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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 7)*
RESPONSE ONCOLOGY, INC.
(Name of Issuer)
Common Stock $.01 Par Value (1)
(Title of Class of Securities)
761232-107
(CUSIP Number)
Lathrop M. Gates, 2345 Grand Blvd., Suite 2800,
Kansas City, MO 64108, (816) 292-2000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
6-2-96
(Date of Event which Requires Filing of this Statement)
If the reporting person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b) (3) or (4), check the following box.
______
Check the following box if a fee is being paid with this statement. ______ (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7).
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1 (a) for other parties to whom copies are to
be sent.
(Continued on following pages)
(Page 1 of pages)
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*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Seafield Capital Corporation
43-1039532
(2) Check the Appropriate Box (a) ______
if a Member of a Group* (b) ______
(3) SEC Use Only
(4) Source of funds*
WC
(5) Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) ______
(6) Citizenship or Place of Organization
Missouri
Number of Shares (7) Sole Voting Power
beneficially Owned 4,121,700 (1)(2)
by Each Reporting
Person With (8) Shared Voting Power
26,067 (1)
(9) Sole Dispositive Power
4,121,700 (1)(2)
(10) Shared Dispositive Power
26,067 (1)
(11) Aggregate Amount Beneficially Owned By Each Reporting Person
4,147,767 (1)(2)
(12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares*
X
----
(13) Percent of Class Represented by Amount in Row (11)
54.6% (3)
(14) Type of Reporting Person*
CO
* See Instructions before Filling Out!
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(1) Reflects a 1 for 5 reverse stock split of the Issuer's common stock effected
November 1995.
(2) Does not include shares which the Reporting Person may have the right to
acquire on and after August 1, 1996 pursuant to the conversion option in that
certain Adjustable Rate Convertible Note of the Issuer in the principal amount
of $10,000,000 (the "Convertible Note"); if the Convertible Note is not paid in
full prior to August 1, 1996, the Reporting Person may convert the entire
principal amount into the number of shares of the Issuer's common stock, $.01
par value per share, determined by dividing the "conversion price" (as
hereinafter defined) into $10 million. If the "conversion price" were the same
as the Closing Price on June 20, 1996 for the Issuer's common stock (i.e. $17.25
per share), then if the Reporting Person were to elect to convert the
Convertible Note into shares of common stock of the Issuer, the number of shares
which would be issued to the Reporting Person as a result thereof would be
approximately 579,710.
(3) The percentage would be 57.8% if the "conversion price" were the same as the
closing price on June 20, 1996 for the Issuer's common stock (i.e., $17.25 per
share) and if the Convertible Note were converted into shares of the Issuer's
common stock.
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Item 1. Security and Issuer.
This Amendment No. 7 ("Amendment No. 7") to Schedule 13D concerns the
common stock, par value $.01 per share ("Common Stock") of Response Oncology,
Inc. (formerly named Response Technologies, Inc.) ("Response"), whose principal
executive offices are at 1775 Moriah Woods Boulevard, Memphis, Tennessee 38117.
Amendment No. 7 amends an original report (the "Original Report") on Schedule
13D respecting a purchase of shares of Common Stock on October 31, 1990, as
amended by Amendment No. 1 to Schedule 13D, dated August 2, 1991 ("Amendment No.
1"), Amendment No. 2 to Schedule 13D, dated November 11, 1991 ("Amendment No.
2"), Amendment No. 3 to Schedule 13D, dated June 9, 1992 ("Amendment No. 3"),
Amendment No. 4 to Schedule 13D dated, August 4, 1992 ("Amendment No. 4"),
Amendment No. 5 to Schedule 13D, dated May 13, 1993 ("Amendment No. 5") and
Amendment No. 6 to Schedule 13D, dated February 17, 1995 ("Amendment No. 6")
("Collectively, Amendments No.1, No. 2, No.3, No. 4, No. 5 and No.6 are
sometimes referred to as the "Prior Amendments"). The Issuer is the same Issuer
referred to in the Original Report and in the Prior Amendments; the current name
of the Issuer reflects a change effective November 1995. The Common Stock is the
same class of stock reported on in the Original Report and in the Prior
Amendments; the par value of the common stock was changed in November 1995 as a
result of a 1 for 5 reverse stock split.
Item 2. Identity and Background.
This report is filed by Seafield Capital Corporation ("Seafield")
(formerly named BMA Corporation). Seafield is a Missouri corporation; the
address of its principal executive office is 2600 Grand Boulevard, Suite 500,
P.O. Box 410949, Kansas City, Missouri 64141. Seafield is a holding company
engaged through its subsidiaries in various activities. Its principal interests
are in its 82% owned subsidiary, LabOne, Inc. (formerly named Home Office
Reference Laboratory, Inc.), a provider of clinical, substance abuse and
insurance laboratory testing services whose offices are located at 10310 West
84th Terrace, Lenexa, Kansas 66214, and its interest in Response. Through
subsidiaries, Seafield also owns oil and gas, venture capital and real estate
investments, as well as short-term and intermediate-term investment grade
securities.
Set forth in Schedule 1 hereto are the names, business addresses and
principal occupations or employment of the executive officers and directors of
Seafield. Each person listed on Schedule 1 is a United States citizen.
During the past five years, neither Seafield nor to its knowledge,
any of the persons identified in Schedule 1 has been (i) convicted in a criminal
proceeding, or (ii) a party to a civil proceeding of a judicial or
administrative body as a result of which such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
On April 12, 1996 Seafield made a loan in the principal amount of $10
million (the "Loan") to Response, evidenced by that certain Adjustable Rate
Convertible Note (the "Convertible Note"). The Convertible Note may be converted
into shares of Common Stock of Response under certain circumstances and pursuant
to certain conversion terms as more specifically described in Item 4 below. The
funds used to make the Loan were part of Seafield's working capital.
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Item 4. Purpose of the Transaction.
Seafield made the Loan to provide financing to enable Response to
further its business strategy of acquiring assets of and managing the
non-medical aspects of groups of physicians practicing in the fields of oncology
and hematology. The Loan presently matures December 31, 1996 or earlier in
the event Response receives proceeds from an offering of its equity securities;
however, in connection with a loan agreement referred to in the next sentence,
Seafield has orally agreed with Response's lending banks to extend the Loan's
December 31, 1996 maturity date. Pursuant to a Subordination Agreement dated
as of June 18, 1996, Seafield has agreed to subordinate the Loan as to rights
of payment, security, collection and collection in bankruptcy to obligations (up
to $30 Million in principal amount) of Response to certain banks under a loan
agreement entered into by Response to provide funding for acquisitions and
working capital. The principal amount of the Loan is convertible, at the option
of Seafield, into shares of Common Stock of Response on or after August 1, 1996
if the Loan has not been paid in full by said date. The number of shares into
which the Convertible Note would be converted in the event Seafield were to
exercise its conversion option would be determined by dividing the "conversion
price" into $10 Million, provided that if the number of shares would exceed that
number of shares which Response could issue without a vote of its shareholders
under the rules of the National Association of Securities Dealers, Inc.("NASD"),
then only that part of the principal amount of the Note which would cause the
issuance of the maximum number of shares permitted by the NASD rules without a
vote of shareholders will be converted. The "conversion price" is the average of
the closing prices of the Common Stock on the NASDAQ Stock Market's National
Market for the five (5) consecutive trading days ending one (1) trading day
prior to the date Response receives notice from Seafield of an election to
exercise the conversion option.
The "conversion price" can not be determined at this time, and,
therefore, it is not possible to determine the number of shares of Common Stock
into which the Convertible Note could be converted. The closing price for the
common stock on June 20, 1996 was $17.25 per share. If the "conversion price"
were the same as said closing price, then approximately 579,710 shares of Common
Stock would be issued to Seafield if it were to elect to convert the Convertible
Note into Common Stock. The foregoing is presented for illustration purposes
only; no forecast or estimate of future closing prices of the Common Stock is
intended or made by this Amendment No.7 and no assurances can or are being given
as to the number of shares of Common Stock which would be issued to Seafield if
it were to exercise its conversion option in the Convertible Note. Furthermore,
the foregoing is not intended to suggest whether or not Seafield might exercise
such conversion option; its exercise is entirely within Seafield's discretion
and Seafield has not made a decision respecting any such exercise. Seafield
negotiated for the inclusion of the conversion option in the Convertible Note in
order to increase the flexibility it has respecting the nature of its investment
in Response.
