report by the Borrower Corporate Group and the duration of such coverage and
(ii) an insurance broker's statement that all premiums with respect to such
coverage have been paid when due.
(E) ERISA NOTICES. Deliver or cause to be delivered to the Agent and
each of the Lenders, at the Borrower's expense, the following information and
notices as soon as reasonably possible, and in any event:
73
<PAGE>
(i) within ten (10) Business Days after the Borrower has Knowledge
that a Termination Event has occurred which could reasonably be expected to
subject the Borrower and the other members of the Controlled Group to
liability in excess of $100,000, individually or in the aggregate , a
written statement of the chief financial officer of the applicable Person
describing such Termination Event and the action, if any, which the member
of the Controlled Group has taken, is taking or proposes to take with
respect thereto, and when known, any action taken or threatened by the IRS,
DOL or PBGC with respect thereto;
(ii) within ten (10) Business Days after the Borrower has Knowledge
that an assessment of a prohibited transaction excise tax under Section
4975 of the Code against any member of the Controlled Group has occurred, a
statement of the chief financial officer or treasurer of the Borrower
describing such transaction and the action which the applicable Loan Party
has taken, is taking or proposes to take with respect thereto;
(iii) within ten (10) Business Days after the establishment by any Loan
Party of any Benefit Plan or the commencement of, or obligation to
commence, contributions by any Loan Party to any Benefit Plan or
Multiemployer Plan to which any Loan Party was not previously contributing,
notification of such establishment, commencement or obligation to commence
and the amount of such contributions;
(iv) within ten (10) Business Days after any Loan Party receives
notice of any unfavorable determination letter from the IRS regarding the
qualification of a Plan under Section 401(a) of the Code, copies of each
such letter; and
(v) within ten (10) Business Days after the establishment by any Loan
Party of any foreign employee benefit plan or the commencement of, or
obligation to commence, contributions by any Loan Party to any foreign
employee benefit plan to which any Loan Party was not previously
contributing, notification of such establishment, commencement or
obligation to commence and the amount of such contributions.
(F) LABOR MATTERS. Notify the Agent and each of the Lenders in
writing, promptly upon learning thereof, of (i) any material labor dispute to
which any Loan Party may become a party, including, without limitation, any
strikes, lockouts or other disputes relating to such Person's plants and
other facilities and (ii) any Worker Adjustment and Retraining Notification
Act liability incurred with respect to the closing of any plant or other
facility of any Loan Party.
(G) OTHER INDEBTEDNESS. Deliver to the Agent and each of the Lenders
(i) a copy of each regular report, notice or communication regarding
potential or actual defaults (including any accompanying officers'
certificate) delivered by or on behalf of any Loan Party of funded
Indebtedness pursuant to the terms of the agreements governing such
Indebtedness, such delivery to be made at the same time and by the same means
as such notice or other communication is delivered to such holders, and (ii)
a copy of each notice or other communication received by any Loan Party from
the holders of funded Indebtedness pursuant to the terms of such
Indebtedness,
74
<PAGE>
such delivery to be made promptly after such notice or other communication is
received by such Loan Party.
(H) OTHER REPORTS; SEC FILINGS, NOTICES AND OTHER PUBLIC INFORMATION.
As soon as practicable after such items are available, deliver or cause to
be delivered to the Agent and each of the Lenders copies of all financial
statements, reports and notices, if any, sent or made available generally by
any Loan Party to its securities holders or filed with the Commission by any
Loan Party, all press releases made available generally by any Loan Party to
the public concerning material developments in the business of any such Loan
Party and all notifications received from the Commission by any Loan Party
pursuant to the Securities Exchange Act and the rules promulgated thereunder.
Promptly upon the filing thereof or receipt thereof, deliver copies to the
Agent of all registration statements and annual, quarterly, monthly or other
reports (including 8-Ks), if any, which any Loan Party files with the
Securities and Exchange Commission (other than routine reports which are
required to be filed concerning the management of employee benefit plans,
including, without limitation, stock purchases or the exercise of stock
options made under any such employee benefit plan) and all notifications
received from the Securities and Exchange Commission by any Loan Party, if
any, pursuant to the Securities Exchange Act and the rules promulgated
thereunder.
(I) ENVIRONMENTAL NOTICES. As soon as possible and in any event
within ten (10) days after receipt by any Loan Party, a copy of (i) any
notice or claim to the effect that any Loan Party is or may be liable to any
Person as a result of the release by any such Person or any other Person of
any contaminant (including, without limitation, any medical waste) into the
environment, and (ii) any notice alleging any violation of any Environmental,
Health or Safety Requirements of Law by any Loan Party if, in either case,
such notice or claim relates to an event which could reasonably be expected
to subject the Loan Parties to liability in excess of $100,000, individually
or in the aggregate.
(J) BORROWING BASE CERTIFICATE. As soon as practicable, and in any
event (i) within thirty (30) days after the end of each calendar month (and
more often if requested by the Agent or the Required Lenders) and (ii) on
each Acquisition Closing Date on which a Term Loan or Acquisition Loan is
made, the Borrower shall provide to the Agent and each of the Lenders (with
respect to the Borrower Corporate Group and each Subsidiary which has any
amount outstanding under an Intercompany Note) with a Borrowing Base
Certificate, together with such supporting documents as the Agent deems
desirable, all certified as being true and correct by the president or
treasurer of the Borrower. Without limiting the foregoing, together with
each Borrowing Base Certificate, the Borrower shall provide to the Agent and
each of the Lenders (i) detailed information regarding unpaid taxes,
assessments or other similar amounts which are payable to any federal, state,
county or municipal Governmental Authority or any agency or instrumentality
thereof if the aggregate amount payable to any municipal, county, state or
federal Governmental Authority equals or exceeds $10,000 and (ii) information
regarding the percentage of the total Eligible Receivables reflected on such
Borrowing Base Certificate which consists of Receivables from the Society.
75
<PAGE>
(K) OTHER INFORMATION. Promptly upon receiving a request therefor,
prepare and deliver to the Agent and each of the Lenders such other information
with respect to any Loan Party or the Collateral, including, without limitation,
schedules identifying and describing the Collateral and any dispositions thereof
or any Asset Sale (and the use of the Net Cash Proceeds thereof), as from time
to time may be reasonably requested by the Agent or any Lender.
(L) HEALTHCARE NOTICES. Deliver or cause to be delivered to the Agent
and each of the Lenders, at the Borrower's expense, the following information
and notices as soon as reasonably possible, and in any event:
(i) within ten (10) Business Days after receipt by any Loan Party,
copies of all notices received by any Loan Party which contain any
recommendation from any Governmental Authority or other regulatory body
that any such Loan Party should have its licensure or Accreditation
revoked, or its Health Licenses restricted or revoked, or have its
eligibility to participate in CHAMPUS, Medicare or Medicaid or to accept
assignments or rights to reimbursement under CHAMPUS Regulations, Medicaid
Regulations or Medicare Regulations revoked unless certain corrections are
made;
(ii) within ten (10) Business Days after receipt by any Loan Party,
notice of any investigation or pending or threatened proceedings relating
to any possible violation by any Loan Party of CHAMPUS, CHAMPUS
Regulations, Medicare Regulations, Medicaid Regulations, including, without
limitation, any investigation or proceeding involving possible violation of
any of the Medicare and/or Medicaid fraud and abuse provisions;
(iii) within three (3) Business Days after any Loan Party obtains
knowledge thereof, notice of any claims to recover any alleged overpayments
with respect to any of the Loan Parties' Receivables, whether such payments
were received from CHAMPUS, Medicare, Medicaid or from any Applicable
Carrier;
(iv) within three (3) Business Days after any Loan Party obtains
knowledge thereof, notice of termination of eligibility of any Loan Party
to participate in any reimbursement program of any Applicable Carrier or
other Payor applicable to it;
(v) within three (3) Business Days after the occurrence thereof,
notice of any reduction in the level of reimbursement expected to be
received with respect to any Receivables of any Loan Party unless such
reduction has already been reflected in the Adjusted Amount of Eligible
Receivables delivered on the most recently delivered Borrowing Base
Certificate; and
(vi) within ten (10) Business Days after receipt thereof, copies of
any report or communication from any Governmental Authority in connection
with any inspection of any facility of any Loan Party or any health care
facility to which any Loan Party provides services or sells Inventory.
76
<PAGE>
(M) REPORTS IN CONNECTION WITH ACQUISITION AGREEMENTS. Deliver or cause
to be delivered to the Agent and each of the Lenders as soon as reasonably
possible, and in any event within five (5) Business Days of when such item was
sent or received, as applicable, copies of all financial statements, reports and
notices, if any, sent, made or received by any Loan Party to or from any other
Person in connection with a Permitted Acquisition.
(N) FINANCIAL INFORMATION REGARDING THE SOCIETY. Upon request of the
Agent or the Required Lenders, financial information, including without
limitation the most recent financial statements of the Society, which the Agent
or such Required Lenders may reasonably request in order to, among other things,
evaluate the creditworthiness of the Society.
6.2. AFFIRMATIVE COVENANTS.
(A) CORPORATE EXISTENCE, ETC. The Borrower shall, and shall cause each
Loan Party to, at all times maintain its corporate existence and preserve and
keep, or cause to be preserved and kept, in full force and effect its rights and
franchises material to its businesses.
(B) CORPORATE POWERS; CONDUCT OF BUSINESS. The Borrower shall, and shall
cause each Loan Party to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its business requires it to be so qualified
and where the failure to be so qualified will have or is reasonably likely to
have a Material Adverse Effect. The Borrower shall, and shall cause each Loan
Party to, carry on and conduct its business in substantially the same manner and
in substantially the same fields of enterprise as it is presently conducted,
including any business related or incidental thereto.
(C) COMPLIANCE WITH LAWS, ETC. The Borrower shall, and shall cause each
Loan Party to, (a) comply with all Requirements of Law and Permits and all
restrictive covenants affecting such Person or the business, properties, assets
or operations of such Person unless failure to comply could not reasonably be
anticipated to have a Material Adverse Effect, (b) obtain as needed all Permits
and other government approvals and authorizations necessary for its operations
and maintain such Permits, approvals and authorizations in good standing unless
failure to obtain or maintain such Permits, approvals or authorizations has not
had, and is not reasonably likely to have, a Material Adverse Effect and (c)
maintain adequate assets, licenses, patents, copyrights, trademarks, service
marks, trade names, privileges, franchises and concessions as are reasonably
necessary to conduct its respective business.
(D) PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. The Borrower shall,
and shall cause each other Loan Party to, pay (i) all material taxes,
assessments and other governmental charges imposed upon it or on any of its
properties or assets or in respect of any of its franchises, business, income or
property before any penalty or interest accrues thereon, and (ii) all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
may become a Lien (other than a Lien permitted by SECTION 6.3(C)) upon any of
the Collateral, prior to the time when any penalty or fine shall be incurred
with respect thereto; PROVIDED, HOWEVER, that no such taxes, assessments and
governmental charges referred to in CLAUSE (i) above or claims referred to in
CLAUSE (ii) above
77
<PAGE>
(and interest, penalties or fines relating thereto) need be paid if being
contested in good faith by appropriate proceedings diligently instituted and
conducted and if such reserve or other appropriate provision, if any, as
shall be required in conformity with Agreement Accounting Principles shall
have been made therefor. The Borrower shall not, and shall not permit any
Loan Party to, file or consent to the filing of any consolidated income tax
return with any Person other than the Borrower and its consolidated
Subsidiaries.
(E) INSURANCE. The Borrower shall maintain for itself and each other
Loan Party, or shall cause each Loan Party to maintain, in full force and effect
the insurance policies and programs listed on SCHEDULE 5.17 to this Agreement or
substantially similar policies and programs or other policies and programs as
reflect coverage that is reasonably consistent with prudent industry practice.
Each certificate and policy relating to coverages shall contain an endorsement
(i) naming the Agent and the Lenders as additional insureds under such policy
with respect to liability coverage and (ii) naming the Agent as lender's loss
payee with respect to property damage, boiler and machinery and business
interruption insurance coverage. In the event any Loan Party, at any time or
times hereafter shall fail to obtain or maintain any of the policies or
insurance required herein or to pay any premium in whole or in part relating
thereto, then the Agent, without waiving or releasing any obligations or
resulting Default hereunder, may at any time or times thereafter (but shall be
under no obligation to do so) obtain and maintain such policies of insurance and
pay such premiums and take any other action with respect thereto which the Agent
deems advisable. All sums so disbursed by the Agent shall constitute part of
the Obligations, payable as provided in this Agreement.
(F) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The Borrower
shall permit, and shall cause each other Loan Party to permit, any authorized
representative(s) designated by either the Agent or any Lender to visit and
inspect any of the properties of any Loan Party, to examine, audit, check and
make copies, at the Borrower's expense, of their respective financial and
accounting records, books, journals, orders, receipts and any correspondence and
other data relating to their respective businesses or the transactions
contemplated hereby and by the Permitted Acquisitions (including, without
limitation, in connection with environmental compliance, hazard or liability),
and to discuss their affairs, finances and accounts with their officers and
independent certified public accountants, all upon reasonable notice and at such
reasonable times during normal business hours, as often as may be reasonably
requested. The Borrower shall keep and maintain, and cause each other Loan
Party to keep and maintain, in all material respects, proper books of record and
account in which entries in conformity with Agreement Accounting Principles
shall be made of all dealings and transactions in relation to their respective
businesses and activities, including, without limitation, transactions and other
dealings with respect to the Collateral. If a Default has occurred and is
continuing, the Borrower, upon the Agent's request, shall and shall cause each
other Loan Party to turn over copies of any such records to the Agent or its
representatives.
(G) INSURANCE AND CONDEMNATION PROCEEDS. The Borrower hereby directs,
and shall cause each other Loan Party to direct, all insurers under policies of
property damage, boiler and machinery and business interruption insurance and
payors of any condemnation claim or award relating to the property to pay all
proceeds payable under such policies or with respect to such
78
<PAGE>
claim or award for any loss with respect to the Collateral directly to the
Agent, for the benefit of the Agent and the Holders of the Secured
Obligations; PROVIDED, HOWEVER, in the event that such proceeds or award are
less than $200,000 in the aggregate for all events during the prior 12-month
period ("EXCLUDED INSURANCE PROCEEDS"), unless a Default shall have occurred
and be continuing, the Agent shall remit such Excluded Insurance Proceeds to
the Borrower or the applicable Loan Party. Each such policy shall contain a
lender's loss-payable endorsement naming the Agent as lender's loss payee,
which endorsement shall be in form and substance acceptable to the Agent.
The Agent shall, upon receipt of such proceeds (other than Excluded Insurance
Proceeds) and at Borrower's direction, either apply the same to the principal
amount of the Revolving Credit Loans outstanding at the time of such receipt
and create a corresponding reserve against Revolving Credit Availability in
an amount equal to such application (the "DECISION RESERVE") or hold them as
cash collateral for the Obligations. For up to 60 days from the date of any
loss (the "DECISION PERIOD"), the Borrower may notify the Agent that the
applicable Loan Party intends to restore, rebuild or replace the property
subject to any insurance payment or condemnation award and shall, as soon as
practicable thereafter, provide the Agent detailed information, including a
construction schedule and cost estimates. If (i) a Default occurs at any
time during the Decision Period, (ii) the Borrower notifies the Agent that
the applicable Loan Party has decided not to rebuild or replace such property
during the Decision Period, or (iii) the Borrower fails to notify the Agent
of the Borrower's or the applicable Loan Party's decision during the Decision
Period, then the amounts held as cash collateral pursuant to this SECTION
6.2(G) or as the Decision Reserve shall upon the Required Lenders' direction
be deemed to be Net Cash Proceeds of an Asset Sale and applied as a mandatory
prepayment pursuant to SECTION 2.5(B)(i)(a). Proceeds held as cash
collateral pursuant to this SECTION 6.2(G) or constituting the Decision
Reserve shall be disbursed as payments for restoration, rebuilding or
replacement of such property become due; PROVIDED, HOWEVER, should a Default
occur after the Borrower has notified the Agent that a Loan Party intends to
rebuild or replace the property, the Decision Reserve or amounts held as cash
collateral may, or shall, upon the Required Lenders' direction, be applied as
a mandatory prepayment of the Term Loans or Acquisition Loans as set forth
above. Upon completion of the restoration, rebuilding or replacement of such
property, the unused proceeds shall be deemed to constitute Net Cash Proceeds
of an Asset Sale and shall be applied as a mandatory prepayment of the Term
Loans and/or Acquisition Loans pursuant to SECTION 2.5(B)(i)(a).
(H) ERISA COMPLIANCE. The Borrower shall, and shall cause each other
Loan Party to, establish, maintain and operate all Plans to comply in all
material respects with the provisions of ERISA, the Code, all other applicable
laws, and the regulations and interpretations thereunder and the respective
requirements of the governing documents for such Plans.
(I) MAINTENANCE OF PROPERTY . The Borrower shall, and shall cause each
other Loan Party to, cause substantially all property used or useful in the
conduct of its business or the business of any of its respective Subsidiaries to
be maintained and kept in good condition, repair and working order (ordinary
wear and tear excepted) and supplied with all necessary equipment and shall
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as may be necessary so that the business carried on in
connection therewith may be effectively and lawfully conducted at all times;
PROVIDED, HOWEVER, that
79
<PAGE>
nothing in this Section shall prevent any Loan Party from discontinuing the
operation or maintenance of any of such property if such discontinuance, in
the judgment of the applicable Loan Party, is desirable in the conduct of its
business or the business of any of its Subsidiaries and not disadvantageous
in any material respect to the Agent or the Lenders.
(J) ENVIRONMENTAL COMPLIANCE. The Borrower shall, and shall cause each
other Loan Party to, comply with all Environmental, Health or Safety
Requirements of Law (including, without limitation, those applicable to the
disposal of medical waste), except where noncompliance would not reasonably be
likely to subject the Loan Parties to liability in excess of $100,000,
individually or in the aggregate.
