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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT,
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 20, 1997 (OCTOBER 3,
1997)
NU-TECH BIO-MED, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-11772 25-1411971
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
55 ACCESS ROAD
WARWICK, RHODE ISLAND 02886
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (401) 732-6520
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Item 2. Acquisition or Disposition of Assets.
THIS REPORT ON FORM 8-K REFERS TO AND SUMMARIZES CERTAIN
AGREEMENTS, CONTRACTS AND DOCUMENTS RELATING TO PHYSICIANS CLINICAL LABORATORY,
INC., A COMPANY IN WHICH THE REGISTRANT HAS ACQUIRED A MAJORITY INTEREST. ANY
DESCRIPTION OF THE TERMS OR PROVISIONS OF SUCH AGREEMENTS, CONTRACTS AND
DOCUMENTS DOES NOT PURPORT TO BE COMPLETE AND IN EACH INSTANCE REFERENCE IS
MADE TO THE ACTUAL AGREEMENT, CONTRACT OR DOCUMENT BEING DISCUSSED WHICH IS
FILED AS AN EXHIBIT HERETO.
On November 8, 1996 (the "Petition Date"), Physicians Clinical
Laboratory, Inc., a Delaware corporation ("PCL"), and its subsidiaries, Quantum
Clinical Laboratories, Inc., Regional Reference Laboratory Governing
Corporation, Diagnostic Laboratories, Inc., and California Regional Reference
Laboratory (collectively with PCL, the "Debtors") commenced their respective
reorganization cases by filing voluntary petitions for relief under chapter 11
of the Bankruptcy Code, 11 U.S.C. Sections 101-1330 (the "Bankruptcy
Code").
The Debtors provide clinical laboratory testing services in
the State of California. Clinical testing focuses on testing bodily fluids for
the diagnosis and treatment of illnesses. The Debtors provide these services in
a high-quality and cost-efficient manner to a diversified group of customers and
payor sources, including office-based physicians, managed health care
associations and acute-care hospitals.
On December 12, 1996, the Debtors, Registrant and the Debtors'
senior lenders (collectively, the "Proponents") filed a joint plan of
reorganization which embodied the terms of the Prepetition Termsheet agreed to
among the Proponents. On January 17, 1997, the Proponents filed a modified joint
plan of reorganization, which contained certain amendments to the joint plan of
reorganization filed on December 2, 1996. On February 11, 1997, the Proponents
filed the Second Amended Plan of Reorganization of Physicians Clinical
Laboratories, Inc. and Its Affiliated Debtors (the "Plan") with the United
States Bankruptcy Court for the Central District of California (the "Court"),
which contained certain amendments to the plan of reorganization filed on
January 17, 1997.
On February 26, 1997, the Registrant completed the sale of its
ownership interest in another clinical laboratory company, Medical Science
Institute, Inc. ("MSI") to PCL. The Registrant sold its interest in MSI to PCL
for approximately $7.6 million. The Registrant received approximately $2.6
million in cash and a secured promissory note of PCL in the principal amount of
$5,000,000 that was secured by all the assets of PCL, but was subordinate to
certain other claims and other administrative expenses (the "MSI Acquisition
Note"). In the event the Plan was consummated and the Plan provided that the
Registrant was to become the owner of 52.6% of the outstanding capital stock of
PCL, the MSI Acquisition Note was to be forgiven.
By order dated April 23, 1997 (the "Confirmation Order"), the
Court confirmed the Plan pursuant to section 1129 of the Bankruptcy Code. By
separate order dated April 23, 1997, the Debtors' chapter 11 estates were
substantively consolidated. Pursuant to the Plan, all conditions to the
effective date of the plan (the "Effective Date") were to be satisfied or waived
on or before July 22, 1997, unless such date was extended by the Court.
In late May, 1997, PCL became aware of a subpoena it had
received in April of 1997 to furnish certain documents to the United States
Department of Defense with respect to PCL's Civilian Health and Medical Program
of Uniformed Services ("CHAMPUS") billing practices. In late May, 1997, PCL was
also notified that its Medicare and MediCal billing practices were undergoing
review by the Office of Inspector General of the United States Department of
Health and Human Services ("HHS/OIG"), and in early June of 1997, PCL
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received a subpoena to furnish certain documents to HHS/OIG in connection with
such review. Due to PCL's cooperation and negotiations with these government
agencies, on July 24, 1997, the Court, on stipulation of PCL, the Registrant,
and the creditors of PCL, extended the date that certain conditions be satisfied
or waived pursuant to the Plan for 60 days to September 19, 1997, and stated
that the terms and conditions of the Plan would continue in full force and
effect.
SETTLEMENT AGREEMENTS
On or about July 18, 1997, PCL and the United States reached
an agreement in principle to settle such billing practice claims. The agreement
disposed of the claims on substantially the following terms. The following
description of the terms and provisions of the Federal Agreement is a summary
only, and is qualified in its entirety by the actual terms and conditions of the
Federal Agreement, which is attached hereto as Exhibit 99.15.
(1) PCL paid to the United States Government $200,000 18
days after the Court issued its order approving the
Settlement Agreement (October 7, 1997); and will pay
$1,800,000 in principal plus interest calculated at
the Treasury Bill interest rate payable in equal
monthly installments of $25,000 for six years;
(2) PCL entered into a five-year corporate integrity
agreement (the "Corporate Integrity Agreement") with
the HHS/OIG, pursuant to which PCL will, among other
requirements, set up and follow an internal corporate
compliance plan with monitoring provided by an
internal corporate compliance officer, provide proper
training for its billing and marketing personnel, and
fulfill various reporting requirements to HHS;
(3) PCL and J. Marvin Feigenbaum were released from civil
and criminal liability under the False Claims Act and
common law causes of action in connection with their
billing practices from January 1, 1992, to July 18,
1997;
(4) The amounts owed to the United States will not be
dischargeable in any bankruptcy; and
(5) If PCL defaults on any of its obligations under the
Settlement Agreement, all amounts owed will be
immediately due, all releases will be void and PCL
may be excluded from participation in Medicare and
Medicaid.
Subsequent to reaching an agreement in principle with the
United States, PCL approached representatives of the State of California (the
"State") to discuss the compromise and settlement of any outstanding claims that
the State might have against PCL for its prior billing practices involving the
MediCal program for clinical laboratory services during the period from January
1, 1992 to July 18, 1997. On or about August 28, 1997, PCL and the State reached
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a final agreement to settle such claims (the "State Agreement"). The State
Agreement disposed of the claims on substantially the following terms. The
following description of the terms and provisions of the State Agreement is a
summary only, and is qualified in its entirety by the actual terms and
conditions of the State Agreement, which is attached hereto as Exhibit 99.14.
(1) PCL paid the State the sum of $100,000 22 days after
the Court issued its order approving the Settlement
Agreement (October 11). All of the terms of the
Corporate Integrity Agreement executed by PCL and the
United States Government are incorporated by
reference and all of the terms therein are made
applicable to the Settlement Agreement with the
state;
(2) The State released PCL and J. Marvin Feigenbaum from
any civil or administrative monetary claim or cause
of action that the California Department of Health
Services has or may have, and from any action seeking
exclusion from the MediCal program with regard to the
provision of and reimbursement for laboratory
services under the MediCal program;
(3) The State released PCL and Mr. Feigenbaum from any
criminal liability for any conduct covered by the
State Agreement;
(4) PCL will cooperate in any further investigation of
individuals and entities not released by the State
in the State Agreement.
On September 19, 1997, the Court granted the Debtors' motion to approve the
Federal and State Settlement Agreements. The Court's order became final on
September 30, 1997.
ACTIONS ON THE EFFECTIVE DATE
Pursuant to the Plan, prior to the Effective Date, all of the
Debtors were merged with and into PCL. On October 3, 1997, all conditions to the
Effective Date that were set forth in the Plan were satisfied, the Effective
Date occurred, and the following actions occurred:
The Old Common Stock of each Debtor, the Old Stock Options and
the Old Warranty (collectively, the "Capital Stock"), the original credit
agreements, guarantees, letters of credit, reimbursement agreements and other
documents executed and/or agreements entered into by each Debtor relating to the
Senior Debt Claims (collectively, the "Existing Lender Agreements"), that
certain Indenture dated as of August 24, 1993 by and among PCL, Donaldson,
Lufkin & Jenrette Securities Corporation and Smith Barney Shearson, Inc., and
all related agreements (collectively, the "Old Indenture"), and the $40 million
7.5% Convertible Subordinated Debenture due 2000 (the "Debentures") were deemed
canceled and of no further force and effect. The Company amended and restated
its Certificate of Incorporation in the State of Delaware ("Reorganized PCL"),
attached hereto as Exhibit 99.13, which authorized the issuance of 50,000,000
shares of common stock, par value $0.01 per share (the "New Common Stock").
Reorganized PCL issued, inter alia, (i) 2,500,000 shares of New Common Stock,
(ii) senior secured notes, in the principal amount of $55,000,000, and (iii)
warrants, exercisable within five years of the Effective Date, to purchase
approximately
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131,579 shares of New Common Stock to be issued and outstanding on the Effective
Date, at an exercise price of $13.30 per share. In addition, Reorganized PCL
adopted Amended and Restated Bylaws effective as of September 30, 1997 (the
"Bylaws"), attached hereto as Exhibit 99.12.
PCL satisfied its obligations to its impaired creditors as
follows: (A) the Registrant received 890,000 shares of New Common Stock, which
constitutes approximately 35.6% of the amount of issued and outstanding New
Common Stock, in exchange for approximately $13.0 million in senior secured debt
(which debt it purchased from Oaktree Capital Management LLC, The Copernicus
Fund, L.P. ("Copernicus"), DDJ Overseas Corp., Belmont Fund, L.P. ("Belmont I"),
Belmont Capital Partners, II, L.P. ("Belmont II") and Cerberus Partners, L.P.
("Cerberus") (collectively, the "Senior Lenders") just prior to the Petition
Date), constituting an estimated percentage recovery of 79.58% of its allowed
claims; the Registrant also received an additional 17% of the amount of New
Common Stock issued and outstanding on the Effective Date in exchange for the
Registrant's cancellation of the MSI Acquisition Note; (B) the Senior Lenders,
which held an aggregate of approximately $80.0 million of secured debt, each
received a pro rata share of $55.0 million in new senior secured notes and
952,500 shares of New Common Stock, which constitutes 38.1% of the amount of
issued and outstanding New Common Stock, constituting an estimated percentage
recovery of 84.37% of their aggregate allowed claims; (C) the Debentures each
received a pro rata share of 232,500 shares of New Common Stock, which
constitutes 9.3% of the amount of issued and outstanding New Common Stock,
constituting an estimated percentage recovery of 5.9% of their aggregate allowed
claims; (D) the Company's former shareholders will receive warrants to purchase
131,579 shares of the New Common Stock for a period of up to five years, at a
purchase price of $13.30 per share, which price is based upon an implied
enterprise value for the Company of $90.0 million, and (E) each of the Company's
general unsecured creditors received a pro rata share of $2.45 million in cash
and an unsecured note in the principal amount of $400,000, constituting an
estimated percentage recovery of 16.29% of their aggregate allowed claims. The
holders of Old Stock Options and Old Warrants did not receive any distributions
or property under the Plan. As a result, the Registrant currently holds
1,315,000 shares, or approximately 52.6% of Reorganized PCL's outstanding common
stock.
In addition, Reorganized PCL entered into the following
agreements: (A) the New Indenture, dated as of September 30, 1997 between
Reorganized PCL and First Trust National Association ("FTNA"), attached hereto
as Exhibit 99.1 (the "Indenture"); (B) the Security Agreement, dated as of
September 30, 1997, between Reorganized PCL and FTNA, attached hereto as
Exhibit 99.2; (C) the Pledge Agreement, dated as of September 30, 1997,
between Reorganized PCL and FTNA, attached hereto as Exhibit 99.4;
(D) the Stockholders Agreement, dated as of September 30, 1997, by and
among Reorganized PCL, the Registrant, and Oaktree, attached hereto as
Exhibit 99.3; (E) the Employment Agreement, made as of September 30, 1997,
by and between Reorganized PCL and
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J. Marvin Feigenbaum, attached hereto as Exhibit 99.5; (F) the Noncompetition
Agreement, made as of September 30, 1997, by and among Reorganized PCL and the
Registrant, attached hereto as Exhibit 99.6; (G) the Warrant Agreement, dated
as of September 30, 1997, between Reorganized PCL and U.S. Trust Company of
California, N.A., attached hereto as Exhibit 99.11; (H) the Healthcare
Receivables Purchase and Transfer Agreement, dated as of September 30, 1997,
attached hereto as Exhibit 99.7; (I) the Assignment of Healthcare Receivables
Purchase and Transfer Agreement as Collateral Security, dated September 30, 1997
and attached hereto as Exhibit 99.8; (J) the Loan and Security Agreement, dated
as of September 30, 1997, between Bio-Cypher Funding Corp, a Delaware
corporation ("the Funding Corp."), and Daiwa Healthco-2 LLC, a Delaware LLC
("Daiwa"), attached hereto as Exhibit 99.9; and (K) the Depositary Agreement,
dated as of September 30, 1997, among Reorganized PCL, the Funding Corp.,
Daiwa, and Union Bank of California, N.A., attached hereto as Exhibit 99.10.
The Indenture
The Indenture was entered into between Reorganized PCL and
FTNA in connection with the issuance of Reorganized PCL's $55,000,000 Senior
Secured Notes Due 2004. The original principal amount is $55,000,000 and the
Notes will bear interest at the rate of either 10% per annum in cash or 12% per
annum in kind, at the option of Reorganized PCL, for the first two years after
issuance. Reorganized PCL may not make any interest payments in kind once a cash
interest payment has been made pursuant to the Indenture. After two years, the
Notes will bear interest at the rate of 11% per annum in cash, which rate will
be increased by 1% per annum through maturity. Interest will be payable
semi-annually. To the extent lawful, Reorganized PCL will pay interest on
overdue principal and overdue installments of interest at the rate of 1% per
annum in excess of the then applicable interest rate on the Notes. The Notes
will mature seven years after issuance.
The Notes may be redeemed, at Reorganized PCL's option, in
whole or in part, upon not less than 30 or more than 60 days' notice, at a
redemption price equal to 100% of the principal amount thereon, plus accrued and
unpaid interest thereon through the applicable redemption date. Except with
respect to certain repurchase obligations, Reorganized PCL will not be obligated
to make mandatory redemption or sinking fund payments with respect to the Notes.
Upon the occurrence of a Change of Control (as defined in the Indenture), each
noteholder shall have the right to require Reorganized PCL to repurchase such
holder's Notes at an offer price in cash equal to 101% of the aggregate
principal amount of such Note, plus accrued and unpaid interest through the date
of repurchase. When the aggregate amount of excess proceeds from any asset sale
exceeds $5.0 million, Reorganized PCL will be obligated to make an offer to
repurchase the maximum principal amount of Notes that may be purchased with such
Excess Proceeds at an offer price in cash equal to 100% of the principal amount
of such Notes at maturity, plus accrued and unpaid interest. "Excess Proceeds"
means the net proceeds from any asset sale that have not been applied, at
Reorganized PCL's option, (a) to permanently reduce amounts outstanding under
the Working Capital Facility, or (b) to make an investment in a permitted
business or certain permissible capital expenditures with respect to the
acquisition of certain long term tangible assets. Upon consummation by
Reorganized PCL of an underwritten public offering of its capital stock,
Reorganized PCL shall be obligated to offer
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to purchase the maximum principal amount of Notes possible from the Equity Net
Proceeds at an offer price in cash equal to 100% of the principal amount of such
Notes at maturity, plus accrued and unpaid interest. "Equity Net Proceeds" means
35% of the net proceeds received by Reorganized PCL from any such public
offering of its capital stock.
Payment of the Notes is secured by a first priority security
interest in all existing and future assets of Reorganized PCL including, without
limitation, accounts, equipment, inventory, intellectual property (including
patents, copyrights and trademarks), documents, instruments and any and all
proceeds of the foregoing. Finally, as additional collateral for payment of the
Notes, Reorganized PCL pledged all of the capital stock of its now owned, or
hereafter acquired, subsidiaries, for the benefit of the noteholders. Each of
the Security Agreement, Leasehold Mortgage Agreement and Pledge Agreement
contains customary provisions regarding the preservation of collateral, defaults
and remedies, as well as customary covenants, representations and warranties.
Pursuant to an intercreditor agreement between the Trustee (on behalf of the
noteholders) and Reorganized PCL's exit financing lender, the security interests
granted to the Trustee in Reorganized PCL's receivables will be subordinated to
the lender providing Reorganized PCL's exit financing facility.
Until the first two cash interest payments are made by
Reorganized PCL, the Indenture will contain covenants regarding minimum EBITDA
(earnings before interest, taxes, depreciation and amortization), minimum
tangible net worth, minimal EBITDA/interest expense coverage and certain
restrictions on capital expenditures. The Indenture contains customary
covenants, representations and warranties, as well as customary provisions
regarding defaults, remedies and modifications.
The Warrant Agreement
Reorganized PCL has agreed to issue warrants (subject to
adjustment as set forth below) for the purchase by warrant holders of an
aggregate of 131,579 shares of New Common Stock in Reorganized PCL, $.01 par
value, which amount constitutes approximately 5% of the shares of the New Common
Stock to be issued and outstanding immediately after the Effective Date of the
Plan. Each warrant will entitle the holder thereof to acquire one share of New
Common Stock at a price of $13.30 per share. The exercise price was derived
based upon an assumed total enterprise value for Reorganized PCL of $90 million.
The warrants will be exercisable at any time from 9:00 a.m., New York City time,
on the date of their issuance to 5:00 p.m., New York City time, on the fifth
anniversary of the Effective Date of the Plan (the "Exercise Period"). Each
warrant not exercised prior to the expiration of the Exercise Period will become
void.
The number and kind of securities purchasable upon the
exercise of warrants and the exercise price therefor will be subject to
adjustment upon the occurrence of certain events, including the issuance of New
Common Stock or other shares of capital stock as a dividend or distribution on
the New Common Stock; subdivisions, reclassifications and combinations of the
New Common Stock; the issuance to all holders of New Common Stock of certain
rights, options or warrants entitling them to subscribe for or purchase New
Common Stock; the distribution to holders of New Common Stock of evidences of
indebtedness or assets of Reorganized PCL or any entity controlled by
Reorganized PCL (excluding cash dividends or
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cash distributions from consolidated earnings or surplus legally available for
such dividends or distributions); the distribution to holders of New Common
Stock of shares of capital stock of any entity controlled by Reorganized PCL;
the issuance of shares of New Common Stock for less consideration than the
then-current market price of the New Common Stock; and the issuance of
securities convertible into or exchangeable or exercisable for shares of New
Common Stock or rights to subscribe for such securities, for a consolidation per
share of New Common Stock deliverable on such conversion, exchange or exercise
that is less than the then-current market price thereof (although that no
adjustment in such shares or exercise price will be required in connection with
the issuance of the New Common Stock, options, rights, warrants or other
securities pursuant to the Plan, any plan adopted by Reorganized PCL or any
entity controlled by Reorganized PCL for the benefit of employees or directors,
or any share purchase rights plan adopted by Reorganized PCL; the issuance of
shares of New Common Stock or securities convertible into or exchangeable for
shares of New Common Stock pursuant to an underwritten public offering
satisfying specified criteria; sales of New Common Stock pursuant to a plan
adopted by Reorganized PCL for the reinvestment of dividends or interest; the
issuance of shares of New Common Stock to shareholders of any corporation which
is acquired by, merged into or made a part or subsidiary of Reorganized PCL in
an arm's-length transaction; or a change in the par value of the New Common
Stock). Additionally, no adjustment will be required if in connection with any
of the events otherwise giving rise to an adjustment the holders of the warrants
receive such rights, securities or assets as such holders would have been
entitled had the warrants been exercised immediately prior to such event, and no
adjustment will be required unless such adjustment would require a change in the
aggregate number of shares of New Common Stock issuable upon the hypothetical
exercise of a warrant of at least 1% (but any adjustment requiring a change of
less than 1% will be carried forward and taken into account in any subsequent
adjustment).
Reorganized PCL and the warrant agent may from time to time
supplement or amend the Warrant Agreement without the approval of any holder to
cure, among other things, any ambiguity or to correct or supplement any
provision or to comply with the requirements of any national securities
exchange. Any other supplement or amendment to the Warrant Agreement may be made
with the approval of the holders of a majority of the then outstanding warrants;
provided, however, that any such amendment or supplement that (i) increases the
exercise price; (ii) decreases the number of shares of New Common Stock issuable
upon exercise of warrants; or (iii) shortens the Exercise Period requires the
consent of each holder of a warrant affected thereby.
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THE STOCKHOLDERS AGREEMENT AND CERTAIN GOVERNANCE MATTERS
The Stockholders Agreement
The Registrant and Oaktree (collectively, the "Stockholders")
and Reorganized PCL entered into the Stockholders Agreement as of September 30,
1997. Following is a brief description of the substantive provisions of such
agreement:
(i) Transfer Restrictions. None of the shares of the New
Common Stock or any securities exercisable for or convertible into the New
Common Stock (the "Securities") held by the Stockholders may be transferred
unless (A) the transferee shall deliver to Reorganized PCL a written
acknowledgement that the Securities are subject to the Stockholders Agreement;
(B) such transfer shall be made pursuant to a public offering registered under
the Securities Act and in accordance with applicable state law; (C) such
transfer is made to an Affiliate of the transferring Stockholder; or (D) such
transfer is made by the Registrant in a pro rata distribution of Securities to
its stockholders. In addition, the Stockholders agree that they will not,
without the prior written consent of Reorganized PCL, transfer any shares of
Common Stock to Cerberus or any entity which owns, directly or indirectly, 5% or
more of the issued and outstanding equity securities of any entity that conducts
clinical or specialized laboratory services as its principal business.
(ii) Stockholder Share Purchase Rights. If Reorganized PCL
desires in good faith to issue or transfer the Securities, Reorganized PCL shall
deliver a written notice of the proposed transfer to each of the Registrant and
Oaktree (the "Transfer Notice"), which notice
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shall contain a description of the proposed transaction and the terms thereof,
and shall be accompanied by a copy of the bona fide third party written offer.
If Reorganized PCL receives authority from its Board of Directors, it may issue
the Securities on the terms set forth in the Transfer Notice; subsequently
(except in certain circumstances set forth in the Shareholders Agreement),
Reorganized PCL shall make the offer to sell to each Stockholder a pro rata
portion of the Securities based upon such Stockholder's holdings of New Common
Stock. Any Stockholder may, by written notice, accept such offer, in whole or in
part, within thirty (30) days after receipt of the offer.
Reorganized PCL's Certificate of Incorporation also provides
certain shareholders with rights to acquire additional shares pro rata to their
holdings if additional shares are issued or transferred by Reorganized PCL. The
terms of the Certificate of Incorporation are identical to those set forth in
the Shareholders' Agreement, except that in addition to the Registrant and
Oaktree, Belmont I, Belmont II, Copernicus, Gallileo Fund, L.P. ("Gallileo") and
Cerberus, and all of their respective permitted transferees, are the
beneficiaries of such purchase rights.
(iii) Initial Board of Directors. The Initial Board of
Directors, as specified in the Shareholders Agreement is comprised of:
Dr. Nathan Rubin
Mr. J. Marvin Feigenbaum
Mr. Matthew S. Barrett
Mr. David Sterling
Mr. William J. Begley
(iv) Voting Agreement. On or after September 30, 1998, at the
next annual or special meeting called for the purpose of electing directors,
each Stockholder shall elect five members of the Board of Directors, of which
two individuals shall be designated by OCM Administrative Services, L.L.C. or
its designee ("OCM") (an affiliate of Oaktree) and three individuals shall be
designated by the Registrant. If a director designated by OCM or the Registrant
vacates such position for any reason prior to the expiration of his or her term,
then OCM or the Registrant shall have the right to nominate a replacement so
long as it continues to beneficially own the percentage of outstanding
Securities specified in the Shareholders Agreement.
(v) Corporate Governance. During such time as OCM has the
right to designate Directors under the Shareholders Agreement, an affirmative
vote of at least one Director who is appointed by OCM shall be required to: (A)
authorize or propose to authorize any agreement of Reorganized PCL other than
issuances of securities pursuant to the Warrants, employee benefit plans,
management incentive plans or employment agreements with officers of Reorganized
PCL; (B) issue, or propose to issue any capital stock; (C) modify or propose to
modify the Certificate of Incorporation or the By-Laws of Reorganized PCL; (D)
directly or indirectly acquire or propose to acquire any of its capital stock,
or any security exercisable or exchangeable for or convertible into any of its
capital stock; (E) effect or propose to effect a recapitalization or
reorganization of Reorganized PCL in any form; (F) consolidate or merge, or
propose to consolidate or merge, or transfer all or substantially all of the
properties and assets of Reorganized PCL; (G) incur, or cause any subsidiary of
Reorganized PCL to incur any
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indebtedness or other payment obligation out of the ordinary course of business
(other than amounts borrowed pursuant to the Loan and Security Agreement), that
exceeds $1,000,000 when aggregated with all other outstanding indebtedness of
Reorganized PCL and its subsidiaries; (H) make any Capital Expenditure that
exceeds $1,000,000 when aggregated with all other Capital Expenditures in the
immediately preceding twelve month period; or (I) modify the Employment
Agreement or otherwise approve any compensation arrangement or other transaction
for the benefit of Mr. Feigenbaum other than as provided in the Employment
Agreement.
In addition, upon the affirmative vote of two directors,
Reorganized PCL shall institute claims for indemnification pursuant to the
provisions of the Stock Purchase Agreement between Registrant and Reorganized
PCL. The Stockholders shall take all actions necessary to cause the Board of
Directors to adopt resolutions that establish an Indemnity Committee. Such
Indemnity Committee shall be composed of two Directors designated by OCM and one
Director designated by the Registrant (so long as the Registrant is entitled to
designate Directors). Reorganized PCL shall also reimburse any Director for
reasonable costs and expenses incurred in connection with the initiation or
prosecution of such claims, and indemnify and hold harmless such Director for
any liability incurred in relation thereto.
The Certificate of Incorporation and the By-Laws
The Certificate of Incorporation also provides that the number
of Directors shall be five, the Directors may be elected only at an annual
meeting of Stockholders, and said election need not be by written ballot unless
requested by the Chairman or by the majority Stockholders. Vacancies on the
Board will be filled solely by the majority of the remaining Directors then in
office and Board Members elected in this manner will hold office until the next
annual meeting and until his or her successor is elected and qualified. Any
Director may be removed from office only at an annual or special meeting of the
Stockholders, the notice of which meeting states that the removal of a Director
is among the purposes of the meeting, and with an affirmative vote of the
holders of at least 66 2/3% of the voting stock. The Certificate of
Incorporation provides that each Director, officer, employee or agent of
Reorganized PCL shall be indemnified by Reorganized PCL to the full extent
permitted by law, and will be entitled to advancement of expenses in connection
therewith.
The Bylaws of Reorganized PCL provide, in general, that (i)
subject to the Certificate of Incorporation, the number of Directors will be
fixed within a specified range by a majority of the total number of Reorganized
PCL Directors then in office; (ii) the Directors in office from time to time
will fill any newly created directorship or vacancy on the Board; (iii)
Directors may be removed only by the holders of at least 66 2/3% of Reorganized
PCL's voting stock; (iv) special meetings of Stockholders may be called only by
the Chairman of the Board or the Secretary of the Reorganized PCL within ten
days of receipt of the written request of a majority of the total number of
Directors of Reorganized PCL that Reorganized PCL would have if there were no
vacancies, or the holders of record of at least 10% of the voting stock, and any
such request must state the purpose or purposes of the proposed meeting; and (v)
subject to certain exceptions, the Board may postpone and reschedule any
previously scheduled annual or special meeting of Stockholders.
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The Bylaws also require that Stockholders desiring to bring
any business before an annual meeting of Stockholders deliver written notice
thereof to the Secretary of Reorganized PCL not less than 50 days in advance of
the meeting of Stockholders; provided, however, that in the event that the date
of the meeting is not publicly announced by Reorganized PCL more than 60 days
prior to the meeting, notice by the Stockholder to be timely must be delivered
to the Secretary of Reorganized PCL not later than the close of business on the
tenth day following the day on which such announcement of the date of the
meeting was so communicated. The Bylaws further require that the notice by the
Stockholder set forth a description of the business to be brought before the
meeting and the reasons for conducting such business at the meeting and certain
information concerning the Stockholder proposing such business at the meeting
and the beneficial owner, if any, on whose behalf the proposal is made,
including their names and addresses, the class and number of shares of
Reorganized PCL that are owned beneficially and of record by each of them and
any material interest of either in the business proposed to be brought before
the meeting.
The Bylaws also provide that the terms of any Director who is
also an officer of Reorganized PCL will terminate automatically, without any
further action on the part of the Board or such Director, upon the termination
for any reason of such Director in his or her capacity as an officer of
Reorganized PCL.
Under applicable provisions of the Delaware General
Corporation Law, the approval of a Delaware company's board of directors, in
addition to stockholder approval, is required to adopt any amendment to a
company's certificate of incorporation, but a company's bylaws may be amended
either by action of its stockholders or, if the company's certificate of
incorporation so provides, its board of directors. However, Reorganized PCL's
Certificate and Bylaws provide that the provisions summarized above and certain
other provisions, including those relating to the classification of the Board
and nominating procedures, may not be amended by the Stockholders nor may any
provisions inconsistent therewith be adopted by the Stockholders, without the
affirmative vote of the holders of at least 75% of the company's voting stock,
voting together as a single class. The Company's Certificate authorizes the
Board to approve amendments to the Bylaws. Any amendment to the Bylaws relating
to the automatic termination of any Director who is an officer upon termination
of such officer would require the affirmative vote of the holders of at least
66 2/3% of the Directors then in office.
Daiwa Facility
On September 30, 1997, Reorganized PCL and its wholly owned
subsidiary, the Funding Corp. entered into a $10 million healthcare receivables
financial facility (the "Exit Financing Facility") with Daiwa. Under the Exit
Financing Facility, Reorganized PCL sells and contributes all of its healthcare
accounts receivables to the Funding Corp., which in turn pledges such accounts
receivable to the Daiwa as collateral for revolving loans. The proceeds of such
revolving loans are used to purchase the eligible accounts receivable from
Reorganized PCL. Reorganized PCL then uses such funds to fund future operating
and capital expenditures and to establish the future liquidity needed to operate
its businesses.
Under a Healthcare Receivables Purchase and Transfer
Agreement, Reorganized PCL sells and contributes all of its healthcare accounts
receivables and related items to the
12
<PAGE> 13
Funding Corp. for a purchase price equal to 95% of the expected net value of
those accounts receivable that meet certain eligibility requirements.
Reorganized PCL will also act as the servicer of such accounts receivable,
continuing to conduct all billing and collection responsibilities. The Funding
Corp. may replace Reorganized PCL with a third-party servicer upon the
occurrence of certain termination events.
Under a Loan and Security Agreement, the Funding Corp. pledges
the accounts receivable received from Reorganized PCL to Daiwa as collateral for
revolving loans. Daiwa makes revolving loans available to the Funding Corp. in
an amount up to the lessor of (a) $10 million and (b) a borrowing base equal to
85% of the value of eligible accounts receivables, subject to certain
adjustments. The Funding Corp. must pay interest on the outstanding balance of
these revolving loans at an interest rate per annum equal to two percent in
excess of the LIBO Rate (as defined and calculated under the Loan and Security
Agreement), which interest rate will increase by three percent after an event of
default under the Loan and Security Agreement. The Funding Corp. must also pay
to Daiwa a monthly non-utilization fee equal to one-half of a percent on the
amount by which $10 million exceeds the outstanding balance of all revolving
loans during the prior month.
Both the Healthcare Receivables Purchase and Transfer
Agreement and the Loan and Security Agreement contain representations and
warranties, affirmative and negative covenants (including financial covenants),
events of default and events of termination that are typical in transactions of
this nature. The Exit Financing Facility expires on September 30, 1999.
Employment Agreement
On September 30, 1997, J. Marvin Feigenbaum, President and
Chief Executive Officer of Registrant, entered into an Employment Agreement with
PCL pursuant to which he is also to be employed as President and Chief Executive
Officer and Chairman of the Board of PCL. The employment of Mr. Feigenbaum is
for a term of three years at a base salary of $104,000 per annum through October
31, 1997, and $208,000 per annum thereafter. PCL is to provide Mr. Feigenbaum
with health insurance to the extent not provided for under other employment
arrangements, long term disability insurance, reimbursement for reasonable and
necessary expenses incurred, and an automobile allowance of $500 per month
relating to the use of an automobile while in the state of California. Mr.
Feigenbaum is also to be provided with a policy of term life insurance in the
amount of $500,000. As part of his Employment Agreement with PCL, Mr. Feigenbaum
is subject to certain non-disclosure provisions and a restrictive covenant which
provide for the non-disclosure of trade secrets and confidential information of
PCL and which information is not generally known. While employed by PCL, Mr.
Feigenbaum may not become associated with another business which is directly
involved in the provision of clinical laboratory services anywhere in the United
States and, in the event of his termination of employment under certain
circumstances, Mr. Feigenbaum is not to engage in any competitive act in the
United States prior to September 30, 2001. In connection with his employment by
PCL, PCL granted to Mr. Feigenbaum options to purchase 100,000 shares of PCL's
common stock at an exercise price of $.25 per share and granted options to
purchase an additional 100,000 shares of PCL's common stock at an exercise price
of $5 per share, which latter 100,000 options vest and become exercisable based
on PCL's performance for each of the
13
<PAGE> 14
years ended December 31, 1997, 1998 and 1999. Such Employment Agreement is
attached hereto as Exhibit 99.5.
Non-Competition Agreement
On September 30, 1997, Registrant entered into a
Non-Competition Agreement with PCL. The entry into this agreement was in
connection with the purchase by PCL of all of the shares of capital stock of
Medical Science Institute, Inc. formerly owned by the Registrant. The
Non-Competition Agreement provides that Registrant will not, directly or
indirectly, engage in a business which is involved in the provision of clinical
laboratory services in the United States during such time as the Registrant is
the beneficial owner of 25% of the issued and outstanding shares of PCL;
provided, however, that the specialized cancer or genetic diagnostic laboratory
services shall not be deemed to be clinical laboratory services for the purposes
of the Non-Competition Agreement. The Non-Competition Agreement is attached
hereto as Exhibit 99.6.
14
<PAGE> 15
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The financial statements required to be filed as part of this Current
Report on Form 8-K will be filed no later than December 19, 1997 (60 days from
the date of this report) as an amendment to this report.
(b) PRO FORMA FINANCIAL INFORMATION.
The pro forma financial information required to be filed as part of
this Current Report on Form 8-K will be filed no later than December 19, 1997
(60 days from the date of this report) as an amendment to this report.
(c) EXHIBITS.
EXHIBIT
NO. DESCRIPTION
2 Joint Plan of Reorganization of Physicians Clinical Laboratory as
filed with the U.S. Bankruptcy Court (Central District of California,
Case No. SV96-23185-GM) [previously filed as Exhibit 2.4 to the
Company's Registration Statement on Form S-3, File No. 333-17859, and
incorporated by reference herein pursuant to 17 C.F.R. Section 230.411]
99.1 Indenture, dated as of September 30, 1997, among Physicians Clinical
Laboratory, Inc., a Delaware corporation ("PCL"), and First Trust
National Association ("FTNA").
99.2 Security Agreement, dated as of September 30, 1997 between PCL and FTNA.
99.3 Stockholders Agreement, dated as of September 30, 1997, by and among
PCL, Nu-Tech, and Oaktree.
99.4 Pledge Agreement, dated as of September 30, 1997, between PCL and FTNA.
99.5 Employment Agreement, made as of September 30, 1997, by and between PCL
and J. Marvin Feigenbaum.
99.6 Noncompetition Agreement, made as of September 30, 1997, by and among
PCL and Nu-Tech.
99.7 Healthcare Receivables Purchase and Transfer Agreement, dated as of
September 30, 1997.
99.8 Assignment of Healthcare Receivables Purchase and Transfer Agreement as
Collateral Security.
99.9 Loan and Security Agreement, dated as of September 30, 1997, between
Bio-Cypher Funding Corp, a Delaware corporation ("Bio-Cypher"), and
Daiwa Healthco-2 LLC, a Delaware LLC ("Daiwa").
99.10 Depositary Agreement, dated as of September 30, 1997, among PCL,
Bio-Cypher, Daiwa, and Union Bank of California, N.A.
99.11 Warrant Agreement, dated as of September 30, 1997, between PCL and U.S.
Trust Company of California, N.A.
99.12 Amended and Restated Bylaws of PCL, effective as of September 30, 1997.
99.13 Amended and Restated Certificate of Incorporation of PCL.
99.14 Settlement Agreement re: State of California.
99.15 Settlement Agreement re: Federal Government.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
NU-TECH BIO-MED, INC.
By: /s/ J. Marvin Feigenbaum
Name: J. Marvin Feigenbaum
Title: Chairman of the Board, President, Chief
Executive and Chief Financial Officer
Date: October 20, 1997
<PAGE> 1
PHYSICIANS CLINICAL LABORATORY, INC.
SENIOR SECURED NOTES DUE 2004
-----------------
INDENTURE
Dated as of September 30, 1997
-----------------
FIRST TRUST NATIONAL ASSOCIATION
Trustee
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1) 8.10
(a)(2) 8.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 8.10
(b) 8.10
(c) N.A.
311 (a) 8.11
(b) 8.11
(c) N.A.
312 (a) 2.5
(b) N.A.
(c) N.A.
313 (a) 8.6
(b) 8.6
(c) 8.6
(d) 8.6
314 (a) N.A.
(b) N.A.
(c)(1) N.A.
(c)(2) N.A.
(c)(3) N.A.
(d) N.A.
(e) N.A.
(f) N.A.
315 (a) N.A.
(b) 8.5
(c) N.A.
(d) N.A.
(e) N.A.
316 (a)(last sentence) N.A.
(a)(1)(A) N.A.
(a)(1)(B) N.A.
(a)(2) N.A.
(b) N.A.
(c) 2.13
<PAGE> 3
317 (a)(1) N.A.
(a)(2) N.A.
(b) N.A.
318 (a) N.A.
(b) N.A.
(c) N.A.
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
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<PAGE> 4
TABLE OF CONTENTS
Page
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ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE....................... 1
Section 1.1. Definitions............................................ 1
Section 1.2. Other Definitions..................................... 19
Section 1.3. Incorporation by Reference of Trust
Indenture Act......................................... 19
Section 1.4. Rules of Construction................................. 20
ARTICLE 2. THE NOTES....................................................... 20
Section 2.1. Form and Dating....................................... 20
Section 2.2. Execution and Authentication.......................... 21
Section 2.3. Registrar and Paying Agent............................ 21
Section 2.4. Paying Agent to Hold Money in Trust................... 22
Section 2.5. Lists of Holders of the Notes......................... 22
Section 2.6. Transfer and Exchange................................. 23
Section 2.7. Replacement Notes..................................... 24
Section 2.8. Outstanding Notes..................................... 24
Section 2.9. Treasury Notes........................................ 25
Section 2.10. Temporary Notes....................................... 25
Section 2.11. Cancellation.......................................... 25
Section 2.12. Defaulted Interest.................................... 26
Section 2.13. Record Date........................................... 26
Section 2.14. CUSIP Numbers......................................... 26
Section 2.15. Computation of Interest............................... 26
ARTICLE 3. REDEMPTION AND OFFERS TO PURCHASE............................... 27
Section 3.1. Notices to Trustee.................................... 27
Section 3.2. Selection of Notes to Be Purchased or
Redeemed.............................................. 27
Section 3.3. Notice of Redemption.................................. 28
Section 3.4. Effect of Notice of Redemption........................ 29
Section 3.5. Deposit of Redemption or Purchase Price............... 29
Section 3.6. Notes Redeemed or Purchased in Part................... 30
Section 3.7. Optional Redemption................................... 30
Section 3.8. Mandatory Redemption.................................. 30
Section 3.9. Sale Offers........................................... 30
ARTICLE 4. COVENANTS....................................................... 33
Section 4.1. Payment of Notes...................................... 33
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Page
----
Section 4.2. Maintenance of Office or Agency....................... 34
Section 4.3. Reports............................................... 34
Section 4.4. Compliance Certificate................................ 35
Section 4.5. Taxes and Other Claims................................ 36
Section 4.6. Stay, Extension and Usury Laws; Refund
of Excess............................................. 36
Section 4.7. Limitations on Distributions and
Investments........................................... 37
Section 4.8. Dividend and Other Payment Restrictions
Affecting Subsidiaries................................ 37
Section 4.9. Line of Business...................................... 38
Section 4.10. Asset Sales........................................... 38
Section 4.11. Transactions with Affiliates.......................... 40
Section 4.12. Liens................................................. 40
Section 4.13. Sale and Lease Back Transactions...................... 41
Section 4.14. Incurrence of Indebtedness............................ 41
Section 4.15. Offer to Purchase Upon Change of
Control............................................... 43
Section 4.16. Corporate Existence................................... 45
Section 4.17. Capital Expenditures.................................. 45
Section 4.18. Interest Coverage Ratio............................... 46
Section 4.19. Consolidated Indebtedness to
Consolidated EBITDA................................... 46
Section 4.20. Maintenance of Adjusted Consolidated Net
Worth................................................. 47
Section 4.21. Maintenance of Consolidated EBITDA.................... 47
Section 4.22. Amendments or Waivers of Certain Related
Agreements............................................ 47
Section 4.23. Maintenance of Properties............................. 48
Section 4.24. Maintenance of Insurance.............................. 48
Section 4.25. Restriction on Subsidiaries........................... 48
Section 4.26. Redemption upon Public Offering of
Capital Stock......................................... 48
Section 4.27. Issuance of Preferred Stock........................... 49
ARTICLE 5. SECURITY........................................................ 49
Section 5.1. Security.............................................. 49
Section 5.2. Recording, etc........................................ 49
Section 5.3. Suits to Protect the Collateral....................... 50
ARTICLE 6. SUCCESSORS...................................................... 50
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Page
----
Section 6.1. Merger, Consolidation, or Sale of
Assets................................................ 50
Section 6.2. Successor Corporation Substituted..................... 51
ARTICLE 7. DEFAULTS AND REMEDIES........................................... 51
Section 7.1. Events of Default..................................... 51
Section 7.2. Acceleration and Payment of Premium................... 54
Section 7.3. Other Remedies........................................ 55
Section 7.4. Waiver of Past Defaults............................... 55
Section 7.5. Control by Majority................................... 55
Section 7.6. Limitation on Suits................................... 56
Section 7.7. Rights of Holders of Notes to Receive
Payment............................................... 56
Section 7.8. Collection Suit by Trustee............................ 56
Section 7.9. Trustee May File Proofs of Claim...................... 57
Section 7.10. Priorities............................................ 57
Section 7.11. Undertaking for Costs................................. 58
ARTICLE 8. TRUSTEE......................................................... 58
Section 8.1. Duties of Trustee..................................... 58
Section 8.2. Rights of Trustee..................................... 60
Section 8.3. Individual Rights of Trustee.......................... 60
Section 8.4. Trustee's Disclaimer.................................. 61
Section 8.5. Notice of Defaults.................................... 61
Section 8.6. Reports by Trustee to Holders of the
Notes................................................. 61
Section 8.7. Compensation and Indemnity............................ 61
Section 8.8. Replacement of Trustee................................ 62
Section 8.9. Successor Trustee by Merger, etc...................... 64
Section 8.10. Eligibility; Disqualification......................... 64
Section 8.11. Preferential Collection of Claims
Against Company....................................... 64
ARTICLE 9. LEGAL DEFEASANCE AND COVENANT DEFEASANCE........................ 64
Section 9.1. Option to Effect Legal Defeasance or
Covenant Defeasance................................... 64
Section 9.2. Legal Defeasance and Discharge........................ 65
Section 9.3. Covenant Defeasance................................... 65
Section 9.4. Conditions to Legal or Covenant
Defeasance............................................ 66
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Page
----
Section 9.5. Deposited Money and Government
Securities to be Held in Trust; Other
Miscellaneous Provisions.............................. 68
Section 9.6. Repayment to Company.................................. 69
Section 9.7. Reinstatement......................................... 69
ARTICLE 10. AMENDMENT, SUPPLEMENT AND WAIVER............................... 70
Section 10.1. Without Consent of Holders of Notes................... 70
Section 10.2. With Consent of Holders of Notes...................... 70
Section 10.3. Compliance with Trust Indenture Act................... 72
Section 10.4. Revocation and Effect of Consents..................... 72
Section 10.5. Notation on or Exchange of Notes...................... 73
Section 10.6. Trustee to Sign Amendments, etc....................... 73
ARTICLE 11. MISCELLANEOUS.................................................. 74
Section 11.1. Trust Indenture Act Controls.......................... 74
Section 11.2. Notices............................................... 74
Section 11.3. Communication by Holders of Notes with
Other Holders of Notes................................ 75
Section 11.4. Certificate and Opinion as to Conditions
Precedent............................................. 75
Section 11.5. Statements Required in Certificate or
Opinion............................................... 75
Section 11.6. Rules by Trustee and Agents........................... 76
Section 11.7. No Personal Liability of Directors,
Officers, Employees and Stockholders.................. 76
Section 11.8. Governing Law......................................... 76
Section 11.9. No Adverse Interpretation of Other
Agreements............................................ 76
Section 11.10.Successors............................................ 77
Section 11.11.Severability.......................................... 77
Section 11.12.Counterpart Originals................................. 77
Section 11.13.Table of Contents, Headings, etc...................... 77
Section 11.14.Trustee To Include Paying Agent....................... 77
SCHEDULE I - Liens
SCHEDULE II - Initial Holders
EXHIBIT A - Form of Note
EXHIBIT B - Form of Assignment
EXHIBIT C - Form of Option of Holder to Purchase
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Page
----
EXHIBIT D - Form of Trustee Authentication
EXHIBIT E - Form of Pledge Agreement
EXHIBIT F - Form of Receivables Subsidiary Agreement
EXHIBIT G - Form of Security Agreement
- v -
<PAGE> 9
This INDENTURE is dated as of September 30, 1997 among Physicians
Clinical Laboratory, Inc., a Delaware corporation, as Issuer ("PCL"), and First
Trust National Association, as trustee
(the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the Senior Secured
Notes due 2004:
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1. Definitions.
"Accreted Amount" means, as of any date of determination, the excess
principal amount of a Note over the original principal amount of such Note which
shall have been accreted thereon through such date, such amount to be so
accreted on a daily basis at the rate of 12% per annum of the original principal
amount of the Notes, semi-annually on each March 31 and September 30, using a
360-day year composed of twelve 30-day months from the date of issuance of the
Notes through the date of determination.
"Adjusted Consolidated Net Worth" means, with respect to any Person
as of any date, the sum of (i) the consolidated equity of the common
stockholders of such Person and its consolidated Subsidiaries as of such date
plus (ii) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, plus (iii) the
principal amount of the Notes, minus (iv) the sum of the cost of treasury shares
and the book value of all assets which should be classified as intangibles
(without duplication of deductions in respect of items already deducted in
arriving at
- 1 -
<PAGE> 10
surplus and retained earnings) but in any event including goodwill, minority
interests, research and development costs, trademarks, trade names, copyrights,
patents and franchises, unamortized debt discount and expense, all reserves and
all write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the date hereof in
the book value of any asset owned by such Person or a Consolidated Subsidiary of
such Person, all of the foregoing determined in accordance with GAAP.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Sale" means (i) the sale, lease (that has the effect of a
disposition and is not for security purposes), conveyance or other disposition
(that is not for security purposes) of any assets (including, without
limitation, by way of a sale and leaseback) other than in the ordinary course of
business (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company and its Subsidiaries taken as
a whole will be governed by the provisions of Section 4.15 and/or the provisions
described above under Article 6 hereof and not by the provisions of the Asset
Sale covenant), and (ii) the issuance of Equity Interests in any of the
Company's Subsidiaries or the sale of Equity Interests in any of its
Subsidiaries, in the case of either clause (i) or (ii) whether in a single
transaction or a series of
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<PAGE> 11
related transactions for net proceeds in excess of $2.5 million. Notwithstanding
the foregoing, the following shall not constitute Asset Sales: (i) a transfer of
assets by the Company to a Subsidiary of the Company or by a Subsidiary of the
Company to the Company or to another Subsidiary of the Company, (ii) an issuance
of Equity Interests by a Subsidiary to the Company or to a Subsidiary of the
Company and (iii) sales or other dispositions of obsolete equipment.
"Bankruptcy Law" means Title 11, U.S. Code or any
similar federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or
any authorized committee of the Board of Directors.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than a Legal Holiday.
"Capital Expenditures" means, with respect to any Person, for any
period, the aggregate of all expenditures of such Person (whether paid in cash
or accrued as liabilities and including Capitalized Lease Obligations) during
that period that, in conformity with GAAP, are made in connection with the
purchase, construction or improvement of items properly categorized in the
balance sheet of such Person as property, plant or equipment; provided, however,
that "Capital Expenditures" shall not include any Capital Expenditures that are
made out of proceeds of casualty insurance covering any property, plant and
equipment.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
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<PAGE> 12
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of a partnership, partnership interests (whether general
or limited), (iii) in the case of an association or any other business entity,
any and all shares, interests, participations, rights or other equivalents
(however designated) in the equity of such association or entity, and (iv) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person (other than pursuant to an approved profit sharing plan of the Company or
standard percentage of profit rental payments pursuant to a lease entered into
in the ordinary course of business).
"Change of Control" means the occurrence of any of the following
events: (i) except for any transaction not constituting a Change of Control
pursuant to clause (iii) below, any sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation or for security
purposes), in one or a series of related transactions, of all or substantially
all of the assets of the Company and its Subsidiaries taken as a whole to any
"person" (as defined in Section 13(d) of the Exchange Act) or "group" (as
defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than any
of Oaktree Capital Management, LLC ("Oaktree"), The Copernicus Fund, L.P.
("Copernicus"), The Galileo Fund, L.P. ("Galileo"), Belmont Fund, L.P. ("Belmont
I") or Belmont Capital Partners II, L.P. ("Belmont II" and, collectively with
Belmont I, "Belmont"), or any Affiliate of Oaktree, Copernicus, Galileo or
Belmont or any successor to any of Oaktree, Copernicus, Galileo or Belmont by
merger, sale or transfer of assets or similar transaction or a group of which
any of Oaktree, Copernicus, Galileo, or Belmont or any such Affiliate or
successor is a member, (ii) the adoption by the Company of a plan for the
liquidation or dissolution of the Company, (iii) the Company consolidates with,
or merges with or into, another Person or sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to any
person or "group" (as defined in Sections 13(d)(3) and 14(d)(2) of the Exchange
Act) other than any of Oaktree, Copernicus, Galileo, or Belmont or any Affiliate
of Oaktree, Copernicus, Galileo or Belmont or any successor to any of Oaktree,
Copernicus, Galileo
- 4 -
<PAGE> 13
or Belmont by merger, sale or transfer of assets or similar transaction, or a
group of which any of Oaktree, Copernicus, Galileo, Belmont or any such
Affiliate or successor is a member in a transaction or series of related
transactions in which the Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any transaction
where (A) the outstanding Voting Stock of the Company is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of the surviving or
transferee corporation and (B) the "beneficial owners" (as defined in Rule 13d-3
under the Exchange Act) of the Voting Stock of the Company immediately prior to
such transaction own, directly or indirectly, not less than a majority of the
total Voting Stock of the surviving or transferee corporation immediately after
such transaction, (iv) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined in Section 13(d) of the Exchange Act) becomes the
"beneficial owner" (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of more than 50% of the Voting Stock of the
Company; provided, however, that a Change in Control shall not be deemed to have
occurred by virtue of the Company, any Subsidiary, any employee stock ownership
plan or other employee benefit plan of the Company or a Subsidiary, any person
holding Voting Stock for or pursuant to the terms of any such employment benefit
plan, or any of Nu-Tech Bio-Med, Inc. ("Nu-Tech"), Oaktree, Copernicus, Galileo
or Belmont or any Affiliate of Nu-Tech, Oaktree, Copernicus, Galileo or Belmont
or any successor to any of Nu-Tech, Oaktree, Copernicus, Galileo or Belmont by
merger, sale or transfer of assets or similar transaction, becoming the
beneficial owner, directly or indirectly, of Voting Stock of the Company,
whether in excess of 50% or otherwise; and provided further that a Change in
Control shall not be deemed to have occurred by virtue of any Person becoming
the beneficial owner, directly or indirectly, of more than 50% of the Voting
Stock of the Company (i) by reason of the distribution of Voting Stock by
Nu-Tech pro rata to its stockholders, or (ii) if the transaction or series of
transactions pursuant to which such Person becomes the direct or indirect
beneficial owner of more than 50% of such Voting Stock involved the acquisition
of Voting Stock by such Person from any of Oaktree, Copernicus, Galileo or
Belmont or any
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<PAGE> 14
Affiliate of or any successor to any of Oaktree, Copernicus, Galileo or Belmont
by merger, sale or transfer of assets or similar transaction or (v) the first
day on which a majority of the members of the Board of Directors of the Company
are not Continuing Directors. For purposes of this definition, any transfer of
an equity interest of an entity that was formed for the purpose of acquiring
Voting Stock of the Company, and has acquired such Voting Stock, will be deemed
to be a transfer of such portion of such Voting Stock as corresponds to the
portion of the equity of such entity that has been so transferred.
"Collateral" means, collectively, all of the real, personal and
mixed property in which Liens are purported to be granted pursuant to the
Collateral Documents as security for the Indenture Obligations.
"Collateral Documents" means the Security Agreement and the Pledge
Agreement.
"Commission" means the Securities and Exchange Commission.
"Company" means PCL until a successor replaces it pursuant to
Article 6 of this Indenture and thereafter means the successor.
"Consolidated EBITDA" for any Person means for any period for which
it is to be determined the sum of, without duplication, the amounts for such
period, taken as a single accounting period, of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been reduced thereby, (A)
Consolidated Tax Expense of such Person paid or accrued in accordance with GAAP
for such period, (B) Consolidated Interest Expense of such Person for such
period, and (C) depreciation, depletion and amortization expenses (including,
without limitation, amortization of capitalized debt issuance costs) and other
non-cash expenses (other than any non-cash expense which requires the accrual of
or a reserve for cash charges for any future period) of such Person and its
Subsidiaries for such period, less the amount of consolidated non-cash items
increasing Consolidated Net Income for such period, all as determined on a
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<PAGE> 15
consolidated basis in conformity with GAAP consistent with those applied in the
preparation of the audited financial statements of the Company and its
Consolidated Subsidiaries.
"Consolidated Indebtedness" shall mean Indebtedness of the Company.
"Consolidated Interest Expense" shall mean, for any Person for any
period, the aggregate interest expense of such Person and its Consolidated
Subsidiaries for such period (calculated in accordance with GAAP on a
consolidated basis) payable during such period in respect of all Indebtedness of
such Person and its Consolidated Subsidiaries, on a consolidated basis, for such
period (including, without duplication, that portion of Capitalized Lease
Obligations of such Person and its Subsidiaries representing the interest factor
for such period).
"Consolidated Net Income" means, with respect to any Person for any
period, the consolidated net income (or deficit) of such Person and its
Consolidated Subsidiaries for such period on a consolidated basis, as determined
in accordance with GAAP consistently applied, provided that the net income of
any other Person (other than a Subsidiary) in which such Person or any
Subsidiary of such Person has a joint interest with a third party (which
interest does not cause the net income of such other Person to be consolidated
into the net income of such Person in accordance with GAAP) shall be included
only to the extent of the lesser of (a) such net income that has been actually
received by such Person or such Subsidiary in the form of cash dividends or
similar cash distributions or (b) the net income of such Person (which in no
event shall be less than zero), provided further that there shall be excluded
(i) (x) the net income (but not loss) of any Subsidiary (other than the
Receivables Subsidiary) of such Person that is subject to any restriction or
encumbrance on the ability of such Subsidiary to make the payment of dividends
or other distributions to such Person to the extent of such encumbrance or
restriction and (y) the net income (or loss) of any Person acquired in a pooling
of interests transaction accrued prior to the date it became a Subsidiary of
such Person or is merged into or consolidated with such Person or any Subsidiary
of such Person; (ii) the cumulative effect of a
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<PAGE> 16
change in GAAP during such period; (iii) any gain arising from the acquisition
of any securities, or the extinguishment, retirement or repurchase, as
determined in accordance with GAAP, of any Indebtedness of such Person; (v) any
net after-tax income (or loss) from discontinued operations and any net
after-tax gains (or losses) on disposal of discontinued operations; (vi) any net
after-tax gains or losses attributable to an asset disposition other than in the
ordinary course of business (as determined in good faith by the Board of
Directors); and (vii) in the case of a successor to the Company by consolidation
or merger or as a transferee of the Company's assets (other than any calculation
made under Article 6 hereof), any earnings of the successor corporation prior to
such consolidation, merger or transfer of assets.
"Consolidated Subsidiary" of any specific Person means any
Subsidiary, a majority of whose Capital Stock (other than the minimum required
number of directors' qualifying shares) are owned by such Person and/or by
another Consolidated Subsidiary of such Person, and the accounts of which are,
or under GAAP are required to be, consolidated with the accounts of such Person.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date hereof, (ii) was nominated for election or
elected to the Board of Directors in accordance with the Stockholders Agreement,
or (iii) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election.
"Consolidated Tax Expense" means, with respect to any Person for any
period, the aggregate of the federal, state and local tax expense attributable
to taxes based on income and foreign income tax expenses of such Person and its
Consolidated Subsidiaries for such period (net of any income tax benefit),
determined in accordance with GAAP, other than taxes (whether liabilities or
benefits) attributed to extraordinary, unusual or nonrecurring gains or losses,
or taxes attributable to Asset Sales.
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"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 11.2 hereof or such other address as to which
the Trustee may give notice to the Company.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person that, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable, except to the extent
such Capital Stock is exchangeable only at the option of such Person and only
subject to the terms of any debt instrument to which such Person is a party), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, on or prior to the date on which the Notes
mature.
"Documents" means, collectively, this Indenture, the Notes and the
Collateral Documents.
"Dollars" and "$" mean lawful money of the United States of America.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Indebtedness" means the aggregate principal amount of
Indebtedness of the Company in existence on the date hereof, until such amounts
are repaid.
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<PAGE> 18
"Financing Statements" means Form UCC-1 financing statements to be
filed in all jurisdictions necessary or desirable in order to perfect the
Trustee's security interest in the Collateral.
"First Priority" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Documents, that (i) such
Lien has priority over any other Lien on such Collateral (other than Permitted
Encumbrances permitted pursuant to this Indenture) and (ii) such Lien is the
only Lien (other than Permitted Encumbrances permitted pursuant to this
Indenture) to which such Collateral is subject.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date of the Indenture;
provided, however, that all reports and other financial information provided by
the Company to the Holders, the Trustee and/or the Commission shall be prepared
in accordance with GAAP, as in effect on the date of such report or other
financial information.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness. The amount of any Guarantee of any guaranteeing Person shall
be deemed to be the lower of (i) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee is made and
(ii) the maximum amount for which such guaranteeing Person may be liable
pursuant
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<PAGE> 19
to the terms of the applicable Guarantee, unless such primary obligation and the
maximum amount for which such guaranteeing Person may be liable are not stated
or determinable, in which case, the amount of such Guarantee shall be such
guaranteeing Person's maximum reasonably anticipated liability in respect
thereof as determined by such guaranteeing Person in good faith.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or currency exchange rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, without
duplication, any indebtedness of such Person, whether or not contingent, in
respect of borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or representing Capital Lease Obligations or
the balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, all indebtedness of others secured by a Lien on any asset of such Person
(whether or not such indebtedness is assumed by such Person, but only to the
extent of the fair market value of such asset if such fair market value is less
than the amount of such Indebtedness and such Indebtedness has not been assumed
by such Person), the maximum fixed repurchase price of Disqualified Stock issued
by such Person and the liquidation preference of preferred stock issued by such
Person, in each case, if held by any Person other than the Company or a
Subsidiary and, to the extent not otherwise included, the Guarantee by such
Person of any indebtedness of any other Person.
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<PAGE> 20
"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Indenture Obligations" means all obligations of every nature of the
Company (and any other obligor under this Indenture, the Notes, the Collateral
Documents or the other Documents) to pay principal of, premium, if any, and
interest on the Notes when due and payable, whether at maturity, by
acceleration, call for redemption or repurchase, or otherwise, and all other
amounts due or to become due under or in connection with this Indenture, the
Notes and the other Documents, all fees, expenses and other charges, and the
performance of all other obligations of the Company (and any such obligor) to
the Trustee and the Holders under this Indenture, the Notes and the other
Documents, according to the terms hereof and thereof, including without
limitation all Liquidated Damages (as defined in the Registration Rights
Agreement).
"Initial Holders" means the Persons identified on Schedule II.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in such asset and any filing of any financing statement under the
Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of
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<PAGE> 21
any Asset Sale (including, without limitation, any cash received upon the sale
or other disposition of any non-cash consideration received in any Asset Sale),
net of fees, commissions, expenses and other direct costs relating to such Asset
Sale (including, without limitation, legal, accounting and investment banking
fees, and sales commissions) and any relocation expenses and severance or shut
down costs incurred as a result thereof, taxes paid or payable as a result
thereof (after taking into account any available tax credits or deductions and
any tax sharing arrangements), amounts applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale, any reserve for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP and any reserves in accordance with
GAAP against any liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"Notes" means the Senior Secured Notes due 2004, as amended or
supplemented from time to time pursuant to the terms hereof, that are issued
under this Indenture, including any Notes issued pursuant to Section 4.1.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, principal financial officer or principal accounting officer
of the Company, that meets the requirements of Section 11.5 hereof.
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<PAGE> 22
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee that meets the requirements of Section 11.5
hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Permitted Business" means the provision of clinical laboratory and
medical diagnostic services and any activity reasonably related thereto.
"Permitted Encumbrances" means (i) Liens for taxes, assessments or
charges of any Governmental Authority for claims not yet due or which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with the provisions of
GAAP and enforcement thereof is stayed; (ii) statutory Liens of landlords,
carriers, warehousemen, mechanics, materialmen and other like Liens not
voluntarily granted and arising in the ordinary course of business for amounts
not yet due or which are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, and with respect to
which adequate reserves or other appropriate provisions are being maintained in
accordance with the provisions of GAAP, and enforcement thereof is stayed; (iii)
Liens incurred or deposits made in the ordinary course of business, including
without limitation surety bonds and appeal bonds, in connection with workers'
compensation, unemployment insurance and other types of social security benefits
or to secure the performance of tenders, bids, leases (other than Capitalized
Lease Obligations), governmental contracts, statutory obligations and other
similar obligations or arising as a result of progress payments under government
contracts (other than, in any such case, for the repayment of Indebtedness);
(iv) easements (including without limitation reciprocal easement agreements and
utility agreements), rights-of-way, covenants, consents, reservations,
encroachments, variations and other similar restrictions, charges or
encumbrances (whether or not recorded) and other Liens incurred in the ordinary
course of business, which do not secure Indebtedness or the deferred purchase
price of any asset and which do not interfere materially with the ordinary
conduct of
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<PAGE> 23
the business of the Company or its Subsidiaries and which do not materially
detract from the value of the property to which they attach or materially impair
the use thereof to the Company or its Subsidiaries; (v) building restrictions,
zoning laws and other statutes, laws, rules, regulations, ordinances and
restrictions, and any amendments thereto, now or at any time hereafter adopted
by any Governmental Authority having jurisdiction; (vi) Liens on the accounts
receivable assigned by the Company to the Receivables Subsidiary securing the
Working Capital Facility; (vii) Liens permitted by the Plan and set forth on
Schedule I; (viii) Liens on property or assets of any Subsidiary at the time
such Subsidiary became a Subsidiary of the Company; provided, however, that (a)
if any such Lien shall have been incurred in anticipation of such transaction,
such property or assets subject to such Lien shall have a fair market value (as
determined in good faith by the Board of Directors) at the date of the
acquisition thereof not in excess of the lesser of (1) the aggregate purchase
price paid or owed by the Company in connection with the acquisition of such
Subsidiary and (2) the fair market value (as so determined) of all property and
assets of such Subsidiary, (b) any such Lien shall not extend to any other
property and assets owned by the Company or any Subsidiary and (c) when
aggregated with Indebtedness secured by Liens permitted by the following clause
(ix) and Indebtedness secured by Liens permitted by Section 4.12(b), the
Indebtedness secured by such Liens does not exceed $2,000,000; (x) Liens on
property or assets at the time the Company or any Subsidiary acquired such
property or assets, including any acquisition by means of a merger or
consolidation with or into the Company or such Subsidiary; provided, however,
that (a) if any such Lien shall have been incurred in anticipation of such
transaction, such property or assets subject to such Lien shall have a fair
market value (as determined in good faith by the Board of Directors) at the date
of the acquisition thereof not in excess of the lesser of (1) the aggregate
purchase price paid or owed by the Company or such Subsidiary in connection with
the acquisition thereof and any other property and assets acquired
simultaneously therewith and (2) the fair market value (as so determined) of all
such property and assets acquired by the Company or such Subsidiary in such
transactions, (b) any such Lien shall not extend to any other property or assets
owned by the Company or any Subsidiary
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<PAGE> 24
and (c) when aggregated with Indebtedness secured by Liens permitted by the
preceding clause (viii) and Indebtedness secured by Liens permitted by Section
4.12(b) the Indebtedness secured by such Liens does not exceed $2,000,000; (xi)
Liens to secure any extension, renewal, refinancing, replacement or refunding
(or successive extensions, renewals, refinancings, replacements or refundings)
in whole or in part, of any Indebtedness secured by Liens referred to in any of
clauses (vi), (vii), (viii) and (ix); provided, however, that any such Lien will
be limited to all or part of the same property or assets that secure the
original Lien (plus improvements on such property or assets) in the aggregate
principal amount of Indebtedness that is secured by such Lien will not be
increased to an amount greater than the sum of (a) the outstanding principal
amount, or, if greater, the committed amount of the Indebtedness described under
clauses (vi), (vii), (viii) or (ix), at the time such original Lien became a
Permitted Lien under the Indenture and (b) an amount necessary to pay any
premium, fees and other expenses incurred by the Company in or a Subsidiary
connection with such refinancing, refunding, extension, renewal or replacement;
(xii) Liens arising from an order or judgment against the Company or its
Subsidiaries that are discharged within ninety (90) days or which do not give
rise to an Event of Default; (xiii) Liens on property or assets of the Company
or any Subsidiary securing Indebtedness (1) under Purchase Money Obligation or
(2) Capital Lease Obligations permitted under this Indenture; and (xiv) Liens
existing as of the date of this Indenture, provided that the aggregate
Indebtedness secured by such Liens is not in excess of $375,000.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund (including principal, interest,
fees, expenses and costs thereof) other Indebtedness or the cost of such
Permitted Refinancing Indebtedness of the Company; provided that, except with
respect to Indebtedness incurred to repay, repurchase, redeem or defease all the
Notes: (i) the principal amount of such Permitted Refinancing Indebtedness does
not exceed the principal amount of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of accrued interest,
fees, expenses, premiums and other amounts
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<PAGE> 25
payable in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date the same as or later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Plan" means the Second Amended Plan of Reorganization of Physicians
Clinical Laboratory, Inc. and Its Affiliated Debtors, confirmed by the United
States Bankruptcy Court for the Central District of California on April 18,
1997.
"Pledge Agreement" means the agreement of even date herewith in the
form of Exhibit E executed by the Company pledging the stock of the Receivables
Subsidiary as partial security for its obligations under the Notes and this
Indenture, as the same may be amended, modified or supplemented from time to
time in accordance with its terms.
"Purchase Money Obligation" means any Indebtedness of the Company
incurred to finance the purchase or construction of any equipment or assets by
the Company, to the extent (i) the purchase cost or cost of construction for
such assets is or should be included in "additions to property, plant and
equipment" in accordance with GAAP and (ii) such Purchase Money
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<PAGE> 26
Obligation is incurred within 90 days of such purchase or construction.
"Receivables Subsidiary Security Agreement" means the agreement of
even date herewith in the form of Exhibit F executed by the Receivables
Subsidiary granting Liens on certain of the Collateral as partial security for
the Company's obligations under the Notes and this Indenture, as the same may be
amended, modified or supplemented from time to time in accordance with its
terms.
"Receivables Subsidiary" means Bio-Cypher Funding Corp., a Delaware
corporation and a wholly owned subsidiary of the Company.
"Registration Rights Agreement" means the Registration Rights
Agreement entered into by the Company and the Initial Holders as of even date
herewith.
"Responsible Officer" means (i) when used with respect to the
Trustee, any officer within the Corporate Trust Department of the Trustee (or
any successor group of the Trustee) with direct responsibility for the
administration of this Indenture and (ii) when used with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Investment" means, as applied to any Person, (a) any
direct or indirect advance, loan or other extension of credit to, or guarantee
of any Indebtedness of, any other Person and (b) any direct or indirect capital
contribution to, purchase or other acquisition of any Equity Interests in any
other Person; provided, however, that "Restricted Investments" shall not include
(i) any instruments evidencing any direct obligations of the United States of
America or any agency thereof or any obligation guaranteed by the United States
of America or any agency thereof, in each case, maturing not more than 180 days
of the date of the acquisition of such instrument; (ii) certificates of deposit
and other time deposits of, and other bank accounts with, and banker's
acceptances created by, any bank or trust company that is organized under the
laws of the
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<PAGE> 27
United States of America or any state thereof having surplus and undivided
profits of at least $500 million and whose short-term debt is rated at least A-1
by S&P or at least A by Moody's in the case of certificates of deposits and
other time deposits maturing not more than one year after the acquisition of
such deposit; (iii) investments in commercial paper rated at least A-1 by S&P or
at least P-1 by Moody's and maturing not more than 90 days from the date of
acquisition thereof; (iv) up to $10 million, in the aggregate, of time deposits
of, and other bank accounts with, any bank or trust company organized under the
laws of the United States of America; (v) loans and advances to officers,
directors and employees of such Person for business-related travel expenses,
living expenses and other similar expenses, in each case incurred in the
ordinary course of business and in a maximum amount up to $250,000 at any time
outstanding; (vi) the extension of trade credit in the ordinary course of
business; (vii) any investment of the type described in clause (a) or (b) by the
Company or any Subsidiary: (A) in any Person if as a result of such investment
such Person in one transaction or a series of related transactions becomes a
Subsidiary; (B) in securities or other assets not of the kind described in
clauses (i), (ii) or (iii) above and received in connection with an Asset Sale
and made pursuant to Section 4.10 or any other disposition of assets not
constituting and Asset Sale; (C) existing on the date hereof; (D) by a
Subsidiary in the Company or another Subsidiary; and (E) acquired by the Company
or any Subsidiary (1) in exchange for any other investment or accounts
receivable held by the Company or any Subsidiary in connection with or as a
result of a bankruptcy, workout, reorganization or recapitalization of the
issuer of such other investment of accounts receivable or (2) as a result of a
foreclosure by the Company or any Subsidiary with respect to any secured
investment or other transfer of title with respect to any secured investment in
default and (viii) capital contributions of accounts receivable of the
Receivables Subsidiary pursuant to the Working Capital Facility.
"Restricted Payment" means, as applied to any Person, (i) any direct
or indirect dividend (other than dividends payable solely in Capital Stock of
such Person) or other distribution of assets, properties, cash, rights (other
than rights to acquire Capital Stock of such Person), obligations, partnership
interests
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<PAGE> 28
or securities paid, made, declared or authorized by such Person on or in respect
of any class of any Equity Interests of such Person, (ii) any direct or indirect
payment by or on behalf of such Person in connection with the redemption,
purchase, sinking fund, retirement, defeasance or other acquisition of any
Equity Interests of such Person or (iii) any payment prior to any scheduled
maturity of principal of, premium on, if any, or interest on, redemption,
purchase, retirement, defeasance, sinking fund or similar payment with respect
to any Indebtedness that is subordinated by its terms in right of payment to the
Notes if at the time thereof: (1) an Event of Default, or an event that with the
passage of time or giving of notice, or both, would constitute an Event of
Default, shall have occurred or be continuing, or (2) upon giving effect to such
Restricted Payment, the Company could not incur at least $1.00 of additional
Indebtedness pursuant to Section 4.14.
"Sale Offer" means a Public Equity Offer or Asset Sale Offer, as
appropriate.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the agreement of even date herewith in
the form of Exhibit G executed by the Company granting Liens on certain of the
Collateral as partial security for its obligations under the Notes and this
Indenture, as the same may be amended, modified or supplemented from time to
time in accordance with its terms.
"Settlement Agreements" means (a) the Settlement Agreement and
Corporate Integrity Agreement, by and between the Company, the United States,
acting through its Department of Justice and the Office of Inspector General of
the United States Department of Health and Human Services, the Office of the
Civilian Health and Medical Program for the Uniformed Services of the United
States Department of Defense and Taylor McKeeman and (b) the Settlement
Agreement, by and between the Company, the State of California, acting through
its Department of Justice, Office of the Attorney General, Bureau of Medi-Cal
Fraud, the California Department of Health Services and Taylor McKeeman.
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"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Subordinated Indebtedness" means Indebtedness of the Company
subordinated in right of payment to the Indenture Obligations and the Documents.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb), as amended, in effect on the date of this Indenture, until such
time as this Indenture is qualified under the Trust Indenture Act of 1939, and
thereafter as in effect on the date this Indenture is qualified under the Trust
Indenture Act of 1939; provided, however, that in the event the Trust Indenture
Act of 1939 is amended after such date, the "TIA" means, to the extent required
by such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means any successor trustee serving hereunder.
"Voting Stock" means any class or classes of Capital Stock pursuant
to which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any
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Person (irrespective of whether or not, at the time, stock of any other class or
classes shall have, or might have, voting power by reason of the happening of
any contingency).
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person all the outstanding shares of Capital Stock (other
than directors' qualifying shares, if applicable) of which are owned directly by
such Person.
"Working Capital Facility" means that certain Healthcare Receivables
and Transfer Agreement, dated as of September 30, 1997 by and among the Company
and the Receivables Subsidiary and that certain Loan and Security Agreement,
dated as of September 30, 1997 by and between the Receivables Subsidiary and
Daiwa Healthco-2, LLC, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, amended and restated, modified, renewed, refunded,
replaced or refinanced from time to time, including any agreement extending the
maturity of, increasing the commitments under, or otherwise restructuring all or
any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
Section 1.2. Other Definitions.
Defined in
Term Section
"Affiliate Transaction" 4.11
"Asset Sale Offer" 4.10
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"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
"Change of Control Payment Date" 4.15
"Covenant Defeasance" 9.3
"Commencement Date" 4.10
"Equity Net Proceeds" 4.26
"Event of Default" 7.1
"Excess Proceeds" 4.10
"incur" 4.14
"Legal Defeasance" 9.2
"Moody's" 1.1
"Offer Amount" 3.9
"Offer Period" 3.9
"Paying Agent" 2.3
"Payment Default" 7.1
"Public Equity Offer" 4.26
"Purchase Date" 3.9
"Registrar" 2.3
"S&P" 1.1
Section 1.3. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture,
other than those provisions of the TIA that may be excluded herein, which
provision shall be excluded to the extent specifically excluded in this
Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
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"obligor" on the Notes means the Company and any
successor obligor upon the Notes, as the case may be.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule or regulation
promulgated by the Commission under the TIA have the meanings so assigned to
them.
Section 1.4. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act or
the Exchange Act shall be deemed to include substitute, replacement or successor
sections or rules adopted by the Commission from time to time.
ARTICLE 2.
THE NOTES
Section 2.1. Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit D hereto, the terms of which are
incorporated in and made a part of this Indenture; provided, however, that upon
the change of the Company's name to Bio-Cypher Laboratories Ltd., the Company
shall
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issue, and the Trustee shall authenticate, Notes to the Holders in such new name
in replacement of the Notes issued in the name of Physicians Clinical
Laboratory, Inc. The Notes may have notations, legends or endorsements approved
as to form by the Company and required by law, stock exchange rule, agreements
to which the Company is subject, or usage. Each Note shall be dated the date of
its authentication. Other than Notes issued pursuant to Section 4.1, the Notes
shall be issuable in registered form, without coupons, and only in denominations
of $1,000 and integral multiples thereof.
Section 2.2. Execution and Authentication.
One Officer of the Company shall sign the Notes for the Company by
manual or facsimile signature.
If an Officer of the Company whose signature is on a Note no longer
holds that office at the time the Note is authenticated, the Note shall
nevertheless be valid.
A Note shall not be valid until authenticated by the manual
signature of a Responsible Officer of the Trustee. The signature of the Trustee
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate Notes for original issue in the
aggregate principal amount of up to $55,000,000 upon a written order of the
Company signed by two Officers. In addition, the Trustee shall authenticate
Notes, as appropriate, representing the Accreted Amount upon a written order of
the Company signed by two Officers, as set forth in Section 4.1 hereof and in
the Notes.
The aggregate principal amount (excluding any premium) of Notes
outstanding at any time may not exceed $55,000,000 plus the aggregate Accreted
Amount accrued with respect to the Notes, except as provided in Section 2.7.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by the terms of such appointment,
an authenticating agent may
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authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with the
Company or an Affiliate of the Company.
Section 2.3. Registrar and Paying Agent.
The Company shall maintain (i) an office or agency where Notes may
be presented for registration of transfer or for exchange (including any
co-registrar, the "Registrar") and (ii) an office or agency where Notes may be
presented for payment ("Paying Agent") within the City of and the State of New
York or, at the option of the Company, payment of interest may be made by check
mailed to the Holders at their respective addresses set forth in the register of
Holders; provided that, at the request of any Holder holding in excess of
$1,000,000 of Notes, payments shall be made by federal funds wire pursuant to
wire instructions provided by such Holder. The Registrar shall keep a register
of the Notes and of their transfer and exchange. The Company may appoint one or
more co-Registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent, Registrar or co-Registrar without prior notice to any Holder. The Company
shall notify the Trustee and the Trustee shall notify the Holders of the name
and address of any Agent not a party to this Indenture. The Company may act as
Paying Agent, Registrar or co-Registrar. The Company shall enter into an
appropriate agency agreement with any Agent not a party to this Indenture, which
shall be subject to any obligations imposed by the provisions of the TIA to the
extent that the TIA becomes applicable to this Indenture. The agreement shall
implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or fails to give the
foregoing notice, the Trustee shall act as such, and shall be entitled to
appropriate compensation in accordance with Section 8.7 hereof.
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<PAGE> 35
The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes.
Section 2.4. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, and interest on the Notes, and shall notify the
Trustee of any Default by the Company in making any such payment. While any such
Default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee and to account for any funds disbursed. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent (if other than the Company) shall
have no further liability for the money delivered to the Trustee. If the Company
acts as Paying Agent, it shall segregate and hold in a separate trust fund for
the benefit of the Holders all money held by it as Paying Agent.
Section 2.5. Lists of Holders of the Notes.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven (7)
Business Days before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders, including
the aggregate principal amount at maturity of the Notes held by each thereof,
and the Company shall otherwise comply with TIA Section 312(a).
Section 2.6. Transfer and Exchange.
Where Notes are presented to the Registrar or a co-Registrar with a
request to register a transfer or to exchange them for an equal principal amount
of securities of other
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<PAGE> 36
denominations, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met, including, if required by the
Company, an opinion of counsel to the Holder requesting transfer that an
exemption from registration under the Securities Act is available for such
transfer; provided that no such opinion shall be required if such transfer or
exchange is pursuant to an effective registration statement under the Securities
Act. To permit registrations of transfer and exchanges, the Company shall issue
and the Trustee shall authenticate Notes at the Registrar's request. No service
charge shall be made to the Holder for any registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection therewith (other than
any such transfer tax or similar governmental charge payable upon exchanges or
transfer pursuant to Section 2.10, 3.6 or 10.5 or Sections 5 or 13 of the
Notes).
Neither the Company nor the Registrar shall be required to (i)
issue, register the transfer of or exchange Notes during a period beginning at
the opening of business on a Business Day fifteen (15) days before the day of
any selection of Notes for redemption or purchase under Section 3.2 hereof and
ending at the close of business on the day of selection, (ii) register the
transfer of or exchange any Note so selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part or (iii)
register the transfer or exchange of a Note between a record date and the next
succeeding interest payment date.
No service charge shall be made to any Holder for any registration
of transfer or exchange (except as otherwise expressly permitted herein), but
the Company may require payment of a sum sufficient to cover any transfer tax or
other governmental charge payable in connection therewith (other than such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Sections 2.10, 3.6 or 10.5 hereof, which shall be paid by the Company).
Prior to due presentment to the Trustee for registration of the
transfer of any Note, the Trustee, any Agent
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and the Company may deem and treat the Person in whose name any Note is
registered as the absolute owner of such Note for the purpose of receiving
payment of principal of, premium, if any, and interest on such Note and for all
other purposes whatsoever, whether or not such Note is overdue, and none of the
Trustee, any Agent nor the Company shall be affected by notice to the contrary.
Section 2.7. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Note and the ownership thereof, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers of the
Company, shall authenticate a replacement Note if the Trustee's requirements for
replacement of Notes are met. In every case the applicant for a replacement Note
shall furnish to the Company and to the Trustee and any Agent of the Company or
the Trustee, an indemnity or an indemnity bond, as may be required in the
reasonable judgment of the Trustee and the Company to protect the Company, the
Trustee, each Agent and each authenticating agent from any loss which any of
them may suffer if a Note is replaced. The Company and the Trustee may charge
the applicant for their expenses in replacing a Note.
Every replacement Note is an additional Obligation of the Company
and shall be entitled to all of the benefits of (but shall be subject to all the
limitations of rights set forth in) this Indenture equally and ratably with all
other Notes duly issued hereunder.
Section 2.8. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation and those described in this Section 2.8 as not outstanding. If a
Note is replaced pursuant to Section 2.7 hereof, it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Note is
held by a bona fide purchaser. If the principal
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<PAGE> 38
amount at maturity of any Note is considered paid under Section 4.1 hereof, it
ceases to be outstanding and interest on it ceases to accrue. Subject to Section
2.9 hereof, a Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note.
Section 2.9. Treasury Notes.
In determining whether the Holders of the required principal amount
at maturity of Notes have concurred in any direction, waiver or consent, Notes
owned by the Company or any Subsidiary of the Company shall be considered as
though not outstanding, except that for purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes which a Responsible Officer of the Trustee actually knows to be so
owned shall be so considered. Notwithstanding the foregoing, Notes that are to
be acquired by the Company or a Subsidiary of the Company pursuant to an
exchange offer, tender offer or other agreement shall not be deemed to be owned
by such entity until legal title to such Notes passes to such entity.
Section 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Company and the Trustee consider appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee, upon
receipt of the written order of the Company signed by two Officers of the
Company, shall authenticate definitive Notes in exchange for temporary Notes.
