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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
National Medical Enterprises, Inc.
(Name of Issuer)
Common Stock, $0.075 par value per share
(Title of Class of Securities)
63688610 3
(CUSIP Number)
Melvyn N. Klein
GKH Investments, L.P.
200 West Madison Street
Chicago, Illinois 60606
(312) 750-8477
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 1, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Check the following box if a fee is being paid with the statement [ X ].
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder on this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
(continued on following pages)
Page 1 of 42 Pages
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1. NAME OF REPORTING PERSON
GKH Investments, L.P.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ X ]
3. SEC USE ONLY
4. SOURCE OF FUNDS
OO (See Item 3)
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER 7. SOLE VOTING POWER
OF 10,382,050
SHARES
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY -0-
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 10,382,050
WITH
10. SHARED DISPOSITIVE POWER
-0-
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,382,050
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[X]
The aggregate amount set forth in row 11 excludes 392,530 shares
of Common Stock (.20% of the outstanding shares) owned by GKH
Private Limited. See Items 3 and 6 hereof.
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.20%
14. TYPE OF REPORTING PERSON
PN
Page 2 of 42 Pages <PAGE>
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Item 1. Security and Issuer
-------------------
This statement on Schedule 13D relates to the Common Stock, $0.075 par
value per share (the "Common Stock"), of National Medical Enterprises, Inc.,
a Nevada corporation (the "Company"). The principal executive offices of the
Company are located at 2700 Colorado Avenue, Santa Monica, California 90404.
Item 2. Identity and Background
-----------------------
This statement is being filed by GKH Investments, L.P., a Delaware
Limited Partnership (the "Fund"), the principal executive offices of which are
located at 200 West Madison Street, Chicago, Illinois 60606. The sole general
partner of the Fund is GKH Partners, L.P., a Delaware limited partnership
("GKH"). The Fund's principal business is investing. Certain additional
information regarding GKH and its controlling persons is included in Appendix
A attached hereto and is incorporated herein by this reference.
Neither the Fund nor, to the best knowledge of the Fund, any of the
persons listed in Appendix A hereto, have, during the last five years: (1)
been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (2) been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of or prohibiting or mandating activity subject to, federal
or state securities laws, or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds
--------------------------
Effective March 1, 1995, AMH Acquisition Co., a Delaware corporation and
a wholly owned subsidiary of the Company, was merged (the "Merger") with and
into American Medical Holdings, Inc. ("AMH"). Pursuant to the Merger, the
Fund, formerly a shareholder of AMH, received, among other things, 10,382,050
shares of Common Stock.
In addition, pursuant to the Merger, GKH Private Limited, a Singapore
corporation ("GKHPL"), the assets of which are managed by the Fund, also
formerly a shareholder of AMH, received, among other things, 392,530 shares
of Common Stock.
The Fund disclaims beneficial ownership of the shares of Common Stock
owned of record by GKHPL and GKHPL disclaims beneficial ownership of the
shares of Common Stock owned of record by the Fund.
Item 4. Purpose of Transaction
----------------------
The Common Stock was acquired by the Fund pursuant to the Merger. The
Fund does not have any current intention to purchase or otherwise acquire any
additional shares of Common Stock. In addition, except for the disposition
of shares of Common Stock pursuant to the Shelf Registration (as hereinafter
defined), the Fund has no present intention, plan or proposal to take any
Page 3 of 42 Pages <PAGE>
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other action listed in paragraph (a) through paragraph (j) of Item 4 of
Schedule 13D. However, depending on market conditions and other factors and
subject to applicable law, the Fund reserves the right, in its sole
discretion, to distribute shares of Common Stock to its partners and to take
any action, including without limitation the actions set forth in paragraph
(a) through paragraph (j) of Item 4, all on such terms and at such times as
the Fund considers desirable.
Item 5. Interest in Securities of the Issuer
------------------------------------
As of the date hereof, the Fund beneficially owns 10,382,050 shares of
Common Stock, constituting approximately 5.20% of the total number of
outstanding shares. The shares of Common Stock owned by the Fund excludes
392,530 shares of Common Stock owned by GKHPL (approximately 0.20 percent of
the total outstanding shares of Common Stock).
As of the date hereof, the Fund has sole power to vote and to dispose
of all shares of Common Stock owned by it. During the past 60 days, neither
the Fund nor, to the best of the Fund's knowledge, any of the persons set
forth in Appendix A hereof has effected any transactions in Common Stock
except as otherwise described herein.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
--------------------------------------------------------------
GKH and GKHPL entered into that certain investment management agreement
dated as of October 10, 1988 (the "Management Agreement"). Pursuant to the
Management Agreement, GKH has agreed to invest the assets of GKHPL in
investments made by the Fund, under certain circumstances. The Management
Agreement expires on January 25, 2002 and is generally irrevocable by GKHPL.
The Management Agreement is set forth as Exhibit 99.1 and the description of
the Management Agreement contained herein is qualified in its entirety by
reference to such exhibit.
In connection with the Merger, the Company entered into a registration
rights agreement (the "Registration Rights Agreement") with certain persons
who may be considered to have been "affiliates" of AMH for purposes of the
Securities Act of 1933, as amended (the "Securities Act"), including the
former directors and executive officers of AMH, the Fund, GKHPL and certain
others. Pursuant to the Registration Rights Agreement, the Company, at its
expense, registered under the Securities Act the shares of Common Stock
received by such holders in the Merger to permit such holders to sell or
otherwise dispose of their shares of Common Stock. Such holders have agreed
not to effect a public sale or distribution of any Common Stock under certain
circumstances, including during the ten day period prior to, and during the
eighty day period beginning on, the closing date of an underwritten offering
of Company securities if so requested by the underwriter; provided, however,
that no such request may be made by the Company or such underwriter prior to
May 31, 1995 (the ninetieth day following the effective time of the Merger).
A form of the Registration Rights Agreement is set forth as Exhibit 99.2 and
the description of the Registration Rights Agreement contained herein is
qualified in its entirety by reference to such exhibit.
Page 4 of 42 Pages <PAGE>
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Item 7. Material to be Filed as Exhibits
--------------------------------
Exhibit 99.1: Investment Management Agreement
Exhibit 99.2: Form of Registration Rights Agreement
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 10, 1995.
GKH INVESTMENTS, L.P., a Delaware limited
partnership
By: GKH Partners, L.P., its
general partner
By: HGM Associates Limited
Partnership, a general partner
By: HGM Corporation, its general
partner
By: /s/ Harold S. Handelsman
--------------------------
Harold S. Handelsman,
Vice President
Page 5 of 42 Pages <PAGE>
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APPENDIX A
----------
The sole general partner of the Fund is GKH. By virtue of such position
and by virtue of the Management Agreement, GKH may be deemed the beneficial
owner of 10,382,050 shares of Common Stock owned by the Fund and 392,530
shares of Common Stock owned of record by GKHPL. The general partners of GKH
are JAKK Holding Corp., a Nevada corporation ("JAKK"); DWL Lumber Corporation,
a Delaware corporation ("DWL"); and HGM Associates Limited Partnership, an
Illinois limited partnership ("HGMLP"). The sole general partner of HGMLP is
HGM Corporation, a Nevada corporation ("HGM"). Each of JAKK, DWL, HGMLP and
HGM, by virtue of its relationship to GKH and the Fund may also be deemed to
share beneficial ownership of an aggregate of 10,382,050 shares of Common
Stock owned by the Fund and 392,530 shares of Common Stock owned of record by
GKHPL. Each of such entities disclaims such beneficial ownership.
1. Information Regarding GKH
-------------------------
The principal business of GKH is investing and directing of the
investments of the Fund and GKHPL. The principal executive offices of GKH are
located at 200 West Madison Street, Chicago, Illinois 60606.
2. Information Regarding JAKK
--------------------------
The principal business of JAKK is investing and asset management. The
address of its principal executive offices is Mercantile Tower, MT 209, 615
N. Upper Broadway, Suite 1940, Corpus Christi, Texas 78477. Melvyn Klein is
the sole director and stockholder of JAKK and serves as its president,
treasurer and secretary. By virtue of his relationship to JAKK, Mr. Klein may
be deemed to share beneficial ownership of the shares of Common Stock
beneficially owned by the Fund and GKHPL. Mr. Klein disclaims such beneficial
ownership.
Mr. Klein is a private investor and an attorney and counselor at law.
Mr. Klein's business address is Mercantile Tower, MT 209, 615 N. Upper
Broadway, Suite 1940, Corpus Christi, Texas 78477. Mr. Klein is a United
States citizen.
3. Information Regarding DWL
-------------------------
The principal business of DWL is investing and asset management. The
address of its principal executive offices is c/o Richards & O'Neil, 885 Third
Avenue, New York, New York 10022. Dan W. Lufkin is the sole stockholder and
a director of DWL and serves as its president.
Mr. Lufkin is a special limited partner of the Fund. Mr. Lufkin is a
director of Culbro, Inc., a distributor of consumer products, and OHM, Inc.,
an emergency response and hazardous waste management company, and is a private
investor. Mr. Lufkin's business address is 711 Fifth Avenue, Suite 401,
New York, New York 10022. Mr. Lufkin is a United States citizen.
Page 6 of 42 Pages <PAGE>
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4. Information Regarding HGMLP
---------------------------
The principal business of HGMLP is investing and asset management. Its
principal executive offices are located at 200 West Madison, Chicago, Illinois
60606.
5. Information Regarding HGM
-------------------------
The principal business of HGM is investing and asset management. Its
principal executive offices are located at 200 West Madison Street, Chicago,
Illinois 60606. The names, business addresses and present principal
occupations or employment of each director and executive officer of HGM and
the names and principal businesses of any corporation or other organization
in which such employment is conducted is set forth below. Each director and
executive officer listed below is a United States citizen. By virtue of such
officers' and directors' relationship to HGM, each of such officers and
directors may be deemed to share beneficial ownership of the shares of Common
Stock beneficially owned by the Fund and GKHPL. Each of such directors and
executive officers disclaims such beneficial ownership.
<TABLE>
<CAPTION>
Present Principal
Name and Business Address Occupation or Employment
- ------------------------- ------------------------
<S> <C>
Jay A. Pritzker Director and Chairman of the
200 West Madison Street Board of HGM; Director and
Chicago, Illinois 60606 Chairman of the Board of
Marmon Holdings, Inc., a
Delaware corporation; Chairman
of the Board of Hyatt
Corporation, a domestic hotel
management company.
Thomas J. Pritzker Director and President of HGM;
200 West Madison Street President of Hyatt Corporation,
Chicago, Illinois 60606 a domestic hotel management company.
Glen Miller Vice President and Treasurer
200 West Madison Street of HGM; Chief Executive
Chicago, Illinois 60606 Officer of Diversified
Financial Management Corp.
Harold S. Handelsman Vice President and Secretary
200 West Madison of HGM; Senior Vice President
Chicago, Illinois 60606 and general counsel of Hyatt
Corporation, a domestic hotel
management company.
