<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1998
REGISTRATION NO. 333-26207
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
--------------------------
PHP HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
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<TABLE>
<S> <C>
DELAWARE 54-1023168
(State or other jurisdiction (I.R.S. Employer
of Identification Number)
incorporation or
organization)
</TABLE>
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11440 COMMERCE PARK DRIVE
RESTON, VIRGINIA 20191
(703) 758-3600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
BEN ROSENBAUM III
SECRETARY AND GENERAL COUNSEL
11440 COMMERCE PARK DRIVE, RESTON, VIRGINIA 20191
(703) 758-3600
(Name, address, including zip code, and telephone number, including area code,
of registrant's agent for service)
------------------------------
Please send copies of all communications to:
ANDREW P. VARNEY, ESQ.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
1001 PENNSYLVANIA AVENUE, N.W., SUITE 800
WASHINGTON, D.C. 20004-2505
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after the effective date of the Registration Statement.
------------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM MAXIMUM AGGREGATE
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE PER OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SECURITY PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share, and
associated Preferred Stock Purchase Rights 8,255,639 shares
(3)....................................... (1) $8.6875 (2) $71,720,863.82 (2) $21,157.66 (2)
</TABLE>
(1) Represents (i) 45,000 shares issuable upon the exercise of an outstanding
Warrant, dated November 1, 1992 (the "Warrant"), issued by the Company to
David E. Berman, (ii) 500,150 shares issuable upon exercise of a warrant
issued by the Company to NationsBank, N.A., (iii) 500,000 shares held by
Chase Manhattan Bank, John W. Kluge and Stuart Subotnick Trustees U/A DTD
5/30/84 As Amended made by and for John W. Kluge, and (iv) 7,210,489 shares
issuable upon conversion of (A) 54,100 shares of Series B Convertible
Preferred Stock (the "Series B Preferred Stock") issued in a private
placement in December 1997 and (B) 700 shares of Series B Preferred Stock
issuable upon the exercise of warrants granted to the placement agents
(clauses (A) and (B) together, the "Conversion Shares"). The Conversion
Shares do not include fractional shares of Common Stock that the Company is
not required to issue upon conversion of the Series B Preferred Stock.
Although the number of Conversion Shares is currently indeterminable, for
purposes of calculating the number of shares of Common Stock included in
this Registration Statement, the Company calculated the number of Conversion
Shares based on an assumed conversion price of $7.60, which is 95% of the
lowest trading price of the Common Stock on June 2, 1998.
(2) Pursuant to Rule 457(c), the registration fee for the shares is based upon a
price of $8.6875 per share, the average of the high and low reported sales
prices of the Registrant's Common Stock, par value $.01 per share, as
reported on the NYSE on June 2, 1998. The Company previously paid the
registration fee of $2,649.93 on April 30, 1997 upon the initial filing of
the Registration Statement and the registration fee of $25,485.24 on
February 27, 1998 upon the filing of Amendment No. 1 to this Registration
Statement.
(3) The Preferred Stock Purchase Rights, which are attached to the shares of
Common Stock of the registrant, will be issued for no additional
consideration; no additional registration fee is required.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
PROSPECTUS
PHP HEALTHCARE CORPORATION
8,255,639 SHARES OF COMMON STOCK
------------------
This Prospectus relates to 8,255,639 shares of common stock, par value $.01
per share ("Common Stock"), of PHP Healthcare Corporation, a Delaware
corporation ("PHP" or the "Company"), all of which are being sold by the Selling
Stockholders named under "Selling Stockholders." The 8,255,639 shares of Common
Stock being sold by Selling Stockholders include (i) the 45,000 shares (the
"Warrant Shares") which are issuable upon the exercise of an outstanding
Warrant, dated as of November 1, 1992 (the "Warrant"), granted to David E.
Berman (the "Warrantholder") by the Company, (ii) 500,150 shares (the
"NationsBank Shares") issuable to NationsBank, N.A. ("NationsBank") upon
exercise of a Warrant granted to NationsBank (the "NationsBank Warrant"), (iii)
500,000 shares (the "Kluge Shares") held by Chase Manhattan Bank, John W. Kluge
and Stuart Subotnick Trustees U/A DTD 5/30/84 As Amended made by and for John W.
Kluge ("Kluge") and, (iv) 7,210,489 shares issuable upon conversion of (A)
54,100 shares of Series B Convertible Preferred Stock (the "Series B Preferred
Stock") and (B) 700 shares of Series B Preferred Stock issuable upon the
exercise of warrants granted to the placement agents (the shares referred to in
clauses (A) and (B) together, the "Conversion Shares".) (Although the number of
Conversion Shares is currently indeterminable, the 7,210,489 shares referred to
in this clause (iv) was calculated based on an assumed Conversion Price of
$7.60, which is 95% of the lowest trading price of the Company's Common Stock on
June 2, 1998).
WARRANT SHARES. The Warrant Shares will be issued by the Company from time
to time as and if the Warrant is exercised. The Warrant was granted on November
1, 1992 (the "Grant Date") and is exercisable for a period of seven years after
the Grant Date. The Warrant entitles the holder to purchase 15,000 Warrant
Shares at an exercise price of $5.75 per share, 15,000 Warrant Shares at an
exercise price of $7.50 per share, and 15,000 Warrant Shares at an exercise
price of $12.00 per share, subject to adjustment in certain circumstances. See
"Plan of Distribution--Warrant Shares."
NATIONSBANK SHARES. The NationsBank Shares will be issued by the Company
from time to time as and if the NationsBank Warrant is exercised. The
NationsBank Warrant was granted on October 31, 1997 and is exercisable at any
time until October 31, 2007. The NationsBank Warrants entitle the holder(s)
thereof to acquire 500,150 NationsBank Shares, subject to adjustment in certain
circumstances. See "Plan of Distribution--NationsBank Shares."