Until such exchange, temporary Notes shall be entitled to the same rights,
benefits and privileges as definitive Notes.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for
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registration of transfer, exchange or payment. The Trustee shall cancel all
Notes surrendered for registration of transfer, exchange, payment, replacement
or cancellation. Subject to Section 2.7 hereof, the Company may not issue new
Notes to replace Notes that it has redeemed or paid or that have been delivered
to the Trustee for cancellation. All cancelled Notes held by the Trustee shall
be destroyed and certification of their destruction delivered to the Company.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, the
Company shall pay in cash the defaulted interest in any lawful manner plus, to
the extent lawful, interest payable on the defaulted interest, to the Persons
who are Holders on a subsequent special record date, which date shall be at the
earliest practicable date but in all events at least five (5) Business Days
prior to the payment date, in each case at the rate provided in the Notes and in
Section 4.1 hereof. The Company shall fix or cause to be fixed each such special
record date and payment date, and shall, promptly thereafter, notify the Trustee
of any such date. At least fifteen (15) days before the special record date, the
Company (or the Trustee, in the name of and at the expense of the Company) shall
mail to Holders, at their addresses as they appear on the register of Notes
maintained by the Registrar, a notice that states the special record date, the
related payment date and the amount of such interest to be paid.
Section 2.13. Record Date.
The record date for purposes of determining the identity of Holders
entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA
Section 316(c).
Section 2.14. CUSIP Numbers.
Within five (5) days after the date of this Indenture, the Company
in issuing all Notes shall obtain "CUSIP" numbers and the Trustee shall use such
CUSIP numbers in notices of redemption or exchange as a convenience to Holders;
provided that any such
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notice may state that no representation is made as to the correctness or
accuracy of the CUSIP numbers printed in the notice or on the Notes and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Company will promptly notify the Trustee of any change in the CUSIP
numbers.
Section 2.15. Computation of Interest.
Interest on the Notes will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
ARTICLE 3.
REDEMPTION AND OFFERS TO PURCHASE
Section 3.1. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at
least 45 days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the Section of this Indenture pursuant to which
the redemption shall occur, (ii) the redemption date, (iii) the principal amount
at maturity of Notes to be redeemed and (iv) the redemption price.
If the Company is required to make an offer to purchase Notes
pursuant to the provisions of Sections 3.9 or 4.15 hereof, it shall furnish to
the Trustee, at least 30 days before the scheduled purchase date, an Officers'
Certificate setting forth (i) the Section of this Indenture pursuant to which
the offer to purchase shall occur, (ii) the terms of the offer, (iii) the
purchase price, (iv) the principal amount at maturity of the Notes to be
purchased, (v) the purchase date, and (vi) further setting forth, as applicable,
a statement to the effect that (a) the Company or one of its Subsidiaries has
effected an Asset Sale and there are Excess Proceeds aggregating more than $5.0
million and the amount of such Excess Proceeds, (b) a Change of Control has
occurred or (c) the Company has consummated a Public Offering of its Capital
Stock.
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Section 3.2. Selection of Notes to Be Purchased or Redeemed.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the applicable Holders of
the Notes in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not so listed, on a pro rata basis, by lot or by such other method the Trustee
deems fair and appropriate; provided that no Notes of $1,000 or less shall be
redeemed in part.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
purchase or redemption, the principal amount at maturity thereof to be purchased
or redeemed. Except as otherwise provided in Section 3.7 hereof, Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be purchased or
redeemed, the entire outstanding amount of Notes held by such Holder, even if
not a multiple of $1,000, shall be purchased or redeemed. Except as provided in
the preceding sentence, provisions of this Indenture that apply to Notes called
for redemption also apply to portions of Notes called for redemption.
Section 3.3. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail or cause to be mailed, by first class mail, postage
prepaid, a notice of redemption to Holders whose Notes are to be redeemed at
their last addresses as they shall appear upon the registry books. The notice
mailed in the manner herein provided shall be conclusively presumed to have been
duly given whether or not the Holder receives such notice. In any case, failure
to give such notice by mail or any defect in the notice to the Holder of any
Note shall not affect the validity of the proceeding for the redemption of any
other Note.
The notice shall identify the Notes to be redeemed and shall state:
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(a) the redemption date;
(b) the redemption price (including accrued interest
to the redemption date);
(c) the principal amount at maturity of Notes to be
redeemed;
(d) if any Note is being redeemed in part, the portion of the
principal amount at maturity of such Note to be redeemed and
that, after the redemption date upon surrender of such Note, a
new Note or Notes in principal amount at maturity equal to the
unredeemed portion shall be issued upon cancellation of the
original Note;
(e) the name and address of the Paying Agent;
(f) that Notes called for redemption must be
surrendered to the Paying Agent to collect the
redemption price;
(g) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or
printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.4. Effect of Notice of Redemption.
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Once notice of redemption is mailed in accordance with Section 3.3
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price, plus accrued and unpaid interest, if
any, to such date. A notice of redemption may not be conditional.
Section 3.5. Deposit of Redemption or Purchase Price.
On or before 10:00 a.m. (New York City time) on each redemption date
or the date on which Notes must be accepted for purchase pursuant to Section 3.9
or 4.15, the Company shall deposit with the Trustee or with the Paying Agent in
immediately available funds money sufficient to pay the redemption or purchase
price of and unpaid and accrued interest, if any, on all Notes to be redeemed or
purchased on that date. The Trustee or the Paying Agent shall promptly return to
the Company any money deposited with the Trustee or the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption or purchase
price of (including any applicable premium), and accrued interest on, all Notes
to be redeemed or purchased.
If Notes called for redemption or tendered in an Asset Sale Offer or
Change of Control Offer are paid or if the Company has deposited with the
Trustee or Paying Agent immediately available funds sufficient to pay the
redemption or purchase price of, and unpaid and accrued interest, if any, on all
Notes to be redeemed or purchased on and after the redemption or purchase date,
interest shall cease to accrue on the Notes or the portions of Notes called for
redemption or tendered and not withdrawn in an Asset Sale Offer or Change of
Control Offer (regardless of whether certificates for such securities are
actually surrendered). If a Note is redeemed or purchased on or after an
interest record date but on or prior to the related interest payment date, then
any accrued and unpaid interest shall be paid to the Person in whose name such
Note was registered at the close of business on such record date. If any Note
called for redemption or subject to an Asset Sale Offer or Change of Control
Offer shall not be so paid upon surrender for redemption or purchase because of
the failure of the Company to comply with the preceding paragraph, interest
shall be paid on the unpaid principal, from the redemption or purchase date
until such
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principal is paid, and to the extent lawful on any interest not paid on such
unpaid principal, in each case at the rate provided in the Notes and in Section
4.1 hereof.
Section 3.6. Notes Redeemed or Purchased in Part.
Upon surrender of a Note that is redeemed or purchased in part, the
Company shall issue and the Trustee shall authenticate for the Holder at the
expense of the Company a new Note equal in principal amount at maturity to the
unredeemed or unpurchased portion of the Note surrendered.
Section 3.7. Optional Redemption.
The Notes shall be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at a redemption price equal to 100% of the principal amount thereof at
maturity plus accrued and unpaid interest thereon to the applicable redemption
date; provided that the Notes shall be redeemed pursuant to the terms of this
Section 3.7 only in integral multiples of $1,000,000, unless the Notes to be
redeemed from any Holder pursuant to this Section 3.7 constitute all of the
Notes held by such Holder, in which case amounts redeemed hereunder need not be
in integral multiples of $1,000,000.
Section 3.8. Mandatory Redemption.
Except as set forth below under Sections 3.9, 4.10, 4.15 and 4.26
hereof, the Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Section 3.9. Sale Offers.
In the event that the Company shall be required to commence a Sale
Offer pursuant to Section 4.10 or Section 4.26 hereof, respectively, it shall
follow the procedures specified below:
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The Sale Offer shall remain open for 20 Business Days after the
Commencement Date relating to such Asset Sale Offer, except to the extent
required to be extended by applicable law (as so extended, the "Offer Period").
No later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount at maturity
(the "Offer Amount") of Notes required to be purchased in such Sale Offer
pursuant to Sections 3.2 and Section 4.10 or Section 4.26 hereof, as applicable,
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Sale Offer.
If the Purchase Date is on or after an interest payment record date
and on or before the related interest payment date, any interest accrued to such
Purchase Date shall be paid to the Person in whose name a Note is registered at
the close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Sale Offer.
On the Commencement Date of any Sale Offer, the Company shall send
or cause to be sent, by first class mail, postage prepaid, a notice to each of
the Holders, with a copy to the Trustee. Such notice, which shall govern the
terms of the Sale Offer, shall contain all instructions and materials necessary
to enable the Holders to tender Notes pursuant to the Asset Sale Offer and shall
state:
(1) that the Asset Sale Offer is being made pursuant to this
Section 3.9 and Section 4.10 or Section 4.26 hereof, as
appropriate, and the length of time the Sale Offer shall
remain open;
(2) the Offer Amount, the purchase price and the
Purchase Date;
(3) that any Note not tendered or accepted for payment
shall continue to accrue interest;
(4) that, unless the Company defaults in the payment
of the purchase price, any Note accepted for
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payment pursuant to the Sale Offer shall cease to
accrue interest after the Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to any
Sale Offer shall be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Company, a depositary,
if appointed by the Company, or a Paying Agent at the address
specified in the notice prior to the close of business at
least one Business Day preceding the Purchase Date;
(6) that Holders shall be entitled to withdraw their election if
the Company, depositary or Paying Agent, as the case may be,
receives, not later than the close of business on the last day
of the Offer Period, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal
amount at maturity of the Note the Holder delivered for
purchase and a statement that such Holder is withdrawing his
election to have the Note purchased;
(7) that, if the aggregate principal amount at maturity of Notes
surrendered by Holders exceeds the Offer Amount, the Trustee
shall select the Notes to be purchased on a pro rata basis
(with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(8) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount at maturity to the
unpurchased portion of the Notes surrendered.
On or before 10:00 a.m. (New York City time) on each Purchase Date,
the Company shall irrevocably deposit with the Trustee or Paying Agent in
immediately available funds the
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aggregate purchase price with respect to a principal amount at maturity of Notes
equal to the Offer Amount, together with accrued interest thereon, if any, to be
held for payment in accordance with the terms of this Section 3.9. On the
Purchase Date, the Company shall, to the extent lawful, (i) accept for payment,
pursuant to Section 3.2 hereof, an aggregate principal amount at maturity equal
to the Offer Amount of Notes tendered pursuant to the Sale Offer, or if less
than the Offer Amount has been tendered, all Notes or portions thereof tendered,
(ii) deliver or cause the Paying Agent or depositary, as the case may be, to
deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee an
Officers' Certificate stating that such Notes or portions thereof were accepted
for payment by the Company in accordance with the terms of this Section 3.9. The
Company, the depositary or Paying Agent, as the case may be, shall promptly (but
in any case not later than three Business Days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the Purchase Price with
respect to the Notes tendered by such Holder and accepted by the Company for
purchase, and the Company shall promptly issue a new Note, and the Trustee shall
authenticate and mail or deliver such new Note, to such Holder, equal in
principal amount at maturity to any unpurchased portion of such Holder's Notes
surrendered. Any Note not accepted in the Sale Offer shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce in a newspaper of general circulation or in a press release provided to
a nationally recognized financial wire service the results of the Sale Offer on
the Purchase Date.
Other than as specifically provided in this Section 3.9, each
purchase pursuant to this Section 3.9 shall be made pursuant to the provisions
of Sections 3.1, 3.2, 3.5 and 3.6 hereof.
ARTICLE 4.
COVENANTS
Section 4.1. Payment of Notes.
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The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in
this Indenture and the Notes. Principal, premium, if any, and interest payments
made in cash pursuant to the terms of the Notes shall be considered paid on the
date due if the Paying Agent, if other than the Company, holds as of 10:00 a.m.
(New York City time) on the due date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due. Such Paying Agent shall
return to the Company, no later than five days following the date of payment,
any money that exceeds such amount of principal, premium, if any, and interest
paid on the Notes. Any interest installment made by the Company in Notes, as
permitted prior to September 30, 1999, pursuant to the terms of the existing
Notes, shall be deemed paid by delivery to the Trustee of written order of the
Company signed by two Officers requesting that the Company deliver Notes (valued
at 100% of the principal amount thereof, which shall be rounded upward to the
nearest $1.00), in lieu of the interest payment due on such date; and provided
further that in the event of such a payment, the Company shall deliver a notice
specifying the amount of additional Notes deliverable on such date at least ten
(10) Business Days prior to such date.
The Company shall pay in cash interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; it shall pay in cash interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
same rate to the extent lawful.
Section 4.2. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-Registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
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served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.3 hereof.
Section 4.3. Reports.
Commencing November 15, 1997, whether or not required by the rules
and regulations of the Commission, so long as any Notes are outstanding, the
Company shall file with the Commission (unless the Commission will not accept
such a filing) and furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K, if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its Subsidiaries and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports.
The
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Company also agrees to make such information available to securities analysts
and prospective investors upon request.
The financial information to be distributed to Holders of Notes
shall be filed with the Trustee and mailed to the Holders at their addresses
appearing in the register of Notes maintained by the Registrar, within 90 days
after the end of the Company's fiscal years and within 45 days after the end of
each of the first three quarters of each such fiscal year. Notwithstanding
anything to the contrary herein, the Trustee shall have no duty to review such
documents for purposes of determining compliance with any provisions of this
Indenture.
The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information that the Trustee may
be required to deliver to the Holders under this Section 4.3.
Section 4.4. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company during the preceding fiscal year has been made
under the supervision of the signing Officer with a view to determining whether
the Company has kept, observed, performed and fulfilled its obligations under
this Indenture and the other Documents, and further stating, as to such officer
signing such certificate, that to the best of his knowledge the Company has
kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and the other Documents, and is not in default in the performance
or observance of any of the terms, provisions and conditions hereof or thereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he may have knowledge) and that to the
best of his knowledge no event has occurred and remains in existence by reason
of which payments on account of the principal of or interest, if any, on the
Notes are prohibited, or if such event has occurred, a description of the event.
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(b) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
(c) Within 45 days after the end of each of the first three fiscal
quarters of the Company's fiscal year and 90 days after the end of its fiscal
year, the Company shall deliver to the Holders and the Trustee (i) a written
statement of the principal financial officer of the Company setting forth
computations in reasonable detail showing, as at the end of such quarter or
fiscal year, the Company's compliance with the covenants set forth in Sections
4.17, 4.18, 4.19, 4.20 and 4.21 of this Indenture, and (ii) a certificate of the
president, a vice president or the principal financial officer of the Company,
stating that as of the date of such certificate, based upon such examination or
investigation and review of this Indenture as in the opinion of the signer is
necessary to enable the signer to express an informed opinion with respect
thereto, no Default or Event of Default exists or has existed during such period
or, if a Default or Event of Default shall exist or have existed, specifying all
such Defaults or Events of Default, and the nature and period of existence
thereof, and what action the Company has taken, is taking or proposes to take
with respect thereto.
Section 4.5. Taxes and Other Claims.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies or other charges that may be imposed upon the Company or any such
Subsidiary or any of their properties or assets or in respect of any of their
franchises, business, income or property before any penalty or interest accrues
thereon, and (b) all claims (including without limitation claims for labor,
services, materials and supplies) for sums that have become due and payable and
that by law have or may become a Lien (other than a Permitted Encumbrance) upon
any of their respective properties or assets, prior to the time when any penalty
or fine shall be incurred with respect thereto; provided
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<PAGE> 52
that no such taxes, assessments or governmental charges referred to in clause
(a) above or claims referred to in clause (b) above need be paid if being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, if such reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor.
Section 4.6. Stay, Extension and Usury Laws; Refund of Excess.
(a) The Company (to the extent that it may lawfully do so) shall not
at any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law wherever enacted, now
or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture, the Notes and the other Documents; and the
Company (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it shall not, by resort
to any such law, hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law has been enacted.
(b) Notwithstanding the foregoing, it is the intent of the parties
in the execution and performance of the Documents and the Notes to contract in
strict compliance with the usury laws of all applicable governmental entities
from time to time in effect. In furtherance thereof, none of the terms and
provisions contained in any Document or the Notes shall ever be construed to
create a contract to pay for the use, forbearance or detention of money with
interest at a rate in excess of the highest lawful rate permitted by the
applicable governmental entity and that for purposes hereof "interest" shall
include the aggregate of all charges which constitute interests under such laws
that are contracted for, reserved, taken, charged or received under the
Documents or the Notes. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds the highest lawful rate (but
only for such purpose), the Company shall, to the maximum extent permitted under
applicable law, (a) characterize any nonprincipal payment as an expense, fee or
premium rather than as interest; (b) exclude voluntary prepayments and the
effects thereof, and (c) "spread" the total
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<PAGE> 53
amount of interest throughout the entire contemplated term of the
Notes.
Section 4.7. Limitations on Distributions and Investments.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, make or cause or permit any Restricted Payment or
Restricted Investment.
Section 4.8. Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction on the ability of any
Subsidiary to (i) (A) pay dividends or make any other distributions to the
Company or any of its Subsidiaries (1) on its Capital Stock or (2) with respect
to any other interest or participation in, or measured by, its profits, or (B)
pay any Indebtedness owed to the Company or any of its Subsidiaries, (ii) make
loans or advances to the Company or any of its Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (A)
Existing Indebtedness as in effect on the date hereof, (B) the Working Capital
Facility as in effect on the date of the Indenture and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Working
Capital Facility, (C) the Indenture and the Notes, (D) applicable law, (E) any
agreement or instrument binding on a Person acquired by the Company or any of
its Subsidiaries, or on the property or assets of such Person, as in effect at
the time of such acquisition (except to the extent such encumbrance or
restriction was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other
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<PAGE> 54
than the Person, or the property or assets of the Person, so acquired, (F)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (G) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in this clause (iii) on the property so
acquired or (H) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced.
Section 4.9. Line of Business.
The Company shall not, and shall not permit any Subsidiary to,
engage in any business other than a Permitted Business; provided, however, that
the Company may permit the Receivables Subsidiary to engage in the business of
purchasing receivables from the Company.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Subsidiaries
to, engage in an Asset Sale unless (i) the Company (or the Subsidiary, as the
case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value (evidenced by a resolution of the Board of
Directors set forth in an Officer's Certificate delivered to the Trustee) of the
assets or Equity Interests issued or sold or otherwise disposed of and (ii) at
least 75% of the consideration therefor received by the Company or such
Subsidiary is in the form of cash; provided that the amount of (1) liabilities
of the Company or any Subsidiary in excess of $1,000,000 (as shown on the
Company's or such Subsidiary's most recent balance sheet or in the notes
thereto) that are assumed by the transferee of any such assets and (2) any notes
or other obligations received by the Company or any such Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary into
cash (to the extent of the cash received) shall be deemed to be cash for
purposes of this provision.
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Within 180 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (a) to permanently
reduce amounts outstanding under the Working Capital Facility or (b) up to $1.0
million individually or in the aggregate, to an investment in a Permitted
Business, or the making of a capital expenditure or the acquisition of other
long-term/tangible assets or other assets that would be included as property,
plant and equipment on a balance sheet in accordance with GAAP, in each case,
utilized in a Permitted Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce amounts outstanding under the
Working Capital Facility or otherwise invest such Net Proceeds in any manner
that is not prohibited herein. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company will be required to make an offer to
all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount at maturity of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount at
maturity thereof plus accrued and unpaid interest thereon to the date of
purchase, in accordance with the procedures set forth in Section 3.9 hereof. To
the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, any remaining Excess Proceeds upon
completion of such offer to purchase shall cease to be Excess Proceeds and may
be used by the Company for general corporate purposes. If the aggregate
principal amount at maturity of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis.
An Asset Sale Offer shall be made pursuant to the provisions of
Section 3.9 hereof. No later than the date which is ten (10) Business Days after
the date on which the aggregate amount of Excess Proceeds exceeds $5.0 million,
the Company shall notify the Trustee of such Asset Sale Offer in accordance with
Section 3.9 hereof and commence or cause to be commenced the Asset Sale Offer on
a date no later than ten (10) Business Days after such notice (the "Commencement
Date").
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The Asset Sale Offer shall be made by the Company in compliance with
all applicable laws, including, without limitation, Rule 14e-1 under the
Exchange Act and the rules thereunder, to the extent applicable, and all other
applicable federal and state securities laws.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Subsidiaries
to, sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make any
contract, agreement, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction") unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated Person and (ii)
the Company delivers to the Trustee (a) with respect to any Affiliate
Transaction involving aggregate consideration in excess of $1.0 million, an
Officer's Certificate setting forth a resolution of the Board of Directors to
the effect that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction involving aggregate consideration in excess of $5.0
million, an opinion issued by an investment banking firm of national standing as
to the fairness to the Company or such Subsidiary of such Affiliate Transaction
from a financial point of view. Notwithstanding the foregoing, the Company and
its Subsidiaries (i) may contribute their accounts receivables to the
Receivables Subsidiary as required by the Working Capital Facility; (ii) issue
securities, or other payments, awards or grants in cash, securities or otherwise
to a director or employee pursuant to employment arrangements, stock option and
stock ownership plans approved by the Board of Directors; (iii) make loans or
advances permitted under this Indenture to employees in the ordinary course of
Business; (iv) pay reasonable fees to directors of the Company and its
Subsidiaries; (v) enter into customary indemnification arrangements between the
Company or any Subsidiary and their
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respective directors, officers and other agents pursuant to which the Company or
such Subsidiary agrees to indemnify such directors, officers and other agents
against losses and expenses incurred by such directors, officers and other
agents in connection with their service to the Company or such Subsidiary, as
the case may be; and (vi) perform their obligations or enter into any
transactions required or contemplated by the Plan or the terms of any agreement
to which the Company or a Subsidiary is a party on the date hereof.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien on
any asset now owned or hereafter acquired or any income or profits therefrom or
assign or convey any right to receive income therefrom to secure any
Indebtedness, except:
(a) Permitted Encumbrances; and
(b) Liens upon equipment acquired after the date of this Indenture
by the Company or any of its Subsidiaries, each of which Liens was created
solely for the purpose of securing Indebtedness incurred to finance the cost of
such equipment; provided that no such Lien shall extend to or cover any
equipment of the Company or such Subsidiary other than the equipment so
acquired; and provided, further, that the principal amount of Indebtedness
secured by such Liens when aggregated with any Indebtedness secured by Liens
described in clauses (viii) and (ix) of the definition of Permitted Encumbrances
shall at no time exceed $2,000,000.
Notwithstanding the foregoing, the Company shall not permit the Receivables
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien (other than non-consensual Permitted Encumbrances) on any asset now
owned or hereafter acquired or any income or profits therefrom or assign or
convey any right to receive income therefrom to secure any Indebtedness
(including those items described in paragraphs (a) and (b) above) other than
Liens relating to the Working Capital Facility.
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Section 4.13. Sale and Lease Back Transactions.
The Company shall not, and shall not permit any Subsidiary to, enter
into any arrangement with any lender or investor or other Person or to which
such lender or investor or other Person is a party providing for the lease by
the Company or any Subsidiary of real property or any other asset that has been
or is to be sold or transferred by the Company or any Subsidiary to such lender
or investor or other Person or to any person to whom the funds have been or are
to be advanced by such lender or investor, which advance is secured by such
property, assets or rental obligations of the Company or any Subsidiary.
Section 4.14. Incurrence of Indebtedness.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness other than:
(i) the incurrence by the Receivables Subsidiary and the Company of
Indebtedness in an amount not to exceed the greater of $10,000,000 or a sum
equal to the dollar value of 85% of Eligible Collateral as defined in the
Working Capital Facility;
(ii) the incurrence by the Company of Indebtedness represented by
the Notes;
(iii) the incurrence by the Company of Indebtedness under the
Settlement Agreements;
(iv) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations or Purchase Money
Obligations, in each case incurred for the purpose of financing all or any part
of the purchase price or cost of construction or improvement of property or
purchase of equipment used in the business of the Company or such Subsidiary, in
an aggregate principal amount not to exceed $2,000,000 at any time outstanding;
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(v) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund (including the
cost thereof), Existing Indebtedness or Indebtedness that was permitted hereby
to be incurred; provided, however, that no Subsidiary shall incur Permitted
Refinancing Indebtedness in respect of Indebtedness of the Company; and
(vi) the incurrence by the Company of Indebtedness under its
Promissory Note in the amount of $400,000 to be issued to Credit Managers
Association of California, as the Third-Party Dispersing Agent, in accordance
with the Plan;
provided, however that notwithstanding anything to the contrary contained in the
foregoing, the Receivables Subsidiary shall not incur any Indebtedness other
than the Indebtedness referenced in paragraph (i) above.
For purposes of determining compliance with this covenant from time
to time, (i) in the event that an item of Indebtedness meets the criteria of
more than one type of Indebtedness permitted by this covenant, the Company in
its sole discretion will for purposes of this covenant, classify such item of
Indebtedness as only one such type and will only be required to include the
amount of such Indebtedness in such one type; and (ii) the amount of
Indebtedness issued at a price which is less than the principal amount thereof
shall be equal to the amount of liability in respect thereto determined in
accordance with GAAP.
Section 4.15. Offer to Purchase Upon Change of Control.
Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount at maturity thereof plus
accrued and unpaid interest thereon to the date of purchase (the "Change of
Control Payment").
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Within thirty (30) calendar days following any Change of Control,
the Company shall mail a notice to each Holder stating:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.15 and that all Notes properly tendered will be
accepted for payment;
(2) the purchase price and the purchase date, which will be no
earlier than 30 days nor later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date");
(3) that any Note not properly tendered will continue
to accrue interest;
(4) that, unless the Company defaults in the payment of the Change
of Control Payment, all Notes accepted for payment pursuant to
the Change of Control Offer will cease to accrue interest
after the Change of Control Payment Date;
(5) that Holders electing to have any Notes purchased pursuant to
a Change of Control Offer will be required to surrender the
Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes completed, or transfer
by book-entry, to the Paying Agent at the address specified in
the notice prior to the close of business at least one
Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than one Business Day
prior to the close of business on the Change of Control
Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal
amount at maturity of Notes delivered for purchase, and a
statement that such Holder is
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<PAGE> 61
withdrawing his election to have such Notes purchased;
(7) that Holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount at maturity to
the unpurchased portion of the Notes surrendered (or
transferred by book-entry), which unpurchased portion must be
equal to $1,000 in principal amount at maturity or an integral
multiple thereof; and
(8) the circumstances and material facts regarding such Change of
Control (including, but not limited to, information with
respect to pro forma and historical financial information
after giving effect to such Change of Control, and information
regarding the Person or Persons acquiring control).
On the Change of Control Payment Date, the Company will, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount at maturity of Notes or portions thereof tendered to
the Company. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount at maturity to any unpurchased
portion of the Notes surrendered, if any; provided that each such new Note will
be in a principal amount at maturity of $1,000 or an integral multiple thereof.
The Company will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and
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regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes as a result of a Change of Control.
Section 4.16. Corporate Existence.
Subject to Section 4.15 and Article 6 hereof, as the case may be,
the Company shall do or cause to be done all things necessary to preserve and
keep in full force and effect (i) its corporate existence, and the corporate,
partnership or other existence of each of its Subsidiaries, in accordance with
the respective organizational documents (as the same may be amended from time to
time) of the Company or any such Subsidiary, as the case may be, and (ii) the
rights (charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Subsidiaries, if the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries, taken as a
whole, and that the loss thereof is not adverse in any material respect to the
Holders of the Notes.
Section 4.17. Capital Expenditures.
Until such time as the Company shall have timely made two
consecutive semi-annual interest payments in cash on the Notes, the Company and
its Subsidiaries will not make any Capital Expenditures, except that during the
period (taken as one accounting period) (i) commencing on October 1, 1997 and
ending on December 31, 1997, the Company and its Subsidiaries may make Capital
Expenditures so long as the aggregate amount thereof does not exceed $1.25
million in such period and (ii) commencing on January 1, 1998 and ending on
December 31, 1998 and during each fiscal year thereafter, the Company and its
Subsidiaries may make Capital Expenditures so long as the aggregate amount
thereof does not exceed $5 million in any such period.
Notwithstanding anything to the contrary contained above, to the
extent that Capital Expenditures made during any
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period set forth above are less than the amount set forth for such period above,
75% of such amount may be carried forward to the immediately succeeding fiscal
year and utilized to make Capital Expenditures in excess of the amount permitted
above in the following period, provided, that (x) any amount carried forward
from the immediately preceding fiscal year, if any, shall not be utilized during
a fiscal year to make Capital Expenditures unless and until the relevant amount
set forth above for such fiscal year shall have been utilized in full to make
Capital Expenditures during such fiscal year and (y) no more than 50% of any
amount once carried forward to the next period may be carried forward to periods
again thereafter.
Section 4.18. Interest Coverage Ratio.
Until such time as the Company shall have made two consecutive
semi-annual interest payments in cash on the Notes, the Company will not permit
the ratio of its Consolidated EBITDA to its Consolidated Net Interest Expense
for any quarterly Period ended on the last day of a fiscal quarter set forth
below to be less than the ratio set forth below opposite such date:
Fiscal Quarter Ended Ratio
-------------------- -----
December 31, 1997 0.60
March 31, 1998 1.17
June 30, 1998 1.26
September 30, 1998 1.06
December 31, 1998 0.98
March 31, 1999 1.07
June 30, 1999 1.05
September 30, 1999 1.05
Section 4.19. Consolidated Indebtedness to Consolidated EBITDA.
Until such time as the Company shall have made two consecutive
semi-annual interest payments in cash on the Notes,
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the Company will not permit at any time during any quarterly period ending on a
date set forth below the ratio of (x) Consolidated Indebtedness (net of the
Company's cash on-hand) at such time to (y) Consolidated EBITDA for the
quarterly period then last ended prior to such time to be greater than the ratio
set forth below opposite such date:
Fiscal Quarter Ended Ratio
-------------------- -----
December 31, 1997 63.36
March 31, 1998 33.09
June 30, 1998 29.95
September 30, 1998 35.60
December 31, 1998 38.30
March 31, 1999 36.37
June 30, 1999 37.13
September 30, 1999 37.13
Section 4.20. Maintenance of Adjusted Consolidated Net Worth.
[Intentionally omitted]
Section 4.21. Maintenance of Consolidated EBITDA.
Until such time as the Company shall have made two consecutive
semi-annual interest payments in cash, for each four-fiscal quarter period of
the Company ending on the dates set forth below, the Consolidated EBITDA of the
Company at the end of such period shall be equal to or greater than the
applicable amount set forth across from such fiscal quarter:
Fiscal Quarter Ended Minimum Consolidated EBITDA
-------------------- ---------------------------
December 31, 1997 $1,143,006
March 31, 1998 2,225,492
June 30, 1998 2,392,900
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September 30, 1998 2,007,951
December 31, 1998 1,852,765
March 31, 1999 2,021,002
June 30, 1999 1,999,461
September 30, 1999 1,999,461
Section 4.22. Amendments or Waivers of Certain Related
Agreements.
Except with respect to the change of the Company's name to
Bio-Cypher Laboratories Ltd., neither the Company nor any of its Subsidiaries
will agree to any amendment to, or waive any of its rights under, any Document
without in each case obtaining the prior written consent of Holders of at least
a majority in principal amount at maturity of the then outstanding Notes to such
amendment or waiver. In addition, so long as 66 2/3% of the principal amount of
the then outstanding Notes are held by the Initial Holders, neither the Company
nor any of its Subsidiaries will agree to any amendment to, or waive any of its
rights under, Articles I, III, IV or VII of the certificate of incorporation or
Sections 3, 6, 7, 8, 10, 11, 12, 13 and 39 of the by-laws of the Company or the
documents evidencing the Working Capital Facility without in each case obtaining
the prior written consent of Holders of at least a majority in principal amount
at maturity of the then outstanding Notes to such amendment or waiver.
Section 4.23. Maintenance of Properties.
The Company shall, and shall cause each of its Subsidiaries to,
maintain, preserve, protect and keep their properties in good repair, working
order and condition (ordinary wear and tear excepted), and make necessary and
proper repairs, renewals and replacements so that the business carried on in
connection therewith may be properly conducted at all times consistent with past
practices of the Company, except to the extent that any expenditure required to
comply with this Section 4.23 would otherwise be restricted or prohibited by any
other covenant or provision in this Indenture or any other Document. The
covenants set forth herein shall be in addition to
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any and all other covenants of the Company and its Subsidiaries made in the
other Documents with respect to their real, personal and other property.
Section 4.24. Maintenance of Insurance.
The Company shall, and shall cause each of its Subsidiaries to,
maintain insurance in such amounts and covering such risks as is usually carried
by companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company operates. All insurance shall be
maintained with insurance carriers having an A.M. Best & Co.
rating of "A-" or better.
Section 4.25. Restriction on Subsidiaries.
The Company shall not, directly or indirectly, create or suffer to
exist, any Subsidiary of the Company (other than the Receivables Subsidiary), or
allow any of its Subsidiaries to have Subsidiaries, unless (i) such newly
created or acquired Subsidiary is a Wholly Owned Subsidiary of the Company or
one of the Company's Wholly Owned Subsidiaries; (ii) contemporaneously with the
formation of a new Subsidiary, the Company or the Subsidiary forming such
Subsidiary, pledges the stock of such newly formed Subsidiary to the Trustee for
the benefit of the Noteholders and such newly formed Subsidiary executes a
guaranty and a security agreement, each in form and substance acceptable to the
majority Holders; and (iii) immediately after giving effect to such Subsidiary
becoming a Subsidiary of the Company, there is no Default or Event of Default.
Section 4.26. Redemption upon Public Offering of Capital Stock.
Not later than the date which is thirty-five (35) Business Days after the
date on which the Company consummates any underwritten public offering of the
Capital Stock of the Company registered under the Securities Act, the Company
shall notify the Trustee of such public equity offering in accordance with
Section 3.9 hereof and commence or cause to be commenced an offer to all Holders
of Notes (the "Public Equity Offer") to purchase the maximum principal amount at
maturity of Notes that may be
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purchased out of 35% of the net proceeds received by the Company from such
public equity offering of the Company's Capital Stock (the "Equity Net
Proceeds"), at an offer price in cash in an amount equal to 100% of the
principal amount at maturity thereof plus accrued and unpaid interest thereon to
the date of purchase. To the extent that the aggregate amount of Notes tendered
pursuant to a Public Equity Offer is less than the Equity Net Proceeds, any
remaining Equity Net Proceeds upon completion of such offer shall cease to be
Equity Net Proceeds and may be used by the Company for general corporate
purposes. If the aggregate principal amount at maturity of Notes surrendered by
the Holders thereof exceeds the amount of Equity Net Proceeds, the Trustee shall
select the Notes to be purchased on a pro rata basis.
Section 4.27. Issuance of Preferred Stock.
The Company shall not, and shall not permit any Subsidiary to, issue
any preferred stock.
ARTICLE 5.
SECURITY
Section 5.1. Security.
The performance of the Company shall be secured by the Collateral.
The Trustee is hereby directed to enter into the Collateral Documents.
Section 5.2. Recording, etc.
The Company will have caused or will cause this Indenture and the
Collateral Documents and all amendments or supplements to each of the foregoing
to be registered, recorded and filed and/or rerecorded, re-filed and renewed in
such manner and in such place or places, if any, as may be required by law or
reasonably requested by the Trustee or the Holders of at least a majority of the
principal amount at maturity of the then outstanding Notes in order fully to
preserve and protect the Lien and the perfection of the Lien of the Indenture
and the Collateral Documents on all parts of the Collateral to effectuate
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and preserve the security of the Holders without interruption and all rights of
the Trustee and the Holders. The Company will provide the Trustee, within 90
days after the end of each fiscal year of the Company, an Officers' Certificate
certifying that all actions reasonably necessary to fully preserve and protect
the Lien of the Indenture have been taken.
The Company and any other obligor shall cause TIA ss. 314(d)
relating to the release of Collateral from the Liens under the Collateral
Documents to be complied with. Any certificate or opinion required by TIA ss.
314(d) may be made by any Officer; provided, however, that to the extent
required by TIA ss. 314(d), any such certificate or opinion shall be made by an
Independent Person.
Section 5.3. Suits to Protect the Collateral.
To the extent permitted thereunder, the Trustee or the Holders of at
least a majority in principal amount at maturity of the then outstanding Notes
shall have power to institute and to maintain such suits and proceedings as it
or they may deem expedient to prevent any impairment of the Collateral by any
acts that may be unlawful or in violation of the Collateral Documents or this
Indenture, and such suits and proceedings as the Trustee or such Holders may
deem expedient to preserve or protect the interests of the Trustee and the
interests of the Holders in the Collateral and the Collateral Documents or this
Indenture, and in the profits, rents, revenues and other income arising
therefrom, including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the Collateral or be prejudicial to the interests of the Holders or
the Trustee.
ARTICLE 6.
SUCCESSORS
Section 6.1. Merger, Consolidation, or Sale of Assets.
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The Company may not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another Person unless (i) the
Company is the surviving corporation or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Company
under the Notes and the Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately after such
transaction, and after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable periods, no Default or Event of
Default shall have occurred and be continuing; and (iv) the Company or the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made will have Adjusted
Consolidated Net Worth immediately after the transaction equal to or greater
than the Adjusted Consolidated Net Worth of the Company immediately preceding
the transaction.
Section 6.2. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 6.1 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and
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not to the Company), and may exercise every right and power of the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; provided, however, in the case of any sale, assignment,
transfer, lease, conveyance or other disposition of less than all of the assets
of the Company, the Company shall not be released or discharged from the
obligation to pay the principal of or interest on the Notes.
ARTICLE 7.
DEFAULTS AND REMEDIES
Section 7.1. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest on any Note when
the same becomes due and payable and such Default continues for a period
of five (5) Business Days;
(b) the Company defaults in the payment or deposit of Liquidated
Damages when the same become due and payable (or are required to be
deposited with the Trustee) in accordance with the provisions of Section 1
of the Registration Rights Agreement and such Default continues for a
period of five (5) Business Days;
(c) the Company defaults in the payment of principal of or premium,
if any, on the Notes when the same becomes due and payable at maturity,
upon redemption or otherwise;
(d) the Company fails to comply with the provisions of Sections 4.7
(with respect to Restricted Payments other than as provided in clause
(iii) of the definitions of Restricted Payments), 4.10, 4.12 (with respect
to consensual Liens), 4.14 (with respect to the incurrence of any
Indebtedness in an individual amount or in the aggregate in excess of
$100,000), 4.15, 4.25, 4.26, 4.27 or 6.1 hereof, which failure shall be an
Event of Default without the notice or passage of time;
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(e) the Company fails to comply with any other agreement or covenant
in, or provision of, the Notes or this Indenture or any other Document for
thirty (30) days after notice from the Trustee or Holders of at least 25%
in aggregate principal amount at maturity of the then outstanding Notes;
provided that no notice shall be required to commence such thirty (30) day
period in the case of Section 4.12;
(f) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) whether such Indebtedness or Guarantee now exists, or
is created after the date of this Indenture, which default (i) is caused
by a failure to pay when due the final scheduled principal installment on
the stated maturity thereof prior to the expiration of the grace period
set forth in the documents governing such Indebtedness (a "Payment
Default") or (ii) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more;
(g) at any time after the execution and delivery thereof, (i) any
Collateral Documents shall cease to be in full force and effect in any
material respect (other than by reason of a release of Collateral
thereunder in accordance with the terms hereof or thereof, the
satisfaction in full of the Indenture Obligations or any other termination
of such Collateral Documents in accordance with the terms hereof or
thereof) or shall be declared null and void, or the Trustee shall not have
or shall cease to have a valid and perfected First Priority Lien in any
Collateral purported to be covered thereby, in each case for any reason
other than the failure of the Trustee or any Holder to take any action
within its control, or (iii) any of the Company
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or any of its Subsidiaries shall contest the validity or enforceability of
any Document in writing or deny in writing that it has any further
liability under any Collateral Documents to which it is a party;
(h) the Company or any of its Subsidiaries fails to pay final
judgments reasonably determined not to be covered by insurance maintained
by or for the benefit of the Company or its Subsidiaries aggregating in
excess of $5.0 million if (A) any creditor has commenced an enforcement
proceeding with respect to such final judgments or (B) such final
judgments are not paid, discharged or stayed within 60 days of their
entry;
(i) the Company or any Subsidiary that is a Significant Subsidiary
or group of Subsidiaries that, together, would constitute a Significant
Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case in which it is the debtor,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) admits in writing its inability generally to pay its debts
as the same become due;
(j) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any Subsidiary that
is a Significant Subsidiary or group of Subsidiaries that, together,
would constitute a
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Significant Subsidiary of the Company in an involuntary case in
which it is the debtor,
(ii) appoints a Custodian of the Company or any Subsidiary
that is a Significant Subsidiary or group of Subsidiaries that,
together, would constitute a Significant Subsidiary of the Company
or for all or substantially all of the property of the Company or
any Subsidiary that is a Significant Subsidiary or group of
Subsidiaries that, together, would constitute a Significant
Subsidiary of the Company, or
(iii) orders the liquidation of the Company or any Subsidiary
that is a Significant Subsidiary or group of Subsidiaries that,
together, would constitute a Significant Subsidiary of the Company,
and the order or decree remains unstayed and in effect for 60 consecutive days.
Section 7.2. Acceleration and Payment of Premium.
If an Event of Default (other than an Event of Default with respect
to the Company specified in clauses (i) and (j) of Section 7.1 hereof) occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount at maturity of the then outstanding Notes by written notice to the
Company (and the Trustee, if given by Holders) may declare the unpaid principal
of, premium, if any, and accrued and unpaid interest on all the Notes to be due
and payable and the same (i) shall become immediately due and payable or (ii) if
there are any amounts outstanding under the Working Capital Facility, shall
become due and payable upon the first to occur of an acceleration under the
Working Capital Facility or five business days after receipt by the Company and
the administrative agent under the Working Capital Facility of notice of such
acceleration under the Indenture if such Event of Default is continuing at such
time. If an Event of Default with respect to the Company specified in clause (i)
or (j) of Section 7.1 hereof occurs, all outstanding Notes shall ipso facto
become and be immediately due and payable
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without any declaration or other act on the part of the Trustee
or any Holder.
The Holders of a majority in principal amount at maturity of the then
outstanding Notes by written notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived.
Section 7.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture or to realize upon any Collateral.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 7.4. Waiver of Past Defaults.
Holders of a majority in aggregate principal amount at maturity of
the Notes then outstanding, by notice to the Trustee, may on behalf of the
Holders of all of the Notes waive any existing Default or Event of Default and
its consequences under this Indenture, except a continuing Default or Event of
Default in the payment of the principal of, premium, if any, or interest on, the
Notes. Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
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Section 7.5. Control by Majority.
Holders of a majority in principal amount at maturity of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders or that may involve the
Trustee in personal liability. The Trustee may take any other action which it
deems proper which is not inconsistent with any such direction.
Section 7.6. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes if:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default or the Trustee receives such notice from the Company;
(b) the Holders of at least 25% in principal amount at maturity of
the then outstanding Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount at maturity of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
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A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
Section 7.7. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal of, premium, if any, and
interest on the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
Section 7.8. Collection Suit by Trustee.
If an Event of Default specified in Section 7.1(a) or (b) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company or any other
obligor for the whole amount of principal of, premium, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel and
all other amounts due the Trustee pursuant to Section 8.7 hereof.
Section 7.9. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby
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authorized by each Holder to make such payments to the Trustee, and in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 8.7 hereof. To
the extent that the payment of any such compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 8.7 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
Section 7.10. Priorities.
If the Trustee collects any money pursuant to this Article 7, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 8.7 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the
costs and expenses of collection;
Second: to Holders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Notes for principal, premium, if any, and interest, respectively;
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Third: without duplication, to Holders for any other Obligations
owing to the Holders under this Indenture or the Notes; and
Fourth: to the Company or to such other party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders pursuant to this Section 7.10.
Section 7.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 7.7 hereof, or a suit by Holders of more than 10% in
principal amount at maturity of the then outstanding Notes.
ARTICLE 8.
TRUSTEE
Section 8.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of
Default:
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(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture or the TIA and the Trustee need
perform only those duties that are specifically set forth in this
Indenture or the TIA and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee;
and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 8.1;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 7.5 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section 8.1.
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(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 8.2. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
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(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company. A permissive right granted to the Trustee
hereunder shall not be deemed an obligation to act.
(f) The Trustee shall not be charged with knowledge of any Default
or Event of Default unless either (i) a Responsible Officer of the Trustee shall
have actual knowledge of such Default or Event of Default or (ii) written notice
of such Default or Event of Default shall have been given to the Trustee by the
Company or any Holder.
Section 8.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the Commission
for permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties.
Section 8.4. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 8.5. Notice of Defaults.
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If a Default or Event of Default occurs and is continuing and if it
is known to a Responsible Officer of the Trustee, the Trustee shall mail to the
Holders of the Notes a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default in payment
on any Note pursuant to Section 7.1(a) or (b) hereof, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders.
Section 8.6. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 1, beginning with the May 1 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders a brief report dated as of such reporting date
that complies with TIA Section 313(a) (but if no event described in TIA Section
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee shall also comply with TIA Section
313(b). The Trustee shall also transmit by mail all reports as required by TIA
Section 313(c).
A copy of each report at the time of its mailing to the Holders
shall be mailed to the Company and filed with the Commission and each stock
exchange on which the Notes are listed in accordance with TIA Section 313(d).
The Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
Section 8.7. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
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The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 8.7), and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 8.7 shall survive
the resignation or removal of the Trustee and the satisfaction and discharge of
this Indenture.
To secure the Company's payment obligations in this Section 8.7, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the resignation or removal
of the Trustee and the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 7.1(i) or (j) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
Section 8.8. Replacement of Trustee.
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A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 8.8.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount at maturity of the then outstanding Notes may
remove the Trustee by so notifying the Trustee and the Company in writing. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 8.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount at maturity of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder fails to comply
with Section 8.10 hereof, such Holder of a Note may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
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A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
8.7 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
8.8, the Company's obligations under Section 8.7 hereof shall continue for the
benefit of the retiring Trustee.
Section 8.9. Successor Trustee by Merger, etc.
If the Trustee or any Agent consolidates, merges or converts into,
or transfers all or substantially all of its corporate trust business to another
corporation, the successor corporation without any further act shall be the
successor Trustee or Agent.
Section 8.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has (a) a combined capital and surplus of
at least $50.0 million as set forth in its most recent published annual report
of condition or (b) is a member of a bank holding company with a combined
capital and surplus of at least $50.0 million as set forth in its most recent
published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5).
The Trustee is subject to TIA Section 310(b).
Section 8.11. Preferential Collection of Claims Against Company.
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The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 9.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 9.1. Option to Effect Legal Defeasance or Covenant
Defeasance.
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate and at any time, elect to
have either Section 9.2 or 9.3 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 9.
Section 9.2. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 9.1 hereof of the option
applicable to this Section 9.2, the Company shall, subject to the satisfaction
of the conditions set forth in Section 9.4 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 9.5 hereof and the other Sections of this Indenture
referred to in (a) and (b) of this Section 9.2, and to have satisfied all its
other obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest on such Notes when such payments are due from the trust
referred to below, or on the redemption date, as the case may be, (b) the
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Company's obligations with respect to such Notes under Sections 2.3, 2.6, 2.7,
2.10 and 4.2 hereof, (c) the rights, powers, trust, duties and immunities of the
Trustee hereunder and the Company's obligations in connection therewith and (d)
this Article 9. Subject to compliance with this Article 9, the Company may
exercise its option under this Section 9.2 notwithstanding the prior exercise of
its option under Section 8.3 hereof.
Section 9.3. Covenant Defeasance.
Upon the Company's exercise under Section 9.1 hereof of the option
applicable to this Section 9.3, the Company shall, subject to the satisfaction
of the conditions set forth in Section 9.4 hereof, be released from its
obligations under the covenants contained in Sections 3.9, 4.5, 4.7, 4.8, 4.9,
4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22, 4.23,
4.24, 4.25, 4.26, 4.27 and 6.1 hereof with respect to the outstanding Notes on
and after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Notes, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Sections 7.1(a) through 7.1(h) hereof, but, except as specified above, the
remainder of this Indenture, such Notes shall be unaffected thereby. In
addition, upon the Company's exercise under Section 9.1 hereof of the option
applicable to this Section 9.3 hereof, subject to the satisfaction of the
conditions set forth in
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Section 9.4 hereof, Sections 7.1(a) through 7.1(h) hereof shall not constitute
Events of Default.
Section 9.4. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 9.2 or 9.3 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company shall irrevocably have deposited or caused to be
irrevocably deposited with the Trustee (or another trustee satisfying the
requirements of Section 8.10 who shall agree to comply with the provisions
of this Article 9 applicable to it) as trust funds in trust for the
purpose of making the following payments, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of such Notes,
(i) cash in Dollars in an amount, or (ii) non-callable Government
Securities which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide, not later
than one day before the due date of any payment, cash in Dollars in an
amount, or (iii) a combination thereof, in such amounts, as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge the principal
of, premium, if any, and interest on the outstanding Notes on the stated
maturity or on the applicable redemption date, as the case may be, of such
principal or installment of principal of, premium, if any, and interest on
the outstanding Notes, provided that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such
non-callable Government Securities to said payments with respect to the
Securities;
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(b) in the case of an election under Section 9.2 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there
has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 9.3 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of
the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit) or, insofar as Sections 7.1(i) and 7.1(j) hereof are concerned,
at any time in the period ending on the 91st day after the date of such
deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period);
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company
or any of its
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Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, (A)
no Event of Default under Sections 7.1(i) and 7.1(j) hereof shall have
occurred and (B) the trust funds are not, as of the date of such opinion,
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 9.5. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions.
Subject to Section 9.6 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 9.5, the
"Trustee") pursuant to Section 9.4 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
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The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 9.4 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 9 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 9.4 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 9.4(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 9.6. Repayment to Company.
The Trustee shall promptly pay to the Company, after written request
therefor, any money held at such time in excess of the amounts required to pay
any of the Company's Obligations then owing with respect to the Notes.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, interest or Liquidated Damages, if any, on any Note and remaining unclaimed
for one year after such principal, and premium, if any, or interest, if any,
have become due and payable shall be paid to the Company on its request or (if
then held by the Company) shall be discharged from such trust; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the
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Company cause to be published once, in The New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
Section 9.7. Reinstatement.
If the Trustee or Paying Agent is unable to apply any cash or
non-callable Government Securities in accordance with Section 9.2 or 9.3 hereof,
as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 9.2 or 9.3 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 9.2 or 9.3 hereof,
as the case may be; provided, however, that, if the Company makes any payment of
principal of, premium, if any, or interest, if any, on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 10.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 10.1. Without Consent of Holders of Notes.
Notwithstanding Section 10.2 hereof, the Company and the Trustee may
amend or supplement this Indenture or the Notes without the consent of any
Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to
or in place of certificated Notes;
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(c) to provide for the assumption of the Company's obligations under
this Indenture to the Holders in the case of a merger or consolidation;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Note; or
(e) to comply with requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon receipt
by the Trustee of the documents described in Section 10.6 hereof, the Trustee
shall join with the Company in the execution of any amended or supplemental
indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into such amended or
supplemental indenture that affects its own rights, duties or immunities under
this Indenture or otherwise.
Section 10.2. With Consent of Holders of Notes.
Except as provided below in this Section 10.2, the Company and the
Trustee may amend or supplement this Indenture or the Notes with the consent of
the Holders of at least a majority in principal amount at maturity of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange offer for the Notes), and any existing Default or Event of Default
(other than a Default or Event of Default in the payment of the principal of,
premium, if any, or interest on the Notes, except a payment default resulting
from an acceleration that has been rescinded) or compliance with any provision
of this Indenture or the Notes may be waived with the consent of the Holders of
a majority in principal amount at maturity of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for the Notes).
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Upon the request of the Company accompanied by a Board Resolution,
authorizing the execution of any such amended or supplemental indenture, and
upon the filing with the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 10.6 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental indenture
unless such amended or supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 10.2 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 10.2
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture or waiver. Subject to Sections 7.4 and 7.7 hereof, the Holders of a
majority in aggregate principal amount at maturity of the Notes then outstanding
may waive any existing default or compliance in a particular instance by the
Company with any provision of this Indenture or the Notes. Without the consent
of each Holder affected, however, an amendment or waiver may not (with respect
to any Note held by a non-consenting Holder);
(a) reduce the principal amount at maturity of Notes whose Holders
must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity date of any
Note, alter any of the provisions with respect to the redemption of the
Notes or alter the price at which the Company must offer to purchase the
Notes pursuant to an Asset Sale Offer or any Change of Control Offer;
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(c) reduce the rate of or change the time for payment of interest on
any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount at maturity thereof and a waiver of the payment
default that resulted from such acceleration), including any payment
pursuant to an Asset Sale Offer or a Change of Control Offer;
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of, premium, if any, or interest on the Notes.
(g) waive a redemption or purchase payment with respect to any Note;
or
(h) make any change in the foregoing amendment and waiver
provisions.
The Holders of at least a majority in principal amount at maturity
of the then outstanding Notes may release any portion of the Collateral
constituting less than all or substantially all of the Collateral from the Liens
granted under the Collateral Documents without compliance with the other
requirements of this Indenture, unless this Indenture previously has been
qualified under the TIA and the TIA prohibits such a release.
Section 10.3. Compliance with Trust Indenture Act.
From the date on which this Indenture is qualified under the TIA,
every amendment to this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
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Section 10.4. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder of a Note may revoke the
consent as to its Note if the Trustee receives written notice of revocation
before the date the waiver, supplement or amendment becomes effective. An
amendment, supplement or waiver becomes effective in accordance with its terms
and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record date
for determining which Holders must consent to such amendment or waiver. If the
Company fixes a record date, the record date shall be fixed at (i) the later of
30 days prior to the first solicitation of such consent or the date of the most
recent list of Holders furnished to the Trustee prior to such solicitation
pursuant to Section 2.5 hereof or (ii) such other date as the Company shall
designate.
Section 10.5. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
Section 10.6. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 10 if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment
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or supplemental indenture until the Board of Directors of the Company approves
it. In signing or refusing to sign any amended or supplemental indenture, the
Trustee shall be entitled to receive and (subject to Section 8.1 hereof) shall
be fully protected in relying upon, in addition to the documents required by
Section 11.4 hereof, an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that such amendment or supplemental indenture is authorized
or permitted by this Indenture, that it is not inconsistent herewith, and that
it will be valid and binding upon the Company in accordance with its terms.
ARTICLE 11.
MISCELLANEOUS
Section 11.1. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA Section 318(c), the imposed duties shall control.
Section 11.2. Notices.
Any notice or communication by the Company or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
Physicians Clinical Laboratory, Inc.
3301 C Street, Suite 100E
Sacramento, California 95816
Attention: J. Marvin Feigenbaum
Facsimile No.: (916) 498-6030
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If to the Trustee:
First Trust National Association
First Trust Center
180 East 5th Street, Suite 200
St. Paul, Minnesota 55101
Attention: Richard Prokosch
Facsimile No.: (612) 244-0711
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication to Holders is mailed in the manner
provided above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 11.3. Communication by Holders of Notes with Other
Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA Section
312(c).
Section 11.4. Certificate and Opinion as to Conditions
Precedent.
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Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.5 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants provided for in this Indenture relating
to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.5 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
Section 11.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
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(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 11.6. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 11.7. No Personal Liability of Directors, Officers,
Employees and Stockholders.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company shall have any liability for any obligations of
the Company under the Notes, any guarantee thereof or this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
Section 11.8. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS INDENTURE AND THE NOTES.
Section 11.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture,
loan or debt agreement of the Company or its Subsidiaries or of any other
Person. Any such indenture, loan or debt agreement may not be used to interpret
this Indenture.
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Section 11.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
Section 11.14. Trustee To Include Paying Agent.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 11 shall in such case (unless the context
shall otherwise require) be construed as extending to and including such Paying
Agent within its meaning as fully and for all intents and purposes as if such
Paying Agent were named in this Article 11 in place of the Trustee.
[Signatures on following page]
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<PAGE> 102
SIGNATURES
PHYSICIANS CLINICAL LABORATORY,
INC.
By:_______________________________
J. Marvin Feigenbaum
Chief Operating Officer
FIRST TRUST NATIONAL ASSOCIATION
By:_______________________________
Name:
Title:
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<PAGE> 103
Exhibit A
(Face of Note)
SENIOR SECURED NOTES DUE 2004
No. $
PHYSICIANS CLINICAL LABORATORY, INC.
promises to pay to
or registered assigns,
the principal sum of $
on September 30, 2004.
Interest Payment Dates: March 1 and October 1.
Record Dates: February 15 and September 15.
Dated: September 30, 1997
PHYSICIANS CLINICAL LABORATORY,
INC.
By:___________________________________
Name:_________________________________
Title:________________________________
Trustee's Certificate of Authentication:
This is one of the Notes
referred to in the
within-mentioned Indenture:
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FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By:_________________________________
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<PAGE> 105
(Back of Security)
SENIOR SECURED NOTES DUE 2004
of
PHYSICIANS CLINICAL LABORATORY, INC.
Capitalized terms used herein have the meanings assigned to them in
the Indenture (referred to below) unless otherwise indicated.
1. Interest. Physicians Clinical Laboratory, Inc., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount at
maturity of the Senior Secured Notes due 2004 (the "Notes") of which this Note
is a part at the rate and in the manner specified below.
During the period beginning on the date of issuance hereof and
ending on September 30, 1999, the Company shall pay interest on the principal
amount at maturity of this Note at a rate of 12% per annum by delivery of
additional Notes (valued at 100% of the principal amount thereof, which shall be
rounded upward to the nearest $1.00) in lieu of cash in satisfaction of the
interest payment due at such time; provided that the Company may elect in its
sole discretion to make any such interest payment in cash, and in such event,
the applicable interest rate shall be 10% per annum, by so notifying the Trustee
in writing sixty (60) days before the date on which such payment is due;
provided, further, that the Company may not make any interest payment on the
Notes by issuing additional Notes following the date on which it makes a cash
interest payment on the Notes. Commencing October 1, 1999 and continuing through
September 30, 2004, the Company shall pay interest on the principal amount at
maturity of this Note at a rate of 11% per annum, which amount shall increase 1%
on each October 1 thereafter and shall be paid by the Company in cash. The
Company will pay interest, or issue additional Notes in lieu of cash interest
payments as provided herein and in the Indenture, semi-annually in arrears on
March 1 and October 1 of each year, commencing on March 1, 1998, or if any such
day is not a Business Day (as defined in the Indenture), on the next succeeding
Business Day (each an "Interest Payment
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Date") to Holders of record on the immediately preceding February 15 and
September 15.
Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months. Interest shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
the original issuance of the Notes. To the extent lawful, the Company shall pay
interest on overdue principal at the rate of 1% per annum in excess of the then
applicable interest rate on the Notes; it shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) at the
same rate to the extent lawful.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on February 15 and September 15 next preceding the
Interest Payment Date, even if such Notes are cancelled after such record date
and on or before such Interest Payment Date, except as provided in Section 2.12
of the Indenture with respect to defaulted interest. The Notes will be payable
as to principal, premium, if any, and interest at the office or agency of the
Company maintained in the City of New York; provided however, payment of
interest may be made by check mailed to the Holders at their addresses set forth
in the register of Holders. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. Paying Agent and Registrar. Initially, the Trustee under the
Indenture will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-registrar without notice to any Holder. The
Company may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated
as of September 30, 1997 (the "Indenture") between the Company and First Trust
National Association, as Trustee. The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code Sections
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(77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject
to all such terms, and Holders of the Notes are referred to the Indenture and
such act for a statement of such terms. The terms of the Indenture shall govern
any inconsistencies between the Indenture and the Notes. The Notes are general
Obligations of the Company secured by a Lien on the Collateral (as defined in
the Indenture) and are limited to fifty-five million dollars ($55,000,000.00) in
aggregate principal amount at maturity, plus amounts, if any, sufficient to pay
interest and premium, if any, on outstanding Notes as set forth in Paragraph 1
hereof.
5. Optional Redemption. The Notes will be subject to redemption at
the option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at a redemption price equal to 100% of the principal
amount thereof at maturity plus accrued and unpaid interest thereon to the
applicable redemption date; provided that the Notes shall be redeemed pursuant
to this paragraph 5 only in integral multiples of $1,000,000, unless the Notes
to be redeemed from any Holder pursuant to this paragraph 5 constitute all of
the Notes held by such Holder, in which case amounts redeemed hereunder need not
be in integral multiples of $1,000,000.
6. Mandatory Redemption. Except as set forth under Section 3.9,
Section 4.10, Section 4.15 and Section 4.26 of the Indenture, the Company shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
7. Repurchase at the Option of Holders. (a) Upon the occurrence of a
Change of Control, each Holder shall have the right to require the Company to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes pursuant to the offer described in the Indenture (the
"Change of Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount at maturity thereof plus accrued and unpaid interest,
if any, thereon to the date of purchase.
(b) When the aggregate amount of Excess Proceeds from Asset Sales
exceeds $5.0 million, the Company shall make an offer to all Holders of Notes to
purchase the maximum principal amount
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at maturity of Notes that may be purchased out of the Excess Proceeds, at an
offer price in cash in an amount equal to 100% of the principal amount at
maturity thereof plus accrued and unpaid interest thereon to the date of
purchase in accordance with the procedures set forth in Section 3.9 of the
Indenture. If the aggregate principal amount at maturity of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use such remaining Excess Proceeds for general
corporate purposes.
(c) Following the consummation by the Company of an underwritten
public offering of the Company's Capital Stock registered under the Securities
Act, the Company shall make an offer to all Holders of Notes to purchase the
maximum principal amount at maturity of Notes that may be purchased out of
Equity Net Proceeds at an offer price in cash equal to 100% of the principal
amount at maturity thereof plus accrued and unpaid interest thereon to the date
fixed for the closing of such offer, in accordance with the procedures set forth
in the Indenture. If the aggregate principal amount at maturity of Notes
surrendered by Holders thereof exceeds the amount of Equity Net Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. To the
extent that the aggregate amount of Notes tendered pursuant to the Public Equity
Offer is less than Equity Net Proceeds, the Company may use such remaining
Equity Net Proceeds for general corporate purposes.
(d) Holders that are the subject of an offer to purchase will
receive a Change of Control Offer, Asset Sale Offer or Public Equity Offer from
the Company prior to any related purchase date, and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
appearing below.
8. Notice of Redemption. Notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at its registered address. Except as provided in
paragraph 5 hereof,
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Notes may be redeemed in part but only in whole multiples of $1,000, unless all
of the Notes held by a Holder are to be redeemed. On and after the redemption
date, interest ceases to accrue on Notes or portions thereof called for
redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not exchange or register the transfer of any Note or portion of a
Note selected for redemption or purchase, except for the unredeemed or
unpurchased portion of any Note being redeemed or repurchased in part. Also, it
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or repurchased during the period
between a record date and the corresponding interest payment date.
10. Persons Deemed Owners. The registered holder of a Note shall be
treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Notes may be amended with the consent of the Holders of at
least a majority in principal amount at maturity of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes), and any existing Default or Event of Default (other than a Default
or Event of Default in the payment of the principal of, premium, if any, or
interest on the Notes, except a payment default resulting from an acceleration
that has been rescinded) or compliance with any provision of the Indenture or
the Notes may be waived with the consent of the Holders of a majority in
principal amount at maturity of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes). Without
the consent of any Holder, the Indenture or the Notes may be amended to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the
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assumption of the Company's obligations under the Indenture to Holders in the
case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders or that does not adversely affect
the legal rights of any Holder under the Indenture, or to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the TIA.
Notwithstanding the foregoing, without the consent of each Holder
affected, an amendment or waiver may not (with respect to any Notes held by a
non-consenting Holder): (i) reduce the principal amount at maturity of Notes
whose Holders must consent to an amendment, supplement or waiver, (ii) reduce
the principal or change the fixed maturity date of any Note or alter the
provisions with respect to the redemption of the Notes, or alter the price at
which the Company must offer to purchase the Notes pursuant to an Asset Sale
Offer or a Change of Control Offer, (iii) reduce the rate of or change the time
for payment of interest, on any Note, (iv) waive a Default or Event of Default
in the payment of principal of or premium, if any, or interest, on the Notes
(except a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount at maturity thereof and a waiver of the
payment default that resulted from such acceleration), including any payment
pursuant to an Asset Sale Offer or a Change of Control Offer, (v) make any note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of notes to receive payments of principal of, premium, if any,
or interest on the Notes, (vii) waive a redemption or purchase payment with
respect to any Note or (viii) make any change in the foregoing amendment and
waiver provisions. The Holders of at least a majority in principal amount at
maturity of the then outstanding Notes may release any portion of the Collateral
constituting less than all or substantially all of the Collateral from Liens
granted under the Collateral Documents without compliance with the other
requirements of the Indenture, unless the Indenture has previously been
qualified under the TIA and the TIA prohibits such a release.
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12. Defaults and Remedies. Events of Default occur if: (a) the
Company defaults in the payment of interest on the Notes when the same becomes
due and payable and such default continues for a period of five (5) Business
Days; (b) the Company defaults in the payment or deposit of Liquidated Damages
when the same become due and payable (or are required to be deposited with the
Trustee) in accordance with the provisions of Section 1 of the Registration
Rights Agreement and such Default continues for a period of five (5) Business
Days; (c) the Company defaults in the payment of principal of or premium, if
any, on the Notes when the same becomes due and payable at maturity, upon
redemption or otherwise; (d) the Company fails to comply with the provisions of
Sections 4.7 (with respect to Restricted Payments other than as provided in
clause (iii) of the definitions of Restricted Payments), 4.10, 4.12 (with
respect to consensual Liens), 4.14 (with respect to the incurrence of any
Indebtedness in an individual amount or in the aggregate in excess of $100,000),
4.15, 4.25, 4.26, 4.27 or 6.1 of the Indenture, which failure shall be an Event
of Default without the notice or passage of time; (e) the Company fails to
comply with any other agreement or covenant in, or provision of, the Notes, the
Indenture or any other document for thirty (30) days after notice from the
Trustee or Holders of at least 25% in aggregate principal amount at maturity of
the then outstanding Notes; provided that no notice shall be required to
commence such thirty (30) day period in the case of Section 4.12 of the
Indenture; (f) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created
after the date of the Indenture, which default (i) is caused by a failure to pay
when due the final scheduled principal installment on the stated maturity
thereof prior to the expiration of the grace period set forth in the documents
governing such Indebtedness (a "Payment Default") or (ii) results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so
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accelerated, aggregates $5.0 million or more; (g) at any time after the
execution and delivery thereof, (i) any Collateral Documents shall cease to be
in full force and effect in any material respect (other than by reason of a
release of Collateral thereunder in accordance with the terms hereof or thereof,
the satisfaction in full of the Indenture Obligations or any other termination
of such Collateral Documents in accordance with the terms hereof or thereof) or
shall be declared null and void, or the Trustee shall not have or shall cease to
have a valid and perfected First Priority Lien in any Collateral purported to be
covered thereby, in each case for any reason other than the failure of the
Trustee or any Holder to take any action within its control, or (iii) any of the
Company or any of its Subsidiaries shall contest the validity or enforceability
of any Document in writing or deny in writing that it has any further liability
under any Collateral Documents to which it is a party; (h) the Company or any of
its Subsidiaries fails to pay final judgments reasonably determined not to be
covered by insurance maintained by or for the benefit of the Company or its
Subsidiaries aggregating in excess of $5.0 million, if (A) any creditor has
commenced an enforcement proceeding with respect to such final judgments or (B)
such final judgments are not paid, discharged or stayed within 60 days of their
entry; or (i) certain events of bankruptcy with respect to the Company or any
Subsidiary that is a Significant Subsidiary or group of Subsidiaries that,
together, would constitute a Significant Subsidiary.
If an Event of Default (other than an Event of Default with respect
to the Company specified in clauses (i) and (j) of Section 7.1 of the Indenture)
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount at maturity of the then outstanding Notes may declare all the
Notes to be due and payable and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Working Capital
Facility (as defined in the Indenture), shall become due and payable upon the
first to occur of an acceleration under the Working Capital Facility or five
business days after receipt by the Company and the administrative agent under
the Working Capital Facility of notice of such acceleration under the Indenture
if such Event of Default is continuing at
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such time. If an Event of Default with respect to the Company specified in
clause (i) or (j) of Section 7.1 of the Indenture occurs, all outstanding Notes
shall become ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority of principal amount at maturity of the
then outstanding Notes by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal or interest that has become due solely because of the acceleration)
have been cured or waived.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee. However, in the event that
the Trustee acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue as trustee or
resign.
14. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator or stockholder, as such, of the Company shall
have any liability for any obligations of the Company under the Notes, any
guarantee thereof or the Indenture or for any claim based on, in respect of or
by reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (=
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tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
17. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
18. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THE NOTES.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Request may be made to:
Physicians Clinical Laboratory, Inc.
3301 C Street, Suite 100E
Sacramento, California 95816
Attention: Mr. J. Marvin Feigenbaum
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Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign
and transfer this Note to
_______________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
_______________________________________________________________________________
Date: _____________
Your Signature:___________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee.
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<PAGE> 116
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10, 4.15 or 4.26 of this Indenture, check the box below:
___ Section 4.10 ___ Section 4.15 ___ Section 4.26
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10, Section 4.15 or Section 4.26 of the Indenture,
state the amount you elect to have purchased: $___________
Date: ___________ Your Signature: ___________________________
(Sign exactly as your name appears on the Note)
Tax Identification No.: ______________________
Signature Guarantee.
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<PAGE> 117
Schedule I
LIENS
Liens to be released upon Closing:
1. Los Angeles County
Judgment Lien - 8/22/96 - $1,063,643.38
Medical Group Pathology Laboratory, Inc.
2. Sacramento County
Judgment Lien - 8/22/96 - $1,063,643.38
Medical Group Pathology Laboratory, Inc.
3. Santa Barbara County
Judgment Lien - 8/21/96 - $1,063,643.38
Medical Group Pathology Laboratory, Inc.
4. Los Angeles County
Judgment Lien - 8/15/96 - $71,532.40
CB Commercial Real Estate Group
5. Orange County
Judgment Lien - 8/15/96 - $71,532.40
CB Commercial Real Estate Group
6. Riverside County
Judgment Lien - 8/15/96 - $71,532.40
CB Commercial Real Estate Group
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<PAGE> 118
7. Sacramento County
Judgment Lien - 8/15/96 - $71,532.40
CB Commercial Real Estate Group
8. San Bernardino County
Judgment Lien - 8/15/96 - $71,532.40
CB Commercial Real Estate Group
9. Ventura County
Judgment Lien - 8/15/96 - $71,532.40
CB Commercial Real Estate Group
10. Merced County
Leasehold Deed of Trust - 4/1/94
Wells Fargo Bank
11. Los Angeles County
Leasehold Deed of Trust - 11/29/95
Wells Fargo Bank
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<PAGE> 119
Schedule II
INITIAL HOLDERS
Initial Holder: Amount:
- --------------- -------
Oaktree $18,629,000.00
(Cun & Co., as Nominee)
Galileo 3,793,000.00
(Goldman Sachs & Co., FFC The
Galileo Fund, L.P., as Nominee)
Copernicus 3,793,000.00
(Goldman Sachs & Co., FFC DDJ
Copernicus Fund, L.P., as Nominee)
Belmont I 11,696,000.00
(Goldman Sachs & Co., as Nominee)
Belmont II 12,328,000.00
(Dol & Co., as Nominee)
Cerberus
(Cerberus Partners, L.P.) 4,761,000.00
--------------
TOTAL: $55,000,000.00
==============
A-17
<PAGE> 1
- --------------------------------------------------------------------------------
SECURITY AGREEMENT
Dated as of September 30, 1997
between
PHYSICIANS CLINICAL LABORATORY, INC.
and
FIRST TRUST NATIONAL ASSOCIATION
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
Section 1. Definitions and Interpretation........................... 1
1.01 Certain Defined Terms.................................... 1
Section 2. Collateral............................................... 4
2.01 Grant.................................................... 4
2.02 Intellectual Property.................................... 6
2.03 Perfection............................................... 6
2.04 Preservation and Protection of Security Interests........ 7
2.05 AttorneyinFact........................................... 8
2.06 Use of Intellectual Property............................. 9
2.07 Instruments.............................................. 9
2.08 Use of Collateral....................................... 10
2.09 Rights and Obligations.................................. 10
2.10 Release of Motor Vehicles............................... 10
2.11 Termination............................................. 11
2.11 Subordination and Release Prior to Termination.......... 11
Section 3. Representations and Warranties.......................... 11
3.01 Title................................................... 11
3.02 Intellectual Property................................... 12
3.03 Goods................................................... 12
Section 4. Covenants............................................... 12
4.01 Books and Records....................................... 12
4.02 Removals, Etc........................................... 13
4.03 Sales and Other Liens................................... 13
4.04 Intellectual Property................................... 14
4.05 Further Assurances...................................... 15
Section 5. Remedies................................................ 15
5.01 Events of Default, Etc.................................. 15
5.02 Deficiency.............................................. 17
5.03 Private Sale............................................ 17
5.04 Application of Proceeds................................. 18
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<PAGE> 3
Section 6. Miscellaneous........................................... 18
6.01 Waiver.................................................. 18
6.02 Notices................................................. 19
6.03 Expenses, Etc........................................... 20
6.04 Amendments, Etc......................................... 20
6.05 Successors and Assigns.................................. 20
6.06 Survival................................................ 20
6.07 Agreements Superseded................................... 20
6.08 Severability............................................ 20
6.09 Captions................................................ 21
6.10 Counterparts............................................ 21
6.11 GOVERNING LAW........................................... 21
ANNEX 1 - LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS
AND APPLICATIONS FOR COPYRIGHT REGISTRATION
ANNEX 2 - LIST OF PATENTS AND PATENT APPLICATIONS
ANNEX 3 - LIST OF TRADE NAMES, TRADEMARKS, SERVICE
MARKS, TRADEMARK AND SERVICE MARK REGISTRATIONS
AND APPLICATIONS FOR TRADEMARK AND SERVICE MARK
REGISTRATIONS
ANNEX 4 - LIST OF CONTRACTS, LICENSES AND OTHER
AGREEMENTS
ANNEX 5 - LIST OF LOCATIONS
ANNEX 6 - DEPOSIT ACCOUNTS
- ii -
<PAGE> 4
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") dated as of September 30,
1997 is made between Physicians Clinical Laboratory, Inc. (the "Company") and
First Trust National Association (the "Trustee").
R E C I T A L S
A. Concurrently with the execution hereof, the Company is entering
into that certain Indenture, dated the date hereof (the "Indenture"), with the
Trustee.
B. The Indenture provides for the issuance by the Company of its
Senior Secured Notes Due 2004, in an aggregate principal amount of $55,000,000
on the date hereof. Any Person that holds any of the Senior Notes now or
hereafter shall be referred to herein as a "Noteholder".
C. To induce the Trustee to enter into the Indenture and the other
documents related thereto, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company has agreed
to pledge and grant a security interest in the Collateral (as hereinafter
defined) as security for the Secured Obligations (as hereinafter defined).
A G R E E M E N T
Now therefore, in consideration of the above recitals and other
consideration and the mutual covenants hereinafter set forth, the parties hereto
agree as follows:
Section 1. Definitions and Interpretation.
1.01 Certain Defined Terms. Unless otherwise defined, all
capitalized terms used in this Agreement that are defined in the Indenture
(including those terms incorporated by reference) shall have the respective
meanings assigned to them in the Indenture and shall be interpreted in
accordance with Sections 1.3 and 1.4 of the Indenture. In addition, the
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<PAGE> 5
following terms shall have the following meanings under this Agreement:
"Accounts" shall have the meaning assigned to that term in Section
2.01(a).
"Collateral" shall have the meaning assigned to that term in Section
2.01.
"Copyright Collateral" shall mean all Copyrights, whether now owned
or hereafter acquired by the Company, including each Copyright identified in
Annex 1.
"Copyrights" shall mean, collectively, (a) all copyrights, copyright
registrations and applications for copyright registrations, (b) all renewals and
extensions of all copyrights, copyright registrations and applications for
copyright registration and (c) all rights, now existing or hereafter coming into
existence, (i) to all income, royalties, damages and other payments (including
in respect of all past, present or future infringements) now or hereafter due or
payable under or with respect to any of the foregoing, (ii) to sue for all past,
present and future infringements with respect to any of the foregoing and (iii)
otherwise accruing under or pertaining to any of the foregoing throughout the
world.
"Documents" shall have the meaning assigned to that term in Section
2.01(e).
"Equipment" shall have the meaning assigned to that term in Section
2.01(d).
"Governmental Approvals" shall mean any authorization, consent,
approval, license, lease, ruling, permits, waiver, exemption, filing,
registration or notice by or with any Governmental Person.
"Governmental Person" shall mean any national (Federal or foreign),
state or local government, any political subdivision or any governmental,
quasi-governmental, judicial, public or statutory instrumentality, authority,
agency, body or corpora-
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<PAGE> 6
tion, the Comptroller of the Currency, the Board of Governors of the Federal
Reserve System, any central bank or any comparable authority.
"Instruments" shall have the meaning assigned to that term in
Section 2.01(b).
"Intellectual Property" shall mean all Copyright Collateral, all
Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information, know-how,
trade secrets, computer software, source codes, mask works, and technology; (b)
all licenses or user or other agreements granted to the Company with respect to
any of the foregoing, in each case whether now or hereafter owned or used,
including the licenses or other agreements with respect to the Copyright
Collateral, the Patent Collateral or the Trademark Collateral listed in Annex 4;
(c) all information, customer lists, advertising, identification of suppliers,
data, plans, blueprints, specifications, designs, drawings, recorded knowledge,
surveys, engineering reports, test reports, manuals, materials standards,
processing standards, performance standards, catalogs, computer and automatic
machinery software and programs; (d) all field repair data, sales data and other
information relating to sales or service of products now or hereafter
manufactured; (e) all accounting information and all media in which or on which
any information or knowledge or data or records may be recorded or stored and
all computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all Governmental Approvals now held or hereafter
obtained by the Company in respect of any of the foregoing; and (g) all causes
of action, claims and warranties now owned or hereafter acquired by the Company
in respect of any of the foregoing. It is understood that Intellectual Property
shall include all of the foregoing owned or acquired by the Company on a
worldwide basis.
"Inventory" shall have the meaning assigned to that term in Section
2.01(c).
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<PAGE> 7
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title to any such property is governed
by a certificate of title or ownership.
"Patent Collateral" shall mean all Patents, whether now owned or
hereafter acquired by the Company, including each Patent identified in Annex 2.
"Patents" shall mean, collectively, (a) all patents and patent
applications, (b) all reissues, divisions, continuations, renewals, extensions
and continuations-in-part of all patents or patent applications and (c) all
rights, now existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of all past,
present and future infringements) now or hereafter due or payable under or with
respect to any of the foregoing, (ii) to sue for all past, present and future
infringements with respect to any of the foregoing and (iii) otherwise accruing
under or pertaining to any of the foregoing throughout the world, including all
inventions and improvements described or discussed in all such patents and
patent applications.
"Secured Obligations" shall mean (a) any and all Indenture
Obligations and (b) any and all obligations of the Company for the performance
of its agreements, covenants and undertakings under or in respect of the
Documents.
"Signing Date" shall mean the date of this Agreement.
"Trademark Collateral" shall mean all Trademarks, whether now owned
or hereafter acquired by the Company, including each Trademark identified in
Annex 3. Notwithstanding the foregoing, the Trademark Collateral shall not
include any Trademark which would be rendered invalid, abandoned, void or
unenforceable by reason of its being included as part of the Trademark
Collateral.
"Trademarks" shall mean, collectively, (a) all trade names,
trademarks and service marks, logos, trademark and service mark registrations
and applications for trademark and service mark registrations, (b) all renewals
and extensions of any of the
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<PAGE> 8
foregoing and (c) all rights, now existing or hereafter coming into existence,
(i) to all income, royalties, damages and other payments (including in respect
of all past, present and future infringements) now or hereafter due or payable
under or with respect to any of the foregoing, (ii) to sue for all past, present
and future infringements with respect to any of the foregoing and (iii)
otherwise accruing under or pertaining to any of the foregoing throughout the
world, together, in each case, with the product lines and goodwill of the
business connected with the use of, or otherwise symbolized by, each such trade
name, trademark and service mark.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect in the State of California from time to time or, by reason of
mandatory application, any other applicable jurisdiction.
Section 2. Collateral.
2.01 Grant. As collateral security for the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) and
performance of the Secured Obligations, the Company hereby pledges and grants to
the Trustee a security interest in all of the Company's right, title and
interest in and to the following property, whether now owned or hereafter
acquired by the Company and whether now existing or hereafter coming into
existence (collectively, the "Collateral"):
(a) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Company constituting a right to the payment of
money, whether or not earned by performance, including all moneys due and to
become due to the Company in repayment of any loans or advances, in payment for
goods (including Inventory and Equipment) sold or leased or for services
rendered, in payment of tax refunds and in payment of any guarantee of any of
the foregoing (collectively, the "Accounts");
(b) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the
-5-
<PAGE> 9
Company evidencing, representing, arising from or existing in respect of,
relating to, securing or otherwise supporting the payment of, any of the
Accounts (collectively, the "Instruments");
(c) all inventory (as defined in the Uniform Commercial Code) and
all other goods (including Motor Vehicles) of the Company that are held by the
Company for sale, lease or furnishing under a contract of service (including to
its Subsidiaries or Affiliates), that are so leased or furnished or that
constitute raw materials, work in process or material used or consumed in its
business, including all spare parts and related supplies, all goods obtained by
the Company in exchange for any such goods, all products made or processed from
any such goods and all substances, if any, commingled with or added to any such
goods (collectively, the "Inventory");
(d) all equipment (as defined in the Uniform Commercial Code) and
all other goods (including Motor Vehicles) of the Company that are used or
bought for use primarily in its business, including all spare parts and related
supplies, all goods obtained by the Company in exchange for any such goods, all
substances, if any, commingled with or added to such goods and all upgrades and
other improvements to such goods, in each case to the extent not constituting
Inventory (collectively, the "Equipment");
(e) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of the Company covering, evidencing or representing
Inventory or Equipment (collectively, the "Documents");
(f) all contracts and other agreements of the Company relating to
the sale or other disposition of all or any part of the Inventory, Equipment or
Documents and all rights, warranties, claims and benefits of the Company against
any Person arising out of, relating to or in connection with all or any part of
the Inventory, Equipment or Documents of the Company, including any such rights,
warranties, claims or benefits against any Person storing or transporting any
such Inventory or Equipment or issuing any such Documents;
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<PAGE> 10
(g) all other accounts or general intangibles of the Company not
constituting Accounts, including, (i) to the extent related to all or any part
of the other Collateral, all books, correspondence, credit files, records,
invoices, tapes, cards, computer runs and other papers and documents in the
possession or under the control of the Company or any computer bureau or service
company from time to time acting for the Company and (ii) all clinical
laboratory licenses issued to or held by the Company and all other licenses,
permits, approvals or authorizations of any kind or nature relating to the
laboratory testing business or any other business in which the Company may at
any time be engaged; and all contracts, contract rights, undertakings, franchise
agreements, other agreements, whether written or oral in or under which the
Company may now or hereafter have any right, title or interest, including,
without limitation, with respect to an Account, any agreement relating to the
terms of payment or the terms of performance thereof;
(h) all other tangible and intangible property of the Company,
including all Intellectual Property;
(i) all of the Company's rights, title, estate and interest, whether
now existing or hereafter acquired, in and to any and all deposit accounts (as
defined in the Uniform Commercial Code) including, without limitation, those
identified on Annex 6 hereto (collectively, the "Deposit Accounts"); and
(j) all proceeds and products in whatever form of all or any part of
the other Collateral, including all proceeds of insurance and all condemnation
awards and all other compensation for any casualty event with respect to all or
any part of the other Collateral (together with all rights to recover and
proceed with respect to the same), and all accessories to, substitutions for and
replacements of all or any part of the other Collateral.