(K) USE OF PROCEEDS. The Borrower will use the proceeds of the Revolving
Loans solely to provide funds for the working capital needs of the Borrower and
its Subsidiaries and other general corporate purposes. The Borrower will use
the proceeds of the Term Loans and the Acquisition Loans solely for the purpose
of effecting the Permitted Acquisitions and paying Transaction Costs related
thereto and, with respect to proceeds of the Term Loan made on the Closing Date,
to refinance existing indebtedness of the Borrower. The Borrower will not use
any of the proceeds of the Loans, nor will it permit any Loan Party to use any
of the proceeds of the Loans, to (1) purchase or carry any "margin stock" (as
defined in Regulation U), (2) to make any other Acquisition or (3) to make loans
to, Investments in or otherwise enter into any transaction with any of the
Borrower's Non-Controlled Affiliates.
(L) HEALTHCARE REGULATORY MATTERS. The Borrower shall at all times, and
shall cause each Loan Party at all times to:
(i) comply in all material respects with all applicable CON
requirements in jurisdictions where such Person operates,
(ii) maintain in good standing all required Health Licenses required
for the operation of such Loan Party's business;
(iii) maintain the requisite Accreditation, if any, for the
operation of such Loan Party's business;
(iv) maintain eligibility to participate in CHAMPUS, Medicaid and
Medicare as required for the operation of such Loan Party's business or to
accept assignments or rights to reimbursement under CHAMPUS Regulations,
Medicaid Regulations or Medicare Regulations, as applicable, and from any
Applicable Carrier;
(v) maintain CHAMPUS, Medicare and Medicaid provider numbers as
required for the operation of such Loan Party's business which initially
were issued to the current provider and which have not been used by any
predecessor in interest;
(vi) comply with all applicable provisions of CHAMPUS, CHAMPUS
Regulations, Medicaid Regulations and Medicare Regulations; and
80
<PAGE>
(vii) operate the businesses acquired prior to the Closing Date
pursuant to operative Health Licenses issued to such Loan Party and operate
the businesses acquired in connection with any Permitted Acquisition
pursuant to Health Licenses pursuant to which such Loan Party may legally
operate, whether pursuant a valid and enforceable power of attorney or
otherwise, for the period from the Acquisition Closing Date with respect
thereto through not later than the earlier to occur of the expiration date
of such Health License or the date that is sixty (60) days after such
Acquisition Closing Date and on or before such date obtain and thereafter
maintain Health Licenses issued to such Loan Party with respect to the
operations so acquired.
(M) DEPOSIT ACCOUNTS. The Borrower shall, and shall cause each other
Loan Party to, maintain a cash management system for the Borrower Corporate
Group acceptable to the Agent, including, without limitation, compliance with
the provisions of SECTION 2.12.
(N) FUTURE LIENS ON REAL PROPERTY. The Borrower shall, and shall cause
each other Loan Party to, execute and deliver to the Agent immediately upon the
acquisition of any real property after the Closing Date, a mortgage, deed of
trust or other appropriate instrument (each, a "MORTGAGE") evidencing a lien
upon any such acquired property, in form and substance reasonably satisfactory
to the Agent, to be subject only to such Liens as otherwise shall be permitted
by this Agreement. Upon recording of each Mortgage, the Borrower agrees to
obtain and deliver to the Agent, at Borrower's expense, an ALTA lender's title
policy insuring the lien of each Mortgage, subject only to Liens permitted by
SECTION 6.3(C) hereof, together with such endorsements as may be reasonably
requested by the Agent, and such other certificates, opinions and documents as
the Agent shall reasonably request. The Borrower shall, and shall cause each
other Loan Party to, use its best efforts to obtain a landlord, mortgagee,
bailee and/or warehouseman's access and lien waiver agreement, as applicable, in
each case in form and substance acceptable to the Agent, with respect to each of
the properties leased by the Borrower or any other Loan Party at which the
Borrower or such Loan Party maintains any collateral securing the Obligations.
(O) SUBSIDIARY GUARANTEE; SUBSIDIARY SECURITY AGREEMENT. The Borrower
hereby agrees to cause each Person which is or may hereafter become a Subsidiary
to execute, deliver and perform a Subsidiary Guarantee, such Collateral
Documents as the Agent may reasonably require, in form and substance acceptable
to the Agent, in order to grant to the Agent, for the benefit of itself and the
Holders of Secured Obligations, a lien on and security interest in all of such
Subsidiary's assets, subject only to Liens permitted hereunder, and such
documents, certificates and opinions as the Agent may reasonably request in
connection therewith.
(P) SEPARATE CORPORATE EXISTENCE. The Borrower shall take all reasonable
steps (including, without limitation, all steps which the Agent may from time to
time reasonably request) to maintain its and the other Loan Parties' identity as
separate legal entities and to make it apparent to third parties that Borrower
and such Loan Parties are each an entity with assets and liabilities distinct
from those of the Borrower's Non-Controlled Affiliates. Without limiting the
generality of the foregoing, the Borrower shall:
81
<PAGE>
(i) require that all full-time employees of the Borrower and each
other Loan Party identify themselves as such and not as employees of a Non-
Controlled Affiliate (including, without limitation, by means of providing
appropriate employees with business or identification cards identifying
such employees solely as Borrower's or such Loan Party's employees, as
applicable);
(ii) compensate all employees, consultants, investment bankers,
accountants, lawyers and agents directly, from Borrower's or such Loan
Party's applicable bank accounts, for services provided to Borrower or such
Loan Party by such employees, consultants, investment bankers and agents
and, to the extent any employee, consultant, investment banker or agent of
Borrower or any Loan Party is also an employee, consultant, investment
banker or agent of a Non-Controlled Affiliate, allocate the compensation of
such employee, consultant, investment banker or agent between Borrower or
the Loan Party, as applicable, and the Non-Controlled Affiliate on the
basis of actual use of the services so rendered to the extent practicable
and, to the extent such allocation is not practical, on a basis reasonably
related to actual use of such services;
(iii) allocate all overhead expenses (including, without
limitation, telephone and other utility charges and lease and office
expenses) for items shared between Borrower or any Loan Party and a Non-
Controlled Affiliate on the basis of actual use to the extent practicable
and, to the extent such allocation is not practicable, on a basis
reasonably related to actual use;
(iv) cause the Borrower and each other Loan Party to be named as an
insured on the insurance policy covering its property, or enter into an
agreement with the holder of such policy whereby in the event of a loss in
connection with such property, proceeds are paid to the Borrower or
applicable Loan Party;
(v) maintain the Borrower's and the other Loan Parties' books and
records complete and separate from those of any Non-Controlled Affiliate;
(vi) ensure that any consolidated financial statements or other public
information for the Borrower and its Affiliates (including any Non-
Controlled Affiliates) on a consolidated basis contain appropriate
disclosures concerning the Borrower's separate existence;
(vii) not maintain bank accounts or other depository accounts to
which a Non-Controlled Affiliate is an account party, into which a Non-
Controlled Affiliate makes deposits or from which a Non-Controlled
Affiliate has the power to make withdrawals;
(viii) not permit a Non-Controlled Affiliate to pay any of the
Borrower's or any other Loan Party's operating expenses (except when paid
and charged pursuant to an allocation based upon actual use, to the extent
practicable and to the extent such allocation is not practicable, on a
basis reasonably related to actual use);
82
<PAGE>
(ix) not pay dividends or make distributions, loans or other advances
to a Non-Controlled Affiliate, except in each case, as duly authorized by
its board of directors and in accordance with applicable corporation law
and the provisions of this Agreement; and
(x) ensure that all advances and loans between or among the Loan
Parties shall be properly accounted for as indebtedness, shall be
documented as intercompany indebtedness and shall be evidenced by an
intercompany note.
(Q) WAIVER UNDER SHAREHOLDERS AGREEMENT. The Borrower hereby consents to
the execution and delivery by each of AMC and the Foundation of the Parent
Pledge Agreement to which it is a party and to the pledge of the Pledged
Collateral (as defined therein) to the Agent for the benefit of itself and the
Holders of Secured Obligations. The Borrower hereby further consents and agrees
that neither the Agent nor any Holder of Secured Obligations, nor any successor,
assign or transferee thereof shall be obligated by or subject to any of the
provisions of the Shareholders Agreement, including without limitation any
restrictions on Transfers (as defined in the Shareholders Agreement), rights of
first refusal or voting rights. The Borrower hereby waives the provisions of
the Shareholders Agreement to the extent that they are contrary to or
inconsistent with the terms of this Agreement or the Parent Pledge Agreements.
6.3. NEGATIVE COVENANTS.
(A) INDEBTEDNESS. The Borrower shall not, and shall not permit any other
Loan Party to, directly or indirectly create, incur, assume or otherwise become
or remain directly or indirectly liable with respect to any Indebtedness,
except:
(i) the Obligations;
(ii) Permitted Existing Indebtedness of any Loan Party, and any
extension, renewal, refunding or refinancing thereof, PROVIDED THAT any
such extension, renewal, refunding or refinancing is in an aggregate
principal amount not greater than the principal amount of and interest,
fees and expenses accrued on, such Permitted Existing Indebtedness
outstanding at the time thereof and is on terms (including, without
limitation, maturity, amortization, interest rate, premiums, fees,
covenants, events of default, and remedies) not materially less favorable
to the applicable Loan Party or materially adverse to the Lenders than the
terms of such Permitted Existing Indebtedness;
(iii) unsecured Subordinated Indebtedness (other than Acquisition
Subordinated Debt) the terms (including, without limitation, subordination,
default, standstill, sinking fund, maturity, amortization, interest rate,
premiums, fees, covenants, the entity (or entities) which issue the
Subordinated Indebtedness, events of default, and remedies) of which are
acceptable to the Lenders when issued, but not any increase in the
principal amount thereof and not any refinancing, modification, refunding
or extension of maturity thereof, in whole or in part, unless such
refinancing, modification, refunding or extension is not materially less
favorable to the applicable Loan Party, including, without
83
<PAGE>
limitation, with respect to amount, maturity, amortization, interest rate,
premiums, fees, covenants, subordination terms, events of default and
remedies or materially adverse to the Lenders than the terms of the
original approved Subordinated Indebtedness. Without limiting the
foregoing with respect to Subordinated Indebtedness that is not Acquisition
Subordinated Debt, (i) the scope and nature of covenants and defaults which
the Agent and the Lenders may deem acceptable will be determined taking
into account the Person(s) to which such Indebtedness is issued and the
relative size of the Subordinated Indebtedness compared to the size of the
Loans; (h) financial covenants, if any, contained in the agreement
governing such Subordinated Indebtedness shall be less restrictive than
those contained in this Agreement, (iv) such Subordinated Indebtedness
shall be unsecured; (v) there shall be no mandatory prepayments or
redemptions of such Subordinated Indebtedness of any type; PROVIDED,
HOWEVER, those interest payments permissible as Restricted Junior Payments
pursuant to SECTION 6.3(F)(ii) may be paid in accordance therewith; (vi)
none of the Subordinated Indebtedness shall mature prior to December 31,
2003; (vii) the agreement governing such Subordinated Indebtedness shall
not contain a cross-default to this Agreement or other Indebtedness (but
may contain a cross-acceleration clause to Indebtedness in excess of a
threshold amount to be determined based upon the size of the Subordinated
Indebtedness); and (viii) the agreement governing such Subordinated
Indebtedness shall contain no limitation on the sale of assets of any Loan
Party provided that any such sale does not involve a transfer of all or
substantially all of the assets of the Borrower or the applicable Loan
Party, any such sale is made in good faith on an arm's length basis and the
net proceeds of such sale are applied to repay or retire Obligations under
this Agreement.
(iv) Acquisition Subordinated Debt meeting the requirements of Section
6.3(H)(iii);
(v) Indebtedness constituting Contingent Obligations permitted by
SECTION 6.3(E);
(vi) Indebtedness constituting Contingent Purchase Price Payments,
which Indebtedness is issued pursuant to and in accordance with the terms
of the applicable Acquisition Documents;
(vii) Indebtedness arising from intercompany loans borrowed by any
Loan Party from the Borrower, evidenced by an intercompany note;
(viii) Indebtedness in respect of Interest Rate Agreements
permitted under SECTION 6.3(S); and
(ix) purchase money Indebtedness (including Capitalized Leases)
incurred by the Borrower or any other Loan Party after the Closing Date to
finance the acquisition of fixed assets, if (a) at the time of such
incurrence, no Default or Unmatured Default has occurred and is continuing
or would result from such incurrence, (b) such Indebtedness has a scheduled
maturity and is not due on demand, (c) such Indebtedness does not
84
<PAGE>
exceed $1,000,000 in the aggregate outstanding at any time for all Loan
Parties, and (d) any Lien securing such Indebtedness is permitted under
SECTION 6.3(C).
(B) SALES OF ASSETS. The Borrower shall not, and shall not permit any
other Loan Party to, sell, assign, transfer, lease, convey or otherwise dispose
of any property, whether now owned or hereafter acquired, or any income or
profits therefrom, or enter into any agreement to do so, unless:
(i) such sale is in connection with sales of Inventory in the
ordinary course of business;
(ii) (w) such sale, assignment, transfer, lease, conveyance or
disposition does not involve Inventory or Receivables, (x) the aggregate
net book value of assets sold in connection with all such sales by the
Borrower and each other Loan Party in the prior 12-month period does not
exceed $200,000, (y) such sale, assignment, transfer, lease, conveyance or
disposition is made in connection with the anticipated purchase by the
Borrower or the applicable Loan Party of replacement assets, and (z) all
mandatory prepayments required in connection therewith shall have been made
as and when provided in SECTION 2.5(B)(i)(a);
(iii) the aggregate net book value of such assets, together with
the net book value of all other assets sold, assigned, transferred, leased,
conveyed or otherwise disposed of and not replaced in accordance with the
provisions of CLAUSE (ii) above (other than sales and leases of Inventory
in the ordinary course of business) since the Closing Date does not exceed
$500,000 and all mandatory prepayments required in connection therewith
shall have been made as and when provided in Section 2.5(B)(i)(a);
(iv) such sale, assignment, transfer, lease, conveyance or other
disposition occurs pursuant to a merger (if such merger is not otherwise
prohibited by this Agreement) of one Loan Party into the Borrower or
another Loan Party (provided, in connection therewith the applicable
parties shall be in full compliance with the terms of the Collateral
Agreements); or
(v) such sale is in connection with the issuance by the Borrower of
any Capital Stock of the Borrower (x) to AMC pursuant to the terms of the
Share Purchase Agreement, (y) to employees, directors or Affiliates or (z)
in connection with a Permitted Acquisition; PROVIDED in connection
therewith no Change in Control shall occur and PROVIDED, FURTHER all
mandatory prepayments required in connection therewith shall have been made
as and when provided in SECTION 2.5(B)(i)(a).
(C) LIENS . The Borrower shall not, and shall not permit any other Loan
Party to, directly or indirectly create, incur, assume or permit to exist any
Lien on or with respect to any of their respective property or assets,
including, without limitation with respect to its Capital Stock, except:
85
<PAGE>
(i) Liens created by the Loan Documents;
(ii) Permitted Existing Liens;
(iii) Customary Permitted Liens; and
(iv) purchase money Liens (including the interest of a lessor under
a Capitalized Lease and Liens to which any property is subject at the time of
the Loan Party's acquisition thereof) securing Indebtedness permitted under
SECTION 6.3(A)(IX); PROVIDED that such Liens shall not apply to any property
of any of the Loan Parties other than that purchased with the proceeds of
such Indebtedness or subject to such Capitalized Lease.
In addition, neither Borrower nor any other Loan Party nor any of its
stockholders shall become a party to any agreement, note, indenture or other
instrument, or take any other action, which would prohibit the creation of a
Lien on any of its properties or other assets or its Capital Stock in favor
of the Agent for the benefit of itself and the Holders of Secured
Obligations, as additional collateral for the Obligations; PROVIDED that any
agreement, note, indenture or other instrument in connection with secured
purchase money Indebtedness (including Capitalized Leases) permitted pursuant
to the terms of this Agreement may prohibit the creation of a Lien in favor
of the Agent for the benefit of itself and the Holders of the Secured
Obligations on the items of property obtained with the proceeds of such
purchase money Indebtedness or subject to such Capitalized Lease.
(D) INVESTMENTS. Except to the extent permitted pursuant to
PARAGRAPH (H) below, the Borrower shall not, and shall not permit any other
Loan Party to, directly or indirectly make or own any Investment, except:
(i) Investments in Cash Equivalents;
(ii) Permitted Existing Investments in an amount not greater
than the amount thereof on the Closing Date;
(iii) Investments received in connection
with the bankruptcy or reorganization of suppliers and
customers and in settlement of delinquent obligations of,
and other disputes with, customers and suppliers arising
in the ordinary course of business;
(iv) Investments consisting of (a) bank and money market accounts
(other than those subject to a Restricted Account Agreement)
maintained by the Borrower or any Loan Party with financial
institutions provided not more than $50,000 shall be
maintained in all such accounts at any one time; and (b)
deposit accounts maintained by the Borrower or any Loan
Party with LaSalle provided funds deposited in such deposit
accounts are subject to the terms of the Concentration
Account Agreement;
86
<PAGE>
(v) Investments by the Borrower in connection with any
Permitted Acquisition, provided that if as a result of or
in connection with such Permitted Acquisition a Subsidiary
is created or acquired, such Subsidiary complies with the
requirements set forth in SECTION 6.3(H);
(vi) Investments by the Borrower or a
Wholly-Owned Subsidiary of the Borrower into a
Wholly-Owned Subsidiary, PROVIDED that upon the creation
or acquisition of a Wholly-Owned Subsidiary the following
requirements will have been satisfied:
(1) Such Wholly-Owned Subsidiary shall have executed a
Subsidiary Guarantee in substantially the form attached
hereto as EXHIBIT G.