KLUGE SHARES. The Kluge Shares were sold to Chase Manhattan Bank, John W.
Kluge and Stuart Subotnick Trustees U/A DTD 5/30/84 As Amended made by and for
John W. Kluge pursuant to Stock Purchase Agreements dated as of April 28, 1997
between (i) the Company and Kluge, dated as of April 28, 1997, as to 200,000 of
the Kluge Shares and (ii) Charles H. Robbins and Kluge, dated as of May 2, 1997,
as to 300,000 of the Kluge Shares. The Kluge Shares were acquired at a price of
$13.00 per share. The Kluge Shares may be offered by Kluge from time to time by
open market transactions, registered transactions or a combination of such
methods of sale, at fixed prices, at market prices prevailing at the time of
sale, at prices related to prevailing market prices or at negotiated prices. See
"Plan of Distribution--Kluge Shares."
CONVERSION SHARES. The Conversion Shares consist of an estimated 7,210,489
shares of Common Stock that may be issued by the Company from time to time upon
the conversion of the Series B Preferred Stock, which was issued in a private
placement completed on December 30, 1997. See "Plan of Distribution--Conversion
Shares." The number of the Conversion Shares offered hereby is an estimate based
upon (i) an assumed Conversion Price of $7.60, which is 95% of the lowest
trading price of the Common Stock on June 2, 1998, (ii) the exercise of the
Convertible Stock Warrants as of the date of their issue and (iii) the
conversion of all outstanding shares of Series B Preferred Stock. This number is
subject to adjustment and could be materially more or less than such estimated
amount depending on factors that cannot be predicted by the Company at this
time, including, without limitation, the future market price of the Common Stock
and the decision of the holders of the Series B Preferred Stock as to when and
in what amounts to convert their shares of Series B Preferred Stock. This
presentation is not intended to constitute a prediction as to future market
price of the Common Stock or when and in what amount holders of the Series B
Preferred Stock will elect to convert their shares. See "Risk Factors--Effect of
Conversion of Series B Preferred Stock; Description of Capital Stock--Series B
Preferred Stock."
The Warrant Shares, the NationsBank Shares, the Kluge Shares and the
Conversion Shares are collectively referred to herein as the "Shares."
The Common Stock is traded on the New York Stock Exchange under the symbol
PPH. On June 4, 1998, the closing price of the Common Stock as reported by the
New York Stock Exchange was $8.9375 per share.
The Company will not receive any of the proceeds from the sale of shares by
the Selling Stockholders.
--------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JUNE , 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
may be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and
at the Commission's Regional Offices located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington D.C. 20549, at prescribed rates. Such materials can also be
inspected at the New York Stock Exchange, 20 Broad Street, New York, New York
10005. The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company has filed with the Commission a registration statement on Form
S-3 (such registration statement, together with all amendments and exhibits
thereto, being hereinafter referred to as the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), for the
registration under the Securities Act of the Shares offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Reference is hereby made to the Registration
Statement for further information with respect to the Company and the securities
offered hereby. Statements contained herein concerning the provisions of
documents filed as exhibits to the Registration Statement are necessarily
summaries of such documents, and each such statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission. Copies of the Registration Statement and the exhibits may be
inspected, without charge, at the offices of the Commission, or obtained at
prescribed rates from the Public Reference Section of the Commission at the
address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the Company
pursuant to the Exchange Act are incorporated by reference in this Prospectus
and made a part hereof: the Company's Annual Report on Form 10-K, Form 10-K/A
and Form 10-K/A-2 for the fiscal year ended April 30, 1997, the Company's
Quarterly Reports on Form 10-Q and Form 10-Q/A for the three months ended July
31, 1997, on Form 10-Q and Form 10-Q/A for the three months ended October 31,
1997 and on Form 10-Q and Form 10-Q/A for the three months ended January 31,
1998, the Company's Current Reports on Form 8-K, Form 8-K/A and Form 8-K/A-2,
dated November 17, 1997, January 20, 1998 and June 4, 1998, respectively, and
the Company's Current Reports on Form 8-K and 8-K/A, dated January 6, 1998 and
May 7, 1998, respectively, and the description of the Company's Common Stock
contained in the Company's Registration Statement on Form 8-A, Amendment 1,
filed on August 11, 1992, including any amendments or reports filed for the
purpose of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents which have been incorporated by reference in this
Prospectus, other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the documents so incorporated.
Requests for such copies should be directed to: Anthony M. Picini, Executive
Vice President, PHP Healthcare Corporation, 11440 Commerce Park Drive, Reston,
Virginia 20191, telephone (703) 758-3600.
2
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus and in the
documents incorporated herein by reference, prospective purchasers of the Shares
should carefully consider the factors set forth below before purchasing the
Shares.
EFFECT OF SERIES B PREFERRED STOCK
POTENTIAL DILUTION. The exact number of shares of Common Stock issuable
upon conversion of the Series B Preferred Stock depends on the Conversion Price
in effect at the time of conversion. Because the Conversion Price is equal to
the lowest reported trade over a specified period of trading days adjusted for a
certain discount, the number of shares of Common Stock issuable upon conversion
will vary inversely with the market price of the Company's Common Stock. Holders
of the Common Stock will be diluted by any issuances of Common Stock upon
conversion of the Series B Preferred Stock and may be substantially diluted
depending upon the market price of the Common Stock. See "Description of Capital
Stock--Series B Preferred Stock."