2.02 Intellectual Property. Solely for the purpose of enabling the
Trustee to exercise its rights, remedies, powers and privileges under Section 5
at such time or times as the Trustee shall be lawfully entitled to exercise such
rights, remedies, powers and privileges, and for no other purpose, the Company
hereby grants to the Trustee, to the extent assignable,
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<PAGE> 11
an irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to the Company) to use, assign, license or sublicense any of
the Intellectual Property of the Company, together with reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout of such items.
2.03 Perfection. Concurrently with the execution and delivery of
this Agreement, the Company shall (i) file such financing statements and other
documents in such offices as shall be necessary or as the Trustee may reasonably
request to perfect and establish the priority (subject only to Liens permitted
under Section 4.12 of the Indenture) of the Liens granted by this Agreement,
(ii) deliver and pledge to the Trustee any and all Instruments, endorsed or
accompanied by such instruments of assignment and transfer in such form and
substance as the Trustee may request, (iii) cause the Trustee (to the extent
requested by the Trustee) to be listed as the lienholder on all certificates of
title or ownership relating to Motor Vehicles owned by the Company and deliver
to the Trustee originals of all such certificates of title or ownership for the
Motor Vehicles together with the odometer statements for each respective Motor
Vehicle and (iv) take all such other actions as shall be necessary or as the
Trustee may request to perfect and establish the priority (subject only to such
permitted Liens) of the Liens granted by this Agreement.
2.04 Preservation and Protection of Security Interests. The Company
shall:
(a) upon the acquisition after the Signing Date by the Company of
any Instrument, promptly deliver and pledge to the Trustee all such Instruments,
endorsed or accompanied by such instruments of assignment and transfer in such
form and substance as the Trustee may request;
(b) upon the acquisition after the Signing Date by the Company of
any Motor Vehicle, promptly deliver to the Trustee originals of the certificates
of title or ownership for such Motor Vehicles with the Trustee listed as
lienholder, together
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<PAGE> 12
with the manufacturer's statement of origin and odometer statements;
(c) without limiting the obligations of the Company under Section
2.04(b), upon the acquisition after the Signing Date by the Company of any
Equipment covered by a certificate of title or ownership, promptly cause the
Trustee to be listed as the lienholder on such certificate of title and within
120 days of the acquisition of such Equipment deliver evidence of the same to
the Trustee;
(d) upon the Company's acquiring, or otherwise becoming entitled to
the benefits of, any Copyright (or copyrightable material), Patent (or
patentable invention), Trademark (or associated goodwill) or other Intellectual
Property or upon or prior to the Company's filing, either directly or through
any agent, licensee or other designee, of any application with any Governmental
Person for any Copyright, Patent, Trademark, or other Intellectual Property, in
each case after the Signing Date, execute and deliver such contracts, agreements
and other instruments as the Trustee may request to evidence, validate, perfect
and establish the priority (subject only to Liens permitted under Section 4.12
of the Indenture) of the Liens granted by this Agreement in such and any related
Intellectual Property and, if requested by the Trustee, amend Annex 1, 2 or 3
(as the case may be) to reflect the inclusion of any such Intellectual Property
as part of the Collateral (it being understood that the failure to amend any
such Annex shall not affect the Liens granted by this Agreement on any such
Intellectual Property); and
(e) give, execute, deliver, file or record any and all financing
statements, notices, contracts, agreements or other instruments, obtain any and
all Governmental Approvals and take any and all steps that may be necessary or
as the Trustee may request to create, perfect, establish the priority (subject
only to Liens permitted under Section 4.12 of the Indenture) of, or to preserve
the validity, perfection or priority (subject only to such permitted Liens) of,
the Liens granted by this Agreement or to enable the Trustee to exercise and
enforce its rights, rem-
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<PAGE> 13
edies, powers and privileges under this Agreement with respect to such Liens.
2.05 Attorney-in-Fact.
(a) Subject to the rights of the Company under Sections 2.06, 2.07,
2.08 and 2.09, the Trustee is hereby appointed the attorney-in-fact of the
Company for the purpose of carrying out the provisions of this Agreement and
taking any action and executing any instruments which the Trustee may deem
necessary or advisable to accomplish the purposes of this Agreement, to preserve
the validity, perfection and priority (subject only to Liens permitted under
Section 4.12 of the Indenture) of the Liens granted by this Agreement and,
following any Default, to exercise its rights, remedies, powers and privileges
under this Agreement. This appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing, the
Trustee shall be entitled under this Agreement upon the occurrence and
continuation of any Event of Default (i) to ask, demand, collect, sue for,
recover, receive and give receipt and discharge for amounts due and to become
due under and in respect of all or any part of the Collateral; (ii) to receive,
endorse and collect any Instruments or other drafts, instruments, documents and
chattel paper in connection with clause (i) above (including any draft or check
representing the proceeds of insurance or the return of unearned premiums);
(iii) to file any claims or take any action or proceeding that the Trustee may
deem necessary or advisable for the collection of all or any part of the
Collateral, including the collection of any compensation due and to become due
under any contract or agreement with respect to all or any part of the
Collateral; and (iv) to execute, in connection with any sale or disposition of
the collateral under Section 5, any endorsements, assignments, bills of sale or
other instruments of conveyance or transfer with respect to all or any part of
the Collateral.
(b) Without limiting the rights and powers of the Trustee under
Section 2.05(a), the Company hereby appoints the Trustee as its
attorney-in-fact, effective the Signing Date and terminating upon the
termination of this Agreement, for the purpose of (i) executing on behalf of the
Company title or
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<PAGE> 14
ownership applications for filing with appropriate state agencies to enable
Motor Vehicles now owned or hereafter acquired by the Company to be retitled and
the Trustee to be listed as lienholder as to such Motor Vehicles, (ii) filing
such applications with such state agencies and (iii) executing such other
documents and instruments on behalf of, and taking such other action in the name
of, the Company as the Trustee may deem necessary or advisable to accomplish the
purposes of this Agreement (including the purpose of creating in favor of the
Trustee a perfected lien on the Motor Vehicles and exercising the rights and
remedies of the Trustee under Section 6). This appointment as attorney-in-fact
is irrevocable and coupled with an interest.
2.06 Use of Intellectual Property. Subject to such action not
otherwise constituting a Default and so long as no Event of Default shall have
occurred and be continuing, the Company will be permitted to exploit, use,
enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of the
business of the Company. In furtherance of the foregoing, so long as no Event of
Default shall have occurred and be continuing, the Trustee shall from time to
time, upon the request of the Company, execute and deliver any instruments,
certificates or other documents, in the form so requested, which such Company
shall have certified are appropriate (in its judgment) to allow them to take any
action permitted above (including relinquishment of the license provided
pursuant to Section 2.02 as to any specific Intellectual Property). The exercise
of rights, remedies, powers and privileges under Section 5 by the Trustee shall
not terminate the rights of the holders of any licenses or sublicenses
theretofore granted by the Company in accordance with the first sentence of this
Section 2.06.
2.07 Instruments. So long as no Event of Default shall have occurred
and be continuing, the Company may retain for collection in the ordinary course
of business any Instruments obtained by it in the ordinary course of business,
and the Trustee shall, promptly upon the request, and at the expense of, the
Company, make appropriate arrangements for making any Instruments pledged by the
Company available to the Company for purposes of presentation, collection or
renewal. Any such
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<PAGE> 15
arrangement shall be effected, to the extent deemed appropriate by the Trustee,
against trust receipt or like document.
2.08 Use of Collateral. So long as no Event of Default shall have
occurred and be continuing, the Company shall, in addition to its rights under
Sections 2.06, 2.07 and 2.08 in respect of the Collateral contemplated in those
sections, be entitled to use and possess the other Collateral and to exercise
its rights, title and interest in all contracts, agreements, licenses and
Governmental Approvals, subject to the rights, remedies, powers and privileges
of the Trustee under Section 5.
2.09 Rights and Obligations.
(a) The Company shall remain liable to perform its duties and
obligations under the contracts and agreements included in the Collateral in
accordance with their respective terms to the same extent as if this Agreement
had not been executed and delivered. The exercise by the Trustee of any right,
remedy, power or privilege in respect of this Agreement shall not release the
Company from any of its duties and obligations under such contracts and
agreements. The Trustee shall have no duty, obligation or liability under such
contracts and agreements or in respect to any Governmental Approval included in
the Collateral by reason of this Agreement or any other Document, nor shall the
Trustee be obligated to perform any of the duties or obligations of the Company
under any such contract or agreement or any such Governmental Approval or to
take any action to collect or enforce any claim (for payment) under any such
contract or agreement or Governmental Approval.
(b) No Lien granted by this Agreement in the Company's right, title
and interest in any contract, agreement or Governmental Approval shall be deemed
to be a consent by the Trustee to any such contract, agreement or Governmental
Approval.
(c) No reference in this Agreement to proceeds or to the sale or
other disposition of Collateral shall authorize the Company to sell or otherwise
dispose of any Collateral except to the extent otherwise expressly permitted by
the terms of any Document.
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<PAGE> 16
(d) The Trustee shall not be required to take steps necessary to
preserve any rights against prior parties to any part of the Collateral.
2.10 Release of Motor Vehicles. So long as no Event of Default shall
have occurred and be continuing, upon the request of, and at the expense of, the
Company, the Trustee shall execute and deliver to the Company such instruments
as the Company shall reasonably request to remove the notation of the Trustee as
lienholder on any certificate of title for any Motor Vehicle; provided that any
such instruments shall be delivered, and the release shall be effective, only
upon receipt by the Trustee of a certificate from the Company stating that the
Motor Vehicle the Lien on which is to be released is to be sold in the ordinary
course of business or has suffered a casualty loss (with title passing to the
appropriate casualty insurance company in settlement of the claim for such
loss).
2.11 Termination. When all Secured Obligations shall have been paid
in full, this Agreement shall terminate, and the Trustee shall forthwith cause
to be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any and all remaining
Collateral and money received in respect of the Collateral, to or on the order
of the Company and to be released, canceled and granted back all licenses and
rights referred to in Section 2.02. The Trustee shall also execute and deliver
to the Company upon such termination such Uniform Commercial Code termination
statements, certificates for terminating the Liens on the Motor Vehicles and
such other documentation as shall be reasonably requested by the Company to
effect the termination and release of the Liens granted by this Agreement on the
Collateral.
2.11 Subordination and Release Prior to Termination. The Trustee
hereby acknowledges that pursuant to the Intercreditor and Subordination
Agreement dated as of September 30, 1997, the security interest in Accounts and
Instruments granted pursuant to Sections 2.01(a) and 2.01(b) is expressly
subordinated to the security interest granted by the Company to Daiwa Healthco-2
LLC and the rights of the parties with respect thereto are as set forth in such
intercreditor agreement.
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<PAGE> 17
Section 3. Representations and Warranties. As of the Signing Date,
the Company represents and warrants to the Trustee as follows:
3.01 Title. The Company is the sole beneficial owner of the
Collateral in which it purports to grant a Lien pursuant to this Agreement, and
such Collateral is free and clear of all Liens, except for the Liens granted to
the Trustee pursuant to this Agreement and the Liens permitted under Section
4.12 of the Indenture. The Liens granted by this Agreement in favor of the
Trustee have attached and constitute a perfected security interest in all of
such Collateral (other than Intellectual Property registered or otherwise
located outside of the United States of America) prior to all other Liens
(except such permitted Liens).
3.02 Intellectual Property.
(a) Annexes 1, 2 and 3 set forth completely and correctly all
Copyrights, Patents and Trademarks owned by the Company on the Signing Date;
except pursuant to licenses and other user agreements entered into by the
Company in the ordinary course of business and listed in Annex 4, the Company
owns and possesses the right to use, and has done nothing to authorize or enable
any other Person to use, any Copyright, Patent or Trademark listed in Annex 1, 2
or 3; all registrations listed in Annexes 1, 2 and 3 are valid and in full force
and effect; and, except as may be set forth in Annex 4 the Company owns and
possesses the right to use all Copyrights, Patents and Trademarks listed in
Annexes 1, 2 and 3.
(b) Annex 4 sets forth completely and correctly all licenses and
other user agreements included in the Intellectual Property on the Signing Date.
(c) To the Company's knowledge, (i) except as set forth in Annex 4,
there is no violation by others of any right of the Company with respect to any
Copyright, Patent or Trademark listed in Annex 1, 2 or 3 and (ii) the Company is
not infringing in any respect upon any Copyright, Patent or Trademark of any
other Person; and no proceedings have been instituted, are
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<PAGE> 18
pending against the Company or, to the Company's knowledge, have been threatened
against, and no claim has been received by, the Company, alleging any such
violation, except as may be set forth in Annex 4.
(d) The Company does not own any Trademarks registered in the United
States of America to which the last sentence of the definition of Trademark
Collateral applies.
3.03 Goods. Any goods now or hereafter manufactured or otherwise
produced by the Company or any of its Subsidiaries included in the Collateral
have been and will be produced in compliance with the requirements of the Fair
Labor Standards Act.
Section 4. Covenants.
4.01 Books and Records. The Company shall:
(a) keep full and accurate books and records relating to the
Collateral and stamp or otherwise mark such books and records in such manner as
the Trustee may reasonably require in order to reflect the Liens granted by this
Agreement;
(b) furnish to the Trustee from time to time (but, unless a Default
shall have occurred and be continuing, no more frequently than quarterly)
statements and schedules further identifying and describing the Copyright
Collateral, the Patent Collateral and the Trademark Collateral and such other
reports in connection with the Copyright Collateral, the Patent Collateral and
the Trademark Collateral, as the Trustee may reasonably request, all in
reasonable detail;
(c) prior to filing, either directly or through an agent, licensee
or other designee, any application for any Copyright, Patent or Trademark,
furnish to the Trustee prompt notice of such proposed filing; and
(d) permit representatives of the Trustee, upon reasonable notice,
at any time during normal business hours to inspect and make abstracts from its
books and records pertaining
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<PAGE> 19
to the Collateral, permit representatives of the Trustee to be present at the
Company's place of business to receive copies of all communications and
remittances relating to the Collateral and forward copies of any notices or
communications received by the Company with respect to the Collateral, all in
such manner as the Trustee may request.
4.02 Removals, Etc. Without at least 30 days' prior written notice
to the Trustee, the Company shall not (i) maintain any of its books and records
with respect to the Collateral at any office or maintain its principal place of
business at any place, or permit any Inventory or Equipment to be located
anywhere, other than at the address initially indicated for notices to it under
Section 6 or at one of the locations identified in Annex 5 or in transit from
one of such locations to another or (ii) except with respect to the change of
the Company's name to Bio-Cypher Laboratories Ltd., change its corporate name,
or the name under which it does business, from the name shown on the signature
pages to this Agreement.
4.03 Sales and Other Liens. Without the prior written consent of the
Trustee, the Company shall not dispose of any Collateral, create, incur, assume
or suffer to exist any Lien (other than Liens permitted under Section 4.12 of
the Indenture) upon any Collateral or file or suffer to be on file or authorize
to be filed, in any jurisdiction, any financing statement or like instrument
with respect to all or any part of the Collateral in which the Trustee is not
named as the sole secured party for its own benefit; provided, however, that the
Company shall, without the consent of the Trustee, be allowed, (i) to dispose of
obsolete Collateral in the ordinary course of business, and (ii) provided that
no Event of Default shall have occurred and be continuing, to dispose of
Collateral in the ordinary course of business.
4.04 Intellectual Property.
(a) The Company (either itself or through licensees) will, for each
Trademark, (i) to the extent consistent with past practice and good business
judgment, continue to use such Trademark on each and every trademark class of
goods applicable to its
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<PAGE> 20
current line as reflected in its current catalogs, brochures and price lists in
order to maintain such Trademark in full force and effect free from any claim of
abandonment for nonuse, (ii) maintain as in the past the quality of products and
services offered under such Trademark, (iii) employ such Trademark with the
appropriate notice of registration and (iv) not (and not permit any licensee or
sublicensee to) do any act or knowingly omit to do any act whereby any Trademark
material to the conduct of its business may become invalidated.
(b) The Company (either itself or through licensees) will not do any
act or knowingly omit to do any act whereby any Patent material to the conduct
of its business may become abandoned or dedicated.
(c) The Company shall notify the Trustee immediately if it knows or
has reason to know that any Intellectual Property material to the conduct of its
business may become abandoned or dedicated, or of any adverse determination or
development (including the institution of, or any such determination or
development in, any proceeding before any Governmental Person) regarding the
Company's ownership of any Intellectual Property material to its business, its
right to copyright, patent or register the same (as the case may be), or its
right to keep, use and maintain the same.
(d) The Company will take all necessary steps that are consistent
with good business practices in any proceeding before any appropriate
Governmental Person to maintain and pursue each application relating to any
Intellectual Property (and to obtain the relevant registrations) and to maintain
each registration material to the conduct of its business, including payment of
maintenance fees, filing of applications for renewal, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings.
(e) In the event that any Intellectual Property material to the
conduct of its business is infringed, misappropriated or diluted by a third
party, the Company shall notify the Trustee within (10) days after it learns of
such event and shall, if consistent with good business practice, promptly sue
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<PAGE> 21
for infringement, misappropriation or dilution, seek temporary restraints and
preliminary injunctive relief to the extent practicable, seek to recover any and
all damages for such infringement, misappropriation or dilution and take such
other actions as are appropriate under the circumstances to protect such
Collateral.
(f) The Company shall, through counsel acceptable to the Trustee,
prosecute diligently any application for any Intellectual Property pending as of
the Signing Date or thereafter made until the termination of this Agreement,
make application on uncopyrighted but copyrightable material, unpatented but
patentable inventions and unregistered but registerable Trademarks and preserve
and maintain all rights in applications for any Intellectual Property; provided,
however, that the Company shall have no obligation to make any such application
if making such application would be unnecessary or imprudent in the good faith
business judgment of the Company. Any expenses incurred in connection with such
an application shall be borne by the Company. The Company shall not abandon any
right to file an application for any Intellectual Property or any pending such
application in the United States without the consent of the Trustee, which
consent shall not be unreasonably withheld.
(g) The Trustee shall have the right but shall in no way be
obligated to bring suit in its own name to enforce the Copyrights, Patents and
Trademarks and any license under such Intellectual Property, in which event the
Company shall, at the request of the Trustee, do any and all lawful acts and
execute and deliver any and all proper documents reasonably required by the
Trustee in aid of such enforcement action.
4.05 Further Assurances. The Company agrees that, from time to time
upon the written request of the Trustee, the Company will execute and deliver
such further documents and do such other acts and things as the Trustee may
reasonably request in order fully to effect the purposes of this Agreement.
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<PAGE> 22
Section 5. Remedies.
5.01 Events of Default, Etc. If any Event of Default shall have
occurred and be continuing:
(a) The Trustee in its discretion may require the Company to, and
the Company shall, assemble the Collateral owned by it at such place or places,
reasonably convenient to both the Trustee and the Company, designated in the
Trustee's request;
(b) the Trustee in its discretion may make any reasonable compromise
or settlement it deems desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or otherwise
modify the terms of, all or any part of the Collateral;
(c) the Trustee in its discretion may, in its name or in the name of
the Company or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for all
or any part of the Collateral, but shall be under no obligation to do so;
(d) the Trustee in its discretion may, upon ten business days' prior
written notice to the Company of the time and place, with respect to all or any
part of the Collateral which shall then be or shall thereafter come into the
possession, custody or control of the Trustee or any of its agents, sell, lease
or otherwise dispose of all or any part of such Collateral, at such place or
places as the Trustee deems best, for cash, for credit or for future delivery
(without thereby assuming any credit risk) and at public or private sale,
without demand of performance or notice of intention to effect any such
disposition or of time or place of any such sale (except such notice as is
required above or by applicable statute and cannot be waived), and the Trustee
or any other Person may be the purchaser, lessee or recipient of any or all of
the Collateral so disposed of at any public sale (or, to the extent permitted by
law, at any private sale) and thereafter hold the same absolutely, free from any
claim or right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Company, any such demand, notice and right or
equity being hereby
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<PAGE> 23
expressly waived and released. In the event of any sale, license or other
disposition of any of the Trademark Collateral, the goodwill connected with and
symbolized by the Trademark Collateral subject to such disposition shall be
included, and the Company shall supply to the Trustee or its designee, for
inclusion in such sale, assignment or other disposition, all Intellectual
Property relating to such Trademark Collateral. The Trustee may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the sale may be so
adjourned; and
(e) the Trustee shall have, and in its discretion may exercise, all
of the rights, remedies, powers and privileges with respect to the Collateral of
a secured party under the Uniform Commercial Code (whether or not the Uniform
Commercial Code is in effect in the jurisdiction where such rights, remedies,
powers and privileges are asserted) and such additional rights, remedies, powers
and privileges to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights, remedies, powers and privileges in respect of
this Agreement or the Collateral may be asserted, including the right, to the
maximum extent permitted by law, to exercise all voting, consensual and other
powers of ownership pertaining to the Collateral as if the Trustee were the sole
and absolute owner of the Collateral (and the Company agrees to take all such
action as may be appropriate to give effect to such right).
The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 5.01 and of the exercise of the license
granted to the Trustee in Section 2.02 shall be applied in accordance with
Section 5.04.
5.02 Deficiency. If the proceeds of, or other realization upon, the
Collateral by virtue of the exercise of remedies under Section 5.01 and of the
exercise of the license granted by the Trustee in Section 2.02 are insufficient
to cover the costs and expenses of such exercise and the payment in full of the
other Secured Obligations, the Company shall remain liable for any deficiency.
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<PAGE> 24
5.03 Private Sale.
(a) The Trustee shall incur no liability as a result of the sale,
lease or other disposition of all or any part of the Collateral at any private
sale pursuant to Section 5.01 conducted in a commercially reasonable manner. The
Company hereby waives any claims against the Trustee arising by reason of the
fact that the price at which the Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale or
was less than the aggregate amount of the Secured Obligations, even if the
Trustee accepts the first offer received and does not offer the Collateral to
more than one offeree.
(b) The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933 and applicable state securities laws,
the Trustee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to distribution or resale. The Company acknowledges that any such private sales
may be at prices and on terms less favorable to the Trustee than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agree that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that the Trustee shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective Issuer of
such Collateral to register it for public sale.
5.04 Application of Proceeds. Except as otherwise expressly provided
in this Agreement and except as provided below in this Section 5.04, the
proceeds of, or other realization upon, all or any part of the Collateral by
virtue of the exercise of remedies under Section 5.01 or of the exercise of the
license granted in Section 2.02, and any other cash at the time held by the
Trustee under this Section 5, shall be applied by the Trustee:
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<PAGE> 25
First, to the payment of the costs and expenses of such exercise of
remedies, including reasonable out-of-pocket costs and expenses of the Trustee,
the reasonable fees and expenses of its agents and counsel and all other
expenses incurred and advances made by the Trustee in that connection;
Next, to the payment in full of the remaining Secured Obligations in
such manner as the Trustee may determine in accordance with the provisions of
the Indenture; and
Finally, to the payment to the Company, or its respective successors
or assigns, or as a court of competent jurisdiction may direct, of any surplus
then remaining.
As used in this Section 5, "proceeds" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to the Company or any issuer of,
or account debtor or other obligor on, any of the Collateral.
Section 6. Miscellaneous.
6.01 Waiver. No failure on the part of the Trustee to exercise and
no delay in exercising, and no course of dealing with respect to, any right,
remedy, power or privilege under this Agreement shall operate as a waiver of
such right, remedy, power or privilege, nor shall any single or partial exercise
of any right, remedy, power or privilege under this Agreement preclude any other
or further exercise of any such right, remedy, power or privilege or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges provided in this Agreement are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
6.02 Notices. All notices and communications to be given under this
Agreement shall be given or made in writing to the intended recipient at the
address specified below or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
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<PAGE> 26
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telex or telecopier, delivered to the telegraph
or cable office or personally delivered or, in the case of a mailed notice, upon
receipt, in each case, given or addressed as provided in this Section 6.02:
To the Company : Physicians Clinical Laboratory, Inc.
3301 "C" Street, Suite 100E
Sacramento, California 95816
Attention: J. Marvin Feigenbaum
To the Trustee : First Trust National Association
First Trust Center
180 East 5th Street, Suite 200
St. Paul, Minnesota 55101
Attention: Richard Prokosch
6.03 Expenses, Etc. The Company agrees to pay or to reimburse the
Trustee for all costs and expenses (including reasonable attorney's fees and
expenses) that may be incurred by the Trustee in any effort to enforce any of
the provisions of Section 5 or any of the obligations of the Company in respect
of the Collateral or in connection with (a) the preservation of the Lien of, or
the rights of the Trustee under, this Agreement or (b) any actual or attempted
sale, lease, disposition, exchange, collection, compromise, settlement or other
realization in respect of, or care of, the Collateral, including all such costs
and expenses (and reasonable attorney's fees and expenses) incurred in any
bankruptcy, reorganization, workout or other similar proceeding.
6.04 Amendments, Etc. Any provision of this Agreement may be
modified, supplemented or waived only by an instrument in writing duly executed
by the Company and the Trustee. Any such modification, supplement or waiver
shall be for such period and subject to such conditions as shall be specified in
the instrument effecting the same and shall be binding upon the Trustee, each
holder of any of the Secured Obligations and the Company, and any such waiver
shall be
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<PAGE> 27
effective only in the specific instance and for the purposes for which given.
6.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Company, the Trustee and each holder of any of
the Secured Obligations and their respective successors and permitted assigns.
The Company shall not assign or transfer its rights under this Agreement without
the prior written consent of the Trustee.
6.06 Survival. All representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant to or in
connection with this Agreement shall survive the execution and delivery of this
Agreement or such certificate or other document (as the case may be) or any
deemed repetition of any such representation or warranty.
6.07 Agreements Superseded. This Agreement supersedes all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.
6.08 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
6.09 Captions. The table of contents and captions and section
headings appearing in this Agreement are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
6.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties to this Agreement may execute this Agreement
by signing any such counterpart.
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<PAGE> 28
6.11 GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS AGREEMENT.
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<PAGE> 29
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
PHYSICIANS CLINICAL
LABORATORY, INC.
By:_________________________
Name:
Title:
FIRST TRUST NATIONAL ASSOCIATION
By:_________________________
Name:
Title:
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<PAGE> 30
ANNEX 1
LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
PHYSICIANS CLINICAL LABORATORY, INC.
Title Date Filed Registration No. Effective Date
- ---------------------------------------------------------------
None.
Annex 1 to Security Agreement
- 1 -
<PAGE> 31
ANNEX 2
LIST OF PATENTS AND PATENT APPLICATIONS
PHYSICIANS CLINICAL LABORATORIES, INC.
File Patent Country Registration No. Date
- -------------------------------------------------------------
None
Annex 2 to Security Agreement
- 1 -
<PAGE> 32
ANNEX 3
LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS
U.S. Trademarks
PHYSICIANS CLINICAL LABORATORIES, INC.
Application (A)
Registration (R) Registration
Mark or Series No. (S) or Filing Date
- ------------------------------------------------------------
See Attached.
Annex 3 to Security Agreement
- 1 -
<PAGE> 33
Foreign Trademarks
PHYSICIANS CLINICAL LABORATORIES, INC.
Application (A) Registration or
Mark Registration (R) Country Filing Date (F)
- ---------------------------------------------------------------
None.
Annex 3 to Security Agreement
- 2 -
<PAGE> 34
ANNEX 4
LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS
PHYSICIANS CLINICAL LABORATORIES, INC.
[None]
Annex 4 to Security Agreement
- 1 -
<PAGE> 35
ANNEX 5
LIST OF LOCATIONS
PHYSICIANS CLINICAL LABORATORIES, INC.
See attached.
Annex 5 to Security Agreement
- 1 -
<PAGE> 36
ANNEX 6
DEPOSIT ACCOUNTS
See Attached.
Annex 6 to Security Agreement
- 1 -
<PAGE> 1
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is made and entered
into as of September 30, 1997, by and among Physicians Clinical Laboratory,
Inc., a Delaware corporation (the "Company"), and each of the entities listed
under the caption "Stockholders" on the signature pages hereof (collectively,
the "Stockholders").
W I T N E S S E T H
WHEREAS, pursuant to the Articles (as defined below) the total
number of shares of capital stock which the Company has authority to issue is
50,000,000 shares of common stock;
WHEREAS, the Stockholders acquired the Securities (as defined below)
in exchange for claims against the Company that were relieved pursuant to the
Company's Plan of Reorganization approved by a court of appropriate jurisdiction
(the "Plan");
WHEREAS, on the date hereof the Stockholders own the Securities in the
number of shares and percentage of outstanding Securities set forth in Schedule
I; and
WHEREAS, the Company and the Stockholders deem it to be in their
best interests to provide for continuity in the control and operation of the
Company and for various other matters set forth herein.
NOW, THEREFORE, in consideration of the agreements and mutual
covenants set forth herein, the parties agree as follows:
Section 1. Definitions. As used in this Agreement, the following
terms have the following meanings:
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or
<PAGE> 2
under direct or indirect common control with such specified Person. For purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10% or more of the voting stock
of a Person shall be deemed to be control.
"Agreement" means this Agreement, as the same shall be amended from
time to time.
"Articles" means the Certificate of Incorporation of the Company as
in effect on the date hereof.
"Business Day" means a day other than Saturday, Sunday or any other
day on which banks located in the State of California and New York are
authorized or obligated to close.
"Cerberus" means Cerberus Partners, L.P. and any Affiliate of
Cerberus.
"Common Stock" means the Company's common stock, $0.01 par value per
share.
"Company" has the meaning assigned to such term in the preamble.
"Company Transferee" has the meaning assigned to such term in
Section 3(a).
"Company Transfer Notice" has the meaning assigned to such term in
Section 3(a).
"Company Transfer Securities" has the meaning assigned to such term
in Section 3(a).
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<PAGE> 3
"Employment Agreement" means that certain Employment Agreement dated
as of September 30, 1997 by and between the Company and J. Marvin Feigenbaum.
"Exchange Act" has the meaning assigned to such term in Section
4(b).
"Initial Public Offering" means the public offering of shares of
Common Stock of the Company pursuant to a Registration Statement in a
transaction where (A) the aggregate Proceeds to be paid to the Company in such
public offering (aggregated with the proceeds paid to the Company in any prior
public offerings of shares of Common Stock of the Company in any prior public
offerings of shares of Common Stock of the Corporation pursuant to a
Registration Statement) are not less than $10,000,000 and (B) the number of
shares of Common Stock sold pursuant to such Registration Statement (aggregated
with the shares previously sold pursuant to any Registration Statement filed by
the Company, including in each case any shares sold or to be sold by selling
shareholders) is not less than fifteen percent (15%) of the fully-diluted number
of outstanding shares of Common Stock after giving pro forma effect to such
Initial Public Offering.
"Noteholders" means the original holders of the Company's Senior
Notes due 2004, issued pursuant to that certain indenture dated as of September
30, 1997 by and between the Company and First Trust National Association, as
trustee.
"OCM" has the meaning assigned to such term in Section 4(b).
"Offer to Sell" has the meaning assigned to such term in Section
3(b).
"Qualifying Acquisition" has the meaning assigned to such term in
Section 3(a).
"Person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or agency or political
subdivision thereof.
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<PAGE> 4
"Proceeds" shall mean the proceeds of the Company in a public
offering net of underwriting discounts and commissions and before deducting any
other expenses payable by the Company.
"Pro Rata" shall mean, with respect to any offer of shares of Common
Stock or securities exercisable or convertible into shares of Common Stock, an
offer based on the relative percentages of Common Stock then held by or issuable
to all of the Stockholders to whom such offer is made.
"Public Offering" means any offering of Common Stock to the public,
including the Initial Public Offering, either on behalf of the Company or any of
its stockholders, pursuant to an effective Registration Statement under the
Securities Act.
"Registration Statement" means a registration statement filed by the
Company pursuant to the Securities Act, other than registrations on Form S-8 or
Form S-4 or any other registration form to be used for a business combination or
any successor form to either of such forms.
"Securities" shall mean the shares of Common Stock and any
securities exercisable for or convertible into shares of Common Stock, and
whenever an amount of Securities is calculated or used in any provision of this
Agreement, exercisable and convertible securities shall be counted as the number
of shares of Common Stock issuable upon such exercise or conversion.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Stockholders" has the meaning assigned to such term in the
preamble.
"Stock Purchase Agreement" has the meaning assigned to such term in
Section 5(b).
"Transfer" has the meaning assigned to such term in Section 2(a).
"Transfer Notice" has the meaning assigned to such term in Section
2.
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<PAGE> 5
"Warrants" means the warrants issued pursuant to the Plan.
Section 2. General Provisions Regarding Transfer.
(a) General Restrictions. Subject to Section 10(g), so long as this
Agreement shall remain in force, none of the Securities may be issued, sold,
assigned, transferred, given away or in any way disposed of by the Stockholders
(any of the foregoing being hereinafter referred to as a "Transfer") unless:
(i) the Person in whose favor such Transfer is made shall
deliver to the Company a written acknowledgment that the Securities to be
transferred are subject to this Agreement and that such Person and such Person's
successors in interest are bound hereby on the same terms as the Transferor of
such Securities, but prior to any such Transfer, the Person proposing to make
such Transfer shall give the Company (1) notice describing the manner and
circumstances of the proposed Transfer and (2) if reasonably requested by the
Company, a written opinion in form and substance reasonably satisfactory to
legal counsel of the Company to the effect that the proposed Transfer may be
effected without registration under the Securities Act or any applicable state
law;
(ii) such Transfer shall be made pursuant to a public offering
registered under the Securities Act and in accordance with applicable state law;
(iii) such Transfer is made to a Person who is an Affiliate of
the transferring Stockholder; or
(iv) such Transfer is made by Nu-Tech in a pro rata
distribution of Securities to its stockholders.
Any attempted Transfer other than in accordance with this Agreement shall be
void, and the Company shall refuse to recognize any such Transfer and shall not
reflect on its records any change in record ownership of the Securities pursuant
to any such attempted Transfer.
(b) Mechanics of Transfer. Any Stockholder who Transfers Securities
shall (i) take all such actions and execute and deliver all such documents as
may be necessary or reasonably
-5-
<PAGE> 6
requested by the Company in order to consummate the Transfer of such Securities
and (ii) pay to the Company such amounts as may be required for any applicable
stock transfer taxes.
(c) Restrictions on Transfers by Stockholders. Each of the
Stockholders hereby agrees that, so long as this Agreement is in effect, it will
not, without the prior written consent of the Company, sell or otherwise
transfer any of the shares of Common Stock held by such Stockholder to Cerberus
or any entity which owns, directly or indirectly, 5% or more of the issued and
outstanding equity securities of any entity that conducts clinical or
specialized laboratory services as its principal business.
Section 3. Preemptive Rights. If the Company proposes to issue or
otherwise Transfer any Securities to any Person, then the Company shall make the
offer to sell and otherwise comply with the requirements set forth in this
Section 3. Notwithstanding the foregoing, (A) the Company may Transfer
Securities, and any right, title or interest therein, without making the offer
to sell set forth in this Section 3 in connection with (i) an Initial Public
Offering, (ii) the issuance of up to 200,000 shares of Common Stock to
management and employees of the Company pursuant to the Company's 1997 Equity
and Performance Incentive Plan or any other incentive plan which provides for
the issuance of Securities to directors, officers or employees of the Company,
(iii) the issuance of shares of Common Stock pursuant to the Employment
Agreement and the Warrants or (iv) an issuance of Securities in consideration
for and upon consummation of (x) a merger with respect to which the holders of
Voting Stock immediately prior to such merger beneficially own not less than a
majority of the issued and outstanding shares of Voting Stock of the surviving
entity or (y) an acquisition of assets or stock by the Company so long as, in
either the case of (x) or (y), such transaction has been approved by the
affirmative vote of at least one director appointed by OCM (a "Qualifying
Acquisition") and (B) any rights or obligations pursuant to this Section 3 shall
terminate upon an Initial Public Offering. For purposes of this Section 3,
"Voting Stock" shall mean stock of the Company of any class or series entitled
to vote generally in the election of directors of the Company.
(a) Transfer Notice. If the Company desires in good faith to
Transfer any Securities to any Person, the Company shall
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<PAGE> 7
deliver a written notice of the proposed Transfer (the "Company Transfer
Notice") to each Stockholder. The Company Transfer Notice shall contain a
description of the proposed transaction and the terms thereof including the
number of Securities and type of Securities proposed to be transferred
(collectively, the "Company Transfer Securities"), the name of each person to
whom or in favor of whom the proposed Transfer is to be made (the "Company
Transferee") and a description of the consideration to be received by the
Company upon Transfer of the Company Transfer Securities. The Company Transfer
Notice shall be accompanied by a copy of the bona fide third party written offer
(for purposes of this Section 3, an executed letter of intent stating the terms
of such offer, or incorporating by reference a separate summary of terms, shall
be deemed a written offer). On a day that is not earlier than ten (10) days
following the delivery of the Company Transfer Notice and after having received
the requisite approval from the Board of Directors, the Company may issue the
Company Transfer Securities to the Company Transferee on the terms set forth in
the Company Transfer Notice.
(b) Terms of Offer. Upon completion of the issuance of the Company
Transfer Securities referred to in paragraph (a) above, the Company shall
deliver a written offer to sell (the "Offer to Sell") to each Stockholder a Pro
Rata portion of the Company Transfer Securities based upon such Stockholder's
holdings of Common Stock. The Offer to Sell shall be on the same terms and
conditions, and shall be for the same consideration, as described in the Company
Transfer Notice; provided, however, that any such Stockholder may, at its
option, pay fair market value in cash in lieu of any non-cash consideration.
(c) Acceptance of Offer. For a period of thirty (30) days after
receipt of an Offer to Sell, any Stockholder may, by written notice to the
Company, accept the Offer to Sell in whole or in part.
(d) Transfer of Shares. Transfers of Securities pursuant to offers
made and accepted in accordance with this Section 3 shall occur simultaneously
on a Business Day not more than sixty (60) days after the last date on which any
offer made in accordance with this Section 3 could have been accepted and each
such Transfer shall be made in accordance with Sections 2(a) and (b).
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<PAGE> 8
Section 4. Board of Directors.
(a) Initial Board of Directors; Designated Directors. The initial
Board of Directors shall consist of the following members:
Dr. Nathan Rubin
Mr. J. Marvin Feigenbaum
Mr. Matthew S. Barrett
Mr. David Sterling
Mr. William J. Begley
Each of such director shall hold office until the next annual or special meeting
called on or after the date one year from the date hereof for the purpose of
electing directors in accordance with the provisions of the Company's Bylaws.
Thereafter, each Stockholder shall cause all Securities that are entitled to
vote and are beneficially owned by such Stockholder or its Affiliates, with
respect to which such Stockholder or its Affiliates may direct the voting, or
that are registered in the name of such Stockholder or its Affiliates to be
voted as required, and will otherwise take or cause to be taken all such other
action as may be necessary, (i) to cause the Board of Directors of the Company
to consist of five (5) members, and (ii) until such time as the Noteholders or
their Affiliates collectively no longer beneficially own, in the aggregate, at
least 20% of the issued and outstanding Common Stock held by the Noteholders on
the date hereof, to elect two individuals designated in writing by OCM
Administrative Services, L.L.C. or its designee ("OCM"), as members of the Board
of Directors, and (iii) until such time as (A) Nu-Tech and its Affiliates no
longer beneficially own more than 30% of the issued and outstanding Common Stock
or (B) any "person" (as defined in Section 13(a) of the Exchange Act of 1934, as
amended (the "Exchange Act")) or a "group" (as defined in Section 13(a)(3) and
14(a)(2) of the Exchange Act), other than Oaktree Capital Management, LLC, The
Copernicus Fund, L.P., DDJ Overseas Corp., Belmont Fund, L.P. and Belmont
Capital Partners II, L.P. and their respective Affiliates, holds a number of
shares of Common Stock of the Company that is greater than the number of shares
of Common Stock of the Company held by Nu-Tech and its Affiliates, to elect
three individuals designated in writing by Nu-Tech; provided, that the
requirement that Nu-Tech and its Affiliates beneficially own more than 30% of
the issued and outstanding Common Stock shall be adjusted in the event of
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<PAGE> 9
the issuance by the Company of shares of Common Stock in a Qualifying
Acquisition such that the percentage of the issued and outstanding Common Stock
required to be beneficially owned by Nu-Tech and its Affiliates following such
issuance of Common Stock shall be equal to the quotient determined by dividing
(x) the number of shares held by Nu-Tech as of the date hereof by (y) the sum of
(I) the number of shares of Common Stock issued and outstanding as of the date
hereof plus (II) the number of shares of Common Stock issued in such Qualifying
Acquisition, plus (III) the number of shares of Common Stock issued in all
previously consummated Qualifying Acquisitions.
(b) Filling Vacancies, etc. At such time as a vacancy is created on
the Board of Directors by the death, removal or resignation of any one of the
directors, the remaining directors shall meet in person or by telephone for the
purpose of approving and appointing a director to fill such vacancy in
accordance with the provisions of the Bylaws of the Company. Notwithstanding the
foregoing sentence, if a director designated by OCM or Nu-Tech, as the case may
be, resigns or is removed from or vacates such position for any reason prior to
the expiration of his or her term as a director of the Company, then, OCM or
Nu-Tech, respectively, shall have the right to nominate a replacement designee
so long as it continues to beneficially own not less than the applicable
percentage of outstanding Securities set forth in paragraph (a) of this Section
4, and the other Stockholders shall cause the directors to elect such
replacement designee to the Board of Directors or the Stockholders shall vote
their Securities at any regular or special meeting called for the purpose of
filling positions on the Board of Directors, or in any written consent executed
in lieu of such a meeting of stockholders, and shall take all other actions
necessary, to ensure the election to the Board of Directors of such replacement
designee to fill the unexpired term of the director whom such new designee is
replacing. Each director elected to the initial Board of Directors and each
nominee to the Board of Directors shall provide each of the Stockholders with
his or her resume prior to such time as he or she is elected to the Board of
Directors.
(c) Voting Agreement. All parties to this Agreement agree that this
Section 4 shall constitute a voting agreement within the meaning of Section 218
of the Delaware General Corporation Law.
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<PAGE> 10
(d) Termination. The rights and obligations of the Stockholders
pursuant to this Section 4 shall terminate at such time as the Noteholders and
their Affiliates cease to collectively own, in the aggregate, at least 20% of
the issued and outstanding shares of Common Stock held by the Noteholders on the
date hereof.
Section 5. Corporate Governance.
(a) During such time as OCM has the right to appoint directors
pursuant to Section 4 hereof, an affirmative vote of at least one director
appointed by OCM pursuant to Section 4 hereof shall be required to:
i) authorize, issue or enter into, or proposing to authorize,
issue or enter into, any agreement, including, without limitation,
options, warrants or other rights providing for the issuance or sale
(contingent or otherwise) of any equity securities or any notes or debt
securities containing equity features (including, without limitation, any
notes or debt securities convertible into or exchangeable for equity
securities, or containing provisions that set or provide a mandatory
formula for determining, directly or indirectly, the participation in
earnings and profits, or options, warrants or rights to acquire securities
exchangeable or exercisable for any such securities) of the Company other
than issuances of securities pursuant to the Warrants, employee benefit
plans, management incentive plans or employment agreements with officers
of the Company;
ii) issue, or propose to issue, any capital stock whether of
the same series as, or of a different series from, the Securities;
iii) supplement, modify, amend, rescind, alter or restate, or
propose to supplement, modify, amend, rescind, alter or restate, in any
manner the Articles or the By-Laws of the Company;
iv) directly or indirectly, redeem, purchase or otherwise
acquire, or propose to redeem, purchase or otherwise acquire, any of its
capital stock, including any options, warrants or rights to acquire any of
its capital stock, or any security exercisable or exchangeable for or
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<PAGE> 11
convertible into any of its capital stock, directly or indirectly;
v) liquidate or dissolve or propose to liquidate or dissolve,
or effecting, or propose to effect, a recapitalization or reorganization
of the Company in any form of transaction;
vi) consolidate or merge, or propose to consolidate or merge,
with or into any other Person or transfer (by lease, assignment, sale or
otherwise) all or substantially all of the properties and assets of the
Company, in a single transaction or through a series of related
transactions;
vii) incur, or cause any subsidiary of the Company to incur,
after the date hereof, any indebtedness or other payment obligation out of
the ordinary course of business (other than amounts borrowed pursuant to
that certain Loan and Security Agreement dated as of September 30, by and
between Bio-Cypher Funding Corp., a Delaware corporation, and Daiwa
Healthco-2, LLC, as in effect on the date hereof) that, when aggregated
with all other then outstanding indebtedness of the Company and its
subsidiaries incurred after the date hereof and payment obligations of the
Company and its subsidiaries incurred after the date hereof, exceeds
$1,000,000;
viii) make any Capital Expenditure (as hereinafter defined)
after the date hereof that, when aggregated with all other Capital
Expenditures made in the immediately preceding twelve (12) month period,
which initial twelve (12) month period shall begin on the date hereof,
exceed $1,000,000. As used herein, Capital Expenditure means expenditures
made in connection with the purchase, construction or improvement of items
properly categorized, in accordance with generally accepted accounting
principles, on the balance sheet of the Company as property, plant or
equipment, but not including any Capital Expenditures that are made out of
the proceeds of casualty insurance covering any property, plant and
equipment of the Company; or
-11-
<PAGE> 12
ix) modify, amend, extend or renew the Employment Agreement or
otherwise approve any compensation arrangement or other transaction for
the benefit of Mr. Feigenbaum other than as provided in the Employment
Agreement.
(b) During such period of time as indemnification claims may be
instituted pursuant to that certain Stock Purchase Agreement by and between the
Company and Nu-Tech dated as of February 24, 1997 (the "Stock Purchase
Agreement") and notwithstanding anything to the contrary contained in the
General Corporation Law of the State of Delaware or the contrary vote of
directors constituting the majority of the Board of Directors, upon the
affirmative vote of two directors, the Company shall institute claims for
indemnification pursuant to Section 10.6 of the Stock Purchase Agreement. In
furtherance of the foregoing, the Stockholders shall take or cause to be taken
all action as may be necessary to cause the Board of Directors to adopt
resolutions substantially in the form attached hereto as Exhibit A (the
"Resolutions"), which Resolutions shall establish an Indemnity Committee
composed of two Directors designated by OCM and, so long as Nu-Tech is entitled
to designate Directors pursuant to Section 4 hereof, one Director designated by
Nu-Tech, which committee shall have the sole authority to institute such claims
for indemnification and which committee shall cease to be a committee of the
Board of Directors of the Company at such time as the Company is no longer
permitted to institute claims for indemnification pursuant to the Stock Purchase
Agreement. Further, the Stockholders shall take or cause to be taken all action
as may be necessary to ensure that the Resolutions are not amended or rescinded,
and that no resolutions inconsistent therewith are adopted by the Board of
Directors, until the expiration of the term of the Indemnity Committee as set
forth in the Resolutions. In addition, the Company shall reimburse any such
director for the reasonable costs and expenses incurred by such director in
prosecuting claims instituted on behalf of the Company pursuant to the
provisions of this Section 5(b) and shall, to the fullest extent permitted by
Delaware law and the certificate of incorporation and bylaws of the Company,
indemnify and hold harmless such director for any liability incurred in
connection with the initiation or prosecution of such claims.
-12-
<PAGE> 13
Section 6. Certificates.
(a) Restrictive Endorsements. Each certificate evidencing any
Securities shall bear a legend in substantially the following form:
"The securities evidenced by this certificate are subject to a
Stockholders Agreement dated as of September 30, 1997, copies of which are
on file at the principal office of the Company and will be furnished to
the holder on request to the Secretary of the Company. Such Stockholders
Agreement provides, among other things, for certain restrictions on
voting, sale, transfer, pledge, hypothecation or other disposition of the
securities evidenced by this certificate."
(b) Replacement Certificates. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any certificate evidencing any Securities, and (in the case of
loss, theft or destruction) of indemnity reasonably satisfactory to the Company,
upon surrender and cancellation of such certificate or receipt of such
indemnity, the Company will execute, register and deliver a new certificate of
like tenor in lieu of such lost, stolen, destroyed or mutilated certificate.
Section 7. Representations. Each Stockholder represents that such
Stockholder is the record and beneficial owner of the number of issued and
outstanding Securities appearing opposite such Stockholder's name in Schedule I
attached hereto, free and clear of any option, lien, encumbrance or charge of
any kind whatsoever, except as created by or described in this Agreement.
Section 8. Equitable Relief. The parties hereto agree and declare
that legal remedies may be inadequate to enforce the provisions of this
Agreement and that equitable relief, including specific performance and
injunctive relief, may be used to enforce such provisions.
Section 9. Miscellaneous.
(a) Notices. All communications under this Agreement shall be in
writing and shall be personally delivered, sent by
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<PAGE> 14
facsimile transmission or mailed by first class mail, postage prepaid:
i) if to the Company, at
Physicians Clinical Laboratory, Inc.
3301 C Street
Sacramento, California 95816
Attention: Chief Financial Officer
ii) if to the Stockholders, at
NU-TECH BIO-MED, INC.
Attn: Mr. J. Marvin Feigenbaum
500 Fifth Avenue, Suite 2424
New York, New York 10016
Fax: 212-391-2864
OAKTREE CAPITAL MANAGEMENT, LLC
Attn: Mr. Matthew Barrett
550 S. Hope Street, 22nd Floor
Los Angeles, California 90071
Fax: 213-694-1599
or at such other address as the appropriate party to this Agreement may have
furnished in writing to each other party hereto, or
iii) if to any other Person who is the registered holder of
any Securities to the address for the purpose of such holder as it appears
in the stock ledger of the Company.
Any notice shall be deemed to have been duly given when delivered by hand if
personally delivered, by confirmation of completed facsimile transmission if
delivered by facsimile, and if sent by mail, two (2) Business Days after being
deposited in the mail, postage prepaid.
(b) Waiver. No failure or delay on the part of the parties or any of
them in exercising any right, power or privilege hereunder, nor any course of
dealing between the parties or any of them shall operate as a waiver of any such
right, power or privilege nor shall any single or partial
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<PAGE> 15
exercise of any such right, power or privilege preclude the simultaneous or
later exercise of any other right, power or privilege. The rights and remedies
herein expressly provided are cumulative and are not exclusive of any rights or
remedies which the parties or any of them would otherwise have. No notice to or
demand on the Company in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the other parties or any of them to take any other or
further action in any circumstances without notice or demand.
(c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(d) Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware.
(e) Filing. A copy of this Agreement and of all amendments hereto
shall be filed at the principal office of the Company.
(f) Amendment or Termination. This Agreement may be amended or
terminated at any time only by an instrument in writing signed by each of the
parties hereto.
(g) Benefit and Binding Effect. Notwithstanding any other provision
of this Agreement to the contrary, the rights of the Stockholders pursuant to
Section 4 of this Agreement shall not be assignable or transferable and any
attempted assignment or transfer in violation of this provision shall be void;
provided, however, that the obligations of each Stockholders pursuant to Section
4 of this Agreement shall be binding upon a Person who receives Securities in a
Transfer permitted pursuant to Section 2(a)(i) hereof and any Affiliate of a
Stockholder who receives Securities from a Stockholder. Subject to compliance
with the terms of this Agreement regarding Transfer of Securities, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. This Agreement does not create and shall
not be construed as creating any rights enforceable by any Person not a party
hereto.
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<PAGE> 16
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.
Section 10. Limitations on Liability.
Each of the parties hereto acknowledges and agrees that in no event
shall any of the partners, officers, directors, shareholders, employees, agents,
affiliates or investment managers (collectively "Representatives") of Oaktree
Capital Management, LLC ("Oaktree"), as agent and on behalf of the funds and
accounts set forth on Schedule II attached hereto (the "Funds"), have any
obligation or liability to such party for any action taken or omitted by or on
behalf of such Funds or in connection herewith (such obligation and liability
being the sole responsibility of such Funds). Each party hereto further
acknowledges and agrees that (a) all obligations and liabilities of each Fund
under this Agreement or in connection herewith are enforceable solely against
such Fund and its assets and not against the assets of Oaktree, any other Fund
or any Representatives of Oaktree and (b) the obligations and liabilities of
each Fund shall be several in the proportions set forth on Schedule II hereto
and not joint and several.
[signature page follows]
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<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement as of the day and year first above written.
The Company: PHYSICIANS CLINICAL LABORATORY, INC.
By: ______________________________
J. Marvin Feigenbaum
Chief Operating Officer
Stockholders:
NU-TECH BIO-MED, INC.
By: ______________________________
J. Marvin Feigenbaum
Chief Executive Officer
OAKTREE CAPITAL MANAGEMENT, LLC, as agent
and on behalf of certain funds and accounts
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
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<PAGE> 18
SCHEDULE I
STOCKHOLDER SECURITIES
- ----------- ----------
Nu-Tech Bio-Med, Inc. 52.6% of Common Stock
Oaktree Capital Management, LLC, 47.4% of Common Stock
as agent and on behalf of the
funds and accounts set forth on
Schedule II hereto (without
taking into account the Securities
issued in connection with OCM's
Old Debenture Claims)
<PAGE> 19
SCHEDULE II
OCM Opportunities Fund, L.P. 93.0%
Columbia/HCA Master Retirement Trust 7.0%
<PAGE> 1
*****************************************************************
PLEDGE AGREEMENT
Dated as of September 30, 1997
between
PHYSICIANS CLINICAL LABORATORY, INC.
and
FIRST TRUST NATIONAL ASSOCIATION,
as the Trustee
*****************************************************************
<PAGE> 2
TABLE OF CONTENTS
Page
----
Section 1. Definitions and Interpretation...............................- 1 -
1.01 Certain Defined Terms........................................- 1 -
Section 2. Collateral...................................................- 2 -
2.01 Grant........................................................- 2 -
2.02 Perfection...................................................- 3 -
2.03 Preservation and Protection of Security
Interests....................................................- 3 -
2.04 Attorney-in-Fact.............................................- 4 -
2.05 Special Provisions Relating to Stock Collateral..............- 5 -
2.06 Rights and Obligations.......................................- 5 -
2.07 Termination..................................................- 6 -
Section 3. Representations and Warranties...............................- 6 -
3.01 Title........................................................- 6 -
3.02 Pledged Stock................................................- 6 -
Section 4. Covenants....................................................- 7 -
4.01 Books and Records............................................- 7 -
4.02 Removals, Etc................................................- 7 -
4.03 Sales and Other Liens........................................- 7 -
4.04 Stock Collateral.............................................- 7 -
4.05 Further Assurances...........................................- 7 -
Section 5. Remedies.....................................................- 8 -
5.01 Events of Default, Etc.......................................- 8 -
5.02 Deficiency...................................................- 9 -
5.03 Private Sale.................................................- 9 -
5.04 Application of Proceeds.....................................- 10 -
Section 6. Miscellaneous...............................................- 10 -
6.01 Waiver......................................................- 10 -
6.02 Notices.....................................................- 10 -
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<PAGE> 3
6.03 Expenses, Etc...............................................- 11 -
6.04 Amendments, Etc.............................................- 11 -
6.05 Successors and Assigns......................................- 11 -
6.06 Survival....................................................- 12 -
6.07 Agreements Superseded.......................................- 12 -
6.08 Severability................................................- 12 -
7.10 Captions....................................................- 12 -
7.11 Counterparts................................................- 12 -
7.12 GOVERNING LAW...............................................- 12 -
ANNEX 1 - PLEDGED STOCK
-ii-
<PAGE> 4
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement") dated as of September 30,
1997 is made between Physicians Clinical Laboratory, Inc. (the "Obligor") and
First Trust National Association, (the "Trustee").
R E C I T A L S
A. Concurrently with the execution hereof, the Obligor is entering
into that certain Indenture, dated the date hereof (the "Indenture"), with the
Trustee.
B. The Indenture provides for the issuance by the Obligor of its
Senior Secured Notes Due 2004, in an aggregate principal amount of $55,000,000
on the date hereof. Any Person that holds any of the Senior Notes now or
hereafter shall be referred to herein as a "Noteholder".
C. To induce the Trustee to enter into the Indenture and the other
documents related thereto, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Obligor has agreed
to pledge and grant a security interest in the Collateral (as hereinafter
defined) as security for the Secured Obligations (as hereinafter defined).
A G R E E M E N T
Now therefore, in consideration of the above recitals and other
consideration and the mutual covenants hereinafter set forth, the parties hereto
agree as follows:
Section 1. Definitions and Interpretation.
1.01 Certain Defined Terms. Unless otherwise defined, all
capitalized terms used in this Agreement that are defined in the Indenture
(including those terms incorporated by
<PAGE> 5
reference) shall have the respective meanings assigned to them in the Indenture
and shall be interpreted in accordance with Sections 1.3 and 1.4 of the
Indenture. In addition, the following terms shall have the following meanings
under this Agreement:
"Collateral" shall have the meaning assigned to that term in Section
2.01.
"Equity Rights" shall mean, with respect to any Person, any
outstanding subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or the outstanding securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"Issuers" shall mean, collectively, each Subsidiary, directly or
indirectly, of the Obligor that is the issuer (as defined in the Uniform
Commercial Code) of any shares of capital stock now owned or hereafter acquired
by the Obligor, including the respective corporations identified in Annex 1
under the caption "Issuer."
"Pledged Stock" shall have the meaning assigned to that term in
Section 2.01(a).
"Secured Obligations" shall mean (a) any and all Indenture
Obligations and (b) any and all obligations of the Obligor for the performance
of its agreements, covenants and undertakings under or in respect of the
Documents.
"Signing Date" shall mean the date first written above.
"Stock Collateral" shall have the meaning assigned to that term in
Section 2.01(a).
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect in the State of California from time
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<PAGE> 6
to time or, by reason of mandatory application, any other applicable
jurisdiction.
Section 2. Collateral.
2.01 Grant. As collateral security for the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) and
performance of the Secured Obligations, the Obligor hereby pledges and grants to
the Trustee, for the benefit of the Trustee and the Noteholders, a security
interest in all of the Obligor's right, title and interest in and to the
following property, whether now owned or hereafter acquired by the Obligor and
whether now existing or hereafter coming into existence (collectively, the
"Collateral"):
(a) (i) all of the shares of capital stock of the Issuers
represented by the respective certificates identified in Annex 1 and all other
shares of capital stock of whatever class of the Issuers, now owned or hereafter
acquired by the Obligor, together with in each case the certificates
representing the same (collectively, the "Pledged Stock");
(ii) all shares, securities, moneys or property representing a
dividend on, or a distribution or return of capital in respect of any of the
Pledged Stock, resulting from a split-up, revision, reclassification or other
like change of any of the Pledged Stock or otherwise received in exchange for
any of the Pledged Stock and all Equity Rights issued to the holders of, or
otherwise in respect of, any of the Pledged Stock; and
(iii) without affecting the obligations of the Obligor under
any provision prohibiting such action under any Document, in the event of any
consolidation or merger in which any Issuer is not the surviving corporation,
all shares of each class of the capital stock of the successor corporation
(unless such successor corporation is the Company itself) formed by or resulting
from such consolidation or merger (collectively, and together with the property
described in clauses (i) and (ii) above, the "Stock Collateral");
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<PAGE> 7
(b) to the extent related to all or any part of the other
Collateral, all books, correspondence, credit files, records, invoices, tapes,
cards, computer runs and other papers and documents in the possession or under
the control of the Obligor or any computer bureau or service company from time
to time acting for the Obligor; and
(c) all proceeds and products in whatever form of all or any part of
the other Collateral.
2.02 Perfection. Concurrently with the execution and delivery of
this Agreement, the Obligor shall (i) deliver to the Trustee all certificates
identified in Annex 1, accompanied by undated stock powers duly executed in
blank and (ii) take all such other actions as shall be necessary or as the
Trustee may request to perfect and establish the priority (subject only to Liens
permitted under Section 4.12 of the Indenture) of the Liens granted by this
Agreement.
2.03 Preservation and Protection of Security Interests. The Obligor
shall:
(a) upon the acquisition after the Signing Date by the Obligor of
any Stock Collateral, promptly either (x) transfer and deliver to the Trustee
all such Stock Collateral (together with the certificates representing such
Stock Collateral securities duly endorsed in blank or accompanied by undated
stock powers duly executed in blank) or (y) take such other action as the
Trustee shall deem reasonably necessary or appropriate to perfect, and establish
the priority of, the Liens granted by this Agreement in such Stock Collateral;
and
(b) give, execute, deliver, file or record any and all financing
statements, notices, contracts, agreements or other instruments, obtain any and
all approvals required by any governmental agencies and take any and all steps
that may be necessary or as the Trustee may request to create, perfect,
establish the priority (subject only to Liens permitted under Section 4.12 of
the Indenture) of, or to preserve the validity, perfection or priority (subject
only to such permitted Liens) of, the Liens granted by this Agreement or to
enable the Trustee to
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<PAGE> 8
exercise and enforce its rights, remedies, powers and privileges under this
Agreement with respect to such Liens, including causing any or all of the Stock
Collateral to be transferred of record into the name of the Trustee or its
nominee (and the Trustee agrees that if any Stock Collateral is transferred into
its name or the name of its nominee, the Trustee will thereafter promptly give
to the Obligor copies of any notices and communications received by it with
respect to the Stock Collateral pledged by the Obligor).
2.04 Attorney-in-Fact. Subject to the rights of the Obligor under
Section 2.05, the Trustee is hereby appointed the attorney-in-fact of the
Obligor for the purpose of carrying out the provisions of this Agreement and
taking any action and executing any instruments which the Trustee may deem
necessary or advisable to accomplish the purposes of this Agreement, to preserve
the validity, perfection and priority (subject only to Liens permitted under
Section 4.12 of the Indenture) of the Liens granted by this Agreement and,
following any Default, to exercise its rights, remedies, powers and privileges
under this Agreement. This appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing, the
Trustee shall be entitled under this Agreement, upon the occurrence and
continuation of any Event of Default, (i) to ask, demand, collect, sue for,
recover, receive and give receipt and discharge for amounts due and to become
due under and in respect of all or any part of the Collateral; (ii) to receive,
endorse and collect any drafts, instruments, documents and chattel paper in
connection with clause (i) above; (iii) to file any claims or take any action or
proceeding that the Trustee may deem necessary or advisable for the collection
of all or any part of the Collateral; and (iv) to execute, in connection with
any sale or disposition of the collateral under Section 5, any endorsements,
assignments, bills of sale or other instruments of conveyance or transfer with
respect to all or any part of the Collateral.
2.05 Special Provisions Relating to Stock Collateral.
(a) So long as no Event of Default shall have occurred and be
continuing, the Obligor shall have the right to exercise
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<PAGE> 9
all voting, consensual and other powers of ownership pertaining to the Stock
Collateral for all purposes not inconsistent with the terms of any Document,
provided that the Obligor agrees that it will not vote the Stock Collateral in
any manner that is inconsistent with the terms of any Document; and the Trustee
shall, at the Obligor's expense, execute and deliver to the Obligor or cause to
be executed and delivered to the Obligor all such proxies, powers of attorney,
dividend and other orders and other instruments, without recourse, as the
Obligor may reasonably request for the purpose of enabling the Obligor to
exercise the rights and powers which it is entitled to exercise pursuant to this
Section 2.05(a).
(b) So long as no Event of Default shall have occurred and be
continuing, the Obligor shall be entitled to receive and retain any dividends on
the Stock Collateral paid in cash out of earned surplus.
(c) If any Event of Default shall have occurred and be continuing,
and whether or not the Trustee or any Noteholder exercises any available right
to declare any Secured Obligation due and payable or seeks or pursues any other
right, remedy, power or privilege available to it under applicable law, this
Agreement or any other Document, all dividends and other distributions on the
Stock Collateral shall be paid directly to the Trustee and retained by it as
part of the Stock Collateral, subject to the terms of this Agreement, and, if
the Trustee shall so request, the Obligor agrees to execute and deliver to the
Trustee appropriate additional dividend, distribution and other orders and
instruments to that end, provided that if such Event of Default is cured, any
such dividend or distribution paid to the Trustee prior to such cure shall, upon
request of the Obligor (except to the extent applied to the Secured
Obligations), be returned by the Trustee to the Obligor.
2.06 Rights and Obligations.
(a) No reference in this Agreement to proceeds or to the sale or
other disposition of Collateral shall authorize the Obligor to sell or otherwise
dispose of any Collateral except to
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the extent otherwise expressly permitted by the terms of any Document.
(b) Neither the Trustee nor any Noteholder shall be required to take
steps necessary to preserve any rights against prior parties to any part of the
Collateral.
2.07 Termination. When all Secured Obligations shall have been paid
in full, this Agreement shall terminate, and the Trustee shall forthwith cause
to be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect of the Collateral (together with the certificates
representing the Stock Collateral and any accompanying undated stock powers), to
or on the order of the Obligor.
Section 3. Representations and Warranties. As of the Signing Date,
the Obligor represents and warrants to the Noteholders and the Trustee as
follows:
3.01 Title. The Obligor is the sole beneficial owner of the
Collateral in which it purports to grant a Lien pursuant to this Agreement, and
such Collateral is free and clear of all Liens (and, with respect to the Stock
Collateral, of any Equity Right in favor of any other Person), except for the
Liens granted under the Indenture and any other Liens permitted under Section
4.12 of the Indenture. The Liens granted by this Agreement in favor of the
Trustee for the benefit of the Trustee and the Noteholders have attached and
constitute a perfected security interest in all of such Collateral prior to all
other Liens (except such permitted Liens).
3.02 Pledged Stock.
(a) The Pledged Stock evidenced by the certificates identified in
Annex 1 is duly authorized, validly existing, fully paid and nonassessable, and
none of such Pledged Stock is subject to any contractual restriction, or any
restriction under the charter or by-laws of the respective Issuer of such
Pledged
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<PAGE> 11
Stock, upon the transfer of such Pledged Stock (except for any such restriction
contained in any Document).
(b) The Pledged Stock evidenced by the certificates identified in
Annex 1 constitutes all of the issued and outstanding shares of capital stock of
any class of the Issuers beneficially owned by the Obligor on the Signing Date
(whether or not registered in the name of the Obligor), and Annex 1 correctly
identifies, as at the Signing Date, the respective Issuers of such Pledged
Stock, the respective class and par value of the shares comprising such Pledged
Stock and the respective number (and registered owners) of the shares evidenced
by each such certificate.
Section 4. Covenants.
4.01 Books and Records. The Obligor shall:
(a) keep full and accurate books and records relating to the
Collateral and stamp or otherwise mark such books and records in such manner as
the Trustee may reasonably require in order to reflect the Liens granted by this
Agreement; and
(b) permit representatives of the Trustee, upon reasonable notice,
at any time during normal business hours to inspect and make abstracts from its
books and records pertaining to the Collateral, permit representatives of the
Trustee to be present at the Obligor's place of business to receive copies of
all communications and remittances relating to the Collateral and forward copies
of any notices or communications received by the Obligor with respect to the
Collateral, all in such manner as the Trustee may reasonably request.
4.02 Removals, Etc. Without at least 30 days' prior written notice
to the Trustee, the Obligor shall not (i) maintain any of its books and records
with respect to the Collateral at any office or maintain its principal place of
business at any place, other than at the address initially indicated for notices
to it under Section 6 or (ii) change its corporate name, or the name under which
it does business, from the name shown on the signature pages to this Agreement.
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<PAGE> 12
4.03 Sales and Other Liens. Except as otherwise permitted under
Section 4.10 or 4.12 of the Indenture, without the prior written consent of the
Trustee, the Obligor shall not dispose of any Collateral, create, incur, assume
or suffer to exist any Lien upon any Collateral or file or suffer to be on file
or authorize to be filed, in any jurisdiction, any financing statement or like
instrument with respect to all or any part of the Collateral in which the
Trustee is not named as the sole secured party for the benefit of the
Noteholders.
4.04 Stock Collateral. The Obligor will cause the Stock Collateral
to constitute at all times 100% of the total number of shares of each class of
capital stock of each Issuer then outstanding. The Obligor shall cause all such
shares to be duly authorized, validly issued, fully paid and nonassessable and
to be free of any contractual restriction or any restriction under the charter
or bylaws of the respective Issuer of such Stock Collateral, upon the transfer
of such Stock Collateral (except for any such restriction contained in any
Document).
4.05 Further Assurances. The Obligor agrees that, from time to time
upon the written request of the Trustee, the Obligor will execute and deliver
such further documents and do such other acts and things as the Trustee may
reasonably request in order fully to effect the purposes of this Agreement.
Section 5. Remedies.
5.01 Events of Default, Etc. If any Event of Default shall have
occurred and be continuing:
(a) The Trustee in its discretion may, in its name or in the name of
the Obligor or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for all
or any part of the Collateral, but shall be under no obligation to do so;
(b) the Trustee in its discretion may, upon ten business days' prior
written notice to the Obligor of the time and place, with respect to all or any
part of the Collateral
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<PAGE> 13
which shall then be or shall thereafter come into the possession, custody or
control of the Trustee, the Noteholders or any of their respective agents, sell,
lease or otherwise dispose of all or any part of such Collateral, at such place
or places as the Trustee deems best, for cash, for credit or for future delivery
(without thereby assuming any credit risk) and at public or private sale,
without demand of performance or notice of intention to effect any such
disposition or of time or place of any such sale (except such notice as is
required above or by applicable statute and cannot be waived), and the Trustee
or any Noteholder or any other Person may be the purchaser, lessee or recipient
of any or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any right
or equity of redemption (statutory or otherwise), of the Obligor, any such
demand, notice and right or equity being hereby expressly waived and released.
The Trustee may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time or
place to which the sale may be so adjourned; and
(c) the Trustee shall have, and in its discretion may exercise, all
of the rights, remedies, powers and privileges with respect to the Collateral of
a secured party under the Uniform Commercial Code (whether or not the Uniform
Commercial Code is in effect in the jurisdiction where such rights, remedies,
powers and privileges are asserted) and such additional rights, remedies, powers
and privileges to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights, remedies, powers and privileges in respect of
this Agreement or the Collateral may be asserted, including the right, to the
maximum extent permitted by law, to exercise all voting, consensual and other
powers of ownership pertaining to the Collateral as if the Trustee were the sole
and absolute owner of the Collateral (and the Obligor agrees to take all such
action as may be appropriate to give effect to such right).
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<PAGE> 14
The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 5.01 shall be applied in accordance with
Section 5.04.
5.02 Deficiency. If the proceeds of, or other realization upon, the
Collateral by virtue of the exercise of remedies under Section 5.01 are
insufficient to cover the costs and expenses of such exercise and the payment in
full of the other Secured Obligations, the Obligor shall remain liable for any
deficiency.
5.03 Private Sale.
(a) The Trustee and the Noteholders shall incur no liability as a
result of the sale, lease or other disposition of all or any part of the
Collateral at any private sale pursuant to Section 5.01 conducted in a
commercially reasonable manner. The Obligor hereby waives any claims against the
Trustee or any Noteholder arising by reason of the fact that the price at which
the Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale or was less than the aggregate
amount of the Secured Obligations, even if the Trustee accepts the first offer
received and does not offer the Collateral to more than one offeree.
(b) The Obligor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933 and applicable state securities laws,
the Trustee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to distribution or resale. The Obligor acknowledges that any such private sales
may be at prices and on terms less favorable to the Trustee than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agrees that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that the Trustee shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective Issuer of
such Collateral to register it for public sale.
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<PAGE> 15
5.04 Application of Proceeds. Except as otherwise expressly provided
in this Agreement and except as provided below in this Section 5.04, the
proceeds of, or other realization upon, all or any part of the Collateral by
virtue of the exercise of remedies under Section 5.01, and any other cash at the
time held by the Trustee under this Section 5, shall be applied by the Trustee:
First, to the payment of the costs and expenses of such exercise of
remedies, including reasonable out-of-pocket costs and expenses of the Trustee,
the reasonable fees and expenses of its agents and counsel and all other
expenses incurred and advances made by the Trustee in that connection;
Next, to the payment in full of the remaining Secured Obligations
equally and ratably in accordance with their respective amounts then due and
owing or as the Noteholders holding the same may otherwise agree, all in
accordance with the terms of the Indenture; and
Finally, to the payment to the Obligor, or its respective successors
or assigns, or as a court of competent jurisdiction may direct, of any surplus
then remaining.
As used in this Section 5, "proceeds" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to the Obligor or any issuer of,
or account debtor or other obligor on, any of the Collateral.
Section 6. Miscellaneous.
6.01 Waiver. No failure on the part of the Trustee to exercise and
no delay in exercising, and no course of dealing with respect to, any right,
remedy, power or privilege under this Agreement shall operate as a waiver of
such right, remedy, power or privilege, nor shall any single or partial exercise
of any right, remedy, power or privilege under this Agreement preclude any other
or further exercise of any such right, remedy, power or privilege or the
exercise of any other right, remedy, power or
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<PAGE> 16
privilege. The rights, remedies, powers and privileges provided in this
Agreement are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
6.02 Notices. All notices and communications to be given under this
Agreement shall be given or made in writing to the intended recipient at the
address specified below or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telex or facsimile delivered to the telegraph or
cable office or personally delivered or, in the case of a mailed notice, upon
receipt, in each case, given or addressed as provided in this Section 6.02:
To the Obligor: Physicians Clinical
Laboratory, Inc.
3301 C Street, Suite 100E
Sacramento, California 95816
Attention: J. Marvin Feigenbaum
Facsimile No.: (916) 498-6030
To the Trustee: First Trust National Association
First Trust Center
180 East 5th Street, Suite 200
St. Paul, Minnesota 55101
Attention: Richard Prokosch
Facsimile No.: (612) 244-0711
6.03 Expenses, Etc. The Obligor agrees to pay or to reimburse the
Trustee for all costs and expenses (including reasonable attorney's fees and
expenses) that may be incurred by the Trustee in any effort to enforce any of
the provisions of Section 5 or any of the obligations of the Obligor in respect
of the Collateral or in connection with (a) the preservation of the Lien of, or
the rights of the Trustee and the Noteholders under, this Agreement or (b) any
actual or attempted sale, lease, disposition, exchange, collection, compromise,
settlement or
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other realization in respect of, or care of, the Collateral, including all such
costs and expenses (and reasonable attorney's fees and expenses) incurred in any
bankruptcy, reorganization, workout or other similar proceeding.
6.04 Amendments, Etc. Any provision of this Agreement may be
modified, supplemented or waived only by an instrument in writing duly executed
by the Obligor and the Trustee. Any such modification, supplement or waiver
shall be for such period and subject to such conditions as shall be specified in
the instrument effecting the same and shall be binding upon the Trustee, each
holder of any of the Secured Obligations and the Obligor, and any such waiver
shall be effective only in the specific instance and for the purposes for which
given.
6.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Obligor, the Trustee, the Noteholders and each
holder of any of the Secured Obligations and their respective successors and
permitted assigns. The Obligor shall not assign or transfer its rights under
this Agreement without the prior written consent of the Trustee.
6.06 Survival. All representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant to or in
connection with this Agreement shall survive the execution and delivery of this
Agreement or such certificate or other document (as the case may be) or any
deemed repetition of any such representation or warranty.
6.07 Agreements Superseded. This Agreement supersedes all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.
6.08 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition
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<PAGE> 18
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7.10 Captions. The table of contents and captions and section
headings appearing in this Agreement are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
7.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties to this Agreement may execute this Agreement
by signing any such counterpart.
7.12 GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS AGREEMENT.
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<PAGE> 19
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
PHYSICIANS CLINICAL LABORATORY, INC.
By:_____________________________________
Name: J. Marvin Feigenbaum
Title: Chief Operating Officer
FIRST TRUST NATIONAL ASSOCIATION
By:_____________________________________
Name:
Title:
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<PAGE> 20
ANNEX 1
PLEDGED STOCK
Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ----------- ---------- ----------------
Bio-Cypher
Funding Corp. _______ _______ ________ shares of
common stock, $.01
par value per
share
Annex 1 to Pledge Agreement
<PAGE> 1
EMPLOYMENT AGREEMENT
This AGREEMENT is made as of September 30, 1997, by and between,
Physicians Clinical Laboratory, Inc., a Delaware corporation (the "Company"),
and J. MARVIN FEIGENBAUM, an individual (hereinafter referred to as the
"Employee").
W I T N E S S E T H :
WHEREAS, the Company is engaged in the operation of a medical
laboratory and related business enterprise; and
WHEREAS, the Company employs and desires to continue the employment
of the Employee for the purpose of securing to the Company the experience,
ability and services of the Employee; and
WHEREAS, the Employee desires to continue his present employment
with the Company, pursuant to the terms and conditions herein set forth,
superseding all prior agreements between the Company, its subsidiaries and/or
predecessors and Employee;
NOW THEREFORE, it is mutually agreed by and between the parties
hereto as follows:
ARTICLE I
EMPLOYMENT
Subject to and upon the terms and conditions of this Agreement, the
Company hereby employs and agrees to continue the employment of the Employee,
and the Employee hereby accepts such continued employment in his capacity as
Chairman of the Board, President and Chief Executive Officer. In this capacity,
Employee will report to the Board of Directors of the Company.
<PAGE> 2
ARTICLE II
DUTIES
(A) The Employee shall, during the term of his employment with the
Company, perform such services and duties of an executive nature in connection
with the business, affairs and operations of the Company as may be reasonably
and in good faith assigned or delegated to him from time to time by or under the
authority of the Board of Directors of the Company and consistent with the
position of Chairman of the Board, President and Chief Executive Officer.
(B) Employee agrees to use his best efforts in the promotion and
advancement of the Company and its welfare and business. Employee agrees to
devote such time and effort to the business of the Company as is reasonably
necessary to fulfill the duties of Chairman of the Board, President and Chief
Executive Officer; provided, however, that the Company acknowledges that (i)
Employee is serving and will continue to serve as Chairman, President and Chief
Executive Officer of NU-TECH BIO-MED, INC. ("Nu-Tech") and Nu-Tech's
subsidiaries, and Employee will devote a portion of his professional time to the
business of Nu-Tech consistent with such duties and (ii) Employee may devote a
portion of his time to charitable work or positions on boards of directors or
committees of other companies or charitable organizations, provided that such
actions do not interfere with the performance by Employee of his duties
hereunder.
(C) Employee shall not be required to perform all of his duties at
the facilities of the Company, and Employee may utilize telephone, computer and
facsimile communications to perform services while he is not located at the
Company's facilities, but Employee shall spend such portion of his time at the
facilities of the Company as is necessary to satisfactorily perform his duties
as Chairman of the Board, President and Chief Executive Officer of the Company.
Additionally, Employee shall undertake such occasional travel, within or without
the United States, as is or may be necessary to satisfactorily perform his
duties and Chairman of the Board, President and Chief Executive Officer of the
Company.
2
<PAGE> 3
ARTICLE III
COMPENSATION
(A) Commencing with the date hereof, the Company shall pay to
Employee a salary at the rate of $104,000 per annum until October 31, 1997
(payable in equal weekly installments or pursuant to such regular pay periods
adopted by the Company) (the "Base Salary"). On November 1, 1997, the Base
Salary shall be increased to $208,000 per annum.
(B) Employee may receive such other additional compensation as may
be determined from time to time by the Board of Directors. Nothing herein shall
be deemed or construed to require the Board to award any bonus or additional
compensation.
(C) The Company shall deduct from Employee's compensation all
federal, state and local taxes which it may now or may hereafter be required to
deduct.
3
<PAGE> 4
ARTICLE IV
BENEFITS
(A) During the term hereof, (i) the Company shall provide Employee
with Blue Cross/Blue Shield or equivalent health insurance benefits and major
medical insurance, to the extent that Employee does not have such insurance
coverage pursuant to other employment arrangements, including his employment by
Nu-Tech, and long-term disability insurance, all in accordance with the
Company's policies; (ii) Employee shall be reimbursed by the Company upon
presentation of appropriate receipts, in accordance with the Company's policies,
for all reasonable and necessary business expenses incurred by the Employee on
behalf of the Company, including reasonable travel expenses, expenses related to
Employee's lodging and transportation incurred while Employee is performing
services hereunder at the Company's facilities, and telephone, cellular
telephone and facsimile expenses incurred by Employee to perform his duties
hereunder; and (iii) Employee shall receive the sum of $500 per month as and for
an automobile allowance and shall be reimbursed for all reasonable gasoline,
automobile maintenance and related expenses in connection with the use of an
automobile in the performance of his duties for the Company in the state of
California.
(B) In the event the Company wishes to obtain Key Man life insurance
on the life of Employee, Employee agrees to cooperate with the Company in
completing any applications necessary to obtain such insurance and promptly
submit to such physical examinations and furnish such information as any
proposed insurance carrier may request.
(C) The Company will obtain and maintain during the full term hereof
and at its sole cost and expense a policy of term life insurance on the life of
Employee in the face amount of $500,000 payable to a beneficiary named and
designated by Employee. Upon the conclusion or termination of this Agreement,
all right, title and interest in the policy shall be transferred to the
Employee, and the Employee shall be responsible for any premium due after such
transfer.
(D) For each year of the term hereof, Employee shall be entitled to
four weeks paid vacation. Unused vacation shall accrue and Employee may, at his
option, for each year in which he
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<PAGE> 5
has any unused vacation elect to be paid cash compensation for such unused
vacation at a rate equal to his prevailing Base Salary.
ARTICLE V
NON-DISCLOSURE
The Employee shall not, at any time during or after the termination
of his employment hereunder except when acting an behalf of and with the
authorization of the Company, make use of or disclose to any person,
corporation, or other entity, for any purpose whatsoever, any trade secret or
other confidential information concerning the Company's business, finances,
proposed and current products, customers and pricing (collectively referred to
as the "Proprietary Information"). For the purposes of this Agreement, trade
secrets and confidential information shall mean information disclosed to the
Employee or known by him as a consequence of his employment by the Company,
whether or not pursuant to this Agreement, and not generally known in the
industry, concerning the business, finances, methods, operations, market
information, research and development, pricing and information relating to
proposed expansion of the Company or the Company's business plans. The Employee
acknowledges that trade secrets and other items of confidential information, as
they may exist from time to time, are valuable and unique assets of the Company,
and that disclosure of any such information would cause substantial injury to
the Company. The Company acknowledges that the Employee has been previously
employed in the medical laboratory industry and acknowledges that general
information regarding the industry known to the Employee prior to his employment
by the Company shall not be considered Proprietary Information. The provisions
of this Article V shall survive termination of this Agreement.
ARTICLE VI
RESTRICTIVE COVENANT
(A) Employee agrees that during the period of time that Employee is
employed by the Company he will not directly or indirectly enter into or become
associated with or engage in any other business (whether as a partner, officer,
director, shareholder, employee, consultant, representative, agent,
5
<PAGE> 6
franchisor, franchisee or otherwise), which business is directly or indirectly
involved in the provision of clinical laboratory services (each, a "Competitive
Act") anywhere in the United States and that, in the event that Employee's
employment hereunder is terminated pursuant to paragraph (D) or (E) of Article
VIII hereof, Employee will not engage in any Competitive Act anywhere in the
United States prior to the fourth anniversary of the date hereof (the
"Noncompete Period"). Employee further agrees that, in the event that Employee's
employment hereunder is terminated pursuant to paragraph (A), (C), (F) or (G) of
Article VIII hereof, he will not engage in any Competitive Act in any state
listed on Schedule I attached hereto during the Noncompete Period and during
such period he will not solicit clinical laboratory service business from any of
such states.