(2) Such Wholly-Owned Subsidiary, if any, shall have
executed a Security Agreement in substantially the
form attached hereto as EXHIBIT D.
(3) Such Wholly-Owned Subsidiary shall have obtained all
of the third party agreements from the applicable
parties as set forth herein and in the Security
Agreement with respect to its assets.
(4) Each other Person party to any of the Loan Documents
shall have executed a consent and reaffirmation of
such Person's obligations under the Loan Documents.
(5) The Borrower and/or the Subsidiary of which such
Wholly-Owned Subsidiary will be a direct Subsidiary,
as applicable, shall have delivered to the Agent as
Collateral stock certificates representing all of
the Capital Stock of such Wholly-Owned Subsidiary
and such Capital Stock shall be subject to the
Pledge Agreements.
(6) The Agent shall have received in form suitable for
filing UCC-1 financing statements naming such
Wholly-Owned Subsidiary as debtor and the Agent as
secured party in all jurisdictions requested by the
Agent and shall have confirmed that no Liens exist
with respect to the assets or property of such
Wholly-Owned Subsidiary except Liens permitted under
the terms of this Agreement and the relevant
Security Agreement.
(7) The Agent shall have been provided with endorsements
with respect to the insurance to be maintained with
respect to such Wholly-Owned Subsidiary as required
pursuant to SECTION 6.2(E).
(8) Each of the Borrower and the other Loan Parties,
including such Wholly-Owned Subsidiary, shall have
executed and delivered the
87
<PAGE>
Contribution Agreement and/or an addendum thereto,
as applicable, together with a completed or revised
SCHEDULE I to the Contribution Agreement, in
substantially the form attached hereto as EXHIBIT L.
(9) The Loan Parties (including such Wholly-Owned
Subsidiary) shall have executed such other Loan
Documents and/or Collateral Documents and delivered
such documents, instruments, agreements and opinions
as shall be reasonably requested by the Agent, in
each case, in form and substance reasonably
satisfactory to the Agent. Such additional
documents shall disclose any revisions necessary to
the Schedules to this Agreement or any of the other
Loan Documents, all of which revisions shall be
reasonably acceptable to the Agent and the Required
Lenders.
(vii) Investments consisting of loans to management of the
Borrower and the other Loan Parties at any time not to
exceed $200,000 in the aggregate for all Loan Parties.
(E) CONTINGENT OBLIGATIONS. The Borrower shall not, and shall not
permit any other Loan Party to, directly or indirectly create or become or be
liable with respect to any Contingent Obligation, except (i) recourse
obligations resulting from endorsement of negotiable instruments for
collection in the ordinary course of business, (ii) Permitted Existing
Contingent Obligations and any extensions, renewals or replacements thereof,
provided that any such extension, renewal or replacement is not greater than
the Indebtedness under, and shall be on terms no less favorable to the
Borrower or such Loan Party, as applicable, than the terms of, the Permitted
Existing Contingent Obligation being extended, renewed or replaced and (iii)
Contingent Obligations arising under the Loan Documents.
(F) RESTRICTED JUNIOR PAYMENTS. The Borrower shall not, and shall not
permit any other Loan Party to, declare or make any Restricted Junior Payment,
except:
(i) payment of management fees, investment fees, professional
services fees, expense reimbursements or other amounts to
a Non-Controlled Affiliate required to be paid pursuant
to a services agreement in an amount not to exceed
$25,000 for any fiscal quarter, PROVIDED that no such
management fees, investment fees, professional services
fees, expense reimbursements or other amounts shall be
paid to a Non-Controlled Affiliate on or before December 31,
1996;
(ii) annual mandatory payments of interest, if any, due on the
Permitted Subordinated Indebtedness (as permitted under
SECTION 6.3(A)(III)) (other than Acquisition Subordinated
Debt) unless such payments are prohibited by the terms of
such Indebtedness or the subordination agreement or
intercreditor agreement related thereto;
88
<PAGE>
(iii) annual mandatory Contingent Purchase Price Payments in an
amount not to exceed the amount which would be payable
under the applicable Acquisition Documents entered into
at the time of the applicable Acquisition, without taking
into account any amendment, modification, supplement or
restatement of any such agreement or the adjustment of
any such amount pursuant to the terms of any such
Acquisition Document resulting from a change of facts and
circumstances after the Closing Date (as it relates to
the Omaha Acquisition) or Acquisition Closing Date with
respect thereto (unless the Agent and the Lenders shall
have consented to the terms thereof) the effect of which
is to increase the amount or accelerate the time of
payment of any such Contingent Purchase Price Payment;
(iv) Restricted Junior Payments from any Loan Party to the
Borrower; and
(v) annual mandatory payments of interest and principal, if any,
due on Acquisition Subordinated Debt unless such payments
are prohibited by the terms of such Indebtedness or the
subordination agreement or intercreditor agreement
related thereto;
PROVIDED, HOWEVER, that (a) the Restricted Junior Payments described in
CLAUSES (I), (II), (III), and (V) above shall not be permitted if either a
Default or an Unmatured Default shall have occurred and be continuing at the
date of payment thereof or would result therefrom.
(G) CONDUCT OF BUSINESS; SUBSIDIARIES. The Borrower shall not, and
shall not permit any other Loan Party to, engage in any business other than
the businesses engaged in by the Borrower on the date hereof and any business
or activities which are substantially similar, related or incidental thereto.
The Borrower shall not, and shall not permit any other Loan Party to, sell
to or provide services to any Person that has not obtained or maintained in
good standing all required Health Licenses. Except in connection with a
Permitted Acquisition or as otherwise permitted by SECTION 6.3(D)(VI), the
Borrower shall not, and shall not permit any other Loan Party to, create,
capitalize or acquire any Subsidiary after the date hereof.
(H) ACQUISITIONS. The Borrower shall not, and shall not permit any
other Loan Party to, make any Acquisition and no Target shall be added as a
Subsidiary, unless (i) the purchase price (including without limitation all
cash and non-cash consideration and any assumption of liabilities) of a
Target is less than $500,000 and in the aggregate the total purchase price of
Acquisitions which have not been approved by the Acquisition Approval Lenders
does not exceed $500,000 in any twelve month period or (ii) the Agent and the
Acquisition Approval Lenders shall have consented to the proposed Acquisition
of such Target, which consent shall not be unreasonably withheld. In
connection with each proposed Acquisition requiring the consent of the
Acquisition Approval Lenders, the Borrower shall deliver an Acquisition
Approval Package to each of the Lenders containing such information and in
such detail as shall be satisfactory to the Agent. Each Lender, in its
discretion, shall deliver to the Agent a certificate in the form of EXHIBIT N
hereto ("ACQUISITION CONSENT CERTIFICATE") indicating whether or not
89
<PAGE>
such Lender consents to the proposed Acquisition. If a Lender fails to
deliver the Acquisition Consent Certificate within the time frame requested
by the Borrower (but in any event no later than forty-five (45) days after
receipt of the completed Acquisition Approval Package), then the Lender shall
be deemed to have disapproved of the Acquisition. If the Agent has received
within such period, executed Acquisition Consent Certificates from the
Acquisition Approval Lenders indicating their consent to the proposed
Acquisition, then, subject to the Agent's satisfaction with all documentation
in connection therewith and that the Borrower is in compliance with the
criteria set forth below, the approved Acquisition may be consummated not
later than sixty (60) days after the consent of the Acquisition Approval
Lenders has been received by the Agent on the terms and conditions of the
Acquisition Approval Package (each such approved Acquisition constituting a
"PERMITTED ACQUISITION") :
(i) No Default or Unmatured Default shall have occurred and be
continuing or would result from such Acquisition or the incurrence of any
Indebtedness in connection therewith.
(ii) Each of the Lenders shall have been provided with two years of
audited financial statements with respect to the Target for distribution to
the Lenders. In the event that audited financial statements for such period
are not available as a result of divisional accounting or similar accounting
issues or past business practices, then the Lenders shall have received for
distribution to the Lenders, financial statements of the Target in such form
as shall be acceptable to the Agent and the Acquisition Approval Lenders.
(iii) Any Indebtedness (other than the applicable Acquisition Loan)
("ACQUISITION SUBORDINATED DEBT") incurred for the purpose of financing all
or any part of the Acquisition shall be subordinated to the Obligations on
terms and conditions acceptable to the Agent and the Acquisition Approval
Lenders. The terms and conditions of any such Acquisition Subordinated Debt,
including without limitation, those pertaining to subordination, default,
standstill, sinking fund, amortization, interest rate, covenants and
defaults, the entity or entities which issue or are otherwise liable for the
Acquisition Subordinated Debt, shall be in form and substance reasonably
acceptable to the Agent and the Acquisition Approval Lenders. Without
limiting the foregoing: (i) the scope and nature of covenants and defaults
which the Agent and the Acquisition Approval Lenders may deem acceptable will
be determined taking into account the Person(s) to which such Indebtedness is
issued (it being expected that the scope and nature of covenants and defaults
in Indebtedness issued to the seller of a Target would be significantly more
limited than terms from third-party financing sources) and the relative size
of the Acquisition Subordinated Indebtedness; (ii) financial covenants, if
any, contained in the agreement governing such Acquisition Subordinated Debt
shall be materially less restrictive than the financial covenants included in
this Agreement; (iii) other covenants or defaults, if any, contained in the
agreement governing such Acquisition Subordinated Debt which covenants or
defaults contain monetary baskets or restrictions shall be materially less
restrictive than those contained in this Agreement; (iv) such Acquisition
Subordinated Debt shall be unsecured; (v) the maturity of such Acquisition
Subordinated Debt and any mandatory prepayments or redemptions of such
Acquisition Subordinated Debt shall be acceptable to the Agent and the
Acquisition Approval Lenders; (vi) the agreement governing such Acquisition
Subordinated Debt shall not contain a cross-default to this Agreement or
other Indebtedness (but may contain a cross-
90
<PAGE>
acceleration clause to this Agreement and other Indebtedness in excess of a
threshold amount to be determined based upon the size of the Target); and
(vii) the agreement governing such Acquisition Subordinated Debt shall
contain no limitation on the sale of assets of any Target provided that any
such sale does not involve a transfer of all or substantially all of the
assets of the Target, any such sale is made in good faith on an arm's length
basis and the net proceeds of such sale are applied to repay or retire
Obligations under this Agreement.
(iv) The Acquisition is either a purchase of assets by the Borrower or a
Subsidiary or the resulting entity becomes a Subsidiary, is consummated
pursuant to a negotiated acquisition agreement on a non-hostile basis on
terms and conditions reasonably acceptable to the Agent and the Acquisition
Approval Lenders and involves the purchase of a business line similar,
related or incidental to that of the Borrower as of the Closing Date. In the
event that the acquisition agreement contains any Contingent Purchase Price
Payments, the terms thereof shall be reasonably acceptable to the Agent and
the Acquisition Approval Lenders.
(v) After giving effect to such Acquisition, the representations and
warranties set forth in ARTICLE V hereof shall be true and correct in all
material respects on and as of the date of such Acquisition with the same
effect as though made on and as of such date except for those made only as of
the Closing Date.
(vi) Prior to such Acquisition, the Borrower shall deliver to the
Lenders (i) PRO FORMA historical financial statements for the twelve-month
period ending on the last day of the Borrower's most recently completed
fiscal quarter taking into account the proposed Acquisition and the
incurrence of Indebtedness in connection therewith; (ii) PRO FORMA opening
date balance sheets as of the date of such proposed Acquisition taking into
account the consummation thereof and the incurrence of any Indebtedness
proposed to be incurred in connection therewith; and (iii) PRO FORMA
projections for the period remaining until the Termination Date. The
financial information delivered pursuant to this clause (vi) shall also
contain a revised plan and forecast (including a projected balance sheet,
income statement and funds flow statement) of the Borrower and the Borrower
Corporate Group for the balance of the fiscal year prepared in such detail as
shall be reasonably satisfactory to the Agent.
(vii) As of the applicable Acquisition Closing Date, the Borrower shall
deliver to the Agent and the Lenders a certificate from the Borrower's chief
financial officer demonstrating to the satisfaction of the Agent and the
Acquisition Approval Lenders that after giving effect to such Acquisition and
the incurrence of any Indebtedness permitted in connection therewith on a PRO
FORMA basis as if such Acquisition and such incurrence of Indebtedness had
occurred on the first day of the twelve-month period ending on the last day
of the Borrower's most recently completed fiscal quarter, the Borrower would
have been in compliance with all provisions of SECTION 6.4 at all times
during such twelve-month period and will be in compliance with all provisions
of SECTION 6.4 at all times during the period from such Acquisition Closing
Date until the Termination Date.
(viii) All material regulatory and legal approvals for the Acquisition
shall have been obtained.
91
<PAGE>
(ix) There shall be an absence of injunction or temporary restraining
order which, in the judgment of the Agent would prohibit the making of the
Term Loans or Acquisition Loans, if any, on the Acquisition Closing Date or
the consummation of the Acquisition.
(x) The Agent (directly or through its traveling auditors and/or
outside consultants) shall have completed its review of the Target and, if
applicable, its subsidiaries and their respective business operations, assets
and liabilities, including, without limitation, review of financial
statements and review of pending and threatened litigation and insurance
coverage relating thereto, environmental risks and liabilities, material
agreements, retiree medical benefits, ERISA obligations and compliance with
applicable laws and regulations deemed necessary or prudent by the Agent and
the Acquisition Approval Lenders, and such review shall have provided the
Agent and the Lenders with results and information which, in the Agent's and
the Acquisition Approval Lenders' reasonable determination, are satisfactory
to permit the Lenders to enter into the secured financing transaction in
connection with the Acquisition and to make the Term Loans or Acquisition
Loans, if any, in connection therewith. The Agent and the Acquisition
Approval Lenders shall have determined that all financial, accounting and tax
aspects of the Acquisition are reasonably acceptable.
(xi) The Agent and the Lenders shall have received legal opinions from
the Borrower's and the Target's counsel (or other counsel reasonably
satisfactory to the Agent) in form and substance reasonably satisfactory to
the Agent addressing such matters as the Agent shall reasonably designate and
such other opinions as are customary for transactions of a similar nature.
(xii) Simultaneously with any such Acquisition, the Borrower and the
Target shall have taken all action required under applicable law, or
reasonably requested by the Agent, to grant to the Agent, for the benefit of
the Holders of Secured Obligations, a valid and perfected first-priority
security interest in all of the stock of the Target owned by the Borrower or
any one or more of its Subsidiaries and, subject to Customary Permitted Liens
and Liens securing Indebtedness or leases of the Target which the Agent and
the Acquisition Approval Lenders agree to permit to remain outstanding, all
of the assets of the Target. In connection therewith:
(1) Each Subsidiary acquired or created in connection with such Permitted
Acquisition (a "New Subsidiary"), if any, shall have executed a
Subsidiary Guarantee in substantially the form attached hereto as
EXHIBIT G.
(2) Each New Subsidiary, if any, shall have executed a Security Agreement
in substantially the form attached hereto as EXHIBIT D.
(3) Each Loan Party (including any New Subsidiary) shall have obtained all
of the third party agreements from the applicable parties as set forth
herein and in the Security Agreements with respect to the Target's
assets.
92
<PAGE>
(4) Each other Person party to any of the Loan Documents shall have
executed a consent and reaffirmation of such Person's obligations
under the Loan Documents.
(5) The Borrower or the Subsidiary of which any New Subsidiary will be a
direct Subsidiary, as applicable, shall have delivered to the Agent as
Collateral stock certificates representing all of the Capital Stock of
the Target owned by the Borrower or such Subsidiary and (a) such
Capital Stock together with the Capital Stock of other Persons which
have executed a Pledge Agreement shall be for not less than 80% of the
combined voting power of the Target's outstanding Capital Stock
ordinarily having the right to vote at an election of directors and
(b) such Capital Stock shall be subject to the Pledge Agreements.
(6) The Agent shall have received in form suitable for filing UCC-1
financing statements naming the applicable Loan Party or New
Subsidiary as debtor and the Agent as secured party in all
jurisdictions requested by the Agent and shall have confirmed that no
Liens exist with respect to the assets or property of the Target
except Liens permitted under the terms of this Agreement and the
relevant Security Agreement (PROVIDED, HOWEVER, the Agent and the
Lenders agree that prefiling and post-filing Lien searches need not be
conducted in jurisdictions where the aggregate book value of assets of
the Target do not exceed $100,000, PROVIDED the aggregate book value
of assets of all Loan Parties for which such Lien searches have not
been conducted shall not exceed five percent (5.0%) of the
consolidated book value of all assets of all members of the Borrower
Corporate Group).
(7) The Agent shall have been provided with endorsements with respect to
the insurance to be maintained with respect to the Target as required
pursuant to SECTION 6.2(E).
(8) Upon the creation or acquisition of a New Subsidiary, each of the
Borrower and the other Loan Parties shall have executed and delivered
the Contribution Agreement and/or an addendum thereto, as applicable,
together with a completed or revised SCHEDULE I to the Contribution
Agreement, in substantially the form attached hereto as EXHIBIT L.
(9) The applicable Loan Parties shall have entered into a Collateral
Assignment of Representations, Warranties and Covenants in
substantially the form attached hereto as EXHIBIT M with respect to
the acquisition agreement in connection with the proposed Acquisition.
(10) The Borrower shall have delivered to the Agent certificates of value,
solvency and other appropriate factual information from Borrower's
chief financial officer in form and substance acceptable to the Agent,
supporting the conclusions that after giving effect to the Acquisition
of the Target, the Borrower is solvent and will be solvent subsequent
to incurring the Indebtedness in connection with the
93
<PAGE>
Acquisition, will be able to pay its debts and liabilities as they
become due and will not be left with unreasonably small capital
with which to engage in its businesses.