As noted above, the exact number of shares of Common Stock issuable upon
conversion of the Series B Preferred Stock cannot currently be determined but
such issuances will vary inversely with the market price of the Common Stock,
and such shares will be issued at a discount which increases to 9% if Series B
Preferred Stock is held through the last day of the eleventh month after
issuance. The current holders of Common Stock will be diluted by issuances of
Common Stock upon conversion of the Series B Preferred Stock to an extent that
depends on the future market price of the Common Stock, the timing of
conversions of Series B Preferred Stock and exercise of the related placement
agent warrants, and whether the Company opts to pay cash in lieu of additional
shares of Common Stock upon conversion of Series B Preferred Stock. The
potential effects of any such dilution on the existing shareholders of the
Company include the significant diminution of the current shareholders' economic
and voting interests in the Company. In addition, pursuant to the terms of the
Series B Preferred Stock purchase agreement and depending upon the Conversion
Price, the Company may be required to register additional shares of Common Stock
to cover the conversion of the Series B Preferred Stock. The registration and
sale of such additional shares of the Common Stock of the Company, or the
prospect thereof, could have a material adverse affect on the market price of
the Common Stock.
POTENTIAL LIQUIDATED DAMAGES CLAIMS. Pursuant to the Preferred Stock
Investment Agreements entered into between the Company and the holders of Series
B Preferred Stock, the Company agreed to use its best efforts to have this
Registration Statement declared effective by April 1, 1998. The Preferred Stock
Investment Agreements state that, if the Registration Statement is not effective
by April 1, 1998, the Company will be required to make a cash payment to the
holders equal to 3% of the purchase price for the Series B Preferred Stock for
each 30-day period thereafter until the Registration Statement if effective
(pro-rated as to a period of less than 30 days). The Registration Statement was
declared effective on June , 1998. Accordingly, under the terms of the
Preferred Stock Investment Agreements, the Company would be required to pay an
aggregate amount of approximately $ million to holders of the Series B
Preferred Stock. However, the Company believes that the liquidated damages
provision constitutes an unenforceable penalty and intends to challenge any
attempt to enforce the provision. The Company is seeking waivers of this
provision from the holders of the Series B Preferred Stock. There can be no
assurance that the Company will be successful in obtaining waivers from the
holders of Series B Preferred Stock or that the Company will prevail in
establishing that the provision is unenforceable. The enforcement of the
liquidated damages provision against the Company could have a material adverse
effect on the Company's financial condition and results of operations. See
"--Legal Proceedings."
3
<PAGE>
CAPITATED NATURE OF REVENUE
The Company provides a portion of its services on a capitated basis, and the
Company intends to negotiate additional capitated agreements with managed care
organizations or assume such contracts in connection with its affiliation with
primary care practices. Such contracts, typically referred to as "risk sharing"
contracts, are arrangements between the Company and another managed care
organization under which the Company agrees to arrange for the provision of
certain health care services, as required by members of such managed care
organization, in exchange for a fixed fee per member per month. Under these
contracts, the Company bears the risk that the cost of the services it is
required to provide will exceed the fixed fees it is entitled to receive. In
order for such risk sharing contracts to be profitable for the Company, the
Company must effectively manage the utilization rate of primary care services,
specialty physician services, and hospital services delivered to members of the
managed care organization. There can be no assurance that the capitation fees
that the Company will receive will be sufficient to recover the costs of the
health care services it will be required to provide.
DEPENDENCE ON PRIMARY CARE PHYSICIANS
Primary care physicians are a key operating component of the Company's
integrated health care delivery networks. The Company competes for exclusive
primary care physician affiliations with a variety of networks including group
practices, IPAs, HMOs, practice management companies and hospitals. Most primary
care physicians have traditionally practiced independently or in small single
specialty groups. The competitive and operational disadvantages to the physician
of this type of practice structure have compelled many of these physicians to
evaluate alternatives. The process of negotiating these affiliations is
competitive, complex and time-consuming. There can be no assurance that the
Company will continue to be able to identify and secure affiliations with a
sufficient number of primary care physicians to operate its integrated health
care delivery networks effectively.
DEPENDENCE ON CERTAIN RELATIONSHIPS
Effective October 31, 1997, the Company completed the acquisition of 18
health care centers and related assets from HIP of New Jersey, Inc. ("HIP") for
approximately $80 million including transaction costs (the "HIP Transaction").
HIP is a New Jersey not-for-profit health maintenance organization. In
connection with the acquisition, the Company also entered into a Health Services
Agreement with HIP. Pursuant to the Health Services Agreement, PHP will arrange
for the provision of health care services for more than 200,000 HIP members over
the next 20 years on a capitated basis, with the capitation payments calculated
as a percentage of the premiums collected by HIP. The percentage of premiums
will decrease gradually over the first five years of the contract and will
remain fixed for the last 15 years of the agreement. Based upon HIP's current
premium rates and enrollment, the Company is currently receiving capitation
payments and other revenues of approximately $30 million per month. In addition
to arranging for medical care, the Company will also be delegated the
responsibility for certain administrative functions, including provider
relations, utilization management and claims payment. The Health Services
Agreement has a 20-year term and may be renewed for successive 5-year periods.
This agreement also permits HIP to buy out the contract after December 31, 2000
and prior to December 31, 2003, at a price equal to the greater of (i) the
unamortized purchase price paid by the Company or (ii) the value of the
agreement through the end of the initial 20-year term. For the year ended April
30, 1997 and for the nine months ended January 31, 1998, on a pro forma basis
after giving effect to the HIP Transactions, approximately 60% and 61.0%,
respectively, of the Company's revenues and an even greater percentage of gross
profits would be derived from the HIP relationship. The termination of the
Health Service Agreement would have a material adverse effect on the Company's
business, financial condition and results of operations.