(B) During the Noncompete Period, the Employee shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee,
consultant, independent contractor or agent of the Company or any of its
subsidiaries to leave the employ of the Company or such subsidiary, or in any
way interfere with the relationship between the Company or any of its
subsidiaries and any employee, consultant, independent contractor or agent
thereof, (ii) hire or otherwise retain any person who was an employee,
consultant, independent contractor or agent of the Company or any of its
subsidiaries at any time during the six-month period immediately prior to the
date on which such hiring or engagement would take place, provided that this
clause (ii) shall not apply with respect to hiring or retaining any bona fide
agent, consultant or independent contractor of the Company that is also retained
by persons other than the Company or (iii) induce or attempt to induce any
customer, supplier, licensee, licensor, franchisee or other business relation of
the Company or any of its subsidiaries to cease doing business with the Company
or such subsidiary, or in any way interfere with the relationship between any
such customer, supplier, licensee, franchisee or business relation and the
Company or any of its subsidiaries (including making any negative statements or
communications about the Company or any of its subsidiaries).
(C) The parties hereto agree that, based upon the Company's present
business and plans for future expansion, the covenants and agreements contained
in this Article VI are reasonable in duration, scope and geographic area and are
necessary to protect the goodwill of the Company's business. The
6
<PAGE> 7
breach of the provisions of this Article VI would irreparably harm the Company.
If, however, any court shall hold that the duration of non-competition or any
other restriction contained in this Article VI is unenforceable, it the
intention of the parties hereto that this Article VI shall not thereby be
terminated but shall be deemed amended to delete therefrom or modify such
provision or portion adjudicated to be invalid or unenforceable or in the
alternative such judicially substituted term may be substituted therefor.
(D) The covenants and restrictions contained in this Article VI
shall survive termination of this Agreement.
7
<PAGE> 8
ARTICLE VII
TERM
This Agreement shall be for a term commencing on the date first set
forth above and terminating on the third anniversary hereof, unless earlier
terminated pursuant to the terms hereof.
ARTICLE VIII
TERMINATION
Employee's employment pursuant to this Agreement shall terminate on
the earliest to occur of the following:
(A) The expiration of the term hereof;
(B) The death of Employee;
(C) Upon written notice from the Company to the Employee, if
Employee becomes disabled and as a result of such disability, has been prevented
from and unable to perform all of his duties hereunder for a consecutive period
of four (4) months or for a total of one hundred and twenty (120) days in any
six (6) month period;
(D) Upon written notice from the Company to Employee, if (i)
Employee is convicted of a felony involving moral turpitude or has engaged in
embezzlement or other fraudulent or dishonest behavior, or (ii) the Employee, in
carrying out his duties under this Agreement, has performed in a manner as to
materially harm the Company and did so recklessly or wilfully or has refused to
follow reasonable and lawful directions from the Board of Directors;
(E) Upon written notice delivered by Employee to the Company not
less than ninety (90) days prior to the date of such termination;
(F) Upon written notice from the Company to Employee; or
8
<PAGE> 9
(G) In the event of a material diminution by the Company of
Employee's title and responsibilities or duties hereunder or a breach of the
Company's obligations pursuant to Article III hereof. In such event, Employee
shall deliver written notice to the Company not less than sixty (60) days prior
to the proposed date of termination stating with specificity the conditions
constituting the material diminution of title, responsibilities or duties or
breach by the Company; provided that Employee's employment hereunder shall not
terminate if the Company shall have remedied the breach specified in the notice
delivered by the Employee pursuant to this paragraph (G) prior to the date
specified as the proposed termination date in full notice.
In the event of a termination pursuant to paragraph (A), (D) or (E)
above, Employee shall be entitled only to (i) unpaid Base Salary accrued to the
date of such termination, (ii) compensation for unused vacation time accrued to
the date of termination for which payment has not been previously made and (iii)
unreimbursed expenses accrued to the date of such termination. In the event of a
termination pursuant to paragraph (B), (C) or (G) above, Employee shall receive
(i) his Base Salary for the period beginning on the termination date and ending
on the third anniversary of the date hereof, compensation for unused vacation
time accrued to the date of termination for which payment has not been
previously made, (ii) unreimbursed expenses accrued to the date of such
termination, and (iv) in the case of a termination pursuant to paragraph (C) or
(G) hereof, health insurance coverage or reimbursement for the reasonable cost
thereof. In the event of a termination pursuant to paragraph (F) above, Employee
shall receive (i) his Base Salary for the period beginning on the termination
date and ending on the fourth anniversary of the date hereof, (ii) compensation
for unused vacation time accrued to the date of termination for which payment
has not been previously made and (iii) health insurance coverage or
reimbursement for the reasonable cost thereof from the date of such termination
to the third anniversary of the date hereof.
ARTICLE IX
STOCK OPTIONS
9
<PAGE> 10
As an inducement to Employee to enter into this Agreement the
Company hereby grants to Employee two ten-year non-incentive stock options (the
"Options"), to purchase shares of the Company's Common Stock, $.01 par value,
upon and subject to the following conditions:
(A) Subject to the terms and conditions of the Company's Employee
Stock Option Plan (the "Plan"), Employee is hereby granted an option to purchase
100,000 shares of the Company's Common Stock, at an exercise price of $.25 per
share, which options shall vest and be immediately exercisable by Employee upon
and following execution of this Agreement by the parties hereto.
(B) Subject to the terms and conditions of the Plan, Employee is
hereby granted an option (the "Performance Based Option") to purchase 100,000
shares of the Company's Common Stock at an exercise price of $5.00 per share
that shall vest and become exercisable by Employee based on the Company's
performance measured with reference to earnings before interest, taxes,
depreciation and amortization ("EBITDA") for the years ended December 31, 1997,
1998, and 1999 (each, a "Performance Period"). One-third of the Performance
Based Option shall vest and become exercisable by Employee as of the April 1st
immediately following the end of a Performance Period (each, a "Vesting Date")
if the Company achieves the EBITDA target for such Performance Period. In no
event shall such EBITDA targets be less than $1,000,000 for the period from
October 1, 1997 through December 31, 1997, and $8,400,000 and $8,400,000 for the
years 1998 and 1999, respectively. For purposes of determining whether the
Performance Based Options shall vest and become exercisable, EBITDA shall be
derived from the Company's audited financial statements for the applicable
Performance Period. If the Company's EBITDA for either or both of the first two
Performance Periods is less than the EBITDA target established for such
Performance Period (any such shortfall referred to as the "Shortfall Amount"),
the portion of the Performance Based Option that otherwise would have vested and
become exercisable as of the Vesting Date immediately following the end of such
Performance Period (the "Scheduled Vesting Date") shall nonetheless vest and
become exercisable as of the next succeeding Vesting Date if the Company's
performance for the next succeeding Performance Period exceeds the EBITDA target
for such succeeding Performance Period
10
<PAGE> 11
by an amount that is greater than or equal to the Shortfall Amount.
(C) Notwithstanding the provisions of this Article IX above, if (i)
a "Change of Control" of the Company occurs during the term hereof, and (ii) as
of the date of such Change of Control the annual internal rate of return on an
equity investment in the Company (determined with reference to the price per
share paid in the Change of Control transaction versus an assumed valuation of
$5.00 per share (as adjusted to reflect stock splits, stock dividends and
reverse stock splits occurring after the date hereof and prior to such Change of
Control transaction) as of the date of this Agreement) is at least 25% per
annum, the Performance Based Option shall immediately vest and become
exercisable in full. A "Change in Control" of the Company means the occurrence
of any of the following events: (i) except for any transaction not constituting
a Change of Control pursuant to clause (iii) below, any sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation or
for security purposes), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its subsidiaries taken as a
whole to any "person" (as defined in Section 13(d) of the Exchange Act of 1934,
as amended (the "Exchange Act")) or "group" (as defined in Sections 13(d)(3) and
14(d)(2) of the Exchange Act), (ii) the adoption by the Company of a plan for
the liquidation or dissolution of the Company, (iii) the Company consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any person or "group" (as defined in Sections 13(d)(3) and 14(d)(2) of
the Exchange Act) in a transaction or series of related transactions in which
the voting stock of the Company is converted into or exchanged for cash,
securities or other property, other than any transaction where (A) the
outstanding voting stock of the Company is converted into or exchanged for
voting stock of the surviving or transferee corporation and (B) the "beneficial
owners" (as defined in Rule 13d-3 under the Exchange Act) of the voting stock of
the Company immediately prior to such transaction own, directly or indirectly,
not less than a majority of the total voting stock of the surviving or
transferee corporation immediately after such transaction, or (iv) the
consummation of an initial public offering of Common Stock of the Company in
which the Company receives greater than $20,000,000 in aggregate gross proceeds.
11
<PAGE> 12
(D) Except as expressly provided in this paragraph (D), upon the
termination of Employee's employment with the Company under any circumstances,
the Options that have not vested as of the date of Employee's termination (the
"Termination Date") shall immediately terminate; provided, that if Employee's
employment is terminated pursuant to paragraph (B) or (C) of Article VIII prior
to the third anniversary of the date hereof because of death or disability of
Employee during any Performance Period and the Company achieves the EBITDA
target for such Performance Period, one-third of the Performance Based Option
shall vest on the Vesting Date applicable to such Performances Period. Any
vested Options that have not been exercised prior to the Termination Date or
Performance Based Options that vest following the Termination Date shall
terminate in full on the date that is one year following the Termination Date;
provided that in the event that the Company has not registered the shares of
Common Stock issuable upon exercise of the Options, as contemplated by paragraph
(E) below, prior to such date, the expiration date for such Options shall toll
until such time as the Company has caused the shares of Common Stock issuable
upon such exercise to be registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to paragraph (E) below.
(E) The Company hereby agrees that it shall register the shares of
the Company's Common Stock issuable upon exercise of the Options granted
hereunder under the Securities Act of 1933, as amended (the "Securities Act"),
upon Form S-3, Form S-8 or any comparable form, at the same time as the Plan is
registered.
(F) The Options provided for herein are not transferable by
Employee, except to members of Employee's immediate family, a trust established
by Employee for the exclusive benefit of Employee and his immediate family or
charitable foundation established by Employee, and shall be exercised only by
Employee, by a trustee of a trust or charitable foundation established by
Employee or by Employee's legal representative or executor. The Options may be
exercised by delivery by any such person of the exercise price therefore to the
Company in cash, pursuant to a "cashless" exercise, by notice from any such
person, authorizing the Company to withhold from the issuance a number of shares
of Common Stock issuable upon exercise which, when multiplied by the then
current "fair market
12
<PAGE> 13
value" of the Common Stock, is equal to the aggregate exercise price of the
Options then being exercised by such person, or as provided in the Plan. For
purposes of this paragraph (F), fair market value shall be determined with
reference to the average closing price for the ten (10) trading days immediately
preceding the delivery of such notice, if the Common Stock is then so listed on
a national securities exchange or quoted on an automated quotation system, and
if the Common Stock is not then so listed or quoted, by the good faith
determination by action of a majority of the members of the Company's board of
directors, with Employee abstaining from any such action of the board of
directors. The Options are not qualified as incentive stock options.
(G) The Options shall be subject to the same anti-dilution
protections as are set forth in Section 8 of that certain Warrant Agreement by
and between the Company and U.S. Trust Company of California, N.A. dated as of
September 30, 1997.
ARTICLE X
TERMINATION OF PRIOR AGREEMENTS
This Agreement sets forth the entire agreement between the parties
and supersedes all prior agreements between the parties, whether oral or
written, without prejudice to Employee's right to all accrued compensation prior
to the effective date of this Agreement.
ARTICLE XI
SEVERABILITY
If any provision of this Agreement shall be held invalid and
unenforceable, the remainder of this Agreement shall remain in full force and
effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall remain in full force and effect in all other
circumstances.
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<PAGE> 14
ARTICLE XII
NOTICE
All notices required to be given under the terms of this Agreement
shall be in writing and shall be deemed to have been duly given only if
delivered to the addressee in person or mailed by certified mail, return receipt
requested, as follows:
IF TO THE COMPANY: Physicians Clinical Laboratory, Inc.
3301 C Street, Suite 100E
Sacramento, California 95816
(with a copy to each of the members of the Board of Directors of the Company)
IF TO THE EMPLOYEE: J. MARVIN FEIGENBAUM
250 East 73rd Street
New York, New York 10021
or to any such other address as the party to receive the notice shall advise by
due notice given in accordance with this paragraph. Any such written notice
shall be effective upon receipt, but not later than four (4) days after the
deposit with the U.S. Postal Service.
ARTICLE XIII
BENEFIT
This Agreement shall inure to, and shall be binding upon, the
parties hereto, and the heirs of Employee and successors and assigns of the
Company.
ARTICLE XIV
WAIVER
The waiver by either party of any breach or violation of any
condition or provision of this Agreement shall not operate or be construed as a
waiver of any similar or dissimilar
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<PAGE> 15
condition or provision at the same or any prior or subsequent time.
ARTICLE XV
GOVERNING LAW
This Agreement has been negotiated and executed in the State of New
York, and New York law shall govern its construction and validity.
ARTICLE XVI
JURISDICTION
Any or all actions or proceedings which may be brought by the
Company or Employee under this Agreement shall be brought in courts having a
situs within the State of New York and each of the Company and Employee hereby
consent to the jurisdiction of any local, state or federal court located within
the State of New York.
ARTICLE XVII
ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties
hereto. No change, addition or amendment shall be made hereto, except by written
agreement signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
affixed their hands and seals the day and year first above written.
PHYSICIANS CLINICAL LABORATORY, INC.
By: ______________________________
Its: _____________________________
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<PAGE> 16
-----------------------------------
J. MARVIN FEIGENBAUM (Employee)
16
<PAGE> 17
Schedule I
California
Washington
Oregon
Idaho
Utah
Wyoming
Colorado
New Mexico
Arizona
Texas
Montana
Nevada
17
<PAGE> 1
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (this "Agreement") is made and entered
into as of September 30, 1997, by and among Physicians Clinical Laboratory,
Inc., a Delaware corporation (the "Company"), and Nu-Tech Bio-Med, Inc., a
Delaware corporation (the "Stockholder").
W I T N E S S E T H
WHEREAS, the Company acquired all of the issued and outstanding
shares of capital stock of Medical Science Institute, Inc., a California
corporation ("MSI"), from the Stockholder pursuant to that certain Agreement for
Purchase and Sale of Stock dated as of September 30, 1997 by and among the
Company, the Stockholder and MSI;
WHEREAS, the Stockholder owns a majority of the issued and
outstanding capital stock of the Company; and
WHEREAS, the Stockholder will derive certain financial benefits from
the ownership of its interest in the Company, including without limitation the
ability to sell certain of its products to the Company as more fully detailed
below; and
WHEREAS, in consideration of the purchase of the MSI stock by the
Company from the Stockholder and to further the business development of the
Company for the benefit of the Stockholder and the other equityholders of the
Company, the parties hereto agree that it is in their mutual best interests to
define certain parameters relating to competition by the Stockholder with the
Company.
NOW, THEREFORE, in consideration of the agreements and mutual
covenants set forth herein, the parties agree as follows:
Section 1. Definitions. As used in this Agreement, the following
terms have the following meanings:
<PAGE> 2
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting stock of a Person shall be
deemed to be control.
"Agreement" means this Agreement, as the same shall be amended from
time to time.
"Business Day" means a day other than Saturday, Sunday or any other
day on which banks located in the State of California and New York are
authorized or obligated to close.
"Common Stock" means the Company's common stock, $0.01 par value per
share.
"Company" has the meaning assigned to such term in the preamble.
"Employment Agreement" means that certain Employment Agreement dated
as of September 30, 1997 by and between the Company and J. Marvin Feigenbaum.
"Noteholders" means the holders of the Company's Senior Notes due
2004, issued pursuant to that certain indenture dated as of September 30, 1997
by and between the Company and First Trust National Association, as trustee.
"Qualifying Acquisition" has the meaning assigned to such term in
Section 3.
"Securities" shall mean the shares of Common Stock and any
securities exercisable for or convertible into shares of
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<PAGE> 3
Common Stock, and whenever an amount of Securities is calculated or used in any
provision of this Agreement, exercisable and convertible securities shall be
counted as the number of shares of Common Stock issuable upon such exercise or
conversion.
"Stockholder" has the meaning assigned to such term in the preamble.
Section 2. Covenants of the Stockholder. (a) In consideration of the
purchase of the MSI stock by the Company from the Stockholder, the Stockholder
hereby agrees that it will not directly or indirectly enter into or become
associated with or engage in any business which is directly or indirectly
involved in the provision of clinical laboratory services anywhere in the United
States during such time as the Stockholder or its Affiliates beneficially own at
least 25% of the issued and outstanding shares of Common Stock of the Company
(the "Noncompete Period"); provided that (A) the parties hereto agree that the
provision of specialized cancer or genetic diagnostic laboratory services shall
not be deemed to be clinical laboratory services for purposes of this Agreement,
(B) the requirement that the Stockholder and its Affiliates beneficially own at
least 25% of the issued and outstanding Common Stock shall be adjusted in the
event of the issuance by the Company of shares of Common Stock in a Qualifying
Acquisition (as hereinafter defined) such that the percentage of the issued and
outstanding Common Stock required to be beneficially owned by the Stockholder
and its Affiliates following such issuance of Common Stock shall be equal to the
quotient determined by dividing (x) the number of shares held by the Stockholder
as of the date hereof by (y) the sum of (I) the number of shares of Common Stock
issued and outstanding as of the date hereof plus (II) the number of shares of
Common Stock and shares of Common Stock issuable upon conversion of any
Securities issued in such Qualifying Acquisition, plus (III) the number of
shares of Common Stock and shares of Common Stock issuable upon conversion of
Securities issued in all previously consummated Qualifying Acquisitions, and (C)
any shares of Common Stock distributed by the Stockholder in a distribution of
such shares of Common Stock to the Stockholder's stockholders or other holders
of its securities shall be deemed to be owned by the Stockholder for purposes of
this Section 2. As used herein, Qualifying Acquisition means (A) a merger with
respect to which the equity holders of the Company immediately prior to such
merger beneficially own a majority of the issued and outstanding
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<PAGE> 4
shares of capital stock of the surviving entity or (B) an acquisition of assets
or stock by the Company that, in either the case of (A) or (B), is approved by
the affirmative vote of at least one director nominated by OCM Administrative
Services, L.L.C.
(b) During the Noncompete Period the Stockholder shall not directly
or indirectly through another entity (i) induce or attempt to induce any
employee, consultant, independent contractor or agent of the Company or any of
its subsidiaries to leave the employ of the Company or such subsidiary, or in
any way interfere with the relationship between the Company or any of its
subsidiaries and any employee, consultant, independent contractor or agent
thereof, (ii) hire or otherwise retain any person who was an employee,
consultant, independent contractor or agent of the Company or any of its
subsidiaries at any time during the six-month period immediately prior to the
date on which such hiring or engagement would take place, provided that this
clause (ii) shall not apply to the hiring or retaining of any bona fide
consultant, independent contractor or agent of the Company that is also retained
by persons other than the Company and its subsidiaries or the employment by the
Stockholder of J. Marvin Feigenbaum, or (iii) induce or attempt to induce any
customer, supplier, licensee, licensor, franchisee or other business relation of
the Company or any of its subsidiaries to cease doing business with the Company
or such subsidiary, or in any way interfere with the relationship between any
such customer, supplier, licensee, franchisee or business relation and the
Company or any of its subsidiaries (including making any negative statements or
communications about the Company or any of its subsidiaries).
(c) The parties hereto agree that, based upon the Company's present
business and plans for future expansion, the covenants and agreements contained
in this Section 2 are reasonable in duration, scope and geographic area and are
necessary to protect the goodwill of the Company's business. The breach of the
provisions of this Section 2 would irreparably harm the Company. If, however,
any court shall hold that the duration of non-competition or any other
restriction contained in this Section 2 is unenforceable, it the intention of
the parties hereto that this Section 2 shall not thereby be terminated but shall
be deemed amended to delete therefrom or modify such provision or portion
adjudicated to be invalid or unenforceable
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<PAGE> 5
or in the alternative such judicially substituted term may be substituted
therefor.
(d) The Stockholder hereby acknowledges that J. Marvin Feigenbaum
has or will enter into the Employment Agreement with the Company and hereby
waives any claims it may currently have or that may arise in the future against
the Company with respect to the employment by the Company of Mr. Feigenbaum.
Section 3. Equitable Relief. The parties hereto agree and declare
that legal remedies may be inadequate to enforce the provisions of this
Agreement and that equitable relief, including specific performance and
injunctive relief, may be used to enforce such provisions.
Section 4. Miscellaneous.
(a) Notices. All communications under this Agreement shall be in
writing and shall be personally delivered, sent by facsimile transmission or
mailed by first class mail, postage prepaid:
i) if to the Company, at
PHYSICIANS CLINICAL LABORATORY, INC.
3301 C Street
Sacramento, California 95816
Attention: Chief Financial Officer
with a copy to each member of the board of directors of the
Company;
ii) if to the Stockholder, at
NU-TECH BIO-MED, INC.
Attn: Mr. J. Marvin Feigenbaum
500 Fifth Avenue, Suite 2424
New York, New York 10016
Fax: 212-391-2864
or at such other address as the appropriate party to this Agreement may have
furnished in writing to each other party hereto. Any notice shall be deemed to
have been duly given when delivered by hand if personally delivered, by
confirmation of
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<PAGE> 6
completed facsimile transmission if delivered by facsimile, and if sent by mail,
two (2) Business Days after being deposited in the mail, postage prepaid.
(b) Waiver. No failure or delay on the part of the parties or any of
them in exercising any right, power or privilege hereunder, nor any course of
dealing between the parties or any of them shall operate as a waiver of any such
right, power or privilege nor shall any single or partial exercise of any such
right, power or privilege preclude the simultaneous or later exercise of any
other right, power or privilege. The rights and remedies herein expressly
provided are cumulative and are not exclusive of any rights or remedies which
the parties or any of them would otherwise have. No notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
the other parties or any of them to take any other or further action in any
circumstances without notice or demand.
(c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(d) Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York.
(e) Amendment or Termination. This Agreement may be amended or
terminated at any time only by an instrument in writing signed by each of the
parties hereto.
(f) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.
(g) Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and the Noteholders, which are hereby expressly
made third-party beneficiaries hereof with the right to enforce the provisions
of
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<PAGE> 7
this Agreement on behalf of the Company as if they were parties hereto.
[signature page follows]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this
Noncompetition Agreement as of the day and year first above written.
The Company: PHYSICIANS CLINICAL LABORATORY, INC.
By: ______________________________
J. Marvin Feigenbaum
Chief Operating Officer
The Stockholder:
NU-TECH BIO-MED, INC.
By: ______________________________
J. Marvin Feigenbaum
Chief Executive Officer
-8-
<PAGE> 1
HEALTHCARE RECEIVABLES
PURCHASE AND TRANSFER
AGREEMENT
Dated as of September 30, 1997
Between
PHYSICIANS CLINICAL LABORATORY, INC.,
as Provider
and
BIO-CYPHER FUNDING CORP.,
as Purchaser
ALL THE RIGHT, TITLE AND INTEREST OF THE PURCHASER IN AND TO, ALL BENEFITS
OF THE PURCHASER UNDER AND ALL MONIES DUE OR TO BECOME DUE TO THE
PURCHASER UNDER OR IN CONNECTION WITH, THIS AGREEMENT HAVE BEEN ASSIGNED
TO DAIWA HEALTHCO-2 LLC, AS COLLATERAL SECURITY FOR ANY AND ALL THE
OBLIGATIONS OF THE PURCHASER PURSUANT TO A LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 30, 1997 BETWEEN THE PURCHASER AND DAIWA HEALTHCO-2
LLC.
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I: TERMS OF THE PURCHASES AND CONTRIBUTIONS
SECTION 1.01. Sale, Contribution and Purchase of Accounts...............1
SECTION 1.02. Receivable Information and Transferred Batch
Determination.............................................1
SECTION 1.03. The Transfers.............................................2
SECTION 1.04. Collection and Payment Procedures.........................2
SECTION 1.05. Allocation of Servicer Responsibilities...................2
ARTICLE II: PAYMENT MECHANICS; GOVERNMENTAL ENTITIES PAYMENT
MECHANICS; EOB'S; MISDIRECTED PAYMENTS
SECTION 2.01. Payment Mechanics.........................................3
SECTION 2.02. Governmental Entities Payment Mechanics...................4
SECTION 2.03. Misdirected Payments; EOB's...............................4
SECTION 2.04. Unidentified Payments; Purchaser's Right of Presumption...5
SECTION 2.05. No Rights of Withdrawal...................................5
ARTICLE III: REPRESENTATIONS AND WARRANTIES; COVENANTS;
EVENTS OF TERMINATION
SECTION 3.01. Representations and Warranties; Covenants.................5
SECTION 3.02. Events of Termination.....................................5
ARTICLE IV: INDEMNIFICATION; GRANT OF SECURITY INTEREST
SECTION 4.01. Indemnification and Set-Off Rights for Denied Receivables.6
SECTION 4.02. Indemnities by the Provider...............................6
SECTION 4.03. Right of Set-Off..........................................8
SECTION 4.04. Grant of Security Interest................................8
ARTICLE V: MISCELLANEOUS
SECTION 5.01. Amendments, etc...........................................8
SECTION 5.02. Notices, etc..............................................9
SECTION 5.03. Assignability.............................................9
SECTION 5.04. Further Assurances........................................9
SECTION 5.05. Costs, Expenses and Termination Fee.......................9
SECTION 5.06. Confidentiality..........................................10
SECTION 5.07. Term and Termination.....................................11
SECTION 5.08. Sale Treatment...........................................11
i
<PAGE> 3
SECTION 5.09. Grant of Security Interest...............................11
SECTION 5.10. No Liability of the Purchaser............................12
SECTION 5.11. Reserves.................................................12
SECTION 5.12. Attorney-in-Fact.........................................13
SECTION 5.13. Entire Agreement; Severability...........................13
SECTION 5.14. GOVERNING LAW............................................14
SECTION 5.15. WAIVER OF JURY TRIAL, JURISDICTION AND VENUE.............14
SECTION 5.16. Execution in Counterparts................................14
SECTION 5.17. No Proceedings...........................................14
SECTION 5.18. Survival of Termination..................................14
EXHIBITS
Exhibit Definitions
Exhibit II Conditions of Purchases
Exhibit III Representations and Warranties
Exhibit IV Covenants
Exhibit V Events of Termination
Exhibit VI Receivable Information
Exhibit VII-A Form of Notice to Governmental Entities
Exhibit VII-B Form of Notice to Insurers
Exhibit VIII Primary Servicer Responsibilities
Exhibit IX Servicer Termination Events
Exhibit X Interface Between Provider and Master Servicer
Exhibit XI-A Form of Opinion of Provider's Counsel with Respect to the Patient
Consent Form
Exhibit XI-B Form of Opinion of Provider's Counsel with Respect to
Certain Corporate Matters
Exhibit XI-C Form of Opinion of Special Bankruptcy Counsel to the Provider
Exhibit XII Form of Depositary Agreement
SCHEDULES
Schedule I Addresses for Notices
Schedule II Credit and Collection Policy
Schedule III Disclosures
Schedule IV Lockbox Information
Schedule V IRS Payment Schedule
Schedule VI Medicare Payment Schedule
Schedule VII Financial Information
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HEALTHCARE RECEIVABLES PURCHASE AND TRANSFER AGREEMENT
Dated as of September 30, 1997
PHYSICIANS CLINICAL LABORATORY, INC., a Delaware corporation
(together with its corporate successors and assigns, the "Provider") and
BIO-CYPHER FUNDING CORP., a Delaware corporation (together with its successors
and assigns, the "Purchaser"), agree as follows:
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I to this Agreement. References
herein and in the Exhibits and Schedules hereto to the "Agreement" refer to this
Agreement, as amended, restated, modified or supplemented from time to time in
accordance with its terms (the "Agreement").
The Provider wishes to sell or contribute to the Purchaser on a
continuing basis all of its healthcare receivables. The Purchaser is prepared to
purchase or accept the contribution of such healthcare receivables on the terms
and subject to the conditions set forth herein. Accordingly, the parties agree
as follows:
ARTICLE I
TERMS OF THE PURCHASES AND CONTRIBUTIONS
SECTION 1.01. Sale, Contribution and Purchase of Accounts. On each
Transfer Date until the Facility Termination Date and on the terms and
conditions set forth herein, the Provider agrees to sell, without recourse
except to the extent expressly provided herein, or contribute all of the
Provider's Accounts to the Purchaser, and the Purchaser agrees to purchase or
accept such contribution of the Provider's Accounts.
SECTION 1.02. Receivable Information and Transferred Batch
Determination. (a) On each Batching Day after the Initial Transfer Date, the
Servicer, on behalf of the Provider, shall provide by Transmission to the Master
Servicer the information listed on Exhibit VI hereto (as such Exhibit may be
modified by the Purchaser from time to time, the "Receivable Information") with
respect to new Accounts that it has determined constitute Eligible Receivables
(the "Proposed Eligible Receivables") and with respect to new Accounts that it
has determined do not constitute Eligible Receivables.
(b) All Proposed Eligible Receivables for which Receivable
Information has been received by the Master Servicer between the prior Batching
Time and the current Batching Time shall be reviewed by the Daiwa Group. On or
prior to each Transfer Date, the Purchaser or the Program Manager shall prepare
a list of all Proposed Eligible Receivables, and delineating those Proposed
Eligible Receivables that the Purchaser will purchase on the Transfer Date (a
"Purchased Batch", and together with the remaining Proposed Eligible Receivables
and all other Receivables that are not Eligible Receivables that will not be
purchased and instead will be contributed to the
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Purchaser, the "Transferred Batch"), together with an explanation stating that
the identified Proposed Eligible Receivables not included in the Purchased Batch
are not Eligible Receivables and the basis thereof.
SECTION 1.03. The Transfers. (a) On each Transfer Date, (i) subject
to satisfaction of the applicable conditions set forth in Exhibit II hereto, the
Purchaser shall pay to the Provider in same day funds, at the Existing Provider
Account, an amount equal to the Purchase Price of the Purchased Batch, and (ii)
the Provider will contribute to the capital of the Purchaser all other
Receivables in the Transferred Batch.
(b) Effective on each Transfer Date, in consideration of the
Purchase Price and other good and valuable consideration, the Provider hereby
sells, contributes and assigns to the Purchaser and the Purchaser hereby
purchases and accepts, as absolute owner, the Transferred Batch purchased or
contributed on such Transfer Date.
SECTION 1.04. Collection and Payment Procedures. (a) Collections on
the Transferred Batch. The Purchaser shall be entitled with respect to each
Transferred Batch, (i) to the extent permitted by law and in a manner consistent
with all applicable laws and regulations, to receive all Collections on such
Transferred Batch, and (ii) to have and to exercise any and all rights (x) to
collect, record, track and, during the continuance of an Event of Termination or
a Servicer Termination Event, take all actions to obtain Collections with
respect to each Batch Receivable payable by Obligors other than Governmental
Entities, and (y) to the extent permitted by law and in a manner consistent with
all applicable laws and regulations, to record, track and, during the
continuance of an Event of Termination or a Servicer Termination Event, take all
actions to obtain Collections with respect to each Batch Receivable payable by
Governmental Entities.
(b) Collections Not Part of a Transferred Batch. On each Settlement
Date, and provided that (i) the Provider shall have paid all amounts then due
and owing to the Purchaser under this Agreement, (ii) the Provider shall have
deposited all amounts required in accordance with Section 5.11, and (iii) no
Event of Termination shall have occurred and be continuing, the Purchaser shall
pay or turn over, as the case may be, to the Provider any and all cash
collections or other cash or non-cash proceeds received by the Purchaser during
the immediately preceding Settlement Period with respect to Accounts that are
not part of any Transferred Batch.
(c) Distributions on each Settlement Date. On each Settlement Date
and with respect to each Transferred Batch, Total Collections shall be
distributed to the Purchaser.
SECTION 1.05. Allocation of Servicer Responsibilities. (a) Tracking
of purchases, Collections and other transactions pertaining to each Transferred
Batch shall be administered by the Master Servicer in a manner consistent with
the terms of this Agreement. The responsibilities of the Provider to the Master
Servicer have been set forth in Exhibit X attached hereto. The Provider shall
cooperate fully with the Master Servicer in establishing and maintaining the
Transmission of the Receivable Information, including, without limitation, the
matters described in Exhibit X, and shall
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provide promptly to the Master Servicer such other information necessary or
desirable for the administration of Collections on the Batch Receivables as may
be requested from time to time.
(b) The Purchaser hereby appoints the Provider as its agent (in such
capacity, the "Servicer") for the administration and servicing obligations set
forth in Exhibit VIII hereto with respect to the Accounts sold or transferred by
the Provider to the Purchaser hereunder (the "Primary Servicer
Responsibilities"), and the Provider hereby accepts such appointment and agrees
to perform the Primary Servicer Responsibilities. Each of the Provider, the
Servicer and the Purchaser hereby acknowledge that the Servicer's appointment is
subject to and limited by DH-2's appointment of the Purchaser as its agent for
performance of the Primary Servicer Responsibilities under the Loan Agreement
and DH-2's rights thereunder to replace the Purchaser (which replacement may be
effectuated through the outplacement to a qualified and experienced third party
of all back office duties, including billing, collection and processing
responsibilities, and access to all personnel, hardware and software utilized in
connection with such responsibilities). The Purchaser may, at any time following
the occurrence of a Servicer Termination Event (and shall, without requirement
of notice to any party, upon a Servicer Termination Event resulting from the
events described in clauses (g) or (j) of Exhibit V hereto) appoint another
Person to succeed the Servicer as its agent for performance of the Primary
Servicer Responsibilities (which appointment may be effectuated through the
outplacement to a qualified and experienced third party of all back office
duties, including billing, collection and processing responsibilities, and
access to all personnel, hardware and software utilized in connection with such
responsibilities).
(c) As compensation for the performance of the Primary Servicer
Responsibilities, the Servicer (or the successor Servicer who performs such
Primary Servicer Responsibilities) shall be entitled to a Primary Servicing Fee
with respect to each Purchased Batch; provided, that the Primary Servicing Fee
shall be payable solely, to the extent received, from a similar fee payable by
DH-2 to the Purchaser, and, to the extent not received, the Servicer hereby
waives its right to receive it.
ARTICLE II
PAYMENT MECHANICS; GOVERNMENTAL ENTITIES PAYMENT
MECHANICS; EOB'S; MISDIRECTED PAYMENTS
SECTION 2.01. Payment Mechanics. (a) On or prior to the Initial
Transfer Date each of the Servicer, the Provider, the Purchaser, and DH-2 shall
have entered into the Depositary Agreement and shall have caused the Lockbox
Bank to establish the Purchaser Lockbox and the Purchaser Lockbox Account.
(b) The Provider shall prepare, execute and deliver to each Obligor
other than Governmental Entities who is proposed to be a payor of Receivables,
with copies to the Purchaser, on or prior to the Initial Transfer Date, a Notice
to Insurers addressed to each such Obligor, which Notice to Insurers shall
provide that all checks and EOB's from such Obligors on account of
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Receivables shall be sent to the Purchaser Lockbox and all wire transfers on
account of Receivables shall be wired directly into the Purchaser Lockbox
Account.
(c) The Provider covenants and agrees that, on and after the Initial
Transfer Date, all invoices (and, if provided by the Provider, return envelopes)
shall set forth only the address of the Purchaser Lockbox as a return address
for payment of Receivables and delivery of EOB's, and only the Purchaser Lockbox
Account with respect to wire transfers for payment of Receivables. The Provider
hereby further covenants and agrees to instruct and notify each of the members
of its accounting and collections staff to provide identical information in
communications with Obligors with respect to Collections, wire transfers and
EOB's.
SECTION 2.02. Governmental Entities Payment Mechanics. (a) On or
prior to the Initial Transfer Date, each of the Primary Servicer, the Provider,
the Purchaser, and DH-2 shall have entered into the Depositary Agreement, and
the Provider shall have caused the Lockbox Bank to establish the Provider
Lockbox and the Provider Lockbox Account. The Provider shall prepare, execute
and deliver to each Governmental Entity or its fiscal intermediary who is
proposed to be an Obligor of Receivables, with copies to the Purchaser, on or
prior to the Initial Transfer Date, a Notice to Governmental Entities addressed
to each such Governmental Entity, which Notice to Governmental Entities shall
provide that all checks, including any attached EOB's, from Governmental
Entities on account of Receivables shall be sent to the Provider Lockbox and all
wire transfers on account of Receivables shall be wired directly into the
Provider Lockbox Account.
(b) The Provider covenants and agrees that, on and after the Initial
Transfer Date, all invoices to be sent to Governmental Entities (and, if
provided by the Provider, return envelopes) shall set forth only the address of
the Provider Lockbox as a return address for payment of Receivables and delivery
of any EOB's attached to checks from Governmental Entities, and only the
Provider Lockbox Account with respect to wire transfers for payment of
Receivables. The Provider further covenants and agrees to instruct and notify
each of the members of its accounting and collections staff to provide identical
information in communications with Governmental Entities with respect to
Collections, wire transfers and EOB's.
(c) The Provider shall maintain its Provider Lockbox Account solely
and exclusively for the receipt of payments on account of Receivables from
Governmental Entities. The Provider shall take all actions necessary to ensure
that no payments from any Person other than a Governmental Entity shall be
deposited in the Provider Lockbox Account.
SECTION 2.03. Misdirected Payments; EOB's. (a) In the event that the
Provider receives an EOB or a Misdirected Payment in the form of a check, the
Provider shall, as soon as commercially reasonable, send such Misdirected
Payment by overnight delivery service to the appropriate Purchaser Lockbox or
Provider Lockbox, as the case may be, together with the envelope in which such
payment was received. In the event the Provider receives a Misdirected Payment
in the form of cash or wire transfer, the Provider shall, as soon as
commercially reasonable, wire transfer the amount of such Misdirected Payment
directly into the Purchaser Lockbox Account. All
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<PAGE> 8
Misdirected Payments shall be sent promptly upon receipt thereof, and in no
event later than the close of business, on the second full Business Day after
receipt thereof.
(b) If a Misdirected Payment in the form of a check is received by
the Purchaser more than ten days after the postmark date on the envelope
enclosing a check from the Obligor (or, if no such envelope is sent to the
Purchaser Lockbox Account by the Provider, more than ten days after the date of
such check or wire transfer with respect thereto), then the Provider shall pay
interest on such Misdirected Payment to the Purchaser from such tenth subsequent
day to and including the date such check is received in the Purchaser Lockbox
Account, at a rate equal to the LIBO Rate then in effect under the Loan
Agreement (or the maximum rate legally permitted if less than such rate).
(c) The Provider hereby agrees and consents to the Purchaser taking
such actions as are reasonably necessary to ensure that future payments from the
Obligor of a Misdirected Payment shall be made in accordance with the Notice
previously delivered to such Obligor, including, without limitation, following
the occurrence and continuance of an Event of Termination, and to the maximum
extent permitted by law, (i) any member of the Daiwa Group executing on the
Provider's behalf and delivering to such Obligor a new Notice, and (ii) any
member of the Daiwa Group contacting such Obligor by telephone to confirm the
instructions previously set forth in the Notice to such Obligor. Upon the
Purchaser's request, the Provider shall promptly (and in any event, within two
Business Days from such request) take such similar actions as the Purchaser may
request.
SECTION 2.04. Unidentified Payments; Purchaser's Right of
Presumption. Each of the Provider and the Purchaser agrees and consents that the
Daiwa Group may apply any payment it receives against a Purchased Batch if the
Daiwa Group is unable in good faith (after making reasonable attempts to contact
the Provider) to determine from the information in the EOB whether such payment
relates to a Purchased Batch.
SECTION 2.05. No Rights of Withdrawal. Neither the Provider nor the
Purchaser shall have any rights of direction or withdrawal with respect to
amounts held in the Purchaser Lockbox Account.
ARTICLE III
REPRESENTATIONS AND WARRANTIES; COVENANTS;
EVENTS OF TERMINATION
SECTION 3.01. Representations and Warranties; Covenants. The
Provider makes, on the Initial Transfer Date and on each subsequent Transfer
Date, the representations and warranties on and as of such dates, and hereby
agrees to perform and observe the covenants, set forth in Exhibits III and IV,
respectively, hereto.
SECTION 3.02. Events of Termination. If an Event of Termination
shall occur and be continuing, the Purchaser may terminate the appointment of
the Servicer to perform any or all of the Primary Servicer Responsibilities in
the manner set forth in Section 1.05(b).
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ARTICLE IV
INDEMNIFICATION;
GRANT OF SECURITY INTEREST
SECTION 4.01. Indemnification and Set-Off Rights for Denied
Receivables. (a) If a breach of any of the representations or warranties
contained herein relating to a Purchased Receivable shall be discovered at any
time (each, a "Denied Receivable"), the Provider shall, on the next Settlement
Date, repurchase such Denied Receivable from the Purchaser at the Repurchase
Price.
(b) For ease of administration, the Purchaser shall be entitled to
presume that the failure of any Purchased Receivable (or portion thereof) owing
from Insurers or Governmental Entities to be paid in full on or after the 180th
day following the Last Service Date thereof is the result of a breach of a
representation or warranty contained herein with respect to such Purchased
Receivable, unless the Purchaser shall have, or obtains in the future, actual
knowledge to the contrary (such as, by way of example, actual knowledge of the
financial inability of an Obligor to pay its obligations represented by a
Receivable). In the event the Purchaser receives the Repurchase Price for any
such Purchased Receivable and it is thereafter determined that the failure of
such Purchased Receivable to be paid in full was not the result of a breach of
representation or warranty contained herein, the parties hereto shall make an
appropriate adjustment by increasing the Purchase Price of any Purchased Batch
to be purchased on or after such date.
(c) Upon receipt by (or on behalf of) the Purchaser of the
Repurchase Price with respect to any Denied Receivable, the Purchaser shall be
deemed to have reassigned and resold to the Provider such Denied Receivable
without any representation, warranty or recourse whatsoever, and, thereafter,
neither the Purchaser nor any member of the Daiwa Group shall have any further
servicing or other obligation to the Provider with respect to such Denied
Receivable.
(d) From time to time at the request of the Provider, the Purchaser
shall deliver to the Provider (at the Provider's sole cost and expense) such
documents, assignments, releases and instruments of termination as the Provider
may reasonably request to evidence the reconveyance by the Purchaser of a Denied
Receivable pursuant to the terms of Section 4.01(c).
SECTION 4.02. Indemnities by the Provider. Without limiting any
other rights that the Purchaser, the Program Manager, the Master Servicer or any
of their respective Affiliates (together with their respective officers,
directors, shareholders and lenders, each, an "Indemnified Party") may have
hereunder or under applicable law, the Provider hereby agrees to indemnify each
Indemnified Party from and against any and all claims, losses and liabilities
(including, without limitation, reasonable attorneys' fees) (all of the
foregoing being collectively referred to as "Indemnified Amounts") arising out
of or resulting from any of the following:
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(a) the sale of any Receivable which purports to be part of a
Purchased Batch but which is not, at the date of such sale, the type of
Receivable described in subsection (j) of Exhibit III to this Agreement;
(b) any representation or warranty made or deemed made by the
Provider (or any of its officers) under or in connection with this
Agreement and not relating to a Purchased Receivable which shall have been
incorrect in any material respect when made;
(c) the failure by the Provider or any Batch Receivable to
comply with any applicable law, rule or regulation with respect to any
Batch Receivable;
(d) the failure to vest in the Purchaser a perfected ownership
interest in each Receivable included in a Transferred Batch and the
Collections in respect thereof, free and clear of any Liens;
(e) any dispute, claim, set-off or defense to the payment, in
whole or in part, of any Receivable (including, without limitation, a
defense based on such Receivable not being a legal, valid and binding
obligation) or any other claim resulting from the services or merchandise
related to such Receivable or the furnishing or failure to furnish such
services or merchandise or relating to collection activities with respect
to such Receivable (if such collection activities were performed by the
Provider or any of its Affiliates acting as Servicer), provided, however,
this clause (e) shall not be deemed to include any dispute, claim, set-off
or defense to the payment of any Receivable (i) arising out of the
financial inability of an Obligor to pay its obligations represented by
such Receivable including, without limitation, a discharge in bankruptcy,
or (ii) arising after the sale of such Receivable to the Purchaser
hereunder and arising solely as a result of actions taken by any member of
the Daiwa Group;
(f) a failure of the Provider, including, without limitation,
the Servicer's actions on behalf of the Provider under Section 1.05(b) of
this Agreement with respect to Primary Servicer Responsibilities, to
perform its duties or obligations in accordance with the provisions hereof
or to perform its duties or obligations hereunder; or
(g) the commingling by the Provider of Collections at any time
with other funds of the Provider,
provided, however, that in all events there shall be excluded from the foregoing
indemnification any claims, losses or liabilities resulting solely from the
gross negligence or willful misconduct of an Indemnified Party or which
constitutes recourse for an uncollectible Purchased Receivable.
Such Indemnified Party shall notify the Servicer, on behalf of the
Provider, of such claim, provided that the failure to so notify shall not affect
or invalidate the indemnity granted pursuant to this Section 4.02.
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SECTION 4.03. Right of Set-Off. Unless the Provider notifies the
Purchaser in writing that it desires to pay on the date when due the Repurchase
Price under Section 4.01 or any Indemnified Amounts under Section 4.02 and the
Provider makes such payment to the Purchaser in immediately available funds on
such date, the Provider hereby irrevocably instructs the Purchaser to set-off
the full amount of the Repurchase Price or the Indemnified Amounts, as the case
may be, against the Purchase Price of any Purchased Batch to be purchased on or
after such date. No further notification, act or consent of any nature
whatsoever is required prior to the right of the Purchaser to exercise such
right of set-off, provided, however, the Purchaser or a member of the Daiwa
Group shall notify the Servicer on behalf of the Provider that a set-off
pursuant to this Section 4.03 occurred, the amount of such set-off and a
description of the Denied Receivable or Indemnified Amounts, as the case may be.
The Purchaser shall exercise its right to set-off hereunder to the extent funds
are available prior to making a demand for indemnification under Section 4.02
SECTION 4.04. Grant of Security Interest. (a) As collateral security
for the Provider's existing and future (i) obligations to repurchase Denied
Receivables under Section 4.01 hereof, (ii) indemnification obligations to the
Purchaser under Section 4.02 hereof, and (iii) obligations to pay costs,
expenses and fees under Section 5.05 hereof, the Provider hereby grants to the
Purchaser a first priority lien on and security interest in, and right of
set-off against, all of the Accounts now or hereafter owned or held by the
Provider and all bank accounts and instruments in respect thereto and all
proceeds thereof.
(b) In connection with the grant under (a) above, this Agreement
shall be deemed to be a security agreement as understood under the UCC. The
Provider agrees to execute, and hereby authorizes the Purchaser to file, one or
more financing statements or continuation statements or amendments thereto or
assignments thereof in respect of the lien created pursuant to this Section 4.04
which may at any time be required or, in the opinion of the Purchaser, be
desirable, and to do so without the signature of the Provider where permitted by
law.
ARTICLE V
MISCELLANEOUS
SECTION 5.01. Amendments, etc. (a) No amendment or waiver of any
provision of this Agreement or consent to any departure therefrom by a party
hereto shall be effective unless in writing signed by the Servicer, the
Provider, the Purchaser, and DH-2 as assignee of all of the Purchaser's rights
and remedies hereunder, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No failure on the part of the Purchaser, the Servicer or the Provider to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
(b) The parties hereto agree to make any change, modification or
amendment to this Agreement as may be requested by Duff & Phelps Credit Rating
Co. or any other rating agency
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then rating the healthcare finance program of DH-2, so long as any such change,
modification or amendment does not materially adversely affect the parties
hereto.
SECTION 5.02. Notices, etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which may
include facsimile communication) and shall be faxed or delivered, (i) to each
party hereto, at its address set forth under its name on the signature pages
hereto or at such other address as shall be designated by such party in a
written notice to the other parties hereto (the Provider hereby acknowledges and
agrees that notices to or for the benefit of the Provider may be delivered to
the Servicer and such delivery to the Servicer shall be deemed to be received by
the Provider), and (ii) to the Program Manager and the Master Servicer at the
addresses set forth on Schedule I attached hereto. Notices and communications by
telefacsimile shall be effective upon electronic confirmation of receipt by the
addressee, and notices and communications sent by other means shall be effective
when received.
SECTION 5.03. Assignability. (a) This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective permitted
successors and assigns.
(b) Subject to Section 5.03(b) of the Loan Agreement, this Agreement
and the Purchaser's rights and obligations herein (including without limitation,
ownership of the Purchased Receivables in each Purchased Batch, the Purchaser
Lockbox and Purchaser Lockbox Account and rights in relation to the Provider
Lockbox and the Provider Lockbox Account) shall be assignable by the Purchaser
and its successors and assigns. The Provider hereby acknowledges that the
Purchaser is granting to DH-2, which is further granting to its lenders, a
security interest in this Agreement and all of the Purchaser's rights, title and
interests hereunder (including, without limitation, the Purchased Receivables,
Provider's obligations hereunder, the Purchaser Lockbox and Purchaser Lockbox
Account, and rights in relation to the Provider Lockbox and the Provider Lockbox
Account).
(c) The Provider may not assign its rights or obligations hereunder
or any interest herein without the prior written consent of the Purchaser and
DH-2.
SECTION 5.04. Further Assurances. The Provider shall, at its cost
and expense, upon the request of the Purchaser, duly execute and deliver, or
cause to be duly executed and delivered, to the Purchaser such further
instruments and do and cause to be done such further acts as may be necessary or
proper in the reasonable opinion of the Purchaser to carry out more effectively
the provisions and purposes of this Agreement.
SECTION 5.05. Costs, Expenses and Termination Fee. In addition to
the rights of indemnification granted under Section 4.02 hereof, the Provider
agrees to pay on demand all reasonable costs and expenses in connection with the
preparation, execution and delivery of this Agreement and any waiver,
modification, supplement or amendment hereto, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Purchaser and the
members of the Daiwa Group, and all costs and expenses, if any (including
reasonable counsel fees and expenses), of the Purchaser, its Affiliates and the
members of the Daiwa Group in connection
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with the enforcement of this Agreement. The Provider further agrees to pay on
the Initial Transfer Date (and with respect to costs and expenses incurred
following the Initial Transfer Date, within seven days of demand therefor) (a)
all reasonable costs and expenses incurred by the Purchaser or its agent in
connection with periodic audits of the Receivables, and (b) all reasonable costs
and expenses incurred by the Master Servicer or the Program Manager to
accommodate any significant coding or data system changes made by the Provider
that would affect the transmission or interpretation of data received through
the interface.
In the event that any Facility Termination Date is declared (or is
deemed to have occurred) pursuant to an Event of Termination, the Provider shall
pay to the Purchaser an early termination fee in an amount equal to 2.00% of the
Revolving Commitment (as defined in the Loan Agreement) then in effect pursuant
to the Loan Agreement.
In the event that, following the occurrence and continuance of an
Event of Termination or a Servicer Termination Event, the Purchaser or any
member of the Daiwa Group shall retain an attorney or attorneys to collect,
enforce, protect, maintain, preserve or foreclose its interests with respect to
this Agreement, any related documents, any Account, any Lien, or under any
instrument or document delivered pursuant to this Agreement, the Provider shall
pay all of the reasonable and documented costs and expenses of such collection,
enforcement, protection, maintenance, preservation or foreclosure, including
reasonable attorneys' fees, and the Purchaser may take judgment for all such
amounts. The attorneys' fees arising from such services, including those of any
appellate proceedings, and all reasonable and documented out-of-pocket expenses,
charges, costs and other fees incurred by such counsel in any way or in any
respect to or arising out of or in connection with or relating to any of the
events or actions described in this Section 5.05 shall be payable by the
Provider to the Purchaser on demand (with interest accruing from the twentieth
Business Day following the date of such demand).
SECTION 5.06. Confidentiality. (a) The Provider, the Servicer and
the Purchaser hereby acknowledge that this Agreement, the Loan Agreement and the
documents delivered hereunder, thereunder or in connection with, including,
without limitation, any information relating to any member of the Daiwa Group,
contains confidential and proprietary information. Unless otherwise required by
applicable law, each of the Provider, the Servicer and the Purchaser hereby
agrees to maintain the confidentiality of this Agreement (and all drafts and
other documents delivered in connection therewith including, without limitation,
any information relating to any member of the Daiwa Group delivered hereunder or
under the Loan Agreement) in communications with third parties and otherwise and
to take all reasonable action to prevent the unauthorized use or disclosure of
and to protect the confidentiality of such confidential information; provided,
that such confidential information may be disclosed to (i) the Provider's and
Purchaser's legal counsel, accountants and auditors, (ii) the Program Manager,
DH-2, the Servicer, each member of the Daiwa Group, investors in and creditors
of DH-2, appropriate rating agencies with respect to DH-2, and each of their
respective legal counsel, accountants and auditors, (iii) any Person, if such
information otherwise becomes available to such Person or publicly available
through no fault of any party governed by this Section 5.06, (iv) any
Governmental Entity requesting such information, and (v) to any other Person
with the written consent of the applicable party, which consent shall not be
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unreasonably withheld, and provided further that the Provider shall not disclose
such confidential information to any financial adviser except with the consent
of the Program Manager.
(b) Each of the Provider, the Servicer and the Purchaser understands
and agrees that the other or the Daiwa Group may suffer irreparable harm if the
obligations under this Section 5.06 are breached and that monetary damages shall
be inadequate to compensate the injured party for such breach. Accordingly, each
of the Provider, the Servicer and the Purchaser agrees that, in the event of
their respective breach of Section 5.06(a), the injured party, in addition and
not in limitation of its rights and remedies under law, shall be entitled to a
temporary restraining order, preliminary injunction and permanent injunction to
prevent or restrain any such breach.
(c) All parties hereto agree to comply with all applicable state or
federal statutes or regulations relating to patient medical record
confidentiality.
SECTION 5.07. Term and Termination. This Agreement shall continue in
full force and effect from the date hereof until the Final Payment Date;
provided, however, that while the occurrence of the Final Payment Date shall
terminate any security interest of the Purchaser hereunder, it shall not relieve
or discharge any of the Provider, the Servicer or the Purchaser of their
respective duties, obligations or covenants hereunder with respect to any
Transferred Batches transferred prior to the Final Payment Date and not
repurchased pursuant to Section 4.01, and all the terms, provisions and
conditions of this Agreement shall remain in effect for such purpose until such
obligations have been satisfied and performed in full. Upon the satisfaction in
full of all the obligations, the Purchaser shall deliver all assignments,
certificates, releases, notices and other documents at the Provider's expense,
as the Provider may reasonably request to effect such termination.
SECTION 5.08. Sale Treatment. The Provider and the Purchaser have
structured the transactions contemplated by this Agreement with respect to each
Purchased Batch as a sale and intend that such transactions constitute a sale,
and each of the Provider and the Purchaser agree to treat each such transaction
as a sale for all purposes, including, without limitation, in their respective
books, records, computer files, tax returns (federal, state and local),
regulatory and governmental filings (and shall reflect such sale in their
respective financial statements). The Provider will advise all persons inquiring
about the ownership of the Batch Receivables that all Batch Receivables have
been sold or contributed to the Purchaser. The Provider will pay all taxes
(excluding income or franchise taxes of the Purchaser), if any, relating to the
transactions contemplated under this Agreement, including, without limitation,
the sale, transfer and contribution of each Transferred Batch to the Purchaser.
SECTION 5.09. Grant of Security Interest. In the event that,
contrary to the mutual intent of the Provider and the Purchaser, any purchase of
a Purchased Batch is not characterized as a sale, the Provider shall, effective
as of the date hereof, be deemed to have granted (and the Provider hereby does
grant) to the Purchaser a first priority security interest in and to any and all
Batch Receivables and the proceeds thereof to secure the repayment of all
amounts paid to the Provider hereunder with accrued interest thereon, and this
Agreement shall be deemed to be a security
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<PAGE> 15
agreement. The Provider agrees that ten Business Days shall be reasonable prior
notice to the Provider of the date of any public or private sale or other
disposition of all or any of the Batch Receivables.
SECTION 5.10. No Liability of the Purchaser. Neither this Agreement
nor any document executed in connection herewith shall constitute an assumption
by the Purchaser of any obligation to an Obligor or a patient/customer of the
Provider.
SECTION 5.11. Reserves. (a) At least six months prior to the due
date of the initial payment to the IRS, the Provider shall deposit an amount in
cash equal to the next two quarterly payments due in accordance with Schedule V
attached hereto (the "IRS Payment Schedule", as such schedule may be amended
with the consent of the Daiwa Group (such consent not to be unreasonably
withheld) to reflect any reductions in the amounts to be paid to the IRS) (such
required amount for the next six months pursuant to the schedule, the "Special
Reserve Requirement"), in a cash collateral account at the Lockbox Bank in which
the Daiwa Group maintains sole dominion and control pursuant to a cash
collateral agreement in form and substance satisfactory to the Daiwa Group (the
"Special Reserve"). On each payment date set forth thereafter in the IRS Payment
Schedule, the Provider shall deposit an amount in cash into the Special Reserve
such that the aggregate amount in the Special Reserve is equal to the amount set
forth in the IRS Payment Schedule for the payments due within six months
thereafter. So long as no Event of Termination has occurred and all funds
required to be deposited under this Section 5.11 have been so deposited, upon
the written prior request of the Provider, the Daiwa Group shall withdraw from
the Special Reserve such amount to make payment in accordance with the IRS
Payment Schedule of the payment then due and owing thereunder; provided, that
should the Provider fail to request such payment be made, the Daiwa Group, in
its sole discretion, may withdraw the appropriate amounts from the Special
Reserve to make payment of any amounts then due and owing under the IRS Payment
Schedule on behalf of the Provider. Upon the written request of the Provider,
the Daiwa Group shall return to the Provider any amounts held in the Special
Reserve to the extent that the funds in the Special Reserve exceed the amounts
due on the IRS Payment Schedule for the next two quarterly payments thereunder.
(b) On the Initial Transfer Date, the Provider shall deposit an
amount in cash equal to the next two quarterly payments due in accordance with
Schedule VI attached hereto (the "Medicare Payment Schedule", as such schedule
may be amended with the consent of the Daiwa Group (such consent not to be
unreasonably withheld) to reflect any reductions in the amounts to be paid)
(such required amount for the next six months pursuant to the schedule, the
"Medicare Reserve Requirement"), in a cash collateral account at the Lockbox
Bank in which the Daiwa Group maintains sole dominion and control pursuant to a
cash collateral agreement in form and substance satisfactory to the Daiwa Group
(the "Medicare Reserve"). On each payment date set forth thereafter in the
Medicare Payment Schedule, the Provider shall deposit an amount in cash into the
Medicare Reserve such that the aggregate amount in the Medicare Reserve is equal
to the amount set forth in the Medicare Payment Schedule for the payment due six
months thereafter. So long as no Event of Termination has occurred and all funds
required to be deposited under this Section 5.11 have been so deposited, upon
the written prior request of the Provider, the Daiwa Group shall
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<PAGE> 16
withdraw from the Medicare Reserve such amount to make payment in accordance
with the Medicare Payment Schedule of the payment then due and owing thereunder;
provided, that should the Provider fail to request such payment be made, the
Daiwa Group, in its sole discretion, may withdraw the appropriate amounts from
the Medicare Reserve to make payment of any amounts then due and owing under the
Medicare Payment Schedule on behalf of the Provider. Upon the written request of
the Provider, the Daiwa Group shall return to the Provider any amounts held in
the Medicare Reserve to the extent that the funds in the Medicare Reserve exceed
the amounts due on the Medicare Payment Schedule for the next two quarterly
payments thereunder.
(c) At any time there exists a balance due and owing any
Governmental Entity on the financial statements delivered pursuant to clauses
(i) and (ii) of paragraph (j) of Exhibit IV representing amounts other than
those amounts due and owing pursuant to the IRS Payment Schedule, such amounts
shall forthwith be reserved for pursuant to a cash collateral agreement in a
manner reasonably acceptable to the Daiwa Group and generally consistent with
prior reserve practices.
(d) If the Provider fails to make any required deposit within
fifteen days to any reserve required herein, the Daiwa Group shall so establish
and fund such reserve from distributions of Total Collections.
(e) Interest earned on and received on any reserve required herein
shall be deemed to be collections and distributed pursuant to Section 1.04(c).
(f) Each reserve required herein shall be held in its cash
collateral account until (i) the Provider demonstrates to the Daiwa Group that
no further payments are due under such reserve's payment schedule, and the Daiwa
Group, in its sole discretion, determines that such reserve is no longer
necessary; or (ii) the Facility Termination Date occurs and all obligations
under this Agreement and the Loan Agreement have been indefeasibly paid in full.
SECTION 5.12. Attorney-in-Fact. The Provider hereby irrevocably
designates and appoints the Purchaser, the Servicer, the Master Servicer and
each Person in the Daiwa Group, to the extent permitted by applicable law and
regulation, as the Provider's attorneys-in-fact, which irrevocable power of
attorney is coupled with an interest, with authority, during the continuance of
an Event of Termination, to (i) endorse or sign the Provider's name to financing
statements, remittances, invoices, assignments, checks (other than payments from
Governmental Entities), drafts or other instruments or documents in respect of
the Batch Receivables, (ii) notify all Obligors other than Governmental Entities
to make payments on the Batch Receivables directly to the Purchaser, and (iii)
bring suit in the Provider's name and settle or compromise such Batch
Receivables as the Purchaser, the Servicer, the Master Servicer or any other
Person in the Daiwa Group may, in its discretion, deem appropriate.
SECTION 5.13. Entire Agreement; Severability. (a) This Agreement,
including all exhibits hereto, embodies the entire agreement and understanding
of the parties concerning the
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<PAGE> 17
subject matter contained herein. This Agreement supersedes any and all prior
agreements and understandings between the parties, whether written or oral.
(b) If any provision of this Agreement shall be declared invalid or
unenforceable, the parties hereto agree that the remaining provisions of this
Agreement shall continue in full force and effect.
SECTION 5.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
SECTION 5.15. WAIVER OF JURY TRIAL, JURISDICTION AND VENUE. EACH OF
THE PARTIES HERETO HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN THE EVENT OF
ANY LITIGATION WITH RESPECT TO ANY MATTER RELATED TO THIS AGREEMENT, AND HEREBY
IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED
IN NEW YORK COUNTY, NEW YORK CITY, NEW YORK IN CONNECTION WITH ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. IN ANY SUCH LITIGATION,
EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS AND AGREES THAT SERVICE THEREOF MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL DIRECTED TO SUCH PARTY AT ITS ADDRESS SET FORTH ON THE SIGNATURE
PAGE HEREOF. EACH OF THE PARTIES HERETO SHALL APPEAR IN ANSWER TO SUCH SUMMONS,
COMPLAINT OR OTHER PROCESS WITHIN THE TIME PRESCRIBED BY LAW, FAILING WHICH SUCH
PARTY FAILING TO SO APPEAR SHALL BE DEEMED IN DEFAULT AND JUDGMENT MAY BE
ENTERED BY THE OTHER PARTY FOR THE AMOUNT OF THE CLAIM AND OTHER RELIEF
REQUESTED THEREIN.
SECTION 5.16. Execution in Counterparts. This Agreement may be
executed in counterparts, each of which when so executed shall be deemed to be
an original and all of which when taken together shall constitute one and the
same agreement.
SECTION 5.17. No Proceedings. The Provider hereby agrees that it
will not institute against the Purchaser or DH-2 any proceeding of the type
referred to in paragraph (g) of Exhibit V so long as any senior indebtedness
issued by the Purchaser or DH-2 shall be outstanding or there shall not have
elapsed one year plus one day since the last day on which any such senior
indebtedness shall have been outstanding.
SECTION 5.18. Survival of Termination. The provisions of Article IV
(and the representations and warranties with respect thereto) (other than
Section 4.04) and Sections 5.05, 5.06, 5.10 and 5.17 shall survive any
termination of this Agreement.
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<PAGE> 18
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PROVIDER: PHYSICIANS CLINICAL LABORATORY, INC.
By:______________________________________
Name:
Title:
Address: 3301 C Street, Suite 100E
Sacramento, California 95816
Facsimile Number: _______________
PURCHASER: BIO-CYPHER FUNDING CORP.
By:
Name:
Title:
Address: 3301 C Street, Suite 100E
Sacramento, California 95816
Facsimile Number:_________________
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<PAGE> 19
EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits and Schedules), the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accounts" means all accounts (including, without limitation, all
Receivables), general intangibles and other obligations for the payment of money
arising out of the Provider's sale of merchandise or rendition of services in
the ordinary course of business, whether now existing or hereafter arising,
including all rights to reimbursement under any agreements with and payments
from Obligors, customers, patients, residents and other Persons, and all
proceeds of any of the foregoing.
"Accounts Receivable Turnover" means, at any date, for the 12-month
period then most recently ended, the product obtained by multiplying (a) the
quotient obtained by dividing (i) aggregate Receivables of the Provider as of
such date, by (ii) aggregate gross revenue of the Provider for the 12-month
period then ended, by (b) 365 days.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by or is under common control
with such Person or is a director or officer of such 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.
"Agreement" has the meaning set forth in the preliminary statements
hereto.
"Bankruptcy Code" means title 11 of the United States Code, 11
U.S.C. ss.ss. 101 et seq., together with all amendments, modifications, and
replacements as the same exist upon any relevant date, to the extent applicable
to the chapter 11 bankruptcy case of Physicians Clinical Laboratory, Inc.
"Bankruptcy Court" means the United States Bankruptcy Court for the
Central District of California.
"Batch Receivable" means a Receivable that is included in a
Transferred Batch, but excludes a Denied Receivable for which the Repurchase
Price has been received by the Purchaser.
"Batching Day" means each Monday of each week, or if such day is not
a Business Day, the immediately preceding Business Day.
"Batching Time" means 11:00 a.m. New York City time, on each
Batching Day.
"Business Day" means any day on which banks are not authorized or
required to close in New York City or Sacramento, California.
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"Capital Expenditures" means, with respect to any Person for any
period, the aggregate of all expenditures (including, without limitation,
obligations created under Capital Leases in the year in which created but
excluding payments made thereon) of any Person in respect of the purchase or
other acquisition of fixed or capital assets.
"Capital Lease" means, as applied to any Person, any lease of any
Property (whether real, personal or mixed) by that Person as lessee, the
obligations of which are required, in accordance with GAAP, to be capitalized on
the balance sheet of that Person.
"CHAMPUS" means the Civilian Health and Medical Program of the
Uniformed Service, a program of medical benefits covering former and active
members of the uniformed services and certain of their dependents, financed and
administered by the United States Departments of Defense, Health and Human
Services and Transportation and established pursuant to 10 USC ss.ss. 1071-
1106, and all regulations promulgated thereunder including without limitation
(a) all federal statutes (whether set forth in 10 USC ss.ss. 1071-1106 or
elsewhere) affecting CHAMPUS; and (b) all rules, regulations (including 32 CFR
199), manuals, orders and administrative, reimbursement and other guidelines of
all Governmental Entities (including, without limitation, the Department of
Health and Human Services, the Department of Defense, the Department of
Transportation, the Assistant Secretary of Defense (Health Affairs), and the
Office of CHAMPUS, or any Person or entity succeeding to the functions of any of
the foregoing) promulgated pursuant to or in connection with any of the
foregoing (whether or not having the force of law) in each case as may be
amended, supplemented or otherwise modified from time to time.
"Change of Control" means (a) the sale, lease or transfer of all or
substantially all of the assets of a Provider to any Person or group (as such
term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended); (b) the liquidation or dissolution of (or the adoption of a plan of
liquidation by) a Provider; or (c) the acquisition by any Person or group (as
such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended) of a direct or indirect majority interest of the voting stock of a
Provider by way of merger or consolidation or otherwise.
"Closing Date" means October 1, 1997.
"Collections" means, with respect to any Batch Receivable or
Transferred Batch, all cash collections, wire transfers, electronic funds
transfers and other cash proceeds of such Batch Receivable or Transferred Batch,
as the case may be, deposited in the Purchaser Lockbox Account, including,
without limitation, all cash proceeds thereof.
"Confirmation Order" means the order of the Bankruptcy Court
confirming the Plan pursuant to Section 1129 of the Bankruptcy Code.
"Consolidated EBITDA" means, for any period, the EBITDA of the
Provider and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.
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"Consolidated Interest Coverage Ratio" means, for any period, the
quotient obtained by dividing (i) Consolidated EBITDA minus Consolidated Capital
Expenditures by (ii) Consolidated Interest Expense.
"Consolidated Interest Expense" means, for any period, the Interest
Expense of the Provider and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Worth" shall mean at any date of determination, an
amount equal to (a) the total assets of the Provider and its Subsidiaries on a
consolidated basis minus (b) the total liabilities of the Provider and its
Subsidiaries on a consolidated basis.
"Consolidated Total Net Income" means, for any period, the total Net
Income of the Provider and its Subsidiaries for such period, determined on a
consolidated basis.
"Credit and Collection Policy" means those receivables credit and
collection policies and practices of the Provider in effect on the date of the
Agreement and set forth in Schedule II hereto, as modified from time to time
with the consent of the Purchaser.
"Daiwa Group" means (i) DH-2, the Program Manager and the Master
Servicer and (ii) DH-2's agents, delegates, designees and assigns identified
from time to time to effectuate the Agreement.
"Debt" means as to any Person (without duplication): (i) all
obligations of such party for borrowed money, (ii) all obligations of such party
evidenced by bonds, notes, debentures, or other similar instruments, (iii) all
obligations of such party to pay the deferred purchase price of property of
services (other than trade payables in the ordinary course of business), (iv)
all Capital Leases of such party, (v) all Debt of others directly or indirectly
Guaranteed (which term shall not include endorsements in the ordinary course of
business) by such party, (vi) all obligations secured by a Lien existing on
property owned by such party, whether or not the obligations secured thereby
have been assumed by such party or are non-recourse to the credit of such party
(but only to the extent of the value of such property), and (vii) all
reimbursement obligations of such party (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptance and similar instruments.
"Defaulted Receivable" means a Batch Receivable (i) as to which the
Obligor thereof or any other Person obligated thereon has taken any action, or
suffered any event to occur, of the type described in paragraph (g) of Exhibit V
or (ii) which, consistent with the Credit and Collection Policy, would be
written off the Provider's books as uncollectible.
"Delinquency Ratio" means, as of the last Business Day of each
month, a percentage equal to:
DR/OPP
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where:
DR= The Expected Net Value of all Purchased Receivables which
became Delinquent Receivables in the four week period
immediately prior to the date of calculation.
OPP= The average Outstanding Purchase Price (calculated as the
arithmetic average of all daily balances) of all Purchased
Receivables in the four week period immediately prior to the
date of calculation.
"Delinquent Receivable" means a Batch Receivable (a) that has not
been paid in full on or following the 180th day following the Last Service Date
thereof, or (b) that is a Denied Receivable.
"Denied Receivable" has the meaning set forth in Section 4.01
hereto.
"Depositary Agreement" means that certain Depositary Account
Agreement, dated the date hereof, among the Provider, the Purchaser, DH-2 and
the Lockbox Bank, in substantially the form attached hereto as Exhibit XII, as
such agreement may be amended, modified or supplemented from time to time in
accordance with its terms.
"DH-2" means Daiwa Healthco-2 LLC, a Delaware limited liability
company.
"Disclosure Statement" means the Disclosure Statement Pursuant to
Section 1125 of the Bankruptcy Code With Respect To The Second Amended Plan Of
Reorganization Of Physicians Clinical Laboratory, Inc. And Its Affiliated
Debtors dated February 11, 1997, as approved by the Bankruptcy Court under
Section 1125 of the Bankruptcy Code in an order dated February 11, 1997.
"EBITDA" means, for any period, the sum (determined without
duplication on a consolidated basis) for the Provider and its Subsidiaries of
(a) net income (or net loss) of the Provider and its Subsidiaries (calculated
before extraordinary items), plus (b) Consolidated Interest Expense for such
period deducted in the determination of such net income (or net loss) plus (c)
depreciation, amortization and other non-cash items for such period to the
extent included in the determination of net income (or net loss) plus or minus
(d) all taxes accrued for such period on or measured by income to the extent
deducted or credited in determining such net income (or net loss) minus or plus
(e) gains (or losses) from asset dispositions outside of the normal course of
business to the extent included in determining such net income (or net loss)
plus (f) losses due to asset impairment.
"Eligibility Criteria" has the meaning specified in the Loan
Agreement as such Eligibility Criteria may be modified from time to time by DH-2
upon written notice to the Provider.
"Eligible Receivables" has the meaning specified in the Loan
Agreement.
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"Employee Benefit Plan" means any employee benefit plan within the
meaning of ss. 3(3) of ERISA maintained by the Provider or any ERISA Affiliate,
or with respect to which any of them have any liability.
"EOB" means the explanation of benefit from an Obligor that
identifies the services rendered on account of the Batch Receivable specified
therein.
"Equity" means the amount set forth on the balance sheet of the
Provider as equity.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means any entity which is under common control
with the Provider within the meaning of ERISA or which is treated as a single
employer with the Provider under the Internal Revenue Code of 1986, as amended.
"Event of Termination" means any of the events specified in Exhibit
V hereto.
"Existing Provider Account" means account # 0700489922 of the
Provider at Union Bank of California, N.A., ABA #122 000 496, Los Angeles,
California, or such other bank account designated by the Provider by written
notice to the Provider, the Master Servicer, the Purchaser and the Program
Manager from time to time, as the account for receipt of proceeds on behalf of
the Provider.
"Expected Net Value" means, with respect to any Batch Receivable,
the gross unpaid amount of such Receivable on the Transfer Date therefor, times
the Net Value Factor.
"Facility Termination Date" means the earlier of (a) the date
twenty-four months after the Initial Transfer Date (subject to an automatic
extension of such date to coincide with the Scheduled Maturity Date" under the
Loan Agreement) and (b) the date of delivery of notice of the occurrence of an
Event of Termination, if required pursuant to Section 3.02 hereof, or the date
of occurrence of an Event of Termination if no notice is required, unless such
event is waived by the Purchaser in writing.
"Final Order" means an order or judgment of a court as entered on
the legal docket maintained by the clerk of such court that has not been
reversed, stayed, modified, vacated or amended and as to which such time period
to appeal or petition for certiorari has expired and as to which no appeal,
reargument or petition for certiorari is pending or as to which any right to
appeal, reargue or petition for certiorari has been waived in writing or, if an
appeal, reargument or petition for certiorari thereof has been denied, the time
to take any further appeal or to seek further hearing or certiorari has expired.
"Final Payment Date" means the first Settlement Date following the
Settlement Period in which final collection has been received for all Purchased
Receivables or such Purchased Receivables have become Denied Receivables or
Defaulted Receivables.
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"GAAP" means generally accepted accounting principles in the United
States of America, applied on a consistent basis, as set forth in Opinions of
the Accounting Principles Board of the American Institute of Certified Public
Accountants or in statements of the Financial Accounting Standards Board or the
rules and regulations of the Securities and Exchange Commission or their
respective successors and which are applicable in the circumstances as of the
date in question.
"Governmental Entity" means the United States of America, any state,
any political subdivision of a state and any agency or instrumentality of the
United States of America or any state or political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government. Payments from Governmental Entities
shall be deemed to include payments governed under the Social Security Act (42
U.S.C. ss.ss. 1395 et seq.), including payments under Medicare, Medicaid, and
CHAMPUS/Champva, and payments administered or regulated by HCFA.
"Guaranty" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay), or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other obligation of the
payment thereof or to protect the obligee of such Debt or other obligation of
the payment thereof or to protect the obligee against loss in respect thereof
(in whole or in part), provided that the term Guaranty shall not include
endorsements for collection or deposit in the ordinary course of business.
The term "Guarantee" used as a verb has a corresponding meaning.
"HCFA" means the Health Care Financing Administration of the United
States Department of Health and Human Services.
"Indemnified Amounts" has the meaning set forth in Section 4.02
hereto.
"Indemnified Party" has the meaning set forth in Section 4.02
hereto.
"Initial Transfer Date" means the date of the initial purchase and
contribution of Receivables hereunder.
"Insurer" means any Person which in the ordinary course of its
business or activities agrees to pay for healthcare goods and services received
by individuals, including commercial insurance companies, nonprofit insurance
companies (such as Blue Cross, Blue Shield entities), employers or unions which
self-insure for employee or member health insurance, prepaid health care
organizations, preferred provider organizations and health maintenance
organizations. "Insurer" includes insurance companies issuing health, personal
injury, or other types of insurance but does not include any individual
guarantors.
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"IRS Payment Schedule" has the meaning set forth in Section 5.11
hereto.
"Last Service Date" means, with respect to any Receivable, the date
set forth on the related invoice or statement as the most recent date on which
services or merchandise were provided by the Provider to the related patient.
"LIBO Rate" has the meaning specified in the Loan Agreement.
"Lien" means any lien, mortgage, security interest, tax lien,
pledge, hypothecation, assignment, preference, priority, other charge or
encumbrance, or any other type of preferential arrangement of any kind or nature
whatsoever by or with any Person (including, without limitation, any conditional
sale or title retention agreement), whether arising by contract, operation of
law, or otherwise.
"Loan Agreement" means the Loan and Security Agreement dated as of
the date hereof between the Purchaser as borrower and DH-2 as lender, as such
agreement may be modified, supplemented or amended from time to time in
accordance with its terms.
"Lockbox" means either the Provider Lockbox or the Purchaser
Lockbox, as the context requires.
"Lockbox Bank" means Union Bank of California, N.A. as lockbox bank
under the Depositary Agreement.
"Loss-to-Liquidation Ratio" means, as of the last Business Day of
each month, a percentage equal to:
DR/C
where:
DR= The Expected Net Value of all Purchased Receivables which
became Defaulted Receivables in the four week period
immediately prior to the date of calculation.
C= Collections in the four week period immediately prior to the
date of calculation.
"Master Servicer" means RJE Data Processing, Inc., and any other
Person then identified by the Program Manager to the Provider as being
authorized to administer and service Receivables.
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"Material Adverse Effect" means any event, condition, change or
effect that (a) has a materially adverse effect on the business, Properties,
capitalization, liabilities, operations, or financial condition of the Provider,
(b) materially impairs the ability of the Servicer, the Provider or the
Purchaser to perform its obligations under this Agreement, or (c) materially
impairs the validity or enforceability of, or materially impairs the rights,
remedies or benefits available to the Purchaser under this Agreement.
"Medicare Payment Schedule" has the meaning set forth in Section
5.11 hereto.
"Medicare Reserve" has the meaning set forth in Section 5.11 hereto.
"Medicare Reserve Requirement" has the meaning set forth in Section
5.11 hereto.
"Misdirected Payment" means any form of payment in respect of a
Batch Receivable made by an Obligor in a manner other than as provided in the
Notice sent to such Obligor.
"Multiemployer Plan" means a plan, within the meaning of ss. 3(37)
of ERISA, as to which the Provider or any ERISA Affiliate contributed or was
required to contribute within the preceding five (5) years.
"Net Value Factor" means (i) the historical actual final collections
received on the Provider's Receivables within 180 days of the Last Service Date
of such Receivables, divided by (ii) the gross value of such Receivables.
"New Consent Form" has the meaning set forth in clause (i) of
Exhibit II hereto.
"Notice" means a Notice to Governmental Entities or Notice to
Insurers, as applicable.
"Notice to Governmental Entities" means a notice letter on the
Provider's corporate letterhead in substantially the form attached hereto as
Exhibit VII-A.
"Notice to Insurers" means a notice letter on the Provider's
corporate letterhead in substantially the form attached hereto as Exhibit VII-B.
"Obligor" means the entity responsible for the payment of all or any
portion of a Receivable.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
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"Plan" means the Second Amended Joint Plan of Reorganization Of
Physicians Clinical Laboratory, Inc. And Its Affiliated Debtors, and all
exhibits annexed thereto, dated February 11, 1997, as it may be further amended,
supplemented or otherwise modified in a manner acceptable to the Program
Manager.
"Primary Servicer Responsibilities" has the meaning set forth in
Section 1.05(b) hereto.
"Primary Servicing Fee" means, with respect to any Purchased Batch,
an amount equal to 50(cents) per bill in such Purchased Batch.
"Program Manager" means (i) Daiwa Securities America Inc., or (ii)
any other Person then identified by DH-2 to the Provider as being authorized to
provide administrative services with respect to the Purchaser and the
Purchaser's purchase, funding and collection of healthcare receivables.
"Projected EBITDA" means such amount set forth for the applicable
time period on Schedule VII attached hereto.
"Projected Net Income" means such amount set forth for the
applicable time period on Schedule VII attached hereto.
"Property" means property of all kinds, real, personal or mixed,
tangible or intangible (including, without limitation, all rights relating
thereto), whether owned or acquired on or after the date of this Agreement.
"Proposed Eligible Receivables" has the meaning set forth in Section
1.02 hereto.
"Provider" has the meaning set forth in the preamble hereto.
"Provider Lockbox" means the lockbox set forth on Schedule IV hereto
to receive checks and EOB's with respect to Receivables payable by Governmental
Entities.
"Provider Lockbox Account" means the account set forth on Schedule
IV hereto in the name of the Provider and associated with the Provider Lockbox
established and controlled by the Provider to deposit Collections, including
Collections received in the Provider Lockbox and Collections received by wire
transfer directly from Governmental Entities, all as more fully set forth in the
Depositary Agreement.
"Purchase Price" means, with respect to Receivables in each
Purchased Batch, (i) the aggregate Expected Net Value of such Receivables, minus
(ii) 5%.
"Purchased Batch" has the meaning set forth in Section 1.02(b)
hereto.
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"Purchased Receivable" means a Receivable that has been purchased by
the Purchaser.
"Purchaser" has the meaning set forth in the preamble hereto.
"Purchaser Lockbox" means the lockbox set forth on Schedule IV
hereto to receive checks and EOB's with respect to Receivables payable by
Obligors other than Governmental Entities.
"Purchaser Lockbox Account" means the lockbox account set forth on
Schedule IV hereto associated with the Purchaser Lockbox established by the
Purchaser to deposit Collections, including Collections received in the
Purchaser Lockbox and Collections received by wire transfer directly from
Obligors other than Governmental Entities, all as more fully set forth in the
Depositary Agreement.
"Receivable Information" has the meaning set forth in Section 1.02
hereto.
"Receivables" means all third-party reimbursable portions or
third-party directly payable portions of healthcare accounts receivable or
Self-Pay, owing (or in the case of Unbilled Receivables, to be owing) to the
Provider, arising out of the rendition of medical, surgical, diagnostic or other
professional medical services or the sale of medical products by the Provider,
including all rights to reimbursement under any agreements with and payments
from Obligors, together with, to the maximum extent permitted by law, all
accounts and general intangibles related thereto, all rights, remedies,
guaranties, security interests and Liens in respect of the foregoing, all books,
records and other Property evidencing or related to the foregoing, and all
proceeds of any of the foregoing.