(11) The Loan Parties (including any New Subsidiaries) shall have executed
such other Loan Documents and/or Collateral Documents and delivered
such documents, instruments and agreements as shall be reasonably
requested by the Agent, in each case, in form and substance reasonably
satisfactory to the Agent. Such additional documents shall disclose
any revisions necessary to the Schedules to this Agreement or any of
the other Loan Documents, all of which revisions shall be reasonably
acceptable to the Agent and the Acquisition Approval Lenders and which
shall not disclose any information which is inconsistent with the
other criteria for permitting an Acquisition under this SECTION
6.3(H). Set forth as EXHIBIT O is a sample list of closing documents
which would be delivered in connection with the closing of an
Acquisition.
(I) TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. The Borrower shall
not, and shall not permit any other Loan Party to, directly or indirectly (i)
except as permitted in SECTION 6.3(F), pay any management fees or other
similar fees or compensation to any Non-Controlled Affiliate or any holder or
holders of any Loan Party's Capital Stock or any Affiliate thereof, other
than wages, salaries, bonuses and advances for expenses incurred in the
ordinary course and consistent with past practices of employees who are also
stockholders of any Loan Party in the ordinary course and consistent with
past practices of the Borrower or (ii) except as disclosed in SCHEDULE
6.3(I), enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Non-Controlled Affiliate or any holder or
holders of any of the Capital Stock of any Loan Party or any Affiliate
thereof which is not a Subsidiary of the Borrower, on terms that are less
favorable to the applicable Loan Party than those that might be obtained in
an arm's length transaction at the time from Persons who are not such a
holder or Affiliate.
(J) RESTRICTION ON FUNDAMENTAL CHANGES. The Borrower shall not, and
shall not permit any other Loan Party to, enter into any merger or
consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation
or dissolution), or convey, lease, sell, transfer or otherwise dispose of, in
one transaction or series of transactions, all or substantially all of any
such Person's business or property, whether now or hereafter acquired, except
(i) transactions permitted under SECTIONS 6.3(B) or 6.3(H) and (ii) merger of
any Loan Party with and into the Borrower, with the Borrower as the surviving
corporation in the merger.
(K) SALES AND LEASEBACKS. The Borrower shall not, and shall not permit
any other Loan Party to, become liable, directly, by assumption or by
Contingent Obligation, with respect to any lease, whether an Operating Lease
or a Capitalized Lease, of any property (whether real or personal or mixed)
(i) which the Borrower or one of the Loan Parties sold or transferred or is
to sell or transfer to any other Person, or (ii) which the Borrower or one of
the Loan Parties intends to use for substantially the same purposes as any
other property which has been or is to be sold or transferred by the Borrower
or one of the Loan Parties to any other Person in connection with
94
<PAGE>
such lease, unless in either case the sale involved is not prohibited under
SECTION 6.3(B) and the lease involved is not prohibited under SECTION 6.3(A).
(L) MARGIN REGULATIONS. No Loan Party shall use all or any portion of
the proceeds of any credit extended under this Agreement to purchase or carry
Margin Stock.
(M) ERISA. No Loan Party shall participate in any prohibited
transaction described in Sections 406 of ERISA or 4975 of the Code for which
a statutory or class exemption is not available or a private exemption has
not been previously obtained from the DOL, if (i) as a result thereof the
Loan Parties could be subject to liability in excess of $100,000,
individually or in the aggregate, or (ii) if it could result in a Material
Adverse Effect.
(N) ISSUANCE OF CAPITAL STOCK. Except as permitted in SECTION 6.3(B),
no Loan Party shall issue any Capital Stock.
(O) CORPORATE DOCUMENTS. No Loan Party shall amend, modify or
otherwise change any of the terms or provisions in any of their respective
corporate documents as in effect on the date hereof or on the Acquisition
Closing Date or the date of the creation thereof, as applicable, with respect
to any Subsidiary acquired or created after the date hereof, in any manner
adverse to the interests of the Lenders without the prior written consent of
the Required Lenders (which consent shall not be unreasonably withheld).
(P) OTHER INDEBTEDNESS. The Borrower shall not, and shall not permit
any other Loan Party to, amend, supplement or otherwise modify the terms of
(i) any Indebtedness permitted under SECTION 6.3(A)(II) or (IV) or any
Permitted Existing Contingent Obligations in any way that would be materially
less advantageous to such Loan Party or materially adverse to the Lenders,
including, without limitation, with respect to amount, maturity,
amortization, interest rate, premiums, fees, covenants, events of default and
remedies or (ii) any Indebtedness incurred under Sections 6.3(A)(iii), (vii)
or (viii) in any manner such that such Indebtedness as so amended,
supplemented or modified could not be incurred as of the date of such
amendment, supplement or modification pursuant to such applicable subsection
of Section 6.3. Except for mandatory payments of principal and interest on
Indebtedness (other than Permitted Subordinated Indebtedness), mandatory
payments of principal and interest on Acquisition Subordinated Debt permitted
pursuant to Section 6.3(F)(iii) and mandatory payments of interest on
Permitted Subordinated Indebtedness (other than Acquisition Subordinated
Debt) permitted pursuant to Section 6.3(F)(ii), no Loan Party shall purchase,
redeem, prepay or repay any principal of, premium, if any, interest or other
amount payable in respect of any Indebtedness (other than the Obligations).
(Q) FISCAL YEAR. The Borrower shall not, and shall not permit any
other Loan Party to, change its fiscal year for accounting or tax purposes
from a period consisting of the 12-month period ending on December 31 of each
calendar year.
(R) SUBSIDIARY COVENANTS. The Borrower will not permit any of its
Subsidiaries to create or otherwise become effective any consensual
encumbrance or restriction of any kind on
95
<PAGE>
the ability of any such Subsidiary to pay dividends or make any other
distribution on its stock, or make any other Restricted Junior Payment, pay
any Indebtedness or other Obligation owed to the Borrower or any other such
Subsidiary, make loans or advances or other Investments in the Borrower or
any other such Subsidiary, or sell, transfer or otherwise convey any of its
property to the Borrower or any other such Subsidiary.
(S) RATE HEDGING OBLIGATIONS. No Loan Party shall enter into any
interest rate, commodity or foreign currency exchange, swap, collar, cap or
similar agreements other than those entered into pursuant to which any Loan
Party has hedged its actual interest rate, foreign currency or commodity
exposure (such hedging agreements are sometimes referred to herein as
"INTEREST RATE AGREEMENTS").
(T) CHANGE OF DEPOSIT ACCOUNTS. The Borrower shall not, and shall not
permit any other Loan Party to, establish any deposit account with any bank
or other financial institution, except in accordance with and in compliance
with the provisions of SECTION 2.12.
6.4 FINANCIAL COVENANTS. The Borrower shall and shall cause each
of the Loan Parties to be operated in a manner so as to comply with the
following:
(A) DEFINED TERMS FOR FINANCIAL COVENANTS.
The following terms used in this Agreement shall have the following meanings
(such meanings to be applicable, except to the extent otherwise indicated in
a definition of a particular term, both to the singular and the plural forms
of the terms defined):
"CAPITAL EXPENDITURES" means, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities and including
Capitalized Leases and Permitted Purchase Money Indebtedness and including
all related Transaction Costs) by the Borrower and its consolidated
Subsidiaries during such period that, in conformity with Agreement Accounting
Principles, are required to be included in or reflected by the property,
plant, equipment or similar fixed asset accounts reflected in the
consolidated balance sheet of the Borrower and its consolidated Subsidiaries
other than with respect to the acquisition of inventory and equipment in the
ordinary course of business or with respect to the Permitted Acquisitions.
"EBITDA" means, for any period, on a consolidated basis for Borrower and
its consolidated Subsidiaries, the sum, without duplication, of the amounts
for such period of (i) Net Income, PLUS (ii) charges against income for
foreign, federal, state and local taxes, PLUS (iii) Interest Expense, plus
(iv) Fees, PLUS (v) amortization expense, including, without limitation,
amortization of goodwill and other intangible assets, PLUS (vi) other
non-cash charges classified as long-term deferrals in accordance with
Agreement Accounting Principles, PLUS (vii) depreciation expense, MINUS
(viii) interest income, MINUS (ix) extraordinary gains (and any unusual gains
arising in or outside of the ordinary course of business not included in
extraordinary gains determined in accordance with Agreement Accounting
Principles which have been included in the determination of Net Income).
96
<PAGE>
"FEES" means fees (including agency and unused commitment fees) and
discounts with respect to (i) Letters of Credit and (ii) Indebtedness
evidenced by this Agreement.
"FIXED CHARGE COVERAGE RATIO" means a ratio of: (i) the sum, without
duplication, of the amounts of (a) EBITDA, PLUS (b) Rentals, MINUS (c)
Capital Expenditures, MINUS (d) Contingent Purchase Price Payments to (ii)
the sum, without duplication, of the amounts of (a) Interest Expense, PLUS
(b) Fees, PLUS (c) Rentals, PLUS (d) Restricted Junior Payments consisting of
management fees paid pursuant to SECTION 6.3(F)(I), PLUS (e) any amounts paid
by the Borrower or any of its Subsidiaries to any Governmental Authority with
respect to the Borrower Corporate Group's tax liability, PLUS (f) scheduled
amortization of the principal portion of the Term Loans and Acquisition Loans
and scheduled amortization of the principal portion of all other Indebtedness
of Borrower and its consolidated Subsidiaries during such period; provided
that at any time that (i) the Borrower is otherwise in compliance with the
requirements of the provisions of Section 6.4 and (ii) the Borrower has a
contractual commitment (which is not subject to any conditions (other than
notice as provided in the Shareholders Agreement), which are not satisfied)
from AMC to advance funds to the Borrower in the amount of the outstanding
Acquisition Subordinated Indebtedness, the scheduled amortization of the
principal portion of the Acquisition Subordinated Indebtedness shall be
excluded from the calculation pursuant to clause (ii)(f) above.
In each case the Fixed Charge Coverage Ratio shall be determined as of the
last day of each fiscal quarter for the four-quarter period ending on such
day.
"INTEREST EXPENSE" means, for any period, total interest expense of
Borrower and its consolidated Subsidiaries, other than in respect of Fees,
whether paid, deferred or accrued (including the interest component of
Capitalized Leases), but excluding interest expense not payable in cash
(including amortization of discount), all as determined in conformity with
Agreement Accounting Principles.
"NET INCOME" means, for any period, the net earnings (or loss) after
taxes of Borrower and its consolidated Subsidiaries on a consolidated basis
for such period taken as a single accounting period determined in conformity
with Agreement Accounting Principles.
"RENTALS" of a Person means the aggregate fixed amounts payable by such
Person under any lease of real or personal property having an original term
(including any required renewals or any renewals at the option of the lessor
or lessee) of one year or more but does not include any amounts payable under
Capitalized Leases of such Person.
(B) INTEREST EXPENSE COVERAGE RATIO . Maintain a ratio (the "INTEREST
EXPENSE COVERAGE RATIO") of (i) EBITDA, MINUS Capital Expenditures to (ii)
Interest Expense for the applicable period of at least:
97
<PAGE>
Applicable Period Applicable Interest
Coverage Ratio
From the Closing Date and each 2.00 to 1.0
fiscal quarter thereafter
In each case the Interest Expense Coverage Ratio shall be determined as of
the last day of each fiscal quarter for the four-quarter period ending on
such day.
(C) FIXED CHARGE COVERAGE RATIO. Maintain a Fixed Charge Coverage
Ratio of at least 1.15 to 1.00 as of the last day of each fiscal quarter of
the Borrower.
(D) MINIMUM EBITDA. Not permit EBITDA for the applicable period to be
less than:
Applicable Period Minimum EBITDA
From January 1, 1996 through June 30, 1996 $200,000, PLUS 75% of the
Projected EBITDA of Targets
From January 1, 1996 through September 30, 1996 $450,000, PLUS
75% of the Projected
EBITDA of Targets
From January 1, 1996 through December 31, 1996 $825,000, PLUS 75% of the
Projected EBITDA of Targets
For purposes hereof, the "PROJECTED EBITDA OF TARGETS" shall mean with
respect to each Target, for each applicable period occurring after the
Acquisition Closing Date in respect of such Target, the sum of the projected
EBITDA (determined in a manner consistent with calculation of EBITDA of the
Borrower and its Subsidiaries as defined in SECTION 6.4(A)) for such period
for each Target acquired by a Loan Party from and after the Closing Date
based upon the projected financial information contained in the Acquisition
Approval Package delivered to the Lenders regarding such Target.
The parties hereto acknowledge and agree, that the minimum levels of EBITDA
for each period of each fiscal year after the fiscal year ending after
December 31, 1996 shall be established prior to the beginning of each fiscal
year and further agree to enter into negotiations, in good faith, in
98
<PAGE>
order to establish such levels in a manner so as to reflect equitably the
desired result that the criteria for evaluating the Borrower's and the
Borrower Corporate Group's financial condition shall be consistent with the
criteria used in establishing the levels for the fiscal year ending December
31, 1996.
(E) MAXIMUM LEVERAGE RATIO. Shall not permit at any time on or after
the earlier of December 31, 1996 or the Conversion Date the ratio ("LEVERAGE
RATIO") of (i) Indebtedness of Borrower and its consolidated Subsidiaries for
borrowed money (excluding from the calculation thereof any Contingent
Obligations or Rate Hedging Obligations) to (ii) EBITDA MINUS Capital
Expenditures for the applicable period, to be greater than:
Applicable
Applicable Period Leverage Ratio
From December 31, 1996 through the Conversion Date 4.50 to 1.0
For the first three fiscal quarters after the 4.25 to 1.0
Conversion Date
For the fourth, fifth, sixth and seventh 4.00 to 1.0
fiscal quarters after the Conversion Date
For the eighth fiscal quarter after the 3.50 to 1.0
Conversion Date
For the ninth fiscal quarter after the 3.25 to 1.00
Conversion Date
For the tenth and eleventh fiscal quarters 3.00 to 1.00
after the Conversion Date
Each fiscal quarter thereafter 2.75 to 1.00
The Leverage Ratio shall be calculated, in each case, as of the last day of
each fiscal quarter based upon (A) for Indebtedness, Indebtedness as of the
last day of each such fiscal quarter; and (B) for EBITDA and Capital
Expenditures, the actual amount for the four-quarter period ending on such
day.
(F) CALCULATIONS FOR ACQUISITION. For purposes of calculating the
Leverage Ratio, EBITDA and Capital Expenditures for any period shall be
calculated on a pro forma basis as if each Permitted Acquisition and the
Colorado Acquisition, if applicable, consummated during such period had
occurred on the first day of such four (4) quarter period.
ARTICLE VII. DEFAULTS
7.1 DEFAULTS . Each of the following occurrences shall constitute a
Default under this Agreement:
99
<PAGE>
(a) FAILURE TO MAKE PAYMENTS WHEN DUE. The Borrower shall (i) fail to
pay when due any of the Obligations consisting of principal with respect to
the Loans or (ii) shall fail to pay within three (3) Business Days of the
date when due any of the other Obligations under this Agreement or the other
Loan Documents.
(b) BREACH OF CERTAIN COVENANTS. The Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation
binding on it under:
(i) Sections 6.1(C), 6.1(D), 6.1(E), 6.1(F), 6.1(G), 6.1(H), 6.1(I),
6.1(K), 6.1(N), 6.2(B) or 6.2(F) and such failure shall continue unremedied
for fifteen (15) days;
(ii) Section 6.1(A), 6.1(B), 6.1(J) or 6.2(E) and such failure shall
continue unremedied for five (5) Business Days;
(iii) Section 6.3 and such failure shall continue unremedied for five (5)
Business Days but only if such failure was unintentional and inadvertent and
is capable of being and is reasonably likely to be cured or remedied within
such five (5) Business Day period; or
(iv) Section 6.3 (to the extent such failure is not subject to CLAUSE (III)
above), 6.4(B), 6.4(C), 6.4(D) or 6.4(E).
(c) BREACH OF REPRESENTATION OR WARRANTY. Any representation or warranty
made or deemed made by Borrower, any other Loan Party, AMC or the Foundation
to the Agent or any Lender herein or in any of the other Loan Documents or in
any statement or certificate at any time given by any such Person pursuant to
any of the Loan Documents shall be false or misleading in any material
respect on the date as of which made (or deemed made).
(d) OTHER DEFAULTS. The Borrower shall default in the performance of or
compliance with any term contained in this Agreement (other than as covered
by PARAGRAPHS (a), (b) or (c) of this SECTION 7.1), or the Borrower or any
other Loan Party shall default in the performance of or compliance with any
term contained in any of the other Loan Documents, and such default shall
continue for thirty (30) days after the occurrence thereof.
(e) DEFAULT AS TO OTHER INDEBTEDNESS. The Borrower or any other Loan
Party shall fail to make any payment when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) with respect to any
Indebtedness (other than the Obligations), which Indebtedness has an
outstanding principal balance in excess of $200,000; or any breach, default
or event of default shall occur, or any other condition shall exist under any
instrument, agreement or indenture pertaining to any such Indebtedness, if
the effect thereof is to cause an acceleration, mandatory redemption, a
requirement that Borrower or such Loan Party offer to purchase such
Indebtedness or other required repurchase of such Indebtedness, or permit the
holder(s) of such Indebtedness to accelerate the maturity of any such
Indebtedness or require a redemption or other repurchase of such
Indebtedness; or any such Indebtedness shall be otherwise declared to be due
and payable (by acceleration or otherwise) or required to be prepaid,
100
<PAGE>
redeemed or otherwise repurchased by Borrower or any Loan Party (other than
by a regularly scheduled required prepayment) prior to the stated maturity
thereof.
(f) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) An involuntary case shall be commenced against the Borrower or any
other Loan Party and the petition shall not be dismissed, stayed, bonded or
discharged within sixty (60) days after commencement of the case; or a court
having jurisdiction in the premises shall enter a decree or order for relief
in respect of the Borrower or any other Loan Party in an involuntary case,
under any applicable bankruptcy, insolvency or other similar law now or
hereinafter in effect; or any other similar relief shall be granted under any
applicable federal, state, local or foreign law.