</TABLE>
Page 7 of 42 Pages <PAGE>
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One hundred percent of the issued and outstanding common stock of HGM
is owned by Charles Evans Gerber, not individually but solely as trustee of
F.L.P. Trust No. 10 which trust was organized primarily for the benefit of
members of the Pritzker Family. The term "Pritzker Family" refers to the
lineal descendants of Nicholas J. Pritzker, deceased. Mr. Gerber disclaims
beneficial ownership of the shares of Common Stock owned by the Fund and
GKHPL.
Charles Evans Gerber is a partner in the law firm of Neal Gerber &
Eisenberg and his business address is Two North LaSalle Street, Suite 2200,
Chicago, Illinois 60602. Mr. Gerber is a citizen of the United States.
Page 8 of 42 Pages <PAGE>
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EXHIBIT 99.1
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT is entered into as of October 10,
1988 between GKH Partners, L.P., a Delaware limited partnership, as manager
(the "Manager") and Harry Gray Pte. Ltd., a Singapore corporation (the
"Investor").
R E C I T A L S
WHEREAS, the Investor is familiar with the investment objectives of
Harry Gray, Mel Klein & Partners, L.P. a Delaware limited partnership (the
"Partnership"), and has reviewed the investment guidelines and restrictions
contained in the Partnership's Amended and Restated Limited Partnership
Agreement, dated as of January 25, 1988, as amended through the date hereof;
and
WHEREAS, the Investor wishes to establish an investment management
account with the Manager and to commit to fund such account in an amount up
to $20,000,000; and
WHEREAS, the Investor wishes to have such funds invested in parallel and
pari passu with investments made by the Partnership and the Parallel Investors
(aa defined herein), subject to certain restrictions and under the various
terms provided for herein; and
WHEREAS, the Manager wishes to accept and manage the funds and the
investments made with such funds in accordance with this Agreement.
NOW, THEREFORE, in consideration of the premises hereinabove set forth
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Investor and the Manager hereby agree as
follows:
SECTION 1
DEFINED TERMS
The terms set forth below shall have the indicated meanings.
"Account" shall refer to the account established for the Investor as
hereinafter set forth.
"Affiliate" means, when used with reference to a specified Person, any
Person controlled by, controlling or under common control with a Person and
in the case of the Manager shall mean each of its partners and employees and
each of their respective partners, stockholders, officers, employees or
Affiliates.
"Agreement" means this Investment Management Agreement, as originally
executed and as amended from time to time, as the context requires.
Page 9 of 42 Pages <PAGE>
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"Approved Partner" means any of Harry J. Gray, Melvyn N. Klein, HGM
Associates, a limited partnership organized under the laws of Nevada, the
general partner of which is HGM Corporation, a Nevada corporation (only during
the period HGM is controlled by the lineal descendants of Nicholas J.
Pritzker, deceased, and/or their current or former spouses, and/or trusts for
their benefit), and any other general partner of the original Manager who is
approved by the Investor. An Approved Partner shall also mean a corporation
wholly owned by Melvyn N. Klein or Harry Gray.
"Assets" means any cash, securities, investments or any other property
or assets managed by the Manager pursuant to this Agreement.
"Capital Gains" or "Capital Losses" means, with respect to an
Investment, the difference between the amount realized upon disposition or
repayment of such Investment (not including Long Term Income) and the cost of
the Investment or, at the termination of the Agreement, with respect to Assets
that are not sold but are paid over in kind, the difference between the value
of the Investment (as determined pursuant to Section 8.1) and the cost of the
Investment. The amount of such difference which is greater than zero shall
be a Capital Gain and the amount of such difference which is less than zero
shall be a Capital Loss. If more than one Security was purchased as part of
a single Investment unit, the cost of each Security so purchased shall be
determined by allocating the total cost of such unit among such Securities
based on a determination, made by the Manager at the time of purchase, as to
the relative fair market values thereof. For purposes of determining Capital
Gains or Capital Losses, any items which are taken into account in determining
Short-Term Profits or Short-Term Losses shall be disregarded. For purposes
of determining Capital Gains with respect to the sale or distribution of any
debt security or preferred stock, the cost of such Security, determined in
accordance with the foregoing, shall be adjusted to reflect any accrued
original issue discount or constructive distribution (determined on the basis
of such cost) in accordance with generally accepted tax accounting principles.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision of succeeding law).
"Committed" or "Commitment" means, when referring to a dollar amount,
the maximum amount the Investor has committed to fund to its Account pursuant
to Section 3.1.
"Fiscal Period" means a calendar year or a portion thereof (x) beginning
on any of (i) the first day of a calendar year, (ii) the day following any day
the Manager receives any cash or Marketable Securities from the sale or other
disposition of Securities or other Assets or (iii) the day following any day
the Manager transfers Assets, other than cash or Marketable Securities, to the
Investor and (y) ending on the next to occur of (i) the last day of a calendar
year, (ii) the day the Manager receives any cash or Marketable Securities from
the sale or other disposition of Securities or other Assets (iii) the day the
Manager transfers Assets, other than cash or Marketable Securities, to the
Investor, or (iv) the date of the termination of this Agreement.
"Funding" means cash required to be funded by the Investor to its
Account.
"Funding Date" shall mean the Initial Funding Date or any Subsequent
Funding Date.
"HGM" means HGM Associates, a Nevada limited partnership.
Page 10 of 42 Pages <PAGE>
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"Incentive Fee" shall have the meaning set forth in Section 4.2.
"Initial Funding Date" means the date of this Agreement.
"Investment" means any direct or indirect investments of Assets by the
Manager in the Securities or assets of any Person or related Persons,
including any investment in short-term cash equivalents pending investment in
such Securities or assets or pending distribution following the sale or other
disposition of such Securities or assets.
"Investor" means the Person identified as such in the preamble and its
successors and assigns.
"Investor Liability Cap" shall mean the sum of the following, which
shall be calculated as of the date the Investor Liability Cap is to be
determined, (i) the Unused Investor Commitment not released from Commitment,
(ii) the value of the Assets, as determined pursuant to Section 8.2 and (iii)
all amounts paid by the Manager to the Investor pursuant to Section 4.
"Long Term Income" means income in the nature of interest, dividends and
other similar distributions from any Investment other than from Investments
giving rise to Short-Term Gain or Short-Term Loss.
"Management Fee" shall have the meaning set forth in Section 5.5.
"Manager" means GKH Partners, or any other Person who becomes a
successor Manager as provided for herein.
"Marketable Securities" means Securities of a class which is publicly
traded, which may or may not be subject to restrictions on transferability
imposed by Rules 144 or 145 under the Securities Act of 1933, as amended.
"Net Long Term Profits" for any Fiscal Period means the sum of (i) the
excess of Capital Gains over Capital Losses for the Fiscal Period, and (ii)
realized Long Term Income for the Fiscal Period, less (x) the excess of Short-
Term Losses over Short-Term Profits for the Fiscal Period and (y) the
Management Fee for the Fiscal Period.
"Parallel Investor(s)" means a person who has entered into a Parallel
Investment Management Agreement with the Manager.
"Parallel Investment Management Agreement(s)" means an agreement in
substantially the same form as this Agreement between the Manager and other
Persons and partnership agreements with foreign investors in substantially the
same form as the Second Amended and Restated Limited Partnership Agreement of
the Fund.
"Partnership" means Harry Gray, Mel Klein & Partners, L.P. a Delaware
limited partnership, as it may from time to time be constituted.
"Person" means any individual, partnership, corporation, trust or other
entity.
Page 11 of 42 Pages <PAGE>
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"Portfolio Company" means any corporation, partnership or other entity
in which the Partnership makes an investment or proposes to make an
investment. Such entity shall be deemed to be a Portfolio Company at such
time as the Partnership announces a tender offer for, or other proposal to
acquire Securities of such entity or, if earlier, the date on which formal
negotiations for such acquisition commence and such entity shall be deemed no
longer to be a Portfolio Company at the earlier to occur of the date the
Partnership announces that such proposed acquisition is abandoned,
negotiations for such acquisition are terminated or the date the Partnership's
investment in the Portfolio Company is disposed of.
"Securities" means capital stock, partnership interests, bonds, notes,
debentures or other similar interests or obligations of any Person or any
securities convertible into or exchangeable for, or any options, warrants or
other rights to acquire, any such securities of any Person, and any rated
commercial paper and certificates or other evidences of deposits in domestic
commercial banks; and any other short-term cash equivalent securities,
instruments or accounts in which the Investor, in the discretion of the
Manager, may from time to time invest, subject to Section 5.2(h).
"Shared Investment" means any direct or indirect investments of assets
of Parallel Investors, the Investor or the Partnership under direction of the
Manager or the general partner of the Partnership in securities or assets of
any Person or related Persons, including any investment in short-term cash
equivalents pending investment in such securities or assets or pending
distribution following the sale or other disposition of such securities or
assets.
"Short-Term Profit or Loss" means with respect to each Investment, the
profit or loss on Assets attributable to such Investment that are invested in
short-term cash equivalents pending investment in such Investment or pending
payment to the Investor, taking into account expenditures determined in good
faith by the Manager to be related to such Investments.
"Special Fees" means any break-up, investment banking, advisory,
management, director's and other similar fees or other remuneration or
recoveries related to transactions with Portfolio Companies which do not close
for any reason received by the Manager, HGM, any of their respective partners,
and any stockholders, officers, directors, employees, agents and Affiliates
of any of the Manager, HGM or any of their respective partners in connection
with a Portfolio Company.
"Subsequent Funding Date means a Funding Date described in Section
3.2(b).
"Total Commitments" means the sum of the Commitment, commitments of
Parallel Investors to invest funds under the Manager's direction and
commitments of partners of the Partnership to contribute capital thereto.
"Unused Investor Commitment" shall mean that portion of the Investor's
Commitment which has not been funded by the Investor to its Account.
Page 12 of 42 Pages <PAGE>
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"Unused Total Commitments" shall mean the Unused Investor Commitment
plus commitments, not previously drawn upon, of Parallel Investors to invest
funds under the Manager's direction and commitments of partners of the
Partnership to contribute capital thereto which commitments have not been
drawn upon.
SECTION 2
TERM
This Agreement shall continue in full force and effect until January 25,
2002, unless terminated earlier in accordance with the terms of this
Agreement.
SECTION 3
THE ACCOUNTS
3.1 Commitment. The Investor hereby commits itself, at such time and
in such manner as shall be required by this Agreement, to fund its Account
with an aggregate amount of cash not to exceed $20,000,000 (such amount
hereinafter referred to as the "Commitment").
3.2 Funding.
(a) On the Initial Funding Date, the Investor will fund its
Account with an amount of cash equal to $2,000,000.
(b) From time to time, in accordance with the procedures set
forth in Section 3.2(c), the Investor shall fund its Commitment in
immediately available funds. In no event shall the Investor be required
to fund its Account after January 25, 1993.