"Repurchase Price" means an amount equal to (x) the Purchase Price
of such Denied Receivable, minus (y) any cash received from the Obligor in the
Purchaser Lockbox Account with respect to such Denied Receivable, plus (z)
interest on such amount calculated at the interest rate then in effect under the
Loan Agreement (or the maximum rate legally permitted if less than such rate) on
the average outstanding difference between clauses (x) and (y) from and
including the Business Day following the Transfer Date of such Denied Receivable
to the date the Repurchase Price is received by the Purchaser.
"Self-Pay" means a healthcare account receivable for which a patient
or customer of the Provider is directly and primarily liable to pay.
"Servicer" means the Provider, if it is then authorized to perform
the Primary Servicer Responsibilities pursuant to Section 1.05(b), or the Master
Servicer, or any other Person then authorized hereunder to perform the Primary
Servicer Responsibilities.
"Servicer Termination Event" means any of the events specified in
Exhibit IX hereto.
"Settlement Date" means Tuesday of each week; or if such day is not
a Business Day, the next succeeding Business Day; provided, that, if, following
the occurrence of an Event of Termination, the Purchaser shall have selected a
period shorter than one week as the Settlement
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Period, the Settlement Date shall mean the fifth Business Day following the end
of each such Settlement Period.
"Settlement Period" means the period beginning on Friday of each
week and ending at the close of Thursday of the following week; provided, that
notwithstanding the foregoing, the first Settlement Period shall be the period
from and including the Initial Transfer Date through the Thursday of the
following week; and provided, further, that following the occurrence of an Event
of Termination, the Purchaser may from time to time, by notice to the Provider,
select a shorter period as the Settlement Period.
"Special Reserve" has the meaning set forth in Section 5.11 hereto.
"Special Reserve Requirement" has the meaning set forth in Section
5.11 hereto.
"Subsidiary" means, with respect to the Provider, any corporation or
entity of which at least a majority of the outstanding shares of stock or other
ownership interests having by the terms thereof ordinary voting power to elect a
majority of the board of directors (or Persons performing similar functions) of
such corporation or entity (irrespective of whether or not at the time, in the
case of a corporation, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled by the
Provider.
"Tangible Net Worth" means, with respect to any Person at any time,
the sum of (i) such Person's capital stock, capital in excess of par or stated
value of shares of its capital stock, retained earnings and any other account
which, in accordance with GAAP, constitutes stockholders' equity, less (ii)
treasury stock, minus (iii) the book value of all assets classified as
intangible under GAAP, including, without limitation, goodwill, deferred taxes,
deferred financing costs, trademarks, trade names, patents, copyrights and
licenses.
"Total Collections" means, as to each Transferred Batch, the sum of
all Collections, Repurchase Prices and Indemnified Amounts, but only to the
extent that such Indemnified Amounts are received in lieu of Collections,
distributed to and received by the Purchaser with respect thereto.
"Transfer Date" means Tuesday of each week after the Initial
Transfer Date, or if such day is not a Business Day, the next succeeding
Business Day provided that there shall not be more than one Transfer Date in any
single week, and, provided further that, each Transfer Date shall occur
simultaneously with each Funding Date as defined in the Loan Agreement.
"Transferred Batch" has the meaning set forth in Section 1.02
hereto.
"Transmission" means, upon establishment of computer interface
between the Provider and the Master Servicer in accordance with the
specifications established by the Master Servicer, the transmission of
Receivable Information through computer interface to the Master Servicer in a
manner satisfactory to the Master Servicer.
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"UCC" means the Uniform Commercial Code as in effect from time to
time in the specified jurisdiction.
"Unbilled Receivable" means a Receivable in respect of which the
goods have been shipped, or the services rendered, to the relevant customer or
patient, and rights to payment therefor have accrued, but the invoice has not
been rendered to the applicable Obligor.
"Written Notice" and "in writing" shall mean any form of written
communication or a communication by means of telex, telecopier device, telegraph
or cable.
Other Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. All terms used in Article 9 of the
UCC in the State of New York, and not specifically defined herein, are used
herein as defined in such Article 9.
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<PAGE> 31
EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent on Initial Transfer Date. The purchase of a
Purchased Batch under the Agreement on the Initial Transfer Date is subject to
the conditions precedent that the Purchaser shall have received on or before the
Initial Transfer Date the following, each (unless otherwise indicated) dated
such date, in form and substance satisfactory to the Purchaser:
(a) A certificate issued by the Secretary of State of the state of
the Provider's (i) organization as to the legal existence and good standing of
the Provider and (ii) locale of operation, if different from its state of
organization, as to the foreign qualification, authorization and good standing
of the Provider in such locale (all of which certificates shall be dated not
more than 20 days prior to the Initial Transfer Date) or an opinion of counsel
for such entity to such effect.
(b) Certified copies of the charter and by-laws of the Provider,
certified copy of the Confirmation Order approving the Agreement, certified
copies of all documents filed to register any and all assumed names of the
Provider, and certified copies of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to the
Agreement.
(c) A certificate of the Secretary or Assistant Secretary of the
Provider certifying the names and true signatures of the incumbent officers of
such entity authorized to sign the Agreement and the other documents to be
delivered by it hereunder.
(d) Certified copies of the balance sheets of the Provider and its
Subsidiaries as at February 28, 1997, and for the prior 3 fiscal years and the
related statements of income and expense and retained earnings of the Provider
and its Subsidiaries for the fiscal year then ended, certified in a manner
acceptable to the Purchaser by independent public accountants acceptable to the
Purchaser.
(e) Acknowledgment or time stamped receipt copies of proper
financing statements (showing the Provider as debtor/seller, the Purchaser as
secured party/purchaser and DH-2 as assignee, and stating that the financing
statements are being filed because UCC Section 9-102 does not distinguish
between a sale and a secured loan for filing purposes) duly filed on or before
the Initial Transfer Date under the UCC of all jurisdictions that the Purchaser
may deem necessary or desirable in order to perfect the ownership interests
contemplated by the Agreement.
(f) Acknowledgment or time-stamped receipt copies of proper
financing statements (showing Provider as debtor and the Purchaser as secured
party and DH-2 as assignee with respect to the grant by the Provider of a first
priority security interest to the Purchaser in the Provider's Accounts, as
contemplated by Section 4.04 of the Agreement) duly filed on or before the
Initial Transfer Date under the UCC of all jurisdictions that the Purchaser may
deem necessary or desirable in order to perfect such security interest.
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(g) UCC search results, dated within twenty days of the Initial
Transfer Date, and a schedule thereof listing all effective financing statements
filed in the jurisdictions referred to in subsections (e) and (f) above that
name the Provider as debtor, together with copies of all other financing
statements filed against the Provider (none of which shall cover any Accounts).
(h) Releases and properly completed and executed financing
statements (Form UCC-3), if any, necessary to evidence the release of all
security interests, ownership and other rights of any Person previously granted
by the Provider in any of its Accounts.
(i) Favorable opinions of such local counsels for the Provider as
the Daiwa Group requests, substantially in the form attached hereto as Exhibit
XI-A, regarding compliance with patient confidentiality laws, and including a
new form of consent form to be used by the Provider in such locales (the "New
Consent Forms"), and as to such other matters as the Daiwa Group requests.
(j) Favorable opinions of Jones, Day, Reavis & Pogue, counsel for
the Provider, substantially in the form attached hereto as Exhibit XI-B.
(k) Payment of all reasonable attorneys' fees and disbursements
incurred by the Purchaser and the Daiwa Group.
(l) A duly executed Depositary Agreement, together with evidence
satisfactory to the Purchaser that the Purchaser Lockbox, the Provider Lockbox,
the Purchaser Lockbox Account and the Provider Lockbox Account have been
established.
(m) Copies of all Notices required pursuant to Article II of the
Agreement, together with evidence satisfactory to the Purchaser that such
Notices have been or will be delivered to the addressees thereof.
(n) A copy of each new form of invoice from Provider showing the
proper Provider Lockbox or Purchaser Lockbox as the remittance address.
(o) A copy of all of the Provider's existing forms of consents, if
any, which were signed by each customer for which the currently existing
Receivables were created, as well as a copy of each New Consent Form to be
signed by each customer for which a Receivable will be created on or after the
Initial Funding Date, which consents authorize certain demographic and medical
information with respect to such patient to be disclosed by the Provider to its
servicing agents and by such servicing agents to any third party obligors
thereon, certified by an officer of the Provider, as being true, complete,
correct and the only consent forms presently in effect.
(p) Evidence satisfactory to the Purchaser and the Daiwa Group that
prior to the making of the initial purchase hereunder, (i) the Confirmation
Order shall have become a Final Order, (ii) the Effective Date (as defined in
the Plan) of the Plan shall have occurred and the transactions contemplated by
the Plan shall have been substantially consummated in accordance with the terms
of the Plan as so confirmed, (iii) the Bankruptcy Court shall have entered an
order approving the
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commitment extension letter from and the payment of certain fees set forth in
the commitment extension letter to the Program Manager and such order shall have
become a Final Order, and (iv) no "Old Common Stock" and no "Old Subordinated
Debentures" (each as defined in the Plan) remain outstanding.
(q) Evidence satisfactory to the Provider and the Daiwa Group that
the funds available to the Provider from cash and cash equivalents held by the
Provider and its Subsidiaries and the proceeds of the Senior Notes (but not the
proceeds from the sale of receivables hereunder) are sufficient to pay all
amounts payable by the Providers and its Subsidiaries in connection with the
consummation of the transactions contemplated by the Plan, including, without
limitation, all fees, commissions and expenses paid or payable in connection
therewith.
(r) A certificate of the appropriately authorized financial officer
of the Provider as to the reasonability and conformance with GAAP of, and
attaching as annexes thereto: (i) the consolidated financial statements of the
Provider and its Subsidiaries set forth in the Disclosure Statement, (ii) the
pro forma opening consolidated balance sheet of the Provider and its
Subsidiaries after giving effect to the consummation of the transactions
contemplated by the Plan and the transactions contemplated hereby, (iii) a pro
forma statement of consolidated operating cash flow for the Provider and its
Subsidiaries for the last fiscal year of the Provider after giving effect to the
consummation of the transactions contemplated by the Plan and the transactions
contemplated hereby, and (iv) a pro forma statement of consolidated operating
cash flow for the Provider and its Subsidiaries for the twelve month period
ended March 31, 1997 after giving effect to the consummation of the transactions
contemplated by the Plan and the transactions contemplated hereby, in each case
prepared in accordance with GAAP and demonstrating on a pro forma basis that, as
of the Closing Date, the consolidated total liabilities do not exceed 280% of
the consolidated total assets of the Provider and its Subsidiaries.
(s) A certificate of the appropriately authorized financial officer
of the Provider certifying that upon the consummation of the transactions
contemplated hereby, none of the Provider or any of its Subsidiaries has any
Debt outstanding other than (i) Debt described on Schedule III hereto, including
the Senior Notes, (ii) income taxes payable to the extent the same may be
treated as an accrued expense under GAAP, and (iii) trade payables in the
ordinary course of business.
(t) Evidence satisfactory to the Purchaser and the Daiwa Group that,
except as listed on Schedule III hereto, all necessary governmental and third
party consents and approvals in connection with the consummation of (i) the Plan
and (ii) the transactions hereunder have been obtained and are in full force and
effect, and that all applicable waiting periods have expired or have been
terminated without any action being taken by any competent authority which
restricts, prevents or imposes materially adverse conditions upon the making of
the purchases hereunder or the consummation of any other transaction
contemplated by the Plan.
(u) A certificate from the Master Servicer stating that all computer
linkups and interfaces necessary or desirable, in the judgment of the Master
Servicer, to effectuate the transactions and information transfers hereunder,
are fully operational to the satisfaction of the Master Servicer.
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(v) Copies of the monthly balance sheets of the Provider and its
Subsidiaries since January 1, 1997, and the related statements of income and
expense and retained earnings of the Provider and its Subsidiaries for the same
periods then ended, certified as to the accuracy thereof in a manner acceptable
to the Purchaser by the Chief Operating Officer of the Provider.
(w) A copy of the monthly projected balance sheet of the Provider
and its Subsidiaries for each of the twenty-four months following the Closing
Date, and the related statements of income and expense and retained earnings of
the Provider and its Subsidiaries for the same periods then ended, certified as
to the reasonableness of the assumptions and preparation thereof in a manner
acceptable to the Purchaser by the Chief Operating Officer of the Provider.
(x) Evidence that all monies due to MediCal have been paid in full.
(y) Evidence that the Medicare Reserve Requirement has been funded
in full and that any other reserve required pursuant to Section 5.11 has been
funded in full.
2. Conditions Precedent on All Transfer Dates. Each purchase of a
Purchased Batch on a Transfer Date (including the Initial Transfer Date) shall
be subject to the further conditions precedent that the Provider and the
Purchaser shall have agreed upon the terms of such purchase and also that:
(a) The Provider shall have delivered to the Purchaser or the Master
Servicer, as the case may be, at least two Business Days prior to such Transfer
Date, in form and substance satisfactory to the Purchaser:
(i) completed Receivable Information with respect to each
Proposed Eligible Receivable (such Receivable Information having been
delivered on or prior to the most recent Batching Time preceding such
Transfer Date), together with such additional information as may
reasonably be requested by the Purchaser or the Master Servicer; and
(ii) to the extent not previously provided, executed Notices to
each Obligor responsible for the payment of any of the Batch Receivables
to be purchased on such Transfer Date, directing such Obligors to make
payment to the address and account designated in the Notices, as set forth
in Article II hereof, together with evidence that such Notices have been
delivered to such Obligors.
(b) On each such Transfer Date the following statements shall be
true (and acceptance of the proceeds of such purchase by the Provider shall be
deemed a representation and warranty by the Provider that such statements are
then true):
(i) the representations and warranties contained in Exhibit III
are correct on and as of the date of such purchase as though made on and
as of such date except to the extent made with respect to an earlier date,
and
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(ii) no event has occurred and is continuing, or would result from
such purchase, that constitutes an Event of Termination or that would
constitute an Event of Termination but for the requirement that notice be
given or time elapse or both.
(c) Affirmation from the Master Servicer that, in its sole judgment,
all computer linkups and interfaces continue to be fully operational to the
satisfaction of the Master Servicer.
(d) The Purchaser shall have received such other approvals, opinions
or documents as it may reasonably request.
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EXHIBIT III
REPRESENTATIONS AND WARRANTIES
The Provider represents and warrants as follows:
(a) It is a corporation duly incorporated, validly existing and in
good standing under the laws of the state of its incorporation and is duly
qualified to do business, and is in good standing, in every jurisdiction where
the nature of its business requires it to be so qualified, except in any
jurisdiction other than that of its chief executive offices where the failure to
be so qualified would not have a Material Adverse Effect.
(b) The execution, delivery and performance by it of the Agreement
and the other documents to be delivered by it thereunder, (i) are within its
corporate powers, (ii) have been duly authorized by all necessary corporate
action, (iii) do not contravene (1) its charter or by-laws, (2) any law, rule or
regulation applicable to it, (3) any contractual restriction binding on or
affecting it or its Property, or (4) any order, writ, judgment, award,
injunction or decree binding on or affecting it or its Property, and (iv) do not
result in or require the creation of any Lien upon or with respect to any of its
Properties, other than the interest created by the Agreement. The Agreement has
been duly executed and delivered by it. It has furnished to the Purchaser a
correct and complete copy of its certificate of incorporation and by-laws,
including all amendments thereto.
(c) No authorization or approval or other action by, and no notice
to or filing with, any Governmental Entity is required for the due execution,
delivery and performance by it of the Agreement or any other document to be
delivered thereunder.
(d) The Agreement constitutes the legal, valid and binding
obligation of it, enforceable against it in accordance with its terms, except as
limited by bankruptcy, insolvency, moratorium, fraudulent conveyance or other
laws relating to the enforcement of creditors' rights generally and general
principles of equity (regardless of whether enforcement is sought at equity or
law).
(e) It has all power and authority, and has all permits, licenses,
accreditations, certifications, authorizations, approvals, consents and
agreements of all Insurers, Governmental Entities, accreditation agencies and
any other Person (including without limitation, accreditation by the appropriate
Governmental Entities and industry accreditation agencies and accreditation and
certifications as the Provider of healthcare services eligible to receive
payment and compensation and to participate under Medicare, Medicaid,
CHAMPUS/Champva, Blue Cross/Blue Shield and other equivalent programs),
necessary or required for it (i) to own the assets (including Receivables) that
it now owns, and (ii) to carry on its business as now conducted, except where
failure to have such permits, licenses, agreements with third-party payors,
accreditation and certifications (including, without limitation, accreditation
by the appropriate Governmental Entities and industry accreditation agencies and
accreditation and certifications as the Provider of healthcare services eligible
to receive
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<PAGE> 37
payment and compensation and to participate under Medicare, Medicaid,
CHAMPUS/Champva, Blue Cross/Blue Shield and other equivalent programs) would not
have a Material Adverse Effect.
(f) It has not been notified by any Insurer, Governmental Entity or
instrumentality, accreditation agency or any other Person, during the
immediately preceding 24 month period, that such party has rescinded or not
renewed, or is reasonably likely to rescind or not renew, any such permit,
license, accreditation, certification, authorization, approval, consent or
agreement granted to it or to which it is a party except as disclosed in
Schedule III hereto.
(g) As of the Initial Transfer Date, all conditions precedent set
forth in Exhibit II have been fulfilled or waived in writing by the Purchaser,
and as of each Transfer Date, the conditions precedent set forth in paragraph 2
of such Exhibit II have been fulfilled or waived in writing by the Purchaser.
(h) The balance sheets of the Provider and its Subsidiaries as at
February 28, 1997, and the related statements of income and expense, cash flows
and retained earnings of the Provider and its Subsidiaries for the fiscal
periods then ended, copies of which have been furnished to the Purchaser, fairly
present the financial condition of the Provider and its Subsidiaries as at such
date and the results of the operations of the Provider and its Subsidiaries for
the period ended on such date, all in accordance with GAAP, and since February
28, 1997 there has been no change resulting in a Material Adverse Effect other
than the commencement of the bankruptcy case disclosed in the Plan.
(i) Except as disclosed on Schedule III hereto, there is no pending
or, to the Provider's knowledge, threatened action or proceeding or injunction,
writ or restraining order affecting the Provider or any of its Subsidiaries
before any court, Governmental Entity or arbitrator which could reasonably be
expected to result in a Material Adverse Effect, and, other than as discussed in
the Plan, the Provider or any Subsidiary is not currently the subject of, and
has no present intention of commencing, an insolvency proceeding or petition in
bankruptcy.
(j) Except as disclosed on Schedule III hereto, it is the legal and
beneficial owner of the Receivables in each Transferred Batch free and clear of
any Lien (other than any Lien on Accounts that is expressly subordinated in
writing to the Lien created hereunder in a manner acceptable to the Purchaser,
in its sole discretion); upon each purchase or contribution of a Transferred
Batch, the Purchaser shall acquire valid ownership of each Receivable in such
Transferred Batch and in the Collections with respect thereto prior to all other
Liens thereon. No effective financing statement or other instrument similar in
effect covering any Accounts or the Collections with respect thereto is on file
in any recording office, except those filed in favor of the Purchaser, DH-2 or
any permitted assignee of DH-2 relating to the Agreement, and no competing
notice or notice inconsistent with the transactions contemplated in the
Agreement remains in effect with respect to any Obligor.
(k) All Receivable Information, information provided in the
application for the program effectuated by the Agreement, and each other
document, report and Transmission provided by the Provider to the Daiwa Group is
or shall be accurate in all material respects as of its date and as of the date
so furnished, and no such document contains or will contain any untrue statement
of a
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<PAGE> 38
material fact or omits or will omit to state a material fact necessary in order
to make the statements contained therein, in the light of the circumstances
under which they were made, not misleading.
(l) The principal place of business and chief executive office of
the Provider are located at the respective address referred to on the signature
page of the Agreement and the offices where the Provider keeps its records
concerning the Receivables are as set forth on Schedule III hereto, and there
have been no other such locations for the four immediately prior months.
(m) Each purchase of a Purchased Batch will constitute a purchase or
other acquisition of notes, drafts, acceptances, open accounts receivable or
other obligations representing part or all of the sales price of merchandise,
insurance or services within the meaning of Section 3(c)(5) of the Investment
Company Act of 1940, as amended.
(n) Each Receivable included in a Purchased Batch is, as of the
Transfer Date of such Purchased Batch, an Eligible Receivable.
(o) The provisions of the Agreement create, on the Initial Transfer
Date, legal and valid liens in all of the Accounts owned or held by the Provider
(other than the Batch Receivables that have been sold or contributed to the
Purchaser pursuant to the provisions of the Agreement) in the Purchaser's favor,
and when all proper filings and other actions necessary to perfect such Liens
have been completed, will constitute a perfected and continuing Lien on all of
the Accounts owned or held by the Provider (other than the Batch Receivables
that have been sold or contributed to the Purchaser pursuant to the provisions
of the Agreement), having priority over all other Liens on such Accounts of the
Provider, enforceable against the Provider and all third parties.
(p) All required Notices have been prepared and delivered to each
Obligor, and all invoices now bear only the appropriate remittance instructions
for payment direction to the Purchaser Lockbox, the Purchaser Lockbox Account,
the Provider Lockbox or the Provider Lockbox Account, as the case may be.
(q) Except as disclosed on Schedule III hereto, the Provider has not
changed its principal place of business or chief executive office in the last
five years.
(r) The exact name of the Provider is as set forth on the signature
pages of the Agreement and, except as set forth on such signature page, the
Provider has not changed its name in the last five years and, except as set
forth on Schedule III, during such period the Provider has not used, nor does
the Provider now use, any other fictitious, assumed or trade name.
(s) Except as disclosed on Schedule III with respect to itself or
any of its Subsidiaries, there exists no event which has or is reasonably likely
to have a Material Adverse Effect.
(t) It is not in violation under any applicable statute, rule,
order, decree or regulation of any court, arbitrator or governmental body or
agency having jurisdiction over the Provider which is reasonably likely to have
a Material Adverse Effect.
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(u) It has filed on a timely basis all tax returns (federal, state
and local) required to be filed and has paid, or made adequate provision for
payment of, all taxes, assessments and other governmental charges due from it,
unless contested in good faith by appropriate proceedings. Other than as
disclosed on Schedule III hereto, no tax Lien has been filed and is now
effective against it or any of its Properties, except any Lien in respect of
taxes and other charges not yet due or contested in good faith by appropriate
proceedings. To its knowledge, there is no pending investigation of it by any
taxing authority or any pending but unassessed tax liability of it. It does not
have any obligation under any tax sharing agreement.
(v) It is solvent and will not become insolvent after giving effect
to the transactions contemplated by the Agreement; it has not incurred debts or
liabilities beyond its ability to pay; it will, after giving effect to the
transaction contemplated by the Agreement, have an adequate amount of capital to
conduct its business in the foreseeable future; the sales and contributions of
Receivables hereunder are made in good faith and without intent to hinder, delay
or defraud its present or future creditors.
(w) The Provider Lockbox is the only post office box and the
Provider Lockbox Account and the other accounts previously disclosed to the
Purchaser are the only lockbox accounts maintained by the Provider; and the
Provider has directed all Obligors to remit payments on Proposed Eligible
Receivables or Batch Receivables to the applicable Purchaser Lockbox, Purchaser
Lockbox Account, Provider Lockbox, or Provider Lockbox Account.
(x) Each pension plan or profit sharing plan to which it is a party
has been fully funded in accordance with its obligations as set forth in such
plan.
(y) To its knowledge, there are no pending civil or criminal
investigations by any Governmental Entity involving it or its officers or
directors and neither it nor any of its officers or directors has been involved
in, or the subject of, any civil or criminal investigation by any Governmental
Entity.
(z) The primary business of the Provider is the provision of
healthcare services, products, merchandise or equipment.
(aa) The assets of the Provider are free and clear of any liens in
favor of the Internal Revenue Service, any Employee Benefit Plan or the PBGC
other than inchoate tax liens resulting from an assessment of the Provider.
(bb) With respect to each Employee Benefit Plan of it, including to
its knowledge as to any Multiemployer Plan, such Employee Benefit Plan has
complied and been administered in accordance with its terms and in substantial
compliance with all applicable provisions of ERISA and the Internal Revenue Code
of 1986, as amended; neither it nor any ERISA Affiliate has been notified by the
sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of ERISA;
and it has no material unpaid liability for any Employee Benefit Plan.
III-4
<PAGE> 40
(cc) None of the Proposed Eligible Receivables or Batch Receivables
constitutes or has constituted an obligation of any Subsidiary, parent or other
Person which is its Affiliate.
(dd) No transaction contemplated under this Agreement requires
compliance with any bulk sales act or similar law.
(ee) It has, or has the right to use, valid provider identification
numbers and licenses to generate the Receivables.
(ff) It shall treat each sale of Receivables hereunder as a sale for
federal and state income tax, reporting and accounting purposes and shall treat
each contribution of Receivables hereunder as a contribution for federal and
state income tax, reporting and accounting purposes.
(gg) It is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation G, T, U, or X of the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of any extension of credit under this Agreement will be used to purchase or
carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying margin stock.
(hh) Each Receivable that is an Unbilled Receivable will be, or has
been, billed to the Obligor of such Receivable within 45 days of the Last
Service Date.
(ii) Commencing October 3, 1997, only the New Consent Forms are
being obtained from each patient and customer receiving services or products
from the Provider.
(jj) Since the Order confirming the Plan was entered on April 23,
1997 the terms of the Plan have not been modified in any manner adverse to the
Purchaser, DH-2, the Program Manager, or any other member of the Daiwa Group,
whether before or after confirmation of the Plan, without the prior written
consent of the Program Manager. All conditions precedent to the Plan have been
satisfied and all actions required to be taken pursuant to the Plan have been
consummated prior to the Closing Date.
(kk) From and after the filing of the Plan with the Bankruptcy
Court, there has been (i) no change in control other than as contemplated by the
Plan; (ii) no transaction not in the ordinary course of business which has not
been approved by Final Order of the Bankruptcy Court; and (iii) no material
amendment, modification or termination of any material contract or agreement to
which the Provider is a party, except as contemplated by the Plan.
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<PAGE> 41
EXHIBIT IV
COVENANTS
Until the later of the Facility Termination Date and the Final
Payment Date, the Provider agrees as follows:
(a) Compliance with Laws, etc. It will comply in all material
respects with all applicable laws, rules, regulations and orders and preserve
and maintain its corporate existence, rights, franchises, qualifications, and
privileges except to the extent that the failure so to comply with such laws,
rules and regulations or the failure so to preserve and maintain such existence,
rights, franchises, qualifications, and privileges would not result in a
Material Adverse Effect.
(b) Offices, Records and Books of Account. It will keep its
principal place of business and chief executive office and the office where it
keeps its records concerning the Accounts at the address set forth under its
name on the signature pages to the Agreement and as set forth on Schedule III
hereto or, upon 30 days' prior Written Notice to the Purchaser, at any other
locations in jurisdictions where all actions reasonably requested by the
Purchaser or otherwise necessary to protect, perfect and maintain the
Purchaser's security interest in the Accounts have been taken and completed. It
shall keep its books and accounts in accordance with generally accepted
accounting principles and shall make a notation on its books and records,
including any computer files, to indicate which Receivables have been sold to
the Purchaser and the security interest of the Purchaser in its Accounts not
sold to the Purchaser. It shall maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing Receivables and related contracts in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for
collecting all Batch Receivables (including, without limitation, records
adequate to permit the daily identification of each Batch Receivable and all
Collections of and adjustments to each existing Batch Receivable) and for
providing the Receivable Information.
(c) Performance and Compliance with Contracts and Credit and
Collection Policy. It will, at its expense, timely and fully perform and comply
with all material provisions, covenants and other promises required to be
observed by it under the contracts related to the Batch Receivables, and timely
and fully comply in all material respects with the Credit and Collection Policy
in regard to each Batch Receivable and the related contract, and it shall
maintain, at its expense, in full operation each of the bank accounts and
lockboxes required to be maintained under the Agreement. It shall not do
anything to impede or interfere, or suffer or permit any other Person to impede
or interfere in any material respect, with the collection by the Purchaser, or
the Master Servicer on behalf of the Purchaser, of the Batch Receivables.
(d) Notice of Breach of Representations and Warranties. It shall
promptly (and in no event later than one Business Day following actual knowledge
thereof) inform the Purchaser and the Master Servicer of any breach of covenants
or representations and warranties hereunder, including, without limitation, upon
discovery that a Receivable ceases to be an Eligible Receivable.
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<PAGE> 42
(e) Sales, Liens, etc. It will not sell, assign (by operation of law
or otherwise) or otherwise dispose of, or create or suffer to exist any Liens
upon or with respect to, its Accounts, or upon or with respect to any account to
which any Collections of any Batch Receivable are sent, or assign any right to
receive income in respect thereof except (i) it may grant a Lien on Accounts
that is expressly subordinated in writing to the Lien created hereunder in a
manner acceptable to DH-2, in its sole discretion and (ii) those Liens in favor
of the Purchaser, DH-2 or any assignee of DH-2 relating to the Agreement.
(f) Extension or Amendment of Batch Receivables. It shall not amend,
waive or otherwise permit or agree to any deviation from the terms or conditions
of any Batch Receivable except in accordance with the Credit and Collection
Policy.
(g) Change in Business or Credit and Collection Policy. It will not
make any change in the Credit and Collection Policy or make any change in the
character of its business that, in either event, could reasonably be expected to
result in a Material Adverse Effect. It will not make any other material changes
in the Credit and Collection Policy without the prior written consent of the
Purchaser.
(h) Audits and Visits. It will, at any time and from time to time
during regular business hours as requested by the Program Manager and upon
reasonable advance notice (unless an Event of Termination has occurred and is
continuing, in which case no notice is required), permit the Purchaser, or its
agents or representatives (including the Master Servicer), (i) on a confidential
basis, to examine, audit and make copies of and abstracts from all books,
records and documents (including, without limitation, computer tapes and disks)
in its possession or under its control relating to Batch Receivables including,
without limitation, the related contracts; (ii) to visit its offices and
properties for the purpose of examining and auditing such materials described in
clause (i) above, provided that, absent the occurrence of an Event of
Termination, the examination and audit in clauses (i) and (ii) above shall not
occur more frequently than once every twelve months; and (iii) to discuss
matters relating to Batch Receivables or its performance hereunder or under the
contracts with any of its officers or employees having knowledge of such
matters. It shall permit the Master Servicer to have at least one agent or
representative physically present in its administrative office during normal
business hours to assist it in performing its obligations under the Agreement,
including its obligations with respect to the collection of Batch Receivables
pursuant to Article I of the Agreement.
(i) Change in Payment Instructions. It will not terminate the
Provider Lockbox, the Provider Lockbox Account, the Purchaser Lockbox or the
Purchaser Lockbox Account, or make any change or replacement in the instructions
contained in any invoice, Notice or otherwise, or regarding payments with
respect to Receivables to be made to it, the Purchaser or the Master Servicer,
except upon the prior and express written consent of the Program Manager or the
Purchaser.
(j) Reporting Requirements. It will provide to the Purchaser and to
the Program Manager (in multiple copies, if requested) the following:
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<PAGE> 43
(i) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Provider, consolidated balance sheets of the Provider and its Subsidiaries
as of the end of such quarter and consolidated statements of income, cash
flows and retained earnings of the Provider and its Subsidiaries for the
period commencing at the beginning of the current fiscal year and ending
with the end of such quarter, certified by the chief financial officer of
the Provider, and accompanied by a certificate of an authorized officer of
the Provider detailing the Provider's compliance for such fiscal period
with all terms, including the financial covenants, contained in the
Agreement, and to the extent any non-compliance exists, a description of
the steps being taken by the Provider to address such non-compliance;
(ii) as soon as available and in any event within 90 days after
the end of each fiscal year of the Provider, a copy of the audited
consolidated financial statements (together with explanatory notes
thereon) and the auditor's report letter for such year for the Provider
and its Subsidiaries, containing financial statements for such year
audited by Ernst & Young or other independent public accountants of
recognized standing, and accompanied by a certificate of an authorized
officer of the Provider detailing the Provider's compliance for such
fiscal period with all terms, including the financial covenants, contained
in the Agreement, and to the extent any non-compliance exists, a
description of the steps being taken by the Provider to address such
non-compliance;
(iii) on or before the 20th of each month, monthly and year-to-date
statistical and financial reports, including volume and time business
reports (to be requested by the Purchaser) and unaudited consolidated
profit and loss reports, from the chief financial officer of the Provider;
(iv) promptly and in any event within five Business Days after the
occurrence of each Event of Termination or event which, with the giving of
notice or lapse of time, or both, would constitute an Event of
Termination, a statement of the chief financial officer of the Provider
setting forth details of such Event of Termination or event, and the
action that it has taken and proposes to take with respect thereto;
(v) promptly after the sending or filing thereof, if any, copies
of all reports and registration statements that the Provider or any
Subsidiary files with the Securities and Exchange Commission or any
national securities exchange and official statements that the Provider or
any Subsidiary files with respect to the issuance of tax-exempt
indebtedness;
(vi) promptly after the filing or receiving thereof, copies of all
reports and notices that the Provider or any Affiliate files under ERISA
with the Internal Revenue Service or the PBGC or the U.S. Department of
Labor or that the Provider or any Affiliate receives from any of the
foregoing or from any Multiemployer Plan to which the Provider or
Affiliate is or was, within the preceding five years, a contributing
employer, in each case in respect of the assessment of withdrawal
liability or an event or condition which could, in the aggregate, result
in the imposition of liability on the Provider or any such Affiliate in
excess of $10,000;
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<PAGE> 44
(vii) at least ten Business Days prior to any change in the
Provider's name or any implementation of a new trade/assumed name, a
Written Notice setting forth the new name or trade name and the proposed
effective date thereof and copies of all documents required to be filed in
connection therewith;
(viii) promptly (and in no event later than one Business Day
following actual knowledge or receipt thereof), written notice in
reasonable detail, of (w) any Lien asserted or claim made against a Batch
Receivable, (x) the occurrence of a Servicer Termination Event, (y) the
occurrence of any other event which could materially and adversely affect
the value of a Batch Receivable or the interest of the Purchaser in a
Batch Receivable or (z) the results of any cost report or similar audits
being conducted by any federal, state or county Governmental Entity or its
agents or designees;
(ix) at least 30 days prior to the commencement of each fiscal
year, an operating plan (together with a complete statement of the
assumptions on which such plan is based) of the Provider and its
Subsidiaries approved by its Board of Directors, which shall include
monthly budgets for the prospective year in reasonable detail acceptable
to the Purchaser and will integrate operating profit and cash flow
projections and personnel, capital expenditures, and facilities plans;
(x) promptly upon receipt thereof, a copy of any management
letter or written report submitted to the Provider by independent
certified public accountants with respect to the Subsidiaries, business,
condition (financial or otherwise), operations, prospects, or Properties
of the Provider;
(xi) no later than five (5) Business Days after the commencement
thereof, Written Notice of all actions, suits, and proceedings before any
Governmental Entity or arbitrator affecting the Provider which, if
determined adversely to the Provider, could reasonably be expected to have
a Material Adverse Effect;
(xii) promptly after the furnishing thereof, copies of any
statement or report furnished by the Provider to any other party pursuant
to the terms of any indenture, loan, or credit or similar agreement and
not otherwise required to be furnished to the Purchaser pursuant to this
Agreement;
(xiii) as soon as possible and in any event within five (5) days
after becoming aware of the occurrence thereof, Written Notice of any
matter that could reasonably be expected to result in a Material Adverse
Effect;
(xiv) as soon as available, (A) one copy of each financial
statement, report, notice or proxy statement sent by the Provider to its
stockholders generally, (B) and one copy of each regular, periodic or
special report, registration statement, or prospectus filed by the
Provider or any Subsidiary with any securities exchange or the Securities
and Exchange Commission or any successor agency or the Bankruptcy Court,
and (C) all press releases and other
IV-4
<PAGE> 45
statements made available by the Provider to the public concerning
developments in the business of the Provider or any Subsidiary;
(xv) within the sixty (60) day period prior to the end of each
fiscal year of the Provider, a report satisfactory in form to the
Purchaser, listing all material insurance coverage maintained as of the
date of such report by the Provider and its Subsidiaries and all material
insurance planned to be maintained by the Provider and its Subsidiaries in
the subsequent fiscal year; and
(xvi) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of the Provider or any
Subsidiary as the Purchaser may from time to time reasonably request.
(k) Notice of Proceedings; Overpayments. The Provider shall promptly
notify the Master Servicer and the Program Manager in the event of any action,
suit, proceeding, dispute, set-off, deduction, defense or counterclaim that is
or may be asserted by an Obligor with respect to any Batch Receivable.
(l) Officer's Certificate. On the date the financial statements
referred to in clause (j) above are to be delivered in each fiscal year after
the Initial Transfer Date, the chief financial officer of the Provider shall
deliver a certificate to the Purchaser, stating that, as of such date, (i) all
representations and warranties are true and correct, (ii) the conditions
precedent set forth in paragraph 2 of Exhibit II have been fulfilled or waived
in writing by the Purchaser, and (iii) no Event of Termination exists and is
continuing.
(m) Further Instruments, Continuation Statements. The Provider
shall, at its expense, promptly execute and deliver all further instruments and
documents, and take all further action that the Program Manager or the Purchaser
may reasonably request, from time to time, in order to perfect, protect or more
fully evidence the full and complete transfer of ownership of the Batch
Receivables, or to enable the Purchaser or the Program Manager to exercise or
enforce the rights of the Purchaser hereunder or under the Batch Receivables.
Without limiting the generality of the foregoing, the Provider will upon the
request of the Program Manager execute and file such UCC financing or
continuation statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be, in the opinion of the Program Manager,
necessary or appropriate. The Provider hereby authorizes the Program Manager or
its designees, upon ten Business Days' notice, to file one or more financing or
continuation statements and amendments thereto and assignments thereof, relative
to all or any of the Batch Receivables now existing or hereafter arising without
the signature of the Provider where permitted by law. If the Provider fails to
perform any of its agreements or obligations under the Agreement, the Program
Manager may (but shall not be required to) itself perform, or cause performance
of, such agreement or obligation, and the reasonable expenses of the Program
Manager incurred in connection therewith shall be payable by the Provider.
(n) Taxes. The Provider shall pay any and all taxes (excluding the
Purchaser's income, gross receipts, franchise, doing business or similar taxes)
relating to the transactions
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<PAGE> 46
contemplated under the Agreement, including but not limited to the sale,
transfer and assignment of each Batch Receivable.
(o) Deviation from Terms of Batch Receivable, etc. The Provider
shall not, without the prior written consent of the Purchaser:
(i) other than in connection with the repurchase of a Denied
Receivable, compromise, adjust, extend, satisfy, subordinate, rescind, set
off, waive, amend, or otherwise modify, or permit or agree to any
deviation from, the terms and conditions of any Batch Receivable, or
materially or adversely amend, modify or waive any term or condition of
any contract related thereto;
(ii) (x) amend, modify, supplement or delete in any way or to any
extent any provision for uncollectible accounts and free care applicable
to any Batch Receivable or (y) amend, modify or supplement in any way or
to any extent any financial category or change in any way or to any extent
the manner in which any financial category is treated or reflected in the
Provider's records;
(iii) materially or adversely alter or modify (x) its claims
processing system, or (y) its third party billing system, as applicable;
or
(iv) change, modify or rescind any direction contained in any
invoice or previously delivered Notice.
(p) Purchaser's Ownership of Batch Receivables. It shall not prepare
or permit to be prepared any financial statements which shall account for the
transactions contemplated hereby in a manner which is, or in any other respect
account for the transactions contemplated hereby in a manner which is,
inconsistent with the Purchaser's ownership of the Batch Receivables.
(q) Merger, Consolidation. It shall not merge with or into or
consolidate with or into, another Person, or convey, transfer, lease or
otherwise dispose of all or substantially all of its assets (whether now owned
or hereafter acquired).
(r) No "Instruments". It shall not take any action which would
allow, result in or cause any Transferred Batch or Batch Receivable to be
evidenced by an "instrument" within the meaning of the UCC of the applicable
jurisdiction.
(s) Master Servicer Certificate. On or before the thirtieth calendar
day after the Initial Transfer Date, the Purchaser shall receive a certificate
from the Master Servicer stating that all computer linkups and interfaces
necessary or desirable, in the judgment of the Master Servicer, to effectuate
the transactions and information transfers contemplated hereunder, are fully
operational to the satisfaction of the Master Servicer.
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<PAGE> 47
(t) Implementation of New Consent Forms. As soon as possible after
the Initial Transfer Date and in any event no later than October 3, 1997, the
Purchaser shall receive a certificate from an officer of the Provider stating
that the New Consent Forms are the only forms being used by the Provider and
that all reasonable steps have been and are being taken to obtain New Consent
Forms from customers currently being provided services or products by the
Provider.
(u) Deviation from New Consent Form. The Provider shall not, without
the prior written consent of the Purchaser, substitute, alter, modify or change
in any way the New Consent Form applicable to it.
(v) Implementation of New Invoices. The Provider shall take all
reasonable steps to ensure that all invoices rendered or dispatched on or after
the Initial Transfer Date contain only the remittance instructions required
under Article II of the Agreement.
(w) Assumed/Trade Name Certificates. On or before the Closing Date,
the Purchaser shall receive copies of all certificates filed by the Provider in
each applicable jurisdiction regarding the use of each of the trade or assumed
names set forth on Schedule III attached hereto.
(x) Payments of Interest under the New Indenture as defined in the
Disclosure Statement. At any time the Interest Coverage Ratio of the Provider is
below 1.4:1, the Provider, unless otherwise instructed in writing by the Program
Manager, shall pay its semi-annual interest due under the New Senior Notes (as
defined in the Disclosure Statement) by delivery of additional New Senior Notes
(in lieu of cash) in the manner set forth in the New Senior Notes as in effect
on the date hereof.
(y) "Priority Tax Claim" (as defined in the Plan). The Provider
shall not accelerate any payments due to the Internal Revenue Service in any way
to be at variance with the schedule described in Section 2.2 of the Plan without
the prior written consent of the Lender.
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<PAGE> 48
EXHIBIT V
EVENTS OF TERMINATION
Each of the following shall be an "Event of Termination":
(a) The Servicer, in its capacity as agent for the Purchaser
pursuant to Section 1.05(b), shall fail to perform or observe any term, covenant
or agreement included in the Primary Servicer Responsibilities (other than a
Servicer Termination Event resulting from the events described in paragraph (g)
of this Exhibit) and such failure shall remain unremedied for fifteen (15) days,
or the Servicer or the Provider shall fail to make when due any payment or
deposit to be made by it under the Agreement.
(b) The Provider or the Servicer (i) fails to transfer any servicing
rights and obligations with respect to the Batch Receivables to any successor
designated pursuant to Section 1.05(b) of the Agreement, (ii) fails to make any
payment required under the Agreement (unless such payment obligation has been
fulfilled in full pursuant to the Purchaser's set-off rights under Section 4.03
of the Agreement) or (iii) sends a "Revocation Order" (as defined in the
Depositary Agreement) or makes any change or replacement in the "Standing
Revocable Instruction" (as defined in the Depositary Agreement).
(c) Any representation or warranty (other than those representations
and warranties (i) with respect to the purchase of Receivables that are covered
by paragraph (f) of this Exhibit and (ii) with respect to Batch Receivables, the
Repurchase Price with respect thereto is paid to the Purchaser in the manner set
forth in Article IV of this Agreement within five Business Days following demand
therefor) made or deemed made by the Provider under or in connection with the
Agreement or any information or report delivered by the Provider pursuant to the
Agreement shall prove to have been incorrect or untrue in any material respect
when made or deemed made or delivered.
(d) The Provider fails to perform or observe any other term,
covenant or agreement contained in the Agreement on its part to be performed or
observed and any such failure shall remain unremedied for three Business Days
after Written Notice thereof shall have been given to the Provider by the
Purchaser.
(e) The Provider or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any of its Debt when the same becomes due
and payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such Debt;
or any other event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt and shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the effect
of such event or condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed,
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<PAGE> 49
purchased or defeased, or an offer to repay, redeem, purchase or defease such
Debt shall be required to be made, in each case prior to the stated maturity
thereof.
(f) Any purchase of a Purchased Batch pursuant to the Agreement
shall for any reason (other than pursuant to the terms hereof) fail or cease to
create or fail or cease to be a valid and perfected ownership interest in each
Batch Receivable in such Purchased Batch and the Collections with respect
thereto free and clear of all Liens (other than Liens referred to in clauses (i)
and (ii) of paragraph (e) of Exhibit IV) unless, as to any such Batch
Receivable, the Repurchase Price with respect thereto is paid to the Purchaser
in the manner set forth in Article IV of the Agreement within five Business Days
following demand therefor.
(g) The Provider or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Provider or
any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
Property and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 45 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, it
or for any substantial part of its Property) shall occur; or the Provider or any
of its Subsidiaries shall take any action to authorize any of the actions set
forth above in this paragraph (g).
(h) As of any date of determination, the Provider is found to have
been overpaid by Governmental Entities by 8% or more during any period covered
by an audit conducted by the HCFA and such overpayment is not repaid within 30
days of its due date or reserved for in a manner reasonably acceptable to the
Program Manager or reserved for as required under Section 5.11 of the Agreement.
(i) There shall have occurred any Material Adverse Effect since
September 30, 1997.
(j) The Provider shall have consummated, or have entered into any
agreement which is intended to result in the consummation of (i) the merger or
consolidation of the Provider into or with another Person, (ii) the acquisition
of all or a substantial portion of the assets of any Person, (iii) the transfer,
sale, assignment, lease or other disposition of all or a substantial portion of
the Provider's assets or Properties, (iv) a change in the general nature of the
Provider's business, or (v) a Change of Control shall have occurred.
(k) Judgments or orders for payment of money (other than judgments
or orders in respect of which adequate insurance is maintained for the payment
thereof) against the Provider in
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<PAGE> 50
excess of $500,000 in the aggregate remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of 30 days or more.
(l) Any governmental authority (including, without limitation, the
Internal Revenue Service or the PBGC) files a notice of a Lien against the
assets of the Provider other than a Lien (i) that is limited by its terms to
assets other than Accounts and (ii) that does not result in a Material Adverse
Effect.
(m) The Provider does not pay or discharge at or before maturity or
before becoming delinquent (i) all taxes, levies, assessments, and governmental
charges imposed on it or its income or profits or any of its Property, and (ii)
all lawful claims for labor, material, and supplies, which, if unpaid, might
become a Lien upon any of the Receivables.
(n) The Provider does not maintain proper books of record and
account in which full, true and correct entries in conformity with GAAP are made
of all dealings and transactions in relation to the Receivables.
(o) The Provider does not comply in any material respect with (i)
any document directly relating to the responsibilities of the Provider under the
Agreement or (ii) any agreement, contract, or instrument that results in a
Material Adverse Effect.
(p) The Provider does not comply with all minimum funding
requirements and all other material requirements of ERISA, if applicable, so as
not to give rise to any liability thereunder which would cause a Lien to be
placed against the Receivables.
(q) The Provider engages in any line or lines of business activity
other than the businesses in which it is engaged on the date hereof and any
lines of business related thereto.
(r) An "Event of Default" (as defined in the Loan Agreement) shall
occur under the Loan Agreement.
(s) Any provision of this Agreement shall for any reason cease to be
valid and binding on the Provider or the Provider shall so state in writing.
(t) The Loss-to-Liquidation Ratio in any four consecutive calendar
weeks exceeds 10%.
(u) The Delinquency Ratio in any four consecutive calendar weeks
exceeds 10%.
(v) Consolidated Net Worth. The Provider permits the Consolidated
Net Worth, calculated at the end of each calendar month for the prior calendar
quarter (inclusive of such month), to be less than the amount of actual
Consolidated Net Worth as at the start of such prior calendar quarter plus 84%
of the Projected Net Income for such calendar quarter; provided, that if the
Provider fails such test hereinbefore, the Provider shall have one month to cure
such failure; provided, further,
V-3
<PAGE> 51
that at the end of such cure period, the Consolidated Net Worth calculated as of
such date shall not be less than the amount of actual Consolidated Net Worth on
the start of the fourth prior month plus 84% of the Projected Net Income for
such four month period.
(w) Consolidated EBITDA. The Provider permits the Consolidated
EBITDA, calculated as of the end of each calendar month for the prior calendar
quarter (inclusive of such month) to be less than the amount of actual
Consolidated EBITDA as of the start of such prior calendar quarter plus 84% of
the Projected EBITDA for such calendar quarter; provided, that if the Provider
fails such test hereinbefore, the Provider shall have one month to cure such
failure and be in full compliance with the test as applied at the end of such
month.
(x) Accounts Receivable Turnover. The Provider permits the Accounts
Receivable Turnover, calculated as of the end of each fiscal quarter of the
Provider for the four fiscal quarters of the Provider then most recently ended,
to be more than 90 days.
(y) The Provider's Debt to Equity Ratio. The Provider permits the
ratio of Debt of the Provider to its Equity to exceed 2.8:1.0 at the end of any
fiscal quarter.
(z) Payments of Interest under the New Indenture as defined in the
Disclosure Statement. If at any time the Interest Coverage Ratio of the Provider
is below 1.4:1, the Provider, unless otherwise instructed in writing by the
Program Manager, pays its semi-annual interest due under the New Senior Notes
(as defined in the Disclosure Statement) in any form other than by delivery of
additional New Senior Notes.
(aa) Funding for the Special Reserve. The Provider fails to fund the
Special Reserve in accordance with Section 5.11(a).
(bb) Other Reserves. The Provider fails to reserve funds as required
pursuant to Section 5.11(b) or (c).
(cc) Payments under the IRS Payment Schedule. The Provider shall
fail to make any scheduled payment on the date set forth in the IRS Payment
Schedule.
(dd) Payments under the Medicare Payment Schedule. The Provider
shall fail to make any scheduled payment on the date set forth in the Medicare
Payment Schedule.
V-4
<PAGE> 52
EXHIBIT VI
RECEIVABLE INFORMATION
Subject to compliance with and the limitations of applicable law in
effect from time to time, including, without limitation, patient confidentiality
restrictions which may limit or otherwise proscribe the providing of requested
medical information, the following information shall, as appropriate, be
provided by the Provider to the Master Servicer with respect to each Batch
Receivable, as appropriate, together with such other information and in such
form as may reasonably be requested from time to time by the Master Servicer and
as, in accordance with applicable law, may be disclosed or released to the
Master Servicer (the "Receivable Information"):
(i) customer/patient demographic information;
(ii) insured party demographic and other policy-related
information;
(iii) Provider services and products classification information
(i.e., D.R.G. and other like information established by the Provider from
time to time to classify services rendered or goods sold at or by the
Provider's institution);
(iv) Obligor required information (i.e., information provided in
the ordinary course of business to any specified Obligor or any other
information required to be provided to an Obligor pursuant to any
agreement, contract or other arrangement with such Obligor); and
(v) billing information (i.e., all information provided by the
Provider on invoices to Obligors and any other information required to be
provided pursuant to the Credit and Collection Policy and, to the extent
the Transmission will not be via computer interface, including a copy of
the admitting face sheet, HCFA Form and a detailed copy of the bill).
VI-1
<PAGE> 53
EXHIBIT VII-A
FORM OF NOTICE TO GOVERNMENTAL ENTITIES
[Letterhead of the Provider]
[Date]
[Name and Address
of Governmental Entity]
Re: Change of Account and Address
To Whom it May Concern:
Please be advised that we have opened a new bank account at
_____________ and a post-office box with respect to such bank account.
Accordingly, until further notice, we hereby request that:
(1) All wire transfers be made directly into our account at:
________________________
________________________
________________________
Account #_______________
ABA #_____________________
Confirm Phone Number: _______________
Attention: ___________________
(2) All Explanations of Benefits, remittance advices and other
forms of payment, including checks, be made to our post office
box located at:
________________________
________________________
________________________
Reference: Account #____________
Thank you for your cooperation in this matter.
PHYSICIANS CLINICAL LABORATORY, INC.
By:____________________
[Authorized Officer]
VII-A-1
<PAGE> 54
EXHIBIT VII-B
FORM OF NOTICE TO INSURERS
[Letterhead of the Provider]
[Date]
[Name and Address
of Insurer]
Re: Change of Account and Address
To Whom it May Concern:
Please be advised that we (the "Provider") are selling and
contributing to Bio-Cypher Funding Corp. (the "Purchaser"), an affiliated
company, all of our existing and future receivables payable by you to us; and
the Purchaser is assigning the aforementioned existing and future arising
receivables as collateral to Daiwa Healthco-2 LLC (the "Lender"). Accordingly,
you are hereby directed to make:
(1) All wire transfers directly to the following account:
________________________
________________________
________________________
Account #_______________
ABA #_____________________
Confirm Phone Number: _______________
Attention: ___________________
(2) All Explanation of Benefits, remittance advices and other
forms of payment, including checks, to the following address:
________________________
________________________
Reference: DAIWA HEALTHCO-2 LLC
The foregoing directions shall apply to all existing receivables
payable to us and (until further written notice) to all receivables arising in
the future and may not be revoked except by a writing executed by the Purchaser.
VII-B-1
<PAGE> 55
Please acknowledge your receipt of this notice by signing the
enclosed copy of this letter and returning it in the enclosed envelope.
Thank you for your cooperation in this matter.
PHYSICIANS CLINICAL LABORATORY, INC.
By:____________________
[Authorized Officer]
BIO-CYPHER FUNDING CORP.
By:____________________
[Authorized Officer]
Receipt Acknowledged:
[Name of Insurer]
By: ____________________
Title:
VII-B-2
<PAGE> 56
EXHIBIT VIII
PRIMARY SERVICER RESPONSIBILITIES
The Provider shall be responsible for the following administration
and servicing obligations (the "Primary Servicer Responsibilities") which shall
be performed by the Provider on behalf of the Purchaser until such time as a
successor servicer shall be designated and shall accept appointment pursuant to
Section 1.05(b) of the Agreement:
(a) Servicing Standards and Activities. The Provider agrees to
administer and service the Batch Receivables sold or contributed by the Provider
in each Transferred Batch (i) to the extent consistent with the standards set
forth in clauses (b) (i) through (iv) below, with the same care that it
exercises in administering and servicing similar receivables for its own
account, (ii) within the parameters of services set forth in paragraph (b) of
this Exhibit VIII, as such parameters may be modified by mutual written
agreement of the Purchaser and the Provider, (iii) in compliance at all times
with applicable law and with the agreements, covenants, objectives, policies and
procedures set forth in the Agreement, and (iv) in accordance with industry
standards for servicing healthcare receivables unless such standards conflict
with the procedures set forth in paragraph (b) of this Exhibit VIII in which
case the provisions of paragraph (b) shall control. The Provider shall establish
and maintain electronic data processing services for monitoring, administering
and collecting the Batch Receivables in accordance with the foregoing standards
and shall, within three (3) Business Days of the receipt of information, EOB's
or other written matter into a Lockbox, post such information to its electronic
data processing services.
(b) Parameters of Primary Servicing. The Primary Servicer
Responsibilities shall be performed within the following parameters:
(i) Subject to the review and authority of the Purchaser and
except as otherwise provided herein, the Provider shall have full power
and authority to take all actions that it may deem necessary or desirable,
consistent in all material respects with its existing policies and
procedures with respect to the administration and servicing of accounts
receivable, in connection with the administration and servicing of Batch
Receivables. Without limiting the generality of the foregoing, the
Provider shall, in the performance of its servicing obligations hereunder,
act in accordance with all legal requirements and subject to the terms and
conditions of the Agreement. The Provider agrees that the Primary
Servicing Fee has been calculated to cover all costs and expenses incurred
in the performance of its servicing obligations hereunder and no other
reimbursement of costs and expenses shall be payable to the Servicer.
(ii) The Provider shall not be entitled to sue to enforce or
collect any Batch Receivable without the prior written consent of the
Purchaser unless the Provider shall have repurchased such Batch Receivable
in accordance with the Agreement.
VIII-1
<PAGE> 57
(iii) The Provider shall not change in any material respect its
existing policies and procedures with respect to the administration and
servicing of accounts receivable (including, without limitation, the
amount and timing of write-offs) without the prior written consent of the
Purchaser.
(iv) The Provider will be responsible for the monitoring and
collection of the Batch Receivables, including, without limitation,
contacting Obligors that have not made payment on their respective Batch
Receivables within the customary time period for such Obligor, and
resubmitting any claim rejected by an Obligor due to incomplete
information.
(v) If the Provider determines that a payment with respect to a
Batch Receivable has been received directly by a patient or any other
Person, the Provider shall promptly advise the Purchaser, and the Provider
shall promptly demand that such patient or other Person remit and return
such funds. If such funds are not promptly received by the Provider, the
Provider shall take all reasonable steps to obtain such funds.
(vi) Notwithstanding anything to the contrary contained herein,
the Provider may not amend, waive or otherwise permit or agree to any
deviation from the terms or conditions of any Batch Receivable in any
material respect without the prior consent of the Purchaser.
(c) Aged Term Servicing. The parties hereby agree that at such time
as any Batch Receivable due from an Obligor is unpaid for more than 120 days
after the Last Service Date, the Provider shall, upon the request of the
Purchaser, turn over all of its Primary Servicer Responsibilities under this
Agreement with respect to such Batch Receivable to a successor Servicer selected
by the Purchaser, and such Servicer shall thereafter service such Batch
Receivable.
(d) Termination of Primary Servicer Responsibilities; Cooperation.
Upon the occurrence of a Servicer Termination Event, the Purchaser may, by
written notice, terminate the Provider's Primary Servicer Responsibilities, in
which event the Provider shall, as promptly as commercially possible, transfer
to a successor servicer designated by the Purchaser all records, computer access
and other information as shall be necessary or desirable, in the reasonable
judgment of such successor servicer, to perform such responsibilities. The
Provider shall otherwise cooperate fully with such successor servicer.
(e) Primary Servicing Fee. Upon the transfer of servicing with
respect to any Purchased Receivable pursuant to this Agreement, the Provider
shall no longer be paid the Primary Servicing Fee relating to such Purchased
Receivables, which will be paid to the successor Person performing the Primary
Servicer Responsibilities.
VIII-2
<PAGE> 58
EXHIBIT IX
SERVICER TERMINATION EVENTS
Each of the following shall be a "Servicer Termination Event":
(a) An event has occurred and is continuing that constitutes an
Event of Termination or that would constitute an Event of Termination but for
the requirement that notice be given or time elapse or both.
(b) The Servicer is not performing, or becomes unable (in the
commercially reasonable determination of the Purchaser) to perform, fully the
Primary Servicer Responsibilities set forth in Exhibit VIII hereof.
(c) The Provider is unable to maintain the Transmission interface
described in Exhibit X to the satisfaction of the Master Servicer, or the
electronic information servicing capabilities of the Provider are not
functioning for a period of more than five consecutive Business Days.
(d) The Provider has sent multiple Transmissions to the Master
Servicer in a manner that is not in compliance with the specifications set forth
in Exhibit X hereof.
(e) The Purchaser, in its sole judgement, which judgment shall be
commercially reasonable, is not satisfied with the performance by the Provider
of the Primary Servicer Responsibilities or the Servicer on behalf of the
Provider with respect to the Batch Receivables.
(f) If, at any date, the aggregate Expected Net Value of all
Delinquent Receivables that became Delinquent during the prior 3 months is in
excess of 8% of the aggregate Expected Net Value of all Receivables sold by the
Provider to the Purchaser during the prior 3 months (regardless of whether the
Denied Receivables are repurchased by the Provider pursuant to Article IV of the
Agreement).
(g) As of any date after the Initial Transfer Date, (i) the
dollar-weighted average days outstanding with respect to all outstanding Batch
Receivables on such date and on the same day of each of the two preceding
calendar months (or if there is no corresponding day in any such preceding
month, the last day of such month) is greater than 90 days, or (ii) the average
over the preceding 90-day period of the dollar-weighted average days outstanding
with respect to all outstanding Batch Receivables on each day during such period
is greater than 90 days.
(h) As of any date after the Initial Transfer Date, more than 20% of
all outstanding Batch Receivables (excluding Denied Receivables) are aged more
than 120 days but less than 180 days from the respective Last Service Dates of
such Batch Receivables.
IX-1
<PAGE> 59
(i) As of any date, Collections on all Batch Receivables that have
been liquidated or written off during the then most recent 13 week period, are
less than 8% of the aggregate gross value (billed amount) of such Batch
Receivables.
IX-2
<PAGE> 60
EXHIBIT X
INTERFACE BETWEEN MASTER SERVICER AND THE PROVIDER
1. The Master Servicer will convey appropriate data requirements and
instructions to the Provider to establish a computer interface between the
Provider's systems and the Master Servicer's receivables monitoring
system. The interface will permit the Master Servicer to receive
electronically the Provider's accounts receivable data, including the
Receivable Information, billing data and collection and other transaction
data relating to the Receivables.
2. The Provider shall give the Master Servicer and the Purchaser at least ten
Business Days' notice of any coding changes or electronic data processing
system modifications made by the Provider which could affect the Master
Servicer's processing or interpretation of data received through the
interface.
3. The Master Servicer shall have no responsibility to return to the Provider
any information which the Master Servicer receives pursuant to the
computer interface.
4. The Provider will prepare daily accounts receivable data files of all
transaction types for all of the Provider's sites that are included in the
funding program. The weekly cutoff will occur at a predetermined time each
week, and the weekly cutoff date for all of the sites must occur at
exactly the same time. The cutoff date that will be selected will be at
the end of business for a specific day of the week, or in other words, at
the end of the Provider's transaction posting process for that day. The
Provider will temporarily maintain a copy of the accounts data files in
the event that the data is degraded during transmission, and needs to be
re- transmitted.
The Master Servicer will be responsible for the management of the
hardware, communications and software used in the funding program.
5. The Master Servicer's data center will receive the Receivable files, and
immediately confirm that the files have been passed without degradation of
data by balancing the detailed items to the control totals that accompany
the files. Any problems in this process will be immediately reported to
the Provider so that the Receivable file can be re-transmitted, if
necessary.
6. Once the receipt of the Receivable data has been confirmed, the Master
Servicer will perform certain tests and edits to ensure that each
Receivable meets the specified eligibility criteria for purchase by the
Purchaser. Compliance with concentration limits will be verified and the
Master Servicer will notify the Program Manager to initiate a Receivable
purchase using the Receivable file received. Upon the successful
completion of a purchase, the Master Servicer will generate a one-line
trial balance (listing all purchased accounts) confirming the Receivables
that have been purchased. A copy of the trial balance will be forwarded to
the Provider, to the Servicer, to the Purchaser, and to the Program
Manager to confirm the purchase.
X-1
<PAGE> 61
7. The Provider's sites will continue to post daily transactions to their
respective Receivable files. The Provider's Receivable files for each of
the eligible sites will include all transactions posted through that day.
The Provider will create a transaction report and a Receivable file for
each of the eligible sites. The transaction report will contain all
transactions posted to the respective site Receivable file for the
specified period (and will indicate the respective site and the number of
items and total dollars on each transaction report for control purposes).
The Receivable file will contain balances that reflect the transactions
posted on the Provider's systems through the end of business of the
specified period.
The Provider will transmit the billing, transaction, and the most current
Receivable data files to the Master Servicer's data center according to
the established schedule. The Provider and the Servicer should, again,
maintain the backup of each of these files in the event that a
re-transmission is necessary.
8. The Master Servicer's data center will confirm that the files have been
received intact, and will immediately communicate any problems to the
Provider in order to initiate a re-transmission. The Master Servicer will
then post the transaction files to the accounts receivable for the
previously purchased accounts that the Master Servicer is maintaining, and
consequently update the affected balances. Upon completion of the posting
process, the Master Servicer will generate summary reports of the posting
process that the Program Manager will use to complete various funding
activities. The Master Servicer summary reports will reference the
Provider's transaction codes and activity to codes that are common to the
funding program.
9. The Master Servicer will then compare the updated accounts balances on the
Master Servicer's system to the corresponding account balances reflected
on the Receivable file. The Master Servicer expects that the balances for
the funded Receivables will be congruent, and any discrepancies will be
immediately examined and resolved through the cooperative effort of the
Master Servicer and the Provider. The Master Servicer shall produce
discrepancy reports (e.g., "Funding Only" or "Out of Balance" reports) and
the Provider shall respond promptly to such reports.
10. Once the reconciliation process has been completed and any discrepancies
between the Master Servicer and the Provider's Receivable files resolved
through the discrepancy report process described in paragraph 9 above, the
Master Servicer will then process the Receivable file and advise the
Purchaser that it may purchase any new Receivable that is eligible. The
Master Servicer will then proceed through exactly the same process
described in paragraph 6 above.
X-2
<PAGE> 62
EXHIBIT XI-A
FORM OF OPINION OF PROVIDER'S COUNSEL
WITH RESPECT TO THE CONSENT FORM
RJE Data Processing, Inc.
2513 West Peterson
Chicago, Illinois 60659
Daiwa Healthco-2 LLC
c/o Lord Securities Corporation
2 Wall Street
New York, NY 10005
Ladies and Gentlemen:
As [special local] counsel to PHYSICIANS CLINICAL LABORATORY, INC.,
a [Delaware] corporation (the "Provider"), we have examined the following in
connection with the proposed sale by the Provider of certain healthcare
receivables (the "Receivables") to BIO-CYPHER FUNDING CORP. (the "Purchaser")
and the assignment of those Receivables by the Purchaser to DAIWA HEALTHCO-2 LLC
("DH-2"):
(a) A copy of the Healthcare Receivables Purchase and Transfer
Agreement (the "RPA") between the Provider and the Purchaser (terms not
otherwise defined herein shall have the meanings provided in the RPA);
(b) A copy of the Loan and Security Agreement (the "LSA")
between the Purchaser and DH-2;
(c) A sample of the Receivables proposed to be sold by the
Provider and assigned by the Purchaser;
(d) Each consent form used by the Provider (the "Consent
Form"), copies of which are attached hereto as Exhibit A; and
(e) Such other documents, statutes, regulations and materials
as we have deemed necessary to deliver the opinion set forth herein.
This opinion is being delivered pursuant to clause 1(i) of the
conditions precedent listed on Exhibit II of the RPA.
Based upon the foregoing examination, we are of the opinion that the
Consent Form is sufficient to permit the lawful disclosure or release of
relevant medical information and documents which have been redacted to remove
patient-specific diagnostic and procedural information or
XI-A-1
<PAGE> 63
diagnosis to the Purchaser, DH-2, any third-party servicer acting for the
Purchaser or DH-2 pursuant to the RPA or LSA (whether such servicer is
performing the Primary Servicer Responsibilities or providing data processing
services with respect to the Receivables, and including without limitation the
Master Servicer), and any person guarantying such servicer's obligations.
[In order to disclose or release the full complement of information
regarding medical products sold to a Person in [name of locale], the Provider
should obtain a consent form in the form attached hereto as Exhibit B (the "New
Consent Form") from each new and existing customer. Subject to the proper
completion and execution of such New Consent Form by each customer, we are of
the opinion that the New Consent Form is sufficient to permit the lawful
disclosure or release of medical information and documents to the Purchaser,
DH-2, any third-party servicer acting for the Purchaser or DH-2 pursuant to the
RPA or LSA (whether such servicer is performing the Primary Servicer
Responsibilities or providing data processing services with respect to the
Receivables, and including without limitation the Master Servicer), and any
person guarantying such servicer's obligations.]
Very truly yours,
XI-A-2
<PAGE> 64
EXHIBIT XI-B
FORM OF OPINION OF PROVIDER'S AND PURCHASER'S COUNSEL
WITH RESPECT TO CERTAIN CORPORATE MATTERS
[TO BE ATTACHED]
XI-B-1
<PAGE> 65
EXHIBIT XI-C
[FORM OF OPINION OF SPECIAL BANKRUPTCY COUNSEL TO THE PROVIDER]
[Date]
Daiwa Healthco-2 LLC
c/o Lord Securities Corporation
2 Wall Street
New York, NY 10005
Ladies and Gentlemen:
We have acted as special bankruptcy counsel to Physicians Clinical
Laboratory, Inc. (the "Provider") in connection with the execution thereby of
the Healthcare Receivables Purchase and Transfer Agreement (the "RPTA") dated as
of _______ __, 1997 between the Provider and Bio-Cypher Funding Corp. ("PCL"),
providing for purchases and transfers of receivables from the Provider to PCL.
Capitalized terms used but not defined herein shall have the respective meanings
given to such terms in the RPTA.
In connection with this opinion, we have examined originals or
certified copies of the following documents (hereinafter collectively referred
to as the "Documents"), each executed by each of the parties thereto:
(i) the RPTA;
(ii) the Loan Agreement:
(iii) the Confirmation Order (including any exhibits thereto)
entered on [April 18, 1997] by the Bankruptcy Court; and
(iv) the Plan (including any exhibits thereto).
The agreements referred to in (i) and (ii) above are referred to
herein as, collectively, the "Subject Agreements." We have also examined the
original or certified copies of such corporate records, agreements and
instruments of the Provider, certificates of public officials and of officers of
the Obligors, and such other documents and records, and such matters of law, as
we have deemed appropriate as a basis for the opinions hereinafter expressed.
In making such examination, we have assumed:
(i) the genuineness of all signatures;
XI-C-1
<PAGE> 66
(ii) the authenticity of all documents submitted to us as
originals and the conformity with the originals of all
documents submitted to us as copies;
(iii) that each of the parties to the Documents (other than
the Provider) has the power to enter into and perform
each of its respective obligations thereunder; and
(iv) the due authorization, execution and delivery of each of
the Documents by each of the parties thereto.
Based upon the foregoing, we are of the opinion that:
1. The Confirmation Order has been entered, is in full force and
effect in accordance with its terms and no order has been entered (and remains
in effect) in the Court or any other court having jurisdiction amending,
staying, vacating or rescinding the Confirmation Order. No appeal or petition
for certiorari is pending with respect to the Confirmation Order and the
Confirmation Order is not subject to further appeal or petition for writ or
certiorari. There exists no application, judgment, order, injunction or other
restraint issued or filed under the Bankruptcy Code with the Bankruptcy Court
having jurisdiction over the bankruptcy proceedings which prohibits the sale or
contribution of receivables by or extensions of credit to the Provider or any of
its subsidiaries under the RPTA or the consummation by the Provider or any of
its subsidiaries of the transactions contemplated by the RPTA, the Loan
Agreement, and the other documents delivered in connection therewith.
2. The Effective Date (as defined in the Plan) has occurred and the
transactions contemplated by the Plan have been substantially consummated in
accordance with the terms of the Plan as so confirmed and the Confirmation
Order.
3. No other authorizations, approvals or consents of, and no filings
or registrations with, any governmental or regulatory authority or agency are
necessary under the Bankruptcy Code for the execution, delivery or performance
by the Provider of the Documents to which it is a party or for the validity or
enforceability thereof or with respect to the consummation of the transactions
contemplated by the Documents.
4. Except for the resolution of disputed claims arising out of the
Chapter 11 Cases or as set forth on Schedule __ hereto, no action, claim or
proceeding is now pending or threatened against the Borrower or any of its
subsidiaries, at law, in equity or otherwise, before any court, board,
commission, agency or instrumentality of any federal, state, or local government
or of any agency or subdivision thereof, or before any arbitrator or panel of
arbitrators, which, if determined adversely, could have a Material Adverse
Effect. None of the foregoing actions, claims or proceedings questions the
validity of any of the Subject Agreements or any action taken or to be taken
pursuant thereto.
XI-C-2
<PAGE> 67
5. The Bankruptcy Court entered an order approving the commitment
extension letter and the payment of certain fees set forth in the commitment
extension letter to the Program Manager and such order has become a Final Order.
6. No "Old Common Stock" and no "Old Subordinated Debentures" (each
as defined in the Plan) remain outstanding.
Our opinions expressed above are limited, except to the extent
otherwise expressly stated herein, to the laws of the States of New York,
California, and Illinois, the Federal laws of the United States of America and
the General Corporation Law of the State of Delaware.
XI-C-3
<PAGE> 68
EXHIBIT XII
FORM OF DEPOSITARY AGREEMENT
[TO BE ATTACHED]
XII-1
<PAGE> 69
SCHEDULE I
ADDRESSES FOR NOTICE
If to the Program Manager:
Daiwa Securities America Inc.
32 Old Slip, Financial Square
New York, New York 10005-3538
Attention: Chief Financial Officer
Tel: (212) 612-6290
Fax: (212) 612-7122
If to the Master Servicer:
RJE Data Processing, Inc.
2513 West Peterson
Chicago, Illinois 60659
Attention: Jack Callahan, President
Tel: (312) 561-6966
Fax: (312) 878-6355
S-I
<PAGE> 70
SCHEDULE II
CREDIT AND COLLECTION POLICY
[SEE FINAL CLOSING BINDER]
S-II
<PAGE> 71
SCHEDULE III
DISCLOSURES
[PROVIDED BY
PROVIDER'S COUNSEL]
S-III
<PAGE> 72
SCHEDULE IV
LOCKBOX INFORMATION
Provider Lockbox:
Physicians Clinical Laboratory, Inc.
Post Office Box 450303
San Francisco, CA 94145-0030
Provider Lockbox Account:
Physicians Clinical Laboratory, Inc.
Lockbox Bank
Los Angeles, CA
Account # 23800012157
ABA # 122000496
Purchaser Lockbox:
Post Office Box 45744
San Francisco, CA 94145-0744
Purchaser Lockbox Account:
Account # 0700489647
Lockbox Bank
Los Angeles, CA
ABA # 122000496
S-IV
<PAGE> 73
SCHEDULE V
IRS PAYMENT SCHEDULE
S-V
<PAGE> 74
SCHEDULE VI
MEDICARE PAYMENT SCHEDULE
S-VI
<PAGE> 75
SCHEDULE VII
FINANCIAL INFORMATION
S-VII
<PAGE> 1
ASSIGNMENT OF HEALTHCARE RECEIVABLES
PURCHASE AND TRANSFER AGREEMENT
AS COLLATERAL SECURITY
FOR VALUE RECEIVED, BIO-CYPHER FUNDING CORP. (the "Assignor"),
hereby grants a security interest in and assigns and transfers to DAIWA
HEALTHCO-2 LLC, as Lender (the "Assignee"), all right, title and interest of the
Assignor in and to, all benefits of the Assignor under, and all monies due or to
become due to the Assignor under or in connection with, the contract more
particularly described as follows:
That certain Healthcare Receivables Purchase and Transfer Agreement,
dated as of September 30, 1997, among Physicians Clinical Laboratory,
Inc., as Provider, and the Assignor, as Purchaser (as may be amended,
restated, modified or supplemented from time to time in accordance with
the terms thereof and hereof, the "Transfer Agreement")
as collateral security for any and all of the obligations of the Assignor
pursuant to that certain Loan and Security Agreement dated as of September 30,
1997 between the Assignor and the Assignee (as such may be amended, modified or
supplemented from time to time, the "Loan Agreement", the terms defined therein
and not otherwise defined herein being used herein as therein defined), whether
at stated maturity, by acceleration or otherwise (including, without limitation,
all interest thereon, whether accruing prior or subsequent to the commencement
of a bankruptcy or similar proceeding involving the Assignor as a debtor), and
all present and future obligations of the Assignor under this Assignment,
whether at stated maturity, by acceleration or otherwise (all of the foregoing
being herein referred to as the "Obligations").
The Assignor agrees, covenants, represents and warrants that:
1. The Assignor's right, title and interest in the Transfer
Agreement is owned by the Assignor free and clear of all claims,
mortgages, pledges, liens, encumbrances and security interests of every
nature whatsoever, except in favor of the Assignee. Without the Assignee's
prior written consent, the Assignor will not sell, transfer, assign,
pledge or grant a security interest in the Transfer Agreement to any other
person. Any such sale, transfer, assignment, mortgage, pledge or
encumbrance without the Assignee's written consent shall be void and of no
force and effect.
2. Without the Assignee's prior written consent, the Assignor will
not amend (directly or indirectly), modify, supplement, waive compliance
with, seek or grant a waiver under or assent to non-compliance with the
Transfer Agreement.
3. The Assignor specifically acknowledges and agrees that the
Assignee does not assume, and shall have no responsibility for, the
payment of any sums due or to become due under the Transfer Agreement by
the Assignor or the performance of any obligations to be performed under
or with respect to the Transfer Agreement by the Assignor, and the
<PAGE> 2
Assignor hereby agrees to indemnify and hold the Assignee harmless with
respect to any and all claims by any person relating thereto. The
Assignee, in its discretion, may file or record this Assignment.
4. If an Event of Termination shall occur and be continuing, in
addition to all other rights and remedies of the Assignee pursuant to any
agreements of the Assignor in favor of or assigned to and held by the
Assignee or pursuant to applicable law or otherwise, the Assignee or its
successor shall have all rights and benefits under the Transfer Agreement,
including, without limitation, any and all rights to indemnification,
without modifying or discharging any of the Obligations, except to the
extent payment in respect thereof is received. Upon the occurrence and
continuance of an Event of Termination, the Assignor agrees to execute any
and all documents requested by the Assignee in its sole discretion to
enable the Assignee to exercise all of the rights of the Assignor under
the Transfer Agreement. The specified remedies to which the Assignee may
resort under the terms of this Assignment are cumulative and are not
intended to be exclusive of any other remedies or means of redress to
which the Assignee may be lawfully entitled in case of any breach or
threatened breach by the Assignor of any provision hereof or of any of the
Obligations. Nothing contained in this Assignment and no act or action
taken or done by the Assignee pursuant to the powers and rights granted to
it hereunder or under any instrument collateral hereto shall be deemed to
be a waiver by the Assignee of any of its rights and remedies against the
Assignor in connection with, or in respect of, any of the Obligations. The
right of the Assignee to collect and enforce collection of the Obligations
and to enforce any security and collateral held by it may be exercised by
the Assignee prior to, simultaneously with, or subsequent to any action
taken by the Assignee hereunder.
5. Upon the payment and satisfaction in full of all of the
Obligations and the termination of any commitment by the Assignee to make
loans or other financial accommodations to or for the benefit of the
Assignor under the Loan Agreement, this Assignment shall be terminated by
the Assignee and shall be of no further force or effect, but the
affidavit, certificate, letter or statement of any officer, agent or
attorney of the Assignee showing that any part of the Obligations remains
unpaid or unsatisfied shall be and constitute prima facie evidence of the
validity, effectiveness and continuing force of this Assignment and any
person may, and is hereby authorized to, rely thereon.
6. The Assignee may take, or release, in whole or in part, other
security which it may hold for the payment of the Obligations, may release
any party primarily or secondarily liable therefor, and may apply any
other security held by it to the satisfaction, or partial satisfaction, of
such Obligations, without prejudice to any of its rights under this
Assignment.
7. This Assignment shall inure to the benefit of the Assignee and
its permitted successors, assigns and designees, and shall be binding upon
any subsequent owner of the Assignor's interest in and to the Transfer
Agreement.
2
<PAGE> 3
8. The Assignor covenants to execute and deliver to the Assignee,
upon demand, such additional assurances, writings or other instruments as
may be reasonably required by the Assignee to effectuate the purpose
hereof. This Assignment may not be changed orally and is to be governed by
the internal laws of the State of New York applicable to contracts
executed and to be performed in such State.
9. The Assignor hereby irrevocably designates and appoints the
Assignee as attorney-in-fact of the Assignor with power of substitution,
and with authority from and after and during the continuance of an Event
of Termination: to execute and deliver for and on behalf of the Assignor
any and all instruments, documents, agreements and other writings
necessary or advisable for the exercise on behalf of the Assignor pursuant
hereto of any rights, benefits or options created or existing under or
pursuant to the Transfer Agreement and in this regard; to endorse the name
of the Assignor on its behalf on any and all notes, acceptances, checks,
drafts, money orders, instruments or other evidences of collateral, that
may come into the Assignee's possession; to execute proofs of claim and
loss; to execute endorsements, assignments or other instruments of
conveyance and transfer; to execute releases; and, to do all other acts
and things necessary and advisable in the discretion of the Assignee to
carry out and enforce this Assignment or the Obligations. All acts done by
the Assignee under the foregoing authorization are hereby ratified and
approved, and neither the Assignee or its successors nor any designee or
agent thereof shall be liable for any acts of commission or omission
(other than acts committed or omitted through bad faith, gross negligence
or willful misconduct), for any error of judgment or for mistake of facts
or law. This power of attorney being coupled with an interest is
irrevocable while any of the Obligations shall remain unpaid and
unperformed.
10. If an Event of Termination shall occur and be continuing, the
Assignee may, in its discretion, in its name or the Assignor's, notify any
obligor under the Transfer Agreement to make payment to the Assignee of
all amounts due or to become due under the Transfer Agreement.
11. If an Event of Termination shall occur and be continuing, the
Assignee may, in its discretion, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or in
exchange for the Transfer Agreement, or, with respect to payments which
have become due and payable under the Transfer Agreement, make any
compromise or settlement deemed desirable by the Assignee.
12. The Assignor agrees that any copy of this Assignment signed by
the Assignor and transmitted by telefax for delivery to the Assignee shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned has caused this Assignment
to be executed this ______ day of ____________, 1997.
BIO-CYPHER FUNDING CORP.
By: ____________________________________
Name:
Title:
Acknowledged by:
PHYSICIANS CLINICAL LABORATORY, INC.
By: __________________________
Name:
Title:
4
<PAGE> 1
LOAN AND SECURITY AGREEMENT
Dated as of September 30, 1997
Between
BIO-CYPHER FUNDING CORP.
as Borrower
and
DAIWA HEALTHCO-2 LLC
as Lender
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I: COMMITMENT; AMOUNTS AND TERMS OF THE REVOLVING
LOAN
ss. 1.01. Revolving Advances...........................................1
ss. 1.02. Revolving Commitment and Borrowing Limit.....................1
ss. 1.03. Notice of Borrowing; Borrower's Certificate..................2
ss. 1.04. Termination of Revolving Commitment..........................2
ss. 1.05. Interest and Non-Utilization Fee.............................2
ss. 1.06. Voluntary Reductions.........................................2
ss. 1.07. Computation of Interest......................................3
ss. 1.08. Procedures for Payment.......................................3
ss. 1.09. Indemnities..................................................4
ss. 1.10. Telephonic Notice............................................5
ss. 1.11. Maximum Interest.............................................5
ARTICLE II: COLLECTION AND DISTRIBUTION
ss. 2.01. Collections on the Receivables...............................6
ss. 2.02. Establishment of Lender Reserve; Distributions...............6
ss. 2.03. Distribution of Funds........................................7
ss. 2.04. Distribution of Funds at the Maturity Date or
Upon an Event of Default.....................................7
ss. 2.05. Distributions to the Borrower Generally......................7
ss. 2.06. Avoidance of Breakage Costs..................................7
ARTICLE III: REPRESENTATIONS AND WARRANTIES; COVENANTS;
EVENTS OF DEFAULT
ss. 3.01. Representations and Warranties; Covenants....................8
ss. 3.02. Events of Default; Remedies..................................8
ss. 3.03. Attorney-in-Fact.............................................8
ARTICLE IV: SECURITY
ss. 4.01. Grant of Security Interest...................................9
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<PAGE> 3
ARTICLE V: MISCELLANEOUS
ss. 5.01. Amendments, etc..............................................9
ss. 5.02. Notices, etc.................................................9
ss. 5.03. Assignability...............................................10
ss. 5.04. Further Assurance...........................................10
ss. 5.05. Costs and Expenses; Collection Costs........................10
ss. 5.06. Confidentiality.............................................11
ss. 5.07. Term and Termination; Early Termination Fee.................11
ss. 5.08. No Liability of Lender......................................13
ss. 5.09. Entire Agreement; Severability..............................13
ss. 5.10. GOVERNING LAW...............................................13
ss. 5.11. WAIVER OF JURY TRIAL, JURISDICTION AND VENUE................13
ss. 5.12. Execution in Counterparts...................................14
ss. 5.13. No Proceedings..............................................14
EXHIBITS
Exhibit I Definitions
Exhibit II Conditions of Revolving Advances
Exhibit III Representations and Warranties
Exhibit IV Covenants
Exhibit V Events of Default
Exhibit VI Eligibility Criteria
Exhibit VII-A Form of Borrowing Base Certificate
Exhibit VII-B Form of Borrower's Certificate
Exhibit VIII Form of Depositary Agreement
Exhibit IX-A Form of Opinion of Counsel
Exhibit IX-B Form of Opinion of Counsel
SCHEDULES
Schedule I Addresses for Notice
Schedule II Credit and Collection Policy
Schedule III Disclosures
Schedule IV Lockbox Information
ii
<PAGE> 4
LOAN AND SECURITY AGREEMENT, dated as of September 30, 1997, between
BIO-CYPHER FUNDING CORP., a Delaware corporation (together with its successors
and assigns, the "Borrower") and DAIWA HEALTHCO-2 LLC, a Delaware limited
liability company (together with its successors and assigns, the "Lender"),
agree as follows:
Certain terms that are capitalized and used throughout this
Agreement are defined in Exhibit I to this Agreement. References herein, and in
the Exhibits and Schedules hereto, to the "Agreement" refer to this Agreement,
as amended, restated, modified or supplemented from time to time in accordance
with its terms.