In addition, the Company has two contracts, one with the District of
Columbia Department of Human Services ("DCDHS") (concerning the Company's
Medicaid HMO in the District of Columbia) and one with the Medigroup, Inc., a
wholly owned subsidiary of BCBSNJ (related to the provision of health care
4
<PAGE>
services to BCBSNJ beneficiaries under a global capitation arrangement) which,
for the year ended April 30, 1997 and for the nine months ended January 31,
1998, accounted for 33.5% and 20.7%, respectively, of the Company's revenues,
and an even greater percentage of the Company's gross profits. On a pro forma
basis after giving effect to the HIP Transaction, for the year ended April 30,
1997 and for the nine months ended January 31, 1998, these two contracts
accounted for 13.4% and 12.3%, respectively, of the Company's revenues. The
DCDHS contract and the BCBSNJ contract individually accounted for 19.8% and
13.7%, respectively, of the Company's revenues in fiscal 1997 and 10.8% and
9.9%, respectively, of the Company's revenues for the nine months ended January
31, 1998. On a pro forma basis after giving effect to the HIP Transaction, the
DCDHS contract and the BCBSNJ contract individually accounted for 7.9% and 5.5%,
respectively, of the Company's revenues for fiscal 1997, and accounted for 6.4%
and 5.9%, respectively, of the Company's revenues for the nine months ended
January 31, 1998. The loss of either the DCDHS contract or the BCBSNJ contract
would have a material adverse effect on the Company's business, financial
condition and results of operations.
RISKS ASSOCIATED WITH THE DCDHS RECEIVABLE
The Company's accounts receivable as of January 31, 1998 include gross
amounts due from DCDHS and the United States Department of Health and Human
Services totalling $24.1 million related to the cost settlement for the
three-year contract period ended September 30, 1994, and related to the cost
settlement for the contract period beginning October 1, 1994. In the quarter
ending January 31, 1997, the Company established a reserve of $9.8 million
against its Medicaid receivable from DCDHS, principally relating to services
provided during the period 1992 through 1994, resulting in a net receivable of
$14.3 million. The Company cannot predict when or whether any of the unreserved
amounts will be paid. The failure of the Company to collect such amounts would
have a material adverse effect on the Company's business, financial condition
and results of operations.
Prior to April 1996, the terms of the Company's contracts with DCDHS
provided that the final settlements would be on a non-risk basis, calculated in
part on a cost-based methodology. However, in April 1996, the United States
Congress enacted legislation which required these contracts to be settled
retroactively on a capitated rate-per-enrollee or "risk" basis for the period
October 1, 1991 through October 1, 1999. Following the enactment of this
legislation, the Company entered into negotiations with the District of Columbia
in an attempt to agree on the retroactive amounts due for the 1992 through 1994
contract periods. The Company and the District of Columbia were unable to agree
on the capitation rates to be applied to the Company's contract during this
period. The Company claimed that it was entitled to approximately $37.5 million
in additional capitation payments, based on the capitation rates set by
actuaries for DCDHS and the Health Care Financing Administration and actually
paid by the District of Columbia to other managed care organizations during
fiscal 1994. The District of Columbia, however, took the position that the
Company was entitled to use capitation rates based upon a retroactive cost study
completed in 1996. In February 1997, the Company and the District of Columbia
agreed to settle outstanding claims related to the 1992 to 1994 contract periods
for $18.9 million. Although the settlement agreement was signed by
representatives of the Company and the Commission on Health Care Finance, the
District of Columbia's Chief Financial Officer ("DCCFO") has refused to approve
the payment. Instead, the DCCFO offered the Company $6.2 million, which is
substantially less than the amount to which the Company believes it is entitled.
As a result of the impasse, for the third quarter of fiscal 1997, the Company
determined to recognize reserves of $9.8 million against its receivables from
the District of Columbia, principally related to services provided during the
1992 to 1994 contract periods. The Company intends to pursue vigorously all
remedies available to it in connection with this matter, including litigation.
However there can be no assurance that such remedies will be successful. The
Company does not believe the ultimate resolution of this matter will have a
material adverse effect on the Company's business, financial condition or
results of operations.
5
<PAGE>
LIMITATIONS ON THIRD PARTY REIMBURSEMENT
A major portion of the Company's revenues is derived from governmental
programs. In particular, for the year ended April 30, 1997 and the nine months
ended January 31, 1998, approximately 26.5% and 17.7%, respectively, of the
Company's revenues (10.6% and 10.5%, respectively, on a pro forma basis after
giving effect to the HIP Transaction) were derived from the Medicaid program, a
cooperative state-federal program for medical assistance to the needy.
Reflecting a trend in the health care industry, third party payors increasingly
are negotiating with health care providers such as the Company concerning the
prices charged for medical services, with the goal of lowering reimbursement and
utilization rates. There can be no assurance that any future reduction in
reimbursement rates would be offset through enhanced operating efficiencies, or
that any such enhancement of operating efficiencies would occur. Third party
payors may also deny reimbursement if they determine that a treatment was not
performed in accordance with the cost-effective treatment methods established by
such payors, was experimental, or for other reasons.
Congress continues to make cutbacks in the Medicare and Medicaid programs
providing for reductions in the rate of spending increases in the Medicare and
Medicaid programs. These cutbacks, budgetary constraints at both the federal and
state levels, and increasing public and private sector pressures to contain
health care costs are likely to continue to lead to significant reductions in
government and other third party reimbursements for medical charges which could
adversely affect the Company.
GOVERNMENT REGULATION
UNCERTAINTY RELATED TO REGULATORY ENVIRONMENT.