The Convertible Note has been, and it is Seafield's present intent
that any shares of Response Common Stock acquired by Seafield in the event it
were to elect to exercise its conversion option in the Convertible Note would
be, acquired as an investment.
Seafield recited in Amendment No. 6 that it is contemplating a merger
with its 82% owned subsidiary, LabOne, Inc. and that such a merger would likely
be preceded by a distribution to Seafield shareholders, or other disposition by
Seafield, of its Response shares and other assets.
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Seafield has stated in the Original Report and the Prior Amendments
that, except for rights granted to Seafield in the Securities Purchase Agreement
filed as Exhibit (a) to Amendment No. 6, which rights are no longer material, it
had no plans or proposals which relate to or would result in (i) the acquisition
by any person of additional securities of Response, or the disposition of
securities of Response; (ii) an extraordinary corporate transaction involving
Response or any of its subsidiaries; (iii) a sale or transfer of a material
amount of assets of Response or any of its subsidiaries; (iv) any change in
the present board of directors or management of Response; (v) any material
change in the present capitalization or dividend policy of Response; (vi) any
other material change in Response's business or corporate structure; (vii)
Any change in Response's charter or bylaws which may impede the acquisition of
control of Response by any person; (viii) causing a class of Response's
securities to be delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (ix) a class of equity securities of Response
being eligible for termination of registration pursuant to Section 12(g)(4) of
the Securities Exchange Act of 1934; or (x) any act similar to any of those
enumerated above.
The foregoing statement remains accurate, except as otherwise set
forth herein.
Item 5. Interest in Securities of the Issuer.
(a), (b), (c) and (d)
At present, Seafield beneficially owns 4,147,767 shares of Response
Common Stock, plus the number of shares of Response Common Stock which would be
issued to Seafield if it were to exercise the conversion option in the
Convertible Note evidencing the Loan made by Seafield to Response on April 12,
1996 (which number cannot be determined at this time). See Item 4 for a
description of the terms of the conversion option. Of those, Seafield currently
has sole power to vote and dispose of 4,121,700 shares and it would have sole
power to vote and dispose of any and all shares issued in the event it were to
exercise the conversion option in the Convertible Note; however, with respect to
26,067 shares which have been pledged to it ("Pledged Shares") to secure an
indebtedness of a member of Response's management to Seafield, Seafield does not
have the right to exercise any voting or other rights (including the right to
dividends) unless a default under the note evidencing such indebtedness
("Secured Note") or the pledge agreement respecting such indebtedness ("Pledge
Agreement") occurs. All such rights, including the right to dividends on such
shares are retained by the owner of such shares, who was the beneficiary of such
indebtedness, unless and until a default occurs. Defaults include (i) failure to
pay any obligation under the Secured Note or Pledge Agreement when the same is
due, (ii) the death of the beneficiary of such indebtedness, the failure of the
beneficiary to pay his debts or the institution of bankruptcy proceedings by or
against the beneficiary, or (iii) the breach of any representation, warranty or
agreement made by the beneficiary in the Secured Note or the Pledge Agreement.
If such a default occurs, Seafield has rights under the Pledge Agreement which
include the right to (a) receive all cash dividends payable with respect to the
Pledged Shares, (b) exercise any and all voting and other rights with respect to
the Pledged Shares, and (c) cause the Pledged Shares to be transferred of record
into Seafield's name or the name of Seafield's nominee.
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The number of shares beneficially owned by Seafield (exclusive of any
share which would be issued to Seafield if it were to exercise the conversion
option in the Convertible Note), including the Pledged Shares, constitutes
approximately 54.6% of Response's outstanding Common Stock, calculated in
accordance with Exchange Act Rule 13d-3(d)(1). If the "conversion price" were to
be the same as the closing price for Response Common Stock on June 20,1996 (i.e.
$17.25 per share), then the percentage of shares beneficially owned by Seafield
would constitute approximately 57.8% of Response's outstanding Common Stock.
These percentages do not reflect shares subject to issue upon exercise of
warrants, stock options or upon conversion of shares of Series A Convertible
Preferred Stock of Response presently outstanding and owned by persons other
than Seafield.
Certain of the persons named in Schedule 1 are known by Seafield to
beneficially own shares of Response stock. To Seafield's knowledge, these shares
were acquired by such persons solely for investment purposes and, except as
noted below with respect to Mr. Herman, such persons have sole power to vote and
dispose of such shares. Seafield disclaims any beneficial ownership in any of
such shares. The persons known to Seafield to beneficially own such shares and
the number of such shares beneficially owned by such persons (with an indication
of the shares which there is a right to acquire) are as follows:
Name Number of Shares
---- ----------------
Joseph T. Clark 219,940
W. Thoms Grant, II 6,400
Michael E. Herman 2,560
P. Anthony Jacobs 10,400
James R. Seward 10,400
Of the number of shares shown above, the following numbers consist of options
which the indicated individuals have the right to exercise either presently or
within 60 days: for Joseph T. Clark, 215,040; for W. Thomas Grant II, 6000; for
P. Anthony Jacobs, 6000 and for James R. Seward, 6000. Of the number of shares
shown above as beneficially owned by Mr. Herman, 360 are owned by his wife, and
he disclaims beneficial ownership of his wife's shares.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understanding or Relationships with Respect
to Securities of the Issuer.
No change to Item 6 is effected by this Amendment No. 7.
Item 7 Exhibits.
99.1 Adjustable Rate Convertible Note, dated April 12, 1996, in
the principal amount of $10,000,000.
99.2 Waiver Letter respecting maturity of the Convertible Note.
99.3 Subordination Agreement dated June 18, 1996 by and among
Response Oncology, Inc., NationsBank of Tennessee, N.A., as Agent and Seafield
Capital Corporation.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
SEAFIELD CAPITAL CORPORATION
By: /s/ P. Anthony Jacobs
P. Anthony Jacobs, President
Date: June 24, 1996
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SCHEDULE 1
Directors of Seafield Capital Corporation
Name, Occupation and Business Address
Lan C. Bentsen, Managing Partner
Remington Partners (investments)
3040 Post Oak Boulevard, Suite 200
Houston, Texas 77056
John C. Gamble, Managing Partner
Allen, Matkins Leck, Gamble and Mallory (law)
18400 Von Karmen, 4th Floor
Irvine, California 92715
William D. Grant, Consultant
Seafield Capital Corporation
2600 Grand Boulevard, Suite 500
Post Office Box 410949
Kansas City, Missouri 64141
W. Thomas Grant, II, Chairman of the Board and Chief Executive Officer/Seafield
Capital Corporation; Chairman of the Board, President of Chief Executive
Officer/LabOne, Inc.
2600 Grand Boulevard, Suite 500
Post Office Box 410949
Kansas City, Missouri 64141
Michael E. Herman
Private Investor
9300 Ward Parkway
Post Office Box 8480
Kansas City, Missouri 64114
P. Anthony Jacobs, President and Chief Operating Officer
Seafield Capital Corporation, 2600 Grand Boulevard, Suite 500
Post Office Box 410949
Kansas City, Missouri 64141
David W. Kemper, Chairman, President and Chief Executive Officer
Commerce Bancshares, Inc. (banking)
1000 Walnut Street, 18th Floor
Kansas City, Missouri 64106
John H. Robinson, Jr., Managing Partner
Black & Veatch (design and construction)
Corporate Woods, Building 27
10975 Grandview
Overland Park, Kansas 66210
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James R. Seward, Executive Vice President and Chief Financial Officer
Seafield Capital Corporation
2600 Grand Boulevard, Suite 500
Post Office Box 410949
Kansas City, Missouri 64141
Dennis R. Stephen, Chief Operating Officer
Tennessee Farmers Insurance Companies (insurance)
Post Office Box 307
Columbia, Tennessee 38401
Executive Officers of Seafield Capital Corporation
Name, Position and Business Address
W. T. Grant, II
Chairman of the Board and Chief Executive Officer/Seafield Capital Corporation
Chairman of the Board, President and Chief Executive Officer/LabOne, Inc.