(c) The Manager may call upon the Investor to fund its Commitment,
or a portion thereof, by giving notice ("Notice") by telephonic,
telegraphic, telex or other electronic communication, with written
confirmation to follow promptly thereafter, which Notice shall specify
(i) the place at which the Funding is to be made, (ii) the amount of the
Funding to be made, and (iii) the time at which the Funding is to be
made, which time shall not be earlier than 9:00 a.m. New York time on
the tenth day after the giving of the Notice (the "Subsequent Funding
Date").
(d) In the event the Investor fails to make any Funding within
10 days of when such Funding is due (a "Default"), the Investor shall
no longer be permitted to make any further Funding to its Account, and
the Manager, in its sole discretion, may:
(i) enforce such Investor's obligation to make its Funding
by a suit in law or in equity;
Page 13 of 42 Pages <PAGE>
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(ii) charge the Investor's Account at any time and from
time to time with actual damages incurred by the Manager as a
result of such Default; and/or
(iii) purchase or cause to be purchased by such person as
the Manager may designate, at any time or from time to time, the
Account of the Investor at its fair market value, less any damages
charged against such Account pursuant to Section 3.2(d)(ii).
(e) The Management Fee payable by the Investor after a Default
shall be calculated based on the total original Commitment (without
reduction for any Special Fees, if any, to be credited against the
Management Fees), less, after January 25, 1993, the amount of the
Commitment which would have been released from Commitment after such
date had the Investor made Investments on a parallel basis with the
Parallel Inventors and the Partnership prior to such date.
(f) In the event the Investor is prohibited from making its
Funding as a result of any law applicable to the Investor or any rule
or regulation of any governmental agency, commission or authority (other
than the government of Singapore Investment Corporation (Pte.) Ltd.)
having jurisdiction over the Investor, the Investor shall be released
from its obligation to make such Funding without being in default
hereunder, provided, that, at least 5 days after the date of receipt of
the Notice, the Investor shall have delivered to the Manager an opinion
of counsel reasonably satisfactory to the Manager confirming the
Investor's inability to make its Funding. The exception to Funding
pursuant to this Section 3.2(f) shall not reduce the Commitment.
3.3 Release of Commitment. In the event the entire Commitment has not
been invested by the Manager prior to January 25, 1993, the amount of such
unused Commitment shall be released and the Manager shall not be permitted to
call for any further Fundings.
3.4 Withdrawal of Funds. Except as provided in Section 3.3 and
Section 4.1, the Investor shall not have any right to withdraw or make a
demand for withdrawal of any of its Fundings until the termination of this
Agreement.
SECTION 4
PAYMENTS
4.1 Proceeds. The Manager shall pay to the Investor, (i) as soon as
practicable after the receipt thereof, but in no event later than 14 days
after such receipt, any cash or Marketable Securities received from the sale
or other disposition of an Investment, net of any expenses associated with
such Investment which are to be borne by the Investor pursuant to Section 5.4,
and (ii) at least annually, all realized Long Term Income and all Short-Term
Profits realized on or prior to the end of the most recent Fiscal Period to
the extent not previously distributed. The foregoing payments shall be
reduced by the amount of expenses for which the Investor is liable pursuant
to Section 5.4 (other than those taken into account in determining net
proceeds under Section 4.1(i) above) and any amount of Incentive Fee or
Management Fee payable hereunder, such reduction to be applied first to the
payments described in paragraph (ii) above and thereafter to the payments
described in clause (i) above.
Page 14 of 42 Pages <PAGE>
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4.2 Incentive Fee. The Manager shall receive an incentive fee (the
"Incentive Fee"), payable at the end of each Fiscal Period, equal to 20% of
the excess of Net Long Term Profits realized during the Fiscal Period over
expenses allocated to the Investments generating the Net Long Term Profits
and, if the end of such Fiscal Period coincides with the termination of this
Agreement, 20% of the excess of the Capital Gain unrealized at the end of such
Fiscal Period over expenses allocable to the Investments which have not
previously been taken into account in calculating the Incentive Fee, such
Capital Gain to be determined pursuant to Section 8 below. Notwithstanding
the foregoing:
(a) The Manager shall be entitled to the Incentive Fee only if,
and to the extent that, after taking into account such Incentive Fee,
the cumulative amount of the Incentive Fee will not exceed 20% of the
amount, if any, of cumulative Net Long Term Profits realized from the
date of commencement of this Agreement through the end of the Fiscal
Period.
(b) In the event, upon termination of this Agreement, the
Incentive Fee exceeds 20% of the cumulative Net Long Term Profits from
the date of commencement of this Agreement, the Manager shall pay the
Investor the amount of such excess within 90 days of such termination,
or if later, the date upon which the value of any Securities to be
distributed to the Investor is determined pursuant to Section 8 hereof.
4.3 Payments in Securities and Other Property. The Manager shall make
no payments to the Investor in kind except payments in connection with the
termination of the Agreement or payments in Marketable Securities, which may
be paid to the Investor, at any time and in the discretion of the Manager,
except that no such payment shall be made to the extent the Investor would be
prohibited by applicable law from holding such Securities or other property;
provided, however, that the Manager intends to make payments only in cash
prior to termination of the Agreement and that the Manager shall make payments
in kind prior to the termination of the Agreement only if, in its reasonable
opinion, such payments are in the best interests of the Investor.
SECTION 5
AUTHORITY OF THE MANAGER
5.1 Management. The Manager shall have all specific rights and powers
required or appropriate to manage and invest the Assets as investment manager.
The Manager shall have the exclusive right to manage and invest the Assets and
sell or otherwise dispose of Investments in accordance with this Agreement,
make all policy and investment decisions, and the Investor shall have no right
or power to invest, take part in the management of or transact any business
with respect to such Assets (except as specifically provided otherwise
herein). Without limiting the foregoing, the Manager's power and authority
under this Agreement include the power and authority to do the following:
Page 15 of 42 Pages <PAGE>
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(a) review, select, analyze, negotiate and close Investment
transactions, monitor and sell or otherwise dispose of Investments, and
enter into, execute and consummate all agreements, instruments and other
documents and do all other acts the Manager deems advisable in
connection with the investment and management of the Assets;
(b) perform the following services:
(i) set up books of account, records and payment
procedures;
(ii) collect, manage and disburse the Fundings of the
Investor for the purposes set forth in this Agreement;
(iii) collect receipts and make payments and expenditures
in accordance with the terms of this Agreement; and
(iv) make, or cause to be made, periodic reports relating
to operating results, valuations and Investor's Account, as
required by this Agreement;
(c) employ from time to time third parties to render services
to it in connection with this Agreement, including but not limited to,
attorneys, investment brokers or finders, independent certified public
accountants and printers (including attorneys and accountants who may
also act as attorneys and accountants for the Manager or any of its
Affiliates);
(d) take whatever steps are required by governmental authorities
having jurisdiction over the Investor or the Assets;
(e) subject to Section 5.2(e), exercise, assign, waive or
release (whether by proxy or otherwise), in its sole and absolute
discretion, any rights attached to or associated with any Securities
held in the Account to participate in the management of the issuer of
such Securities, including any right to participate in any vote to elect
the board of directors or to permit any corporate action requiring the
approval of the holders of such Securities;
(f) to utilize Assets to purchase or otherwise acquire, possess
or transfer, and to exercise all rights, powers, privileges and other
incidents of ownership or possession with respect to, Securities with
the ultimate objective of the preservation, protection, improvement and
enhancement in value thereof; provided, however, that the Manager shall
not invest more than thirty-five percent (35%) of the Commitment in any
Investment or Investments issued by a single Person and its Affiliate;
(g) do any other acts that the Manager deems advisable to
further the purposes of this Agreement and that are not prohibited by
this Agreement or applicable law.
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5.2 Certain Restrictions. Within the categories of investments
permitted by Section 5.3, the Manager may invest the Assets as it deems
advisable, provided that:
(a) No funds in the Investor's Account may be invested in non-
corporate entities that engage in (i) commercial activities within the
meaning of Section 892(a)(2) of the Code or (ii) activities which
constitute the conduct of a trade or business within the meaning of
Section 864(b) of the Code;
(b) The acquisition and disposition of investments made with
funds in the Investor's Account shall not be dictated by short-term
price movements on any public or established stock market;
(c) The funds in the Investor's Account shall not be invested
in short-sales (other than conventional repurchase agreements and
similar arrangements) or in any type of commodities trading;
(d) Any investment of funds in the Investor's Account in puts,
calls, warrants or similar securities of any issuer shall be made only
in conjunction with an investment in equity or debt securities of such
issuer or an Affiliate of such issuer (with the exception of
conventional repurchase agreements and similar arrangements);
(e) Nothing herein shall authorize the Manager, in the
performance of its obligations hereunder, to (x) serve on the Investor's
behalf as a member of the board of any entity in which Investments have
been made for the Investor's Account, (y) manage, supervise or direct
on the Investor's behalf the operations of any such entity or (z)
provide on the Investor's behalf any consulting, advisory or other
related services to any such entity; provided, however, that this
restriction shall not prohibit the Manager from taking such actions or
serving in such capacity on behalf of any other Person;
(f) The Manager shall not cause any Portfolio Company or utilize
Assets to enter into any transaction with the Manager or an Affiliate
of the Manager except on terms no less favorable to the Portfolio
Company or the Investor than the terms that would have been available
to the Portfolio Company or the Investor in an arm's-length transaction
with a Person not an Affiliate of the Manager taking into account all
the circumstances surrounding the transaction;
(g) The Investments will be subject to the limitations of
Section 6 below;
(h) The Manager shall not make short-term investments of Assets
not utilized to purchase Securities in any investment other than (i)
direct obligations of the United States or any agency thereof; (ii)
commercial paper rated as Prime-1 by Moody's Investors Service, or as
A-1 by Standard & Poor's Corp., or similarly rated by any successor to
either of such investment rating services; (iii) readily redeemable
money market funds; or (iv) certificates of deposit, time deposits or
banker's acceptances of any bank having capital and surplus in excess
of $500,000,000;
(i) The Manager shall not make Investments in entities which
operate, own or lease, or whose Affiliates operate, own or lease any
gambling facilities or activities; and
Page 17 of 42 Pages <PAGE>
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(j) The Manager shall not make Investments in any venture
capital or other pooled investment fund or similar entity.
5.3 Permitted Investments.
(a) Except as expressly provided elsewhere herein and subject
to Section 5.3(c), the Manager shall invest the Assets in Securities in
which the Partnership and Parallel Investors invert such that the ratio
of (i) the initial cost of such Securities held by the Manager for the
Account to (ii) the initial cost of such Securities held by the
Partnership, Parallel Investors and by the Manager for the Account shall
equal the ratio of the Unused Investor Commitment to the Unused Total
Commitments.
(b) Notwithstanding any other provision of this Agreement, the
Manager shall not make any Investment for the Investor's Account if the
Manager receives an opinion from its counsel or from counsel to the
Investor stating such investment would likely cause the Investor to be
deemed, for federal income tax purposes, to be engaged in commercial
activities in the United States within the meaning of Section 892(a)(2)
of the Code or in activities which constitute the conduct of a trade or
business within the meaning of Section 864(b) of the Code; provided,
however, that nothing in this Section 5.3(b), except as expressly stated
in such section, shall affect any other obligations of the Manager under
this Agreement. In the event an Investment is not made as a result of
the preceding sentence, the Manager shall return to the Investor the
amount that would otherwise have been invested in such Investment;
provided, however, that such amounts returned to the Investor will not
be considered released from, or reduce the, Commitment.