The Borrower (i) is a Delaware corporation owned by the Provider,
(ii) has acquired and will acquire healthcare receivables from the Provider by
purchase or contribution to the capital of the Borrower pursuant to the RPTA, as
determined from time to time by the Borrower and the Provider, and (iii) wishes
to borrow funds from the Lender on a continuing and revolving basis secured by
healthcare receivables acquired from the Provider.
The Lender is prepared to make a revolving loan secured by such
healthcare receivables on the terms and subject to the conditions set forth
herein.
Accordingly, the parties agree as follows:
ARTICLE I.
COMMITMENT; AMOUNTS AND TERMS OF THE REVOLVING LOAN
ss. 1.01. Revolving Advances. (a) The Lender agrees to lend to the
Borrower, subject to and upon the terms and conditions herein set forth, on any
Funding Date, such amounts as, in accordance with the terms hereof, may be
requested by the Borrower (each such borrowing, a "Revolving Advance" and the
outstanding principal balance of all Revolving Advances from time to time, the
"Revolving Loan").
(b) Each Revolving Advance shall be in a minimum amount of $100,000
or an integral multiple of $100,000 in excess thereof and shall be made on the
date specified in the Written Notice, or telephonic notice confirmed in writing,
as described in Section 1.03 hereof.
ss. 1.02. Revolving Commitment and Borrowing Limit. (a) The
aggregate unpaid principal amount of the Revolving Loan at any time shall not
exceed an amount equal to the lesser of (i) $10,000,000 (the "Revolving
Commitment"), and (ii) the Borrowing Base as of such time (the lesser of (i) and
(ii) being the "Borrowing Limit").
(b) Subject to the limitations herein and of Exhibit II hereof, the
Borrower may borrow, repay (without premium or penalty) and reborrow the
Revolving Loan. The Revolving Loan shall not exceed in aggregate principal
amount at any one time outstanding, and the Lender shall not have any obligation
to make any Revolving Advance which shall result in the Revolving Loan being in
excess of, the Revolving Commitment.
<PAGE> 5
(c) If at any time the outstanding principal amount of the Revolving
Loan exceeds the Borrowing Limit at such time, the Borrower shall promptly, in
accordance with Article II hereof, eliminate such excess by paying an amount
equal to such excess until such excess is eliminated in full.
(d) The Borrower may elect to decrease the Revolving Commitment;
provided, that such decrease shall be in an amount equal to $1,000,000 or an
integral multiple of $1,000,000 in excess thereof and the Borrower shall, upon
the effective date of such decrease, pay to the Lender an amount equal to 2.00%
of any such decrease.
ss. 1.03. Notice of Borrowing; Borrower's Certificate. Whenever the
Borrower desires a Revolving Advance to be made, the Borrower shall give the
Lender two Business Days' prior Written Notice not later than 11:00 a.m. (New
York time), or telephonic notice from an Authorized Representative confirmed
promptly by a Written Notice, (which, in each case, shall be irrevocable) of its
desire for a Revolving Advance. Each notice of borrowing under this Section 1.03
shall be substantially in the form of Exhibit VII-B hereto (each a "Borrower's
Certificate") and specify the date on which the Borrower desires to make a
borrowing of a Revolving Advance (which in each instance shall be a Funding
Date) and the amount of such borrowing. The Borrower shall attach the most
recent Borrowing Base Certificate to the Borrower's Certificate.
ss. 1.04. Termination of Revolving Commitment. On the Maturity Date,
the Revolving Commitment shall be cancelled automatically. Upon such
cancellation, the Revolving Advances (together with all other Lender Debt) shall
become, without further action by any Person, immediately due and payable
together with all accrued interest thereon to such date plus any fees, premiums,
charges or costs provided for hereunder.
ss. 1.05. Interest and Non-Utilization Fee. (a) Interest. The
Borrower shall pay interest on the unpaid principal amount of the Revolving Loan
on each Interest Payment Date and on the Maturity Date (whether by acceleration
or otherwise), in each case, at an interest rate per annum equal to the LIBO
Rate plus 3.00%.
(b) Default Interest. Notwithstanding anything to the contrary
contained herein, while any Event of Default is continuing, interest on the
Revolving Advances shall be payable on demand at a rate per annum equal to two
percentage points (2.00%) in excess of the rate then otherwise applicable to the
Revolving Loan.
(c) Non-Utilization Fee. The Borrower shall pay to the Lender on the
first Funding Date of each month a fee (the "Non-Utilization Fee") equal to
0.50% per annum on the average amount, calculated on a daily basis, by which the
Revolving Commitment exceeded the outstanding amount of the Revolving Loan
during the prior Month.
ss. 1.06. Voluntary Reductions. Upon not less than two Business
Days' Written Notice and at its sole election, the Borrower may on any Funding
Date reduce the outstanding principal amount of the Revolving Loan; provided,
however, that the Borrower shall provide the
2
<PAGE> 6
Lender with at least 30 days' prior Written Notice to the extent such reduction
shall be more than 10% of the then outstanding principal amount of the Revolving
Loan.
ss. 1.07. Computation of Interest. (a) Interest on the Revolving
Loan and fees and other amounts calculated by the Lender on the basis of a rate
per annum shall be computed on the basis of actual days elapsed over a 360-day
year.
(b) Whenever any payment to be made hereunder or under any other
Document shall be stated to be due and payable on a day which is not a Business
Day, such payment shall be made on the next succeeding Business Day and such
extension of time shall in such case be included in computing interest on such
payment.
ss. 1.08. Procedures for Payment. (a) Each payment hereunder shall
be made not later than 12:00 noon (New York City time) on the day when due in
lawful money of the United States of America to the Lender without counterclaim,
offset, claim or recoupment of any kind and free and clear of, and without
deduction for, any present or future withholding or other taxes, duties or
charges of any nature imposed on such payments or prepayments by or on behalf of
any Governmental Entity thereof or therein, except for Excluded Taxes. If any
such taxes, duties or charges are so levied or imposed on any payment to the
Lender, the Borrower will make additional payments in such amounts as may be
necessary so that the net amount received by the Lender, after withholding or
deduction for or on account of all taxes, duties or charges, including
deductions applicable to additional sums payable under this Section 1.08, will
be equal to the amount provided for herein. Whenever any taxes, duties or
charges are payable by the Borrower with respect to any payments hereunder, the
Borrower shall furnish promptly to the Lender information, including certified
copies of official receipts (to the extent that the relevant governmental
authority delivers such receipts), evidencing payment of any such taxes, duties
or charges so withheld or deducted. If the Borrower fails to pay any such taxes,
duties or charges when due to the appropriate taxing authority or fails to remit
to the Lender the required information evidencing payment of any such taxes,
duties or charges so withheld or deducted, the Borrower shall indemnify the
Lender for any incremental taxes, duties, charges, interest or penalties that
may become payable by the Lender as a result of any such failure.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Borrower agrees to pay any present or future stamp or documentary
taxes, any intangibles tax or any other sales, excise or property taxes, charges
or similar levies now or hereafter assessed that arise from and are attributable
to any payment made hereunder or from the execution, delivery of, or otherwise
with respect to, this Agreement or any other Documents and any and all recording
fees relating to any Documents securing any Lender Debt ("Other Taxes").
(c) The Borrower shall indemnify the Lender for the full amount of
any taxes, duties or charges other than Excluded Taxes (including, without
limitation, any taxes other than Excluded Taxes imposed by any jurisdiction on
amounts payable under this Section 1.08) duly paid or payable by the Lender and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto. Indemnification payments shall be made within 30 days from
the
3
<PAGE> 7
date the Lender makes written demand therefor together with summary
documentation with respect thereto.
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 1.08 shall survive the payment in full of principal and interest
hereunder.
ss. 1.09. Indemnities. (a) The Borrower hereby agrees to indemnify
the Lender on demand against any loss or expense which the Lender or a branch or
an Affiliate of the Lender may sustain or incur as a consequence of: (i) any
default in payment or prepayment of the principal amount of any Revolving
Advance made to it or any portion thereof or interest accrued thereon, as and
when due and payable (at the due date thereof, by irrevocable notice of payment
or prepayment, or otherwise); (ii) the effect of the occurrence of any Event of
Default upon any Revolving Advance made to it; (iii) the payment or prepayment
of the principal amount of any Revolving Advance made to it or any portion
thereof, on any day other than a Funding Date; or (iv) the failure by the
Borrower to accept a Revolving Advance after it has requested such borrowing,
conversion or renewal; in each such case including, but not limited to, any loss
or expense sustained or incurred in liquidating or employing deposits from third
parties acquired to effect or maintain such Revolving Advance or any portion
thereof. The Lender shall provide to the Borrower a statement, supported when
applicable by documentary evidence, explaining the amount of any such loss or
expense it incurs, which statement shall be conclusive absent manifest error.
(b) The Borrower hereby agrees to indemnify and hold harmless the
Lender and its Affiliates, directors, officers, agents, representatives, counsel
and employees and each other Person, if any, controlling them or any of its
Affiliates within the meaning of either Section 15 of the Securities Act of
1933, as amended, or Section 20(a) of the Exchange Act (each an "Indemnified
Party"), from and against any and all losses, claims, damages, costs, expenses
(including reasonable counsel fees and disbursements) and liabilities which may
be incurred by or asserted against such Indemnified Party with respect to or
arising out of the commitments hereunder to make the Revolving Advances, or the
financings contemplated hereby, the other Documents, the Collateral (including,
without limitation, the use thereof by any of such Persons or any other Person,
the exercise by the Lender of rights and remedies or any power of attorney with
respect thereto, and any action or inaction of the Lender under and in
accordance with any Security Document), the use of proceeds of any financial
accommodations provided hereunder, any investigation, litigation or other
proceeding brought or threatened relating thereto, or the role of any such
Person or Persons in connection with the foregoing whether or not they or any
other Indemnified Party is named as a party to any legal action or proceeding
("Claims"). The Borrower will not, however, be responsible to any Indemnified
Party hereunder for any Claims to the extent that such Claim shall have arisen
out of or resulted principally from (a)(i) actions taken or omitted to be taken
by any Indemnified Party which constitute bad faith, willful misconduct or gross
negligence of any Indemnified Party, or (ii) the violation of any law or
regulation applicable to such Indemnified Party (except to the extent that such
violation results principally from any breach of any representation, warranty or
agreement by or on behalf of the Borrower, any Subsidiary or any Affiliate of
the Borrower, or (b) a successful claim by any Subsidiary or Affiliate of the
Borrower against any Indemnified Party ("Excluded
4
<PAGE> 8
Claims"). The Indemnified Party shall give the Borrower prompt Written Notice of
any Claim setting forth a description of those elements of the Claim of which
such Indemnified Party has knowledge. The Borrower shall have the right at any
time during which a Claim is pending to select counsel to defend and settle any
Claims so long as in any such event the Borrower shall have stated in a writing
delivered to the applicable Indemnified Party that, as between the Borrower and
such Indemnified Party, the Borrower is responsible to such Indemnified Party
with respect to such Claim; provided, however, that the Borrower shall not be
entitled to control the defense of any Claim in the event that there are
defenses available to the Indemnified Party which are material and meritorious
and are not available to, or capable of assertion by, the Borrower. In any other
case, the Indemnified Party shall have the right to select counsel and control
the defense of any Claims (but solely to the extent that it elects to diligently
pursue such Claim) and to the extent that the Indemnified Party does not, in its
sole reasonable judgment, believe that such action or strategy will detriment
its economic interest, such Indemnified Party shall endeavor in good faith to
minimize the indemnity obligations of the Borrower hereunder; provided, however,
that no Indemnified Party shall settle any Claim as to which it is controlling
the defense without the prior written consent of the Borrower, which consent
shall not be unreasonably withheld or delayed. With respect to any Claim for
which the Borrower is entitled to select counsel, each Indemnified Party shall
have the right, at its expense, to participate in the defense of such Claim. In
the event that, with respect to any Claim, more than one Indemnified Party shall
be permitted hereunder to select counsel to defend such Claim for which expense
the Borrower would otherwise be liable and shall decide to do so, then all such
Indemnified Parties shall select the same counsel to defend such Indemnified
Parties with respect to such Claim; provided, however, that if any such
Indemnified Party shall in its reasonable opinion consider that the retention of
one joint counsel as aforesaid shall result in a conflict of interest, such
Indemnified Party may, at its expense, retain its own counsel to defend such
Indemnified Party with respect to such Claim. The Indemnified Parties and the
Borrower and their respective counsel shall cooperate with each other in all
reasonable respects in any investigation, trial and defense of any such Claim
and any appeal arising therefrom.
Provided that the Borrower fulfills its indemnification payment
obligations to any Indemnified Party with respect to any Claim pursuant to this
Section 4.02, the Borrower shall be subrogated to the rights of such Indemnified
Party in respect of such Claim.
ss. 1.10. Telephonic Notice. Without in any way limiting the
Borrower's obligation to confirm in writing any telephonic notice of a
borrowing, conversion or renewal, the Lender may act without liability upon the
basis of telephonic notice believed by the Lender in good faith to be from an
Authorized Representative of the Borrower prior to receipt of written
confirmation.
ss. 1.11. Maximum Interest. (a) No provision of this Agreement shall
require the payment to the Lender or permit the collection by the Lender of
interest in excess of the maximum rate of interest from time to time permitted
(after taking into account all consideration which constitutes interest) by laws
applicable to the Lender Debt and binding on the Lender (such maximum rate being
the Lender's "Maximum Permissible Rate").
5
<PAGE> 9
(b) If the amount of interest (computed without giving effect to
this Section 1.11) payable on any Interest Payment Date in respect of the
preceding interest computation period would exceed the amount of interest
computed in respect of such period at the Maximum Permissible Rate, the amount
of interest payable to the Lender on such date in respect of such period shall
be computed at the Maximum Permissible Rate.
(c) If at any time and from time to time: (i) the amount of interest
payable to any Lender on any Interest Payment Date shall be computed at the
Maximum Permissible Rate pursuant to the preceding subsection (b); and (ii) in
respect of any subsequent interest computation period the amount of interest
otherwise payable to the Lender would be less than the amount of interest
payable to the Lender computed at the Maximum Permissible Rate, then the amount
of interest payable to the Lender in respect of such subsequent interest
computation period shall continue to be computed at the Maximum Permissible Rate
until the amount of interest payable to the Lender shall equal the total amount
of interest which would have been payable to the Lender if the total amount of
interest had been computed without giving effect to the preceding subsection
(b).
ARTICLE II.
COLLECTION AND DISTRIBUTION
ss. 2.01. Collections on the Receivables. The Lender shall be
entitled with respect to all Receivables, (i) to receive and to hold as
collateral all Receivables and all Collections on Receivables in accordance with
the terms of the Depositary Agreement, and (ii) to the extent permitted by law
and in a manner consistent with all applicable laws and regulations, to have and
to exercise any and all rights (x) to collect, record, track and, during the
continuance of an Event of Default, take all actions to obtain Collections with
respect to all Receivables payable by Insurers and Private Payors, and (y)
record, track and, during the continuance of an Event of Default, take all
actions to obtain Collections with respect to all Receivables payable by
Governmental Entities.
ss. 2.02. Establishment of Lender Reserve; Distributions. On the
Initial Funding Date the Lender will establish a segregated deposit account in
the name and sole dominion and control of the Lender (the "Lender Reserve") for
the purpose of receiving funds from the Borrower to be distributed towards the
payment, when due, of the A/R Fees and interest. Amounts held in the Lender
Reserve shall be invested solely in Eligible Investments. So long as no Event of
Default is continuing (i) on each Interest Payment Date, the Lender shall
withdraw from all amounts available in the Lender Reserve to make payment (in
whole or, if such amounts are insufficient to make payment in whole, then to
make payment in part) of (x) all interest due and payable on such Interest
Payment Date, and (y) any Borrowing Base Deficiency existing on such Interest
Payment Date, and (ii) on the first Business Day of each Month the Lender shall
withdraw from all amounts available in the Lender Reserve to make payment (in
whole or, if such amounts are insufficient to make payment in whole, then to
make payment in part) of all A/R Fees due and payable. Upon the occurrence and
during the continuance of an Event of Default, amounts in the Lender Reserve
shall be made available for distribution in accordance with the provisions of
Section 2.04 hereof. Upon the payment in full of all Lender Debt, all remaining
amounts held in the Lender Reserve shall be delivered to the Borrower.
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ss. 2.03. Distribution of Funds. On each Funding Date, and provided,
that no Event of Default is continuing, the Lender shall distribute any and all
Collections received since the immediately prior Funding Date, together with
interest thereon (at the Overnight Rate established from time to time) from the
date of receipt until the Funding Date so distributed as follows: FIRST, to the
Special Reserve Account, an amount in cash, if any, sufficient to fund the
Special Reserve Requirement in accordance with Section 5.11 of the RPTA; SECOND,
to any other cash collateral account, if any, established pursuant to Section
5.11 of the RPTA, an amount in cash sufficient to fund such cash collateral
account as agreed pursuant to Section 5.11(b) of the RPTA; THIRD, to the Lender,
an amount in cash equal to the Fee and Interest Shortfall, if any, until such
amount has been paid in full; FOURTH, to the Lender Reserve, an amount in cash,
if any, sufficient to fund the balance of the Lender Reserve to the Reserve
Requirement, until the Reserve Requirement has been funded in full; FIFTH, to
the Lender Reserve, an amount in cash equal to the Borrowing Base Deficiency, if
any, until such amount is paid in full; SIXTH, to the Lender, an amount in cash
equal to the payment, if any, of principal on the Revolving Loan due and payable
on such Funding Date, until such amount has been paid in full; SEVENTH, to the
Lender, an amount in cash equal to the payment of any other Lender Debt due and
payable on such Funding Date, if any, until such amount has been paid in full;
and EIGHTH, to the Borrower, all remaining amounts of Collections, together with
interest thereon (at the Overnight Rate established from time to time) from the
date of receipt until the Funding Date so distributed.
ss. 2.04. Distribution of Funds at the Maturity Date or Upon an
Event of Default. At the Maturity Date or upon the occurrence and during the
continuance of an Event of Default, subject to the rights and remedies of the
Lender pursuant to Section 3.02 hereof, the Lender shall distribute any and all
Collections as follows: FIRST, to the Lender, an amount in cash equal to any and
all accrued fees and collection costs as set forth in Section 5.05, until such
amount has been paid in full; SECOND, to the Lender, an amount in cash equal to
all accrued and unpaid interest on the Revolving Loan (at the rates established
under Section 1.05) until such amount has been funded in full; THIRD, to the
Lender, an amount in cash equal to the principal amount of the Revolving Loan,
until such amount is paid in full; FOURTH, to the Lender, an amount in cash
equal to the payment of any other Lender Debt due and payable on such Funding
Date, until such amount has been paid in full; and FIFTH, to the Borrower, all
remaining amounts of Collections.
ss. 2.05. Distributions to the Borrower Generally. Distributions to
the Borrower on each Funding Date shall be deposited in an account designated by
the Borrower in writing to the Program Manager from time to time.
ss. 2.06. Avoidance of Breakage Costs. So long as no Default or
Event of Default is continuing or the Borrower has provided at least 30 days'
prior Written Notice thereof, the Lender shall not apply out of the Collections
any payment of principal to any portion of a Revolving Loan in excess of 10% of
the outstanding principal amount of the Revolving Loan outstanding at such time.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
EVENTS OF DEFAULT
ss. 3.01. Representations and Warranties; Covenants. The Borrower
makes on the Initial Funding Date and on each subsequent Funding Date, the
representations and warranties set forth in Exhibit III hereto, and hereby
agrees to perform and observe the covenants set forth in Exhibit IV hereto.
ss. 3.02. Events of Default; Remedies. (a) If any Event of Default
shall occur and be continuing, the Lender may, by Written Notice to the
Borrower, take either or both of the following actions: (x) declare the Maturity
Date to have occurred, and (y) without limiting any rights hereunder and subject
to applicable law, replace the Borrower and the Borrower's agent in its
performance of any or all of the "Primary Servicer Responsibilities" under the
RPTA (which replacement may be effectuated through the outplacement to a
qualified and experienced third-party of all back office duties, including
billing, collection and processing responsibilities, and access to all
personnel, hardware and software utilized in connection with such
responsibilities); provided, that, with respect to the Event of Default in
clause (i) of Exhibit V, the Maturity Date shall be deemed to have occurred
automatically and without notice. Upon any such declaration or designation, the
Lender shall have, in addition to the rights and remedies which it may have
under this Agreement, all other rights and remedies provided after default under
the UCC and under other applicable law, which rights and remedies shall be
cumulative.
(b) Right of Set-Off. The Borrower hereby irrevocably authorizes and
instructs the Lender to set-off the full amount of any Lender Debt due and
payable against (i) any Collections, or (ii) the principal amount of any
Revolving Advance requested on or after such due date. No further notification,
act or consent of any nature whatsoever is required prior to the right of the
Lender to exercise such right of set-off; provided, however, a member of the
Lender Group shall notify the Borrower: (1) a set-off pursuant to this Section
3.02 occurred, (2) the amount of such set-off and (3) a description of the
Lender Debt that was due and payable.
ss. 3.03. Attorney-in-Fact. The Borrower hereby irrevocably
designates and appoints the Lender, the Master Servicer and each other Person in
the Lender Group, to the extent permitted by applicable law and regulation, as
the Borrower's attorneys-in-fact, which irrevocable power of attorney is coupled
with an interest, with authority, upon the occurrence and during the continuance
of an Event of Default (and to the extent not prohibited under applicable law
and regulations) to (i) endorse or sign the Borrower's name to financing
statements, remittances, invoices, assignments, checks (other than, absent a
court order, payments from Governmental Entities), drafts, or other instruments
or documents in respect of the Receivables, (ii) notify Insurers and Private
Payors to make payments on the Receivables directly to the Lender, and (iii)
bring suit in the Borrower's name and settle or compromise such Receivables as
the Lender or the Master Servicer may, in its discretion, deem appropriate.
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ARTICLE IV.
SECURITY
ss. 4.01. Grant of Security Interest. (a) As collateral security for
the Borrower's obligations to pay the Lender Debt when due and payable and its
indemnification obligations hereunder, the Borrower hereby grants to the Lender
a first priority Lien on and security interest in and right of set-off against
all of the rights, title and interest of the Borrower in and to (i) the RPTA,
(ii) to the maximum extent permitted by law, the Provider Lockbox and the
Provider Lockbox Account, (iii) all of the Borrower's Accounts whether now owned
or hereafter acquired, (iv) any and all amounts held in any bank or trust
accounts maintained at Union Bank of California, N.A. in respect of any of the
foregoing or in compliance with any terms of this Agreement, and (v) all
proceeds of the foregoing. This Agreement shall be deemed to be a security
agreement as understood under the UCC.
(b) The Borrower agrees to execute, and hereby authorizes the Lender
to file, one or more financing statements or continuation statements or
amendments thereto or assignments thereof in respect of the Lien created
pursuant to this Section 4.01 which may at any time be required or, in the
reasonable opinion of the Lender, be desirable, and to do so without the
signature of the Borrower where permitted by law.
ARTICLE V.
MISCELLANEOUS
ss. 5.01. Amendments, etc. (a) No amendment or waiver of any
provision of this Agreement or consent to any departure therefrom by a party
hereto shall be effective unless in a writing signed by the Lender and the
Borrower and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. No failure
on the part of the Lender or the Borrower to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
(b) The parties hereto agree to make any change, modification or
amendment to this Agreement as may be requested by Duff & Phelps Credit Rating
Co. or any other rating agency then rating the healthcare financing program of
the Lender, so long as any such change, modification or amendment does not
materially adversely affect the parties hereto.
ss. 5.02. Notices, etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which may
include facsimile communication) and shall be faxed or delivered, (i) to each
party hereto (and the Lender hereby agrees that notices to or for its benefit
may be delivered to the Program Manager and such delivery to the Program Manager
shall be deemed received by the Lender), at its address and facsimile number set
forth under its name on the signature pages hereof or at such other address and
facsimile number as shall be designated by such party in a Written Notice to the
other parties hereto, and (ii) to the Program Manager and the
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Master Servicer at the respective addresses and facsimile numbers set forth on
Schedule I attached hereto. Notices and communications by facsimile shall be
effective upon electronic confirmation of receipt by the addressee, and notices
and communications sent by other means shall be effective when received.
ss. 5.03. Assignability. (a) This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective permitted
successors and assigns.
(b) The Borrower may not assign its rights or obligations hereunder
or any interest herein without the prior written consent of the Lender.
ss. 5.04. Further Assurance. The Borrower shall, at its cost and
expense, upon the request of the Lender, duly execute and deliver, or cause to
be duly executed and delivered, to the Lender such further instruments and do
and cause to be done such further acts as may be necessary or proper in the
reasonable opinion of the Lender to carry out more effectively the provisions
and purposes of this Agreement.
ss. 5.05. Costs and Expenses; Collection Costs. (a) The Borrower
agrees to pay on demand (i) all reasonable non-legal costs and expenses in
connection with the preparation, execution and delivery of this Agreement; (ii)
the reasonable fees and out-of-pocket expenses of counsels for the Lender and
its Affiliates in connection with this transaction; and (iii) all reasonable
costs and expenses, if any (including reasonable counsel fees and expenses), of
the Lender and its Affiliates in connection with any waiver, modification,
supplement or amendment hereto, or the enforcement of this Agreement. The
Borrower further agrees to pay on the Initial Funding Date (and with respect to
costs and expenses incurred following the Initial Funding Date, within seven
days of demand therefor) (x) all reasonable costs and expenses incurred by the
Lender or its agent in connection with periodic audits of the Receivables, which
audits, other than after an Event of Default, shall occur no more frequently
than annually, and (y) all reasonable costs and expenses incurred by the Master
Servicer or the Program Manager to accommodate any significant coding or data
system changes made by the Borrower that would affect the transmission or
interpretation of data received through the interface.
(b) In the event that, after an Event of Default has occurred and is
continuing, the Lender shall retain an attorney or attorneys to collect,
enforce, protect, maintain, preserve or foreclose its interests with respect to
this Agreement, any other Documents, any Lender Debt, any Receivable or the Lien
on any Collateral or any other security for the Lender Debt or under any
instrument or document delivered pursuant to this Agreement, or in connection
with any Lender Debt, the Borrower shall pay all of the reasonable costs and
expenses of such collection, enforcement, protection, maintenance, preservation
or foreclosure, including reasonable attorneys' fees, which amounts shall be
part of the Lender Debt, and the Lender may take judgment for all such amounts.
The attorney's fees arising from such services, including those of any appellate
proceedings, and all expenses, costs, charges and other fees incurred by such
counsel in any way or with respect to or arising out of or in connection with or
relating to any of the events or actions described in this Section 5.05 shall be
payable by the Borrower to the Lender on demand (with
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interest accruing from the twentieth Business Day following the date of such
demand, and shall be additional obligations under this Agreement. Without
limiting the generality of the foregoing, such expenses, costs, charges and fees
may include: recording costs, appraisal costs, paralegal fees, costs and
expenses; accountants' fees, costs and expenses; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram charges;
telecopier charges; secretarial overtime charges; and expenses for travel,
lodging and food paid or incurred in connection with the performance of such
legal services, all of which shall be reasonable.
ss. 5.06. Confidentiality. (a) The Borrower and the Lender hereby
acknowledge that this Agreement and documents delivered hereunder or under the
RPTA (including, without limitation, any information relating to the Borrower,
the Lender or the Provider) contain confidential and proprietary information.
Unless otherwise required by applicable law, the Borrower and the Lender each
hereby agrees to maintain the confidentiality of this Agreement (and all drafts
and other documents delivered in connection therewith including, without
limitation, any information relating to the Borrower, the Lender or the Provider
delivered hereunder and/or under the RPTA) in communications with third parties
and otherwise and to take all reasonable actions to prevent the unauthorized use
or disclosure of and to protect the confidentiality of such confidential
information; provided, that, such confidential information may be disclosed to
(i) the Borrower's legal counsel, accountants and auditors, the Provider under
the RPTA, and the Borrower's and Provider's investors and creditors, and their
respective legal counsel, accountants and auditors, (ii) the Program Manager,
the Person then fulfilling the "Primary Servicer Responsibilities" under the
RPTA, each member of the Lender Group, investors in and creditors of the Lender,
appropriate rating agencies with respect to the Lender, and each of their
respective legal counsel and auditors, (iii) any Person, if such information
otherwise becomes available to such Person or publicly available through no
fault of any party governed by this Section 5.06, (iv) any Governmental Entity
requesting such information, and (v) any other Person with the written consent
of the other party, which consent shall not be unreasonably withheld.
(b) Each of the Borrower and the Lender understands and agrees that
the Borrower and the Lender may suffer irreparable harm if the Borrower breaches
its obligations under Section 5.06(a) herein and that monetary damages shall be
inadequate to compensate the Lender for such breach. Accordingly, each of the
Borrower and the Lender agrees that, in the event of a breach by the Borrower of
Section 5.06(a), the Lender, in addition and not in limitation of its rights and
remedies under law, shall be entitled to a temporary restraining order,
preliminary injunction and permanent injunction to prevent or restrain any such
breach.
(c) Lender hereby agrees to, and shall take all reasonable steps to
cause each member of the Lender Group to, comply with all applicable laws
regarding confidential patient/customer information it receives in connection
with the transactions described in this Agreement.
ss. 5.07. Term and Termination; Early Termination Fee. (a) The
obligations of the Lender under this Agreement shall continue in full force and
effect from the date hereof until the
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Maturity Date. Upon the payment in full of all Lender Debt, the Lender shall
take all actions and deliver all assignments, certificates, releases, notices
and other documents, at the Borrower's expense, as the Borrower may reasonably
request to effect such termination.
(b) The Borrower may terminate this Agreement at any time prior to
the Maturity Date upon (i) lapse of not less than five Business Days' prior
Written Notice (which shall be irrevocable) to the Lender of default of the
commitment by the Lender to make Revolving Advances pursuant to Article I hereof
and (ii) payment in full of all Lender Debt, including all applicable fees,
charges, premiums and costs, all as provided hereunder, and in such occurrence
of clauses (i) and (ii) the commitment hereunder shall be deemed to be
terminated.
(c) Upon the termination of this Agreement (for any reason other
than the default hereof by the Lender) prior to the Scheduled Maturity Date, the
Borrower shall pay to the Lender an early termination fee amount equal to 2.00%
of the Revolving Commitment then in effect.
(d) The termination of this Agreement shall not affect any rights of
the Lender or any obligations of the Borrower arising on or prior to the
effective date of such termination, and the provisions hereof shall continue to
be fully operative until all Lender Debt incurred on or prior to such
termination has been paid and performed in full.
(e) Upon the giving of notice of acceleration after the occurrence
of an Event of Default under this Agreement, all Lender Debt shall be due and
payable on the date of the Event of Default specified in such notice. Upon the
(i) the termination of all commitments and obligations of the Lender, and (ii)
the indefeasible payment in full of all Lender Debt, the Lender shall, at the
Borrower's request and sole cost and expense, execute and deliver to the
Borrower such documents as the Borrower shall reasonably request to evidence
such termination.
(f) The Liens and rights granted to the Lender hereunder shall
continue in full force and effect, notwithstanding the termination of this
Agreement, until all of the Lender Debt has been indefeasibly paid in full in
cash.
(g) All indemnities representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof unless
otherwise provided.
(h) Notwithstanding the foregoing, if after receipt of any payment
of all or any part of the Lender Debt, the Lender is for any reason compelled to
surrender such payment to any Person or entity because such payment is
determined to be void or voidable as a preference, an impermissible setoff, a
diversion of trust funds or for any other reason, this Agreement shall continue
in full force (except that the Revolving Commitment of the Lender shall have
been terminated), and the Borrower shall be liable to, and shall indemnify and
hold the Lender harmless for the amount of such payment surrendered until the
Lender shall have been finally and irrevocably paid in full. The provisions of
the foregoing sentence shall be and remain effective notwithstanding any
contrary action which may have been taken by the Lender in reliance upon such
payment, and any such
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contrary action so taken shall be without prejudice to the Lender's rights under
this Agreement and shall be deemed to have been conditioned upon such payment
having become final and irrevocable.
ss. 5.08. No Liability of Lender. (a) Neither this Agreement nor any
document executed in connection herewith shall constitute an assumption by the
Lender of any obligation to any Obligor or any patient or customer of the
Provider.
(b) Notwithstanding any other provision herein, no recourse under
any obligation, covenant, agreement or instrument of the Lender contained herein
or with respect hereto shall be had against any Related Person whether arising
by breach of contract, or otherwise at law or in equity (including any claim in
tort), whether express or implied, it being understood that the agreements and
other obligations of the Lender herein and with respect hereto are solely its
corporate obligations; provided, however, nothing herein above shall operate as
a release of any liability which may arise as a result of such Related Person's
gross negligence or willful misconduct. The provisions of this Section 5.08
shall survive the termination of this Agreement.
ss. 5.09. Entire Agreement; Severability. (a) This Agreement,
including all exhibits hereto, embodies the entire agreement and understanding
of the parties concerning the subject matter contained herein. This Agreement
supersedes any and all prior agreements and understandings between the parties,
whether written or oral.
(b) If any provision of this Agreement shall be declared invalid or
unenforceable, the parties hereto agree that the remaining provisions of this
Agreement shall continue in full force and effect.
ss. 5.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
ss. 5.11. WAIVER OF JURY TRIAL, JURISDICTION AND VENUE. THE PARTIES
HERETO HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY IN THE EVENT OF ANY LITIGATION
WITH RESPECT TO ANY MATTER RELATED TO THIS AGREEMENT, AND HEREBY IRREVOCABLY
CONSENT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK
COUNTY, NEW YORK CITY, NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT. IN ANY SUCH LITIGATION, THE
PARTIES HERETO WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS
AND AGREE THAT SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL
DIRECTED TO THE PARTIES HERETO AT THEIR ADDRESSES SET FORTH ON THE SIGNATURE
PAGE HEREOF OR SUCH OTHER ADDRESS AS A PARTY MAY NOTIFY THE OTHER PARTY IN
WRITING FROM TIME TO TIME. THE PARTIES HERETO SHALL APPEAR IN ANSWER TO SUCH
SUMMONS, COMPLAINT OR OTHER PROCESS WITHIN THE
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TIME PRESCRIBED BY LAW, FAILING WHICH THE PARTY FAILING TO SO APPEAR SHALL BE
DEEMED IN DEFAULT AND JUDGMENT MAY BE ENTERED BY THE PARTY PROSECUTING THE CLAIM
FOR THE AMOUNT OF THE CLAIM AND OTHER RELIEF REQUESTED THEREIN.
ss. 5.12. Execution in Counterparts. This Agreement may be executed
in counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
ss. 5.13. No Proceedings. The Borrower hereby agrees that it will
not institute against the Lender any proceeding of the type referred to in
clause (i) of Exhibit V so long as any senior indebtedness issued by the Lender
shall be outstanding or there shall not have elapsed one year plus one day since
the last day on which any such senior indebtedness shall have been outstanding.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER: BIO-CYPHER FUNDING CORP.
By: __________________________________
Name:
Title:
Address: 3301 C Street, Suite 100E
Sacramento, CA 95816
Attention:
Facsimile Number:
LENDER: DAIWA HEALTHCO-2 LLC
By: __________________________________
Name:
Title:
c/o Lord Securities Corporation
Two Wall Street
New York, NY 10005
Attention: Richard L. Taiano/
Dwight Jenkins
Facsimile Number: (212) 346-9012
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EXHIBIT I.
DEFINITIONS
As used in the Agreement (including its Exhibits and Schedules), the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accounts" means any and all accounts (including, without
limitation, all Receivables), general intangibles and other obligations owing or
to be owing to the Borrower for the payment of money arising out of any sale of
medical products or rendition of medical services in the ordinary course of
business by the Provider (including, without limitation, under any tradenames of
the Provider), whether now existing or hereafter arising, including all rights
to reimbursement under any agreements with and payments from Obligors,
customers, patients or other Persons and all proceeds of any of the foregoing.
"Accounts Receivable Turnover" means, at any date, for the 12-month
period then most recently ended, the product obtained by multiplying (a) the
quotient obtained by dividing (i) aggregate Receivables of the Provider as of
such date, by (ii) aggregate revenue of the Provider for the 12-month period
then ended, by (b) 365 days.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by or is under common control
with such Person or is a director or officer of such 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.
"Agreement" has the meaning set forth in the preamble hereto.
"A/R Fee" means the account receivable tracking fee, due on the
first Business Day of each Month, in an amount equal to:
AORA x TD/360 x ARP
where:
AORA = The average outstanding amount of the Revolving Loan for
the prior Month, calculated as the arithmetic average of
all daily balances
TD = The actual amount of days in such prior Month
ARP = The applicable A/R Fee Percentage, determined by
reference to the AORA for the prior Month, as follows:
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AORA for A/R Fee
the Prior Month Percentage
- --------------- ----------
less than or equal to $3,000,000 0.60%
greater than $3,00,000 but less than or equal to $5,000,000 0.55%
greater than $5,000,000 but less than or equal to $7,000,000 0.50%
greater than $7,000,000 but less than or equal to $10,000,000 0.45%
greater than $10,000,000 0.40%
provided that if this Agreement shall be terminated on a day other than the
first Business Day of a Month, such A/R Fee for such period from the last day of
the prior Month to the date of termination shall be calculated as above by
substituting such final period for the term "Month" hereinabove.
"Authorized Representative" shall mean each Person designated from
time to time, as appropriate, in a Written Notice by the Borrower to the Lender
for the purposes of giving notices of borrowing, conversion or renewal of
Revolving Advances, which designation shall continue in force and effect until
terminated in a Written Notice to the Lender.
"Borrower" has the meaning set forth in the preamble hereto.
"Borrower's Certificate" has the meaning set forth in Section 1.03.
"Borrowing Base" shall mean an amount equal to 85% of the Expected
Net Value of Eligible Receivables as of such time as determined by reference to
and as set forth in the most recent Borrowing Base Certificate delivered to the
Lender by the Borrower as of such time pursuant to Exhibit IV, Clause (j)(i).
"Borrowing Base Certificate" shall mean a certificate (which may be
sent by Transmission), substantially in the form set forth in Exhibit VII-A
hereto, which shall provide the most recently available information (including
updated information) with respect to the Eligible Receivables of the Borrower
(segregated by the classes set forth in the definition of "Net Value Factor")
that is set forth in the general trial balance of the Provider, in form and
substance satisfactory to the Lender and the Master Servicer.
"Borrowing Base Deficiency" shall mean, as of any date, the positive
difference, if any, between (x) the outstanding principal amount of the
Revolving Loan, minus (y) the Borrowing Base indicated on the most recent
Borrowing Base Certificate.
"Borrowing Limit" has the meaning set forth in Section 1.02.
"Business Day" means any day on which banks are not authorized or
required to close in New York City, New York or Sacramento, California.
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<PAGE> 21
"CHAMPUS" means the Civilian Health and Medical Program of the
Uniformed Service, a program of medical benefits covering former and active
members of the uniformed services and certain of their dependents, financed and
administered by the United States Departments of Defense, Health and Human
Services and Transportation and established pursuant to 10 USC ss.ss. 1071-1106,
and all regulations promulgated thereunder including without limitation (a) all
federal statutes (whether set forth in 10 USC ss.ss. 1071-1106 or elsewhere)
affecting CHAMPUS; and (b) all rules, regulations (including 32 CFR 199),
manuals, orders and administrative, reimbursement and other guidelines of all
Governmental Entities (including, without limitation, the Department of Health
and Human Services, the Department of Defense, the Department of Transportation,
the Assistant Secretary of Defense (Health Affairs), and the Office of CHAMPUS,
or any Person or entity succeeding to the functions of any of the foregoing)
promulgated pursuant to or in connection with any of the foregoing (whether or
not having the force of law) in each case as may be amended, supplemented or
otherwise modified from time to time.
"Claims" has the meaning set forth in Section 1.09(b).
"Collateral Account Agreement" means that certain Collateral Account
Agreement to be established in connection with the Special Reserve Account in
form and substance satisfactory to the Borrower and the Lender, as such
agreement may be amended, modified or supplemented from time to time in
accordance with its terms.
"Collections" means all cash collections, wire transfers, electronic
funds transfers and other cash proceeds of Accounts deposited in or transferred
to the Lender Lockbox Account, including, without limitation, all cash proceeds
thereof.
"Credit and Collection Policy" means those receivables credit and
collection policies and practices of the Borrower in effect on the date of the
Agreement and set forth in Schedule II hereto, as modified from time to time
with the consent of the Lender.
"Debt" of any Person means (without duplication): (i) all
obligations of such party for borrowed money, (ii) all obligations of such party
evidenced by bonds, notes, debentures, or other similar instruments, (iii) all
obligations of such party to pay the deferred purchase price of property or
services (other than trade payables in the ordinary course of business), (iv)
all "capital leases" (as defined by GAAP) of such party, (v) all Debt of others
directly or indirectly guaranteed (which term shall not include endorsements in
the ordinary course of business) by such party, (vi) all obligations secured by
a Lien existing on property owned by such party, whether or not the obligations
secured thereby have been assumed by such party or are non-recourse to the
credit of such party (but only to the extent of the value of such property), and
(vii) all reimbursement obligations of such party (whether contingent or
otherwise) in respect of letters of credit, bankers' acceptances and similar
instruments.
"Default" shall mean an event, act or condition which with the
giving of notice or the lapse of time, or both, would constitute an Event of
Default.
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"Defaulted Receivable" shall mean a Receivable (i) as to which the
Obligor thereof or any other Person obligated thereon has taken any action, or
suffered any event to occur, of the type described in paragraph (i) of Exhibit
V, or (ii) which, consistent with the Credit and Collection Policy, would be
written off the Provider's books as uncollectible.
"Delinquency Ratio" has the meaning set forth in the RPTA.
"Delinquent Receivable" shall mean a Receivable (a) that has not
been paid in full on or following the 180th day following the invoicing thereof,
or (b) that is a Denied Receivable.
"Denied Receivable" shall mean any Receivable to which any related
representations or warranties have been discovered at any time to have been
breached.
"Depositary Agreement" means that certain Depositary Account
Agreement, dated the date hereof, among the Provider, the Borrower, the Lender,
and the Lockbox Bank, in substantially the form attached hereto as Exhibit VIII,
as such agreement may be amended, modified or supplemented from time to time in
accordance with its terms.
"Distribution" shall mean any dividend payment or other distribution
of assets, properties, cash, rights, obligations or securities on account of any
capital interest in the Borrower, or return any capital to its shareholders as
such, or purchase, retire, defease, redeem or otherwise acquire for value or
make any payment in respect of any shares of any class of capital interests in
the Borrower or any warrants, rights or options to acquire any such interests,
now or hereafter outstanding.
"Documents" shall mean this Agreement, the RPTA, the Depositary
Agreement, each Borrower's Certificate, each Borrowing Base Certificate, and
each other document or instrument now or hereafter executed and delivered to the
Lender by or on behalf of the Borrower pursuant to or in connection herewith or
therewith.
"Eligible Investments" shall mean one or more of the following:
(a) direct obligations of, and obligations fully guaranteed
by, the United States of America, or any agency or instrumentality of the
United States of America the obligations of which are backed by the full
faith and credit of the United States of America, that are non-callable,
that have a fixed dollar amount of principal due at maturity that cannot
vary or change, and, if rated by Standard & Poor's, do not have an 'r'
highlighter affixed to its rating; or
(b) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States of
America or any State thereof which have a long-term unsecured debt rating
in the highest rating category of at least two rating agencies; and, in
the case of Standard & Poor's rating, that such securities do not have an
'r' highlighter affixed to its rating; or
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<PAGE> 23
(c) commercial paper with (i) an original maturity of less
than 270 days, (ii) a rating in the highest rating category of at least
two rating agencies, and (iii) if rated by Standard & Poor's, no 'r'
highlighter affixed to its rating; or
(d) certificates of deposit of, banker's acceptances issued
by, or federal funds sold by, any depository institution or trust company
(including any bank incorporated under the laws of the United States of
America or any State thereof and subject to supervision and examination by
federal and/or state authorities) so long as at the time of such
investment or contractual commitment providing for such investment such
depository institution or trust company has a short-term unsecured debt
rating in the highest rating category (without regard to modifiers such as
"+" or "-") of at least two rating agencies and provided, that each such
investment has an original maturity of less than 365 days, and provided,
further that in the case of a Standard & Poor's rating, that such
investment does not have an 'r' highlighter affixed to its rating; or
(e) repurchase agreements governing direct general obligations
of the United States of America having a maturity of not more than 60 days
from the date of acquisition with an obligor having the highest rating
category of at least two rating agencies at the time of such investment
provided, that in the case of a Standard & Poor's rating, that such
investment does not have an 'r' highlighter affixed to its rating; or
(f) shares of money market funds (i) rated in the highest
rating category by at least two rating agencies or (ii) the assets of
which are invested solely in investments of the type specified in clauses
(a), (b), (c) or (d) of the definition of Eligible Investments.
"Eligible Receivables" means Receivables that satisfy the
Eligibility Criteria.
"Eligibility Criteria" means the criteria and basis for determining
whether a Receivable shall be deemed by the Lender Group to qualify as an
Eligible Receivable, all as set forth in Exhibit VI hereto, as such Eligibility
Criteria may be modified from time to time by the Lender in its good faith
discretion upon Written Notice to and after consultation with the Borrower.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of ss. 3(3) of ERISA maintained by the Provider, the Borrower, any of
their respective ERISA Affiliate, or with respect to which any of them have any
liability.
"EOB" means the explanation of benefit from an Obligor that
identifies the services rendered on account of the Receivable specified therein.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means any entity which is under common control
with the Borrower within the meaning of ERISA or which is treated as a single
employer with the Borrower under the Internal Revenue Code of 1986, as amended.
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<PAGE> 24
"Event of Default" means any of the events specified in Exhibit V
hereto.
"Event of Termination" shall have the meaning set forth in the RPTA.
"Excluded Claims" has the meaning set forth in Section 1.09(b).
"Excluded Taxes" shall mean taxes upon or determined by reference to
the Lender's net income imposed by the jurisdiction in which such Lender is
organized or has its principal or registered office.
"Expected Net Value" means, with respect to any Eligible Receivable,
the gross unpaid amount of such Receivable on date of creation thereof, times
the Net Value Factor.
"Fee and Interest Shortfall" as of any Funding Date, shall mean the
amount, if any, of A/R Fee or interest that is due and payable and has not
otherwise been paid in full by the Borrower.
"Funding Date" means Tuesday of each week after the Initial Funding
Date, or if such day is not a Business Day, the next succeeding Business Day.
"GAAP" means generally accepted accounting principles in the United
States of America, applied on a consistent basis as set forth in Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards Board
and/or the rules and regulations of the Securities and Exchange Commission
and/or their respective successors and which are applicable in the circumstances
as of the date in question.
"Governmental Entity" means the United States of America, any state,
any political subdivision of a state and any agency or instrumentality of the
United States of America or any state or political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government. Payments from Governmental Entities
shall be deemed to include payments governed under the Social Security Act (42
U.S.C. ss.ss. 1395 et seq.), including payments under Medicare, Medicaid and
CHAMPUS, and payments administered or regulated by HCFA.
"HCFA" means the Health Care Financing Administration of the United
States Department of Health and Human Services.
"Indemnified Party" has the meaning set forth in Section 1.09(b).
"Initial Funding Date" means the date of the initial Revolving
Advance in respect of Receivables hereunder.
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"Insurer" means any Person which in the ordinary course of its
business or activities agrees to pay for healthcare goods and services received
by individuals, including commercial insurance companies, nonprofit insurance
companies (such as Blue Cross, Blue Shield entities), employers or unions which
self-insure for employee or member health insurance, prepaid health care
organizations, preferred provider organizations and health maintenance
organizations. "Insurer" includes insurance companies issuing health, personal
injury or other types of insurance but does not include any individual
guarantors.
"Interest Payment Date" shall mean the last day of each Month, or if
such day is not a Business Day, the next succeeding Business Day.
"Last Service Date " means, with respect to any Eligible Receivable,
the date set forth on the related invoice or statement as the most recent date
on which services or merchandise were provided by the Provider to the related
patient or customer.
"Lender" has the meaning set forth in the preamble hereto.
"Lender Debt" means and includes any and all amounts due, whether
now existing or hereafter arising, under the Agreement, including, without
limitation, any and all principal, interest, penalties, fees, charges, premiums,
indemnities and costs owed or owing to the Lender, the Program Manager or the
Master Servicer by the Borrower, the Provider, arising under or in connection
with this Agreement, the RPTA or the Depositary Agreement, in each instance, and
all interest and other charges thereon, including, without limitation,
post-petition interest whether or not such interest is an allowable claim in a
bankruptcy.
"Lender Group" means (i) the Lender, the Program Manager and the
Master Servicer, and (ii) the Lender's agents and delegates identified from time
to time to effectuate this Agreement.
"Lender Lockbox" means the lockbox located at the address set forth
on Schedule IV to receive checks and EOB's with respect to Receivables payable
by Insurers.
"Lender Lockbox Account" means the account at the Lockbox Bank as
set forth on Schedule IV as associated with the Lender Lockbox and established
by the Borrower to deposit Collections, including Collections received in the
Lender Lockbox and Collections received by wire transfer directly from Insurers,
all as more fully set forth in the Depositary Agreement.
"Lender Reserve" has the meaning set forth in Section 2.02.
"LIBO Rate" means the rate established by the Program Manager from
time to time based on an annualized 30-day interest rate (calculated on the
basis of actual days elapsed over a 360-day year) equal to the offered rate that
appears on page 3751 of the Telerate Service for the Bank of Tokyo for U.S.
dollar deposits of amounts and in funds comparable to the principal amount of
the Revolving Loan.
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"Lien" means any lien, mortgage, security interest, tax lien,
pledge, hypothecation, assignment, preference, priority, other charge or
encumbrance, or any other type of preferential arrangement of any kind or nature
whatsoever by or with any Person (including, without limitation, any conditional
sale or title retention agreement), whether arising by contract, operation of
law, or otherwise.
"Lockbox Bank" means Union Bank of California, N.A., as lockbox bank
under the Depositary Agreement.
"Loss-to-Liquidation Ratio" means, as of the last Business Day of
each Month, a percentage equal to:
DR/C
where:
DR = The Expected Net Value of all Eligible Receivables
which became Defaulted Receivables in the four week
period immediately prior to the date of calculation.
C = Collections on such Eligible Receivables in the four
week period immediately prior to the date of
calculation.
"Master Servicer" means RJE Data Processing, Inc., and any other
Person then identified by the Lender to the Borrower as being authorized to
administer and service Receivables.
"Maturity Date" means the earlier of (a) the Scheduled Maturity
Date, and (b) the occurrence of an Event of Default if so declared by the Lender
pursuant to Section 3.02 unless deemed to have occurred automatically.
"Material Adverse Effect" means any event, condition, change or
effect that (a) has a materially adverse effect on the business, operations or
financial condition of (i) the Provider on a consolidated basis, (ii) the
Borrower, or (iii) the Provider, (b) materially impairs the ability of the
Borrower to perform its obligations under this Agreement, (c) materially impairs
the ability of the Provider or the Borrower to perform their respective
obligations under the RPTA, or (d) materially impairs the validity or
enforceability of, or materially impairs the rights, remedies or benefits
available to the Lender under this Agreement or (as assignee of the Borrower)
under the RPTA.
"Maximum Permissible Rate" has the meaning set forth in Section
1.11(a).
"Month" means a calendar month.
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"Multiemployer Plan" means a plan, within the meaning of ss. 3(37)
of ERISA, as to which the Borrower or any ERISA Affiliate contributed or was
required to contribute within the preceding five (5) years.
"Net Income" means, for any period, for any Person, the net income
(loss) of such Person for such period determined in accordance with GAAP.
"Net Value Factor" means, initially, as follows:
Obligor Net Value Factor
------- ----------------
Blue Shield 10%
Client 60%
Insurers/HMO's 20%
MediCal 15%
Medicare 20%
Patient 25%
as such percentage may be adjusted, upwards or downwards with Written Notice to
the Borrower, in the good faith discretion of the Lender but in consultation
with the Borrower and the Provider, based on historical actual final collections
received on the Receivables within the past 180 days. "Client", as used herein,
shall mean any third party who provides testing or laboratory services, such as
hospitals and doctors' offices.
"Non-Utilization Fee" has the meaning set forth in Section 1.05(c).
"Notice" shall have the meaning set forth in the RPTA.
"Obligor" means the Person responsible for the payment of all or any
portion of a Receivable.
"Other Corporations" means the Provider and each of its direct and
indirect parents or subsidiaries other than the Borrower.
"Other Taxes" has the meaning set forth in Section 1.08.
"Overnight Rate" means the interest rate for overnight funds as set
by the Lockbox Bank from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
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<PAGE> 28
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, limited liability company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereto
"Private Payor" means a Person other than an Insurer or Governmental
Entity.
"Program Manager" means (i) Daiwa Securities America Inc. or (ii)
any other Person then identified by the Lender to the Borrower as being
authorized to provide administrative services with respect to the Lender and the
Lender's finance, funding and collection of healthcare receivables.
"Property" means property of all kinds, real, personal or mixed,
tangible or intangible (including, without limitation, all rights relating
thereto), whether owned or acquired on or after the date of this Agreement.
"Provider" means Physicians Clinical Laboratory, Inc., together with
its Affiliates, corporate successors and permitted assigns.
"Provider Lockbox" means the lockbox set forth on Schedule IV hereto
to receive checks and EOB's with respect to Receivables payable by Governmental
Entities.
"Provider Lockbox Account" means the account set forth on Schedule
IV hereto in the name of the Provider and associated with the Provider Lockbox
established and controlled by the Provider to deposit Collections, including
Collections received in the Provider Lockbox and Collections received by wire
transfer directly from Governmental Entities, all as more fully set forth in the
Depositary Agreement.
"Receivable Information" has the meaning set forth in the RPTA.
"Receivables" means the third-party reimbursable or the third-party
directly payable portion of healthcare accounts receivable or Self-Pay, owing to
the Borrower, arising out of the sale of medical products or the rendition of
medical services by the Provider, including all rights to reimbursement under
any agreements with and payments from Obligors, together with, to the maximum
extent permitted by law, all accounts and general intangibles related thereto,
all rights, remedies, guaranties, security interests and Liens in respect of the
foregoing, all books, records and other Property evidencing or related to the
foregoing and all proceeds of any of the foregoing.
"Related Person" means any incorporator, stockholder, Affiliate
(other than the Program Manager), agent, attorney, officer, director, member,
manager, employee or partner of the Lender or its stockholders.
"Reserve Requirement" means, during any Month, a minimum amount
equal to the aggregate amount of A/R Fees and interest reasonably projected by
the Program Manager to be due and payable for such Month and if the "days sales
outstanding" as historically determined exceeds
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<PAGE> 29
thirty days, then such amount to be deposited as the Reserve Requirement shall
be added to as follows:
days sales outstanding incremental amount
---------------------- ------------------
31-60 one Month's projected A/R Fees and interest
61-90 two Months' projected A/R Fees and interest
91-120 three Months' projected A/R Fees and interest
121-150 four Months' projected A/R Fees and interest
151-180 five Months' projected A/R Fees and interest
"Revolving Advance" has the meaning set forth in Section 1.01(a).
"Revolving Commitment" has the meaning set forth in Section 1.02.
"Revolving Loan" has the meaning set forth in Section 1.01(a).
"RPTA" means that certain Healthcare Receivables Purchase and
Transfer Agreement, dated as of the date of this Agreement, between the Provider
and the Borrower, as such agreement may be amended, modified or supplemented
from time to time in accordance with the terms hereof and thereof.
"Scheduled Maturity Date" means the date 24 months after the Initial
Funding Date.
"Self-Pay" means a healthcare account receivable for which a patient
or customer of the Provider is directly and primarily liable to pay.
"Servicer Termination Event" shall have the meaning set forth in the
RPTA.
"Special Reserve Account" means an account to be established at the
Lockbox Bank to provide a cash reserve with respect to certain payments required
to be made by the Provider to the Internal Revenue Service, all in the manner
required pursuant to the RPTA and pursuant to the Collateral Account Agreement.
"Special Reserve Requirement" shall have the meaning set forth in
the RPTA.
"Tangible Net Worth" with respect to the Borrower, means, at any
time, the excess of (i) the Expected Net Value of all Receivables owned by the
Borrower and not financed by the Lender, plus cash, plus investments, plus
amounts which are owing from the Lender to the Borrower minus (ii) the sum of
all accrued unpaid monetary obligations and accrued unpaid fees and expenses
payable hereunder or otherwise owed by the Borrower.
"Transmission" means, upon establishment of computer interface
between the Borrower and the Master Servicer in accordance with the
specifications established by the Master
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<PAGE> 30
Servicer, the transmission of Receivable Information through computer interface
to the Master Servicer, and prior to such time (not to exceed 60 days from the
Initial Funding Date), by facsimile or overnight courier, all in a manner
satisfactory to the Master Servicer.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the specified jurisdiction.
"Written Notice" and "in writing" shall mean any form of written
communication or a communication by means of telex, telecopier device, telegraph
or cable.
Other Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. All terms used in Article 9 of the
UCC in the State of New York, and not specifically defined herein, are used
herein as defined in such Article 9.
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<PAGE> 31
EXHIBIT II.
CONDITIONS OF REVOLVING ADVANCES
1. Conditions Precedent on Initial Funding Date. The making of the
Revolving Advance on the Initial Funding Date is subject to the conditions
precedent that the Lender shall have received on or before the Initial Funding
Date the following, each (unless otherwise indicated) dated such date, in form
and substance satisfactory to the Lender:
(a) A certificate issued by the Secretary of State of the State of
Delaware, dated as of a recent date, as to the legal existence and good standing
of the Borrower (which certificate may be dated not more than 20 days prior to
the Initial Funding Date) or an opinion of counsel for the Borrower to that
effect.
(b) Certified copies of the Certificate of Incorporation and By-laws
of the Borrower and all amendments thereto, certified copies of resolutions of
the Board of Directors of the Borrower approving this Agreement and certified
copies of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement.
(c) A certificate of the Secretary or Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign this Agreement and the other documents to be
delivered by it hereunder.
(d) A copy of the opening balance sheet of the Borrower as at the
Initial Funding Date, certified by the chief financial officer of the Borrower
and by the Chief Executive Officer as to the accuracy thereof.
(e) Acknowledgment or time-stamped receipt copies of proper
financing statements (showing the Borrower as debtor and the Lender as secured
party) duly filed on or before the Initial Funding Date under the UCC of all
jurisdictions that the Lender may deem necessary or reasonably desirable in
order to perfect the security interests contemplated by the Agreement.
(f) Releases of, and acknowledgment copies of proper termination
statements (Form UCC-3), if any, necessary to evidence the release of all
security interests, ownership and other rights of any Person previously granted
by Borrower in its Accounts.
(g) A copy of each of the Provider's existing forms of customer
consents which were signed by each customer for which the currently existing
Receivables were created, as well as a copy of each new customer consent form to
be signed by each customer for which a Receivable will be created after the
Initial Funding Date, which consent forms authorize certain demographic and
medical information with respect to such customer to be disclosed by the
Provider to its servicing agents and by such servicing agents to any third party
obligors thereon, certified by a Secretary or Assistant Secretary of the
Borrower as being true, complete and correct.
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<PAGE> 32
(h) A favorable opinion of Jones, Day, Reavis & Pogue, substantially
in the form attached hereto as Exhibit IX-A.
(i) A favorable opinion of Jones, Day, Reavis & Pogue, counsel for
the Borrower and the Provider, substantially in the form attached hereto as
Exhibit IX-B.
(j) The Assignment of Healthcare Receivables Purchase and Transfer
Agreement as Collateral Security with respect to the RPTA and assignments of all
other documents, lockboxes and lockbox accounts with respect to the RPTA, duly
executed by the Borrower and acknowledged by the Provider.
(k) Originally executed copies of the RPTA, all other documentation
required to be delivered with respect to this Agreement and the RPTA, all in
form and substance satisfactory to the Lender, which agreements shall be in full
force and effect and enforceable in accordance with their respective terms.
(l) Evidence that all of the conditions precedent with respect to
the Provider to the initial purchase from the Provider under the RPTA have been
satisfied or waived.
(m) A duly executed Depositary Agreement, together with evidence
satisfactory to the Lender that the Provider Lockbox and the Provider Lockbox
Account have been established.
(n) Payment of an advisory fee of $250,000 to Daiwa Securities
America Inc.
(o) Payment of all reasonable attorneys' fees plus reasonable
disbursements incurred by the Lender Group.
(p) Affirmation by Duff & Phelps Credit Rating Co. or an equivalent
rating agency acceptable to the Lender of the transactions contemplated
hereunder with a minimum rating of AA/BBB-.
(q) Evidence that the capitalization of the Borrower is satisfactory
to the Lender.
(r) Evidence that all monies due to MediCal have been paid in full.
(s) Evidence that the Medicare Reserve Requirement has been funded
in full and that any other reserve required pursuant to Section 5.11 of the RPTA
has been funded in full.
(t) Evidence from the Master Servicer that, in its sole judgment,
all computer linkups and interfaces with the Provider are fully operational to
the satisfaction of the Master Servicer.
2. Conditions Precedent on All Funding Dates. Each Revolving Advance
on a Funding Date (including the Initial Funding Date) shall be subject to the
further conditions precedent
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<PAGE> 33
that the Borrower and the Lender shall have agreed upon the terms of such
Revolving Advance and also that:
(a) the Borrower shall have delivered to the Lender, at least two
Business Days prior to such Funding Date, in form and substance satisfactory to
the Lender a completed Borrower's Certificate and a Borrowing Base Certificate,
together with such additional information as may reasonably be requested by the
Lender or the Master Servicer;
(b) on such Funding Date the following statements shall be true (and
acceptance of the proceeds of such Revolving Advance shall be deemed a
representation and warranty by the Borrower that such statements are then true):
(i) the representations and warranties contained in Exhibits
III and VII are correct on and as of the date of such Revolving Advance as
though made on and as of such date other than such representations and
warranties that, by their terms, refer only to a specific date other than
such Funding Date, and
(ii) no event has occurred and is continuing, or would result
from such Revolving Advance or any actions connected therewith, that
constitutes a Default or an Event of Default;
(c) the Lender shall have received such other approvals, opinions or
documents as it may reasonably request.
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<PAGE> 34
EXHIBIT III.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is duly
qualified to do business, and is in good standing, in every jurisdiction where
the nature of its business requires it to be so qualified.
(b) The execution, delivery and performance by the Borrower of the
Agreement and the other documents to be delivered by it thereunder, (i) are
within the Borrower's powers, (ii) have been duly authorized by all necessary
organizational action, (iii) do not contravene (1) the Borrower's Certificate of
Incorporation or its By-laws, (2) any law, rule or regulation applicable to the
Borrower, (3) any contractual restriction binding on or affecting the Borrower
or its Property, or (4) any order, writ, judgment, award, injunction or decree
binding on or affecting the Borrower or its Property, and (iv) do not result in
or require the creation of any Lien upon or with respect to any of its
Properties, other than the security interest created by the Agreement. The
Agreement has been duly executed and delivered by the Borrower. The Borrower has
previously furnished to the Lender a correct and complete copy of the Borrower's
Certificate of Incorporation and By-laws including all amendments thereto.
(c) No authorization or approval or other action by, and no notice
to or filing with, any Governmental Entity is required for the due execution,
delivery and performance by the Borrower of the Agreement or any other document
to be delivered thereunder.
(d) The Agreement constitutes the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, except as limited by bankruptcy, insolvency, moratorium, fraudulent
conveyance or other laws relating to the enforcement of creditors' rights
generally and general principles of equity (regardless of whether enforcement is
sought at equity or law).
(e) The Borrower has all power and authority, and has all permits,
licenses, accreditations, certifications, authorizations, approvals, consents
and agreements of all Insurers, Governmental Entities, accreditation agencies
and any other Person necessary or required for the Borrower (i) to own the
assets (including Receivables) that it now owns, (ii) to carry on its business
as now conducted, (iii) to execute, deliver and perform the Agreement and the
RPTA, and (iv) to receive payments from the Obligors in the manner contemplated
in the Agreement and the RPTA.
(f) Except as disclosed in Schedule III, the Provider has not been
notified by any Insurer, Governmental Entity or instrumentality, accreditation
agency or any other person, during the immediately preceding 12 month period,
that such party has rescinded or not renewed, or is reasonably likely to rescind
or not renew, any such permit, license, accreditation, certification,
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<PAGE> 35
authorization, approval, consent or agreement granted by it to the Provider or
to which it and the Provider are parties.
(g) As of the Initial Funding Date, all conditions precedent set
forth in Exhibit II have been fulfilled or waived in writing by the Lender, and
as of each Funding Date, the conditions precedent set forth in paragraph 2 of
such Exhibit II have been fulfilled or waived in writing by the Lender.
(h) The opening balance sheet of the Borrower, copies of which have
been furnished to the Lender, fairly presents the financial condition of the
Borrower as of the date thereof in accordance with GAAP.
(i) The RPTA is in full force and effect and no Event of Termination
or Servicer Termination Event (without regard to waivers granted or sought) is
continuing thereunder.
(j) There is no pending or, to the Borrower's knowledge, threatened
action, proceeding, injunction, writ or restraining order affecting the Borrower
or the Provider before any court, Governmental Entity or arbitrator which could
reasonably be expected to result in a Material Adverse Effect, or which purports
to affect the legality, validity or enforceability of the Agreement, the RPTA or
any other document executed in connection herewith or therewith, and neither the
Borrower nor the Provider is currently the subject of, or has any present
intention of commencing, an insolvency proceeding or petition in bankruptcy.
(k) The Borrower is the legal and beneficial owner of the
Receivables free and clear of any Lien; the Lender shall acquire a valid
security interest in the Receivables and in the Collections with respect thereto
subject to no third-party claims of interest thereon. No effective financing
statement or other instrument similar in effect covering any Receivables or the
Collections with respect thereto is on file in any recording office, except
those being terminated on or before the Initial Funding Date and those filed in
favor of the Borrower relating to the purchase of the Receivables under the RPTA
and those in favor of the Lender relating to the Agreement, and no competing
notice or notice inconsistent with the transactions contemplated in the
Agreement has been sent to any Obligor since November 8, 1996.
(l) All Receivable Information, information provided in the
application for the program effectuated by the Agreement, and each other
document, report and Transmission provided by the Borrower to the Lender Group
is or shall be accurate in all material respects as of its date and as of the
date so furnished.
(m) Except as disclosed on Schedule III hereto, the principal place
of business and chief executive office of the Borrower and the office where the
Borrower keeps its records concerning the Receivables are located at the address
referred to on the signature page of the Agreement and there have been no other
such locations for the four immediately prior months.
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<PAGE> 36
(n) The provisions of the Agreement create, on the Initial Funding
Date, legal and valid Liens in all of the Borrower's Receivables in the Lender's
favor and when all proper filings and other actions necessary to perfect such
Liens have been completed, will constitute a perfected and continuing Lien on
all of the Borrower's Receivables, having priority over all other Liens on such
Receivables of the Borrower, enforceable against the Borrower and all third
parties.
(o) The Borrower has not changed its principal place of business or
chief executive office in the last five years except as disclosed on Schedule
III hereto.
(p) The exact name of the Borrower is as set forth on the signature
page of the Agreement, and except as notified in writing to the Lender, the
Borrower has not changed its name in the last 12 months, and, except as notified
in writing to the Lender, the Borrower did not use, nor does the Borrower now
use, any fictitious or trade name.
(q) With respect to the Borrower or the Provider, since the Funding
Date prior to the making of this representation, there has occurred no event
which has or could reasonably be expected to have a Material Adverse Effect.
(r) Neither the Borrower nor the Provider is in violation under any
applicable statute, rule, order, decree or regulation of any court, arbitrator
or governmental body or agency having jurisdiction over the Borrower or the
Provider which has, or could reasonably be expected to have, a Material Adverse
Effect.
(s) The Borrower has filed on a timely basis all tax returns
(federal, state and local) required to be filed and has paid, or made adequate
provision for payment of, all taxes, assessments and other governmental charges
due from the Borrower. No tax Lien has been filed and is now effective against
the Borrower or any of its Properties except any Lien in respect of taxes and
other charges not yet due or contested in good faith by appropriate proceedings.
To the Borrower's knowledge, there is no pending investigations of the Borrower
by any taxing authority nor any pending but unassessed tax liability of the
Borrower.
(t) The Borrower is solvent and will not become insolvent after
giving effect to the transactions contemplated by this Agreement; the Borrower
has not incurred debts or liabilities beyond its ability to pay; the Borrower
will, after giving effect to the transaction contemplated by this Agreement,
have an adequate amount of capital to conduct its business; the sales of
Receivables hereunder are made in good faith and without intent to hinder, delay
or defraud present or future creditors of the Borrower.
(u) The Provider maintains only the one Provider Lockbox and only
the one Provider Lockbox Account, each as described on Schedule IV to the
Agreement, for Receivables of which the Obligor is a Governmental Entity (except
those lockboxes and lockbox accounts terminated or being terminated prior to or
on the Initial Funding Date); and no direction is in effect directing Obligors
to remit payments on Receivables other than to the applicable Lender Lockbox,
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<PAGE> 37
Lender Lockbox Account, Provider Lockbox, or Provider Lockbox Account, each as
described on Schedule IV.
(v) The Borrower has no pension plans or profit sharing plans.
(w) There are no pending civil or criminal investigations by any
Governmental Entity involving the Borrower, the Provider or any of their
respective officers or directors and neither the Borrower, the Provider or any
of their respective officers or directors has been involved in, or the subject
of, any civil or criminal investigation by any Governmental Entity.
(x) The sole business of the Borrower is as provided in its
Certificate of Incorporation.
(y) The assets of the Borrower are free and clear of any Liens in
favor of the Internal Revenue Service, any Employee Benefit Plan, any
Multiemployer Plan or the PBGC other than inchoate tax Liens resulting from an
assessment of the Provider or the Borrower.
(z) None of the Eligible Receivables constitutes or has constituted
an obligation of any Person (other than an individual) which is an Affiliate of
the Borrower.
(aa) The Obligor of each Eligible Receivable has not been the
Obligor of any Defaulted Receivables in the past 12 months (other than, for the
purpose of this clause, as a result of good faith disputes).
(bb) No transaction contemplated under this Agreement requires
compliance with any bulk sales act or similar law.
(cc) The Borrower has no Debt except hereunder and under the RPTA.
III-4
<PAGE> 38
EXHIBIT IV.
COVENANTS
Until the payment in full of all Lender Debt and the termination of
the Revolving Commitment hereunder:
(a) Compliance with Laws, etc. The Borrower will comply in all
material respects with all applicable laws, rules, regulations and orders and
preserve and maintain its corporate existence, rights, franchises,
qualifications, and privileges except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve and
maintain such existence, rights, franchises, qualifications, and privileges
could not reasonably be expected to result in Material Adverse Effect.
(b) Offices, Records and Books of Account. The Borrower will keep
its principal place of business and chief executive office and the office where
it keeps its records concerning the Receivables at the address of the Borrower
set forth under its name on the signature page to the Agreement or, upon 30
days' prior Written Notice to the Lender, at any other locations in
jurisdictions where all actions reasonably requested by the Lender or otherwise
necessary to protect and perfect the Lender's interest in the Receivables have
been taken and completed. The Borrower shall keep its books and accounts in
accordance with GAAP and shall make a notation on its books and records,
including any computer files, to indicate that the Accounts have been assigned
as security to the Lender and the security interest of the Lender in the
Borrower's Accounts not assigned to the Lender, to the extent not sold or
transferred. The Borrower shall maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing Receivables and related contracts in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for
collecting all Receivables (including, without limitation, records adequate to
permit the daily identification of each Receivable and all Collections of and
adjustments to each existing Receivable) and for providing the Receivable
Information, it being understood that the Servicer may maintain such records and
procedures on behalf of the Borrower.
(c) Performance and Compliance with Contracts and Credit and
Collection Policy. The Borrower will, at its expense, timely and fully perform
and comply (and will cause the Provider or its designee to fully perform and
comply) with all material provisions, covenants and other promises required to
be observed by it under the contracts related to the Receivables, and timely and
fully comply in all material respects with the Credit and Collection Policy in
regard to each Receivable and the related contract, and the Borrower shall
maintain, at its expense, in full operation each of the bank accounts and
lockboxes required to be maintained under the Agreement. The Borrower shall do
nothing, nor suffer or permit any other Person, to impede or interfere with the
collection by the Lender, or the Master Servicer on behalf of the Lender, of the
Receivables.
(d) Notice of Breach of Representations and Warranties. The Borrower
shall promptly (and in no event later than five Business Days following actual
knowledge thereof) inform
IV-1
<PAGE> 39
the Lender and the Master Servicer of any breach of covenants or representations
and warranties hereunder and under the RPTA, including, without limitation, upon
discovery of a breach of the Eligibility Criteria set forth in Exhibit VI
hereof.
(e) Debt, Sales, Liens, etc. The Borrower will not incur or assume
any Debt or issue any securities except under or as contemplated by this
Agreement. The Borrower will not sell, assign (by operation of law or otherwise)
or otherwise dispose of, or create or suffer to exist any Liens upon or with
respect to, the Borrower's Accounts, or upon or with respect to any account to
which any Collections are sent, or assign any right to receive income in respect
thereof except (i) the Borrower may grant a Lien on Accounts that is expressly
subordinated in writing to the Lien created hereunder in a manner acceptable to
the Lender, in its sole discretion, (ii) those Liens in favor of the Lender or
any assignee of the Lender relating to the Agreement, and (iii) Liens in respect
of taxes not yet due or contested in good faith by appropriate proceedings.
(f) Extension or Amendment of Receivables. The Borrower shall not
amend, waive or agree, or otherwise suffer or permit the Provider to amend,
waive, or agree, to any deviation from the terms or conditions of any Receivable
in a manner inconsistent with the Credit and Collection Policy.
(g) Change in Business or Credit and Collection Policy. The Borrower
will not make any change in the Credit and Collection Policy or make any change
in the character of its business that, in either event, could reasonably be
expected to result in a Material Adverse Effect. The Borrower will not make any
other material changes in the Credit and Collection Policy without the prior
written consent of the Lender.
(h) Audits and Visits. The Borrower will permit the Lender, from
time to time during regular business hours as requested by the Lender and upon
reasonable advance notice (unless an Event of Default has occurred and is
continuing, in which case no notice is required), without interfering with the
Borrower's or the Provider's business or operations and subject to compliance
with applicable law in the case of review of customer information, or its agents
or representatives (including the Master Servicer), (i) to examine, audit and
make copies of and abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession or under the
control of the Borrower relating to Receivables including, without limitation,
the related contracts; (ii) to visit the offices and properties of the Borrower
for the purpose of examining and auditing such materials described in clause (i)
above, provided that, absent the occurrence of an Event of Default, the
examination and audit in clauses (i) and (ii) above shall not occur more
frequently than once every twelve months; and (iii) to discuss matters relating
to Receivables or the Borrower's performance hereunder or under the contracts
with any of the officers or employees of the Borrower having knowledge of such
matters. The Borrower shall permit the Master Servicer to have at least one of
its agents or representatives physically present in the Borrower's
administrative office during normal business hours to assist the Borrower in the
collection of Receivables.
IV-2
<PAGE> 40
(i) Change in Payment Instructions. The Borrower will not terminate
the Provider Lockbox, the Provider Lockbox Account, the Lender Lockbox, or the
Lender Lockbox Account, or make any change or replacement in the instructions
contained in any Notice or otherwise, or regarding payments to be made to the
Borrower, the Lender or the Master Servicer, except upon the prior and express
direction of the Program Manager or the Lender.
(j) Reporting Requirements. The Borrower will provide to the Lender
(in multiple copies, if requested by the Lender) the following:
(i) on Monday of each week (or, if such day is not a Business
Day, the immediately following Business Day), a Borrowing Base
Certificate;
(ii) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal year of
the Borrower, balance sheets of the Borrower as of the end of such quarter
and statements of income, cash flows and retained earnings of the Borrower
for the period commencing at the beginning of the current fiscal year and
ending with the end of such quarter, certified by the chief financial
officer of the Borrower, and accompanied by a certificate of an authorized
officer of the Borrower detailing its compliance for such fiscal period
with the financial covenants contained in this Agreement;
(iii) as soon as available and in any event within 90 days
after the end of each fiscal year of the Borrower, balance sheets as of,
and statements of income for, such fiscal year, and accompanied by a
certificate of an authorized officer of the Borrower detailing its
compliance for such fiscal period with the financial covenants contained
in this Agreement;
(iv) promptly and in any event within five Business Days after
the occurrence of each Default or Event of Default, a statement of the
chief financial officer of the Borrower setting forth details of such
Default or Event of Default and the action that the Borrower has taken and
proposes to take with respect thereto;
(v) at least ten Business Days prior to any change in the
Borrower's name, a notice setting forth the new name and the proposed
effective date thereof;
(vi) promptly (and in no event later than five Business Days
following actual knowledge or receipt thereof), Written Notice in
reasonable detail, of (x) any Lien asserted or claim made against a
Receivable, or (y) the results of any cost report or similar audits of the
Provider being conducted by any federal, state or county Governmental
Entity or its agents or designees;
(vii) no later than five (5) Business Days after the
commencement thereof, Written Notice of all actions, suits, and
proceedings before any Governmental Authority or
IV-3
<PAGE> 41
arbitrator affecting the Borrower which, if determined adversely to the
Borrower, could reasonably be expected to have a Material Adverse Effect;
(viii) as soon as possible and in any event within five (5)
Business Days after becoming aware of the occurrence thereof, Written
Notice of any matter that could reasonably be expected to have a Material
Adverse Effect;
(ix) within 90 days after the end of each fiscal year of the
Borrower, a certificate of independent certified public accountants
stating that to their knowledge no Servicer Termination Event has occurred
and exists as of the end of such fiscal year, or if in their opinion such
a Servicer Termination Event has occurred and is continuing, a statement
as to the nature thereof; and
(x) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of the Borrower as the
Lender may from time to time reasonably request.
(k) Notice of Proceedings; Overpayments. The Borrower shall promptly
notify the Master Servicer (and modify the next Borrowing Base Certificate to be
delivered hereunder) in the event of any action, suit, proceeding, dispute,
set-off, deduction, defense or counterclaim that is or may be asserted by an
Obligor with respect to any Receivable.
(l) Officer's Certificate. On the date the financial statements
referred to in subclauses (ii) and (iii) of clause (j) above are to be delivered
after the Initial Funding Date, the chief financial officer of the Borrower
shall deliver a certificate to the Lender, stating that, as of such date, (i)
all representations and warranties are true and correct, (ii) no Default has
occurred, and (iii) no Event of Default exists and is continuing.
(m) Further Instruments, Continuation Statements. The Borrower
shall, at its expense, promptly execute and deliver all further instruments and
documents, and take all further action that the Program Manager or the Lender
may reasonably request, from time to time, in order to perfect, protect or more
fully evidence the assignment as security of the Receivables, or to enable the
Lender or the Program Manager to exercise or enforce the rights of the Lender
hereunder or under the Receivables. Without limiting the generality of the
foregoing, the Borrower will upon the request of the Program Manager execute and
file such UCC financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments or notices, as may be, in the
opinion of the Program Manager, necessary or appropriate. The Borrower hereby
authorizes the Program Manager, upon ten Business Days' notice, to file one or
more financing or continuation statements and amendments thereto and assignments
thereof, relative to all or any of the Receivables now existing or hereafter
arising without the signature of the Borrower where permitted by law. If the
Borrower fails to perform any of its agreements or obligations under the
Agreement, the Program Manager may (but shall not be required to) itself
perform, or cause performance of, such agreement or obligation, and the
reasonable expenses of the Program Manager incurred in connection therewith
shall be payable by the Borrower.
IV-4
<PAGE> 42
(n) Merger, Consolidation. The Borrower shall not merge with or into
or consolidate with or into, another Person, or convey, transfer, lease or
otherwise dispose of all or substantially all of its assets (whether now owned
or hereafter acquired).
(o) No "Instruments". The Borrower shall not take any action which
would allow, result in or cause any Eligible Receivable to be evidenced by an
"instrument" within the meaning of the UCC of the applicable jurisdiction.
(p) Preservation of Corporate Existence. The Borrower shall preserve
and maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its organization, and qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises, privileges and
qualification would materially adversely affect the interests of the Lender or
the Program Manager or their ability of to perform their respective obligations
hereunder or under the RPTA.
(q) RPTA. The Borrower will, at its sole expense, timely and fully
perform and comply with all provisions, covenants and other promises required to
be observed to be observed by it under the RPTA, maintain the RPTA in full force
and effect, enforce the RPTA in accordance with its terms, take all such action
to such end as may be from time to time reasonably requested by the Lender, and
make to any party to the RPTA such demands and requests for information and
reports or for action as the Borrower is entitled to make thereunder and as may
be from time to time reasonably requested by the Lender. The Borrower shall not
permit any waiver, modification or amendment of the RPTA. The Borrower shall not
permit any other Person to become a "Provider" under the RPTA without the prior
written consent of the Lender.
(r) Master Servicer Certificate. On or before the thirtieth calendar
day after the Initial Funding Date, the Lender shall receive a certificate from
the Master Servicer stating that all computer linkups and interfaces necessary
or desirable, in the judgment of the Master Servicer, to effectuate the
transactions and information transfers contemplated hereunder, are fully
operational to the satisfaction of the Master Servicer.