2600 Grand Boulevard, Suite 500
Post Office Box 410949
Kansas City, Missouri 64141
P. Anthony Jacobs, President and Chief Operating Officer
Seafield Capital Corporation
2600 Grand Boulevard, Suite 500
Post Office Box 410949
Kansas City, Missouri 64141
James R. Seward, Executive Vice President and Chief Financial Officer
Seafield Capital Corporation
2600 Grand Boulevard, Suite 500
Post Office Box 410949
Kansas City, Missouri 64141
Steve K. Fitzwater, Vice President, Chief Accounting Officer and Secretary
Seafield Capital Corporation
2600 Grand Boulevard, Suite 500
Post Office Box 410949
Kansas City, Missouri 64141
Joseph T. Clark, President and Chief Executive Officer
Response Oncology, Inc.
1775 Moriah Woods Boulevard
Memphis, Tennessee 38117
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EXHIBIT INDEX
Ex. 99.1 Adjustable Rate Convertible Note dated April 12, 1996,
in the principal amount of $10,000,000
Ex. 99.2 Waiver Letter respecting maturity of the Convertible Note
Ex. 99.3 Subordination Agreement dated June 18, 1996 by and among
Response Oncology, Inc., NationsBank of Tennessee, N.A., as
Agent and Seafield Capital Corporation.
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EXHIBIT 99.1
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS RESPONSE ONCOLOGY, INC.
HAS BEEN FURNISHED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH
TRANSACTION WILL NOT VIOLATE SUCH REGISTRATION REQUIREMENTS.
RESPONSE ONCOLOGY, INC.
NO. 1996-1 $10,000,000
ADJUSTABLE RATE CONVERTIBLE NOTE
DUE DECEMBER 31, 1996
Dated April 12, 1996
For value received, RESPONSE ONCOLOGY, INC., a Tennessee corporation (the
"Company"), hereby promises to pay to SEAFIELD CAPITAL CORPORATION, a Missouri
corporation ("Seafield"), or its registered assigns, the principal sum of TEN
MILLION DOLLARS ($10,000,000) together with interest on the unpaid principal
portion thereof, as herein provided.
The principal amount of this Note, together with any accrued and unpaid
interest thereon, shall be payable in full on the earlier of (i) December 31,
1996 (ii) the date the Company first obtains funding under the Credit Facility,
or (iii) the date the Company receives proceeds from an offering of its equity
securities.
This Note shall bear interest from the date this Note is dated at a rate
per annum equal to the Prime Rate of Commerce Bank N. A. (Kansas City), as in
effect from time to time, plus 1%, which rate shall be adjusted on the first day
of each month following any change in the Prime Rate. Interest on this Note
shall be paid on the last day of each month and at maturity or upon redemption
or conversion. Interest hereunder shall be calculated for the actual number of
days elapsed on the basis of a year consisting of 365 days.
Such principal and interest payments shall be made to Seafield or to such
other person in whose name this Note is registered (Seafield or such other
person being referred to as the "Holder") on the register maintained by the
Secretary of the Company ("Note Register") at the close of business on the
"Record Date" for such principal and interest installment. Such Record Date
shall be the fifth day (whether or not a Business Day) next preceding such
principal and interest payment date.
Payment of the principal of and interest on this Note will be made to the
Holder at the Principal Executive Office of the Company in Memphis, Tennessee,
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; provided,
however, that at the request of the Holder made on or before the Record
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Date payment may be made by check mailed to the address of the Holder as such
address shall appear in the Company's Note Register or by wire transfer to such
account as may be specified to Company in writing by the Holder.
This Note is designated as the Company's Adjustable Rate Convertible Note,
No. 1996-1, Due December 31, 1996 (the "Note") and when issued was in the
aggregate principal amount of $10,000,000. This Note is convertible as provided
in Section 3 hereof.
This Note was originally issued to fund the acquisition by the Company of
the Oncology Practice, as herein defined.
The following terms apply to this Note:
SECTION 1. Certain Definitions.
As used in this Note:
"Affiliate" means (i) with respect to any specified Person, any 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" 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 stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in the City of New York are
authorized or obligated by law or executive order to close.
"Capital Lease" means any lease of property, real or personal, in respect
of which the present value of the minimum rental commitment would be capitalized
on a balance sheet of the lessee in accordance with generally accepted
accounting principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Common Stock" means the Company's Common Stock, par value $ .01 per share,
or any shares of Capital Stock of the Company into which such stock shall
hereafter be changed or reclassified.
"Credit Facility" means a credit agreement which may be entered into with
NationsBank N.A. or some other financial institution in order to, among other
purposes, provide refunding proceeds to acquire the Oncology Practice.
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"Existing Loan" means borrowings under the Company's existing $5,000,000
credit agreement with Union Planter's National Bank.
"Indebtedness" of any Person means (i) any liability of such Person (a) for
borrowed money, (b) evidenced by a note, debenture or similar instrument
(including a purchase money obligation or deferred payment obligation) given in
connection with the acquisition of any services, property or assets (other than
inventory, other accrued current liabilities or similar property acquired in the
ordinary course of business), including securities (but excluding reverse
repurchase agreements entered into in the ordinary course of business), (c) for
the payment of a Capital Lease obligation of such person or (d) with respect to
the reimbursement of any letter of credit, banker's acceptance or similar credit
transaction (other than trade letters of credit issued in the ordinary course of
business; provided, that failure to make prompt reimbursement of any trade
letter of credit shall be deemed to be the incurrence of Indebtedness); (ii) any
guarantee by such Person of any liability of others described in clause (i)
above or any obligation of such Person with respect to any liability of others
described in clause (i) above, including liability of others secured by a lien
on the property of such Person, whether or not the liability so secured has been
assumed by such Person; and (iii) all Interest Rate Protection Obligations of
such Person. Indebtedness shall not include operating leases or trade accounts
payable.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include without limitation, interest rate swaps, caps,
floors, collars and similar agreements.
"Knoxville Assumed Debt" means Indebtedness of the Oncology Practice under
Capital Lease obligations aggregating $93,475 assumed by the Company as partial
payment of the acquisition price of the Oncology Practice.
"Knoxville Note" means a note payable to the partners of the Oncology
Practice as partial payment of the acquisition price therefor in the principal
amount of $150,000.
"Oncology Practice" means Knoxville Hematology Oncology Associates, whose
principal business office is located in Knoxville, Tennessee.
"pari passu" when used with respect to the ranking of any indebtedness of
any Person in relation to other Indebtedness of such Person, means that each
such indebtedness (a) either (i) is not subordinated in right of payment to any
other Indebtedness of such Person or (ii) is subordinate in right of payment to
the same Indebtedness of such Person as is the other and is so subordinate to
the same extent, and (b) is not subordinate in right of payment to the other or
to any Indebtedness of such Person as to which the other is not so subordinate.
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"Person" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or agency or political
subdivision thereof.
"Principal Executive Office" means 1775 Moriah Woods Boulevard, Memphis,
Tennessee 38117.
"Prime Rate" means the rate of interest from time to time announced by
Commerce Bank N.A. (Kansas City) as its prime commercial lending rate.
"South Florida Note" means that certain note issued January 2, 1996 by the
Company to the shareholders of Oncology Hematology Group of South Florida, P.A.
in the principal amount of $5,959,972.
"Subsidiary" means a corporation more than 50% of the outstanding Voting
Stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries and which is a "significant subsidiary" as defined in
Rule 1-01 (w) of Regulation S-X of the Securities and Exchange Commission.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of stock has such voting power by reason of any contingency.
SECTION 2. Limitation on Other Indebtedness. The Company will not issue,
assume, guarantee or otherwise become liable for, directly or indirectly, or
suffer to exist, any Indebtedness unless (i) such Indebtedness ( other than the
Knoxville Note, the Knoxville Assumed Debt and the South Florida Note, and
borrowings under the Existing Loan not to exceed $5,000,000 in aggregate
principal amount outstanding) is subordinated in right of payment to this Note
in a manner satisfactory to Holder and (ii) such Indebtedness (other than the
Knoxville Assumed Debt and borrowings under the Existing Loan not to exceed
$5,000,000 in aggregate principal amount outstanding) is unsecured. The Company
covenants that Indebtedness under the Existing Loan and the South Florida Note
is, and Indebtedness under the Knoxville Note and the Knoxville Assumed Debt
will be, pari passu in right of payment with Indebtednss under this Note except
that Indebtedness under the Existing Loan and the Knoxville Assumed Debt may
remain secured by property of the Company and the Oncology Practice,
respectively, to the extent they were so secured on April 1, 1996.