(c) Notwithstanding any other provision of this Agreement, in
the event any partner of the Partnership or any Parallel Investor does
not participate in a Shared Investment for any reason (an "Excluded
Person"), the Investor shall make an additional Funding for the purposes
of increasing the Investor's investment in the Shared Investment by an
amount (not to exceed the Unused Investor Commitment) equal to the
product of (i) the amount the Excluded Person would have otherwise been
required to contribute or invest with respect to the Shared Investment
and (ii) a fraction, the numerator of which is the amount of the Unused
Investor Commitment and the denominator of which is the Unused Total
Commitment, determined without regard to any commitment drawn upon to
make the Shared Investment; provided, however, that the Investor shall
not be obligated to make a further Funding in respect of any Shared
Investment in excess of 50% of the amount set forth in the initial
notice requesting a Funding in respect of such Shared Investment.
Page 18 of 42 Pages <PAGE>
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(d) The Securities purchased in connection with Investments
under this Section 5.3 shall be held by the Manager, in its own name or
in a name designated by it, as nominee for the Investor: provided,
however, that in the event the Manager is removed and a successor
Manager is appointed under Section 11.2(c) or the Agreement is
terminated and Securities are distributed to the Investor, the Manager
shall use its best efforts to obtain the transfer of the record
ownership of the Securities to the successor Manager or to such other
person as the Investor may designate in writing. In the event
Securities are purchased in the United States of America or Securities
of a United States corporation are purchased by the Manager, such
Securities shall be held in the name of a "United States person" as
defined in Section 7701(a)(30) of the Code. All Securities not held in
the name of the Manager shall be held in the name of a financial
institution having capital and surplus or net worth in excess of $100
million.
5.4 Expenses.
(a) The Investor shall bear all (except in connection with
uncompleted Investments) expenses incurred in connection with, or
allocable to, the management of the Account, including fees and expenses
of legal counsel and independent certified public accountants,
appraisers, interest charges, fees and expenses of experts or
custodians, investment banking fees related to the rendering of fairness
opinions or similar services, taxes, fees or other governmental charges,
litigation expenses, winding-up or liquidating expenses or other
expenses of an extraordinary nature that do not usually arise in the
normal management of the Account and one half the expenses allocable to
the Account of transactions with Portfolio Companies which do not close
for any reason. The Manager will bear all expenses not specifically
listed in the preceding sentence relating to the performance of its
function in finding, acquiring and monitoring Investments, including
clerical, bookkeeping and administration expenses, salaries of
personnel, if any, payroll taxes and employee costs related to such
salaries, rent, telephone charges, utility charges, office supplies,
postage, office equipment expenses and all other like expenses and one
half the expenses of transactions with Portfolio Companies which do not
close for any reason.
(b) The expenses which the Investor shall bear pursuant to
Section 5.4(a) shall, as determined in good faith by the Manager, either
be allocated to one or more Investments or not so allocated. If the
expense is to be allocated to more than one Investment, the expense
shall be attributed to all such Investments existing at the date of
occurrence of such expense in proportion to the funds committed to such
Investments.
(c) The expenses payable by the Investor allocable to an
Investment shall be included in the calculation of Capital Gain or
Capital Loss or Short-Term Profit or Short-Term Loss, as the case may
be. All expenses payable by the Investor shall be paid as provided in
Section 4.1 and in the event not paid thereunder, may be paid from
Fundings to be made by the Investor.
Page 19 of 42 Pages <PAGE>
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(d) Notwithstanding the foregoing, any expenses allocable to an
Investment incurred in connection with consummation of such Investment
in a Portfolio Company shall be first paid by the Manager out of, and
shall reduce for purposes of Section 5.5, the Special Fees received in
connection with the consummation of such Investment and the excess, if
any, of such expenses over such Special Fees shall be paid by the
Investor. The Manager may retain or employ, subject to the bearing of
the expense thereof by the Manager to the extent required by this
Section 5.4, such Persons as it deems advisable for the management of
the Account, including management agents, accountants, consultants and
attorneys, on such terms and for such compensation as the Manager may
deem appropriate; provided, however, that, where the Investor is
required by this Section 5.4 to bear the expense thereof, if any Person
retained or employed on behalf of the Manager is an Affiliate of the
Manager or any general partner of the Manager, such retention or
employment shall be upon fair and reasonable terms no less favorable to
the Investor than would have been available in a comparable arm's-length
transaction with a Person not an Affiliate.
5.5 Management Fee.
(a) Commencing on the date hereof, the Investor shall pay to the
Manager, quarterly in advance, as provided in Section 5.5(g), a
Management Fee at an annual rate equal to 1.9302% of the Investor's
Commitment.
(b) For purposes of this Section 5.5, if the Investor has made
the Fundings required hereunder, the Investor's Commitment shall,
subject to Section 3.2(e), be reduced by any amounts released from
Commitment and any amounts paid to the Investor as a return of his
investment.
(c) Amounts paid to the Investor shall be deemed to be a return
of investment to the extent a payment pursuant to Section 4.1(i) exceeds
the sum of cumulative Net Long Term Profits and the cumulative Incentive
Fee.
(d) The Management Fee payable for any calendar quarter by the
Investor shall be reduced (but not below zero) by 50% of the Investor's
share of Special Fees received during the prior calendar quarter. If
the amount of the Investor's share of Special Fees to be credited
against the Management Fee in any calendar quarter exceeds the
Management Fee payable for such calendar quarter, such excess shall be
credited against the Management Fee payable in the next calendar quarter
and each succeeding calendar quarter thereafter until the entire amount
of such excess has been so credited. Special Fees shall not reduce the
Management Fee if the Investor has failed to make a Funding as required
hereunder.
(e) The Management Fee for the first calendar quarter ending
after the date hereof shall be prorated based on the number of days in
the period from the date hereof to the last day of such first calendar
quarter and shall be payable in advance on the date hereof.
Page 20 of 42 Pages <PAGE>
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(f) To the extent not paid pursuant to Section 4.1, the
Management Fee shall be payable in cash, by the Investor to the Manager,
in immediately available funds, at such time and place as the Manager
may designate; provided that the Investor hereby agrees that, if it
fails for any reason to pay the Management Fee when due, the Manager
shall have the right, upon three business days prior notice to the
Investor, in addition to any other rights or remedies to which it may
be entitled, to collect the Management Fee from the Assets. Neither such
direct payment, nor such collection shall reduce the amount of the
Commitment for all purposes of this Agreement.
(g) The Manager shall send the Investor a bill for the
Management Fee for each calendar quarter. The Management Fee shall be
due on the later to occur of (i) five business days after the beginning
of such calendar quarter or (ii) seven business days after such bill for
such Management Fee is sent to the Investor by the Manager.
5.6 Duty of Care and Loyalty. The Manager shall discharge its duties
under this Agreement solely in the interest of the Investor, and shall do so
with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like character and with
like aims. The Manager shall not deal with the Assets in its own interest or
for its own account. Subject to Section 6, the Manager may separately engage
or invest in other business ventures that may be in competition with the
Investor.
5.7 Tax Matters.
(a) Withholding. Subject to the representation made by the
Investor in Section 5.7(c) hereof, and provided that the Investor has
delivered to the Manager a written opinion of counsel (which may be
Messrs. Pettit & Martin, San Francisco, California, or other counsel
satisfactory to the Manager) that the Investor is an "integral part" or
a "controlled entity" of a foreign sovereign within the meaning of
Section 892 of the Code and the rules and regulations promulgated
thereunder, the Manager shall not withhold any amount in respect of
federal income taxes from amounts payable to the Investor; provided,
however, that the Manager may withhold from amounts payable to the
Investor pursuant to the Code and the regulations promulgated thereunder
if any of the following conditions are satisfied: (i) the Manager has
reasonably determined that the Investor is not an "integral part" or a
"controlled entity" of a foreign sovereign within the meaning of Section
892 of the Code and the rules and regulations promulgated thereunder;
or (ii) the Manager has reasonably determined that the Investor is a
"controlled commercial entity" within the meaning of Section 892 of the
Code and the rules and regulations promulgated thereunder for any reason
other than the Investor's being a party to this Agreement: or (iii)
counsel has reasonably advised Manager that the Manager is obligated to
withhold from amounts payable to the Investor as a result of an
amendment to the Code or the regulations promulgated thereunder, the
issuance of new regulations promulgated under the Code, the issuance by
the Internal Revenue Service of a published revenue ruling, or a written
decision of the U.S. Tax Court, the U.S. Court of Claims, the U.S.
District Court in the district in which venue would lie under 28 U.S.C.
Sec. 1402 for an action prosecuted by the Manager or the Investor, any
U.S. Circuit Court of Appeals, or the U.S. Supreme Court; or (iv) the
Internal Revenue Service has asserted in an audit or similar proceeding
Page 21 of 42 Pages <PAGE>
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against the Manager that the Manager is obligated to so withhold and
either (x) the Investor fails to satisfy its obligations under Section
5.7(b) hereof or (y) after consultation with the Investor, the Manager
reasonably determines that any failure by it to so withhold could,
notwithstanding the performance by the Investor of its obligations under
Section 5.7(b) hereof, have a material adverse effect on the Manager.
(b) Certain Obligations of the Investor. The Investor shall
reimburse and hold harmless the Manager from and against any and all
liability suffered or incurred by the Manager as a result of any failure
to withhold taxes (including interest thereon, penalties relating
thereto and expenses (including, without limitation, reasonable
attorneys fees)) with respect to amounts payable to the Investor. In
the event that the Internal Revenue Service asserts in an audit or
similar proceeding against the Manager that the Manager is obligated to
withhold on such amounts payable, the Manager shall promptly give notice
of such fact to the Investor. If the Investor requests that the Manager
decline to so withhold and, either in the Manager's own name or in
cooperation with the Investor, contest the Internal Revenue Service's
assertion, the Manager will, subject to Section 5.7(a) hereof, decline
to so withhold and will cooperate in all reasonable respects with the
Investor in contesting the Internal Revenue Service's position;
provided, however, that (i) the Investor shall, on the first of each
month, pay to the Manager an amount sufficient to compensate the Manager
for all of its expenses incurred in connection with contesting the
Internal Revenue Service's position and (ii) the Manager shall be
entitled to deposit amounts requested to be withheld by the Internal
Revenue Service in an escrow, trust or similar account in lieu of paying
such amounts to the Investor. Nothing in this Section 5.7(b) shall be
construed to limit or alter any right or remedy the Investor may have
under this Agreement or otherwise in the event of any breach by the
Manager of its obligations under other provisions of this Agreement
including, without limitation, any right the Investor may have to sue
for and collect in respect of taxes payable by the Investor as a result
of any such breach by Manager.