IV-5
<PAGE> 43
SPECIAL COVENANTS
ENTITY SEPARATENESS
Until the payment in full of all Lender Debt and the termination of
the Revolving Commitment hereunder:
(i) The Borrower will at all times maintain at least one independent
director who is (x) not a current or former officer, director or employee of an
Affiliate of the Borrower or any Other Corporation and who is not a current or
former officer or employee of the Borrower and (y) not a stockholder of any
Other Corporation or any of their respective Affiliates.
(ii) The Borrower will not direct or participate in the management
of any of the Other Corporations' operations.
(iii) The Borrower will at all times be adequately capitalized in
light of its contemplated business.
(iv) The Borrower will at all times provide for its own operating
expenses and liabilities from its own funds; it being understood that certain
organizational expenses of the Borrower and expenses relating to the creation
and initial implementation of the financing program contemplated by the
Documents will be paid for by the Provider.
(v) Subject to consolidation with the Provider for accounting and
tax purposes, the Borrower will maintain its assets and transactions separately
from those of the Other Corporations and reflect such assets and transactions in
financial statements separate and distinct from those of the Other Corporations
and evidence such assets and transactions by appropriate entries in books and
records separate and distinct from those of the Other Corporations. The Borrower
will maintain telephone numbers, mailing addresses, stationery and other
business forms that are separate and distinct from those of any Affiliate of the
Borrower or any Other Corporation. The Borrower will not hold itself out as
being liable, primarily or secondarily, for any obligations of the Other
Corporations.
(vi) The Borrower will not maintain any joint account with the
Provider or any Other Corporation, or be a party, whether as a co-obligor or
otherwise, to any agreement to which any Other Corporation is a party (other
than the RPTA) or become liable as a guarantor or otherwise with respect to any
indebtedness or contractual obligation of any Other Corporation.
(vii) Other than as contemplated under this Agreement or under the
RPTA and the payment of dividends or distributions to its members, the Borrower
will not make any payment or distribution of assets with respect to any
obligation of any Other Corporation or grant a Lien on any of its assets to
secure any obligation of any Other Corporation.
(viii)The Borrower will not make any loans, advances or otherwise
extend credit to any of the Other Corporations, provided, that the Borrower may
issue dividends or distributions
IV-6
<PAGE> 44
to each of its stockholders to the extent otherwise permitted under this
Agreement and under applicable law.
(ix) The Borrower will hold regular duly noticed meetings of its
stockholders and make and retain minutes of such meetings. The duly elected
Board of Directors of the Borrower and the duly appointed officers of the
Borrower will at all times have sole authority to conduct decisions and actions
with respect to the daily business affairs of the Borrower.
(x) The Borrower will comply in full with the procedures set forth
in the RPTA with respect to the assignment of all assets from any of the Other
Corporations.
(xi) The Borrower will not engage in any transaction with any of the
Other Corporations or any of their respective subsidiaries, except as permitted
or contemplated by the Agreement and as contemplated by the RPTA.
(xii) The Borrower will not enter into any transaction with any
Affiliate or third party except (a)(x) as permitted or contemplated by this
Agreement or the RPTA, or (y) investments of cash and cash equivalents with
third parties and (b) on terms and conditions which reasonably approximate an
arm's length transaction between unaffiliated parties.
(xiii) The Borrower will not amend, modify or supplement its
Certificate of Incorporation or By-laws.
(xiv) The Borrower will not have any Subsidiaries nor ownership
interest in any other entities.
(xv) The Borrower will conduct its business at an office segregated
from the offices of any Other Corporation. If office space is leased from any
Other Corporation, a separate written lease on arm's length terms will be in
effect at a market rental rate.
IV-7
<PAGE> 45
EXHIBIT V.
EVENTS OF DEFAULT
Each of the following shall be an "Event of Default":
(a) The Borrower shall default in the due and punctual payment of
the principal of the Revolving Loan, when and as the same shall become due and
payable (except that the Borrower shall have up 15 days to cure such a default
with respect to a Borrowing Base Deficiency) whether pursuant to Article II of
this Agreement, at maturity, by acceleration or otherwise.
(b) The Borrower shall default in the due and punctual payment of
any installment of interest on the Revolving Loan or any other Lender Debt or of
any fee or expense owing to the Lender pursuant to any of the Documents, when
and as such amount of interest, fee or expense shall become due and payable and
such default shall continue unremedied for three (3) Business Days.
(c) The Borrower shall default in the performance or observance of
any covenant, agreement or provision (other than as described in clause (a) or
(b) above) contained in this Agreement or any other Document or in any
instrument or document evidencing or creating any obligation, guaranty or Lien
in favor of the Lender in connection with or pursuant to this Agreement or any
Lender Debt, and, except in the case of the agreements and covenants contained
in any Document as to each of which no notice or grace period shall apply, such
default continues for a period of thirty days (or, in the case where agreements
and covenants contained in any Document provide for a grace period that is less
than thirty days, continuance of a default for such shorter period) after there
has been given Written Notice of such default to either of the Borrower or the
Provider by the Lender; or if this Agreement or any other Document or any such
other instrument or document shall terminate, be terminated or become void or
unenforceable for any reason whatsoever without the written consent of the
Agent.
(d) An Event of Termination shall have occurred under the RPTA.
(e) The Borrower shall send a Revocation Order (as defined in the
Depositary Agreement) or make any change or replacement in the Standing
Revocable Instruction (as defined in the Depositary Agreement).
(f) Any representation or warranty made or deemed made by the
Borrower (other than with respect to the eligibility of Receivables as Eligible
Receivables hereunder) under or in connection with the Agreement or any
information or report delivered by the Borrower (other than with respect to the
Provider) pursuant to the Agreement shall prove to have been incorrect or untrue
in any material respect when made or deemed made or delivered.
(g) The Borrower shall incur any Debt other than the Debt under this
Agreement.
V-1
<PAGE> 46
(h) This Agreement shall for any reason (other than pursuant to the
terms hereof) fail or cease to create or fail or cease to be a valid and
perfected security interest in the Receivables and the Collections with respect
thereto free and clear of all Liens (other than Liens referred to in clauses
(i), (ii) and (iii) of paragraph (e) of Exhibit IV).
(i) The Borrower or the Provider shall generally not pay its debts
as such debts become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower or
the Provider seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its Property and, in the
case of any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a period of 60
days, or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or for any
substantial part of its Property) shall occur; or the Borrower or the Provider
shall take any action to authorize any of the actions set forth above in this
paragraph (i).
(j) As of any date of determination, the Provider is found to have
been overpaid by Governmental Entities by 8% or more during any period covered
by an audit conducted by the HCFA and such overpayment is not repaid within 30
days of the earlier of receipt of a notice by, or the knowledge of, the Provider
of a notice of such overpayment.
(k) There shall have occurred any change in the financial condition
or operations of the Borrower since its formation that has resulted in a
Material Adverse Effect.
(l) The Borrower (x) shall have entered into any transaction and not
provided prompt Written Notice thereof to the Lender, or (y) shall have
consummated, any transaction which shall result in the consummation of (i) the
merger or consolidation of the Borrower, (ii) the acquisition of all or a
substantial portion of the assets of any Person, (iii) the transfer, sale,
assignment, lease or other disposition of all or a substantial portion of the
Borrower's assets or Properties, or (iv) the sale of a controlling interest,
directly or indirectly, in the Borrower.
(m) The Loss-to-Liquidation Ratio in any four week period exceeds
10%.
(n) The arithmetic average of the Loss-to-Liquidation Ratios in any
three consecutive four week periods exceeds 8%.
(o) The Delinquency Ratio in any four week period exceeds 10%.
(p) Judgments or orders for payment of money (other than judgments
or orders in respect of which adequate insurance is maintained for the payment
thereof) in excess of $500,000
V-2
<PAGE> 47
in the aggregate against the Borrower remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of 90 days or more.
(q) Any governmental authority (including, without limitation, the
Internal Revenue Service or the PBGC) files a notice of a Lien against any of
the Receivables or other assets other than the Receivables involving an
aggregate amount in excess of $500,000 which remains unpaid or discharged for a
period of 45 days or more.
(r) The Borrower shall fail to discharge within a period of thirty
(30) days after the commencement thereof any attachment, sequestration,
forfeiture, or similar proceeding or proceedings involving an aggregate amount
in excess of $500,000 against any of its Properties.
(s) The Borrower does not pay or discharge at or before maturity or
before becoming delinquent all taxes, levies, assessments, and governmental
charges imposed on it or its income or profits or any of its Property, except
any taxes, levies, assessments or charges contested in good faith by appropriate
proceedings.
(t) The Borrower sells, leases, assigns, transfers, or otherwise
disposes of any of its Receivables, except as permitted or contemplated under
the Agreement.
(u) The Borrower declares or makes any Distribution, unless both
prior and subsequent to the effectiveness of such proposed Distribution, (i) no
Event of Default is continuing, including an Event of Default under clause (w)
of this Exhibit V hereof, (ii) such Distribution is in full compliance with
applicable law, including the law of the State of Delaware as in effect at such
time, and (iii) the Borrower and the recipient of such Distribution have taken
all necessary and appropriate corporate action to effectuate such Distribution.
(v) The Borrower engages in any business other than solely the
businesses of directly or indirectly purchasing Receivables from the Provider
and in financing such Receivables with the Lender hereunder and the other
transactions permitted or contemplated hereby.
(w) The Borrower shall at any time fail to maintain a Tangible Net
Worth of at least 3.0% of the higher of (i) the Borrowing Limit, and (ii) the
then outstanding amount of the Revolving Loan.
(x) Any representation or warranty made or deemed made by the
Provider under or in connection with the RPTA or any information or report
delivered by the Provider pursuant to the RPTA shall prove to have been
incorrect or untrue in any material respect when made or deemed made or
delivered and such misstatement causes an Event of Default under the RPTA.
(y) If, at any date, the aggregate Expected Net Value of all
Delinquent Receivables that became Delinquent Receivables during the prior 3
months is in excess of 8% of the aggregate Expected Net Value of all Receivables
sold by the Borrower to the Lender during the prior 3 months (regardless of any
reassignment of Denied Receivables).
V-3
<PAGE> 48
(z) As of any date after the Initial Funding Date, (i) the
dollar-weighted average days outstanding with respect to all outstanding
Eligible Receivables on such date and on the same day of each of the two
preceding Months (or if there is no corresponding day in any such preceding
month, the last day of such month) is greater than 90 days, or (ii) the average
over the preceding 90-day period of the dollar-weighted average days
outstanding with respect to all outstanding Eligible Receivables on each day
during such period is greater than 90 days.
(aa) As of any date after the Initial Funding Date, more than 20% of
all outstanding Eligible Receivables are aged more than 120 days but less than
180 days from the respective Last Service Dates of such Eligible Receivables.
V-4
<PAGE> 49
EXHIBIT VI.
ELIGIBILITY CRITERIA
Until further Written Notice from the Lender to the Borrower, the
following shall constitute the Eligibility Criteria for acceptance of
Receivables for financing and inclusion in the Borrowing Base under the
Agreement (the "Eligibility Criteria"); provided, that, with respect to
Receivables payable by Governmental Entities and Insurers, the Lender may only
modify the Eligibility Criteria in accordance with its customary and reasonable
commercial practices (the Eligibility Criteria relating to all other Persons
being subject to modifications in the sole and absolute discretion of the
Lender):
(a) The information provided by the Borrower with respect to each
such Receivable is complete and correct and all documents, attestations and
agreements relating thereto that have been delivered to the Lender are true and
correct, and the Provider has billed the applicable Obligor and has delivered to
such Obligor all requested supporting claim documents with respect to such
Receivable and no amounts with respect to such Receivable have been paid as of
the date and time of the sale of such Receivable to the Lender. The Provider
has, or has the right to use, valid provider identification numbers and licenses
to generate valid Receivables. All information set forth in the bill and
supporting claim documents with respect to such Receivable is true, complete and
correct; if additional information is requested by the Obligor, the Borrower (or
the Provider) has or will promptly provide the same, and if any error has been
made with respect to such information, the Borrower will promptly correct the
same and, if necessary, rebill such Receivable.
(b) Each such Receivable (i) is payable, in an amount not less than
its Expected Net Value, by the Obligor identified by the Provider as being
obligated to do so, (ii) is based on an actual and bona fide provision of
services or sale of goods to the customer by the Provider in the ordinary course
of business, (iii) is denominated and payable only in U.S. dollars in the United
States, (iv) is an account receivable or general intangible within the meaning
of the UCC of the state in which the Provider has its principal place of
business, or is a right to payment under a policy of insurance or proceeds
thereof, and is not evidenced by any instrument or chattel paper, and (v) shall
be subject to a customer consent form approved by the Lender and executed by the
applicable customer. There is no payor other than the Obligor identified by the
Borrower as the payor primarily liable on such Receivable.
(c) Each such Receivable (i) is not the subject of any action, suit,
proceeding or dispute (pending or threatened), setoff, counterclaim, defense,
abatement, suspension, deferment, deductible, reduction or termination by the
Obligor (except for statutory rights of Governmental Entities that are not
pending or threatened), (ii) is not past, or within 60 days of, the statutory
limit for collection applicable to the Obligor or is not aged more than 180 days
from its Last Service Date, and (iii) was not billed to the Obligor on a date
more than 45 days after the Last Service Date.
(d) Neither the Borrower nor the Provider has any guaranty of,
letter of credit providing credit support for, or collateral security for, such
Receivable, other than any such guaranty,
VI-1
<PAGE> 50
letter of credit or collateral security as has been assigned to the Lender, and
any such guaranty, letter of credit or collateral security is not subject to any
Lien in favor of any other Person.
(e) The goods and services provided and reflected by such Receivable
were medically necessary for the customer or patient, and the customer or
patient has received such goods and services.
(f) The fees charged for the goods and services constituting the
basis for such Receivable are consistent with the usual, customary and
reasonable fees charged by other similar medical providers for the same or
similar goods in the Provider's community and in the community in which the
customer resides.
(g) The Obligor with respect to each such Receivable is (i) not
currently the subject of any bankruptcy, insolvency or receivership proceeding,
nor is it unable to make payments on its obligations when due, (ii) located in
the United States of America, and (iii) one of the following: (x) a Person which
in the ordinary course of its business or activities agrees to pay for
healthcare services received by individuals, including, without limitation,
commercial insurance companies and non-profit insurance companies (such as Blue
Cross and Blue Shield) issuing health, personal injury or other types of
insurance, employers or unions which self-insure for employee or member health
insurance, prepaid healthcare organizations, preferred provider organizations,
health maintenance organizations, commercial hospitals, physician's groups or
any other similar person, (y) a state, an agency or instrumentality of a state
or a political subdivision of a state, or (z) the United States of America or an
agency or instrumentality of the United States of America.
(h) The financing of such Receivables hereunder is made in good
faith and without actual intent to hinder, delay or defraud present or future
creditors of the Borrower.
(i) The insurance policy, contract or other instrument obligating an
Insurer to make payment with respect to such Receivable (i) does not contain any
provision prohibiting the grant of a security interest in such payment
obligation from the customer to the Provider, from the Provider to the Borrower,
or from the Borrower to the Lender, (ii) has been duly authorized and, together
with such Receivable, constitutes the legal, valid and binding obligation of the
Insurer in accordance with its terms, (iii) together with such Receivable, does
not contravene in any material respect any requirement of law applicable
thereto, and (iv) was in full force and effect and applicable to the customer or
patient at the time the goods or services constituting the basis for such
Receivable were sold or performed.
(j) The insurance policy, contract or other instrument obligating a
Governmental Entity to make payment with respect to such Receivable (i) has been
duly authorized and, together with the applicable Receivable, constitutes the
legal, valid and binding obligation of the Governmental Entity in accordance
with its terms, (ii) together with the applicable Receivable, does not
contravene in any material respect any requirement of law applicable thereto,
and (iii) was in full force and effect and applicable to the customer or patient
at the time the goods or services constituting the basis for such Receivable
were sold or performed.
VI-2
<PAGE> 51
(k) No consents by any third party to the sale of such Receivable
are required other than consents previously obtained in writing by the Borrower,
a copy of each such consent having been provided to the Lender.
(l) The inclusion of such Receivable in the Borrowing Base would not
increase the fraction expressed as a percentage where (i) the numerator is the
sum of the then outstanding principal amount of Eligible Receivables for any
obligor (or group of obligors) listed below included in the Borrowing Base, and
(ii) the denominator is the Borrowing Base for all Eligible Receivables, above
the corresponding maximum percentage listed below:
Maximum
Obligor Percentage
- ------- ----------
Medicare 50%
Medicaid 85%
Blue Cross/Blue Shield 25%
All Commercial Insurance Obligors, HMOs and PPOs 75%
CHAMPUS/Champva 20%
any single AAA rated (non-governmental) Obligor 10%
any single AA rated (non-governmental) Obligor 10%
any single A rated (non-governmental) Obligor 7%
any single BBB rated (non-governmental) Obligor 4%
any single unrated (non-governmental) Obligor 2.5%
any Self-Pay 30%
workers' compensation 0%
(m) Unless specifically verified and accepted by the Master Servicer
or Program Manager, no single Eligible Receivable has an Expected Net Value
greater than $15,000.
(n) No prior sale or assignment of security interest which is still
in effect on the applicable Funding Date has been made with respect to or
granted in any such Receivable.
(o) The Obligor of each Proposed Eligible Receivable and each Batch
Receivable has not been the Obligor of any Defaulted Receivables in the past 12
months (other than, for the purpose of this clause, as a result of good faith
disputes).
VI-3
<PAGE> 52
EXHIBIT VII-A
FORM OF BORROWING BASE CERTIFICATE
DAIWA HEALTHCO-2 LLC
Borrowing Base Report
Report Submission Date:_____________
Schedule #:______________
As of Date:______________
--------------------
I. Beginning A/R Balance (from Previous Report)
--------------------
II. Additions:
--------------------
2.01. New billings
--------------------
2.02. Late Charges/Adjustments
--------------------
Total Additions
--------------------
--------------------
III. Deductions:
--------------------
3.01. Collections
--------------------
3.02. Contractual/Discounts
--------------------
3.03. Transfers Bad Debt
--------------------
3.04. Other Discounts/Adjustments
--------------------
Total Deductions
--------------------
--------------------
IV. Accounts Receivable Balance
--------------------
--------------------
V. Less: Ineligible Collateral
--------------------
VI. Total Eligible Collateral (Gross)
--------------------
VII. Estimated Net Value %
--------------------
VIII. Total Eligible Collateral (Net)
--------------------
IX. Less: Unposted Cash
--------------------
X. Adjusted Net Eligible Collateral
--------------------
XI. Advance Rate Percentage 85%
--------------------
XII. Maximum Loan Availability on Collateral
--------------------
VII-1
<PAGE> 53
XIII. Maximum Loan Availability per Agreement $10,000,000
------------------------------
--------------------
XIV. TOTAL LOAN AVAILABILITY (LESSOR OF 12 OR 13)
--------------------
--------------------
XV. Outstanding Loan Balance Prior Report
--------------------
XVI. Less Collections (Net Cash)
--------------------
XVII. Plus Draws Since Prior Report
--------------------
XVIII.Interest Due/Fees
--------------------
XIX. Additional Advance Requested
--------------------
XX. LOAN BALANCE THIS REPORT
--------------------
--------------------
XXI. NET AVAILABILITY (14. minus 20.)
--------------------
The two undersigned representatives of the Borrower represent and warrant that
the foregoing information is true, complete and correct and that the collateral
reflected herein conforms and complies with the conditions, terms, warranties,
representations and covenants set forth in the Loan and Security Agreement
between the undersigned and Daiwa Healthco-2 LLC and any supplements and
amendments, if any, thereto (the "Agreement"). The undersigned promises to pay
to Daiwa Healthco-2 LLC the new loan balances reflected above, plus interest, as
set forth in the Agreement.
BIO-CYPHER FUNDING CORP.
By:_________________________________ Date:____________
Name: J. Marvin Feigenbaum
Title: Chief Executive Officer
By:_____________________________
Name:
Title:
VII-2
<PAGE> 54
EXHIBIT VII-B
FORM OF BORROWER'S CERTIFICATE
Daiwa Healthco-2 LLC
Two Wall Street
New York, New York 10005
Ladies and Gentlemen:
The undersigned refers to the Loan and Security Agreement, dated as
of September 30, 1997 (as the same may be amended, supplemented, restated, or
modified from time to time, the "Loan Agreement") between Bio-Cypher Funding
Corp. (the "Borrower") and Daiwa Healthco-2 LLC (the "Lender"). Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
them in the Loan Agreement.
In accordance with Section 1.03 of the Loan Agreement and in
fulfillment of the condition precedent set forth in Section 2(a) of Exhibit II
thereto, the Borrower hereby gives you irrevocable notice that the undersigned
requests a Revolving Advance under the Loan Agreement, and in connection
therewith sets forth below the information relating to such Advance as required
by Section 1.03 of the Loan Agreement:
Proposed Revolving Advance:
(i) The Funding Date of such Revolving Advance is requested to
be _______ __, 199_;
(ii) The amount of the Revolving Advance is requested to be
$_______________; and
(iii) Attached is the Borrowing Base Certificate delivered to
you on the immediately prior [ Day ].
The Borrower hereby certifies that the following statements are true
and correct on the date hereof, and will be true and correct on the date of the
proposed Revolving Advance:
(A) the representations and warranties contained in Exhibits
III and IV of the Loan Agreement are and will be true and correct,
both before and after giving effect to the Revolving Advance
requested herein and to the application of the proceeds thereof, as
though made on and as of such date (it being understood and agreed
that
VII-3
<PAGE> 55
any representation or warranty which by its terms is made on a
specified date shall be required to be true and correct only as of
such specified date); and
(B) no event has occurred and is continuing, or would result
from the Revolving Advance requested herein or from the application
of the proceeds thereof that constitutes or would constitute an
Event of Default; and
(C) the aggregate outstanding principal amount of the
Revolving Advances after giving effect to the Revolving Advance
requested herein is not in excess of the lesser of the Revolving
Commitment and the Borrowing Limit.
Very truly yours,
BIO-CYPHER FUNDING CORP.
By:__________________________
Name: J. Marvin Feigenbaum
Title: Chief Executive Officer
VII-4
<PAGE> 56
EXHIBIT VIII
FORM OF DEPOSITARY AGREEMENT
[TO BE ATTACHED]
VIII-1
<PAGE> 57
EXHIBIT IX-A
FORM OF OPINION OF COUNSEL
IX-1
<PAGE> 58
EXHIBIT IX-B
FORM OF OPINION OF COUNSEL
IX-2
<PAGE> 59
SCHEDULE I
ADDRESSES FOR NOTICE
If to the Program Manager:
Daiwa Securities America Inc.
32 Old Slip, Financial Square
New York, New York 10005-3538
Attention: Chief Financial Officer
Tel: (212) 612-6290
Fax: (212) 612-7122
If to the Master Servicer:
RJE Data Processing, Inc.
2513 West Peterson
Chicago, Illinois 60659
Attention: Jack Callahan, President
Tel: (312) 561-6966
Fax: (312) 878-6355
<PAGE> 60
SCHEDULE II
CREDIT AND COLLECTION POLICY
SEE ATTACHED.
<PAGE> 61
SCHEDULE III
DISCLOSURES
Records:
The Borrower keeps records concerning the receivables at the following
addresses: (i) 3301 C Street, Suite 100E, Sacramento, California 95816; (ii) 201
Lathrop Way, Suite M, Sacramento, California 95815; and (iii) 811 South San
Fernando Boulevard, Burbank, California 91502.
<PAGE> 62
SCHEDULE IV
LOCKBOX INFORMATION
Provider Lockbox:
Physicians Clinical Laboratory, Inc.
Post Office Box 450303
San Francisco, CA 94145-0030
Provider Lockbox Account:
Physicians Clinical Laboratory, Inc.
Account #23800012157
Lockbox Bank
Los Angeles, CA
ABA #122000496
Lender Lockbox:
Post Office Box 45744
San Francisco, CA 94145-0744
Lender Lockbox Account:
Daiwa Healthco-2 LLC
Account #0700489647
Lockbox Bank
Los Angeles, CA
ABA # 122000496
<PAGE> 1
DEPOSITARY AGREEMENT
DEPOSITARY AGREEMENT (this "Agreement"), dated as of September 30,
1997, among PHYSICIANS CLINICAL LABORATORY, INC. (together with its successors
and assigns, the "Provider"), BIO-CYPHER FUNDING CORP., (together with its
successors and assigns, the "Borrower"), DAIWA HEALTHCO-2 LLC, (together with
its successors and assigns, the "Lender"), and UNION BANK OF CALIFORNIA, N.A.
(the "Lockbox Bank"). Except as otherwise defined herein, capitalized terms not
otherwise defined herein shall have the meanings set forth in the Loan Agreement
as hereinafter defined.
WHEREAS, pursuant to the Healthcare Receivables Purchase and Transfer
Agreement, dated as of September 30, 1997, between the Provider and the Borrower
(as it may be amended, restated, modified or supplemented from time to time in
accordance with its terms, the "Receivables Transfer Agreement"), the Provider
has agreed to sell or contribute all of the Provider's Receivables to the
Borrower.
WHEREAS, pursuant to a certain Loan and Security Agreement, dated as of
September 30, 1997, between the Borrower and the Lender (as it may be amended,
restated, modified or supplemented from time to time in accordance with its
terms, the "Loan Agreement"), the Borrower has agreed to assign the Borrower's
Receivables as collateral to the Lender and the Lender has agreed to make
Advances to the Borrower.
WHEREAS, in connection with the performance of obligations under the
Receivables Transfer Agreement and the Loan Agreement, the Provider and the
Borrower desire to establish with the Lockbox Bank (i) the Lender Lockbox and
the Provider Lockbox (each as defined below) (collectively, the "Lockboxes") and
(ii) the Lender Lockbox Account and the Provider Account (each as defined below)
(collectively, the "Lockbox Accounts").
WHEREAS, the Provider has delivered to all Governmental Entities that
are Obligors of its Receivables, a Notice to Governmental Entities instructing
that all checks and any attached EOB's from Governmental Entities on account of
the Provider's Receivables be sent to the Provider Lockbox and that all wire
transfers from Governmental Entities on account of the Provider's Receivables be
wired directly into the Provider Lockbox Account.
WHEREAS, the Provider has delivered a Notice to Insurers to all
Insurers that are Obligors of its Receivables instructing that all checks and
any attached EOB's from Insurers on account of the Provider's Receivables be
sent to the Lender Lockbox, and that all wire transfers from Insurers on account
of the Provider's Receivables be wired directly into the Lender Lockbox Account.
WHEREAS, the parties hereto wish to set forth the procedures
administering the Lockboxes and the Lockbox Accounts.
1
<PAGE> 2
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
foregoing recitals and the mutual covenants and promises set forth herein, the
parties hereto agree hereby as follows:
1. The Lender Lockbox and the Lender Lockbox Account. (a) The Lender,
the Borrower and the Provider hereby request the Lockbox Bank to open, and the
Lockbox Bank hereby agrees to open, the following post-office box to function as
the Lender Lockbox hereunder, under the Receivables Transfer Agreement, and
under the Loan Agreement:
Daiwa Healthco-2 LLC
P.O. Box 45744
San Francisco, CA 94145-0744
(the "Lender Lockbox")
Each of the Provider, the Borrower and the Lender hereby agree, and the Lockbox
Bank acknowledges, that the Lender Lockbox is being established for the sole
purpose of receiving checks, other forms of Collections, and any attached EOB's
from Insurers on account of Receivables. The Lender Lockbox shall be
administered by the Lockbox Bank as agent for the sole benefit of the Lender.
The Provider hereby agrees and confirms that it has no right or ability to
direct the checks, documents, or other contents held in the Lender Lockbox or to
make a claim against the Lockbox Bank or the Lender in furtherance of such other
parties' rights hereunder.
(b) The Lender hereby requests the Lockbox Bank to open, and the
Lockbox Bank hereby agrees to open, account #0700489647 (as the "Lender Lockbox
Account") for the purpose of (i) depositing checks received from Insurers in the
Lender Lockbox, and (ii) receiving wire transfers from Insurers, each on account
of the Receivables of the Provider payable by Insurers. The Lender hereby
irrevocably and unconditionally instructs the Lockbox Bank on each Business Day,
to deposit on a daily basis (A) all checks received in the Lender Lockbox into
the Lender Lockbox Account, and (B) apply and credit to the Lender Lockbox
Account all transfers directed to such account. The Provider agrees and confirms
that it has no dominion or control whatsoever over funds held in the Lender
Lockbox Account and the Provider hereby disclaims any right of any nature
whatsoever to control or otherwise direct or make any claim against the funds
held in the Lender Lockbox Account from time to time.
The Lender hereby directs the Lockbox Bank to transfer from the Lender
Lockbox Account on each Business Day, all available funds held in the Lender
Lockbox Account to account #910-275-9801 of the Lender at The Chase Manhattan
Bank, ABA #021000128.
2. The Provider Lockbox and the Provider Lockbox Account. (a) The
Provider hereby requests the Lockbox Bank to open, and the Lockbox Bank hereby
agrees to open, the following post-office box to function as the Provider
Lockbox hereunder, under the Receivables Transfer Agreement, and under the Loan
Agreement:
2
<PAGE> 3
Physicians Clinical Laboratory, Inc:
P.O. Box 450303
San Francisco, CA 94145-0030
(the "Provider Lockbox")
The Provider, the Borrower and the Lender hereby agree, and the Lockbox Bank
acknowledges; that the Provider Lockbox is being established for the sole
purpose of receiving checks, other forms of Collections and any attached EOB's
from Governmental Entities on account of Receivables. The Provider Lockbox shall
be administered by the Lockbox Bank as agent for the sole benefit of the
Provider.
(b) The Provider hereby requests that Lockbox Bank open, and the
Lockbox Bank hereby agrees to open with the Lockbox Bank account #2380012157 (as
the "Provider Lockbox Account") for the purpose of (i) depositing checks from
Governmental Entities received in the Provider Lockbox, and (ii) receiving wire
transfers from Governmental Entities, each on account of Receivables of the
Provider payable by Governmental Entities.
THE PARTIES HERETO HEREBY AGREE AND CONFIRM THAT THE PROVIDER HAS SOLE
DOMINION AND CONTROL OVER THE PROVIDER LOCKBOX, THE PROVIDER LOCKBOX ACCOUNT AND
ALL FUNDS HELD THEREIN AND EACH PARTY OTHER THAN THE PROVIDER HEREBY DISCLAIMS
ANY RIGHT OF ANY NATURE WHATSOEVER TO CONTROL OR OTHERWISE DIRECT OR MAKE ANY
CLAIM AGAINST THE FUNDS HELD IN THE PROVIDER ACCOUNT FROM TIME TO TIME, EXCEPT
AS PROVIDED IN SECTION 6 BELOW.
The Provider hereby provides the following standing revocable
instruction (the "Standing Revocable Instruction") to the Lockbox Bank:
On each Business Day, the Lockbox Bank shall (A) deposit all checks
received in the Provider Lockbox into the Provider Lockbox Account, (B)
apply and credit to the Provider Lockbox Account all transfers directed
to such account, and (C) transfer from the Provider Lockbox Account and
account #2180024185 all available funds held in account # 2380012157
and account #2180024185 to the Lender Lockbox Account;
provided, however, that such Standing Revocable Instruction is revocable by the
Provider at any time and for any reason by the Provider providing written
instruction (a "Revocation Order") to the Lockbox Bank, whereupon the within ten
Business Days the Lockbox Bank shall follow such Revocation Order and not the
Standing Revocable Instruction.
3. Access to the Lockboxes. (a) The Lender hereby irrevocably grants
the Lockbox Bank access to the Lender Lockbox and the right to withdraw any mail
delivered thereto and to open such mail. Any and all checks or other forms of
cash deposits withdrawn by the Lockbox
3
<PAGE> 4
Bank from the Lender Lockbox shall be deposited by the Lockbox Bank in the
Lender Lockbox Account. Unless otherwise directed by the Lender, all other items
withdrawn by the Lockbox Bank from the Lender Lockbox shall be returned to the
Provider with a copy to the Lender.
(b) Until such time as the Lockbox Bank has received a Revocation
Order, the Provider hereby grants the Lockbox Bank access to the Provider
Lockbox and the right to withdraw any mail delivered thereto and to open such
mail. Any and all checks or other forms of cash deposits withdrawn by the
Lockbox Bank from the Provider Lockbox shall be deposited by the Lockbox Bank in
the Provider Lockbox Account. All other items withdrawn by the Lockbox Bank from
the Provider Lockbox shall be returned to the Provider with a copy to the
Lender.
4. Other Duties of the Lockbox Bank; Conflicting Instructions. (a) The
Lockbox Bank shall notify the Lender within 48 hours (i) upon the receipt by the
Lockbox Bank of any Revocation Order, (ii) upon a request by the Provider to
withdraw any funds from the Provider Account, and (iii) upon the imposition or
attempted imposition of any Lien, security interest or other encumbrance on any
Lockbox or any Lockbox Account.
(b) In the event the Lockbox Bank receives conflicting requests or
instructions from the other parties hereto (except if the Lockbox Bank receives
a Revocation Order, which the Lockbox Bank shall follow regardless of
conflicting instructions, if any), the Lockbox Bank shall be entitled to
exercise its reasonable judgment in acting, suffering or omitting to act under
such circumstances, and the Lockbox Bank shall be entitled to refrain from
taking any action whatsoever. The Lockbox Bank may also consult with independent
legal counsel and the written opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by the Lockbox Bank hereunder in good faith and in reliance thereon.
(c) In the event that the Provider becomes subject to voluntary or
involuntary proceedings under the U.S. Bankruptcy Code, or if the Lockbox Bank
is served with legal process which the Lockbox Bank in good faith believes
affects the Collections and/or the Lockbox Accounts, the Lockbox Bank may place
a hold on any funds deposited thenceforth in the Lockbox Accounts until such
time as the Lockbox Bank receives an appropriate court order or other assurances
reasonably satisfactory to the Lockbox Bank that the funds may be disbursed
according to the terms of this Agreement. The Lockbox Bank shall immediately
provide notice to the Lender of any such hold placed by the Lockbox Bank.
5. Limitation of Duties; Limitation on Liability. The Lockbox Bank
undertakes to perform only such duties as are expressly set forth herein and as
set forth in the Lockbox Account Agreement between the Lockbox Bank and the
Provider. Notwithstanding any other provision of this Agreement, the parties
hereto agree that the Lockbox Bank shall not be liable for any action taken by
it or by any of its directors, officers, agents or employees in accordance with
this Agreement except for its or their own gross negligence or willful
misconduct. In no event shall the Lockbox Bank be liable for (i) losses or
delays resulting from force majeure, or other causes beyond the Lockbox Bank's
reasonable control; (ii) indirect, special or
4
<PAGE> 5
consequential damages; or, (iii) lost profits, or incidental or punitive
damages, regardless of the basis of the claim, whether in contract, tort, strict
liability or other legal or equitable theory and regardless of whether the
Lockbox Bank has been advised of the possibility of such damages.
6. Indemnity. The Provider agrees to pay, indemnify, and hold the
Lockbox Bank harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including, without limitation,
reasonable legal fees) with respect to the performance of this Agreement by the
Lockbox Bank or any of the Lockbox Bank's directors, officers, agents or
employees, unless arising from its or their own gross negligence or willful
misconduct. The indemnity provided in this paragraph shall extend to any items
deposited in the Lockbox Accounts which may be returned or otherwise not
collected, and all charges, commissions and fees related thereto (collectively,
the "Return Items"). The indemnity provided in this paragraph shall survive the
termination of this agreement pursuant to Section 13 below. The Lockbox Bank may
debit account #0700489922 of the Provider with the Lockbox Bank for any Returned
Items. To the extent there are insufficient funds in account #0700489922 to
cover such Returned Items, the Provider shall reimburse the Lockbox Bank for the
amount of any such Return Items within three Business Days of the Lockbox Bank's
demand for same. If the Provider has not reimbursed the Lockbox Bank for any
such Return Items within five Business Days after the Lockbox Bank's demand
therefor, the Lockbox Bank may then debit the Lockbox Accounts for the amount of
any such Return Items.
7. Fees. In compensation for the services rendered hereunder, the
Lockbox Bank shall be entitled to the fees described in the Lockbox Account
Agreement between the Lockbox Bank and the Provider. The Lockbox Bank's fees for
all the Lockboxes and the Lockbox Accounts shall be, at the Lockbox Bank's
option, debited account #0700489922 of the Provider with the Lockbox Bank or
billed directly to the Provider.
8. Lender Grant Coupled with Interest. The Lender hereby acknowledges
that the agreements made by it and the authorizations granted by it herein are
irrevocable and the authorizations granted and covenants made in Sections 1 and
3 are powers coupled with an interest.
9. Waiver of Right of Set-Off. The Lockbox Bank hereby waives, with
respect to all of its existing and future claims against the Borrower, the
Provider, the Lender or any Affiliate of any of them, except as provided in
Section 6 above, all existing and future rights of set-off and banker's Liens
against the Lender Lockbox, the Provider Lockbox, the Lender Lockbox Account or
the Provider Account and all items (and proceeds thereof) that come into its
possession in connection with the Lender Lockbox, the Provider Lockbox, the
Lender Lockbox Account or the Provider Account.
10. No Lien. The Lockbox Bank hereby represents, warrants and covenants
that as of the date of delivery of this Agreement, it has not received any
notice of any claim, Lien,
5
<PAGE> 6
security interest or other encumbrance relating to the Lender Lockbox Account or
the Provider Account.
11. Further Assurances. Each of the parties hereto agree to execute
such further documents, including, without limitation, forms relating to opening
the Lockboxes and the Lockbox Accounts at the Lockbox Bank, as may be necessary,
in the reasonable judgment of the Lockbox Bank, to further effectuate the
purposes of this Agreement.
12. Miscellaneous. This Agreement is binding upon the parties hereto
and their respective successors and assigns and shall inure to their benefit.
Neither this Agreement nor any provision hereof may be changed, amended,
modified or waived orally, but only by an instrument in writing signed by each
of the parties hereto. Subject to the Loan Agreement, this Agreement and the
Lender's rights and obligations herein shall be assignable by the Lender and its
successors and assigns. The Provider and the Borrower hereby acknowledge that
the Lender is granting its lenders a security interest in this Agreement and all
of the Lender's rights, title and interests hereunder. Any provision of this
Agreement which may prove unenforceable under any law or regulation shall not
affect the validity of any other provision hereof. This Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of New
York. This Agreement may be executed in any number of counterparts which
together shall constitute one and the same instrument.
13. Termination. Upon thirty days' advance written notice to the other
parties hereto, this Agreement may be terminated by (i) the Borrower; (ii) the
Provider only with the consent of the Lender (which consent shall not be
unreasonably withheld); (iii) the Lender; or (iv) the Lockbox Bank. In the event
of termination by the Lockbox Bank, the Provider hereby covenants that, within
such thirty day notice period, it will (x) enter into a substantially similar
depositary account agreement with a successor Lockbox Bank reasonably acceptable
to the Lender, and (y) deliver to all Obligors under the Loan Agreement a Notice
(as defined in the Receivables Transfer Agreement) with respect to such
successor Lockbox Bank.
14. Notices. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and be mailed, transmitted by facsimile, or delivered,
as to each party hereto (with a copy of each such notice and other communication
to the Lender), at its address set forth below or at such other address as shall
be designated by such party in a written notice to the parties hereto. Such
notice shall be delivered to:
if to the Lockbox Bank, to:
if by overnight courier: if by mail:
Union Bank of California, N.A. Union Bank of California, N.A.
Att: Commercial Customer Service Att: Commercial Customer Service -
1980 Saturn Street Corporate Markets
Monterey Park, CA 91755 P.O. Box 3840
6
<PAGE> 7
Los Angeles, CA 90051-3840
Attention: Corporate Markets
Facsimile No.: (800) 738-2329
Telephone No.: (800) 418-6466
if to the Lender, to:
Daiwa Healthco-2 LLC
c/o Lord Securities Corporation
Two Wall Street
New York, NY 10005
Attention: Richard L. Taiano
Facsimile No.: (212) 346-9012
with a copy to:
Daiwa Securities America Inc.
Financial Square, 32 Old Slip
New York, NY 10005-3538
Attention: Chief Operating Officer
Telephone No.: (212) 612-6289
Facsimile No.: (212) 612-7122
and with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Terry D. Novetsky, Esq.
Facsimile No.: (212) 836-6490
if to the Provider, to:
Physicians Clinical Laboratory, Inc.
3301 C Street, Suite 100E
Sacramento, California 95816
Attention: Wayne Cottrell
Facsimile No.: (916) 498-6031
with a copy by facsimile to:
J. Marvin Feigenbaum
Facsimile No.: (818) 841-2829
7
<PAGE> 8
if to the Borrower, to:
Bio-Cypher Funding Corp.
3301 C Street, Suite 100E
Sacramento, California 95816
Attention: Wayne Cottrell
Facsimile No.: (916) 498-6031
with a copy by facsimile to:
J. Marvin Feigenbaum
Facsimile No.: (818) 841-2829
with a copy to:
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, IL 60601
Attention: Stephen E. Hall
Facsimile No.: (312) 782-8585
All such notices and communications shall be effective (a) in the case of notice
by mail, on the earlier of the date of receipt or five Business Days after being
deposited in the mails, first-class postage prepaid, and (b) in the case of
notice by facsimile transmission, when sent, in each case respectively addressed
as aforesaid.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
UNION BANK OF CALIFORNIA, N.A.
By: _____________________________
Name:
Title:
8
<PAGE> 9
DAIWA HEALTHCO-2 LLC
By: _____________________________
Name:
Title:
PHYSICIANS CLINICAL LABORATORY, INC.
By: _____________________________
Name:
Title:
BIO-CYPHER FUNDING CORP.
By: _____________________________
Name:
Title:
9
<PAGE> 1
WARRANT AGREEMENT
between
PHYSICIANS CLINICAL LABORATORY, INC.
and
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
Dated as of September 30, 1997
<PAGE> 2
TABLE OF CONTENTS
PAGE
Section 1. Definitions.................................................. 1
Section 2. Form of Warrant; Execution; Registration..................... 3
Section 3. Transfer and Exchange of Warrants............................ 4
Section 4. Term of Warrants; Exercise of Warrants; Compliance with
Government Regulation........................................ 5
Section 5. Payment of Taxes............................................. 7
Section 6. Mutilated or Missing Warrant; Certificates................... 7
Section 7. Reservation of Warrant Shares................................ 8
Section 8. Adjustment of Exercise Price; Number of Warrant Shares and
Shares of Capital Stock Warrants Are Exercisable Into ....... 8
Section 9. Fractional Interests......................................... 15
Section 10. No Rights as Stockholders; Notices to Holders................ 15
Section 11. Payments in U.S. Currency.................................... 16
Section 12. Merger or Consolidation or Change of Name of Warrant Agent... 16
Section 13. Appointment of Warrant Agent................................. 17
Section 14. Change of Warrant Agent...................................... 19
Section 15. Notices...................................................... 19
Section 16. Cancellation of Warrants..................................... 20
Section 17. Supplements and Amendments................................... 20
Section 18. Successors................................................... 20
Section 19. Applicable Law............................................... 20
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<PAGE> 3
Section 20. Benefits of this Agreement................................... 21
Section 21. Counterparts................................................. 21
Section 22. Captions..................................................... 21
ii
<PAGE> 4
THIS WARRANT AGREEMENT, dated as of September 30, 1997 (the "Effective Date"),
is between Physicians Clinical Laboratory, Inc., a Delaware corporation
(together with its successor after the Effective Date, the "Company"), and U.S.
Trust Company of California, N.A. (the "Warrant Agent"), acting as agent for the
holders of certain existing equity interests in the Company as named on Schedule
1 hereto.
W I T N E S S E T H:
WHEREAS, on November 8, 1996, Physicians Clinical Laboratory, Inc. and
four of its affiliates, filed voluntary petitions in the United States
Bankruptcy Court for the Central District of California, Los Angeles Division
(the "Bankruptcy Court"), Case Number SV96- 23185-GM, seeking reorganization
under Chapter 11 of Title 11 of the United States Code; and
WHEREAS, by Order dated April 23, 1997, the Second Amended Joint Plan of
Reorganization of Physicians Clinical Laboratory, Inc. and its Joint Affiliated
Debtors, filed with the Bankruptcy Court on February 7, 1997 (the "Plan"), was
confirmed by the Bankruptcy Court; and
WHEREAS, the Plan contemplates that the Company will enter into certain
agreements, including this Agreement by which the Company has agreed to issue
warrants (subject to adjustment as provided herein) (the "Warrants") for the
purchase by the Holders of an aggregate of 131,579 shares of the Common Stock of
the Company, $.01 par value, which amount constitutes five percent (5%) of the
shares of Common Stock issued and outstanding on the date hereof, on a fully
diluted basis; and
WHEREAS, the Company desires to issue the Warrants, each of which entitles
the holder thereof to purchase one share of the Common Stock (each of said
shares of Common Stock deliverable upon exercise of the Warrants, a "Warrant
Share"); and
WHEREAS, the Company wishes the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act in connection with the
issuance, division, transfer, exchange and exercise of Warrants.
NOW, THEREFORE, in consideration of the foregoing and for the purpose of
defining the terms and provisions of the Warrants and the respective rights and
obligations thereunder of the Company and the registered owners of the Warrants
and any security into which they may be exchanged (the "Holders"), the Company
and the Warrant Agent hereby agree as follows:
Section 1. Definitions. The following terms, as used herein, have the following
meanings (all terms defined herein in the singular to have the correlative
meanings when used in the plural and vice versa):
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<PAGE> 5
1.1 "Agreement" means this Warrant Agreement, as the same may be amended,
modified or supplemented from time to time.
1.2 "Assets" has the meaning ascribed to such term in Section 8.1(c)
hereof.
1.3 "Bankruptcy Court" has the meaning ascribed to such term in the
preamble hereto.
1.4 "Business Day" means a day other than (a) a Saturday or Sunday, (b)
any day on which banking institutions located in the City of New York, New York
are required or authorized by law or by local proclamation to close or (c) any
day on which the New York Stock Exchange is closed.
1.5 "Commercially Reasonable Efforts" when used with respect to any
obligation to be performed or term or provision to be observed hereunder, means
such efforts as a prudent Person seeking the benefits of such performance or
action would make, use, apply or exercise to preserve, protect or advance its
rights or interests, provided, that such efforts do not require such Person to
incur a material financial cost or a substantial risk of material liability
unless such cost or liability (a) would customarily be incurred in the course of
performance or observance of the relevant obligation, term or provision, (b) is
caused by or results from the wrongful act or negligence of the Person whose
performance or observance is required hereunder or (c) is not excessive or
unreasonable in view of the rights or interests to be preserved, protected or
advanced. Such efforts may include, without limitation, the expenditure of such
funds and retention by such Person of such accountants, attorneys or other
experts or advisors as may be necessary or appropriate to effect the relevant
action; the undertaking of any special audit or internal investigation that may
be necessary or appropriate to effect the relevant action; and the commencement,
termination or settlement of any action, suit or proceeding involving such
Person to the extent necessary or appropriate to effect the relevant action.
1.6 "Common Stock" means the common stock, par value $.01, of the Company.
1.7 "Convertible Securities" has the meaning ascribed to such term in
Section 8.1(d) hereof.
1.8 "Current Market Price" has the meaning ascribed to such term in
Section 8.1(e) hereof.
1.9 "Effective Date" means September 30, 1997.
1.10 "Exercise Period" has the meaning ascribed to such term in Section
4.1 hereof.
2
<PAGE> 6
1.11 "Exercise Price" means $13.30 per share of Common Stock, based upon
an implied enterprise value for the Company of $90,000,000, as adjusted pursuant
to Section 8 hereof.
1.12 "Holders" has the meaning ascribed to such term in the preamble
hereto.
1.13 "NASD" has the meaning ascribed to such term in Section 4.2 hereof.
1.14 "Person" means a natural person, a corporation, a partnership, a
trust, a joint venture, any regulatory authority or any other entity or
organization.
1.15 "Plan" has the meaning ascribed to such term in the preamble hereto.
1.16 "Price Per Share" has the meaning ascribed to such term in Section
8.1(e)(ii) hereof.
1.17 "Rights" has the meaning ascribed to such term in Section 8.1(b)
hereof.
1.18 "SEC" means the United States Securities and Exchange Commission, or
any successor governmental agency or authority thereto.
1.19 "Subsidiary" has the meaning ascribed to such term in Section 8.1(c)
hereof.
1.20 "Transfer Agent" has the meaning ascribed to such term in Section 7
hereof.
1.21 "Warrant" has the meaning ascribed to such term in the preamble
hereto.
1.22 "Warrant Certificate" has the meaning ascribed to such term in
Section 2.1 hereof.
1.23 "Warrant Register" has the meaning ascribed to such term in Section
2.2 hereof.
1.24 "Warrant Share" has the meaning ascribed to such term in the preamble
hereto.
Section 2. Form of Warrant; Execution; Registration.
2.1 Form of Warrant; Execution of Warrants. The certificates evidencing
the Warrants (the "Warrant Certificates") shall be in registered form only and
shall be in the form set forth as Exhibit A hereto. The Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board, Chief
Executive Officer, President or one of its Vice Presidents. The signature of any
such officer on the Warrant Certificates may be manual or by facsimile. Any
Warrant Certificate may be signed on behalf of the Company by any person who, at
the actual date of the execution of such Warrant Certificate, shall be a proper
officer of the Company to sign such Warrant Certificate.
3
<PAGE> 7
Each Warrant Certificate shall be dated the date it is countersigned by the
Warrant Agent pursuant to Section 2.3 hereof.
2.2 Registration. The Warrant Certificates shall be numbered and shall be
registered on the books of the Company maintained at the principal office of the
Warrant Agent initially in Los Angeles, California (or such other place in the
continental United States as the Warrant Agent shall from time to time notify
the Company and the Holders in writing) (the "Warrant Register") as they are
issued. The Company and the Warrant Agent and the Warrant Agent shall be
entitled to treat the registered owner of any Warrant as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person.
2.3 Countersignature of Warrants. The Warrant Certificates shall be
countersigned by the Warrant Agent and shall not be valid for any purpose unless
so countersigned. Warrant Certificates may be countersigned, however, by the
Warrant Agent and may be delivered by the Warrant Agent notwithstanding that the
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature, issuance or delivery. The Warrant Agent shall, upon written
instructions of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Treasurer or the Secretary of the Company,
countersign, issue and deliver Warrant Certificates entitling the Holders
thereof to purchase not more than an aggregate of 131,579 Warrant Shares
(subject to adjustment pursuant to Section 8 hereof) and shall countersign,
issue and deliver Warrant Certificates as otherwise provided in this Agreement.
Section 3. Transfer and Exchange of Warrants. Subject to the terms hereof, the
Warrant Agent shall initially countersign, register in the Warrant Register and
deliver Warrants hereunder in accordance with the written instructions of the
Company. Subject to the terms hereof and the receipt of such documentation as
the Warrant Agent may reasonably require, the Warrant Agent shall thereafter
from time to time register the transfer of any outstanding Warrants upon the
Warrant Register upon surrender of the Warrant Certificate or Certificates
evidencing such Warrants duly endorsed or accompanied (if so required by it) by
a written instrument or instruments of transfer in form reasonably satisfactory
to the Warrant Agent, duly executed by the registered Holder or Holders thereof
or by the duly appointed legal representative thereof or by a duly authorized
attorney. Subject to the terms of this Agreement, each Warrant Certificate may
be exchanged for another Warrant Certificate or Certificates entitling the
Holder thereof to purchase a like aggregate number of Warrant Shares as the
Warrant Certificate or Certificates surrendered then entitles such Holder to
purchase. Any Holder desiring to exchange a Warrant Certificate or Certificates
shall make such request in writing delivered to the Warrant Agent and shall
surrender, duly endorsed or accompanied (if so required by the Warrant Agent) by
a written instrument or instruments of transfer in form reasonably satisfactory
to the Warrant Agent, the Warrant Certificate or Certificates to be so
exchanged. Upon registration of transfer, the Company shall issue and the
Warrant Agent shall countersign and deliver by certified mail a new Warrant
Certificate or Certificates to the persons entitled thereto.
4
<PAGE> 8
No service charge shall be made for any exchange or registration of
transfer of a Warrant Certificate or of Warrant Certificates, but the Company
may require payment of a sum sufficient to cover any stamp tax or other tax or
other governmental charge that is imposed in connection with any such exchange
or registration of transfer pursuant to Section 5 hereof.
By accepting the initial delivery, transfer or exchange of Warrants,
each Holder shall be deemed to agree to the terms of this Agreement as it may be
in effect from time to time, including any amendments or supplements duly
adopted in accordance with Section 17 hereof.
Section 4. Term of Warrants; Exercise of Warrants; Compliance with Government
Regulation.
4.1 Term of Warrants. Subject to the terms of this Agreement, each Holder
shall have the right, which may be exercised at any time from 9:00 a.m., New
York City time, on October 1, 1997 to 5:00 p.m., New York City time, on
September 30, 2002 (five years after the Effective Date) (the "Exercise Period")
to receive from the Company the number of Warrant Shares which the Holder may at
the time be entitled to receive upon exercise of such Warrants and payment of
the Exercise Price then in effect for such Warrant Shares, and the Warrant
Shares issued to a Holder upon exercise of its Warrants shall be duly
authorized, validly issued, fully paid, nonassessable and shall not have been
issued in violation of or subject to any preemptive rights. Each Warrant not
exercised prior to the expiration of the Exercise Period shall become void, and
all rights thereunder and all rights in respect thereof under this Agreement
shall cease as of the expiration of the Exercise Period.
4.2 Exercise of Warrants. During the Exercise Period, each Holder may,
subject to this Agreement, exercise from time to time some or all of the
Warrants evidenced by its Warrant Certificate(s) by (a) surrendering to the
Company at the principal office of the Warrant Agent such Warrant Certificate(s)
with the form of election to purchase on the reverse thereof duly filled in and
signed, which signature shall be guaranteed by a bank or trust company having an
office or correspondent in the United States or a broker or dealer which is a
member of a registered securities exchange or the National Association of
Securities Dealers, Inc. (the "NASD"), and (b) paying to the Warrant Agent for
the account of the Company the aggregate Exercise Price for the number of
Warrant Shares in respect of which such Warrants are exercised. Warrants shall
be deemed exercised on the date such Warrant Certificate(s) are surrendered to
the Warrant Agent and tender of payment of the aggregate Exercise Price is made.
Payment of the aggregate Exercise Price shall be made in cash by wire transfer
of immediately available funds to the Warrant Agent for the account of the
Company or by certified or official bank check or checks to the order of the
Company or by any combination thereof.
Upon the exercise of any Warrants in accordance with this Agreement,
the Company shall issue and cause to be delivered with all reasonable dispatch,
to or upon
5
<PAGE> 9
the written order of the Holder and in such name or names as the Holder may
designate, a certificate or certificates for the number of full Warrant Shares
issuable upon the exercise of such Warrants and shall take such other actions at
its sole expense as are necessary to complete the exercise of the Warrants
(including, without limitation, payment of any cash with respect to fractional
interests required under Section 9 hereof). The Warrant Agent shall have no
responsibility or liability for such issuance or the determination of the number
of Warrant Shares issuable upon such exercise. The certificate or certificates
representing such Warrant Shares shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become a holder
of record of such Warrant Shares as of the date the Warrants are exercised
hereunder. Each Warrant Share, when issued upon exercise of the Warrants, shall
be duly authorized, validly issued, fully paid and non-assessable and will not
have been issued in violation of or subject to any preemptive rights.
In the event that less than all of the Warrants evidenced by a
Warrant Certificate are exercised, the Holder thereof shall be entitled to
receive a new Warrant Certificate or Certificates as specified by such Holder
evidencing the remaining Warrant or Warrants, and the Warrant Agent is hereby
irrevocably authorized by the Company to countersign, issue and deliver the
required new Warrant Certificate or Certificates evidencing such remaining
Warrant or Warrants pursuant to the provisions of this Section 4.2 hereof and of
Section 3 hereof. The Company, whenever required by the Warrant Agent, will
supply the Warrant Agent with Warrant Certificates duly executed on behalf to
the Company for such purpose.
Upon delivery of the Warrant Shares issuable upon exercise in
accordance herewith and of any required new Warrant Certificates, the Company
shall direct the Warrant Agent by written order to cancel the Warrant
Certificates surrendered upon exercise. Such canceled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner permitted by applicable
laws and a certificate of destruction will be issued to the Company. The Warrant
Agent shall account promptly to the Company with respect to Warrants exercised
and concurrently pay to the Company all amounts received by the Warrant Agent
upon exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder available for inspection by the Holders
during normal business hours at its office. The Company shall at its sole
expense supply the Warrant Agent from time to time with such numbers of copies
of this Agreement as the Warrant Agent may reasonably request.
4.3 Compliance with Government Regulations; Qualification under Securities
Laws. The Company covenants that if following a due demand to exercise Warrants
any shares of Common Stock required to be reserved for purposes of exercise of
such Warrants require, under any federal or state law, registration with or
approval of any governmental authority before such shares may be issued upon
exercise, the Company will, unless the Company has received an opinion of
counsel to the effect that such registration is not then permitted by such laws,
use its Commercially Reasonable Efforts to cause such shares to be duly so
registered or approved, as the case may be; provided,
6
<PAGE> 10
however, that the Company shall not be required to prepare, file or cause to be
effective or maintain the effectiveness of any registration statement or obtain
any such approval which would require the Company to make premature disclosure
of facts as to which the Company is required for reasonable business purposes to
remain confidential, including, without limitation, facts regarding pending and
proposed corporate transactions, the Company's customers, operations, products
or competitive conditions, or other material non-public information regarding
the Company's business (collectively, "Non-Public Information"), and the Company
shall notify the Warrant Agent as to the periods of time within which it is in
the best interest of the Company and its stockholders to defer disclosure of
Non-Public Information until such information has reached a more advanced stage;
provided further that in no event shall such shares of Common Stock be issued,
and the exercise of all such Warrants shall be suspended, for the period from
the date of such due demand for exercise until such registration or approval is
in effect; provided further that the Exercise Period for such Warrants (but only
such Warrants) shall be extended one day for each day (or portion thereof) that
any such suspension is in effect. The Company shall promptly notify the Warrant
Agent of any such suspension, and the Warrant Agent shall have no duty,
responsibility or liability in respect of any shares of Common Stock issued or
delivered prior to its receipt of such notice. The Company shall promptly notify
the Warrant Agent of the termination of any such suspension, and such notice
shall set forth the number of days that the Exercise Period with respect to such
Warrants shall be extended as a result of such suspension.
Section 5. Payment of Taxes. The Company will pay all documentary stamp and
other like taxes, if any, attributable to the initial issuance and delivery of
the Warrants and the initial issuance and delivery of the Warrant Shares upon
the exercise of Warrants, provided, that the Company shall not be required to
pay any tax or taxes which may be payable in respect of any transfer of the
Warrants or involved in the issuance or delivery of any Warrant Shares in a name
other than that of the Holder of the Warrants being exercised, and the Warrant
Agent shall not register any such transfer or issue or deliver any Warrant
Certificate(s) or Warrant Shares unless or until the persons requesting the
registration or issuance shall have paid to the Warrant Agent for the account of
the Company the amount of such tax, if any, or shall have established to the
reasonable satisfaction of the Company that such tax, if any, has been paid.
Section 6. Mutilated or Missing Warrant; Certificates. In the event that any
Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company
shall issue, and at the direction of the Company by written order the Warrant
Agent shall countersign and deliver in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate or in lieu of and substitution
for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate
of like tenor and representing an equivalent right or interest, but only upon
receipt of evidence reasonably satisfactory to the Company and the Warrant Agent
of such loss, theft or destruction of such Warrant Certificate and an indemnity
or bond, if requested by the Company or the Warrant Agent, also reasonably
satisfactory to it. An applicant for such a substitute Warrant Certificate shall
also comply with such other reasonable procedures as the Company or the Warrant
Agent may reasonably require.
7
<PAGE> 11
Section 7. Reservation of Warrant Shares. There have been reserved, and the
Company shall at all times keep reserved, out of its authorized Common Stock,
free of all preemptive rights, a number of shares of Common Stock sufficient to
provide for the exercise of the rights of purchase represented by the
outstanding Warrants. The transfer agent for the Common Stock and every
subsequent or other transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the Warrants (each, a "Transfer Agent") will be
and are hereby irrevocably authorized and directed at all times to reserve such
number of authorized shares as shall be required for such purpose. The Company
will keep a copy of this Agreement on file with each Transfer Agent. The Warrant
Agent is hereby irrevocably authorized to requisition from time to time from the
Company or a Transfer Agent, as the case may be, the certificate for Warrant
Shares required to honor outstanding Warrants upon exercise thereof in
accordance with the terms of this Agreement. The Company will supply its
Transfer Agents with duly executed stock certificates for such purposes and will
itself provide or otherwise make available any cash which may be payable as
provided in Section 9 hereof. The Company will furnish to its Transfer Agents a
copy of all notices of adjustments and certificates related thereto, transmitted
to each Holder pursuant to Section 8.3 hereof. The Company will give the Warrant
Agent prompt notice of any change in any Transfer Agent or any change of address
of any Transfer Agent.
Before taking any action which would cause an adjustment pursuant to
Section 8 reducing the Exercise Price, the Company will take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
Section 8. Adjustment of Exercise Price; Number of Warrant Shares and Shares of
Capital Stock Warrants Are Exercisable Into. The number and kind of securities
purchasable upon the exercise of each Warrant, and the Exercise Price, shall be
subject to adjustment from time to time upon the happening of certain events, as
hereinafter described.
8.1 Mechanical Adjustments. The number of Warrant Shares purchasable upon
the exercise of each Warrant and the Exercise Price shall be subject to
adjustment as follows:
(a) Adjustment for Change in Capital Stock. Subject to paragraphs
(f) and (h) below, in case the Company shall (i) pay a dividend on its
outstanding shares of Common Stock in shares of Common Stock or make a
distribution of shares of Common Stock on its outstanding shares of Common
Stock, (ii) make a distribution on its outstanding shares of Common Stock in
shares of its capital stock other than Common Stock, (iii) subdivide its
outstanding shares of Common Stock into a greater number of shares of Common
Stock, (iv) combine its outstanding shares of Common Stock into a smaller number
of shares of Common Stock, or (v) issue, by reclassification of its shares of
Common Stock, other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the surviving entity), then the number of Warrant Shares purchasable
upon exercise of each Warrant immediately prior thereto shall be adjusted so
that the Holder of each Warrant shall be
8
<PAGE> 12
entitled to receive the kind and number of Warrant Shares or other securities of
the Company which such Holder would have owned or have been entitled to receive
upon the happening of any of the events described above had such Warrant been
exercised in full immediately prior to the happening of such event or any record
date with respect thereto. If a Holder is entitled to receive shares of two or
more classes of capital stock of the Company pursuant to the foregoing upon
exercise of Warrants, the allocation of the adjusted Exercise Price between such
classes of capital stock shall be determined reasonably and in good faith by the
Board of Directors of the Company. After such allocation, the exercise privilege
and the Exercise Price with respect to each class of capital stock shall
thereafter be subject to adjustment on terms substantially identical to those
applicable to Common Stock in this Section 8. An adjustment made pursuant to
this paragraph (a) shall become effective immediately after the record date for
such event or, if none, immediately after the effective date of such event. Such
adjustment shall be made successively whenever such an event occurs.
(b) Adjustment for Rights Issue. Subject to paragraphs (f) and (h)
below, in case the Company shall issue rights, options or warrants
(collectively, "Rights") to all holders of its outstanding Common Stock
entitling them to subscribe for or purchase shares of Common Stock at a Price
Per Share (as defined in paragraph (e) below) which is lower at the record date
mentioned below than the then Current Market Price (as defined in paragraph (e)
below) per share of the Common Stock, the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon exercise of each
Warrant by a fraction, the numerator of which shall be the number of shares of
the Common Stock outstanding on the date of issuance of such Rights plus the
additional Number of Shares (as defined in paragraph (e) below) of the Common
Stock offered for subscription or purchase in connection with such Rights and
the denominator of which shall be the number of shares of the Common Stock
outstanding on the date of issuance of such Rights plus the number of shares of
the Common Stock which the aggregate Proceeds (as defined in paragraph (e)
below) received or receivable by the Company upon exercise of such Rights would
purchase at the Current Market Price per share of the Common Stock at such
record date. Such adjustment shall be made whenever Rights are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive Rights.
(c) Adjustment for Other Distributions. Subject to paragraphs (f)
and (h) below, in case the Company shall distribute to all holders of its shares
of Common Stock (x) evidences of indebtedness or assets (excluding cash
dividends or distributions payable out of the consolidated earnings or surplus
legally available for such dividends or distributions and dividends or
distributions referred to in paragraphs (a) or (b) above) of the Company or any
corporation or other legal entity a majority of the voting equity or equity
interests of which are owned, directly or indirectly, by the Company (a
"Subsidiary"), or (y) shares of capital stock of a Subsidiary (such evidences of
indebtedness, assets and securities as set forth in clauses (x) and (y) above,
collectively, "Assets"), then in each case the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon the
exercise of each Warrant by a fraction, the
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numerator of which shall be the Current Market Price per share of Common Stock
on the date of such distribution and the denominator of which shall be such
Current Market Price per share of Common Stock less the fair value as of such
record date as determined reasonably and in good faith by the Board of Directors
of the Company of the portion of the Assets applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made, and
shall become effective on the date of distribution retroactive to the record
date for the determination of stockholders entitled to receive such
distribution.
(d) Adjustment for Common Stock and Convertible Securities Issue.
Subject to paragraphs (f) and (h) below, in case the Company shall issue shares
of its Common Stock, or securities convertible into, or exchangeable or
exercisable for Common Stock or Rights to subscribe for or purchase such
securities (collectively, the "Convertible Securities") (excluding the issuance
of (i) Common Stock or Convertible Securities issued in any of the transactions
described in paragraphs (a), (b) or (c) above or (ii) Warrant Shares issued upon
the exercise of the Warrants), at a Price Per Share of Common Stock, in the case
of the issuance of Common Stock, or at a Price Per Share of Common Stock
initially deliverable upon conversion or exercise or exchange of such
Convertible Securities, in each case, together with any other consideration
received by the Company in connection with such issuance, below the then Current
Market Price per share of Common Stock on the date the Company fixed the
offering, conversion or exercise or exchange price of such additional shares,
then the number of Warrant Shares thereafter purchasable upon the exercise of
each Warrant shall be determined by multiplying the number of Warrant Shares
theretofore purchasable upon exercise of each Warrant by a fraction, the
numerator of which shall be the total number of shares of Common Stock
outstanding on such date plus the additional number of shares of Common Stock
offered for subscription or purchase and the denominator of which shall be the
number of shares of Common Stock outstanding on such date plus the number of
shares of Common Stock which the aggregate Proceeds of the total amount of
Convertible Securities so offered would purchase at the Current Market Price per
share of Common Stock at such record date. In case the Company shall issue and
sell Convertible Securities for a consideration consisting, in whole or in part,
of property other than cash or its equivalent, then in determining the "Price
Per Share" of Common Stock and the "consideration received by the Company" for
purposes of the first sentence and the immediately preceding sentence of this
paragraph (d), the Board of Directors of the Company shall reasonably and in
good faith determine the fair value of such property. The determination of
whether any adjustment is required under this paragraph (d), by reason of the
sale and issuance of any Convertible Securities and the amount of such
adjustment, if any, shall be made at such time and not at the subsequent time of
issuance of shares of Common Stock upon the exercise, conversion or exchange of
Convertible Securities.
(e) Current Market Price; Price Per Share. (i) For the purpose of
any computation under Section 4.2 hereof or this Section 8.1, the "Current
Market Price" per share of Common Stock at any date shall be the average of the
daily closing prices for the 20 consecutive trading days preceding the date of
such computation. The closing price for each day shall be (x) if the Common
Stock shall be then listed or admitted to
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trading on the New York Stock Exchange, the closing price on the NYSE -
Consolidated Tape (or any successor composite tape reporting transactions on the
New York Stock Exchange) or, if such a composite tape shall not be in use or
shall not report transactions in the Common Stock, or if the Common Stock shall
be listed on a stock exchange other than the New York Stock Exchange, the last
reported sales price regular way or, in case no such reported sale takes place
on such day, the average of the closing bid and asked prices regular way for
such day, in each case on the principal national securities exchange on which
the shares of the Common Stock are listed or admitted to trading (which shall be
the national securities exchange on which the greatest number of shares of the
Common Stock have been traded during such 20 consecutive trading days) or (y) if
the Common Stock is not listed or admitted to trading, the average of the
closing bid and asked prices of the Common Stock in the over-the-counter market
as reported by The Nasdaq National Market, the Nasdaq SmallCap Market or any
comparable system. In the absence of one or more such quotations, the Current
Market Price per share of the Common Stock shall be determined reasonably and in
good faith by the Board of Directors of the Company.
(ii) For purposes of this Section 8.1, "Price Per Share" shall
be defined and determined according to the following formula:
P = R/N
where
P = Price Per Share;
R = the "Proceeds" received or receivable by the Company which
(x) in the case of shares of Common Stock is the total
amount received or receivable by the Company in
consideration for the issuance and sale of such shares;
(y) in the case of Rights or of Convertible Securities
with respect to shares of Common Stock, is the total
amount received or receivable by the Company in
consideration for the issuance and sale of Rights or such
Convertible Securities, plus the minimum aggregate amount
of additional consideration, other than the surrender of
such Convertible Securities, payable to the Company upon
exercise, conversion or exchange thereof; and (z) in the
case of Rights to subscribe for or purchase such
Convertible Securities, is the total amount received or
receivable by the Company in consideration for the
issuance and sale of such Rights plus the minimum
aggregate amount of additional consideration, other than
the surrender of such Convertible Securities, payable upon
the conversion or exchange or exercise of such Convertible
Securities, provided that in each case the proceeds
received or receivable by the Company shall be the net
cash proceeds after deducting therefrom (x) any
compensation paid or discount allowed in
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<PAGE> 15
the sale, underwriting or purchase thereof by underwriters
or dealers or others performing similar services, (y) the
fees and disbursements of counsel for the Company and of
its independent public accountants, and (z) the fees and
expenses of other Persons retained or employed by the
Company in connection with the Company's performance of or
compliance with this Agreement; and
N = the "Number of Shares," which (x) in the case of Common
Stock is the number of shares issued; and (y) in the case
of Rights or of Convertible Securities with respect to
shares of Common Stock, is the maximum number of shares of
Common Stock initially issuable upon exercise, conversion
or exchange thereof.
(f) When De Minimis Adjustment May Be Deferred. No adjustment in the
number of Warrant Shares purchasable hereunder shall be required unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the number of Warrant Shares purchasable upon the exercise of each Warrant,
provided that any adjustments which by reason of this paragraph (f) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest
one-thousandth of a Warrant Share and the nearest cent.
(g) Adjustment in Exercise Price. Whenever the number of Warrant
Shares purchasable upon the exercise of each Warrant is adjusted as herein
provided, the Exercise Price payable upon exercise of each Warrant immediately
prior to such adjustment shall be adjusted by multiplying such Exercise Price by
a fraction, the numerator of which shall be the number of Warrant Shares
purchasable upon the exercise of each Warrant immediately prior to such
adjustment and the denominator of which shall be the number of Warrant Shares
purchasable immediately thereafter.
(h) When No Adjustment Required. No adjustment in the number of
Warrant Shares purchasable upon the exercise of each Warrant need be made under
this Section 8.1 in connection with: (i) the issuance of Common Stock pursuant
to the Plan, (ii) shares of Common Stock, options, rights, warrants or other
securities issued pursuant to any plan adopted by the Company or its
subsidiaries for the benefit of employees, directors or consultants; (iii)
shares of Common Stock, options, rights, warrants or other securities issued
pursuant to any employment agreement or arrangement approved by the Board of
Directors of the Company between the Company and an officer or other employee of
the Company or a subsidiary of the Company, (iv) shares of Common Stock,
options, rights, warrants or other securities issued pursuant to any share
purchase rights plan adopted by the Company; (v) any issuance of shares of
Common Stock or securities convertible into or exchangeable for shares of Common
Stock pursuant to an underwritten public offering for a price per share of
Common Stock in the case of an issuance of shares of Common Stock, or for a
price per share of Common Stock initially deliverable upon conversion or
exchange of such securities, that is equal to or greater
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<PAGE> 16
than 95% of the Current Market price per share of the class of Common Stock on
the date the Company fixed the offering, conversion or exchange price of such
additional shares of Common Stock; (vi) sales of Common Stock pursuant to a plan
adopted by the Company for reinvestment of dividends or interest; or (vii)
shares of Common Stock issued to shareholders of any corporation that is
acquired by, merged into or made a part or subsidiary of the Company in an
arm's-length transaction. Additionally, no adjustment need be made if the
Company issues or distributes to each Holder of Warrants the shares, rights,
options, warrants, evidences of indebtedness, assets or other securities
referred to in those paragraphs which each Holder of Warrants would have been
entitled to receive had the Warrants been exercised for the number of Warrant
Shares for which Warrants are then exercisable prior to the happening of such
event or the record date with respect thereto. No adjustment in the number of
Warrant Shares will be made for a change in the par value of the shares of
Common Stock.
(i) Common Stock. For all purposes of this Agreement, the term
"shares of Common Stock" shall mean (i) the class of stock designated as the
Common Stock of the Company at the date of this Agreement, or (ii) any other
class of stock resulting from successive changes or reclassification of such
shares consisting solely of changes in par value, or from par value to no par
value, or from no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to this Section 8.1, the Holders shall
become entitled to purchase any securities of the Company other than shares of
Common Stock, thereafter the number of such other shares so purchasable upon
exercise of each Warrant and the Exercise Price of such shares shall be subject
to adjustment from time to time in a manner and on terms substantially identical
to the provisions with respect to the Warrant Shares contained in paragraphs (a)
through (h) above, and the provisions of this Agreement with respect to the
Warrant Shares shall apply on like terms to any such other securities.
(j) Expiration of Rights, etc. Upon the expiration of any Rights or
conversion or exchange or exercise rights, if any thereof shall not have been
exercised, the Exercise Price and the number of Warrant Shares purchasable upon
the exercise of each Warrant shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had it been originally adjusted
(or had the original adjustment not been required, as the case may be) as if (A)
the only shares of Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such Rights or conversion or
exchange or exercise rights and (B) such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually received by the
Company for the issuance, sale or grant of all of such Rights or conversion or
exchange or exercise rights whether or not exercised, provided that no such
readjustment shall have the effect of increasing the Exercise Price or
decreasing the number of Warrant Shares purchasable upon the exercise of each
Warrant by an amount in excess of the amount of the adjustment initially made in
respect of the issuance, sale or grant of such Rights or conversion or exchange
or exercise rights.
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<PAGE> 17
8.2 Voluntary Adjustment by the Company. The Company may at its sole
option, at any time during the term of the Warrants, reduce the then current
Exercise Price to any amount deemed appropriate by the Board of Directors of the
Company.
8.3 Notice of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Exercise Price of Warrant
Shares is adjusted, as herein provided, the Company shall cause the Warrant
Agent promptly to mail to each Holder, at the sole expense of the Company by
first class mail, postage prepaid, notice of such adjustment or adjustments and
shall deliver to the Warrant Agent a certificate of a firm of independent public
accountants (who may be the regular accountants employed by the Company) or a
certificate of an officer of the Company setting forth the number of Warrant
Shares purchasable upon the exercise of each Warrant and the Exercise Price of
Warrant Shares after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth in reasonable detail the
computations by which such adjustment was made. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same,
from time to time, to any Holder requesting an inspection thereof during
reasonable business hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any Holder to determine whether any facts exist which
may require any adjustment of the Exercise Price or the number of Warrant Shares
or other stock or property purchasable on exercise of Warrants, or with respect
to the nature or extent of any such adjustment when made, or with respect to the
method employed in making such adjustment.
8.4 Preservation of Purchase Rights upon Merger or Consolidation. In case
of any consolidation of the Company with or merger of the Company into another
entity, the Company or such successor entity shall execute and deliver to the
Warrant Agent an agreement, which shall be binding on the Holders, providing
that each Holder shall have the right thereafter upon payment of the Exercise
Price in effect immediately prior to such action (after giving effect to any
applicable adjustments under Section 8.1 hereof) to purchase upon exercise of
each Warrant the kind and amount of shares and other securities and property
(including cash) which such Holder would have owned or have been entitled to
receive after the happening of such consolidation or merger had such Warrant
been exercised immediately prior to such action. The Company shall at its sole
expense mail by first class mail, postage prepaid, to each Holder notice of the
execution of any such agreement. Such agreement shall provide for adjustments,
which shall be substantially identical to the adjustments provided for in this
Section 8. In addition, the Company shall not merge or consolidate with or into,
any other entity unless the successor entity (if not the Company), shall
expressly assume, by supplemental agreement reasonably satisfactory in form and
substance to the Warrant Agent in its sole judgement and executed and delivered
to the Warrant Agent, the due and punctual performance and observance of each
and every covenant and condition of this Agreement to be performed and observed
by the Company. The provisions of this Section 8.4 shall similarly apply to
successive consolidations or mergers. The Warrant Agent shall be under a good
faith duty and responsibility to determine the correctness of any provisions
contained in any such agreement relating to the kind or amount of shares of
stock or other securities or property receivable upon exercise of Warrants or
with respect to the
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<PAGE> 18
method employed and provided therein for any adjustments and shall be entitled
to rely upon the provisions contained in any such agreement.
8.5 Statement on Warrants. Irrespective of any adjustments in the Exercise
Price or the number or kind of shares purchasable upon the exercise of the
Warrants, Warrants theretofore or thereafter issued may continue to express the
same Exercise Price and number and kind of Warrant Shares as are stated in the
Warrants initially issuable pursuant to this Agreement.
Section 9. Fractional Interests. Neither the Company nor the Warrant Agent shall
be required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be exercised at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon such exercise
shall be computed on the basis of the aggregate number of Warrants so exercised.
If any fraction of a Warrant Share would, except for the provisions of this
Section 9, be issuable on the exercise of any Warrant, the Company shall pay an
amount in cash equal to the closing price for one share of Common Stock on the
date the Warrant Certificate is presented for exercise (determined in accordance
with the second sentence of Section 8.1(e)(i) hereof), multiplied by such
fraction.
Section 10. No Rights as Stockholders; Notices to Holders. Nothing contained in
this Agreement or in any of the Warrants shall be construed as conferring upon
the Warrant Agent or the Holders or their transferees the right to vote or to
receive dividends or to consent or to receive notice as stockholders in respect
of any meeting of stockholders for the election of directors of the Company or
any other matter, or any rights whatsoever as stockholders of the Company.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants; or
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of securities or assets (other than cash
dividends); or
(c) of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or
of the conveyance or transfer of a substantial portion of the properties
and assets of the Company for which approval of any stockholders of the
Company is required, or of any reclassification or change of Common Stock
issuable upon exercise of the Warrants (other than a change in par value,
or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or a tender offer or
exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
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<PAGE> 19
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each Holder at its address appearing on the Warrant Register, at
least twenty (20) days prior to the applicable record date hereinafter
specified, or promptly in the case of events for which there is no record date,
by first class mail, postage prepaid, a written notice stating (i) the date as
of which the holders of record of shares of Common Stock entitled to receive any
such rights, options, warrants or distribution are to be determined, or (ii) the
initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock, or (iii) the date on which any such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, as well as the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation, or winding up. The failure to give the
notice required by this Section 9 or any defect therein shall not affect the
legality or validity of any distribution, right, option, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation, winding up or action, or the vote upon any of the foregoing.
Section 11. Payments in U.S. Currency. All payments required to be made
hereunder shall be made in lawful money of the United States of America.
Section 12. Merger or Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporation trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 14 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, any of the
Warrant Certificates shall have been countersigned but not delivered, any such
successor to the Warrant Agent may adopt the countersignature of the original
Warrant Agent and deliver such Warrant Certificates so countersigned; and in
case at that time any of the Warrant Certificates shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrant
Certificates either in the name of the predecessor Warrant Agent or in the name
of the successor Warrant Agent; and in all such cases such Warrant Certificates
shall be fully valid and effective as provided therein and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrant Certificates shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver such Warrant Certificates so countersigned; and in case at that
time any of the Warrant Certificates shall not have been countersigned, the
Warrant Agent may countersign such Warrant Certificates either in its prior name
or in its changed name; and in all such cases such Warrant Certificates shall be
fully valid and effective as provided therein and in this Agreement.
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<PAGE> 20
Section 13. Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act as agent for the Company hereunder and in accordance with
the terms and conditions hereof, and the Warrant Agent hereby accepts such
appointment.
13.1 Concerning the Warrant Agent. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders, by their acceptance of
Warrant Certificates, shall be bound:
13.2 Correctness of Statements. The statements contained herein and in the
Warrant Certificates shall be taken as statements of the Company, and the
Warrant Agent assumes no responsibility for the correctness of any of the same
except such as described the Warrant Agent or action taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrant
Certificates or Warrants except as herein otherwise provided.
13.3 Breach of Covenants. The Warrant Agent shall not be responsible for
any failure of the Company to comply with any of the covenants contained in this
Agreement or in the Warrant to be complied with by the Company.
13.4 Performance of Duties. The Warrant Agent may execute and exercise any
of the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents and shall not be responsible for
the misconduct or negligence of any attorney or agent (which shall not include
an employee of the Warrant Agent) appointed with due care.
13.5 Reliance on Counsel. The Warrant Agent may consult at any time with
legal counsel satisfactory to it (who may be counsel for the Company), and the
Warrant Agent shall incur no liability or responsibility to the Company or to
any Holder in respect to any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
13.6 Proof of Actions Taken. Whenever in the performance of its duties
under this Agreement the Warrant Agent shall deem it necessary or desirable that
any fact or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed conclusively to
be proved and established by a certificate signed by the Chairman of the Board,
the President, a Vice President, the Treasurer or the Secretary of the Company
and delivered to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
13.7 Compensation. The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the performance
of its duties under this Agreement, to reimburse the Warrant Agent for all
reasonable expenses, taxes and governmental charges and other charges of any
kind and nature
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<PAGE> 21
incurred by the Warrant Agent in the performance of its duties under this
Agreement (including but not limited to legal fees and expenses), and to
indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent or any of its agents in the performance of its
duties under this Agreement, except as a result of the Warrant Agent's gross
negligence or willful misconduct as determined in a final judgment of a court of
competent jurisdiction and authority. The Company's obligations under this
Section 13.7 and any claim arising hereunder shall survive the resignation or
removal of the Warrant Agent and the termination or discharge of the Company's
obligations under this Agreement.
13.8 Legal Proceedings. The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or any one or more Holders shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred or any liabilities which may arise, but this
provision shall not affect the power of the Warrant Agent to take such action as
the Warrant Agent may consider proper, whether with or without any such security
or indemnity. All rights of action of any Holder under this Agreement or under
any of the Warrants may be enforced by the Warrant Agent without the possession
of any of the Warrant Certificates or the production thereof at any trial or
other proceeding relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as Warrant Agent,
and any recovery of judgment shall be for the ratable benefit of the Holders, as
their respective rights or interests may appear.
13.9 Other Transactions in Securities of Company. The Warrant Agent and
any stockholders, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or any other securities of the Company or
become pecuniarily interested in any transaction in which the Company may be
interested or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
13.10 Liability of Warrant Agent. The Warrant Agent shall act hereunder
solely as agent, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not be liable for anything which it may do or
refrain from doing in connection with this Agreement except for its own
negligence or bad faith.