Virtually all aspects of the health care industry are subject to extensive
federal and state regulation. Various federal and state laws, which are
interpreted and enforced by courts and regulatory authorities with broad
discretion, regulate the relationships between the Company and its affiliated
physicians, hospitals and ancillary health care providers. These laws include
(i) the anti-fraud and abuse provisions of the Medicaid and Medicare statutes,
which prohibit certain business practices and relationships that may affect the
provision and cost of health care services reimbursable under the Medicaid and
Medicare programs, including the solicitation, payment, receipt or offering of
any direct or indirect remuneration for the referral of patients or for the
provision of goods or services; (ii) the anti-kickback provisions of the Social
Security Act, which restrict physician referrals to certain providers, including
hospitals, with which the physician has a financial arrangement; (iii) the laws
of some states, which prohibit physicians from splitting fees with
non-physicians and prohibit non-physician entities from engaging in the practice
of medicine; (iv) the laws of most states, which regulate the business of
insurance and the operation of HMOs; (v) federal antitrust laws, which prohibit
anti-competitive conduct, including price fixing, concerted refusals to deal and
division of market; and (vi) federal and state civil and criminal statutes which
prohibit health care providers from fraudulently or wrongfully overcharging
governmental or other third party payors for health care services. Violations of
these laws could result in substantial civil or criminal penalties, exclusion
from the Medicaid and Medicare programs, and suspension or debarment from
obtaining government contracts. Although the Company seeks to structure its
operations and arrange its business relationships so as to comply with all
applicable legal requirements (including the laws and regulations mentioned
above), there can be no assurance that, upon review of the Company's business,
courts or regulatory authorities might not adopt or assert a contrary position,
that the Company's present or future operations might not be successfully
challenged as violating, or determined to have violated, such legal
requirements, or that new laws and regulations, or the interpretation of
existing laws and regulations, might not require the Company to restructure some
or all of its operations or adversely effect the Company's business
relationships. Any such result could have a material adverse effect on the
Company.
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POTENTIAL FEDERAL AND STATE INVESTIGATIONS.
As part of the pervasive regulation of the health care industry by federal
and state governments, these governments have begun intensive investigations and
audits of health care providers to determine whether the providers are
overcharging for medical services and procedures for Medicare and Medicaid
patients. In cases in which the overcharging is deemed intentional and meets
other criteria, the federal or state government may seek criminal, civil, or
administrative sanctions against health care providers. This could result in
exclusion from the Medicare and Medicaid programs and could result in suspension
or debarment from government contracts. Any such exclusion, suspension or
debarment of the Company could have a material adverse effect upon the Company's
business.
TRUTH IN NEGOTIATIONS ACT.
Under the Truth in Negotiations Act, the federal government is entitled for
three years after final payment on certain negotiated contracts or contract
modifications to examine all of the Company's cost records with respect to such
contracts to determine whether the Company furnished complete, accurate, and
current cost or pricing data to the government in connection with the
negotiation of the price of the contract or modification. The federal government
also has the right for up to six years after final payment to seek a downward
adjustment to the price of a contract or modification if it determines that the
contractor failed to disclose complete, accurate and current data.
UNCERTAINTY RELATING TO HEALTH CARE REFORM.
Political, economic and regulatory influences are subjecting the health care
industry in the United States to fundamental change. Although Congress has
failed to pass comprehensive health care reform legislation thus far, there are
currently numerous initiatives on the federal and state levels for comprehensive
reforms affecting the payment for and availability of health care services,
including a number of proposals that would significantly limit reimbursement
under Medicare and Medicaid. It is not clear at this time what proposals, if
any, will be adopted or, if adopted, what effect such proposals would have on
the Company's business. There can be no assurance that currently proposed or
future health care legislation or other changes in the administration or
interpretation of governmental health care programs will not have an adverse
effect on the Company.
DEPENDENCE ON MANAGEMENT INFORMATION SYSTEMS
The Company's management information systems are critical to its ability to
manage care efficiently and to be competitive in the market. The Company relies
on these systems to support practice operations and to facilitate the management
and monitoring of clinical performance. Clinical guidelines, practice protocols,
case management and utilization review systems are all essential to the
Company's ability to secure, and operate profitably under, capitated and
shared-risk contracts. There can be no assurance that the Company will be able
to refine and enhance these systems to keep them current and competitive.
LEGAL PROCEEDINGS
A class action lawsuit was filed against the Company and certain current and
former officers and directors of the Company in the United States District Court
for the Central District of California on March 9, 1998, Civil Action No.
98-1658, on behalf of all persons who purchased or otherwise acquired the
Company's common stock between December 11, 1995 and March 10, 1997. The
Complaint alleges that the Company issued false and misleading financial
statements and press releases concerning the Company's income and earnings,
including the results of the Company's wholly owned HMO subsidiary, Chartered
Health Plan. Another suit, Richman v. PHP Healthcare Corporation, et al., was
filed in Los Angeles Superior Court seeking relief under Section 10(b) of the
Securities Exchange Act, and under state law, in connection with alleged
statements relating to Chartered Health Plan. The Plaintiff claims to have
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been damaged in excess of $800,000. The suit has been removed to federal court,
though the Company has not been served with a Complaint. The suit does not seek
class action relief. The Company intends to vigorously defend the lawsuits if
and when it is served with the Complaints. There can be no assurance that the
Company will prevail in either of the suits. Any judgment entered against the
Company in connection with either of the suits could have a material adverse
effect on the Company's financial condition.
On or about May 15, 1998, Elara Ltd. filed a lawsuit against the Company in
the United States District Court for the District of New York (Elara Ltd. v. PHP
Healthcare Corporation, 98 Civ. 3494, S.D.N.Y.). Elara alleges that it purchased
from the Company 3,000 shares of Series B Convertible Preferred Stock and that
it is owed payments under a Preferred Stock Investment Agreement between Elara
and the Company as a result of a registration statement not being declared
effective by April 1, 1998. Elara seeks $90,000 for each 30 day period after
April 1, 1998 which elapses without an effective registration statement in
place. The Company's response is due on or about June 8, 1998.