(c) Representation of the Investor. The Investor hereby
represents that it is an "integral part" of, or a "controlled entity"
of a foreign sovereign, and that it is not a "controlled commercial
entity," all within the meaning of Section 892 of the Code and the rules
and regulations promulgated thereunder (it being understood that, for
purposes of such representation, the Investor may assume that the
Manager will comply with all of its obligations under this Agreement),
such representation to be true as of the date hereof and for all
succeeding periods during the term hereof unless the Investor shall have
delivered to the Manager written notice to the contrary. For so long
as the Manager shall not have received written notice to the contrary
as described in the final clause of the preceding sentence, the Manager
shall be entitled to rely upon the forgoing representation of the
Investor.
5.8 Manager Covenants.
(a) The Manager intends to comply with all federal and state
laws of the United States of general application known to it, including
such laws applying to foreign investors generally and the Investor
specifically.
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(b) Each of Jay A. Pritzker and Thomas J. Pritzker shall
represent HGM in connection with HGM's role as a general partner of the
Manager during each of their lifetimes.
(c) Prior to termination of the Agreement, the Manager shall not
distribute to its partners any amounts paid to it by the Investor
pursuant to Section 4.2 hereof, except (i) to the extent determined by
the Manager to be necessary to provide the partners of the Manager with
sufficient funds to pay, at approximately the time such payments are to
be made, their estimated and actual tax liabilities attributable to
income from receipt of the Incentive Fee (it being understood that in
making such determination the Manager may assume that its partners are
subject to federal income taxes at the highest marginal rate then
applicable to individuals) and (ii) that at such time as the Manager has
made payments to the Investor pursuant to Section 4.1 in an amount equal
to its Commitment, the Manager may make such distributions to its
partners without limitation. Nothing contained in this Section 5.8(c)
shall prohibit or restrict the Manager in investing or reinvesting any
cash or selling Marketable Securities or other property paid to it by
the Investor and which the Manager is not permitted to distribute to its
partners by this Section 5.8(c); provided, however, that no such
investment shall be made in an Affiliate of the Manager.
(d) The terms of any Parallel Investment Management Agreement
will not be materially more favorable to a Parallel Investor than the
terms hereof unless such Parallel Investor commits to invest more than
$50 million under the Parallel Investment Management Agreement.
SECTION 6
AVOIDANCE OF CONFLICTS OF INTEREST
6.1 Waiver of Business Opportunities and Conflicts. HGM and its
partners and their respective stockholders, officers, directors, employees,
agents and Affiliates, other than Harry Gray, Mel Klein, other Approved
Partners and the Manager, (collectively, the "HGM Entities"), may engage in
any business of any kind whatsoever, including those which conflict or compete
with the activities of the Manager hereunder, and may become affiliated in any
way with any other business enterprise, and need not refer any investment
opportunity to the Manager or contribute or pay to the Manager or the Investor
any compensation or distribution received by a HGM Entity for any such
permitted activity. The Manager, its Affiliates (other than the HGM
Entities), each of Messrs. Gray and Klein, and any other Approved Partner
(other than the HGM Entities), however, shall not engage in any activity
competitive with or in conflict with the activities of the Manager hereunder
except as provided below and as set forth in Section 6.2. Messrs. Gray and
Klein, as general partners of the Manager, shall devote substantially all
their business time and attention to the business of the Partnership and the
business of the Manager in fulfilling its obligations hereunder and under the
Parallel Investment Management Agreements and shall not engage in other
business activities except as permitted by Section 6.3. Until all of the
Commitment has been invested in Assets or otherwise released from Commitment,
neither the Manager nor Messrs. Klein or Gray will invest in or manage any
other equity funds, limited partnerships or comparable investment vehicles
other than the Partnership and funds committed pursuant to Parallel Investment
Management Agreements. The Manager, its partners or their Affiliates may,
however, organize (but not manage) one or more equity funds prior to the
investment of the entire Commitment.
Page 23 of 42 Pages <PAGE>
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6.2 Coinvestment Opportunities.
(a) Except as provided below, neither the Manager nor any
Affiliates thereof shall invest (other than, in the case of HGM and its
Affiliates, investments made in the ordinary course of their regular
trading activities) in any Portfolio Company. The Manager may offer
senior management of an investee company the opportunity to acquire up
to 15% in the aggregate proposed investment by the Investor, the
Parallel Investors and the Partnership in the common equity of an
investee company (the "Management Percentage"). Any Person that is a
Parallel Investor or a partner in the Partnership, if it is actively
involved, on a continuing basis, in managing or directing the activities
of the investee company, may participate with management in the
Management Percentage alongside and on the same terms as the Investor.
The Manager or its Affiliates may make a coinvestment with the Investor
and the Partnership in an investee company in excess of the Management
Percentage only to the extent the Manager is prohibited from making such
Investment on behalf of the Investor pursuant to the proviso of Section
5.1(f) and only if the opportunity to make such investment has first
been offered by the Manager to the Investor, the Parallel Investors and
the partners of the Partnership (the "Offerees") on a pro rata basis,
based on each of the partner's capital contributions to the Partnership
attributable to such Investment and the Investor's and the Parallel
Investors' investment in such Investment, on the same terms as the
Manager or its Affiliate will make such coinvestment, and then only to
the extent such coinvestment opportunity is declined by the Offerees.
The Offerees shall respond to a written offer to participate in a
coinvestment opportunity within the time period set forth in such offer,
provided such time period is reasonably taking into account the
circumstances of the opportunity. Failure to respond within the
designated time period shall be deemed to be a rejection of the
coinvestment opportunity.
(b) The Investor hereby acknowledges that additional financing,
whether short-term or long-term, equity or debt, or any combination
thereof, in excess of that proposed to be provided by the Investor, may
be required by Portfolio Companies and that opportunities to provide
such financing, may be made available by the Manager to HGM or its
partners or Affiliates (subject to Section 6.2(a)) or to Parallel
Investors or partners in the Partnership. In addition, any Person that
is an Affiliate of the Manager, a partner in the Partnership or a
Parallel Investor may receive (and nothing herein shall be deemed to
preclude such Person from receiving) fees from the Manager or from a
Portfolio Company, in connection with providing such additional
financing. The Manager will seek to obtain such financing on terms
favorable to the Investor and comparable to terms which could be
obtained from sources of financing that are unaffiliated with the
Manager or the Partnership; provided that the foregoing shall not be
deemed to create any obligation to accept financing in each case at the
lowest obtainable rates if the Manager determines that such financing
would not be in the best interests of the Investor.
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6.3 Duties of Klein and Gray. Neither Mr. Melvyn N. Klein or Mr.
Harry Gray shall be precluded from engaging in other business activities to
the extent such activities do not conflict or compete with the activities of,
or Mr. Klein's or Mr. Gray's obligations to, the Investor as set forth below.
The Manager hereby agrees that each of Mr. Melvyn N. Klein and Mr. Harry J.
Gray, each of whom is a general partner of the Manager, shall devote
substantially all of his business time and attention to the businesses of the
Manager of managing funds invested hereunder and under the Parallel Investment
Management Agreements and of acting as general partner of the Partnership,
until all of the Commitment has been invested or released from Commitment.
Each of Messrs. Klein and Gray will refer to the Manager all available
investment opportunities of which he becomes aware and which may be suitable
for the Investor, the Parallel Investors and the Partnership and, except as
set forth below, will not invest independently in such opportunities or manage
or be in any way actively involved with partnerships, joint ventures or other
entities having investment objectives similar to those of the Partnership or
invest in positions in publicly traded securities other than those positions
held as of the date hereof and disclosed in writing to the Investor, or
pursuant to contractual commitment or other arrangements in effect prior to
the formation of the Manager on February 23, 1987 and disclosed in writing to
the Investor. The foregoing shall not prevent Mr. Klein or Mr. Gray from
serving as a director of any corporation, provided such service is not
inconsistent with their respective obligations hereunder and such corporation
does not have investment objectives similar to those outlined herein.
SECTION 7
BOOKS, RECORDS AND REPORTS
7.1 Books. The Manager shall maintain books and records for the
Accounts at its principal office and the Investor shall have the right to
inspect, examine and copy such books and records. Upon the request of an
Investor, the Manager shall promptly deliver to the Investor, at the
Investor's expense, a copy of any information which the Investor reasonably
requests relating to its Account.
7.2 Reports. The Manager shall cause to be prepared and distributed
to the Investor the following reports:
(a) Within 90 days after the end of each year, such information
as is necessary with respect to the Account for the Investor to complete
its federal and state income tax or information returns;
(b) Within 90 days after the end of each year, an annual report
regarding the Investor's Account containing a statement of assets and
liabilities as of the end of the fiscal year, statements of revenues and
expenses and changes in net Assets for the year then ended, all of which
shall be accompanied by the report of independent certified public
accountants; and
(c) Promptly furnish, and shall use its best efforts within 45
days, after the end of the initial 3-month, 6-month or 9-month period
of each year a financial report regarding the Investor's Account
containing a statement of assets and liabilities, and statements of
revenues and expenses and changes in net assets for the period then
ended.
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The Manager may cause the reports to be distributed to the
Investor to be prepared in accordance with the cash method of accounting or
a modified cash and accrual method of accounting. Further, the Manager may
cause to be prepared such other reports and financial statements as the
Manager deems appropriate for determining the financial performance of the
Account and/or otherwise informing the Investor about the status of the
Account.
7.3 Disclosure. Within 90 days after the end of each year, the
Manager shall deliver a written report to the Investor describing the material
terms of each material transaction including, without limitation, any
coinvestment permitted by this Agreement, engaged in by the Partnership or any
Portfolio Company with the Manager, any Parallel Investor, the Partnership,
any partner of the Partnership or any of its Affiliates.
SECTION 8
VALUATION
8.1 Valuations: Independent Appraisers. Upon termination of this
Agreement, if Assets are to be paid over to the Investor in kind, the Manager
shall value the Assets.
8.2 Methodology. The fair market value of any property on a given
date shall be determined by the Manager, which determination shall be made in
good faith based on such factors as the Manager deems relevant to a
determination of fair market value, including, without limitation, any
restrictions on the marketability or liquidity of, or the exercise of any
ownership rights (including voting rights) with respect to, any Securities or
other property and, if such property is then publicly traded on a national
securities exchange or included in a national quotation system, the most
recent or average closing sale or bid prices for such property on such
exchange or as quoted in such system. Any such determination of fair market
value shall be final, unless, if the Partnership is valuing substantially
identical assets as of the same date, the fair market value shall be
determined by reference to the fair market value as determined by the
Partnership.
SECTION 9
INVESTOR REPRESENTATIONS AND CONSENTS
9.1 Representations.
(a) The Investor represents, acknowledges and agrees that
neither prior to its execution of this Agreement nor as a result of such
execution or of the Manager's performance hereunder did it or will it
(i) become a partner in or of the Partnership, (ii) enter into any
contractual relationship with the Partnership. Except as expressly
stated in this Section, nothing in this Section shall affect any rights
or claims the Investor may have under this Agreement or otherwise,
including, without limitations, any rights or claims against the
Manager.