13.11 Reliance on Documents. The Warrant Agent will not incur any lability
or responsibility to the Company or to any Holder for any action taken in
reliance on any notice, resolution, waiver, consent, order, certificate, or
other paper, document or instrument reasonably believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties.
13.12 Validity of Agreement. The Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Warrant Agent) or in
respect of the
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<PAGE> 22
validity or execution of any Warrant Certificate (except its countersignature
thereof) or any Warrant; nor shall the Warrant Agent by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any Warrant Shares (or other securities) to be issued pursuant to
this Agreement or any Warrant, or as to whether any Warrant Shares (or other
securities) will, when issued, be validly issued, fully paid and nonassessable,
or as to the Exercise Price or the number or amount of Warrant Shares or other
securities or any Assets or other property issuable upon exercise of any
Warrant.
13.13 Instructions from Company. The Warrant Agent is hereby authorized
and directed to accept instructions with respect to the performance of its
duties hereunder from the Chairman of the Board, the President, a Vice
President, the Treasurer or the Secretary of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and shall not
be liable for any action taken or suffered to be taken by it in accordance with
instructions of any such officer or officers.
Section 14. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company thirty
(30) days' notice in writing. The Warrant Agent may be removed by like notice to
the Warrant Agent and the Holders from the Company, such notice to specify the
date when removal shall become effective. If the Warrant Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after such removal or
notification in writing of such registration or incapacity by the resigning or
incapacitated Warrant Agent or by any Holder (who shall with such notice submit
his Warrant Certificate or Certificates for inspection by the Company), then any
Holder may apply to any court of competent jurisdiction for the appointment of a
successor to the Warrant Agent. Any successor Warrant Agent, whether appointed
by the Company or such a court, shall be a bank or trust Company, in good
standing, incorporated under the laws of the United States of America or any
state thereof and having at the time of its appointment as Warrant Agent a
combined capital and surplus of at least $50,000,000. After appointment and
acceptance of such appointment in writing, the successor Warrant Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent with out further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor Warrant Agent
any property at the time held by it hereunder, and shall execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
file any notice provided for in this Section 14, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Warrant Agent or the appointment of the successor Warrant Agent, as the case may
be. In the event of such resignation or removal, the successor Warrant Agent
shall mail, by first class mail, postage prepaid, to each Holder, written notice
of such removal or resignation and the name and address of such successor
Warrant Agent.
Section 15. Notices. Any notice pursuant to this Agreement by the Company or by
any Holder to the Warrant Agent, or by the Warrant Agent or by any Holder to the
19
<PAGE> 23
Company, shall be in writing and shall be delivered in person or by facsimile
transmission, or mailed first class, postage pre-paid, (a) to the Company, at
its offices at 3301 C Street, Sacramento, California 95816, Attention: J. Marvin
Feigenbaum, Telecopier No.: (916) 498-6011, (b) to the Warrant Agent at its
offices at 515 S. Flower Street, 28th Floor, Los Angeles, California 90071,
Attention: Sandee Parks, Telecopier No.: 213-488-1370. Each party hereto may
from time to time change the address to which notices to its are to be delivered
or mailed hereunder by notice to the other party.
Any notice mailed pursuant to this Agreement by the Company or the Warrant
Agent to the Holders shall be in writing and shall be mailed first class,
postage prepaid, or otherwise delivered, to such Holders at their respective
addresses in the Warrant Register. The initial address of each Holder shall be
as provided by the Company to the Warrant Agent. Any Holder may change its
address by notice to the Company and the Warrant Agent given in accordance with
this Section 15.
Section 16. Cancellation of Warrants. In the event the Company shall purchase or
otherwise acquire Warrants, the same shall thereupon be delivered to the Warrant
Agent and be cancelled by it and retired. The Warrant Agent shall cancel any
Warrant certificate surrendered for exchange, substitution, transfer or exercise
in whole or in part.
Section 17. Supplements and Amendments. The Company and the Warrant Agent may
from time to time supplement or amend this Agreement, the Warrants and the
Warrant Certificates without approval of any Holder, in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to comply with
the requirements of any national securities exchange or The Nasdaq National
Market or The Nasdaq Small-Cap Market (including but not limited to the deletion
of Section 8.2), or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Warrant Agreement may deem
necessary or desirable and which shall not be inconsistent with the provisions
of the Warrants and this Agreement. Any other supplement or amendment to this
Agreement may be made with the approval of the Holders of a majority of the then
outstanding Warrants; provided, however, that any such amendment or supplement
that (i) increases the Exercise Price; (ii) decreases the number of shares of
Common Stock issuable upon exercise of a Warrant; or (iii) shortens the period
during which the Warrants may be exercised shall require the consent of each
Holder of a Warrant affected thereby.
Section 18. Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of the Company or the Warrant Agent and shall bind and inure to the
benefit of their respective successors hereunder.
Section 19. Applicable Law. This Agreement and each Warrant issued hereunder
shall be governed by and construed in accordance with the laws of the State of
Delaware without giving effect to the principles of conflict of laws thereof.
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<PAGE> 24
Section 20. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person, corporation or other entity other than the
Company, the Warrant Agent or the Holders any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Warrant Agent, their respective
successors, and the Holders of the Warrants.
Section 21. Counterparts. This Agreement may be executed in any number of
counterparts; each of such counterparts shall for all purposes be deemed to be
an original, and all such counterparts shall together constitute but one and the
same instrument.
Section 22. Captions. The captions of the Sections and subsections of this
Agreement have been inserted for convenience only and shall have no substantive
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
PHYSICIANS CLINICAL LABORATORY, INC.,
By:
--------------------------------------
Name: J. Marvin Feigenbaum
Title: Chief Executive Officer
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
By:
--------------------------------------
Name: Sandee' Parks
Title: Vice President
21
<PAGE> 25
EXHIBIT A
FEDERAL AND CERTAIN STATE LAWS PROHIBIT THE COMPANY FROM BILLING FOR BUSINESS
REFERRED TO THE COMPANY BY A PHYSICIAN IF THE PHYSICIAN OR ANY OF THE
PHYSICIAN'S IMMEDIATE FAMILY MEMBERS HAVE CERTAIN PROSCRIBED RELATIONSHIPS
WITH THE COMPANY, INCLUDING OWNERSHIP OF ITS COMMON STOCK AND/OR OWNERSHIP
OF WARRANTS TO PURCHASE ITS COMMON STOCK. ACCORDINGLY, ANY RECIPIENT OF THIS
WARRANT WHO IS A PHYSICIAN IN A POSITION TO REFER BUSINESS TO THE COMPANY, OR
AN IMMEDIATE FAMILY MEMBER OF THE RECIPIENT OF THIS WARRANT WHO IS A
PHYSICIAN IN A POSITION TO REFER BUSINESS TO THE COMPANY, SHOULD NOT REFER
BUSINESS TO THE COMPANY.
FORM OF WARRANT CERTIFICATE
No. _____________________________ Warrants
Warrant Certificate
BIO-CYPHER LABORATORIES LTD.
This Warrant Certificate certifies that ________________, or registered assigns,
is the registered holder of __________________ Warrants (the "Warrants")
expiring at 5:00 p.m., New York City time, on September 30, 2002 (the
"Expiration Date"), to purchase Common Stock, $.01 par value per share (the
"Common Stock") of BIO-CYPHER LABORATORIES LTD., a Delaware corporation (the
"Company"). The Warrants may be exercised at any time from 9:00 a.m., New York
City time, on October 1, 1997 to 5:00 p.m., New York City time, on the
Expiration Date. Each Warrant entitles the holder upon exercise to receive from
the Company, if exercised before 5:00 p.m., New York City time, on the
Expiration Date, one fully paid and nonassessable share of Common Stock (a
"Warrant Share") at the Exercise Price (as defined in the Warrant Agreement
referred to on the reverse side hereof), payable in lawful money of the United
States of America, upon surrender of this Warrant Certificate and payment of the
Exercise Price, but only subject to the conditions set forth herein and in the
Warrant Agreement. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events as set forth in the Warrant Agreement.
WARRANTS NOT EXERCISED ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON
SEPTEMBER 30, 2002 SHALL BECOME VOID.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof, and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
A-1
<PAGE> 26
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.
IN WITNESS WHEREOF, BIO-CYPHER LABORATORIES LTD., has caused this Warrant
Certificate to be duly executed.
BIO-CYPHER LABORATORIES LTD.
By:
--------------------------------------
J. Marvin Feigenbaum, President
By:
--------------------------------------
Dated:
-----------------------------
Countersigned:
U.S. TRUST COMPANY OF CALIFORNIA, N.A., as Warrant Agent
By:
--------------------------------
Authorized Signatory
A-2
<PAGE> 27
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the Expiration Date, entitle the holder
on exercise to receive shares of Common Stock of the Company and are issued or
to be issued pursuant to a Warrant Agreement dated as of September 30, 1997 (the
"Warrant Agreement"), duly executed and delivered by the Company to the Warrant
Agent (as defined in the Warrant Agreement), which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company, the Warrant Agent and the
holders (the words "holder" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company. By accepting
initial delivery, transfer or exchange of this Warrant, the duly registered
holder shall be deemed to have agreed to the terms of the Warrant Agreement as
it may be in effect from time to time, including any amendments or supplements
duly adopted in accordance therewith.
The holder of Warrants evidenced by this Warrant Certificate may exercise
them by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon properly completed and executed, together with payment
of the Exercise Price in the manner described below at the office of the Warrant
Agent. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued to the holder hereof or its assignee a
new Warrant Certificate evidencing the number of Warrants not exercised.
Payment of the Exercise Price may be made in cash by wire transfer to the
Warrant Agent for the account of the Company or by certified or official bank
check or checks to the order of the Company or by any combination thereof.
The Warrant Agreement provides that upon the occurrence of certain events
the number of shares of Common Stock issuable upon the exercise of each Warrant,
and the Exercise Price of each Warrant, may, subject to certain conditions, be
adjusted. No fractions of a share of Common Stock will be issued upon the
exercise of any Warrant, but the Company shall pay the cash value thereof
determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant Agent
by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
A-3
<PAGE> 28
Upon due presentation for registration of transfer of this Warrant
Certificate, a new Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be issued to the
transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided in the Warrant Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-4
<PAGE> 29
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise this Warrant,
according to the terms and conditions hereof, to the extent of purchasing
____________ shares of Common Stock and hereby makes payment of $______________
in payment of the exercise price thereof. If the number of shares shall not be
all of the shares purchasable under this Warrant, a new Warrant Certificate for
the balance remaining shall be issued in the name of the undersigned or its
assignee as indicated on the Assignment Form.
Dated: _________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:___________________________________________________________________________
(please typewrite or print in block letters)
Address: ______________________________________________________________________
Signature:________________________________________________________________
Note: The signature must conform in all respects to name of
holder as specified on the face of this Warrant Certificate
Signature Guaranteed:
A-5
<PAGE> 30
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
Name:___________________________________________________________________________
(please typewrite or print in block letters)
Address: ______________________________________________________________________
its right to purchase __________ shares of Common Stock represented by this
Warrant and does hereby irrevocably constitute and appoint __________ Attorney,
to transfer the same on the books of the Company, with full power of
substitution in the premises.
Dated:_______________
________________________ Signature:__________________________________________
Social Security or other Note: The signature
identifying number of must conform in all
holder respects to name of holder as
specified on the face of this
Warrant Certificate
Signature Guaranteed:
A-6
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PHYSICIANS CLINICAL LABORATORY, INC.
AMENDED AND RESTATED
BYLAWS
Effective as of
September 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PHYSICIANS CLINICAL LABORATORY, INC.
AMENDED AND RESTATED BYLAWS
STOCKHOLDERS' MEETINGS
1. Time and Place of Meetings. Except as provided in Bylaw , all meetings
of the stockholders for the election of Directors or for any other purpose will
be held at such time and place, within or without the State of Delaware, as may
be designated by the Board or, in the absence of a designation by the Board of
Directors of the Corporation (the "Board), the Chairman, the President or the
Secretary, and stated in the notice of meeting. The Board may postpone and
reschedule any previously scheduled annual or special meeting of the
stockholders.
2. Annual Meeting. Annual meetings of the stockholders for the election of
Directors and for the transaction of such other business as may properly come
before the meeting shall be held on such date and at such time and place, either
within or without the State of Delaware, as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting. Meetings
of stockholders for any other purpose may be held at such time and place, within
or without the State of Delaware, as shall be stated in the notice of the
meeting or in duly executed waiver of notice thereof.
3. Special Meetings. Special meetings of the stockholders may be called
only by (a) the Chairman of the Board ("Chairman") or (b) the Secretary of the
Corporation within 10 calendar days after receipt of the written request of (i)
a majority of the total number of Directors that the Corporation would have if
there were no vacancies, whether or not equal to the actual number of Directors
serving at that time ("Whole Board"), or (ii) the holders of record of at least
10% of the Voting Stock. Any request by a majority of the Whole Board or the
holders of record of at least 10% of the Voting Stock must be sent to the
Chairman and the Secretary and must state the purpose or purposes of the
proposed meeting. As used in these Bylaws, "Voting Stock" means stock of the
Corporation of any class or series entitled to vote generally in the election of
Directors.
4. Notice of Meetings. Written notice of every meeting of the
stockholders, stating the place, date, and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
will be given not less than 10 nor more than 60 calendar days before the date of
the meeting to each stockholder of record entitled to vote at that meeting,
except as otherwise provided herein or required by law. When a meeting is
adjourned to another place, date or time, written notice need not be given of
the adjourned meeting if the place, date and time thereof are announced at the
meeting at which the adjournment is taken; provided, however, that if the
adjournment is for more than 30 calendar days, or if after the adjournment a new
record date is fixed for the adjourned meeting, written notice of the place,
date and time of the adjourned meeting must be given
1
<PAGE> 3
in conformity herewith. At any adjourned meeting, any business may be transacted
which properly could have been transacted at the original meeting.
5. Inspectors. The Board may appoint one or more inspectors of election to
act as judges of the voting and to determine those entitled to vote at any
meeting of the stockholders, or any adjournment thereof, in advance of such
meeting. The Board may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting of stockholders, the presiding officer of the meeting may
appoint one or more substitute inspectors.
6. Quorum. Except as provided by law, the holders of a majority of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, will constitute a quorum at all meetings of the
stockholders for the transaction of business thereat. If, however, such quorum
is not present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, will have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than 30 days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
7. Voting. Except as otherwise provided by law or by the Certificate of
Incorporation, each stockholder will be entitled at every meeting of the
stockholders to one vote for each share of stock having voting power standing in
the name of such stockholder on the books of the Corporation on the record date
for the meeting and such votes may be cast either in person or by written proxy.
Every proxy must be duly executed and filed with the Secretary. A stockholder
may revoke any proxy that is not irrevocable by attending the meeting and voting
in person or by filing an instrument in writing revoking the proxy or another
duly executed proxy bearing a later date with the Secretary. The vote upon any
question brought before a meeting of the stockholders may be by voice vote,
unless otherwise required by the Certificate of Incorporation or these Bylaws or
unless the Chairman or the holders of a majority of the outstanding shares of
all classes of stock entitled to vote thereon present in person or by proxy at
such meeting otherwise determine. Every vote taken by written ballot will be
counted by the inspectors of election (if such are appointed). When a quorum is
present at any meeting, the affirmative vote of the holders of a majority of the
stock present in person or represented by proxy at the meeting and entitled to
vote on the subject matter and which has actually been voted will be the act of
the stockholders, except in the election of Directors or as otherwise provided
in these Bylaws, the Certificate of Incorporation, or by law.
8. Order of Business. (a) The Chairman, or such other officer of the
Corporation designated by a majority of the Whole Board, will call meetings of
the stockholders to order and will act as presiding officer thereof. Unless
otherwise determined by the Board prior to the meeting, the presiding officer of
the meeting of the stockholders
2
<PAGE> 4
will also determine the order of business and have the authority in his or her
sole discretion to regulate the conduct of any such meeting, including without
limitation by imposing restrictions on the persons (other than stockholders of
the Corporation or their duly appointed proxies) who may attend any such
stockholders' meeting, by ascertaining whether any stockholder or his proxy may
be excluded from any meeting of the stockholders based upon any determination by
the presiding officer, in his sole discretion, that any such person has unduly
disrupted or is likely to disrupt the proceedings thereat, and by determining
the circumstances in which any person may make a statement or ask questions at
any meeting of the stockholders.
(b) At any annual meeting of the stockholders, only such business will be
conducted or considered as is properly brought before the meeting. To be
properly brought before an annual meeting, business must be (i) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board in accordance with Bylaw , (ii) otherwise properly brought before the
meeting by the presiding officer or by or at the direction of a majority of the
Whole Board, or (iii) otherwise properly requested to be brought before the
meeting by a stockholder of the Corporation in accordance with Bylaw 8(c).
(c) For business to be properly requested by a stockholder to be brought
before an annual meeting, the stockholder must (i) be a stockholder of the
Corporation of record at the time of the giving of the notice for such annual
meeting provided for in these Bylaws, (ii) be entitled to vote at such meeting,
and (iii) have given timely notice thereof in writing to the Secretary. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 50 calendar
days prior to the annual meeting; provided, however, that in the event public
announcement of the date of the annual meeting is not made at least 60 calendar
days prior to the date of the annual meeting, notice by the stockholder to be
timely must be so received not later than the close of business on the 10th
calendar day following the day on which public announcement is first made of the
date of the annual meeting. A stockholder's notice to the Secretary must set
forth as to each matter the stockholder proposes to bring before the annual
meeting (A) a description in reasonable detail of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (B) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business and the
beneficial owner, if any, on whose behalf the proposal is made, (C) the class
and number of shares of the Corporation that are owned beneficially and of
record by the stockholder proposing such business and by the beneficial owner,
if any, on whose behalf the proposal is made, and (D) any material interest of
such stockholder proposing such business and the beneficial owner, if any, on
whose behalf the proposal is made in such business. If Common Stock is
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), a stockholder must also comply with all applicable
requirements of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Bylaw 8(c). For purposes of this Bylaw
8(c) and Bylaw 13, "public announcement" means disclosure in a press release
reported by the Dow Jones News Service, Associated Press, or comparable national
news service or in a document publicly filed by the Corporation with the
Securities and Exchange
3
<PAGE> 5
Commission pursuant to Sections 13, 14, or 15(d) of the Securities Exchange Act
of 1934, as amended, or furnished to stockholders. Nothing in this Bylaw 8(c)
will be deemed to affect any rights of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended.
(d) At a special meeting of stockholders, only such business may be
conducted or considered as is properly brought before the meeting. To be
properly brought before a special meeting, business must be (i) specified in the
notice of the meeting (or any supplement thereto) given by or at the direction
of the Chairman or a majority of the Whole Board in accordance with Bylaw or
(ii) otherwise properly brought before the meeting by the presiding officer or
by or at the direction of a majority of the Whole Board.
(e) The determination of whether any business sought to be brought before
any annual or special meeting of the stockholders is properly brought before
such meeting in accordance with this Bylaw 8 will be made by the presiding
officer of such meeting. If the presiding officer determines that any business
is not properly brought before such meeting, he or she will so declare to the
meeting and any such business will not be conducted or considered.
DIRECTORS
9. Function. The business and affairs of the Corporation will be managed
under the direction of its Board.
10. Number, Election, and Terms. (a) Subject to any minimum and maximum
number of authorized Directors that may be provided in the Certificate of
Incorporation, the authorized number of Directors may be determined from time to
time only by a vote of a majority of the Whole Board. The Directors will serve
for terms of one year until the next annual meeting and until their respective
successors are elected and qualified. The number of directors initially shall be
five.
(b) Notwithstanding anything contained in the Certificate of Incorporation
or these Bylaws to the contrary, the term of any Director who is also an officer
of the Corporation will terminate automatically, without any further action on
the part of the Board or such Director, upon the termination for any reason of
such Director in his or her capacity as an officer of the Corporation.
Notwithstanding anything contained in the Certificate of Incorporation or these
Bylaws to the contrary, the affirmative vote of at least 662/3% of the Directors
then in office will be required to amend, repeal, or adopt any provision
inconsistent with this Bylaw 10(b).
11. Newly Created Directorships and Vacancies. Newly created directorships
resulting from any increase in the number of Directors and any vacancies on the
Board resulting from death, resignation, disqualification, removal, or other
cause will be filled solely by the affirmative vote of a majority of the
remaining Directors then in office, even though less than a quorum of the Board,
or by a sole remaining Director. Any Director
4
<PAGE> 6
elected in accordance with the preceding sentence will hold office until the
next annual meeting of the Corporation and until his or her successor is elected
and qualified. No decrease in the number of Directors constituting the Board
will shorten the term of an incumbent Director.
12. Removal. At any annual meeting or special meeting of the stockholders,
the notice of which states that the removal of a Director or Directors is among
the purposes of the meeting, the affirmative vote of the holders of record of at
least 662/3% of the Voting Stock of the Corporation may remove such Director or
Directors from office.
13. Nominations of Directors; Election. (a) Only persons who are nominated
in accordance with the following procedures will be eligible for election at a
meeting of stockholders as Directors of the Corporation.
(b) Nominations of persons for election as Directors of the Corporation
may be made only at an annual meeting of stockholders (i) by or at the direction
of the Board or (ii) by any stockholder who is a stockholder of record at the
time of giving of notice provided for in this Bylaw 13, who is entitled to vote
for the election of Directors at such meeting, and who complies with the
procedures set forth in this Bylaw 13. All nominations by stockholders must be
made pursuant to timely notice in proper written form to the Secretary.
(c) To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
50 calendar days prior to the annual meeting of stockholders; provided, however,
that in the event that public announcement of the date of the annual meeting is
not made at least 60 calendar days prior to the date of the annual meeting,
notice by the stockholder to be timely must be so received no later than the
close of business on the 10th calendar day following the day on which public
announcement is first made of the date of the annual meeting. To be in proper
written form, such stockholder's notice must set forth or include (i) the name
and address, as they appear on the Corporation's books, of the stockholder
giving the notice and of the beneficial owner, if any, on whose behalf the
nomination is made; (ii) a representation that the stockholder giving the notice
is a holder of record of stock of the Corporation entitled to vote at such
annual meeting and intends to appear in person or by proxy at the annual meeting
to nominate the person or persons specified in the notice; (iii) the class and
number of shares of stock of the Corporation owned beneficially and of record by
the stockholder giving the notice and by the beneficial owner, if any, on whose
behalf the nomination is made; (iv) a description of all arrangements or
understandings between or among any of (A) the stockholder giving the notice,
(B) the beneficial owner on whose behalf the notice is given, (C) each nominee,
and (D) any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the stockholder giving the
notice; (v) the name, age, residence address and business address of each
nominee; (vi) the principal occupation or employment of each nominee; (vi) the
class, series and number of shares of stock of the Corporation each nominee owns
of record or beneficially, if any; (viii) such other information regarding each
nominee proposed by the stockholder giving the notice as would be required to be
included
5
<PAGE> 7
in a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had the nominee been nominated, or intended to be nominated,
by the Board; and (ix) the signed consent of each nominee to serve as a Director
of the Corporation if so elected. At the request of the Board, any person
nominated by the Board for election as a Director must furnish to the Secretary
that information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee. The presiding officer of any annual
meeting will, if the facts warrant, determine that a nomination was not made in
accordance with the procedures prescribed by this Bylaw 13, and if he or she
should so determine, he or she will so declare to the meeting and the defective
nomination will be disregarded. A stockholder must also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
this Bylaw 13.
14. Resignation. Any Director may resign at any time by giving written
notice of his resignation to the Chairman or the Secretary. Any resignation will
be effective upon actual receipt by any such person or, if later, as of the date
and time specified in such written notice.
15. Regular Meetings. Regular meetings of the Board may be held
immediately after the annual meeting of the stockholders and at such other time
and place either within or without the State of Delaware as may from time to
time be determined by the Board. Notice of regular meetings of the Board need
not be given.
16. Special Meetings. Special meetings of the Board may be called by the
Chairman or the President on one day's notice to each Director by whom such
notice is not waived, given either personally or by telephone, telegram, telex,
facsimile, or similar medium of communication, and will be called by the
Chairman or the President in like manner and on like notice on the written
request of three or more Directors. Special meetings of the Board may be held at
such time and place either within or without the State of Delaware as is
determined by the Board or specified in the notice of any such meeting.
17. Quorum. At all meetings of the Board, a majority of the total number
of Directors then in office will constitute a quorum for the transaction of
business. Except for the designation of committees as hereinafter provided and
except for actions required by these Bylaws or the Certificate of Incorporation
to be taken by a majority of the Whole Board, the act of a majority of the
Directors present at any meeting at which there is a quorum will be the act of
the Board. If a quorum is not present at any meeting of the Board, the Directors
present thereat may adjourn the meeting from time to time to another place,
time, or date, without notice other than announcement at the meeting, until a
quorum is present.
18. Participation in Meetings by Telephone Conference. Members of the
Board or any committee designated by the Board may participate in a meeting of
the Board or any such committee, as the case may be, by means of telephone
conference or similar means by which all persons participating in the meeting
can hear each other, and such participation in a meeting will constitute
presence in person at the meeting.
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19. Committees. (a) The Board, by resolution or resolutions passed by a
majority of the Whole Board, may designate one or more committees, each
committee to consist of one or more of the Directors of the Corporation. Each
committee, to the extent provided in such resolution or resolutions or in these
Bylaws, will have and may exercise to the fullest extent permitted by law the
powers of the Board of Directors in the management of the business and affairs
of the Corporation, and may authorize the affixing of the seal of the
Corporation to all papers which may require it. Each committee will have the
name determined from time to time by resolution of the Board.
(b) Each committee of the Board will serve at the pleasure of the Board or
as may be specified in any resolution from time to time adopted by the Board.
The Board, by majority of the Whole Board, may modify the functions of any
committee at any time. The Board may designate one or more Directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In lieu of such action by the Board, in
the absence or disqualification of any member of a committee of the Board, the
members thereof present at any such meeting of such committee and not
disqualified from voting, whether or not they constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member.
(c) Unless otherwise prescribed by the Board, a majority of the members of
any committee of the Board will constitute a quorum for the transaction of
business, and the act of a majority of the members present at a meeting at which
there is a quorum will be the act of such committee. Each committee of the Board
may prescribe its own rules for calling and holding meetings and its method of
procedure, subject to any rules prescribed by the Board. Each committee of the
Board must keep regular minutes of its proceedings and shall report the same to
the Board when required.
20. Compensation. The Board may establish the compensation for, and
reimburse of the expenses of, Directors for membership on the Board and on
committees of the Board, attendance at meetings of the Board or committees of
the Board, and for other services by Directors to the Corporation or any of its
majority-owned subsidiaries. Directors are not precluded from serving the
Corporation in any other capacity and receiving compensation for those services.
21. Rules. The Board may adopt rules and regulations for the conduct of
meetings and the oversight of the management of the affairs of the Corporation.
NOTICES
22. Generally. Except as otherwise provided by law, these Bylaws, or the
Certificate of Incorporation, whenever by law or under the provisions of the
Certificate of Incorporation or these Bylaws notice is required to be given to
any Director or stockholder, it will not be construed to require personal
notice, but such notice may be given in writing, by mail, addressed to such
Director or stockholder, at the address of such Director or
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stockholder as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice will be deemed to be given at the time when the
same is deposited in the United States mail. Notice to Directors may also be
given by telephone, telegram, telex, facsimile, or similar medium of
communication or as otherwise may be permitted by these Bylaws.
23. Waivers. Whenever any notice is required to be given by law or under
the provisions of the Certificate of Incorporation or these Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time of the event for which notice is to be given,
will be deemed equivalent to such notice. Attendance of a person at a meeting
will constitute a waiver of notice of such meeting, except when the person
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
CHAIRMAN OF THE BOARD
24. Chairman. The Chairman of the Board shall be elected by the Board and
will, other than as provided in Bylaw 8, preside at all meetings of the Board
and the stockholders and shall see that all orders and resolutions of the Board
and its committees are carried into effect. Except as limited by resolution of
the Board, the Chairman shall have authority to execute all contracts, bonds,
mortgages and other instruments of the Corporation.
OFFICERS
25. Generally. The officers of the Corporation will be elected by the
Board and will consist of a Chief Executive Officer, a President (who may also
be the Chief Executive Officer), a Secretary, and a Treasurer. The Board of
Directors may also choose any or all of the following: one or more Vice
Chairmen, one or more Assistants to the Chairman, one or more Vice Presidents
(who may be given particular designations with respect to authority, function,
or seniority), and such other officers as the Board may from time to time
determine. Notwithstanding the foregoing, by specific action the Board may
authorize the Chairman or the Chief Executive Officer to appoint any person to
any office other than Chief Executive Officer, President, Secretary, or
Treasurer. The Chairman or the Chief Executive Officer may appoint additional
subordinate officeholders, who shall not be corporate officers, to such
positions, with such limited authority and such titles, as the Chairman or the
Chief Executive Officer may determine. Any person may hold any number of
offices. Any of the offices may be left vacant from time to time as the Board
may determine. In the case of the absence or disability of any officer of the
Corporation or for any other reason deemed sufficient by a majority of the
Board, the Board may delegate the absent or disabled officer's powers or duties
to any other officer or to any Director.
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26. Compensation. The Board shall fix, or delegate to a committee of the
Board the power to fix, the compensation of all executive officers of the
Corporation. The Board shall fix, or delegate to a committee of the Board or an
officer of the Corporation the power to fix, the compensation of other officers
and agents of the Corporation.
27. Succession. The officers of the Corporation will hold office until
their successors are elected and qualified. Any officer may be removed at any
time by the affirmative vote of a majority of the Whole Board. Any vacancy
occurring in any office of the Corporation may be filled by the Board or by the
Chairman as provided in Bylaw 25.
28. Authority and Duties. Each of the officers of the Corporation will
have such authority and will perform such duties as are customarily incident to
their respective offices or as may be specified from time to time by the Board.
STOCK
29. Certificates. Certificates representing shares of stock of the
Corporation will be in such form as is determined by the Board, subject to
applicable legal requirements. Each such certificate will be numbered and its
issuance recorded in the books of the Corporation, and such certificate will
exhibit the holder's name and the number of shares and will be signed by, or in
the name of, the Corporation by the Chairman and the Secretary or an Assistant
Secretary, or the Treasurer or an Assistant Treasurer. Any or all of the
signatures and the seal of the Corporation, if any, upon such certificates may
be facsimiles, engraved, or printed. Such certificates may be issued and
delivered notwithstanding that the person whose facsimile signature appears
thereon may have ceased to be such officer at the time the certificates are
issued and delivered.
30. Classes of Stock. The designations, preferences, and relative
participating, optional, or other special rights of the various classes of stock
or series thereof, and the qualifications, limitations, or restrictions thereof,
will be set forth in full or summarized on the face or back of the certificates
which the Corporation issues to represent its stock or, in lieu thereof, such
certificates will set forth the office of the Corporation from which the holders
of certificates may obtain a copy of such information.
31. Lost, Stolen, or Destroyed Certificates. The Secretary may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact, satisfactory
to the Secretary, by the person claiming the certificate of stock to be lost,
stolen, or destroyed. As a condition precedent to the issuance of a new
certificate or certificates, the Secretary may require the owners of such lost,
stolen, or destroyed certificate or certificates to give the Corporation a bond
in such sum and with such surety or sureties as the Secretary may direct as
indemnity against any claims that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed or
the issuance of the new certificate.
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32. Record Dates. (a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board may fix a record date, which will not be more
than 60 nor less than 10 calendar days before the date of such meeting. If no
record date is fixed by the Board, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders will be at the
close of business on the calendar day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the calendar day
next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of the
stockholders will apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion, or exchange of stock, or for the purpose of any other lawful
action, the Board may fix a record date, which record date will not be more than
60 calendar days prior to such action. If no record date is fixed, the record
date for determining stockholders for any such purpose will be at the close of
business on the calendar day on which the Board adopts the resolution relating
thereto.
(c) The Corporation will be entitled to treat the person in whose name any
share of its stock is registered as the owner thereof for all purposes, and will
not be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not the Corporation has notice
thereof, except as expressly provided by applicable law.
INDEMNIFICATION
33. Damages and Expenses. (a) Without limiting the generality or effect of
Article Tenth of the Certificate of Incorporation, the Corporation will to the
fullest extent permitted by applicable law as then in effect indemnify any
person (an "Indemnitee") who is or was involved in any manner (including without
limitation as a party or a witness) or is threatened to be made so involved in
any threatened, pending, or completed investigation, claim, action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (including
without limitation any action, suit, or proceeding by or in the right of the
Corporation to procure a judgment in its favor) (a "Proceeding") by reason of
the fact that such person is or was or had agreed to become a Director, officer,
employee, or agent of the Corporation, or is or was serving at the request of
the Board or an officer of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
entity, whether for profit or not for profit, or anything done or not by such
person in any such capacity, against all expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by such person in connection with such proceeding. Such indemnification
will be a contract right and will include the right to receive payment in
advance of any expenses incurred by an
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Indemnitee in connection with such Proceeding upon receipt of an undertaking by
or on behalf of such person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized by this Bylaw 33 or otherwise.
(b) The right of indemnification provided in this Bylaw 33 will not be
exclusive of any other rights to which any person seeking indemnification may
otherwise be entitled and will be applicable to Proceedings commenced or
continuing after the adoption of this Bylaw 33, whether arising from acts or
omissions occurring before or after such adoption.
(c) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Bylaw 33 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such person.
34. Insurance, Contracts, and Funding. The Corporation may purchase and
maintain insurance to protect itself and any Indemnitee against any expenses,
judgments, fines, and amounts paid in settlement or incurred by any Indemnitee
in connection with any Proceeding referred to in Bylaw 33 or otherwise, to the
fullest extent permitted by applicable law as then in effect. The Corporation
may enter into contracts with any person entitled to indemnification under Bylaw
33 or otherwise, and may create a trust fund, grant a security interest, or use
other means (including without limitation a letter of credit) to ensure the
payment of such amounts as may be necessary to effect indemnification as
provided in Bylaw 33.
GENERAL
35. Fiscal Year. The fiscal year of the Corporation will end the last day
of December of each year or such other date as may be fixed from time to time by
the Board.
36. Seal. The Board may adopt a corporate seal and use the same by causing
it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
37. Reliance upon Books, Reports, and Records. Each Director, each member
of a committee designated by the Board, and each officer of the Corporation
will, in the performance of his or her duties, be fully protected in relying in
good faith upon the records of the Corporation and upon such information,
opinions, reports, or statements presented to the Corporation by any of the
Corporation's officers or employees, or committees of the Board, or by any other
person or entity as to matters the Director, committee member, or officer
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
38. Time Periods. In applying any provision of these Bylaws that requires
that an act be done or not be done a specified number of days prior to an event
or that an act be done during a period of a specified number of days prior to an
event, calendar days will be
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used unless otherwise specified, the day of the doing of the act will be
excluded, and the day of the event will be included.
39. Amendments. Except as otherwise provided by law or by the Certificate
of Incorporation or these Bylaws, these Bylaws or any of them may be amended in
any respect or repealed at any time, either (a) at any meeting or by written
consent of stockholders, provided that any amendment or supplement proposed to
be acted upon at any such meeting has been described or referred to in the
notice of such meeting, or (b) at any meeting or by written consent of the
Board, provided that no amendment adopted by the Board may vary or conflict with
any amendment adopted by the stockholders.
40. Certain Defined Terms. Terms used herein with initial capital letters
that are not otherwise defined are used herein as defined in the Certificate of
Incorporation.
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AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PHYSICIANS CLINICAL LABORATORY, INC.
A Stock Corporation
Physicians Clinical Laboratory, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Physicians Clinical Laboratory, Inc. The
date of filing of its original Certificate of Incorporation was April 24, 1992.
2. Pursuant to Sections 242, 245 and 303 of the Delaware General
Corporation Law, this Restated Certificate of Incorporation Restates, integrates
and further amends the provisions of the Certificate of Incorporation of this
corporation. On November 8, 1996, Physicians Clinical Laboratory, Inc. and its
affiliated debtors each filed a voluntary petition for relief under chapter 11
of the Bankruptcy Code, 11 U.S.C. ss.ss. 101-1330 (the "Bankruptcy Code") in the
United States Bankruptcy Court for the Central District of California (Case No.
SV96-23185-GM) (the "Bankruptcy Court"). By order dated April 18, 1997 (the
"Confirmation Order"), the Second Amended Plan of Reorganization of Physicians
Clinical Laboratory, Inc. and Its Affiliated Debtors was confirmed by the
Bankruptcy Court pursuant to section 1129 of the Bankruptcy Code. The
Confirmation Order provides for the making of this Restated Certificate of
Incorporation in connection with the reorganization of Physicians Clinical
Laboratory, Inc. under chapter 11 of the Bankruptcy Code.
3. The text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:
FIRST. The name of the corporation ("Corporation") is
Physicians Clinical Laboratory, Inc.
SECOND. The address of the Corporation's registered office in the State of
Delaware is The Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle, Delaware 19801. The name of the Corporation's
registered agent at such address is The Corporation Trust Company.
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THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH. Section 1. Authorized Capital Stock. The Corporation is authorized
to issue capital stock consisting of 50,000,000 shares of Common Stock, par
value $0.01 per share.
Section 2. Common Stock. Each holder of Common Stock is entitled to
one vote on each matter submitted to a vote at a meeting of stockholders for
each share of Common Stock held of record by that holder as of the record date
for that meeting.
FIFTH. The Board of Directors of the Corporation (the "Board") may make,
amend, and repeal the By-Laws of the Corporation. Any By-Law made by the Board
under the powers conferred hereby may be amended or repealed by the Board
(except as specified in any such By-Law so made or amended) or by the
stockholders in the manner provided in the By-Laws of the Corporation.
Notwithstanding the foregoing and anything contained in this Certificate of
Incorporation to the contrary, By-Laws 3, 8, 10, 11, 12, 13, 33, 34 and 39 may
not be amended or repealed by the stockholders, and no provision inconsistent
therewith may be adopted by the stockholders, without the affirmative vote of
the holders of at least 75% of the Voting Stock, voting together as a single
class. The Corporation may in its By-Laws confer powers upon the Board in
addition to the foregoing and in addition to the powers and authorities
expressly conferred upon the Board by applicable law.
SIXTH. Special meetings of stockholders of the Corporation may be called
only by (a) the Chairman of the Board ("Chairman") or (b) the Secretary of the
Corporation within 10 calendar days after receipt of the written request of (i)
a majority of the total number of Directors that the Corporation would have if
there were no vacancies, whether or not equal to the actual number of Directors
serving at that time ("Whole Board"), or (ii) the holders of record of at least
10% of the Voting Stock. At any annual meeting of stockholders or a special
meeting of stockholders of the Corporation, only such business will be conducted
or considered as has been brought before such meeting in the manner provided in
the By-Laws of the Corporation. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of at least
75% of the Voting Stock will be required to amend or repeal, or adopt any
provision inconsistent with, this Article Sixth. For the purposes of this
Certificate of Incorporation, "Voting Stock" means stock of the Corporation of
any class or series entitled to vote generally in the election of Directors.
SEVENTH. Section 1. Number and Election of Directors. The number of
Directors of the Corporation shall be 5. Directors may be elected only at an
annual meeting of stockholders. Election of Directors of the Corporation need
not be by written ballot unless requested by the Chairman or by the holders of a
majority of the
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Voting Stock present in person or represented by proxy at a meeting of the
stockholders at which Directors are to be elected.
Section 2. Nomination of Director Candidates. Directors may be
nominated for election by the stockholders of any class or series entitled to
vote generally in the election of the Directors only at an annual meeting of
stockholders. Advance notice of stockholder nominations for the election of
Directors must be given in the manner provided in the By-Laws of the
Corporation.
Section 3. Newly Created Directorships and Vacancies. Newly
created directorships resulting from any increase in the number of Directors and
any vacancies on the Board resulting from death, resignation, disqualification,
removal or other cause will be filled solely by the affirmative vote of a
majority of the remaining Directors then in office, even though less than a
quorum of the Board, or by a sole remaining Director. Any Director elected in
accordance with the preceding sentence will hold office until the next annual
meeting of the Corporation and until his or her successor is elected and
qualified.
Section 4. Removal. Any Director may be removed from office by
the stockholders only in the manner provided in this Section 4. At any annual
meeting or special meeting of the stockholders, the notice of which states that
the removal of a Director or Directors is among the purposes of the meeting, the
affirmative vote of the holders of at least 662/3% of the Voting Stock may
remove such Director or Directors.
Section 5. Amendment, Repeal, Etc. Notwithstanding anything
contained in this Certificate of Incorporation to the contrary, the affirmative
vote of at least 75% of the Voting Stock will be required to amend, to repeal,
or to adopt any provision inconsistent with, this Article Seventh.
EIGHTH. Section 1. Definitions. As used in this Article Eighth, the
following terms shall have the following meanings:
"Employment Agreement" shall mean that certain Employment Agreement
dated as of September 30, 1997 by and between the Corporation and J. Marvin
Feigenbaum.
"Initial Public Offering" shall mean the public offering of shares
of Common Stock of the Corporation pursuant to a Registration Statement in a
transaction where (A) the aggregate Proceeds to be paid to the Corporation in
such public offering (aggregated with the proceeds paid to the Corporation in
any prior public offerings of shares of Common Stock of the Corporation pursuant
to a Registration Statement) are not less than Ten Million Dollars ($10,000,000)
and (B) the number of shares of Common Stock to be sold pursuant to such
Registration Statement (aggregated with the shares previously sold pursuant to
any Registration Statement filed by the Corporation, including in each case any
shares sold or to be sold by selling shareholders) is not less than fifteen
percent (15%) of the number of
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outstanding shares of Common Stock after giving pro forma effect to such Initial
Public Offering.
"Participating Stockholders" shall mean the Stockholders and their
respective Permitted Transferees.
"Permitted Transferee" shall mean any Person who shall have acquired
shares of Common Stock from a Stockholder or from another Permitted Transferee
other than in a transaction pursuant to a registration statement filed with the
Securities and Exchange Commission, or any successor rule to such rule, and such
Person shall have given written notice to the Corporation of such acquisition
and of its status as a Permitted Transferee.
"Person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government agency or political subdivision
thereof.
"Pro Rata Portion" shall mean, with respect to any offer of
Securities, as to each Participating Stockholder a percentage based upon a
fraction, the numerator of which is the number of shares of Common Stock held by
such Participating Stockholder immediately prior to delivery of a Corporation
Issuance Notice and the denominator which is the aggregate number of shares of
Common Stock held by all of the Participating Stockholders to whom such Notice
is given.
"Proceeds" shall mean the proceeds to the Corporation in a public
offering net of underwriting discounts and commissions and before deducting any
other expenses payable by the Corporation.
"Registration Statement" shall mean a registration statement filed
by the Corporation pursuant to the Securities Act of 1933, as amended, other
than registrations on Form S-8 or Form S-4 or any other registration form to be
used for a business combination or any successor form to either of such forms.
"Securities" shall mean shares of Common Stock or securities
convertible into or exchangeable for Common Stock or options to purchase Common
Stock or to purchase securities convertible into or exchangeable for Common
Stock.
"Stockholders" shall mean Nu-Tech Bio-Med, Inc., Oaktree Capital
Management, LLC (as agent on behalf of OCM Opportunities Fund, L.P. and
Columbia/HCA Master Retirement Trust), Belmont Fund, L.P., Belmont Capital
Partners II, L.P. The Copernicus Fund, L.P., The Galileo Fund, L.P., and
Cerberus Partners, L.P.
"Stockholders Agreement" shall mean that certain Stockholders
Agreement dated as of September 30, 1997 by and between the Corporation, Nu-Tech
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Bio-Med, Inc. and Oaktree Capital Management, LLC, as agent on behalf of OCM
Opportunities Fund, L.P. and Columbia/HCA Master Retirement Trust.
"Warrants" shall mean the warrants issued pursuant to the Second
Amended Joint Plan of Reorganization of Physicians Clinical Laboratory, Inc. and
Its Affiliated Debtors, filed with the United States Bankruptcy Court on
February 7, 1997.
Section 2. Preemptive Rights. If the Corporation proposes to issue
or transfer any Securities to any Person, the Corporation shall make the offer
to sell and otherwise comply with the requirements set forth in this Article
Eighth. Notwithstanding the foregoing, the Corporation may issue Securities
without making the offer to sell set forth in this Article Eighth in connection
with (i) an Initial Public Offering, (ii) the issuance of Securities
representing up to 200,000 shares of Common Stock to directors, officers and
employees of the Corporation pursuant to the Corporation's 1997 Equity and
Performance Incentive Plan or any other incentive plan which provides for the
issuance of Securities to directors, officers or employees of the Corporation,
(iii) the issuance of Securities pursuant to the Employment Agreement and the
Warrants or (iv) an issuance of Securities in consideration for and upon
consummation of (x) a merger with respect to which the holders of Voting Stock
(as that term is defined in Article Sixth) of the Corporation immediately prior
to such merger beneficially own not less than a majority of the issued and
outstanding shares of Voting Stock of the surviving entity or (y) an acquisition
of assets or stock by the Corporation so long as, in either the case of (x) or
(y), such transaction has been approved by the affirmative vote of at least one
director nominated by OCM Administrative Services, L.L.C. or its designee
pursuant to the Stockholders Agreement (a "Qualifying Acquisition").
(a) Issuance Notice. If the Corporation proposes to issue
Securities to any Person, the Corporation shall deliver a written notice of the
proposed issuance (the "Corporation Issuance Notice") to each Participating
Stockholder. The Corporation Issuance Notice shall contain a description of the
proposed transaction and the terms thereof including the number of Securities
proposed to be issued (collectively, the "Corporation Issued Securities"), the
name of each person to whom or in favor of whom the proposed issuance is to be
made (the "Corporation Recipient") and a description of the consideration to be
received by the Corporation upon issuance of the Corporation Issued Securities.
The Corporation Issuance Notice shall be accompanied by a copy of the bona fide
third party written offer (for purposes of this Article Eighth, an executed
letter of intent stating the terms of such offer, or incorporating by reference
a separate summary of terms, shall be deemed a written offer). On a day that is
not earlier than ten (10) days following the delivery of the Corporation
Transfer Issuance Notice, the Corporation may issue the Corporation Issued
Securities to the Corporation Recipient on the terms set forth in the
Corporation Issuance Notice.
(b) Terms of Offer. Upon completion of the issuance of the
Corporation Issued Securities referred to in paragraph (a) above, the
Corporation
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shall deliver a written offer to sell (the "Offer to Sell") to each
Participating Stockholder a number of Securities equal to such Participating
Stockholders Pro Rata Portion of the Corporation Issued Securities. The Offer to
Sell shall be on the same terms and conditions, and shall be for the same
consideration, as described in the Corporation Issuance Notice; provided,
however, that any such Stockholder may, at its option, pay fair market value in
cash (as determined by the Board of Directors) in lieu of any non-cash
consideration.
(c) Acceptance of Offer. For a period of thirty (30) days
after receipt of an Offer to Sell, any Participating Stockholder may, by written
notice to the Corporation, accept the Offer to Sell in whole or in part.
(d) Termination of Rights. The Stockholders' rights and the
Corporation's obligations with respect to the Participating Stockholders under
this Article Eighth shall terminate upon the occurrence of an Initial Public
Offering.
(e) Reservation of Shares. The Corporation at all times shall
reserve an appropriate number of shares from its authorized but unissued Common
Stock for issuance to the Participating Stockholders pursuant to this Article
Eighth. Upon issuance, all shares of Common Stock issued pursuant to this
Article Eighth shall be duly authorized, validly issued, fully paid and
non-assessable.
NINTH. To the full extent permitted by the Delaware General Corporation
Law or any other applicable law currently or hereafter in effect, no Director of
the Corporation will be personally liable to the Corporation or its stockholders
for or with respect to any acts or omissions in the performance of his or her
duties as a Director of the Corporation. Any repeal or modification of this
Article Ninth will not adversely affect any right or protection of a Director of
the Corporation existing prior to such repeal or modification.
TENTH. Each person who is or was or had agreed to become a Director,
officer, employee or agent of the Corporation, or is or was serving or who had
agreed to serve at the request of the Board or an officer of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other entity, whether for profit or not for profit
(including the heirs, executors, administrators or estate of such person), will
be indemnified by the Corporation to the full extent permitted by the Delaware
General Corporation Law or any other applicable law as currently or hereafter in
effect and will be entitled to advancement of expenses in connection therewith.
The right of indemnification and of advancement of expenses provided in this
Article Tenth (a) will not be exclusive of any other rights to which any person
seeking indemnification may otherwise be entitled, including without limitation
pursuant to any contract approved by a majority of the Whole Board (whether or
not the Directors approving such contract are or are to be parties to such
contract or similar contracts), and (b) will be applicable to matters otherwise
within its scope whether or not such matters arose or arise before or after the
adoption of this Article Tenth. Without limiting the generality of the
foregoing, the Corporation may
-6-
<PAGE> 7
adopt By-Laws, or enter into one or more agreements with any person, which
provide for indemnification and/or advancement of expenses greater or different
than that provided in this Article Tenth or the Delaware General Corporation
Law. Any amendment or repeal of, or adoption of any provision inconsistent with,
this Article Tenth will not adversely affect any right or protection arising
hereunder, or arising out of facts occurring, prior to such amendment, repeal,
or adoption and no amendment, repeal, or adoption will affect the legality,
validity or enforceability of any contract entered into or right granted prior
to the effective date of such amendment, repeal or adoption.
ELEVENTH. The Corporation will not issue nonvoting equity securities to
the extent prohibited by Section 1123 of the Bankruptcy Code; provided, however,
that this Article Eleventh (a) will have no further force and effect beyond that
required under Section 1123 of the Bankruptcy Code, (b) will have such force and
effect, if any, only for so long as such Section is in effect and applicable to
the Corporation, and (c) in all events may be amended or eliminated in
accordance with applicable law as from time to time in effect.
TWELFTH: This Amended and Restated Certificate of Incorporation takes the
place of and supersedes the existing Certificate of Incorporation as heretofore
amended.
* * * * * *
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by J. Marvin Feigenbaum, its
Chief Operating Officer, this 29th day of September, 1997.
PHYSICIANS CLINICAL LABORATORY, INC.
By
-----------------------------------
J. Marvin Feigenbaum,
Chief Operating Officer
-7-
<PAGE> 1
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is entered into between the State
of California, acting through its Department of Justice, Office of the Attorney
General, Bureau of Medi-Cal Fraud ("AG"), the California Department of Health
Services ("DHS") (collectively, "California"), Taylor McKeeman ("Relator"), and
Physicians Clinical Laboratory, Inc. ("PCL"), its subsidiaries, business
entities, and affiliates as delineated in Exhibit "A" hereto which is expressly
incorporated by reference, herein (hereafter collectively referred to as "the
Parties"), through their authorized representatives. It is expressly understood
by all parties that this Agreement is subject to approval by the U.S. Bankruptcy
Court for the Central District of California, Case No. SV96-23185 GM.
The AG is acting on behalf of the State of California pursuant to the
California Civil False Claims Act and on behalf of the People of the State of
California under authority of California Government Code section 12528(a). The
DHS is acting as the Medi-Cal agency responsible for the determination of
restitution and the exclusion of parties from participation in the Medi-Cal
program.
RECITALS
As a preamble to this Agreement, the Parties acknowledge:
1. PCL is an independent clinical laboratory, incorporated in the State of
Delaware. PCL and the subsidiaries, business entities, and affiliates are
identified by name and provider number, where applicable, in the attached
Exhibit A, and are collectively described as PCL in this agreement. On November
8, 1996, PCL and certain of its affiliates filed voluntary petitions for relief
under chapter 11 of the Bankruptcy Code, 11 U.S.C. ss.ss. 101-1330 ( the
"Bankruptcy Code"), in the United States Bankruptcy Court for Central District
of California (the "Bankruptcy Court"). PCL's Chapter 11 case will be
hereinafter referred to as the "Chapter 11 Case." By order entered April 23,
1997, the Bankruptcy Court confirmed the Second Amended Plan of Reorganization
of Physicians Clinical Laboratories, Inc. and Its Affiliated Debtors (the
"Plan") pursuant to ss.1129 of the Bankruptcy Code.
2. The United States alleges that PCL has submitted or caused to be
submitted false and fraudulent claims for payment to the Medicare program
("Medicare"), Title XVIII of the Social Security Act, 42 U.S.C. ss.ss.
1395-1395ddd, the MediCal Program, Title XIX of the Social Security Act, and the
Civilian Health and Medical Program of the Uniformed Services ("CHAMPUS"), 10
U.S.C. ss.ss. 1071-1106 and other federally funded health programs, for clinical
laboratory services during the period from January 1, 1992, to July 18, 1997.
Relator filed an action under the qui tam provisions of the False Claims Act, 31
U.S.C. ss.ss. 3729-33 ("FCA"), alleging that PCL violated the FCA for certain
actions set forth in the Complaint filed in the District Court for the Eastern
District of California, in United States ex rel. Taylor McKeeman v. Physicians
Clinical Laboratory, et al., CIV-S97-I005GEBGGH (the "Civil Action").
<PAGE> 2
3. PCL and the United States and Relator have reached an agreement for the
settlement of any claims that the United States and Relator may have in the
Civil Action. The AG, DHS, Relator and PCL also have reached this agreement to
settle any claims that California may have in the Civil Action described in
paragraph 2.
4. PCL denies the allegations in the Civil Action. However, in order to
avoid the uncertainty and expense of litigation, the Parties hereby reach a full
and final settlement of all issues and disputes between them based upon the
conduct described in paragraph 2 of this Agreement.
TERMS AND CONDITIONS
In accordance with the mutual covenants and agreements herein, and with
full authority to enter into this Agreement and to be bound thereby, the Parties
agree as follows:
5. In settlement of any claims and causes of action that the State of
California AG and DHS has or may have against PCL, as described in paragraph 2
of this Agreement, PCL agrees to pay to the California AG, Bureau of Medi-Cal
Fraud the amount of $100,000.00 ("Settlement Amount"). PCL will pay the
Settlement Amount to California within eleven (11) days of the Effective Date
(as defined in paragraph 19).
6. PCL will satisfy the obligations set forth in paragraph 4 by electronic
funds transfer to the Office of the Attorney General, Bureau of Medi-Cal Fraud.
7. Subject to the exceptions in paragraph 8 and in consideration of PCL's
obligations under this Agreement, the California AG and DHS, on behalf of
itself, its officers and agents, hereby releases PCL (as defined in this
Agreement by reference to those entities listed at Exhibit A, hereof) and J.
Marvin Feigenbaum, from any civil or administrative monetary claim or cause of
action that DHS California has or may have, and from any action seeking
exclusion from the MediCal program with regard to the provision of and
reimbursement for laboratory services under the Medical program.
The California AG hereby releases PCL (as defined in this Agreement by
reference to those entities listed at Exhibit A, hereof) and J. Marvin
Feigenbaum from any criminal liability, for the conduct described in paragraph
2.
Neither the California AG nor DHS agrees to waive any claims, actions,
demands, or causes of action it may have against PCL for conduct other than that
described in paragraph 2 above. This Agreement is intended to be for the benefit
of the Parties and J. Marvin Feigenbaum only, and by this instrument neither the
California AG nor DHS waives, compromises or releases any claims or causes of
action against any other person or entity except as provided herein.
8. Specifically reserved and excluded from the scope and terms of this
Agreement are any and all:
2
<PAGE> 3
(1) criminal liability that may arise from the conduct
described in paragraph 2, and any related administrative
action for mandatory exclusion from the MediCal program except
for the release of PCL and J. Marvin Feigenbaum;
(2) liability to California (or any agencies thereof) for any
conduct other than that described in paragraph 2;
(3) claims against any officers and employees of PCL except J.
Marvin Feigenbaum;
(4) claims related to obligations created by this Agreement;
and
(5) any claims for defective or deficient services.
9. PCL has entered into a Corporate Integrity Agreement with the United
States Department of Health and Human Services, Office of the Inspector General
("HHS/OIG"). On the Effective Date, PCL will commence its obligations under the
Corporate Integrity Agreement, a copy of which is attached hereto as Exhibit B.
PCL agrees that the obligations to report and the agreement to access granted to
the HHS/OIG as delineated in the Corporate Integrity Agreement apply equally to
DHS..
10. PCL has provided sworn financial disclosure statements and other
financial information to the Bankruptcy Court during the Chapter 11 Case, and
financial information to the Office of Legal Services, and California has relied
on the representations therein in reaching this Agreement. PCL warrants that the
financial information provided to California is thorough, accurate, and
complete. PCL further warrants that it does not own any assets which have not
been disclosed to the United States Bankruptcy Court.
11. All costs (as defined in the Federal Acquisition Regulations ("FAR")
31.205-47 and as defined in Titles XVIII and XIX of the Social Security Act, 42
U.S.C. ss. 1395, et seq. and ss. 1396, et seq. and the regulations promulgated
thereunder) incurred by or on behalf of PCL, and its present or former officers,
directors, employees, shareholders, and agents, in connection with 1) the
matters covered by this Agreement, 2) the federal government's audit and
investigation of the matters covered by this Agreement, 3) PCL's investigation,
defense, and the obligations undertaken pursuant to the Corporate Integrity
Agreement incorporated by reference herein, 4) the negotiation of this
Agreement, and 5) the payments made to California pursuant to this Agreement
shall be unallowable costs for government contracting purposes and for Medicare
and Medicaid purposes. These amounts will be separately accounted for by PCL,
and PCL will not charge such costs directly or indirectly to any contracts with
California, or to any cost report submitted to the Medicare or Medicaid program
or any other government health insurance program. Any sums owed by PCL to DHS
for payments made to PCL by MediCal for costs that
3
<PAGE> 4
are unallowable (as defined in this paragraph) shall be paid by PCL to the
Department of Health Services at its direction.
12. PCL agrees to cooperate fully and truthfully with California's
investigation of individuals and entities not specifically released in this
Agreement, for the acts described in paragraph 2. Upon reasonable notice, PCL
will make reasonable efforts to facilitate access to, and encourage the
cooperation of, its directors, officers, and employees for interviews and
testimony, consistent with the rights and privileges of such individuals. PCL
will furnish to California, upon reasonable request, all documents and records
in its possession, custody or control relating to the acts described in
paragraph 2. PCL agrees to waive any applicable attorney-client or work product
privilege that may apply to such documents and not to assert any such privilege
in response to a request for documents under this paragraph.
13. PCL may receive to payment under the MediCal program for clinical
laboratory services rendered, including payment for which the requests may need
to be resubmitted to the Medi-Cal program in the normal course of business, when
billed in accordance with applicable Medi-Cal laws.
14. This Settlement Agreement constitutes the entire agreement between the
Parties. This Agreement may not be altered except by written consent of the
Parties. No other additional promises, conditions or agreements have been
entered into other than those stated in this Agreement.
15. Except as provided for herein, each party to this Agreement will bear
its own costs incurred in this matter, including the preparation and performance
of this Agreement.
16. PCL represents that the Agreement is entered into with knowledge of
the events described herein and upon the advice of counsel. PCL further
represents that this Agreement is freely and voluntarily entered into without
any degree of duress or compulsion whatsoever, in order to avoid litigation.
17. The undersigned PCL signatory represents and warrants that he or she
is fully authorized and empowered to execute this Agreement. The undersigned
California signatories represent that they are signing this Agreement in their
official capacity and that they are fully empowered and authorized to execute
this Agreement.
18. The Parties have executed identical copies of this Agreement, each of
which will be deemed an original.
19. The provisions of this Agreement will be binding upon the Parties and
their heirs, successors, assigns and transferees.
20. This Settlement Agreement is subject to the approval of the Bankruptcy
Court. PCL agrees that it will take all reasonable steps necessary to obtain
such approval as soon as
4
<PAGE> 5
reasonably practicable upon execution of the Settlement Agreement. The
Settlement Agreement shall be effective as of the date on which the Bankruptcy
Court order approving the Settlement Agreement becomes a final, non-appealable
order (the "Effective Date").
IN WITNESS WHEREOF, the parties hereto affix their signatures.
FOR THE CALIFORNIA DEPARTMENT OF HEALTH SERVICES
DATED:________________ _____________________
J. Douglas Porter
Deputy Director, Medical Care Services
State of California
Department of Health Services
FOR THE CALIFORNIA Department of Justice
DATED: _________________ ______________________
Thomas Temmerman,
Director, MediCal Fraud Unit
State of California
Department of Justice
FOR THE RELATOR
DATED: _________________ ______________________
Taylor McKeeman
Relator
_______________________
C. Brooks Cutter
Attorney at Law
5
<PAGE> 6
FOR PCL
DATED:__________________ ______________________________________________
J. Marvin Feigenbaum
Chief Operating Officer
Physicians Clinical Laboratory, Inc.
3301 C Street, Suite 100E
Sacramento, California 95816
DATED:__________________ ______________________________________________
Gregory M. Luce
Jones Day Reavis and Pogue
1450 G Street, N.W.
Washington, D.C. 20005
Counsel for PCL
6
<PAGE> 7
- ------------------ COMPARISON OF HEADERS ------------------
- -HEADER 1-
DRAFT - SUBJECT TO INTERNAL GOVERNMENT REVIEW AND APPROVAL
- - SUBJECT TO PCL BOARD AND BANKRUPTCY COURT APPROVAL
- ------------------ COMPARISON OF FOOTERS ------------------
- -FOOTER 1-
LAMAIN01 Doc: 195111_1.wpd
7
<PAGE> 8
- ---------------------- REVISION LIST ----------------------
The bracketed numbers refer to the Page and Paragraph for the start of the
paragraph in both the old and the new documents.
[1:1 1:1] Changed"20" to "23"
[1:3 1:3] Changed "California ("California")," to "California,"
[1:3 1:3] Changed "Services and" to "Services ("DHS") and"
[1:6 1:6] Changed "Delaware. On" to "Delaware. ... agreement. On"
[1:7 1:7] Changed "and California ... settlement of any" to "and DHS also
... settle any"
[1:7 1:7] Changed "that California ... the Civil" to "that DHS may ... the
Civil"
[2:3 2:3] Changed "that California has" to "that DHS has"
[2:3 2:3] Changed "to California $100,000.00" to "to DHS $100,000.00"
[2:3 2:3] Changed "to California within" to "to DHS within"
[2:5 2:5] Changed "Agreement, California," to "Agreement, DHS,"
[2:5 2:5] Changed "officers, ... departments," to "officers and agents, "
[2:5 2:6] Changed "and any outside" to "and the outside"
[2:5 2:6] Changed "time," to "time [the ... B, hereof],"
[2:5 2:6] Changed "program." to "program with ... Medical program."
[2:7 2:8] Changed "outside directors " to "Outside Directors "
[2:7 2:8] Changed "instrument ... or release" to "instrument ... or
releases"
[3:4 3:5] Changed "Agreement." to "Agreement, ... Exhibit B."
[3:6 3:7] Changed "Government's " to "federal government's "
[3:6 3:7] Changed "to California for" to "to DHS for"
[3:7 3:8] Changed "2. PCL" to "2. [If criminal ... included.] PCL"
[4:4 5:4] Add Para "J. Douglas Porter ... Medical Care Services"
[4:4 5:6] Del Para "Title"
[4:7 5:8] Add Paras "FOR THE CALIFORNIA ... Department of Justice"
8
<PAGE> 1
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is entered into between the United
States of America ("United States"), acting through its Department of Justice
("DOJ") and the Office of Inspector General of the United States Department of
Health and Human Services ("HHS/OIG"), the Office of the Civilian Health and
Medical Program for the Uniformed Services of the United States Department of
Defense ("CHAMPUS"), Taylor McKeeman ("Relator") and Physicians Clinical
Laboratory, Inc. ("PCL") (hereafter collectively referred to as "the Parties"),
through their authorized representatives. It is expressly understood by all
parties that this Agreement is subject to approval by the U.S. Bankruptcy Court
for the Central District of California, Case No.
SV96-23185 GM.
RECITALS
As a preamble to this Agreement, the Parties agree to the following:
1. PCL is an independent clinical laboratory, incorporated in the State of
Delaware. PCL and its subsidiaries and affiliates are identified by name and
provider number, where applicable, in the attached Exhibit A, (collectively
described as PCL in this agreement). On November 8,1996, PCL and certain of its
affiliates filed voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code, 11 U.S.C. Sections 101-1330 (the "Bankruptcy Code"), in the
United States Bankruptcy Court for Central District of California (the
"Bankruptcy Court"). PCL's Chapter 11 case will be hereinafter referred to as
the "Chapter 11 Case." By order entered April 23,1997, the Bankruptcy Court
confirmed the Second amended Plan of Reorganization of Physicians Clinical
Laboratories, Inc. and Its Affiliated Debtors (the "Plan") pursuant to Section
1129 of the Bankruptcy Code.
2. The United States alleges that PCL has submitted or caused to be
submitted false and fraudulent claims for payment to the Medicare program
("Medicare"), Title XVIII of the Social Security Act, 42 U.S.C. Sections
1395-1395ddd, the MediCal Program, Title XIX of the Social Security Act, and the
Civilian Health and Medical Program of the Uniformed Services ("CHAMPUS"), 10
U.S.C. Sections 1071-1106, for clinical laboratory services during the period
from January 1, 1992, to July 18, 1997. Relator filed an action under the qui
tam provisions of the False Claims Act, 31 U.S.C. Sections 3729-33 ("FCA"),
alleging that PCL violated the FCA for certain actions set forth in the
Complaint filed in the District Court for the Eastern District of California, in
United States ex rel. Taylor McKeeman v. Physicians Clinical Laboratory, et al.,
CIV-S97-I005GEBGGH (the "Civil Action").
3. The United States contends that it has or may have certain claims and
causes of action against PCL predicated upon the False Claims Act, 31 U.S.C.
Sections 3729-3733, as amended; the
<PAGE> 2
Civil Monetary Penalties Law, 42 U.S.C. Section 1320a-7a; the Program Fraud
Civil Remedies Act, 31 U.S.C. Sections 3801-12; and the provisions for exclusion
from the Medicare and State health care programs, 42 U.S.C. Section 1320a-7(b),
42 U.S.C. Section 1320a-7a and 42 U.S.C. Section 1320a-7(d); as well as under
common law theories, for damages and penalties arising out of claims for
reimbursement for clinical laboratory services, as described in paragraph 2
above.
4. PCL denies the respective allegations of the United States ad the
Relator. In order to avoid the uncertainty and expense of litigation, the
Parties hereby reach a full and final settlement of all issues and disputes
between them based upon the conduct described in paragraph 2 of this Agreement.
TERMS AND CONDITIONS
In accordance with the mutual covenants and agreements herein, and with
full authority to enter into this Agreement and to be bound thereby, the Parties
agree as follows:
5. In settlement of the claims and causes of action that the United States
has or may have against PCL, as described in paragraphs 2 and 3 of this
Agreement, PCL agrees to pay to the United States $2,000,000.00 ("Settlement
Amount") over six (6) years plus interest. PCL will pay $200,000.00 to the
United States within seven (7) days of the Effective Date (as defined in
paragraph 32). The remaining principal balance due of $1,800,000 will be paid in
monthly installments of $25,000, plus interest on the unpaid balance calculated
at the 30 day Treasury Bill interest rate in effect at the time of the signing,
commencing on October 1,1997, and continuing on the first day of each month for
the next six years through July 1, 2003. PCL agrees to pay interest at the
Treasury Bill interest rate in effect at the time of the installment payment on
the remaining principal balance of $1,800,000. The Settlement Amount or any
installment thereof may be prepaid, in whole or in part, without premium or
penalty. The United States will waive interest for such prepayments.
6. PCL will satisfy the obligations set forth in paragraph 5 by Fedwire
electronic funds transfer to the "Department of Justice," as arranged through
the Financial Litigation Unit, U.S. Attorney's Office, Eastern District of
California.
7. A five (5) calendar day period will be allowed before a payment is
considered to be late. However, all late payments under this paragraph are
subject to an interest charge of 18% (eighteen percent) per annum compounded
daily, commencing on the date payment is due.
8. The occurrence of any of the following events shall constitute an Event
of Default:
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<PAGE> 3
a. Failure to Make Timely Payments: Failure by PCL to pay any amount
provided for in Paragraphs of this Agreement when such payment is
more than ten (10) days late;
b. Commencement of Bankruptcy or Reorganization Proceeding: Except
with respect to the Chapter 11 Case, if prior to making the full
payment of the amount due under Paragraph 5 above, (i) PCL commences
any case, proceeding, or other action (A) under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have any order for relief of debtors, or seeking to adjudicate it
as bankrupt or insolvent, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or
any substantial part of its assets; or (ii) there shall be commenced
against PCL any such case, proceeding or other action referred to in
clause (i) that results in the entry of an order for relief and any
such order remains undismissed, or undischarged or unbonded for a
period of thirty (30) days; and PCL takes any action authorizing, or
in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth above in this
subparagraph.
9. On the occurrence of an Event of Default as defined in paragraph 8
above, the United States agrees that it will provide written notice by certified
mail return receipt requested of the Event of Default and an opportunity for PCL
to cure said Event of Default within five (5) business days of receipt of the
notice. Notification of an Event of Default will be sent by first class mail
addressed to PCL's address with a copy to the address of PCL's counsel provided
in this Agreement. Upon a failure to cure any Event of Default (a "Default"),
the full remaining unpaid balance of the Settlement Amount (including all unpaid
interest and principal) will become immediately due and payable. Interest will
accrue at the rate of the Treasury Bill rate plus two percent (2%) per annum
compounded daily from the date of Default on the remaining unpaid principal
balance of the Settlement Amount.
10. Upon the occurrence of a Default the United States may exercise, at
its sole option, one or more of the following rights, as applicable: (a) declare
this Agreement breached, and proceed against PCL for any claims, including those
to be released by this Agreement; or (b) file an action for specific performance
of the Agreement; or (c) offset the remaining unpaid balance, inclusive of
interest, from any amounts due and owing to PCL by any department, agency, or
agent of the United States at the time of default; and (d) exercise any other
right granted by law, or under the terms of this Agreement and the Corporate
Integrity Agreement, or recognizable at common law or in equity. PCL agrees not
to
3
<PAGE> 4
contest any offset imposed pursuant to this provision, either administratively
or in any State or Federal court. In addition, upon the occurrence of a Default,
PCL will pay the United States all reasonable costs of collection and
enforcement of this Agreement, including attorney's fees and expenses. The
United States reserves the option of referring such matters for private
collection.
11. Upon declaration of default, HHS/OIG may, at its option, exclude PCL
from participation in the Medicare and State health care programs pursuant to 42
U.S.C. Section 1320a-7(b), 42 U.S.C. Section 1320a-7a and 42 U.S.C. Section
1320a-7(d). Any exclusion imposed by HHS/OIG will have national effect and will
also apply to all other Federal procurement and non-procurement programs. PCL
agrees not to contest such exclusion either administratively or in any State or
Federal court. Upon curing said default, PCL may apply for reinstatement after
the date specified in the notice of exclusion, in accordance with 42 C.F.R
Section 1001.3001. This provision does not affect the rights, obligations, or
causes of action the OIG or HHS may have under any authority other than that
specifically referred to in this paragraph.
Subject to the exceptions in paragraph 12 and in consideration of PCL's
obligations under this Agreement, the United States, on behalf of itself, its
officers, agents, agencies, and departments, hereby releases PCL and J. Marvin
Feigenbaum from any civil or administrative monetary claim or cause of action
that the United States has or may have under the False Claims Act, 31 U.S.C.
Sections 3729-3733 (as amended); at common law; under the Program Fraud Civil
Remedies Act, 31 U.S.C. Sections 3801-12; the Civil Monetary Penalties Law, 42
U.S.C. Section 1320a-7a; and from any action seeking exclusion from the Medicare
and State health care programs, pursuant to 42 U.S.C. Section 1320a-7a, 42
U.S.C. Section 1320a-7(b), or 42 U.S.C. Section 1320a-7(d) for the conduct
described in paragraph 2.
The United States also agrees to release PCL and J. Marvin Feigenbaurn from any
criminal liability, for the conduct described in paragraph 2.
In addition, subject to the exceptions in paragraph 12 and in consideration of
PCL's obligations under this Agreement, the United States and the Relator will
sign and file with the Court in the Civil Action a Stipulation and Order
Unsealing the Complaint and Dismissing the Action with Prejudice, which will
allow for the reopening of the Civil Action as set forth in paragraphs 10(a) and
18. The Parties will request, however, that the District Court retain
jurisdiction to enforce the terms of the Agreement.
Neither the OIG nor HHS agrees to waive any claims, actions, demands, or causes
of action they may have against PCL for conduct other than that described in
paragraph 2 above. This
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<PAGE> 5
Agreement is intended to be for the benefit of the Parties and J. Marvin
Feigenbaum and by this instrument the United States does not waive, compromise
or release any claims or causes of action against any other person or entity
except as provided herein.
12. Specifically reserved and excluded from the scope and terms of this
Agreement are any and all:
(1) criminal liability that may arise from the conduct described in
paragraph 2, and any related administrative action for mandatory
exclusion from the Medicare and State health care programs pursuant
to 42 U.S.C. Section 1320a-7(a) except for the release of PCL and J.
Marvin Feigenbaum;
(2) claims that may arise under Title 26, United States Code
(Internal Revenue Service) or under securities laws;
(3) liability to the United States (or any agencies thereof for any
conduct other than that described in paragraph 2;
(4) claims against any officers and employees of PCL except J.
Marvin Feigenbaum;
(5) claims related to Medicare billings prior to July 18, 1997 other
than those specified in paragraph 2;
(6) claims related to obligations created by this Agreement; and
(7) any claims for defective or deficient services.
13. In consideration of the mutual promises and obligations of this
Agreement, Relator hereby releases PCL, and each of its subsidiaries, affiliates
and partners, and any of its present and former shareholders, officers,
directors, employees, predecessors, successors and assigns, from any and all
causes of action, known or unknown, including but not limited to any and all
causes of action related to:
a. any civil claims which Relator asserts or could have asserted under the
False Claims Act, common law, the Program Fraud Civil Remedies Act, or any
other statute creating causes of action for civil relief for the conduct
alleged in Relator's qui tam complaint in the Civil Action;
b. any other claims and causes of action he has or may assert against PCL
whether known or unknown as of the date of this Agreement; provided,
however that any claims of Relator arising from his Motion for Payment of
Administrative Expense, filed with the Bankruptcy Court on
5
<PAGE> 6
January 21,1997, and presently on appeal before the Bankruptcy Appellate
Panel of the Ninth Circuit, shall not be released hereby; and
c. subject to the provisions of paragraphs 8-11, inclusive, Relator's
release shall be effective upon the Effective Date as defined in paragraph
31, hereof.
14. Relator agrees that the settlement between the United States and the
Company in this action is fair, adequate and reasonable pursuant to 31 U.S.C.
Section 3730(c)(2)(B).
15. Pursuant to 31 U.S.C. Section 3730, the United States will pay
Relator's share, in the total amount of $150,000, payable in installments of 15%
of each installment paid by PCL, in accordance with paragraph 5, within a
reasonable amount of time after the United States' receipt of each such payment
from PCL; The United States shall not be obligated to pay Relator unless and
until the United States receives payment from PCL.
16. Relator hereby warrants, represents and agrees that he is fully aware
of the provisions of California Civil Code Section 1542, which provides as
follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IS KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Relator voluntarily waives the provisions of California Civil Code 1542, and any
other similar law, as to any and all claims, demands, causes of action, or
charges of whatever nature, known or unknown, which are related or are in any
manner incidental to the subject matter of the Civil Action, and further agrees
that this waiver is a material aspect of the consideration for entering into
this Agreement.
17. PCL has entered into a Corporate Integrity Agreement with HHS/OIG,
attached as Exhibit B and incorporated by reference herein. On the Effective
Date (as defined in paragraph 31) PCL will commence its obligations under the
Corporate Integrity Agreement.
18. PCL has provided sworn financial disclosure statements and other
financial information to the Bankruptcy Court during the Chapter 11 Case, and
financial information to the U.S. Attorney's Office, and the United States has
relied on the representations therein in reaching this Agreement. PCL warrants
that the financial information provided to the United States is thorough,
accurate, and complete. PCL further warrants that it does not own any assets
which have not been disclosed to the United States Bankruptcy Court. In the
event that the United States discovers previously undisclosed assets totaling
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seventy-five thousand dollars ($75,000) or more in value, which existed at the
time of execution of this Agreement, ad in which PCL had an interest, contingent
or otherwise, the United States may collect one hundred percent (100%) of the
value of the assets previously undisclosed, not to exceed the Settlement Amount
outstanding; provided, however, that if such previously undisclosed assets were
excluded with an intent to defraud this Settlement Agreement may be rescinded by
the United States.
19. With respect to the conduct described in paragraph 2, PCL hereby
waives any defenses it may have to any criminal prosecution, which defenses may
be based in whole or in part on the Double Jeopardy Clause of the Constitution
or the holding or principles set forth in United States v. Halper, 490 U.S. 435
(1989), and agrees not to argue that the amounts paid under this Agreement are
punitive in nature or effect in any such criminal prosecution.
20. Nothing in any provision of this Agreement constitutes a agreement by
the United States concerning the characterization of the amounts paid hereunder
for purposes of any proceeding under Title 26, United States Code (Internal
Revenue Service).
21. All costs (as defined in the Federal Acquisition Regulations ("FAR")
31.205-47 and as defined in Titles XVIII and XIX of the Social Security Act, 42
U.S.C. Section 1395, et seq. and Section 1396, et seq. and the regulations
promulgated thereunder) incurred by or on behalf of PCL, and its present or
former officers, directors, employees, shareholders, and agents, in connection
with 1) the matters covered by this Agreement, 2) the Government's audit and
investigation of the matters covered by this Agreement, 3) PCL's investigation,
defense, and the obligations undertaken pursuant to the Corporate Integrity
Agreement incorporated by reference herein, 4) the negotiation of this
Agreement, and 5) the payments made to the United States pursuant to this
Agreement shall be unallowable costs for government contracting purposes and for
Medicare and Medicaid purposes. These amounts will be separately accounted for
by PCL, and PCL will not charge such costs directly or indirectly to any
contracts with the United States, or to any cost report submitted to the
Medicare or Medicaid program or any other government health insurance program.
Any sums owed by PCL to the United States for payments made to PCL by Medicare
and/or Medicaid (federal share) for costs that are unallowable (as defined in
this paragraph) shall be paid by PCL to HHS at its direction.
22. PCL agrees to cooperate fully and truthfully with the United States'
investigation of individuals and entities not specifically released in this
Agreement, for the acts described in paragraph 2. Upon reasonable notice, PCL
will make reasonable efforts to facilitate access to, and encourage the
cooperation of, its directors, officers, and employees for interviews and
testimony, consistent with the rights and privileges of such
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individuals. PCL will furnish to the United States, upon reasonable request, all
documents and records in its possession, custody or control relating to the acts
described in paragraph 2. PCL agrees to waive any applicable attorney-client
work product privilege that may apply to such documents and not assert any such
privilege in response to a request for documents under this paragraph.
23. Upon the occurrence of a Default following an Event of Default under
paragraph 8b. above (Commencement of Bankruptcy or Reorganization Proceeding),
PCL agrees not to contest or oppose any motion filed by the United States
seeking relief from or modification of the automatic stay of 11 U.S.C. Section
362(a) nor to seek relief under 11 U.S.C. Section 105 to enjoin or restrain the
United States from recovering monies owed by PCL arising out of this Agreement
or its underlying relationship with HHS related to the Medicare Program through
offset. PCL recognizes that this express waiver is in consideration for final
settlement of all issues and disputes between the Parties based upon the conduct
described in paragraph 2 of this Agreement and the releases set forth in
paragraphs 11 and 12. Furthermore, although it is agreed that this Settlement
Agreement will not be construed as an admission or evidence of liability, PCL
and HHS agree that this settlement is based on the conduct described in
paragraph 2 of this Agreement and PCL agrees to waive the right to contest
non-dischargeability of the debt.
24. PCL hereby fully and finally releases, dismisses, and forever
discharges the United States, its agencies, employees, servants, and agents from
any and all claims, causes of action, liens, lawsuits, liabilities, losses and
damages, including attorney's fees, costs, and expenses, of every kind and every
nature whatsoever, regardless of legal theory and however denominated, whether
known or unknown, suspected or unsuspected, past or future, which PCL as
asserted or could have asserted against the United States, its agencies,
employees, servants, and agents, related to or arising from the facts described
in paragraph 2 above.
25. This Settlement Agreement and the Corporate Integrity Agreement
incorporated by reference herein constitute the entire agreement between the
Parties. This Agreement may not be altered except by written consent of the
Parties except to the extent that PCL and HHS/OIG agree to modification of the
Corporate Integrity Agreement, pursuant to paragraph 47 of the Corporate
Integrity Agreement. No other additional promises, conditions or agreements have
been entered into other than those stated in this Agreement.
26. Except as provided for herein, each party to this Agreement will bear
its own costs incurred in connection with the Civil Action, including the
preparation and performance of this Agreement.
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27. PCL represents that the Agreement is entered into with knowledge of
the events described herein and upon advice of counsel. PCL further represents
that this Agreement is freely and voluntarily entered into without any degree of
duress or compulsion whatsoever, in order to avoid litigation.
28. The undersigned PCL signatory represents and warrants that he or she
is fully authorized and empowered to execute this Agreement. The undersigned
United States signatories represent that they are signing this Agreement in
their official capacity and that they are fully empowered and authorized to
execute this Agreement.
29. The Parties have executed identical copies of this Agreement, each of
which will be deemed an original.
30. The provisions of this Agreement will be binding upon the Parties and
their heirs, successors, assigns and transferees.
31. This Settlement Agreement is subject to the approval of the Bankruptcy
Court. PCL agrees that it will take all reasonable steps necessary to obtain
such approval as soon as reasonably practicable upon execution of the Settlement
Agreement. The Settlement Agreement shall be effective eleven (11) days after
the Bankruptcy Court issues an order approving the Settlement Agreement or when
such order otherwise becomes a final, non-appealable order (the "Effective
Date").
IN WITNESS WHEREOF, the parties hereto affix their signatures
FOR THE U.S. DEPARTMENT OF JUSTICE
DATED: ____________ __________________________________________
Robert Twiss
Assistant United States Attorney
United States Attorney's Office for the
Eastern District of California
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FOR THE U.S. DEPARTMENT OF
HEALTH AND HUMAN SERVICES
DATED: ____________ __________________________________________
Lewis Morris
Assistant Inspector General
Office of Inspector General
U.S. Department of Health and Human Services
FOR THE OFFICE OF CHAMPUS
DATED: ____________ __________________________________________
Robert D. Seaman
General Counsel
Office of Civilian Health and Medical
Program of the Uniformed Services
FOR THE REALTOR
DATED: ____________ __________________________________________
Taylor McKeeman
Relator
DATED: ____________ __________________________________________
R. Brooks Cutter
Friedman, Collard, Cutter & Panneton
7750 College Town Drive, Suite 300
Sacramento, California 95826
Realtor's Counsel
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FOR PCL
DATED: ____________ __________________________________________
J. Marvin Feigenbaum
Chief Operating Officer
Physicians Clinical Laboratory, Inc.
3301 C. Street, Suite 100E
Sacramento, California 95816
DATED: ____________ __________________________________________
Gregory M. Luce
Jones, Day, Reavis & Pogue
1450 G Street, N.W.
Washington, D.C. 20005
Counsel for PCL
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