HISTORICAL LOSSES
The Company reported net losses of $4.0 million, $4.0 million, $9.3 million
and $3.8 million for the fiscal years ended April 30, 1997, 1995, 1994 and 1993,
respectively. Additionally, for the nine months ended January 31, 1998, the
Company reported a net loss of $1.6 million, which included an extraordinary
charge of $6.0 million. Although the Company was profitable for the fiscal year
ended April 30, 1996, there can be no assurance that it will operate profitably
in the future, or have earnings or cash flow sufficient to comply with the
financial covenants to which it is subject or to cover its fixed charges. As a
consequence of the losses reported in certain prior periods, the Company failed
to comply with certain financial covenants under its then existing credit
agreement. The Company obtained waivers for such noncompliance and the Company's
bank modified the applicable financial covenants. As of January 31, 1998, the
Company was in compliance with all the financial covenants in its then current
credit agreement. In the future, any failure by the Company to comply with the
financial covenants contained in its credit agreement (or in any replacement
credit facility) could result in a default under such facility which could have
a material adverse effect on the Company's business, financial condition and
results of operations.
DEPENDENCE ON GOVERNMENT CONTRACTS
Contracts with various federal, state and local government agencies
(excluding agreements concerning the Company's Medicaid HMO in the District of
Columbia) accounted for approximately 41.9% and 20.1% of the Company's revenues
for the year ended April 30, 1997 and the nine months ended January 31, 1998,
respectively (16.7% and 12.0%, respectively, on a pro forma basis after giving
effect to the HIP Transaction). Revenues from contracts and subcontracts with
the United States Department of Defense accounted for approximately 20.6% and
11.6% of the Company's revenues for the year ended April 30, 1997 and the nine
months ended January 31, 1998, respectively (8.2% and 6.9%, respectively, on a
pro forma basis after giving effect to the HIP Transaction). These contracts are
obtained primarily through the competitive bidding process as governed by
applicable federal and state statutes and regulations, and generally may be
modified or terminated for the convenience of the government agency at any time
during the term of the contract. Contracts are generally awarded for a base
period of less than one year and corresponding with the government agency's
fiscal year, have two-to-four one-year renewals at the option of the government
agency, and are subject to appropriation of funds annually by the appropriate
legislative body. There is, therefore, no assurance that the Company will be
able to retain its contracts or, if retained, that all of such contracts will be
fully funded.
Under the competitive bidding process, unsuccessful bidders may protest the
award of a contract to another bidder in accordance with a government appeals
process if they believe the award was improper. Such protests could result in
the rebidding, delay or loss of contracts. In addition, contracts with
government agencies are generally complex in nature and subject contractors to
extensive regulation under
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federal, state and local law. For example, government contractors are subject to
audits which can result in adjustments to contract costs and fees.
The Company believes that it has complied in all material respects with
applicable government regulations. In certain circumstances in which a
contractor has not complied with the terms of a contract or with regulations or
statutes, the contractor may be debarred or suspended from obtaining future
contracts for a specified period of time. Moreover, pursuant to recent statutes
and regulations, a suspension or debarment from obtaining future federal
contracts will also result in a reciprocal suspension or debarment from
participation in non-procurement federal programs, such as Medicare, Medicaid,
and other federally-funded grant programs. Any such suspension or debarment of
the Company could have a material adverse effect upon the Company's business.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on the skill and efforts of its senior
management. The loss of key management personnel or the inability to attract,
retain and motivate sufficient numbers of qualified management personnel could
adversely affect the Company's business.
COMPETITION
The managed care industry is highly competitive and is subject to continuing
changes in how services are provided and how providers are selected and paid.
Increased enrollment in prepaid health care plans due to health care reform or
for other reasons, increased participation by physicians in group practices and
other factors may attract new entrants into the managed care industry and result
in increased competition for the Company. Certain of the Company's competitors
are significantly larger, have substantially greater financial resources and may
have longer established relationships with payors than the Company. There can be
no assurance that the Company will be able to compete effectively, that
additional competitors will not enter the market, or that such competition will
not make it more difficult to develop, consolidate and manage integrated health
care delivery networks on terms beneficial to the Company.
EXPOSURE TO PROFESSIONAL LIABILITY
Due to the nature of the Company's business, there are asserted from time to
time medical malpractice lawsuits and other claims against the Company, some of
which are currently pending, which subjects the Company to the attendant risk of
substantial damage awards. The most significant source of potential liability in
this regard is the negligence of physicians employed or contracted by the
Company. To the extent such physicians are employees of the Company or were
regarded as agents of the Company in the practice of medicine, the Company
would, in most instances, be held liable for their negligence. In addition, the
Company could be found in certain instances to have been negligent in performing
its management services under contractual arrangements, even if no agency
relationship with the physician were found to exist. In some cases, the
Company's contracts with hospitals and third party payors require the Company to
indemnify such other parties for losses resulting from the negligence of
physicians who were employed or managed by or affiliated with the Company.
The Company maintains professional and general liability insurance on a
claims made basis in amounts deemed appropriate by management, based on
historical claims and the nature and risks of its business. There can be no
assurances, however, that an existing or future claim or claims will not exceed
the limits of available insurance coverage, that any insurer will remain solvent
and able to meet its obligations to provide coverage for any such claim or
claims or that such coverage will continue to be available or available with
sufficient limits and at a reasonable cost to adequately and economically insure
the Company's operations in the future. A judgment against the Company in excess
of such coverage could have a material adverse effect on the Company.