(b) The Investor has and will maintain a net worth of at least
the lesser of $20 million or the Unused Investor Commitment.
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9.2 Consent to Jurisdiction. The Investor hereby (a) submits to the
jurisdiction of any Federal or California state court sitting in San Francisco
County, California in any action or proceeding arising out of or relating to
this Agreement, and agrees that all claims in respect of such action or
proceeding may be heard determined in such Federal or California state court,
(b) waives, to the fullest extent it may do so, the defense of an inconvenient
forum to the maintenance of such action or proceeding, (c) consents to service
of process by registered mail at the address to which notices are to be given
under the Agreement, and (d) agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions
in any manner provided by law. Nothing herein shall affect any right the
Manager may have to serve legal process in any other manner permitted by law
or to bring any action or proceeding against the Investor or its property in
the courts of any other jurisdiction.
SECTION 10
BANKING; POWER OF ATTORNEY
10.1 Bank Accounts. The Fundings of the Investor and all subsequent
funds received by the Manager from the Investor may be initially deposited in
a separate account in the name of the Investor at such bank or other
institution or savings and loan association as the Manager shall select,
subject to Section 5.2(g). Disbursements therefrom may be made by the Manager
in conformity with the purposes of this Agreement. The Manager may designate
from time to time those persons authorized to execute checks and other items
on such bank accounts. The funds of the Investor shall not be commingled with
the funds of any other person. The Manager shall have fiduciary
responsibility for the safekeeping and use of all funds and assets of the
Investor, whether or not in its possession or control, and it shall not
employ, or take actions to permit another to employ, such funds or assets in
any manner except for the exclusive benefit of the Investor.
10.2 Power of Attorney. The Investor hereby makes, constitutes and
appoints the Manager its true and lawful attorney-in-fact, in its name, place
and stead, with full power to prepare, negotiate and execute on its behalf any
and all agreements, documents and certificates necessary or appropriate in
connection with the making of the investments contemplated herein including,
without limitation, agreements relating to the purchase, sale, ranking,
subordination or rights, privileges or preferences of securities purchased for
the Accounts, documents containing representations substantially similar to
representations made by the Investor in the representation letters delivered
concurrently herewith, and such other agreements or documents as shall be
necessary to cause the investments made for the Account to be substantially
parallel to and identical with those made for the Partnership and the Parallel
Investors. The power of attorney granted under this Section 10.2 is a special
power of attorney coupled with an interest, is irrevocable and shall be
exercisable in such manner as the Manager deems appropriate to further the
purposes of this Agreement. This power of attorney does not, however,
supersede any part of this Agreement, nor is it intended to deprive the
Investor of rights otherwise granted to it hereunder.
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SECTION 11
REMOVAL OF THE MANAGER
11.1 No Voluntary Withdrawal. The Manager shall not have the right to
retire as Manager, except that the Manager may withdraw as Manager if it
substitutes in its stead as Manager, with all of the Manager's rights and
obligations hereunder, any Affiliate or any entity which has, by merger,
consolidation or otherwise, acquired substantially all of its assets, which
Affiliate entity consists of at least two Approved Partners.
11.2 Removal or Incapacity of the Manager.
(a) The Manager may be removed as Manager without its consent
only if the Manager is removed or withdraws as general partner of the
Partnership and an Affiliate of the Manager, consisting of at least two
Approved Partners, is not substituted as the general partner of the
Partnership.
(b) If the Investor removes the Manager in accordance with
Section 11.2(a), notice of removal specifying the effective date of
removal shall be served on the Manager either by certified or by
registered mail, return receipt requested, or by personal service.
(c) If the Manager is removed pursuant to this Section 11, a
successor Manager may be appointed by the Investor to replace the
Manager so long as such successor Manager has also been appointed a
successor general partner of the Partnership. Any such successor Manager
shall have the same rights and obligations under this Agreement as the
replaced Manager would have had subsequent to such date if the replaced
Manager had continued to act as Manager.
11.3 Liabilities and Rights of a Replaced Manager. Any Manager who
shall be replaced as Manager shall remain liable for its portion of any
obligations and liabilities incurred by it as Manager prior to the time such
replacement shall have become effective, but it shall be free of any
obligation or liability incurred on account of the activities of the Investor
or the successor Manager from and after such time. Such replacement shall not
affect any rights of such Manager which shall mature prior to the effective
date of such replacement and the rights and liabilities of the Manager under
Section 11.2(c).
SECTION 12
ASSIGNMENTS OR TRANSFERS
12.1 Assignments or Transfers. An Investor may assign or transfer its
rights under this Agreement if:
(a) The Manager consents; provided however, that such consent
is not required if the assignee or transferee is a single entity that,
directly or indirectly, wholly owns the Investor or is wholly owned by
the Investor or by an entity that wholly owns, directly or indirectly,
the Investor, and the assignee or transferee has and agrees to maintain
a net worth equal to at least the lesser of $20 million or the Unused
Investor Commitment:
Page 28 of 42 Pages <PAGE>
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(b) The Investor and the assignee or transferee execute,
acknowledge and deliver such instruments as the Manager deems necessary,
appropriate or desirable to effect such assignment or transfer,
including the written acceptance and adoption by the assignee or
transferee of the provision of this Agreement and the execution,
acknowledgement and delivery to the Manager of a power of attorney, the
form and substance of which shall be determined by the Manager;
(c) With respect to any assignment or transfer that requires the
Manager's consent pursuant to Section 12.1(a), the Manager receives an
opinion from its counsel that such assignment or transfer is permitted
by any judgment, decree, statute, rule or regulation applicable to the
Manager or the Agreement and any agreement or instrument to which the
Manager is a party; and
(d) The assignee or transferee agrees to bear all expenses and
costs of such assignment or transfer, including legal fees.
12.2 Rights and obligations of Assignee or Transferee. An assignee or
transferee shall succeed to all the rights of the predecessor Investor
hereunder and shall be subject to all of the obligations and restrictions
provided in this Agreement, including the restrictions relating to transfers
and assignments.
SECTION 13
TERMINATION OF THE AGREEMENT
13.1 Termination Generally. Except as expressly provided in this
Agreement, the Investor shall not have the right to terminate this Agreement
before the expiration of its term.
13.2 Events Causing Termination. This Agreement shall be terminated
and the Assets liquidated and the proceeds therefrom distributed in the manner
and order provided for in this Section upon expiration of this Agreement,
unless earlier terminated under the following provisions:
(a) The Manager may elect to terminate this Agreement following
the sale of all or substantially all of the Investments;
(b) The Investor may terminate this Agreement if the Partnership
Agreement is amended, changed or otherwise modified materially to alter
the types of investments the Partnership is permitted to make, which
election must be made within 30 days after the Manager has provided
notice to the Investor of such amendment, change or modification;
(c) The Investor may terminate this Agreement if the Manager is
removed or withdraws as the general partner of the Partnership, unless
a successor general partner, consisting of at least two Approved
Partners, is substituted therefor as provided in the Partnership
Agreement;
(d) The Investor may terminate the Agreement if it is determined
by a court of law, which determination cannot, or has not, within the
required time period, been appealed, that the Manager has breached any
of the material terms of this Agreement; or
Page 29 of 42 Pages <PAGE>
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(e) The Investor may terminate the Agreement if the general
partners of the Manager do not consist of at least two Approved
Partners.
13.3 Distribution and Valuation of Assets on Termination.
(a) In liquidating the Assets held in the Account, the Manager
will make distributions in cash, in kind, or partly in cash and partly
in kind as the Manager may determine based upon the valuation of the
Assets under Section 8.1. The Manager need not distribute all of the
Assets at once, but may make partial distributions.
(b) The Assets held in the Account shall be utilized to pay
expenses and claims allocable to the Account, and to pay the Management
Fee and Incentive Fee due to Manager, prior to final distribution to the
Investor.
13.4 Liquidation Statement.
(a) The Manager shall furnish the Investor with a statement
setting forth the assets and liabilities allocable to the Account as of
the date of liquidation.
(b) Notwithstanding anything to the contrary contained herein,
if the Manager has been removed and the Agreement has been terminated,
the Investor may conduct the liquidation of the Account.
13.5 Transfer of Record Ownership: Books and Records. Upon termination
of this Agreement, the Manager shall transfer record ownership of all
Securities to the name of such Person as the Investor shall direct in writing
and shall deliver to such Person as the Investor designates in writing all
books and records relating to the Account.
SECTION 14
INDEMNIFICATION
14.1 Manager Indemnification. The Manager and its partners and their
respective partners, stockholders, officers, directors, employees, agents and
Affiliates (other than the Partnership) and any Person who is or was serving
at the request and on behalf of the Manager with respect to the Assets as a
partner, officer, director, employee or agent of another partnership,
corporation, joint venture, trust or other enterprise (an "Entity"), and the
heirs, executors and administrators of each such Person (the "Indemnified
Persons") shall be indemnified by the Investor to the fullest extent permitted
by law against all reasonable costs and expenses (including attorneys' fees)
and all judgments, fines, settlements and/or liabilities (collectively,
"Liabilities") incurred by or imposed upon any Indemnified Person in
connection with or resulting from investigating, preparing or defending any
action, suit or proceeding whether civil, criminal, administrative,
legislative or other or any appeal thereof which such Person may be made a
party of or otherwise involved in or with which such Person shall be
threatened which is brought or threatened by any Person by reason of or in
connection with such Indemnified Person:
Page 30 of 42 Pages <PAGE>
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(a) being or having been such Manager with respect to the Assets
or managing or having managed the Shared Investments, whether or not
they include the Assets; and
(b) having acted on behalf of the Manager with respect to the
Assets or the Shared Investments, or being or having been a Person
serving at the request and on behalf of the Manager with respect to the
Assets or the Shared Investments, or being or having been a Person
serving at the request and on behalf of the Manager, with respect to the
Assets or the Shared Investments, as a partner, officer, director,
employee or agent of an Entity (but as to indemnification arising in
connection with being or having been a partner, director, officer,
employee or agent of an Entity, only after first taking up the
indemnification of such Entity and then only to the extent that full
indemnification is not provided by such Entity and in such event the
Investor shall be subrogated to the right of indemnity from such
Entity),
or by reason of any action or alleged action or omission or alleged omission
by any Indemnified Person in any capacity described above, if the Indemnified
Person acted in good faith and in accordance with this Agreement (other than
any action brought by the Investor against the Manager for the Manager's
breach of the provisions hereunder); provided, however, that no Indemnified
Person shall be indemnified for Liabilities arising in connection with or
resulting from such Indemnified Person's fraud, willful misconduct or gross
negligence, the violation by such Indemnified Person of any state or federal
securities laws, or any coinvestment described in Section 6.2, and further
provided that the Investor's liability pursuant to Section 14.1(b) shall be
limited to the product of (i) the Liability and (ii) a fraction the numerator
of which is the Commitment and the denominator of which is the Total
Commitments. The right of indemnification granted by this Section 14 shall
be in addition to any rights to which the Indemnified Person may otherwise be
entitled, whether by law, agreement or otherwise. Upon receipt of an
undertaking in writing by such Indemnified Person to repay such payment if
there shall be a final adjudication or determination not subject to appeal
that such Indemnified Person is not entitled to indemnification as provided
herein, the Investor shall pay the reasonable expenses incurred by any
Indemnified Person in investigating, preparing or defending a civil or
criminal action, suit or proceeding in advance of the final disposition of
such action, suit or proceeding.