SECTION 3. Conversion Rights.
(a) If the Company shall fail to redeem this Note in full prior to
August 1, 1996, the Holder shall have the option, exercisable in writing at any
time on or after such date and until the time this Note is paid in full on
maturity or redeemed in full on the date fixed for redemption (and whether this
Note has been called for redemption prior to the exercise of such option) to
convert
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<PAGE>
this Note in its entirety into shares of the Company's fully paid and
non-assessable Common Stock at the conversion price determined as provided
herein (the "Conversion Price".) Upon the surrender of this Note, accompanied by
a conversion notice in the form attached hereto properly completed and duly
executed by the Holder (a "Conversion Notice"), the Company shall issue and,
within three business days after such surrender of this Note with the Conversion
Notice, deliver to or upon the order of the Holder (i) that number of shares of
Common Stock as shall be determined in accordance herewith and (ii) payment of
the accrued and unpaid interest on this Note (or, if Section 3(f) applies, on
that portion of this Note which is converted.) The number of shares of Common
Stock to be issued upon conversion of this Note shall be determined by dividing
the principal amount of the Note by the Conversion Price in effect on the date
the Conversion Notice is delivered by the Holder to the Secretary of the Company
at its Principal Executive Office. Holder shall be entitled to all rights of a
shareholder of the Company as of such date.
(b) The Conversion Price shall be the average of the closing prices of
the Common Stock on the Nasdaq Stock Market's National Market for the five (5)
consecutive trading days ending one (1) trading day prior to the date the
Conversion Notice is received by the Company; such closing trading price shall
be appropriately adjusted to eliminate the impact of any dividend (whether in
cash, securities or other property), stock split, reclassification,
recapitalization, reverse split or similar event, announced or occurring with
respect to the Company's Common Stock during such five (5) trading day period.
(c) The Company covenants that during the period the foregoing
conversion right exists, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the conversion of this Note. The Company represents that
upon issuance, such shares will be duly and validly issued, fully paid and
non-assessable. The Company agrees that its issuance of this Note shall
constitute full authority to its officers and agents who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the conversion of this Note.
(d) Except as otherwise provided in this Note or agreed by the Holder,
this Note may be converted by the Holder by (i) submitting to the Borrower a
Conversion Notice in the form attached to this Note and (ii) surrendering this
Note at the Principal Executive Office of the Borrower.
(e) The Shares of Common Stock issuable upon the conversion of this
Note may not be sold or transferred unless either (i) they first shall have been
registered under the Securities Act ot 1933 (the "Act") and applicable state
securities laws or (ii) the Company shall have been furnished with an opinion of
legal counsel (which may be the Company's inside general counsel) experienced in
securities laws matters to the effect that such sale or transfer is exempt from
the registration requirements of the Act and all applicable state securities
laws. Each certificate for shares of Common Stock issuable upon conversion of
this Note that have not been so registered and that have not been sold pursuant
to an exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
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<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.
Upon the request of a holder of a certificate representing any shares of Common
Stock issuable upon conversion of this Note, the Company shall remove the
foregoing legend from the certificate or issue to such holder a new certificate
therefore free of any transfer legend, if, with such request, the Company shall
have received either (i) an opinion of counsel (which may be the Company's
inside general counsel) experienced in securities laws matters to the effect
that any such legend may be removed from such certificate, or (ii) if the
present paragraph (k) of Rule 144 or a substantially similar successor rule
remains in force and effect, satisfactory representations from the holder that
such holder is not then, and has not been during the preceding three (3) months,
an affiliate of the Company, and that a period of at least three (3) years has
elapsed since the later of the date the securities were acquired (as determined
under Rule 144) from the Company or an affiliate of the Company.
(f) In no event shall the Company issue more than the Maximum Share
Amount upon conversion of this Note. If after giving effect to the conversion
and issuance of the Maximum Share Amount a portion of the principal amount of
this Note remains unconverted, the Company will issue a new Note of like tenor
to the Holder for the unconverted portion hereof, with appropriate changes to
reflect the reduced principal amount after giving effect to such conversion. The
Maximum Share Amount shall mean that number of shares of Common Stock as will
not exceed the ceiling limitation, if any, imposed on the issuance of shares
without a shareholder vote under Section 6(i) of Part III of Schedule D to the
By-Laws of the National Association of Securities Dealers, Inc.
SECTION 5. Events of Default. "Event of Default", wherever used herein,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any interest upon this Note when it
becomes due and payable, and continuance of such default for a period of 5 days;
(b) default in the payment of the principal of this Note when due
and payable;
(c) failure by the Company to use the proceeds of this Note to
acquire the Oncology Practice;
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<PAGE>
(d) failure by the Company to issue to the Holder the number of shares
of Common Stock issuable upon exercise by the Holder of the conversion rights of
the Holder in accordance with the terms of this Note;
(e) default in the performance, or breach, of any covenant or
agreement of the Company under this Note (other than a default in the
performance, or breach, of a covenant or agreement that is specifically dealt
with elsewhere in this Section), and continuance of such default or breach for a
period of thirty (30) days after there has been given, by registered or
certified mail, to the Company by the Holder a written notice specifying such
default or breach and stating that such notice is a "Notice of Default";
(f) (i) an event of default shall have occurred under any mortgage,
bond, indenture, loan agreement or other document evidencing any Indebtedness of
the Company or any Subsidiary for money borrowed, which Indebtedness has an
aggregate outstanding principal amount of not less than $500,000, and such
default shall result in such Indebtedness becoming, whether by declaration or
otherwise, due and payable prior to the date on which it would otherwise become
due and payable or (ii) a default in any payment when due at final stated
maturity of any such Indebtedness outstanding in an aggregate principal amount
of not less than $500,000 and, in each case, ten (10) Business Days shall have
elapsed after such event during which period such event shall not have been
cured or rescinded or such Indebtedness shall not have been satisfied;
(g) final judgments or orders shall have been rendered against the
Company or any Subsidiary by a court or regulatory agency of competent
jurisdiction which require the payment in money, either individually or in an
aggregate amount, that is more than $ 500,000 (other than any judgment as to
which a reputable insurance company has accepted full liability) and such
judgment or order shall not be discharged and either (i) any creditor shall have
commenced an enforcement proceeding upon such judgment or order, which
enforcement proceeding shall have remained unstayed for a period of ten (10)
days, or (ii) a period of sixty (60) days during which a stay of enforcement
shall not be in effect shall have elapsed following the date on which any period
for appeal has expired;
(h) a decree or order shall have been entered by a court having
jurisdiction for relief in respect of the Company or any Subsidiary in an
involuntary case or proceeding under the Federal Bankruptcy Code or any other
federal or state bankruptcy, insolvency, reorganization or similar law or
adjudging the Company or any Subsidiary a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company or any Subsidiary under the Federal Bankruptcy Code or any other
applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Company or any Subsidiary or of any substantial part of any of their properties,
or ordering the winding up or liquidation of any of their affairs, and any such
decree or order remains unstayed and in effect for a period of sixty (60)
consecutive days; or
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<PAGE>
(i) the Company or any Subsidiary shall have instituted a voluntary
case or proceeding under the Federal Bankruptcy Code or any other applicable
federal or state law or any other case or proceedings to be adjudicated a
bankrupt or insolvent, or the Company or any Subsidiary shall have consented to
the entry of a decree or order for relief in respect of the Company or any
Subsidiary in any involuntary case or proceeding under the Federal Bankruptcy
Code or any other applicable federal or state law or to the institution of
bankruptcy or insolvency proceedings against the Company or any Subsidiary, or
the Company or any Subsidiary shall have filed a petition or answer or consent
seeking reorganization or relief under the Federal Bankruptcy Code or any other
applicable federal or state law, or consented to the filing of any such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of any
of the Company or any Subsidiary or of any substantial part of its property, or
shall have made an assignment for the benefit of creditors, or admitted in
writing its inability to pay its debts generally as they become due or taken
corporate action in furtherance of any such action;
Upon the occurrence of an Event of Default, then, in the case of an event
described in (h) or (i) above, this Note shall immediately become due and
payable, together with interest accrued hereon or, in the case of any other
event described above, the Holder of the Note may declare this Note, together
with all interest accrued hereon to be due and payable and, upon such
declaration, this Note together with accrued interest hereon shall be due and
payable on the date specified in the declaration, in each case without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company. The holder of this Note may also proceed to
protect and enforce its rights either by suit in equity and/or by action at law,
or by other appropriate proceedings, or may proceed to enforce the payment of
this Note or to enforce any other legal or equitable right of the Holder of this
Note, including its right to covert this Note.