(ii) A decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over the Borrower or any
other Loan Party or over all or a substantial part of the property of the
Borrower or any other Loan Party shall be entered; or an interim receiver,
trustee or other custodian of the Borrower or any other Loan Party or of all
or a substantial part of the property of the Borrower or any other Loan Party
shall be appointed or a warrant of attachment, execution or similar process
against any substantial part of the property of the Borrower or any other
Loan Party shall be issued and any such event shall not be stayed, dismissed,
bonded or discharged within sixty (60) days after entry, appointment or
issuance.
(g) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The Borrower
or any other Loan Party shall (i) commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, (ii) consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under
any such law, (iii) consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property, (iv) make any assignment for the benefit of creditors or (v) take
any corporate action to authorize any of the foregoing.
(h) JUDGMENTS AND ATTACHMENTS. Any money judgment(s) (other than a money
judgment covered by insurance as to which the insurance company has not
disclaimed or reserved the right to disclaim coverage), writ or warrant of
attachment, or similar process against Borrower or any other Loan Party or any
of their respective assets involving in excess of $200,000 in the aggregate with
respect to the Borrower and all other Loan Parties is (are) entered and shall
remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60)
days or in any event later than fifteen (15) days prior to the date of any
proposed sale thereunder.
(i) DISSOLUTION. Any order, judgment or decree shall be entered against
Borrower or any other Loan Party decreeing its involuntary dissolution or
split up and such order shall remain undischarged and unstayed for a period
in excess of sixty (60) days; or the Borrower or any other Loan Party shall
otherwise dissolve or cease to exist except as specifically permitted by this
Agreement.
101
<PAGE>
(j) LOAN DOCUMENTS; FAILURE OF SECURITY. At any time, for any reason,
(i) any Loan Document as a whole that materially affects the ability of the
Agent, or any of the Lenders, to enforce the Obligations or enforce their
rights against any guarantor or the Collateral or any other collateral
pledged thereunder ceases to be in full force and effect or the Borrower, any
other Loan Party, AMC or the Foundation seeks to repudiate its obligations
under any of the Loan Documents and the Liens intended to be created thereby
are, or the Borrower, any such Loan Party, AMC or the Foundation seeks to
render such Liens, invalid and unperfected, or (ii) Liens on Collateral with
a fair market value in excess of $100,000 in the aggregate for all Loan
Parties in favor of the Agent contemplated by the Loan Documents shall, at
any time, for any reason, be invalidated or otherwise cease to be in full
force and effect, or such Liens shall not have the priority contemplated by
this Agreement or the Loan Documents.
(k) TERMINATION EVENT. Any Termination Event occurs which the Required
Lenders believe is reasonably likely to subject the Borrower and the other
members of the Controlled Group to liability in excess of $100,000,
individually or in the aggregate.
(l) WAIVER APPLICATION. The plan administrator of any Benefit Plan
applies under Section 412(d) of the Code for a waiver of the minimum funding
standards of Section 412(a) of the Code and the Agent believes that the
substantial business hardship upon which the application for the waiver is
based is reasonably likely to subject the Loan Parties to liability in excess
of $100,000, individually or in the aggregate.
(m) CHANGE OF CONTROL. A Change of Control shall occur.
(n) INTEREST RATE AGREEMENTS. Nonpayment by the Borrower of any
obligation under any Interest Rate Agreements entered into with any Lender or
the breach by the Borrower of any term, provision or condition contained in
any such Interest Rate Agreements, in each case following the expiration of
any cure periods with respect to such nonpayment or breach.
(o) ENVIRONMENTAL MATTERS. The Borrower or any other Loan Party shall be
the subject of any proceeding or investigation pertaining to (i) the release
by any Loan Party of any contaminant (including, without limitation, any
medical waste) into the environment, (ii) the liability of any Loan Party
arising from the release by any other Person of any contaminant (including,
without limitation, any medical waste) into the environment, or (iii) any
violation of any Environmental, Health or Safety Requirements of Law
(including, without limitation, those applicable to the disposal of medical
waste) by any Loan Party, which, in any case, is reasonably likely to subject
the Loan Parties to liability in excess of $100,000, individually or in the
aggregate.
(p) GUARANTOR REVOCATION. Any guarantor of the Obligations shall
terminate or revoke any of its obligations under the applicable guarantee
agreement or breach any of the terms of such guarantee agreement.
(q) FAILURE OF SUBORDINATION. (1) The subordination provisions of the
documents and instruments evidencing any Permitted Subordinated Indebtedness
shall, at any time, be
102
<PAGE>
invalidated or otherwise cease to be in full force and effect; or (2) any
violation or breach of the terms of any subordination or intercreditor
agreement relating to any Permitted Subordinated Indebtedness shall occur by
any Loan Party; or (3) any violation or breach of the terms of any
subordination or intercreditor agreement relating to any Permitted
Subordinated Indebtedness shall occur by any Person other than a Loan Party
and (a) such violation or breach continues unremedied for fifteen (15)
Business Days or (b) the Agent or the Required Lenders have determined that
such violation or breach is reasonably likely to impair or otherwise be
materially disadvantageous to the position of the Lenders.
(r) ACCREDITATION; LICENSING. Any Loan Party shall fail to maintain its
Accreditation or any Health License, as applicable.
(s) CHAMPUS/MEDICARE/MEDICAID ELIGIBILITY. Any Loan Party eligible as of
the Closing Date, or which thereafter becomes eligible, to participate in
CHAMPUS, Medicare and/or Medicaid programs shall receive notice of
termination of its eligibility to, or shall otherwise become ineligible
thereunder for any reason to, participate in the CHAMPUS, Medicare or
Medicaid programs or to accept assignments or rights to reimbursement under
CHAMPUS Regulations, Medicare Regulations or Medicaid Regulations.
(t) PARTICIPATION IN MANAGED CARE PROGRAMS. Any Loan Party eligible as
of the Closing Date, or which thereafter becomes eligible, to participate in
any managed care program or other program from which any Loan Party derives
more than fifteen percent (15%) of its Receivables, shall become ineligible
thereunder for any reason and such Loan Party's eligibility shall not have
been reinstated within five (5) Business Days.
(u) CONTRACTUAL ALLOWANCE UNDERSTATEMENT. Any Loan Party shall
understate by any material amount the Contractual Allowances or shall
overstate by any material amount the Adjusted Amount of Eligible Receivables.
(v) PLEDGE OF CAPITAL STOCK. At any time the Agent shall fail to have a
first perfected possessory pledge with respect to (i) all of the Borrower's
Capital Stock owned by AMC and the Foundation; (ii) at least 80% of the
combined voting power of the Borrower's outstanding Capital Stock ordinarily
having the right to vote at an election of directors; (iii) all of the other
Loan Parties' Capital Stock owned by the Borrower or another Loan Party; or
(iv) at least 80% of the combined voting power of each of the Loan Parties'
(other than the Borrower) outstanding Capital Stock ordinarily having the
right to vote at an election of directors.
(w) MATERIAL ADVERSE CHANGE. (i) Since December 31, 1995, there shall
have occurred any event which could have a Material Adverse Effect or (ii)
the unaudited financial statements of the Borrower as of and for the fiscal
year ended December 31, 1995 do not accurately reflect in all material
respects the financial condition as of such date or the results of operations
for the fiscal year ended on such date, as reflected in the audited financial
statements of the Borrower and its Subsidiaries as of December 31, 1995
delivered to the Lenders pursuant to SECTION 6.1(A)(III).
103
<PAGE>
A Default shall be deemed "continuing" until cured or until waived in
writing in accordance with SECTION 8.3(a).
ARTICLE VIII. ACCELERATION, DEFAULTING LENDERS; WAIVERS,
AMENDMENTS AND REMEDIES
8.1. TERMINATION OF COMMITMENTS; ACCELERATION. If any Default described
in SECTION 7.1 (f) or 7.1(g) occurs with respect to the Borrower or any Loan
Party, the obligations of the Lenders to make Loans hereunder and the
obligation of the Agent or any other Issuing Lender to issue Letters of
Credit hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the part
of the Agent, any Lender or any Issuing Lender. If any other Default occurs,
the Required Lenders may terminate or suspend the obligations of the Lenders
to make Loans hereunder and the obligation of the Agent and the Issuing
Lenders to issue Letters of Credit hereunder, or declare the Obligations to
be due and payable, or both, whereupon the Obligations shall become
immediately due and payable, without presentment, demand, protest or notice
of any kind, all of which the Borrower hereby expressly waive.
8.2. DEFAULTING LENDER. In the event that any Lender fails to fund its
Pro Rata Share of any Advance requested or deemed requested by the Borrower
which such Lender is obligated to fund under the terms of this Agreement (the
funded portion of such Advance by the non-defaulting Lender(s) being
hereinafter referred to as a "NON PRO RATA LOAN") and LaSalle elects not to
make an Over-Advance, until the earlier of such Lender's cure of such failure
and the termination of the Commitments, the proceeds of all amounts
thereafter repaid to the Agent by the Borrower and otherwise required to be
applied to such Lender's share of all other Obligations pursuant to the terms
of this Agreement shall be advanced to the Borrower by the Agent on behalf of
such Lender to cure, in full or in part, such failure by such Lender, but
shall nevertheless be deemed to have been paid to such Lender in satisfaction
of such other Obligations. Notwithstanding anything in this Agreement to the
contrary:
(i) the foregoing provisions of this SECTION 8.2 shall apply only with
respect to the proceeds of payments of Obligations and shall not affect the
conversion or continuation of Loans pursuant to SECTION 2.10;
(ii) any such Lender shall be deemed to have cured its failure to fund
its Pro Rata Share of any Advance at such time as an amount equal to such
Lender's original Pro Rata Share of the requested principal portion of such
Advance is fully funded to the Borrower, whether made by such Lender itself
or by operation of the terms of this SECTION 8.2, and whether or not the Non
Pro Rata Loan with respect thereto has been repaid, converted or continued;
(iii) amounts advanced to the Borrower to cure, in full or in part, any
such Lender's failure to fund its Pro Rata Share of any Advance ("CURE
LOANS") shall bear interest at the rate applicable to Floating Rate Loans in
effect from time to time, and for all other purposes of this Agreement shall
be treated as if they were Floating Rate Loans;
104
<PAGE>
(iv) regardless of whether or not a Default has occurred or is
continuing, and notwithstanding the instructions of the Borrower as to its
desired application, all repayments of principal which, in accordance with
the other terms of this Agreement, would be applied to the outstanding
Floating Rate Loans shall be applied FIRST, ratably to all Floating Rate
Loans constituting Non Pro Rata Loans, SECOND, ratably to Floating Rate Loans
other than those constituting Non Pro Rata Loans or Cure Loans and, THIRD,
ratably to Floating Rate Loans constituting Cure Loans;
(v) for so long as and until the earlier of any such Lender's cure of
the failure to fund its Pro Rata Share of any Advance and the termination of
the Revolving Loan Commitments, the term "Required Lenders" for purposes of
this Agreement shall mean Lenders (excluding all Lenders whose failure to
fund their respective Pro Rata Shares of such Advance have not been so cured)
whose Pro Rata Shares represent equal to or greater than sixty-six and two
thirds percent (66-2/3 %) of the aggregate Pro Rata Shares of such Lenders;
and
(fi) for so long as and until any such Lender's failure to fund its Pro
Rata Share of any Advance is cured in accordance with SECTION 8.2(II), (A)
such Lender shall not be entitled to any commitment fees with respect to its
Revolving Loan Commitment, Term Loan Commitment or Acquisition Loan
Commitment and (B) such Lender shall not be entitled to any letter of credit
fees, which commitment fees and letter of credit fees shall accrue in favor
of the Lenders which have funded their respective Pro Rata Share of such
requested Advance, shall be allocated among such performing Lenders ratably
based upon their relative Revolving Loan Commitments, and shall be calculated
based upon the average amount by which the aggregate Revolving Loan
Commitments of such performing Lenders exceeds the sum of (I) the outstanding
principal amount of the Loans owing to such performing Lenders, PLUS (II) the
outstanding Reimbursement Obligations owing to such performing Lenders, PLUS
(III) the aggregate participation interests of such performing Lenders
arising pursuant to SECTION 2.21 with respect to undrawn and outstanding
Letters of Credit.
8.3. AMENDMENTS.
(a) GENERAL PROVISIONS. Subject to the provisions of this ARTICLE
VIII, the Required Lenders (or the Agent with the consent in writing of the
Required Lenders) and the Borrower may enter into agreements supplemental
hereto for the purpose of adding or modifying any provisions to the Loan
Documents or changing in any manner the rights of the Lenders, or the
Borrower hereunder or waiving any Default hereunder; PROVIDED, HOWEVER, that
no such supplemental agreement shall, without the consent of each Lender
affected thereby:
(b) Postpone or extend the Termination Date, the Term Loan Termination
Date, the Conversion Date or any other date fixed for any payment of
principal of, or interest on, the Loans, the Reimbursement Obligations or any
fees or other amounts payable to such Lender;
(c) Reduce the principal amount of any Loans or L/C Obligations,
reduce the amount of any required payment on the Loans or reduce the rate or
extend the time of payment of interest or fees thereon;
105
<PAGE>
(iii) Reduce the percentage specified in the definition of Required Lenders
or the definition of Acquisition Approval Lenders or any other percentage of
Lenders specified to be the applicable percentage in this Agreement to act on
specified matters;
(iv) Increase the amount of the Revolving Loan Commitment, the Term Loan
Commitment or Acquisition Loan Commitment of any Lender hereunder (except with
respect to an increase in the amount, or other modification to the terms or
components, of the Borrowing Base);
(v) Permit Borrower to assign its rights under this Agreement;
(vi) Amend this SECTION 8.3;
(vii) Release all or substantially all of the Collateral; or
(viii) Release any Subsidiary Guaranty.
No amendment of or waiver of any condition precedent to an Acquisition Loan
under SECTION 4.3 shall be effective without the written consent of the
Acquisition Approval Lenders. No amendment of any provision of this Agreement
relating to the Agent shall be effective without the written consent of the
Agent. No amendment of any provision of this Agreement relating to any Issuing
Lender shall be effective without the written consent of such Issuing Lender.
The Agent may waive payment of the fee required under SECTION 12.3(B) without
obtaining the consent of any of the Lenders.
(b) ITEMS NOT REQUIRING CONSENT. Nothing in this Agreement shall require
the consent of any Lender to the execution by the Agent of documentation
acceptable to the Agent evidencing the release of the Agent's liens on any
Collateral sold in a transaction permitted by SECTION 6.3(B)(II) or SECTION
6.3(B)(III) or otherwise consented to by the requisite group of Lenders so long
as all mandatory prepayments in connection therewith shall have been made
pursuant to SECTION 2.5(B)(I).
8.4. PRESERVATION OF RIGHTS. No delay or omission of the Lenders, the
Issuing Lenders or the Agent to exercise any right under the Loan Documents
shall impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Loan or the issuance of a Letter of
Credit notwithstanding the existence of a Default or the inability of the
Borrower to satisfy the conditions precedent to such Loan or issuance of such
Letter of Credit shall not constitute any waiver or acquiescence. Any single or
partial exercise of any such right shall not preclude other or further exercise
thereof or the exercise of any other right, and no waiver, amendment or other
variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Lenders required
pursuant to SECTION 8.3, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be
106
<PAGE>
available to the Agent, the Lenders and the Issuing Lenders until the
Obligations have been paid in full.
ARTICLE IX. GENERAL PROVISIONS
9.1. SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the Borrower contained in this Agreement shall survive delivery of the Notes and
the making of the Loans herein contemplated.
9.2. GOVERNMENTAL REGULATION. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower and neither the Agent nor any Issuing Lender shall be obligated to
issue any Letter of Credit for the account of the Borrower or any other Person
in violation of any limitation or prohibition provided by any applicable statute
or regulation.
9.3. PERFORMANCE OF OBLIGATIONS. The Borrower agrees that the Agent may,
but shall have no obligation, after the occurrence and during the continuance of
a Default to: pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against any Collateral and make
any other payment or perform any act required of Borrower or any other Loan
Party under any Loan Document or take any other action which the Agent in its
discretion deems necessary or desirable to protect or preserve the Collateral,
including, without limitation, any action to (y) effect any repairs or obtain
any insurance called for by the terms of any of the Loan Documents and to pay
all or any part of the premiums therefor and the costs thereof and (z) pay any
rents payable by any Loan Party which are more than 30 days past due, or as to
which the landlord has given notice of termination, under any lease. The Agent
shall use its best efforts to give the Borrower notice of any action taken under
this SECTION 9.3 prior to the taking of such action or promptly thereafter
provided the failure to give such notice shall not affect the Borrower's
obligations in respect thereof. The Borrower agrees to pay the Agent, upon
demand, the principal amount of all funds advanced by the Agent under this
SECTION 9.3, together with interest thereon at the rate from time to time
applicable to Floating Rate Loans from the date of such advance until the
outstanding principal balance thereof is paid in full. If the Borrower fails to
make payment in respect of any such advance under this SECTION 9.3 within one
(1) Business Day after the date the Borrower receives written demand therefor
from the Agent, the Agent shall promptly notify each Lender and each Lender
agrees that it shall thereupon make available to the Agent, in Dollars in
immediately available funds, the amount equal to such Lender's Pro Rata Share of
such advance. If such funds are not made available to the Agent by such Lender
within one (1) Business Day after the Agent's demand therefor, the Agent will be
entitled to recover any such amount from such Lender together with interest
thereon at the Effective Federal Funds Rate for each day during the period
commencing on the date of such demand and ending on the date such amount is
received. The failure of any Lender to make available to the Agent its Pro Rata
Share of any such unreimbursed advance under this SECTION 9.3 shall neither
relieve any other Lender of its obligation hereunder to make available to the
Agent such other Lender's Pro Rata Share of such advance on the date such
payment is to be made nor increase the obligation of any other Lender to make
such payment to the Agent. All
107
<PAGE>
outstanding principal of, and interest on,
advances made under this SECTION 9.3 shall constitute Obligations secured by the
Collateral until paid in full by the Borrower.