14.2 Investor Indemnification.
(a) The Investor and its stockholders, officers, directors,
employees, agents and Affiliates (the "Investor Indemnitees") shall be
indemnified by the Manager to the fullest extent permitted by law
against all reasonable costs and expenses (including attorneys' fees)
and all judgments, fines, settlements and/or liabilities, determined on
a cumulative basis, in excess of the Investor Liability Cap
(collectively, "Investor Liability") incurred by or imposed upon the
Investor Indemnitees in connection with or resulting from investigating,
preparing or defending any action, suit or proceeding whether civil,
criminal, administrative, legislative or other, or any appeal thereof
which the Investor Indemnitees may be made a party of or otherwise
involved in or with which the Investor Indemnitees shall be threatened
which is brought or threatened by any Person by reason of or in
connection with the Investor having entered into the Agreement or making
Page 31 of 42 Pages <PAGE>
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the investments contemplated hereby or by reason of any action taken by
the Manager on behalf of the Investor (other than any action brought by
the Manager against the Investor for the Investor's breach of the
provisions hereunder); provided, however, that the Investor Indemnitees
shall not be indemnified for Investor Liabilities arising in connection
with or resulting from the Investor Indemnitee's fraud or willful
misconduct, or any coinvestment by the Investor Indemnitees described
in Section 6.2. The right of indemnification granted by this Section
14.2 shall be in addition to any rights to which the Investor
Indemnitees may otherwise be entitled, whether by law, agreement or
otherwise. Upon receipt of an undertaking in writing by the Investor
Indemnitees to repay such payment if there shall be a final adjudication
or determination not subject to appeal that the Investor Indemnitees are
not entitled to indemnification as provided herein, the Manager shall
pay the reasonable expenses incurred by the Investor Indemnitees in
investigating, preparing or defending a civil or criminal action, suit
or proceeding in advance of the final disposition of such action, suit
or proceeding.
(b) Upon first becoming aware of any claim which would give rise
to an obligation by the Manager to indemnify any Investor Indemnitee
hereunder, such Investor Indemnitee agrees to provide the Manager with
notice of such claim and the Manager shall have the right, at its
expense, to participate in or assume control of the defense of any such
claim (with counsel reasonably satisfactory to the Investor
Indemnitees); provided, however, that the Manager shall keep the
Investor Indemnitee informed of all developments relating to such
defense and counsel to the Investor Indemnitee may participate in such
defense at the sole expense of the Investor Indemnitee. The Manager
shall have the right to settle and compromise any such claim only with
the consent of the Investor Indemnitee, which consent shall not be
unreasonably withheld.
14.3 Limited Liability. Notwithstanding anything in this Agreement to
the contrary, the aggregate liability of all Investor Indemnitees for the
following amounts shall under no circumstances exceed the Investor Liability
Cap: (i) the amount of expenses to be borne by the Investor pursuant to
Section 5.4, and (ii) the amount of any liability of the Investor pursuant to
Section 14.1, and (iii) the amount of any liability of any Investor Indemnitee
in connection with the Investor having entered into the Agreement or making
the investments contemplated hereby or by reason of any action taken by the
Manager on behalf of the Investor, which liability is not indemnified by the
Manager pursuant to Section 14.2.
SECTION 15
GENERAL PROVISIONS
15.1 Notices. Except as otherwise provided herein, any notice,
distribution, offer or other communication which shall be given in connection
with this Agreement shall be duly given if reduced to writing and: (a) if to
the Investor, personally delivered or sent by commercial courier or telex or
telegraph to the last address furnished by the Investor for such purpose at
the time of such delivery, telex or telegraph, and if so delivered shall
conclusively be deemed received five days after it is sent; and (b) if to the
Manager, personally delivered or if sent by mail, telex or telegraph, when
actually received at the address of the Manager set forth above or at such
other address as the Manager may then have specified pursuant to the terms of
this Agreement.
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15.2 Survival of Rights. This Agreement shall be binding upon and, as
to permitted or accepted successors, transferees and assigns, inure to the
benefit of the Investor and the Manager and their respective heirs, legatees,
legal representatives, successors, transferees and assigns, in all cases
whether by the laws of descent and distribution, merger, reverse merger,
consolidation, sale of assets, other sale, operation of law, or, without
limitation, otherwise.
15.3 Construction. The language in all parts of this Agreement shall
be in all cases construed simply according to its fair meaning and not
strictly for or against the Investor or the Manager. Nothing contained herein
shall be construed as creating a partnership, joint venture or employment
relationship between Investor and the Manager.
15.4 Section Headings. The captions of the sections in this Agreement
are for convenience only and shall not be used in construing or interpreting
this Agreement.
15.5 Agreement in Counterparts. This Agreement and any amendments
hereto may be executed in multiple counterparts, each of which shall be deemed
an original agreement and all of which shall constitute one and the same
agreement, notwithstanding the fact that all Investors are not signatories to
the original or the same counterpart.
15.6 Governing Law. This Agreement shall be construed according to the
internal laws, and not the laws pertaining to choice or conflict of laws, of
the State of Delaware.
15.7 Additional Documents. The Investor, upon the request of the
Manager, agrees to perform all further acts and execute, acknowledge and
deliver all further documents which may be reasonably necessary, appropriate
or desirable to carry out the provisions of this Agreement, including but not
limited to acknowledging before a Notary Public any signature heretofore or
hereafter made by the Investor.
15.8 Severability. Should any portion or provision of this Agreement
be declared illegal, invalid or unenforceable in any jurisdiction, then such
portion or provision shall be deemed to be severable from this Agreement as
to such jurisdiction (but, to the extent permitted by law, not elsewhere) and
in any event such illegality, invalidity or unenforceability shall not affect
the remainder hereof.
15.9 Amendments. This Agreement may be amended only with the consent
of the Investor and the Manager.
15.10 Pronouns. All pronouns and defined terms and any variations
thereof shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person, persons, entity or entities
may require.
15.11 Entire Agreement. This Agreement, together with the
representation letters executed and delivered by the Manager and executed and
delivered by the Investor, (a) constitute the entire agreement of the Investor
and the Manager, and (b) supersede all prior written and prior and
contemporaneous oral agreements, understandings and negotiations with respect
to the matters governed by this Agreement.
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15.12 Other Activities. Nothing contained herein shall be deemed to
prohibit the Investor or any of its Affiliates from forming or investing in
other entities engaged in activities similar to those contemplated by this
Agreement or from investing in any entity in which the Manager invests or may
invest under this Agreement.
15.13 Disclosure of Investor. Except as may be required by law, the
Manager will not, and will not permit any of its Affiliates to, use the name
of the Investor or any of its Affiliates in any promotion or advertising.
15.14 Brokerage. Each of the Investor and the Manager represent and
warrant to each other that neither it, its Affiliates or its duly authorized
representatives, have engaged or agreed to pay any brokerage or other finders
fees in connection with this Agreement.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the date first written above.
GKH PARTNERS, L.P.
By: /s/ Melvyn N. Klein
Title: General Partner
HARRY GRAY PTE. LTD.
By: /s/ Jimmy Hsu
Title: Director
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EXHIBIT 99.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of October , 1994, by and among National Medical Enterprises, Inc.,
a Nevada corporation (together with its permitted successors and assigns, the
"Company"), and the persons whose signatures appear on the execution pages of
this Agreement (the "Stockholders").
This Agreement is made pursuant to the Agreement and Plan of Merger by
and among the Company, AMH Acquisition Co. and American Medical Holdings, Inc.
dated as of October 10, 1994 (the "Merger Agreement"), pursuant to which the
Stockholders will receive shares of Common Stock (as defined below) of the
Company.
The parties hereto, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, intending to be bound hereby,
agree as follows:
SECTION 1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
Advice: See Section 4 hereof.
"Affiliate" means, with respect to any specified person, any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person. For the purposes of this
definition, "control" when used with respect to any specified person means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day that is not a Saturday, a Sunday or a legal
holiday on which banking institutions in the State of New York are not
required to be open.
"Common Stock" means the Common Stock, par value $.075 per share, of the
Company, or any other shares of capital stock of the Company into which such
stock shall be reclassified or changed (by operation of law or otherwise).
If the Common Stock has been so reclassified or changed, or if the Company
pays a dividend or makes a distribution on its Common Stock in shares of
capital stock, or subdivides (or combines) its outstanding shares of Common
Stock into a greater (or smaller) number of shares of Common Stock, a share
of Common Stock shall be deemed to be such number of shares of capital stock
and amount of other securities to which a holder of a share of Common Stock
outstanding immediately prior to such reclassification, exchange, dividend,
distribution, subdivision or combination would be entitled.
Delay Period: See Section 2(b) hereof.
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Distributee: See Section 6.4 hereof.
Effectiveness Period: See Section 2(b) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Prospectus" means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A), as amended or supplemented
by any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Shares covered by such Registration Statement and
all other amendments and supplements to the prospectus, including post-
effective amendments, and all material incorporated by reference or deemed to
be incorporated by reference in such Prospectus.
"Registrable Shares" means the shares of Common Stock issued to the
Stockholders pursuant to the Merger Agreement or thereafter distributed by the
Stockholder to a Distributee, until in the case of any such share (i) it has
been effectively registered under Section S of the Securities Act and disposed
of pursuant to an effective registration statement under the Securities Act,
(ii) it has been transferred other than pursuant to Rule "4(1-1/2)" (or any
similar private transfer exemption) under the Securities Act or (iii) it may
be transferred by a holder without registration pursuant to Rule 144 under the
Securities Act or any successor rule without regard to the volume limitation
contained in such rule.
"Registration Statement" means any registration statement of the Company
that covers any of the Registrable Shares pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
Shelf Registration: See Section 2(a) hereof.
Stockholders: See the introductory clauses hereof.
"underwritten registration" or "underwritten offering" means a
registration in which securities of the Company are sold to or through one or
more underwriters for reoffering or sale to the public.
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SECTION 2. Shelf Registration.
(a) The Company shall file with, and shall cause to be declared
effective by, the SEC prior to the Effective Time (as defined in the Merger
Agreement), a Registration Statement under the Securities Act relating to the
Registrable Shares, which Registration Statement shall provide for the sale
by the holders thereof of the Registrable Shares from time to time on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act (a
"Shelf Registration").