SECTION 5. Registration of Transfers. The Company shall register the
transfer of this Note upon records to be maintained by the Company for that
purpose, upon surrender of this Note, with the Form of Assignment attached
hereto duly filled in and signed, to the Secretary of the Company at the
Company's Principal Executive Offices. Any such request for transfer must be
accompanied by an opinion of counsel satisfactory to the Company that such
transfer will not violate the registration requirements of the Securities Act of
1933. Upon any such registration of transfer, a new Note, in substantially the
form of this Note evidencing the Note so transferred, shall be issued to the
transferee.
SECTION 6. Payment of Taxes. The Company shall not be required to pay any
tax in respect of the transfer of the Note.
SECTION 7. Redemption. The Note is subject to complete redemption prior to
maturity upon not less than 20 nor more than 40 days' written notice by mail, at
the election of the Company, at a redemption price equal to 100% of the
principal amount of this Note together with accrued interest on this Note to the
redemption date. This Note is not subject to partial redemption.
-8-
<PAGE>
This Note does not have the benefit of any sinking fund obligations.
SECTION 8. Mutilated or Missing Note. If this Note shall be mutilated,
lost, stolen or destroyed, upon request by the Holder hereof, the Company will
issue, in exchange for and upon cancellation of the mutilated Note, or in
substitution for the lost, stolen or destroyed Note, a new Note, in
substantially the form of this Note, of like tenor and maturity and having the
same principal amount, but, in the case of loss, theft or destruction, only upon
receipt of evidence satisfactory to the Company of such loss, theft or
destruction of this Note and, if requested by the Company, indemnity reasonably
satisfactory to it.
SECTION 9. Restriction on Transfer.
(a) This Note shall not be transferred unless the Company has been
furnished an opinion of counsel satisfactory to it that such transaction will
not violate the registration provisions of the Securities Act of 1933 or any
applicable state securities law.
(b) This Note and each Note issued upon transfer or exchange shall
bear a legend (the "Restrictive Legend") as to the restrictions on resale
contained or provided for in this Section 9 in substantially the form set forth
at the beginning of this Note.
SECTION 10. Financial Information. Until this Note is paid in full, if at
any time the Company ceases to be a reporting company under the Securities
Exchange Act of 1934, the Company agrees to furnish to the registered Holder, at
the address specified in the Note Register, within forty-five (45) days after
the end of each quarter, a copy of the Company's quarterly unaudited financial
statements, and within one hundred twenty (120) days after the end of the
Company's fiscal year, a copy of the Company's annual audited consolidated
financial statements.
SECTION 11. Notices. All notices, requests, demands and other
communications relating to the Note shall be in writing, including by telex,
telegram or cable, addressed, if to the registered holder hereof, to it or them
at the address(es) furnished by said registered holder(s) to the Company, and if
to the Company, to it at the Principal Executive Office, Attention: Secretary,
or to such other address as any party shall notify the other party in writing,
and, except as provided in Section 3(a), shall be effective, in the case of
written notice by mail, upon placement into the mails (first class, postage
prepaid), and in the case of notice by telex, telegram or cable, on the day
sent.
SECTION 12. Binding Effect. This Note shall be binding upon and inure to
the sole and exclusive benefit of the Company, its successors and assigns, and
the registered holder or holders from time to time of this Note.
SECTIOn 13. Survival of Rights and Duties. This Note shall terminate and be
of no further force and effect on the date the principal hereof and all interest
hereon shall have been paid in full.
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<PAGE>
SECTION 14. Governing Law. This Note shall be construed in accordance
with and governed by the internal laws of the State of Missouri.
IN WITNESS WHEREOF, the Company has caused this Note to be executed
under its corporate seal by its officers thereunto duly authorized as of the
date hereof.
RESPONSE ONCOLOGY, INC.
[CORPORATE SEAL]
By: /s/ Daryl P. Johnson
Daryl P. Johnson
ATTEST: Executive Vice-President and
Chief Financial Officer
/s/ John A. Good
John A. Good
Executive Vice-President and
General Counsel
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<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, ____________________ hereby sells, assigns and
transfers to the assignee set forth below all of the rights of the undersigned
in and to this Note:
Name of Assignee Address
---------------- -------
Name of Holder
-------------------------------------
Dated: _____________, 199__ (By:) _______________________________
(Title:) ____________________________
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<PAGE>
CONVERSION NOTICE
To Response Oncology, Inc.
The undersigned Holder of this Note irrevocably exercises the option to
convert this Note into shares of Common Stock of Response Oncology, Inc. in
accordance with the terms of this Note, and directs that the shares issuable and
deliverable upon the conversion, together with any check in payment for
fractional shares, be issued and delivered to the registered Holder of this Note
unless a different name has been indicated below. If shares are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto.
Name Of Holder
Dated ______________, 19____ _____________________________________
By: _________________________________
Title: ______________________________
Fill in for registration of shares of Common Stock if to be issued
otherwise than to the registered Holder.
- --------------------------------- -------------------------------------
Name of Person to Whom Shares (Social Security or Other Taxpayer
are to be issued (if other than Identifying Number)
registered holder)
- ---------------------------------
Address including zip code number
- --------------------------------- -------------------------------------
Name of Person to Whom Payment (Social Security of Other Taxpayer
for fractional shares is to be made Identifying Number)
(if other than registered holder)
- ---------------------------------
Address including zip code
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<PAGE>
<PAGE>
EXHIBIT 99.2
RESPONSE ONCOLOGY
- --------------------------------------------------------------------------------
June 3, 1996
Seafield Capital Corporation
2600 Grand Avenue, Suite 500
Kansas City, Missouri 64141
RE: Adjustable Rate Convertible Note (the "Seafield Note")
Gentlemen:
As of May 31, 1996, Response Oncology, Inc. ("Response") executed and delivered
to NationsBank of Tennessee, N.A. ("NationsBank"), as lead bank, and Union
Planters National Bank, as participant, a Loan Agreement (the "Loan Agreement")
for a $27.5 million unsecured credit facility to be used for acquisitions and
working capital (the "NationsBank Facility").
On April 12, 1996, Response borrowed $10 million from Seafield Capital
Corporation and executed and delivered the Seafield Note. The Seafield Note
provides, in pertinent part, that "[t]he principal amount of this Note, together
with any accrued and unpaid interest thereon, shall be payable in full on the
earlier of (i) December 31, 1996, (ii) THE DATE THE COMPANY FIRST OBTAINS
FUNDING UNDER THE CREDIT FACILITY, or (iii) the date the Company receives
proceeds from an offering of its equity securities . . . (emphasis added).
Although the first funding of the NationsBank Facility has not yet occurred, it
is anticipated that such funding will occur on or about June 17, 1996, at which
time Response has scheduled to acquire the St. Petersburg medical oncology
practice. In that regard, Response hereby requests that Seafield waive the
maturity date set forth in item (ii) in the immediately preceding paragraph. In
all other respects, the Seafield Note shall remain in full force and effect,
without additional modification on account of this instrument.
In addition, the Loan Agreement provides for a dollar-for-dollar reduction in
Response's borrowing base for debt obligations that are not subordinated to the
NationsBank Facility. We have instructed NationsBank to deliver to Seafield for
consideration a form of subordination agreement acceptable to NationsBank. We
would appreciate your considering such agreement or a subordination agreement in
form mutually acceptable to Seafield and NationsBank.