9
<PAGE>
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock has experienced a high degree of
volatility. There can be no assurance that such volatility will not continue or
become more pronounced. In addition, recently the stock market has experienced,
and is likely to experience in the future, significant price and volume
fluctuations which could adversely affect the market price of the Common Stock
without regard to the operating performance of the Company. The Company believes
that factors such as uncertainty regarding the potential dilutive effect of the
Series B Preferred Stock, quarterly fluctuations in the financial results of the
Company or its competitors and general conditions in the industry, the overall
economy and the financial markets could cause the price of the Common Stock to
fluctuate substantially.
CONTROL BY MANAGEMENT AND CERTAIN STOCKHOLDERS
As of June 1, 1998, certain of the Company's executive officers and
directors and related entities currently hold an aggregate of approximately
13.2% of the outstanding Common Stock (25.8% including shares issuable upon the
exercise of options or the conversion of convertible securities held by such
persons and exercisable or convertible within 60 days) and may exercise a
controlling influence over the outcome of matters submitted to the Company's
stockholders for approval. As a result, such executive officers, directors and
related entities collectively may have the power to delay, defer or prevent a
change in control of the Company.
ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND CHARTER AND BY-LAW PROVISIONS
Certain provisions of the Company's certificate of incorporation, by-laws
and Delaware law could, together or separately, discourage potential acquisition
proposals, delay or prevent a change in control of the Company and limit the
price that certain investors might be willing to pay in the future for shares of
the Common Stock. These provisions include a classified Board of Directors, the
ability of the Board of Directors to authorize the issuance, without further
stockholder approval, of preferred stock with rights and privileges which could
be senior to the Common Stock, elimination of the stockholders' ability to take
any action without a meeting, and establishment of certain advance notice
procedures for nomination of candidates for election as directors and for
stockholder proposals to be considered at stockholders' meetings. In addition,
the Company has distributed preferred stock purchase rights which could cause
substantial dilution to a person or group that attempts to acquire a controlling
interest in the Company. The Company is also subject to Section 203 of the
Delaware General Corporation Laws which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any of a broad range of
business combinations with any "interested stockholder" for a period of three
years following the date that such stockholder became an "interested
stockholder." See "Description of Capital Stock."
RISKS ASSOCIATED WITH "FORWARD-LOOKING" STATEMENTS
This Prospectus contains and incorporates by reference certain statements
that are "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Those statements include,
among other things, the discussions of the Company's business strategy and
expectations concerning the Company's market position, future operations,
margins, profitability, liquidity and capital resources. Investors in the Common
Stock offered hereby are cautioned that reliance on any forward-looking
statement involves risks and uncertainties, and that although the Company
believes that the assumptions on which the forward-looking statements contained
herein are based are reasonable, any of those assumptions could prove to be
inaccurate, and as a result, the forward-looking statements based on those
assumptions also could be incorrect. The uncertainties in this regard include,
but are not limited to, those identified in the risk factors discussed above. In
light of these and other uncertainties, the inclusion of a forward-looking
statement herein should not be regarded as a representation by the Company that
the Company's plans and objectives will be achieved.
10
<PAGE>
THE COMPANY
GENERAL
PHP develops, consolidates and manages integrated health care delivery
networks. Through its networks of affiliated group and independent practice
association physicians, hospitals and ancillary health care providers, the
Company markets and provides primary and specialty health care services to third
party payors, self-insured employers and government agencies. As of January 31,
1998, PHP was operating 100 healthcare projects in 31 states and was affiliated
with over 7,500 physicians through network, employment and a variety of other
arrangements, providing health care resulting in over two million patient visits
per year.
PHP was organized as a Delaware corporation in January 1986 and succeeded to
the business of a predecessor corporation by merger in March 1986. The Company's
corporate headquarters is located at 11440 Commerce Park Drive, Reston,
Virginia, 20191, and its telephone number at that address is (703) 758-3600.
Unless the context otherwise requires, all references herein to the "Company"
include PHP and its subsidiaries.
RECENT EVENTS
REVISION OF FINANCIAL STATEMENTS. Upon further review the Company has
revised its accounting treatment for two contracts entered into during fiscal
years 1994 and 1995. The two contracts, a construction contract and a management
contract, which were with the same party, were previously combined for purposes
of revenue recognition. The Company has restated previously issued financial
statements to account for these two contracts separately. As a result, the
fiscal year 1995 financial statements have been restated to reduce revenue
recognized by $6.9 million for certain cost overruns related to 1995
construction and start-up activities which would have been recovered
prospectively under the two combined contracts. Furthermore, the Company has
recorded additional contract loss reserves of approximately $915,000 in fiscal
year 1995 resulting from the contracts being accounted for separately. This
revised accounting treatment also resulted in the reduction of fiscal year 1996
revenues and direct costs by approximately $900,000 and $915,000, respectively.
Immaterial adjustments to revenue were also recorded in fiscal year 1997.
The Company has also revised its accounting treatment for a 17-year lease of
primary care facilities. Beginning in August 1997, the Company accounted for
this lease as an operating lease. The Company has restated previously issued
interim financial statements to account for this lease as a financing rather
than an operating lease as a result of the Company's continuing involvement with
the lessor. The effect of this restatement on net earnings and per share amounts
for the nine months ended January 31, 1998 was immaterial. There is no effect on
years prior to 1998.