(b) The Company agrees to use its best efforts to keep the
Registration Statement filed pursuant to this Section 2 continuously effective
and usable for the resale of Registrable Shares for a period ending on the
earlier of (i) two years from the Effective Time (as defined in the Merger
Agreement) and (ii) the first date on which all the Registrable Shares covered
by such Shelf Registration have been sold pursuant to such Registration
Statement. The foregoing notwithstanding, the Company shall have the right
in its sole discretion, based on any valid business purpose (including without
limitation to avoid the disclosure of any corporate development that the
Company is not otherwise obligated to disclose or to coordinate such
distribution with other shareholders that have registration rights with
respect to any securities of the Company or with other distributions of the
Company (whether for the account of the Company or otherwise)), to suspend the
use of the Registration Statement for a reasonable length of time (a "Delay
Period") and from time to time; provided, that (i) the aggregate number of
days in all Delay Periods occurring in any period of twelve consecutive months
shall not exceed 90 and (ii) the Company shall not have the right to commence
any Delay Period prior to the 90th day after the Effective Time. The Company
shall provide written notice to each holder of Registrable Shares covered by
each Shelf Registration of the beginning and end of each Delay Period and such
holders shall cease all disposition efforts with respect to Registrable Shares
held by them immediately upon receipt of notice of the beginning of any Delay
Period. The two year time period for which the Company is required to
maintain the effectiveness of the Registration Statement shall be extended by
the aggregate number of days of all Delay Periods and such two year period or
the extension thereof required by the preceding sentence is hereafter referred
to as the "Effectiveness Period."
(c) The Company may, in its sole discretion, include other
securities in such Shelf Registration (whether for the account of the Company
or otherwise, including without limitation any securities of the Company held
by security holders, if any, who have piggyback registration rights with
respect thereto) or otherwise combine the offering of the Registrable Shares
with any offering of other securities of the Company (whether for the account
of the Company or otherwise).
SECTION 3. Hold-Back Agreement.
Each holder of Registrable Shares agrees, if such holder is requested
by an underwriter in an underwritten offering for the Company (whether for the
account of the Company or otherwise), not to effect any public sale or
distribution of any of the Company's equity securities, including a sale
pursuant to Rule 144 (except as part of such underwritten registration),
during the 10-day period prior to, and during the 80-day period beginning on,
the closing date of such underwritten offering; provided, that neither the
Company nor any underwriter may request a holder not to effect any such sales
or distributions prior to the 90th day after the Effective Time.
Page 37 of 42 Pages <PAGE>
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SECTION 4. Registration Procedures.
In connection with the registration obligations of the Company pursuant
to and in accordance with Section 2 hereof (and subject to the Company's
rights under Section 2), the Company will use its best efforts to effect such
registration to permit the sale of such Registrable Shares in accordance with
the intended method or methods of disposition thereof (other than pursuant to
any underwritten registration or underwritten offering), and pursuant thereto
the Company shall as expeditiously as possible:
(a) prepare and file with the SEC such amendments (including
post-effective amendments) to the Registration Statement, and such supplements
to the Prospectus, as may be required by the rules, regulations or
instructions applicable to the Securities Act or the rules and regulations
thereunder during the applicable period in accordance with the intended
methods of disposition by the sellers thereof (other than pursuant to any
underwritten registration or underwritten offering) and cause the Prospectus
as so supplemented to be filed pursuant to Rule 424 under the Securities Act;
(b) notify the selling holders of Registrable Shares promptly
and (if requested by any such person) confirm such notice in writing, (i) when
a Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the SEC
for amendments or supplements to a Registration Statement or related
Prospectus or for additional information regarding such holder, (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (v) of the happening of
any event that requires the making of any changes in such Registration
Statement, Prospectus or documents so that they will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not misleading;
(c) use commercially reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of a Registration Statement, or the
lifting of any suspension of the qualification or exemption from qualification
of any of the Registrable Shares for sale in any jurisdiction in the United
States;
(d) if requested by the selling holders, furnish to counsel for
the selling holders of Registrable Shares, without charge, one conformed copy
of each Registration Statement as declared effective by the SEC and of each
post-effective amendment thereto, in each case including financial statements
and schedules and all exhibits and reports incorporated or deemed to be
incorporated therein by reference; and such number of copies of the
preliminary prospectus, each amended preliminary prospectus, each final
Prospectus and each post-effective amendment or supplement thereto, as the
selling holders may reasonably request in order to facilitate the disposition
of the Registrable Shares covered by each Registration Statement in conformity
with the requirements of the Securities Act;
Page 38 of 42 Pages <PAGE>
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(e) prior to any public offering of Registrable Shares register
or qualify such Registrable Shares for offer and sale under the securities or
Blue Sky laws of such jurisdictions in the United States as any selling holder
shall reasonably request in writing; and do any and all other reasonable acts
or things necessary or advisable to enable such holders to consummate the
disposition in such jurisdictions of such Registrable Shares covered by the
Registration Statement; provided, however, that the Company shall in no event
be required to qualify generally to do business as a foreign corporation or
as a dealer in any jurisdiction where it is not at the time so qualified or
to execute or file a general consent to service of process in any such
jurisdiction where it has not theretofore done so or to take any action that
would subject it to general service of process or taxation in any such
jurisdiction where it is not then subject;
(f) except during any Delay Period, upon the occurrence of any
event contemplated by paragraph 4(b)(ii) or 4(b)(v) above, prepare a
supplement or post-effective amendment to each Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Shares being sold
thereunder, such Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and
(g) cause all Registrable Shares covered by the Registration
Statement to be listed on each securities exchange, if any, on which similar
securities issued by the Company are then listed.
The Company may require each seller of Registrable Shares as to which
any registration is being effected to furnish such information regarding the
distribution of such Registrable Shares and as to such seller as it may from
time to time reasonably request. If any such information with respect to any
seller is not furnished prior to the filing of the Registration Statement, the
Company may exclude such seller's Registrable Shares from such Registration
Statement.
Each holder of Registrable Shares (including, without limitation, any
Distributee) agrees by acquisition of such Registrable Shares that, upon
receipt of any notice from the Company of the happening of any event of the
kind described in Section 4(b)(ii), 4(b)(iii), 4(b)(iv) or 4(b)(v) hereof or
upon notice of the commencement of any Delay Period, such holder shall
forthwith discontinue disposition of such Registrable Shares covered by such
Registration Statement or Prospectus until such holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 4(f) hereof,
or until it is advised in writing (the "Advice") by the Company that the use
of the applicable Prospectus may be resumed, and has received copies of any
amended or supplemented Prospectus or any additional or supplemental filings
which are incorporated, or deemed to be incorporated, by reference in such
Prospectus and, if requested by the Company, such holder shall deliver to the
Company (at the expense of the Company) all copies, other than permanent file
copies then in such holder's possession, of the Prospectus covering such
Registrable Shares at the time of receipt of such request.
Each holder of Registrable Shares further agrees not to utilize any
material other than the applicable current Prospectus in connection with the
offering of Registrable Shares pursuant to the Shelf Registration.
Page 39 of 42 Pages <PAGE>
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SECTION 5. Registration Expenses.
Whether or not any Registration Statement becomes effective, the Company
shall pay all costs, fees and expenses incident to the Company's performance
of or compliance with this Agreement including, without limitation, (i) all
registration and filing fees, (ii) fees and expenses of compliance with
securities or Blue Sky laws, (iii) printing expenses (including, without
limitation, expenses of printing of prospectuses if the printing of
prospectuses is requested by the holders of a majority of the Registrable
Shares included in any Registration Statement), (iv) fees and disbursements
of counsel for the Company, (v) fees and disbursements of all independent
certified public accountants of the Company and all other Persons retained by
the Company in connection with the Registration Statement and (vi) the fees
and expenses (not to exceed $50,000) for one counsel on behalf of all of the
holders of Registrable Shares. Notwithstanding the foregoing, the fees and
expenses of counsel to, or any other Persons retained by, any holder of
Registrable Shares, and any discounts, commissions, underwriting or advisory
fees, brokers' fees or fees of similar securities industry professional
(including any "qualified independent underwriter" retained for the purpose
of Section 3 of Schedule E of the By-laws of the National Association of
Securities Dealers, Inc.) relating to the distribution of the Registrable
Shares, will be payable by such holder and the Company will have no obligation
to pay any such amounts.
SECTION 6. Miscellaneous.
6.1 Termination. This Agreement and the obligations of the
Company hereunder shall terminate on the earliest of (i) the first date on
which no Registrable Shares remain outstanding; and (ii) the close of business
on the last day of the Effectiveness Period.
6.2 Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of
holders representing a majority of the Registrable Shares. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter which relates exclusively to the rights of holders of
Registrable Shares whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of a
holder whose securities are not being sold pursuant to such Registration
Statement may be given by holders of a majority of the Registrable Shares
being sold by such holders; provided, however, that the provision of this
sentence may not be amended, modified, or Supplemented except in accordance
with the provisions of the immediately preceding sentence.
6.3 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall
be deemed given: when delivered personally; one Business Day after being
deposited with a next-day air courier; five Business Days after being
deposited in the mail, postage prepaid, if mailed; when answered back if
telexed and when receipt is acknowledged, if telecopied, in each case to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice; provided that notices of a change of
address shall be effective only upon receipt thereof):
Page 40 of 42 Pages <PAGE>
<PAGE>
(i) if to a holder, at the most current
address given by such holder to the Company in accordance
with the provisions of this Section 6.3, which address
initially is with respect to each holder, the address set
forth on the signature pages hereto; and
(ii) if to the Company, initially at 2700
Colorado Boulevard, Santa Monica, California 90404,
Attention: Scott Brown, Esq., with a copy to Skadden, Arps,
Slate, Meagher & Flom, 300 South Grand Avenue, Los Angeles,
California 90071, Attention: Thomas C. Janson, Jr.
6.4 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties; provided that the holders may not assign their rights hereunder
except to an Affiliate of such holder or a Distributee (as defined below) and
no person (other than any such Affiliate or Distributee) who acquires
Registrable Shares from a holder shall have any rights hereunder. For
purposes of this Agreement, the term "Distributee" shall mean any person that
is a stockholder or partner of a Stockholder, or any person that is a
stockholder or partner of a Distributee, to which Registrable Shares are
transferred or distributed by such Stockholder or Distributee. This Agreement
shall survive any transfer of Registrable Shares to a Distributee and shall
inure to the benefit of such Distributee.
6.5 Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
6.6 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
6.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE
WITHOUT GIVING EFFECT TO THE PROVISIONS THEREOF GOVERNING CONFLICT OF LAWS
PRINCIPLES.
6.8 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would
have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
Page 41 of 42 Pages <PAGE>
<PAGE>
6.9 Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect
to the Registrable Shares issued pursuant to the Merger Agreement. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
6.10 Calculation of Time Periods. Except as otherwise indicated,
all periods of time referred to herein shall include all Saturdays, Sundays
and holidays; provided, that if the date to perform the act or give any notice
with respect to this Agreement shall fall on a day other than a Business Day,
such act or notice may be timely performed or given if performed or given on
the next succeeding Business Day.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
NATIONAL MEDICAL ENTERPRISES, INC.
By
-----------------------------------
Name:
Title:
STOCKHOLDER:
-------------------------------------
Name:
Address for
Notice:
Number of
Shares:
Page 42 of 42 Pages <PAGE>