<PAGE>
Please acknowledge Seafield's waiver of the maturity date for which such waiver
has been requested hereby signing one copy of this letter and returning the same
to the undersigned at the principal office of Response.
Sincerely,
Response Oncology, Inc.
By: /s/ John A. Good
John A. Good, Executive Vice
President and General Counsel
Agreed and Accepted this 7th day
of June, 1996. (Subject to the
"Notation" below)
Seafield Capital Corporation
By: /s/ James R. Seward
Title: Executive Vice President and
Chief Financial Officer
Notation: Seafield Capital Corporation's agreement to the waiver requested
in this letter is subject to the following:
(1) Notwithstanding anything to the contrary in that certain
letter dated April 8, 1996 of Seafield addressed to Response, the
Seafield Note is not subordinated in any manner to the NationsBank
Facility as a result of this letter; subordination of the Seafield
Note, if any, will only be effected through, and will be governed by
the provisions of, a separate subordination document, the terms and
conditions of which must be acceptable to Seafield in its sole
discretion (as evidenced by the signature of a Seafield officer to
such subordination document) before any indebtedness evidenced by the
Seafield Note will be subordinated in right of payment or otherwise to
the NationsBank Facility, and
(2) As a result of the waiver granted in this letter, all
principal of and accrued interest on the Seafield Note shall be
payable in full on the earlier of (i) December 31, 1996, and (ii) the
date Response receives proceeds from an offering of its equity
securities.
<PAGE>
<PAGE>
EXHIBIT 99.3
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement") is entered into as of the
18th day of June, 1996, by and among RESPONSE ONCOLOGY, INC. ("Borrower"), a
Tennessee corporation; NATIONSBANK OF TENNESSEE, N.A. ("Agent"), a national
banking association, in its capacity as Agent for the "Lenders," as defined in
that Loan Agreement dated as of May 31, 1996, among Borrower, Union Planters
National Bank, a national banking association, and NationsBank of Tennessee,
N.A., as such Loan Agreement may be amended from time to time: and SEAFIELD
CAPITAL CORPORATION ("Subordinated Lender"), a Missouri corporation.
RECITALS:
WHEREAS, Senior Lenders (as defined below) and Subordinated Lender
have both extended or agreed to extend credit to Borrower, on certain terms and
conditions; and
WHEREAS, one condition to Senior Lenders' agreement to extend credit
to Borrower is that Subordinated Lender must agree that certain obligations of
Borrower to Subordinated Lender shall be subordinate to the obligations of
Borrower to Senior Lenders on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises; as an inducement to
cause Senior Lenders to extend credit to Borrower; and for other valuable
consideration, the receipt and sufficiency of which are acknowledged, it is
agreed as follows:
1. DEFINITIONS. As used below in this Agreement, the following
capitalized terms have the meanings set forth below:
"Affiliate" means, with respect to any Person, a second Person
that, directly or indirectly, (i) owns a majority of the equity interest in the
first Person, (ii) is owned in equity interest, in any degree, by the first
Person, or (iii) is owned, as to a majority of its equity interest, by a third
Person who is an Affiliate of the first Person under provisions (i) or (ii)
hereof.
"Agent" means Nationsbank of Tennessee, N.A., a national banking
association, in its capacity as Agent for the Senior Lenders pursuant to the
Senior Loan Agreement.
"Blockage Notice" means a written notice given by Agent to
Subordinated Lender stating that an Event of Default exists under the Senior
Debt Agreements, which notice shall remain in effect (i) in the case of an Event
of Default for nonpayment of principal or interest by Borrower or an Event of
Default arising from the filing of a proceeding under an Insolvency Law, from
the date of issuance of the Blockage Notice until the earlier of the Full
Payment of the Senior Debt or Agent's written notice to Subordinated Lender that
the Event of Default has
<PAGE>
been waived by or cured to the satisfaction of Agent, (ii) in the case of any
other Event of Default, from the date of issuance of the Blockage Notice until
the earlier of (a) one hundred seventy-nine (179) days after the issuance
thereof, (b) Agent's written notice to Subordinated Lender that the Event of
Default has been waived by or cured to the satisfaction of Agent or otherwise
ceased to exist, or (c) the date of Full Payment of the Senior Debt; provided,
however, that (x) no Blockage Notice under (ii) hereof may be imposed more than
twice in any rolling 360-day period and (y) there must be at least 180
consecutive days in each rolling 360-day period in which no Blockage Notice
under (ii) above is in effect.
"Bona Fide Purchaser" means a Person that (i) is not liable for
the Senior Debt (either generally or by the encumbrance of property therefor),
(ii) is not an Affiliate of any Person who is liable for the Senior Debt (either
generally or by the encumbrance of property therefor), and (iii) purchases all
or any portion of the Subordinated Debt in compliance with the provisions of
this Agreement. A wholly-owned subsidiary of Subordinated Lender (other than
Borrower) shall be regarded as a Bona Fide Purchaser.
"Borrower" means Response Oncology, Inc., a Tennessee
corporation, and its successors.
"Equity Securities" means common or preferred stock issued by
Borrower, which stock is not subject to any obligation of redemption or other
obligation of Borrower or any Affiliate of Borrower to purchase or cause the
purchase of such stock.
"Full Payment" of the Senior Debt means the payment of all
principal (in an amount not to exceed ($30,000,000.00), interest and expenses
arising under the Senior Debt Agreements.
"Insolvency Law" means the United States Bankruptcy Code and any
other present or future federal or state law constituting liquidation,
conservatorship, moratorium, receivership, rearrangement, reorganization or
similar debtor relief laws.
"Payment" means any money, security interest or other value or
benefit directly or indirectly given by or on behalf of Borrower to or for the
benefit of Subordinated Lender on account of the Subordinated Debt, or received
directly or indirectly by Subordinated Lender from any other source on account
of the Subordinated Debt, whether such money, etc. is characterized as a payment
to reduce the Subordinated Debt, as a reserve for the payment of the
Subordinated Debt, as consideration for the purchase of the Subordinated Debt or
any interest therein, or otherwise, except that consideration received by
Subordinated Lender from a Bona Fide Purchaser shall not be considered a
Payment.
"Permitted Payments" means Payments that are paid in U.S. Dollars
and which meet either of the following additional criteria:
(a) Payments that (i) represent only interest accrued on the
Subordinated Debt, (ii) are paid by Borrower directly to
Subordinated Lender no earlier than the
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<PAGE>
scheduled due dates thereof as provided in the Subordinated
Note, and (iii) are made when no Blockage Notice is in
effect.
(b) Payments made when an Event of Default has occurred and is
continuing under the Subordinated Note after the applicable
Standstill Period for such Event of Default has ended,
whether or not a Blockage Notice is then in effect, which
Payments are otherwise made in full accordance with the
provisions of this Agreement (including turnover
provisions).
(c) Payments made by the issuance of Equity Securities to
Subordinated Lender in satisfaction of Subordinated Debt
pursuant to the conversion feature thereof or otherwise.
(d) Payments made with the proceeds of an issuance of Equity
Securities, which Payments are made within ten (10) days of
Borrower's issuance thereof.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government, governmental agency or political subdivision thereof, or any other
form of entity.
"Senior Debt" means all present and future obligations of
Borrower to Senior Lenders and Agent under the Credit Facilities described in
the Senior Loan Agreement, including, but not limited to, the obligations to pay
principal (in an amount not to exceed $30,000,000.00), interest, expenses, fees
and other amounts arising under, and to perform all other obligations stated in,
the Senior Debt Agreements, and all refinancings thereof.
"Senior Debt Agreements" mean (i) the Senior Loan Agreement, (ii)
each "Note," as defined in the Loan Agreement, (iii) all other "Loan Documents,"
as defined in the Loan Agreement, in existence as of the date hereof, (iv) any
other document hereafter arising that further evidences or secures the
"Obligations" (as defined in the Loan Agreement); and (v) all amendments,
modifications, restatements, renewals, increases and extensions of any of the
foregoing.
"Senior Lenders" means the "Lenders," as defined in the Senior
Loan Agreement from time to time.
"Senior Loan Agreement" means that Loan Agreement dated as of May
31, 1996, among Borrower, Agent, Union Planters National Bank, a national
banking association, and NationsBank of Tennessee, N.A., a national banking
association.