9.4. HEADINGS. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.
9.5. ENTIRE AGREEMENT. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Agent and the Lenders and supersede all
prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof.
9.6. SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other. The failure of any Lender to
perform any of its obligations hereunder shall not relieve any other Lender from
any of its obligations hereunder. This Agreement shall not be construed so as
to confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns.
9.7. EXPENSES; INDEMNIFICATION.
(A) EXPENSES. The Borrower shall reimburse the Agent for any reasonable
costs, internal charges and out-of-pocket expenses (including attorneys' and
paralegals' fees and time charges of attorneys and paralegals for the Agent,
which attorneys and paralegals may be employees of the Agent, provided such
reimbursements shall be subject to the terms of any written agreements, if any,
entered into with such attorneys regarding their fees) paid or incurred by the
Agent in connection with the preparation, negotiation, execution, delivery,
syndication (but only in connection with any amendment to the credit facilities
provided for herein), review, amendment, modification and administration of the
Loan Documents and any proposal letters or commitment letters issued in
connection therewith, including without limitation, the commitment letter and
accompanying letter agreement dated April 19, 1996 executed in contemplation of
entering into this Agreement. The Borrower also agrees to reimburse the Agent,
the Lenders and the Issuing Lenders for any reasonable costs, internal charges
and out-of-pocket expenses (including attorneys' and paralegals' fees and time
charges of attorneys and paralegals for the Agent and the Lenders, which
attorneys and paralegals may be employees of the Agent, the Lenders or the
Issuing Lenders) paid or incurred by the Agent, any Lender or any Issuing Lender
in connection with any restructuring or "workout" relating to this Agreement and
the Obligations, the collection of the Obligations and enforcement of the Loan
Documents. In addition to expenses set forth above, the Borrower agrees to
reimburse the Agent, promptly after the Agent's request therefor, for each
audit, collateral analysis or other business analysis performed by or for the
benefit of the Lenders in connection with this Agreement or the other Loan
Documents in an amount equal to the Agent's then customary charges for each
person employed to perform such audit or analysis, plus all costs and expenses
(including without limitation, travel expenses) incurred by the Agent in the
performance of such audit or analysis; PROVIDED, HOWEVER the Borrower shall be
obligated to reimburse the Agent for not more than two (2) such audits in any
108
<PAGE>
twelve-month period if such audits were conducted other than in connection with
a proposed Acquisition and at a time when no Default has occurred and is
continuing; PROVIDED, FURTHER, it is expressly understood that the Borrower
shall reimburse the Agent for all such audits (i) conducted in connection with a
proposed Acquisition or (ii) conducted at a time when a Default has occurred and
is continuing. The Agent shall provide Borrower with a detailed statement of
all reimbursements requested under this Section.
(B) INDEMNITY. The Borrower further agrees, jointly and severally, to
defend, protect, indemnify, and hold harmless the Agent, each and all of the
Lenders, each and all of the Issuing Lenders and each of their respective
Affiliates, and each of the Agent's, Lender's, Issuing Lender's or Affiliate's
respective officers, directors, employees, attorneys and agents (including,
without limitation, those retained in connection with the satisfaction or
attempted satisfaction of any of the conditions set forth in ARTICLE IV)
(collectively, the "INDEMNITEES") from and against any and all liabilities,
obligations, losses damages, penalties, actions, judgments, suits, claims,
costs, expenses of any kind or nature whatsoever (including, without limitation,
the fees and disbursements of counsel for such Indemnitees in connection with
any investigative, administrative or judicial proceeding, whether or not such
Indemnitees shall be designated a party thereto), imposed on, incurred by, or
asserted against such Indemnitees in any manner relating to or arising out of:
(i) this Agreement, the other Loan Documents (including without
limitation, the commitment letter and accompanying letter agreement dated April
19, 1996 executed in contemplation of entering into this Agreement) or any of
the Transaction Documents, or any act, event or transaction related or attendant
thereto or to any Permitted Acquisition, the making of the Loans, and the
issuance of and participation in Letters of Credit hereunder, the management of
such Loans or Letters of Credit, the use or intended use of the proceeds of the
Loans or Letters of Credit hereunder, or any of the other transactions
contemplated by the Transaction Documents; or
(ii) any liabilities, obligations, responsibilities, losses, damages,
personal injury, death, punitive damages, economic damages, consequential
damages, special damages, incidental damages, treble damages, intentional,
willful or wanton injury, damage or threat to the environment, natural resources
or public health or welfare, costs and expenses (including, without limitation,
attorney, expert and consulting fees and costs of investigation, feasibility or
remedial action studies), fines, penalties and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future relating to violation of any Environmental, Health or Safety Requirements
of Law (including, without limitation, those applicable to the disposal of
medical waste) arising from or in connection with the past, present or future
operations of the Borrower, any of the other Loan Parties or any of their
respective predecessors in interest, or, the past, present or future
environmental, health or safety condition of any respective property of the
Borrower or any of the other Loan Parties, the presence of asbestos-containing
materials at any respective property of the Borrower or the other Loan Parties
or the release or threatened release of any contaminant (including, without
limitation, any medical waste) into the environment (collectively, the
"INDEMNIFIED MATTERS"); PROVIDED, however, the indemnity set forth in this
CLAUSE (II) shall not apply to any losses or costs incurred
109
<PAGE>
by any Indemnitee to the extent such losses or costs arise solely from the
actions of the Agent, any Lender or any Issuing Lender; PROVIDED, further,
however, the indemnity set forth in this clause (ii) shall otherwise remain
in full force and effect, including, without limitation, with respect to
hazardous substances and hazardous wastes which are discovered or released at
any premises after the Agent acquires possession to the premises, but which
were not actually introduced at the premises by the Agent, with respect to
the continuing migration or release of hazardous substances or hazardous
wastes previously introduced at or near the premises and with respect to all
substances which may be hazardous wastes or hazardous substances and which
are situated at the premises prior to the Agent taking possession but are
removed by the Agent subsequent to such date; PROVIDED, HOWEVER, Borrower
shall not have any obligation to an Indemnitee under CLAUSE (I) or (II)
hereof with respect to Indemnified Matters to the extent caused by or
resulting from (y) a dispute among the Lenders or a dispute between any
Lender and the Agent, or (z) the willful misconduct or Gross Negligence of
such Indemnitee or breach of contract by such Indemnitee with respect to the
Loan Documents, in each case, as determined by the final non-appealed
judgment of a court of competent jurisdiction. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees. In
addition, no settlement shall be entered into by the Borrower or any other
Loan Party with respect to any claim, litigation, arbitration or other
proceeding relating to or arising out of the transaction evidenced by this
Agreement, the other Loan Documents or in connection with Permitted
Acquisitions (whether or not the Agent, any Lender or any Issuing Lender is a
party thereto) unless such settlement releases all Indemnitees from any and
all liability with respect thereto.
(C) WAIVER OF CERTAIN CLAIMS. The Borrower agrees to assert no claim
against any of the Indemnitees on any theory of liability for special or
punitive damages. In any action in which a jury is participating to resolve the
dispute, the Borrower agrees to assert no claim against any of the Indemnitees
on any theory of liability for consequential or indirect damages. In any court
trial, except as expressly provided below, the Borrower agrees to assert no
claim against any of the Indemnitees on any theory of liability for
consequential or incidental damages; PROVIDED, HOWEVER, in the event that the
Borrower, in any such matter is able to establish, as determined by the court in
its written opinion or findings, that any Indemnitee acted with Gross
Negligence, in bad faith or engaged in willful misconduct, then the agreement of
the Borrower not to assert any claim on any theory of liability for
consequential or incidental damages shall be of no further force and effect with
result to damages incurred as a result of such Gross Negligence, bad faith or
willful misconduct.
(D) SURVIVAL OF AGREEMENTS. The obligations and agreements of the
Borrower under this SECTION 9.7 shall survive the termination of this Agreement.
9.8. NUMBERS OF DOCUMENTS. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.
110
<PAGE>
9.9. ACCOUNTING; CHANGES IN AGREEMENT ACCOUNTING PRINCIPLES. Except as
provided to the contrary herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with Agreement Accounting Principles. If any changes in generally
accepted accounting principles are hereafter required or permitted and are
adopted by the Borrower or any Loan Party with the agreement of its
independent certified public accountants and such changes result in a change
in the method of calculation of any of the financial covenants, restrictions
or standards herein or in the related definitions or terms used therein
("ACCOUNTING CHANGES"), the parties hereto agree, at the Borrower's request,
to enter into negotiations, in good faith, in order to amend such provisions
in a credit neutral manner so as to reflect equitably such changes with the
desired result that the criteria for evaluating the Borrower's and the
Borrower Corporate Group's financial condition shall be the same after such
changes as if such changes had not been made; PROVIDED, HOWEVER, until such
provisions are amended in a manner reasonably satisfactory to the Agent and
the Required Lenders, no Accounting Change shall be given effect in such
calculations and all financial statements and reports required to be
delivered hereunder shall be prepared in accordance with Agreement Accounting
Principles without taking into account such Accounting Changes. In the event
such amendment is entered into, all references in this Agreement to Agreement
Accounting Principles shall mean generally accepted accounting principles as
of the date of such amendment.
9.10. SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
9.11. NONLIABILITY OF LENDERS. The relationship between the Borrower, on
the one hand, and the Lenders, the Issuing Lenders and the Agent, on the other,
shall be solely that of borrower and lender. Neither the Agent nor any Lender
nor any Issuing Lender shall have any fiduciary responsibilities to the
Borrower. Neither the Agent nor any Lender nor any Issuing Lender undertakes
any responsibility to the Borrower to review or inform the Borrower of any
matter in connection with any phase of any of Borrower's or any other Loan
Party's business or operations.
9.12. GOVERNING LAW. THE AGENT HEREBY ACCEPTS THIS AGREEMENT, ON BEHALF OF
ITSELF, THE LENDERS AND THE ISSUING LENDERS, AT CHICAGO, ILLINOIS BY
ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE BETWEEN BORROWER AND THE
AGENT, ANY LENDER, ANY ISSUING LENDER OR ANY OTHER HOLDER OF SECURED OBLIGATIONS
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE,
SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, EXCEPT
TO THE EXTENT THE LAWS OF ANOTHER JURISDICTION GOVERN THE PERFECTION (AND EFFECT
OF THE PERFECTION OR NONPERFECTION OF THE AGENT'S LIENS ON THE COLLATERAL).
111
<PAGE>
9.13. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO
THE JURISDICTION OF ANY ILLINOIS STATE OR FEDERAL COURT SITTING IN CHICAGO,
ILLINOIS, OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT AND THE BORROWER HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH ILLINOIS STATE OR FEDERAL COURT. THE BORROWER
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING. THE BORROWER AGREES THAT A JUDGMENT, FINAL BY APPEAL OR EXPIRATION
OF TIME TO APPEAL WITHOUT AN APPEAL BEING TAKEN, IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
SECTION 9.13 SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE AGENT OR
ANY LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTIONS.
(B) SERVICE OF PROCESS. THE BORROWER WAIVES PERSONAL SERVICE OF ANY
PROCESS UPON IT AND HEREBY APPOINTS AND AGREES TO MAINTAIN AT ALL TIMES DURING
THE TERM OF THIS AGREEMENT THE CORPORATION SERVICE COMPANY AT C/O CORPORATION
ASSOCIATES OF ILLINOIS, 700 S. SECOND STREET, SPRINGFIELD, ILLINOIS 62704, AS
ITS REGISTERED AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS ISSUED BY
ANY COURT IN CONNECTION WITH ANY DISPUTE ARISING OUT OF, OR RELATED TO THE
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. THE BORROWER IRREVOCABLY WAIVES
ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE.
(C) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER INSTRUMENT,
112
<PAGE>
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF
THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(D) WAIVER OF BOND. THE BORROWER WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS
OR PROCEEDING TO REALIZE ON THE COLLATERAL (INCLUDING, WITHOUT LIMITATION, THE
REAL PROPERTY COLLATERAL, IF ANY) OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR
TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR
TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR
PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
(E) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 9.13, WITH ITS COUNSEL.
9.14. NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
9.15. SUBORDINATION OF INTERCOMPANY INDEBTEDNESS. The Borrower agrees that
any and all claims of the Borrower against any Loan Party, any endorser or any
other guarantor of all or any part of the Secured Obligations, or against any of
their respective properties, including without limitation pursuant to any
intercompany note or intercompany security agreement executed pursuant to
SECTION 6.3(A)(VI), shall be subordinate and subject in right of payment to the
prior payment, in full and in cash, of all Secured Obligations. Notwithstanding
any right of the Borrower to ask, demand, sue for, take or receive any payment
from any Loan Party, all rights, liens and security interests of the Borrower,
whether now or hereafter arising and howsoever existing, in any assets of any
Loan Party (whether constituting part of Collateral given to any Holder of
Secured Obligations or the Agent to secure payment of all or any part of the
Secured Obligations or otherwise) shall be and are subordinated to the rights of
the Holders of Secured Obligations and the Agent in those assets. The Borrower
shall have no right to possession of any such asset or to foreclose upon any
such asset, whether by judicial action or otherwise, unless and until all of the
Secured Obligations shall have been fully paid and satisfied and all financing
arrangements between the Borrower and each Loan Party and the Holders of Secured
Obligations have been terminated. If all or any part of the assets of any Loan
Party, or the proceeds thereof, are subject to any distribution, division or
application to the creditors of
113
<PAGE>
such Loan Party, whether partial or complete, voluntary or involuntary, and
whether by reason of liquidation, bankruptcy, arrangement, receivership,
assignment for the benefit of creditors or any other action or proceeding, or
if the business of any Loan Party is dissolved or if substantially all of the
assets of any Loan Party are sold, then, and in any such event, any payment
or distribution of any kind or character, either in cash, securities or other
property, which shall be payable or deliverable upon or with respect to any
indebtedness of any such Loan Party to the Borrower ("INTERCOMPANY
INDEBTEDNESS") shall be paid or delivered directly to the Agent for
application on any of the Secured Obligations, due or to become due, until
such Secured Obligations shall have first been fully paid and satisfied. The
Borrower irrevocably authorizes and empowers the Agent to demand, sue for,
collect and receive every such payment or distribution and give acquittance
therefor and to make and present for and on behalf of the Borrower such
proofs of claim and take such other action, in the Agent's own name or in the
name of the Borrower or otherwise, as the Agent may deem necessary or
advisable for the enforcement of this SECTION 9.15. The Agent may vote such
proofs of claim in any such proceeding, receive and collect any and all
dividends or other payments or disbursements made thereon in whatever form
the same may be paid or issued and apply the same on account of any of the
Secured Obligations. Should any payment, distribution, security or
instrument or proceeds thereof be received by the Borrower upon or with
respect to the Intercompany Indebtedness prior to the satisfaction of all of
the Secured Obligations (other than contingent indemnity obligations) and the
termination of all financing arrangements between the Borrower and each Loan
Party and the Holders of Secured Obligations, the Borrower shall receive and
hold the same in trust, as trustee, for the benefit of the Holders of Secured
Obligations and shall forthwith deliver the same to the Agent, for the
benefit of the Holders of Secured Obligations, in precisely the form received
(except for the endorsement or assignment of the Borrower where necessary),
for application to any of the Secured Obligations, due or not due, and, until
so delivered, the same shall be held in trust by the Borrower as the property
of the Holders of Secured Obligations. If the Borrower fails to make any
such endorsement or assignment to the Agent, the Agent or any of its officers
or employees are irrevocably authorized to make the same. The Borrower
agrees that until the Secured Obligations (other than the contingent
indemnity obligations) have been paid in full (in cash) and satisfied and all
financing arrangements between the Borrower, the Loan Parties and the Holders
of Secured Obligations have been terminated, the Borrower will not assign or
transfer to any Person any claim the Borrower has or may have against any
Loan Party.
ARTICLE X. THE AGENT AS THE LENDERS' CONTRACTUAL
REPRESENTATIVE
10.1. APPOINTMENT; NATURE OF RELATIONSHIP. LaSalle National Bank is hereby
appointed by the Lenders (each reference in this Article X to a Lender being in
its capacity either as a Lender or an Issuing Lender, or both) as the Agent
hereunder and under each other Loan Document, and each of the Lenders
irrevocably authorizes the Agent to act as the contractual representative of
such Lender with the rights and duties expressly set forth herein and in the
other Loan Documents. The Agent agrees to act as such contractual
representative upon the express conditions contained in this ARTICLE X.
Notwithstanding the use of the defined term "Agent," it is expressly understood
and agreed that the Agent shall not have any fiduciary responsibilities to any
Lender by reason of this Agreement and that the Agent is merely acting as the
representative
114
<PAGE>
of the Lenders with only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its capacity as the Lenders'
contractual representative, the Agent (i) does not hereby assume any
fiduciary duties to any of the Lenders, (ii) is a "representative" of the
Lenders within the meaning of Section 9-105 of the Uniform Commercial Code
and (iii) is acting as an independent contractor, the rights and duties of
which are limited to those expressly set forth in this Agreement and the
other Loan Documents. Each of the Lenders hereby agrees to assert no claim
against the Agent on any agency theory or any other theory of liability for
breach of fiduciary duty, all of which claims each Lender hereby waives.
10.2. POWERS. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto;
PROVIDED, HOWEVER, the Agent shall not be entitled to commence any judicial or
non-judicial foreclosure with respect to any of the Collateral without the
consent of the Required Lenders and, subject to the provisions of SECTION 10.5,
if directions are received by the Agent from the Required Lenders in connection
therewith, the Agent will proceed with such foreclosure in accordance with the
directions of the Required Lenders. The Agent shall have no implied duties to
or fiduciary duties to the Lenders, or any obligation to the Lenders to take any
action hereunder or under any of the other Loan Documents except any action
specifically provided by the Loan Documents to be required to be taken by the
Agent.