"Standstill Period" means a period of time commencing upon the
date on which an Event of Default occurs under the Subordinated Note (as defined
therein) and ending upon the earlier of (i) one hundred twenty (120) days after
the date on which Subordinated Lender gives written notice to Agent of the
occurrence of the Event of Default under the Subordinated Note other than an
Event of Default resulting from a proceeding under an Insolvency Law or an
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<PAGE>
Event of Default arising from an action described in (v) below), (ii) sixty (60)
days after the institution of a proceeding by a party other than Agent against
Borrower under an Insolvency Law, if such proceeding has not been dismissed
within that time, (iii) ten (10) days after the institution of a proceeding by
Agent against Borrower under an Insolvency Law, (iv) ten (10) days after the
institution of a proceeding by Borrower under an Insolvency Law, or (v) ten (10)
days after Agent's filing of judicial debt enforcement proceedings or its
exercise of other remedies against collateral for the Senior Debt.
"Subordinated Debt" means the obligations of Borrower for
principal, interest, expenses and any other amounts arising under the
Subordinated Note.
"Subordinated Lender" means Seafield Capital Corporation, a
Missouri corporation, its successors and its assigns arising in accordance with
the terms of this Agreement.
"Subordinated Note" means that Adjustable Rate Convertible Note
made by Borrower dated April 12, 1996, in the original principal amount of Ten
Million and No/100 Dollars ($10,000,000.00), a copy of which is attached hereto
as Exhibit A, and all modifications, extensions and renewals thereof entered
into in accordance with the terms of this Agreement.
2. OWNERSHIP OF SUBORDINATED DEBT. Subordinated Lender warrants to
Senior Lenders and Agent that Subordinated Lender is the lawful owner of the
Subordinated Debt and the lawful holder of the Subordinated Note, free of any
security interest, lien, participation interest or other claim of any kind.
3. SUBORDINATION. Subordinated Lender hereby agrees that the
Subordinated Debt shall hereafter be subordinate to the Senior Debt with respect
to the rights of payment, security, collection and collection in bankruptcy, as
and to the extent expressly set forth in this Agreement.
4. SUBORDINATION OF PAYMENTS. Except for Permitted Payments,
Subordinated Lender shall not accept, and Borrower shall not pay, any Payments
with respect to the Subordinated Debt (of principal, interest, expenses or
otherwise) unless Agent gives its express prior written consent to Subordinated
Lender, which consent may be granted or withheld in Agent's discretion.
5. SUBORDINATION OF SECURITY. The Subordinated Debt shall be
unsecured.
6. SUBORDINATION OF RIGHT OF COLLECTION. Notwithstanding the existence
of an Event of Default under the Subordinated Note (as defined therein),
acceleration thereunder or any other occurrence whatsoever, Subordinated Lender
shall take no judicial or other action to collect the Subordinated Debt, to
secure additional collateral therefor, to create a reserve for its payment, or
to seek relief under any Insolvency Law, and Borrower shall not voluntarily
participate in any such collection action, provide additional collateral or
create a reserve for the
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payment of the Subordinated Debt, without the prior written approval of Agent,
which consent may be granted or withheld in Agent's discretion. Any such action,
collateral or reserve purportedly established for the Subordinated Debt without
Lender's prior written consent shall be void. Notwithstanding the foregoing,
following the occurrence of an Event of Default under the Subordinated Note and
the end of the Standstill Period for such Event of Default, even though Full
Payment of the Senior Debt may not have occurred, and provided that the Event of
Default has not been waived or cured, Subordinated Lender may seek enforcement
of Borrower's obligations with respect to the Subordinated Debt through judicial
debt collection proceedings or through the commencement of a proceeding under an
Insolvency Law, with all recoveries accomplished thereby to be paid to Agent for
application to the Senior Debt until the Full Payment of the Senior Debt, as and
to the extent provided in this Agreement.
7. SUBORDINATION OF COLLECTION IN BANKRUPTCY. If Borrower becomes a
party to a voluntary or involuntary bankruptcy proceeding, reorganization
proceeding or any other action under an Insolvency Law, following any applicable
Standstill Period, Subordinated Lender agrees to timely file a claim for the
amount of the Subordinated Debt, in form and substance approved by Agent (which
approval Agent shall not unreasonably withhold). Subordinated Lender hereby
irrevocably authorizes and empowers Agent to file claims in the Agent's own name
and claiming through the Subordinated Lender, as may be necessary or advisable
for the enforcement of this Agreement in any proceeding under an Insolvency Law
and to collect and receive any and all payments or distributions which may be
payable or deliverable at any time upon or with respect to the Subordinated Debt
until Full Payment of the Senior Debt. Agent will provide Subordinated Lender
with copies of any documents filed naming and claiming through the Subordinated
Lender. Subordinated Lender shall retain the right to vote and otherwise act in
any such proceeding, including without limitation, the right to file claims in
its own behalf, and to vote to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition, or extension.
8. TURNOVER OF PAYMENTS. Notwithstanding any other provision of this
Agreement, any Payment made with respect to the Subordinated Debt prior to the
Full Payment of the Senior Debt, with the exception only of Payments under
subsections (a), (c) and (d) of the above definition of Permitted Payments and
those permitted by Agent's consent under Section 4 hereof, shall be held by
Subordinated Lender in trust for Agent, shall not be commingled with other
property of Subordinated Lender, and shall immediately upon receipt be remitted
to Agent (or to the trustee or similar official if received in connection with a
proceeding under an Insolvency Law) in kind with any necessary endorsement
affixed for application to the Senior Debt, without the need of demand by Agent.
9. ACCELERATION OF SUBORDINATED DEBT. Prior to accelerating the
Subordinated Debt, Subordinated Lender shall give Agent written notice of any
Event of Default under the Subordinated Debt (a notice commencing a Standstill
Period shall be regarded as a notice under this Section) and allow Agent the
lesser of (i) the period of time equal to the applicable Standstill Period, or
(ii) twenty (20) days after receipt of such notice to cure or cause the cure
thereof, unless the Event of Default arises from the filing of a voluntary
proceeding by a Borrower under any Insolvency Law, in which case no obligation
of notice or right to cure shall apply.
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10. SUBORDINATION OF SUBORDINATED LENDER. Should any Payments made
with respect to the Subordinated Debt be applied to the Senior Debt pursuant to
the provisions of this Agreement, then, upon the Full Payment of the Senior Debt
(as determined including such redirected Payments), Subordinated Lender shall be
subrogated to any remaining rights of Agent with respect to the Senior Debt.
This provision does not create or evidence any obligation on the part of Agent
to exercise diligence in collection, prevent the impairment of collateral or
otherwise act in any respect for the benefit of Subordinated Lender in Agent's
dealings with Borrower or any collateral securing the Senior Debt, it being the
essence of this Agreement that no such duties exist on the part of Agent. For
purposes of the subrogation provided for in this Section 10, no payment or
distribution to any Agent of any cash, property or securities to which
Subordinated Lender would be entitled except for the provisions of this
Agreement, and no payment over pursuant to the provisions of this Agreement to
any Agent by Subordinated Lender will, as among the Borrower, its creditors
(other than Agent) and the Subordinated Lender be deemed to be a payment or
distribution by Borrower to or on account of any Senior Debt. If other lenders
are similarly subordinated to the Senior Debt at the time of its Full Payment,
and if they are also subrogated to the rights of Senior Lenders, all such
subrogated subordinated lenders shall share in the rights of lender on a pari
passu basis.
11. LEGEND. The Subordinated Note shall bear a legend stating that
it is subject to the provisions of this Agreement.
12. TRANSFER. Subordinated Lender shall not negotiate, sell, assign,
or transfer the Subordinated Note or any interest in the Subordinated Debt
without the prior written approval of Lender, except that prior approval shall
not be necessary if a transfer is (i) made to a Bona Fide Purchaser, and (ii)
made pursuant to documents that are expressly subject to the terms and
conditions of this Agreement and by which the transferee agrees to be regarded
as a Subordinated Lender hereunder, which are delivered to Lender within five
(5) days after they become effective (such transfer to become effective under
this Agreement only upon Agent's receipt thereof). No transfer of the
Subordinated Debt shall release Subordinated Lender from liability for any
obligations to Agent or Lenders hereunder arising prior to the transfer thereof.
13. UNCONDITIONAL SUBORDINATION. The enforceability of this Agreement
in accordance with its terms is not subject to any condition and the validity
and continuing effect hereof shall not be impaired by any event whatsoever,
including, but not limited to, the merger, consolidation, cessation of business
or liquidation of Borrower; the financial decline or bankruptcy of Borrower;
Agent's compromise or settlement with or release of any party liable for the
Senior Debt; Agent's release of any collateral for the Senior Debt; Agent's
failure to give Subordinated Lender notice of any default, Event of Default or
Unmatured Default by Borrower; the extension, amendment, modification, waiver,
increase or renewal of any of the Senior Debt Agreements without notice to
Subordinated Lender; or Agent's failure to exercise diligence in collection.
Subordinated Lender agrees that this Agreement shall be valid and binding upon
Subordinated Lender upon the delivery of this executed Agreement to Subordinated
Lender by or on behalf of Agent. Subordinated Lender and Agent shall each act in
good faith under this Agreement.
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14. MODIFICATION OF SUBORDINATED NOTE. Subordinated Lender and
Borrower agrees that it shall give Agent written notice as promptly as is
practicable of any modification, amendment or waiver of any provision of the
Subordinated Note and agree further that no such modification, amendment or
waiver shall be given effect absent Agent's prior written consent thereto if the
effect thereof would be to (i) modify covenants as to make them more restrictive
on Borrower including, but not limited to, the modification of financial
covenants against the interests of Borrower, (ii) create new Events of Default
or make existing Events of Default more restrictive on Borrower, (iii) increase
the interest rate thereunder or to create or increase non-interest payment
obligations of Borrower, or (iv) provide for the payment of any amount of
principal or interest of the Subordinated Debt prior to its originally scheduled
maturity.
15. EXPENSES. In any effort to enforce this Agreement between Agent
and Subordinated Lender, the prevailing party shall be entitled to recover all
court costs and reasonable attorney's fees and other expenses reasonably
associated therewith.
16. TERMINATION. Following the Full Payment of the Senior Debt, this
Agreement shall be terminated in writing by Agent.
17. NO MARSHALLING OF ASSETS. Agent may proceed against collateral
securing the Senior Debt and against parties liable therefor in such order as it
may elect, and neither Subordinated Lender nor Borrower nor any surety or
guarantor for Borrower nor any other creditor of Borrower shall be entitled to
require Agent to marshall assets. The benefit of any rule of law or equity to
the contrary is hereby expressly waived.
18. NOTICES. Any communications concerning this Agreement or the
credit described herein shall be addressed as follows:
As to Subordinated Lender:
Seafield Capital Corporation
Attn.: Tony Jacobs
============================
Telecopier: (816) 842-2101
With a Copy To:
Carl Struby
Lathrop & Gage L. C.
2345 Grand Boulevard
Kansas City, Missouri 64108-2684
Telecopier: (816) 292-2001
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As to Borrower:
Response Oncology, Inc.
Attn: John A. Good
1775 Moriah Woods Blvd.
Memphis, Tennessee 38117
Telecopier: (901) 683-7277
With a Copy To:
Baker, Donelson, Bearman & Caldwell
Attn: Mary L. Aronov, Esq.
165 Madison Ave.
20th Floor
Memphis, Tennessee 38103
Telecopier: (901) 577-2303
As to Agent:
NationsBank of Tennessee, N.A., Agent
Attn: David H. Dupuy
1 NationsBank Plaza
Nashville, TN 37239
With a Copy To:
Boult, Cummings, Conners & Berry
Attn: John E. Murdock III, Esq.
414 Union Street, Suite 1600
Nashville, Tennessee 37219
Telecopier: (615) 252-2380
Communications shall only be effective when set forth in writing and actually
delivered to the addresses stated above. Any party may change its address for
receipt of notices by submitting the change in writing to the other parties.
19. PAYMENTS OTHERWISE PERMITTED. Nothing contained in this Agreement,
the Senior Debt Agreements or the Subordinated Note will prevent Borrower, at
any time, from making Payments at any time of principal of or interest on, or
any other Payment in respect of, Subordinated Debt, except as expressly provided
in this Agreement.
20. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of
this Agreement are and are intended solely for the purpose of defining the
relative rights of Agent, on the one hand, and Subordinated Lender, on the other
hand. Nothing contained in this Agreement, the Senior Debt Agreements or the
Subordinated Note is intended to or will (i)
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impair, as among the Borrower, its creditors (other than the Agent) and
Subordinated Lender, the obligations of the Borrower, which are absolute and
unconditional, to pay to Subordinated Lender the principal of, or interest on,
the Subordinated Debt, or any other amount payable by Borrower under the
Subordinated Note, as and when the same becomes due and payable in accordance
with their terms; (ii) affect the relative rights against Borrower of
Subordinated Lender and creditors of such Borrower other than the Agent; or
(iii) prevent Subordinated Lender from accelerating any amount payable pursuant
to the Subordinated Note and exercising all other remedies otherwise permitted
by applicable law upon default thereunder, except as expressly provided in this
Agreement.
21. AMENDMENT AND WAIVER IN WRITING. No provision of this Agreement
can be amended or waived, except by a statement in writing signed by the party
against which enforcement of the amendment or waiver is sought.
22. ENTIRE AGREEMENT. This Agreement represents the entire agreement
among the parties concerning the subordination of the Subordinated Debt.
23. SEVERABILITY. Should any provision of this Agreement be invalid
or unenforceable for any reason, the remaining provisions hereof shall remain in
full effect.
24. APPLICABLE LAW. The validity and construction of this Agreement
and all other documents executed with respect to the Senior Debt shall be
determined according to the substantive laws of Tennessee, in which state this
Agreement has been executed and delivered.
25. GENDER AND NUMBER. Words used herein indicating gender or number
shall be read as the context may require.
26. CAPTIONS NOT CONTROLLING. Captions and headings have been
included in this Agreement for the convenience of the parties, and shall not be
construed as affecting the content of the respective paragraphs.
27. CONSENT TO JURISDICTION. Subordinated Lender, Agent and Borrower
hereby irrevocably consent to the jurisdiction of the United States District
Court for the Middle District of Tennessee and of all Tennessee state courts
sitting in Davidson County, Tennessee, for the purpose of any litigation to
which Agent or Borrower may be a party and which concerns this Agreement or the
Senior Debt. It is further agreed that venue for any such action shall lie
exclusively with courts sitting in Davidson County, Tennessee, unless Agent
agrees to the contrary in writing. Matters between Borrower and Agent shall be
determined by binding arbitration as provided in the Senior Debt Agreements.
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28. JOINDER OF BORROWER; PARTIES TO AMENDMENTS. Borrower joins in the
execution of this Agreement to acknowledge and agree to the provisions hereof,
but no rights in favor of Borrower arise under this Agreement and provisions
hereof may be amended, waived or restated as between Agent and Subordinated
Lender without the joinder of Borrower.
29. CONSENT TO SENIOR DEBT. Subordinated Lender hereby consents to
Borrower's incurring of the Senior Debt and waives any Event of Default that
would arise under the Subordinated Note on account of Borrower's incurring the
Senior Debt.
30. SIGNATURES BY FACSIMILE. This Agreement shall be effective upon
the parties' exchange by telecopier of copies hereof showing the signatures of
the other parties; provided, however, each party shall immediately forward an
executed original hereof to Agent. The failure of any party to so provide Agent
with an original hereof shall not impair the validity of this Agreement, but
shall entitle Agent to obtain specific performance of the obligation to provide
an executed original of this Agreement.
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Signature Page to Subordination Agreement
Executed the date first written above.
THE UNDERSIGNED ACKNOWLEDGE A THOROUGH
UNDERSTANDING OF THE TERMS OF THIS
AGREEMENT AND AGREE TO BE BOUND THEREBY:
NATIONSBANK OF TENNESSEE, N.A., Agent
By: ____________________________________
Title: _________________________________
RESPONSE ONCOLOGY, INC, Borrower
By: ____________________________________
Title: _________________________________
SEAFIELD CAPITAL CORPORATION,
Subordinated Lender
By: ____________________________________
Title: _________________________________
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