10.3. GENERAL IMMUNITY. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is found in a final judgment by a court of
competent jurisdiction to have arisen solely from (i) the Gross Negligence or
willful misconduct of such Person or (ii) breach of contract by such Person with
respect to the Loan Documents.
10.4. NO RESPONSIBILITY FOR LOANS, CREDITWORTHINESS, COLLATERAL, RECITALS,
ETC. Neither the Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into, or verify
(i) any statement, warranty or representation made in connection with any Loan
Document or any borrowing hereunder; (ii) the performance or observance of any
of the covenants or agreements of any obligor under any Loan Document; (iii) the
satisfaction of any condition specified in Article IV, except receipt of items
required to be delivered solely to the Agent; (iv) the existence or possible
existence of any Default or (v) the validity, effectiveness or genuineness of
any Loan Document or any other instrument or writing furnished in connection
therewith. The Agent shall not be responsible to any Lender for any recitals,
statements, representations or warranties herein, for the perfection or priority
of any of the Liens on any of the Collateral, or for the execution,
effectiveness, genuineness, validity, legality, enforceability, collectability,
or sufficiency of this Agreement or any of the other Loan Documents or the
transactions contemplated thereby, or for the financial condition of any
guarantor of any or all of the Obligations, the Borrower or any other Loan
Parties.
115
<PAGE>
10.5 ACTION ON INSTRUCTIONS OF LENDERS. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders and on all holders of
Notes. The Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.
10.6 EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may execute any of its
duties as the Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.
10.7 RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
10.8 THE AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective Pro
Rata Shares (i) for any amounts not reimbursed by the Borrower for which the
Agent is entitled to reimbursement by the Borrower under the Loan Documents,
(ii) for any other expenses incurred by the Agent on behalf of the Lenders, in
connection with the preparation, execution, delivery, administration and
enforcement of the Loan Documents and (iii) for any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of the Loan Documents or any other document delivered in connection therewith or
the transactions contemplated thereby, or the enforcement of any of the terms
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent any of the foregoing is found in a final
non-appealable judgment by a court of competent jurisdiction to have arisen
solely from the Gross Negligence or willful misconduct of the Agent.
10.9 RIGHTS AS A LENDER. With respect to its Revolving Loan
Commitment, its Acquisition Loan Commitment, its Term Loan Commitment, Loans
made by it, the Notes issued to it and Letters of Credit issued by it as an
Issuing Lender, the Agent shall have the same rights and powers hereunder and
under any other Loan Document as any Lender and may exercise the same as
though it were not the Agent, and the term "Lender" or "Lenders" or "Issuing
Lender" or "Issuing Lenders", as applicable, shall, unless the context
otherwise indicates, include the Agent in its individual capacity. The Agent
may accept deposits from, lend money to, and generally
116
<PAGE>
engage in any kind of trust, debt, equity or other transaction, in addition
to those contemplated by this Agreement or any other Loan Document, with the
Borrower or any other Loan Party in which such Person is not prohibited
hereby from engaging with any other Person.
10.10 LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements prepared by the Borrower and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
10.11 SUCCESSOR AGENT. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, and the Agent may be removed at
any time with or without cause by written notice received by the Agent from the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint, on behalf of the Borrower and the Lenders, a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders and shall have accepted such appointment within thirty days
after the retiring Agent's giving notice of resignation, then the retiring Agent
may appoint, on behalf of the Borrower and the Lenders, a successor Agent.
Notwithstanding anything herein to the contrary, so long as no Default has
occurred and is continuing, each such successor Agent shall be subject to
approval by the Borrower, which approval shall not be unreasonably withheld or
delayed. Such successor Agent shall be a commercial bank having capital and
retained earnings of at least $50,000,000. Upon the acceptance of any
appointment as the Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder and under the other Loan
Documents. After any retiring Agent's resignation hereunder as Agent, the
provisions of SECTION 9.7 and this ARTICLE X shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Agent hereunder and under the other Loan Documents.
10.12 COLLATERAL DOCUMENTS. Each Lender hereby authorizes the Agent to
enter into each of the Collateral Documents to which it is a party and to take
all action contemplated by such documents. Each Lender agrees that no Lender
shall have the right individually to seek to realize upon the security granted
by any Collateral Document, it being understood and agreed that such rights and
remedies may be exercised solely by the Agent for the benefit of the Holders of
Secured Obligations upon the terms of the Collateral Documents.
10.13 DELIVERY OF DOCUMENTS. The Agent agrees to deliver to each Lender,
promptly upon the Agent's receipt from the Borrower or any other Loan Party,
copies of all notices, certificates and reports, including without limitation
reports delivered pursuant to SECTION 6.1, delivered pursuant to the
requirements contained in this Agreement or any other Loan Document.
117
<PAGE>
ARTICLE XI. SETOFF; RATABLE PAYMENTS
11.1 SETOFF. In addition to, and without limitation of, any rights of
the Lenders or Issuing Lenders under applicable law, if any Default occurs
and is continuing, any indebtedness from any Lender or Issuing Lender to the
Borrower (including all account balances, whether provisional or final and
whether or not collected or available) may be offset and applied toward the
payment of the Obligations owing to such Lender, such Issuing Lender and the
other Obligations, whether or not the Obligations, or any part hereof, shall
then be due.
11.2 RATABLE PAYMENTS. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans (other than payments received pursuant
to SECTIONS 3.1, 3.2 or 3.4) in a greater proportion than that received by
any other Lender, such Lender agrees, promptly upon demand, to purchase a
portion of the Loans held by the other Lenders so that after such purchase
each Lender will hold its ratable proportion of Loans. If any Lender,
whether in connection with setoff or amounts which might be subject to setoff
or otherwise, receives collateral or other protection for its Obligation or
such amounts which may be subject to setoff, such Lender agrees, promptly
upon demand, to take such action necessary such that all Lenders share in the
benefits of such collateral ratably in proportion to the obligations owing to
them. In case any such payment is disturbed by legal process, or otherwise,
appropriate further adjustments shall be made.
11.3 APPLICATION OF PAYMENTS. Except as set forth in SECTION 2.5, and
subject to the provisions of SECTION 8.2, the Agent shall, unless otherwise
specified at the direction of the Required Lenders which direction shall be
consistent with the last sentence of this SECTION 11.3, apply all payments
and prepayments in respect of any Obligations and all proceeds of Collateral
in the following order:
(A) first, to pay interest on and then principal of any portion of
the Loans which the Agent may have advanced on behalf of any Lender for
which the Agent has not then been reimbursed by such Lender or the
Borrower;
(B) second, to pay interest on and then principal of any advance made
under SECTION 9.3 for which the Agent has not then been paid by the
Borrower or reimbursed by the Lenders;
(C) third, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Agent;
(D) fourth, to the ratable payment of Obligations in respect of any
fees, expenses, reimbursements or indemnities then due to the Lenders and
Issuing Lenders;
(E) fifth, to the ratable payment of interest due in respect of Loans
and L/C Obligations;
118
<PAGE>
(F) sixth, to the ratable payment or prepayment of principal
outstanding on Loans and Reimbursement Obligations in such order as the
Agent may determine in its sole discretion;
(G) seventh, to provide required cash collateral if any pursuant to
Section 2.24; and
(H) eighth, to the ratable payment of all other Secured Obligations,
including, without limitation, the Rate Hedging Obligations which are
Secured Obligations.
Unless otherwise designated (which designation shall only be applicable prior
to the occurrence of a Default) by the Borrower, all principal payments in
respect of Loans shall be applied FIRST, to the outstanding Revolving Loans
and, SECOND, prior to the Conversion Date, to the outstanding Acquisition
Loans until the Acquisition Loans are repaid in full and then to the
outstanding Term Loans and on and after the Conversion Date, ratably to the
outstanding Term Loans and Acquisition Loans, in each case, FIRST, to repay
outstanding Floating Rate Loans, and THEN to repay outstanding Eurodollar
Loans with those Eurodollar Loans which have earlier expiring Eurodollar
Interest Periods being repaid prior to those which have later expiring
Eurodollar Interest Periods. The order of priority set forth in this SECTION
11.3 and the related provisions of this Agreement are set forth solely to
determine the rights and priorities of the Agent, the Lenders, the Issuing
Lenders and other Holders of Secured Obligations as among themselves. The
order of priority set forth in CLAUSES (D) through (H) of this SECTION 11.3
may at any time and from time to time be changed by the Required Lenders
without necessity of notice to or consent of or approval by the Borrower or
any other Person. The order of priority set forth in CLAUSES (A) through (C)
of this SECTION 11.3 may be changed only with the prior written consent of
the Agent.
11.4 RELATIONS AMONG LENDERS.
(a) Except with respect to the exercise of set-off rights of any
Lender in accordance with SECTION 11.1, the proceeds of which are applied in
accordance with this Agreement, and except as set forth in the following
paragraph, each Lender agrees that it will not take any action, nor institute
any actions or proceedings, against Borrower or any other obligor hereunder
or with respect to any Collateral or Loan Document, without the prior written
consent of the Required Lenders or, as may be provided in this Agreement or
the other Loan Documents, at the direction of the Agent.
(b) The Lenders are not partners or co-venturers, and no Lender shall
be liable for the acts or omissions of, or (except as otherwise set forth
herein in case of the Agent) authorized to act for, any other Lender.
Notwithstanding the foregoing, and subject to SECTION 11.2, any Lender shall
have the right to enforce on an unsecured basis the payment of the principal
of and interest on any Loan made by it after the date such principal or
interest has become due and payable pursuant to the terms of this Agreement.
119
<PAGE>
ARTICLE XII. BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1 SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower, the
Agent and the Lenders and their respective successors and assigns, except
that (i) the Borrower shall not have the right to assign its rights or
obligations under the Loan Documents and (ii) any assignment by any Lender
must be made in compliance with SECTION 12.3 hereof. Notwithstanding clause
(ii) of this Section, any Lender may at any time, without the consent of
Borrower or the Agent, assign all or any portion of its rights under this
Agreement and its Notes to a Federal Reserve Bank; PROVIDED, HOWEVER, that no
such assignment shall release the transferor Lender from its obligations
hereunder. The Agent may treat the payee of any Note as the owner thereof
for all purposes hereof unless and until such payee complies with SECTION
12.3 hereof in the case of an assignment thereof or, in the case of any other
transfer, a written notice of the transfer is filed with the Agent. Any
assignee or transferee of a Note agrees by acceptance thereof to be bound by
all the terms and provisions of the Loan Documents. Any request, authority
or consent of any Person, who at the time of making such request or giving
such authority or consent is the holder of any Note, shall be conclusive and
binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.
12.2 PARTICIPATIONS.
(A) PERMITTED PARTICIPANTS; EFFECT. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time
sell to one or more banks or other entities ("PARTICIPANTS") participating
interests in any Loan owing to such Lender, any Note held by such Lender, any
Revolving Loan Commitment of such Lender, any Term Loan Commitment of such
Lender, any Acquisition Loan Commitment of such Lender, any L/C Interest of
such Lender or any other interest of such Lender under the Loan Documents on
a pro-rata or non pro-rata basis; provided that the amount of such
participation shall not be for less than $5,000,000. In the event of any
such sale by a Lender of participating interests to a Participant, such
Lender's obligations under the Loan Documents shall remain unchanged, such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the holder of any
such Note for all purposes under the Loan Documents, all amounts payable by
the Borrower under this Agreement shall be determined as if such Lender had
not sold such participating interests, and the Borrower and the Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents except that, for
purposes of ARTICLE III hereof, the Participants shall be entitled to the
same rights as if they were Lenders (provided that any Participant shall not
be entitled to receive any more than the Lender selling such participation
would have received had such sale not taken place).
(B) VOTING RIGHTS. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, modification
or waiver of any provision of the Loan Documents other than any amendment,
modification or waiver with respect to any Loan or Commitment in which such
Participant has an interest which:
120
<PAGE>
(i) Postpones or extends the Termination Date, the Term Loan Termination
Date, the Conversion Date or any other date fixed for any payment of principal
of, or interest on, the Loans, the Reimbursement Obligations or any fees or
other amounts payable in which such Participant has an interest;
(ii) Reduces the principal amount of any Loans or L/C Obligations, or
reduces the rate or extends the time of payment of interest or fees thereon;
(iii) Permits the Borrower to assign its rights under this Agreement;
(iv) Releases all or substantially all of the Collateral; or
(v) Releases any Subsidiary Guarantee.
(C) BENEFIT OF SETOFF. The Borrower agrees that each Participant shall
be deemed to have the right of setoff provided in SECTION 11.1 hereof in respect
to its participating interest in amounts owing under the Loan Documents to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under the Loan Documents, provided that each Lender shall
retain the right of setoff provided in SECTION 11.1 hereof with respect to the
amount of participating interests sold to each Participant except to the extent
such Participant exercises its right of set off. The Lenders agree to share
with each Participant, and each Participant, by exercising the right of setoff
provided in SECTION 11.1 hereof, agrees to share with each Lender, any amount
received pursuant to the exercise of its right of setoff, such amounts to be
shared in accordance with SECTION 11.2 as if each Participant were a Lender.
12.3 ASSIGNMENTS.
(A) PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to one or
more banks or other entities ("PURCHASERS") all or a portion of its rights and
obligations under this Agreement (including, without limitation, its
Commitments, all Loans owing to it, all of its interest as an Issuing Lender
with respect to Letters of Credit, all of its participation interests in
existing Letters of Credit, and its obligation to participate in additional
Letters of Credit hereunder) in accordance with the provisions of this SECTION
12.3. Each assignment shall be of a constant, and not a varying, ratable
percentage of all of the assigning Lender's rights and obligations under this
Agreement. Such assignment shall be substantially in the form of EXHIBIT F
hereto and shall not be permitted hereunder unless such assignment is either for
all of such Lender's rights and obligations under the Loan Documents or involves
loans and commitments in an aggregate amount of at least $5,000,000. The
consent of the Agent shall be required prior to an assignment becoming effective
with respect to a Purchaser which is not a Lender or an Affiliate thereof. Such
consent shall be set forth on the
121
<PAGE>
Notice of Assignment and shall not be unreasonably withheld. In addition,
the consent of the Borrower shall be required (which consent shall not be
unreasonably withheld) prior to an assignment becoming effective if such
assignment is at a time when no Default has occurred and is continuing, which
consent, if required, shall be set forth on the Notice of Assignment;
PROVIDED, no consent of the Borrower shall be required in connection with any
assignment to another Lender or to an Affiliate of any Lender.
(B) EFFECT; EFFECTIVE DATE. Upon (i) delivery to the Agent of a notice
of assignment, substantially in the form attached as APPENDIX I to EXHIBIT F
hereto (a "NOTICE OF ASSIGNMENT"), together with any consents required by
SECTION 12.3(A) hereof, and (ii) payment of a $3,000 fee to the Agent for
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. On and after the
effective date of such assignment, such Purchaser, if not already a Lender,
shall for all purposes be a Lender party to this Agreement and any other Loan
Documents executed by the Lenders and shall have all the rights and obligations
of a Lender under the Loan Documents, to the same extent as if it were an
original party hereto, and no further consent or action by the Borrower, the
Lenders or the Agent shall be required to release the transferor Lender with
respect to the percentage of the Aggregate Revolving Loan Commitment, Aggregate
Term Loan Commitment, Aggregate Acquisition Loan Commitment, Loans and Letter of
Credit participations assigned to such Purchaser. Upon the consummation of any
assignment to a Purchaser pursuant to this SECTION 12.3(B), the transferor
Lender, the Agent and the Borrower shall make appropriate arrangements so that
replacement Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each case in
principal amounts reflecting their Revolving Loan Commitment, Term Loan
Commitment, Acquisition Loan Commitment, or, if after the Conversion Date, their
Term Loans and Acquisition Loans, as adjusted pursuant to such assignment.
(C) THE REGISTER. The Agent shall maintain at its address referred to in
SECTION 13.1 a copy of each assignment delivered to and accepted by it pursuant
to this SECTION 12.3 and a register (the "REGISTER") for the recordation of the
names and addresses of the Lenders and the Revolving Loan Commitment, Term Loan
Commitment and Acquisition Loan Commitment of and principal amount of the Loans
owing to, each Lender from time to time and whether such Lender is an original
Lender or the assignee of another Lender pursuant to an assignment under this
SECTION 12.3. The entries in the Register shall be conclusive and binding for
all purposes, absent manifest error, and the Borrower and each other Loan Party,
the Agent and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder 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.
12.4 CONFIDENTIALITY. Subject to SECTION 12.5, the Agent and the Lenders
shall hold all nonpublic information obtained pursuant to the requirements of
this Agreement in accordance with such Person's customary procedures for
handling confidential information of this nature and in accordance with safe and
sound banking practices and in any event may make disclosure reasonably required
by a prospective "Transferee" (as defined in SECTION 12.5) in connection with
the contemplated participation or assignment or as required or requested by any
Governmental Authority or representative thereof or pursuant to legal process
and shall require any such Transferee to agree (and require any of its
Transferees to agree) to comply with this SECTION 12.4. In no event shall the
Agent or any Lender be obligated or required to return any materials furnished
by or on behalf of the Borrower or any other Loan Party; PROVIDED, HOWEVER, each
122
<PAGE>
prospective Transferee shall be required to agree that if it does not become a
participant or assignee it shall return all materials furnished to it by or on
behalf of any Loan Party in connection with this Agreement.
12.5 DISSEMINATION OF INFORMATION. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "TRANSFEREE") and any
prospective Transferee any and all information in such Lender's possession
concerning the Loan Parties and the Collateral; PROVIDED that, prior to any such
disclosure, such prospective Transferee shall agree to preserve in accordance
with SECTION 12.4 the confidentiality of any confidential information described
therein.
ARTICLE XIII. NOTICES
13.1 GIVING NOTICE. Except as otherwise permitted by SECTION 2.14 with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Documents shall be in
writing or by telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as may
be designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted (answerback confirmed in the case of telexes).
13.2 CHANGE OF ADDRESS. The Borrower, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
ARTICLE XIV. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Borrower, the Agent and the Lenders.
* * * * * * * *
Remainder of this Page Intentionally Blank
* * * * * * * *
123
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.
GOOD SAMARITAN SUPPLY SERVICES, INC.
By: /s/ John L. Erickson
Title: Vice President and Chief Financial
Officer
Address:
Good Samaritan Supply Services, Inc.
2177 Youngman Avenue
Suite 300
St. Paul, Minnesota 55116
Attention: President
Telecopy: (612) 696-3500
Confirmation: (612) 696-3521
LASALLE NATIONAL BANK,
Individually and as Agent
By: /s/ Marc Pressler
Title: Vice President
Address:
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Marc A. Pressler
Telecopy: (312) 904-6242
Confirmation: (312) 904-8284
124
<PAGE>
Exhibit 10.25
TERMINATION AGREEMENT
Agreement dated as of August 15, 1996 by and between GTCR IV, L.P., a
Delaware limited partnership ("GTCR"), and American Medserve Corporation, a
Delaware corporation (the "Company").
WHEREAS, GTCR and the Company entered into a Professional Services
Agreement, dated as of December 3, 1993 (the "Agreement");
WHEREAS, the Company owes GTCR $150,000 under the terms of the Agreement;
WHEREAS, Section 7 of the Agreement provides that the Agreement may be
terminated by mutual consent of both parties;
WHEREAS, the Company is contemplating engaging in an underwritten public
offering (the "IPO") registered under the Securities Act of 1933, as amended, of
shares of the Company's common equity and, in contemplation thereof, the parties
now wish to terminate the Agreement, settle all claims and obligations arising
under the Agreement and discharge each other from the Agreement;
NOW THEREFORE, the parties hereto agree as follows:
1. The Agreement will be terminated effective as of the date of the
consummation of the IPO (the "Effective Date").
2. The Company agrees to pay GTCR a total of $450,000 (the "Settlement
Amount"), of which $150,000 represents payment of management fees due and owing
to GTCR under Section 5 of the Agreement and $300,000 represents consideration
for GTCR's agreement to terminate the Agreement. The Settlement Amount shall be
paid by the Company on the Effective Date.
3. Upon full payment of the Settlement Amount, neither the Company nor
GTCR shall have any further duties, rights or obligations under the Agreement or
be entitled to any compensation thereunder, including without limitation the
payment of any fees or expenses pursuant to Sections 4, 5 and 6 of the
Agreement. Without limiting the generality of the foregoing, upon full payment
of the Settlement Amount, the Company will release and hold harmless GTCR, and
GTCR will release and hold harmless the Company, from and against any and all
liability, causes of action, damages or any other claims whatsoever arising out
of the Agreement.
4. This Agreement (a) contains the complete and entire understanding and
agreement of GTCR and the Company with respect to the subject matter hereof, and
(b) supersedes all prior and contemporaneous understandings, condition and
agreements, oral or written, express or implied, respecting this Agreement and
the termination and settlement of the Agreement.
5. This Agreement may be executed in any number of counterparts, and by
the different parties on different counterparts, all of which taken together
shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed this Termination Agreement
as of the date first written above.
GTCR IV, L.P.
By: Golder, Thoma, Cressey, Rauner,
Inc.
Its General Partner
By: /s/ Bryan C. Cressey
------------------------------
Name: Bryan C. Cressey
----------------------------
Title: Principal
AMERICAN MEDSERVE CORPORATION
By: /s/ Michael B. Freedman
------------------------------
2
<PAGE>
REIMBURSEMENT AND CONVERSION
RIGHTS AGREEMENT
THIS REIMBURSEMENT AND CONVERSION RIGHTS AGREEMENT, made and entered
into as of this 2nd day of August, 1996, by and between AMERICAN MEDSERVE
CORPORATION (the "Company"), a Delaware corporation, and GOLDER, THOMA, CRESSEY,
RAUNER FUND IV, L. P. ("GTCR"), a Delaware limited partnership.
WHEREAS, GTCR has provided a guaranty (the "Guaranty") dated as of the
date hereof in favor of LaSalle National Bank, a national banking association
(the "Bank"), with respect to indebtedness of the Company to the Bank under that
certain term note (the "Note") made by the Company and dated the date hereof in
the aggregate principal amount of $5,000,000;
WHEREAS, subject to the terms and conditions set forth herein, the
Company and GTCR desire that the Company provide reimbursement to GTCR for
payments made by GTCR pursuant to the Guaranty;
WHEREAS, subject to the terms and conditions set forth herein, the
Company and GTCR desire that: (i) GTCR have the right to receive equity
securities of the Company as reimbursement in lieu of a cash or monetary
reimbursement to GTCR for payments made by GTCR pursuant to the Guaranty, and
(ii) if by January 2, 1997, the Obligations (as defined in the Guaranty) remains
unpaid, GTCR shall have the right to repay such Obligations on behalf of the
Company and to receive equity securities of the Company valued in an amount
equal to the amount of the Obligations so repaid.
NOW, THEREFORE, in consideration of the mutual promises herein made
and the mutual benefits to be derived from this Agreement and the transactions
provided for herein, the parties hereto represent, warrant, covenant, agree and
understand as follows:
SECTION 1. AGREEMENT TO REIMBURSE GTCR. Subject to Section 2 hereof:
(a) The Company hereby agrees to reimburse GTCR by making payment to GTCR
in immediately available funds at its address set forth on the signature page
hereto, for any payment made by GTCR under the Guaranty (each such amount so
paid until reimbursed, an "Unpaid Drawing") upon demand by GTCR, together with
interest accruing thereon from and including the date paid to but excluding the
date reimbursement is made at a rate per annum which shall be 10%, compounded
quarterly. Such interest shall be payable on demand.
(b) The obligations of the Company under this Section 1 to reimburse GTCR
with respect to Unpaid Drawings (including, in each case, interest thereon)
shall be absolute and unconditional under any and all circumstances and
irrespective of any set off, counterclaim or defense to payment which the
Company may have or have had against GTCR.
(c) The agreement by the Company in this Section 1 to reimburse GTCR for
Unpaid Drawings is in addition to any such rights that GTCR may have or
obligations that the Company may have under general principals of law or equity.
<PAGE>
SECTION 2. OPTION BY GTCR TO CONVERT UNPAID DRAWINGS INTO EQUITY
SECURITIES.
(a) With respect to all or any portion of the Unpaid Drawings, GTCR shall
have the right, but not the obligation, from time to time, upon notice to the
Company, to receive Equity Securities (as defined below) valued at the Market
Price (as defined below) in aggregate amount not to exceed the aggregate amount
of any remaining Unpaid Drawings (plus interest accrued thereon) in lieu of the
cash or monetary reimbursement to GTCR for such Unpaid Drawings as provided in
Section 1 hereof. The Market Price of the Equity Securities shall be determined
as of the date of the notice by GTCR to the Company under this Section 2.
GTCR's rights to receive Equity Securities shall be subject to existing and
future preemptive rights to which the issuance of such securities may be
subject.
(b) As used in this Agreement, "Equity Securities" shall mean, so long as
any of the Company's Class A Common Stock, $0.01 par value per share, ("Class A
Common Stock") remains issued and outstanding, shares of Class A Common Stock,
and if no shares of Class A Common Stock are outstanding, it shall mean shares
of the Company's common equity securities into which Class A Common Stock has
been converted or for which it has been exchanged. As used in this Agreement,
"Market Price" shall mean as to any security the average of the closing prices
of such security's sales on all domestic securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, on such day, or, if on any day
such security is not quoted in the NASDAQ System, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being determined and the 20
consecutive business days prior to such day; provided that if such security is
listed on any domestic securities exchange the term "business days" as used in
this sentence means business days on which such exchange is open for trading.
If at any time such security is not listed on any domestic securities exchange
or quoted in the NASDAQ System or the domestic over-the-counter market, the
"Market Price" shall be the fair value thereof determined jointly by the
Company, GTCR and, so long as he holds at least 7.5% of the common stock of the
Company (on a fully diluted basis), Timothy L. Burfield; provided that if such
parties are unable to reach agreement within a reasonable period of time, such
fair value shall be determined by an investment banking firm of national or
regional reputation jointly selected by the Company, Timothy L. Burfield and
GTCR. The determination of such investment banking firm shall be final and
binding on the Company, Timothy L. Burfield and GTCR, and the fees and expenses
of such investment banking firm shall be paid by the Company.
(c) To the extent that GTCR exercises its right to receive Equity
Securities under this Section 2, its right to reimbursement under Section 1
shall, upon consummation of the sale of the Equity Securities to GTCR, be deemed
satisfied with respect to the amount of the Unpaid Drawings (and interest
accrued thereon, to the extent Equity Securities are received in respect
thereof) specified in the notice by GTCR to the Company pursuant to this Section
2.
-2-
<PAGE>
SECTION 3. OPTION BY GTCR TO REPAY NOTE. If by January 2, 1997, any of the
Obligations remains unpaid, GTCR shall have the right, but not the obligation,
from time to time, upon notice to the Company, to repay all or any portion of
the Obligations on behalf of the Company (a "GTCR Repayment"). Upon the making
of a GTCR Repayment, GTCR shall be entitled to receive, in consideration thereof
(and in satisfaction and discharge of the Company's obligations to GTCR in
respect thereof), Equity Securities with a Market Value as of the date of the
GTCR Repayment equal to the amount of such GTCR Repayment. GTCR's rights to
receive Equity Securities shall be subject to existing and future preemptive
rights to which the issuance of such securities may be subject.
SECTION 4. SECURITIES LAW COMPLIANCE. The Company shall make all filings
under all applicable federal and state securities laws necessary to consummate
the issuance of the Equity Securities pursuant to this Agreement in compliance
with such laws. Without limiting the generality of the foregoing, if such
issuance can be effected in compliance with such securities laws without
registering such issuance under the securities laws then the Company shall not
be obligated to register such issuance. The forgoing shall not be deemed to
limit any existing rights under, or provide any additional rights under, any
other agreement between GTCR and the Company with respect to registration
rights.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a material
inducement to GTCR to enter into this Agreement and the Guaranty, the Company
hereby represents and warrants to GTCR that:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and is duly
qualified to do business in every jurisdiction in which the failure to so
qualify has had or would reasonably be expected to have a material adverse
effect on its and its subsidiaries financial condition, operating results,
assets, operations or business prospects, taken as a whole.
(b) The execution, delivery and performance of this Agreement, the Note and
all other agreements and instruments contemplated hereby have been duly
authorized by the Company. This Agreement and the Note and all other agreements
and instruments contemplated hereby to which the Company is a party each
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms. The execution and delivery by the Company of this
Agreement, the Note and all other agreements and instruments contemplated hereby
to which the Company is a party, the making of the Note, the issuance of the
Equity Securities upon exercise of the rights granted to GTCR under Sections 1
and 2 hereof, and the fulfillment of and compliance with the respective terms
hereof and thereof by the Company, do not and shall not (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 any of its subsidiary's capital
stock or assets pursuant to, (iv) give any third party the right to modify,
terminate or accelerate any obligation under, (v) result in a violation of, or
(vi) require any authorization, consent, approval, exemption or other action
(which has not been obtained) by or notice or declaration to, or filing with,
any court or administrative or governmental body or agency pursuant to, the
charter or bylaws of the Company or any subsidiary, or any law, statute, rule or
regulation to which the Company or any subsidiary is sub-
-3-
<PAGE>
ject, or any agreement, instrument, order, judgment or decree to which the
Company or any subsidiary is subject.
(c) No material permit, consent, approval or authorization of, or
declaration to or filing with, any governmental authority is required in
connection with the execution, delivery and performance by the Company of this
Agreement, the Note or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby, except as have been or, with respect to actions contemplated to occur
after the date hereof, will be, obtained or made.
(d) On a going concern basis, the Company is solvent as of the date of this
Agreement and shall not become insolvent as a result of the consummation of the
transactions contemplated by this Agreement or by the Note. The Company is, and
after giving effect to the transactions contemplated by this Agreement and the
Note shall be, able to pay its debts as they become due, and its property now
has, and after giving effect to the transactions contemplated hereby shall have,
a fair salable value (determined on a going concern basis) greater than the
amounts required to pay its debts (including a reasonable estimate of the amount
of all contingent liabilities). The Company has adequate capital to carry on
its business, and after giving effect to the transactions contemplated by this
Agreement, the Company shall have adequate capital to conduct its business. No
transfer of property is being made and no obligation is being incurred in
connection with the transactions contemplated by this Agreement or the Note with
the intent to hinder, delay or defraud either present or future creditors of the
Company.
SECTION 6. FEES AND EXPENSES. Whether or not any of the transactions
contemplated hereby are consummated, the Company shall pay any and all
reasonable fees and expenses of the Company and of GTCR, including the fees and
expenses of counsel and of any experts or agents, which may be incurred in
connection with (i) this Agreement, (ii) any of the actions or transactions
contemplated hereby and (iii) the exercise or enforcement of any of the
agreements hereunder.
SECTION 7. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the addresses set forth on the signature page hereto or at such
address, to the attention of such other person, and with such other copy or
copies, as the recipient party has specified by prior written notice to the
sending party. Notices shall be deemed to have been given hereunder when
delivered personally, three days after deposit in the U.S. mail and one day
after deposit with a reputable overnight courier service.
SECTION 8. COOPERATION; FURTHER ASSURANCES. The Company and GTCR shall
reasonably cooperate with the other and will use reasonable efforts to cause
satisfaction of the conditions to and achievement of the objectives contemplated
herein. From and after the date hereof, the parties shall, from time to time,
execute and deliver or cause to be executed and delivered such further
instruments and agreements and perform such other acts, as the other party in
its reasonable its discretion may deem necessary, advisable or desirable to
carry out the actions and intentions contemplated herein either explicitly or
implicitly.
-4-
<PAGE>
SECTION 9. SUCCESSORS; ASSIGNMENT; EFFECT. This Agreement shall inure to
the benefit of, and be binding upon, the respective parties hereto and their
successors. This Agreement is not assignable by the Company, either in whole or
in part, without the prior written consent of GTCR. Nothing express or implied
in this Agreement is intended to, or shall be construed to, confer upon or give
to a person, firm or corporation other than the parties hereto any rights or
remedies hereunder or by reason of this Agreement or any transaction
contemplated hereby.
SECTION 10. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement will be
effective against any party unless such modification, amendment or waiver is
approved in writing by such party. The failure of any party to enforce any of
the provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
SECTION 11. GOVERNING LAW. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights and
obligations of the Company and its stockholders. All other issues and questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Illinois, without giving effect to any choice of law or conflict of
law rules or provisions (whether of the State of Illinois or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Illinois.
SECTION 12. SEVERABILITY. In the event that any provision or any portion
of any provision of this Agreement shall be held invalid, illegal or
unenforceable under applicable law, the remainder of this Agreement shall remain
valid and enforceable, unless such invalidity, illegality or unenforceability
substantially diminishes the rights and obligations, taken as a whole, of any
party hereunder.
SECTION 13. NO STRICT CONSTRUCTION. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
SECTION 14. DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.
SECTION 15. COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
SECTION 16. CONSENT. Pursuant to the Equity Purchase Agreement, made as
of December 3, 1993, between the Company and GTCR (the "Equity Purchase
Agreement"), the Company has agreed not to take certain actions, including,
without limitation, issuing stock or incurring certain obligations, without
obtaining the prior written consent of the holders of a majority of the Investor
Common Stock (as defined in the Equity Purchase Agreement). This
-5-
<PAGE>
Agreement contemplates that the Company will take certain actions which are
restricted by the Equity Purchase Agreement. GTCR, as the holder of all of the
Investor Common Stock, hereby acknowledges, permits and consents to the taking
of such actions as contemplated by the terms of this Agreement.
* * *
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Agreement to be executed by their authorized representatives on
and as of the day and date first above set forth.
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.
Its General Partner
By: Golder, Thoma Cressey, Rauner, Inc.
Its General Partner
By /S/ Bryan C. Cressey
------------------------------------------
Name (Print): Bryan C. Cressey
-------------------------------
Title (Print): Principal
------------------------------
Address: 6100 Sears Tower
Chicago, Illinois 60606
AMERICAN MEDSERVE CORPORATION
By /s/ Michael B. Freedman
------------------------------------------
Name (Print): Michael B. Freedman
-------------------------------
Title (Print): Vice President
------------------------------
Address: 184 Shuman Blvd.
Suite 200
Naperville, Illinois 60563
-6-
<PAGE>
Reference is made to the Stockholders Agreement, made as of December 3,
1993 (the "Stockholders Agreement"), by and among American Medserve
Corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV, L.P.
("GTCR") and Timothy L. Burfield (the "Executive") and to the Reimbursement
and Conversion Rights Agreement, made and entered into as of August __, 1996
(the "Reimbursement Agreement"), between the Company and GTCR.
The Executive acknowledges that the method for determining Market Price (as
defined in the Reimbursement Agreement) as set forth in Section 2(b) of the
Reimbursement Agreement is not consistent with the method prescribed by Section
8 of the Stockholders Agreement. The Executive consents to the use of the
method for determining Market Price set forth in Section 2(b) of the
Reimbursement Agreement only for purposes of the transactions contemplated by
the Reimbursement Agreement.
This acknowledgment and consent shall in no way be construed to be an
amendment to or modification of the Stockholders Agreement, but rather it is an
acknowledgment and consent to the use of the method for determining Market Price
as set forth in the Reimbursement Agreement only for purposes of the
transactions contemplated by the Reimbursement Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 2nd day of
August, 1996.
/s/ Timothy L. Burfield
---------------------------------
Timothy L. Burfield