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The effects of these restatements on net earnings and per share amounts as
previously reported are presented below. Per share amounts have been restated to
reflect the provisions of Statement of Financial Accounting Standards No. 128,
"Earnings per Share."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31, YEAR ENDED APRIL 30,
------------------ -------------------------------
1998 1997 1996 1995
------------------ --------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net earnings (loss), as previously reported.................. $ (2,150) $ (4,088) $ 9,118 $ 952
Adjustment, net of income taxes of $24 in 1997 and $2,807 in
1995....................................................... 0 39 20 (4,990)
------- --------- --------- ---------
Net earnings (loss) as adjusted.............................. $ (2,150) $ (4,049) $ 9,138 $ (4,038)
------- --------- --------- ---------
------- --------- --------- ---------
Per Share Amounts:
Basic earnings (loss) per share:
Net earnings (loss) as previously reported................... $ (0.19) $ (0.37) $ 0.84 $ 0.09
Adjustment, net of tax....................................... 0.00 0.00 0.00 (0.47)
------- --------- --------- ---------
Net earnings (loss) as adjusted.............................. $ (0.19) $ (0.37) $ 0.84 $ (0.38)
------- --------- --------- ---------
------- --------- --------- ---------
Diluted earnings (loss) per share:
Net earnings (loss) as previously reported................... $ (0.15) $ (0.37) 0.68 0.09
Adjustment, net of tax....................................... 0.00 0.00 0.00 (0.47)
------- --------- --------- ---------
Net earnings (loss) as adjusted.............................. $ (0.15) $ (0.37) $ 0.68 $ (0.38)
------- --------- --------- ---------
------- --------- --------- ---------
</TABLE>
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STOCK REPURCHASE PLAN. On April 28, 1998, the Company announced that its
Board of Directors authorized the repurchase of up to 3 million shares of Common
Stock at prevailing prices at the discretion of Company management from time to
time on the open market, through block purchases, or in privately negotiated
transactions. PHP also announced that its Board authorized management to explore
the possibility of repurchasing some or all of PHP's Series B Preferred Stock
through privately negotiated transactions, from time to time and at management's
discretion. As part of the repurchase plan, the Company entered into an
agreement on April 30, 1998 with its former chairman, Charles H. Robbins, to
repurchase 1 million shares held by the Robbins family for $16.75 per share. As
of June 4, 1998, the Company had repurchased approximately shares of Common
Stock and shares of Series B Preferred Stock at a total cost of
approximately $ million.
The number of additional shares to be purchased and the timing of the
repurchases will depend upon the availability of funds, the price of the Common
Stock, general market conditions, and other factors. There is no guarantee as to
the exact number of shares to be repurchased, and the Company may discontinue
repurchases at any time. Any repurchase of shares in the market will be funded
through the Company's available cash and borrowings under the Company's credit
facility. Any shares repurchased may be held by a subsidiary or as treasury
stock and may be available for reissuance in connection with the Company's stock
option plans, conversions of existing convertible securities, or for other
corporate purposes.
NEW CREDIT FACILITY. In May 1998, the Company entered an Amended and
Restated Credit Agreement with NationsBank, N.A. (the "Credit Agreement")
pursuant to which the lenders have made available to the Company up to
$80,000,000 principal amount of senior secured financing in the form of two
tranches of revolving credit facilities: one in an aggregate principal amount of
$15,000,000 (the "Tranche A Revolving Facility"), the other in an aggregate
principal amount of $65,000,000 (the "Tranche B Revolving Facility"). The
amounts available under the Credit Agreement may be used for working capital and
to finance other corporate purposes of the Company. In addition, the Tranche B
Revolving Facility may be used to repurchase capital stock of the Company.
On January 31, 1999, the amounts outstanding under the Tranche B Revolving
Facility will convert into a term loan with nine equal quarterly repayments
beginning on April 30, 1999 and the principal amount available thereafter under
the Tranche B Revolving Facility will be reduced by such outstanding amounts. On
May 15, 2001 (the "Termination Date"), the Company will be required to repay the
principal amounts outstanding under the Tranche A Revolving Facility and the
Tranche B Revolving Facility.
All amounts outstanding under the Credit Agreement will bear interest at the
Alternative Base Rate or the Eurodollar Rate (as defined in the Credit
Agreement), plus the Applicable Margin (as defined in the Credit Agreement)
based on the type of loan. The Alternative Base Rate is defined (i) for the
period through November 30, 1998, as 1.5% for advances subject to the Altenative
Base Rate and 2.5% for advances subject to the Eurodollar Rate, and (ii)
thereafter, as a percentage determined by reference to the Leverage Ratio (as
defined in the Credit Agreement) and advance type, ranging from 0.25% to 2%.
The Credit Agreement provides for certain customary affirmative and negative
covenants and events of default, including, but not limited to, covenants
regarding the Company's capital expenditures, tangible net worth, EBITDA,
leverage ratio, fixed charge ratio and minimum liquidity ratio, as well as
limitations on other indebtedness, mergers, acquisitions and assets sales, other
liens, investments and issuance of capital stock other than for cash. The
Company's obligations under the Credit Agreement have been guaranteed by certain
of the Company's subsidiaries. As security for the obligations of the Company
and such subsidiaries under the Credit Agreement and the Security Guaranty, the
banks have been granted a security interest in substantially all the assets
owned or hereafter acquired by the Company and such subsidiaries.
Under the Credit Agreement, the Company is required to make mandatory
prepayments quarterly consisting of a portion of the Excess Cash Flow and a
portion of any Net Cash Proceeds (as defined in the Credit Agreement) resulting
from the sale of assets, issuance of debt or equity securities, insurance
recoveries, or collection of past due claims. In addition, voluntary prepayments
are permitted, in whole or in part, with prior notice but without premium or
penalty for advances subject to the Alternative Base Rate or upon the expiration
date of each advance subject to the Eurodollar Rate having an unexpired interest
period.
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USE OF PROCEEDS
The Company will not receive any proceeds from the sales of the Shares. See
"Selling Stockholders" for a list of those persons receiving proceeds from the
sale of the Shares.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock, par value $.01 per share, and 10,000,000 shares of Preferred
Stock, par value $.01 per share, of which 50,000 have been designated as Series
A Junior Participating Preferred Stock and 80,800 have been designated as Series
B Preferred Stock. Certain Preferred Stock Purchase Rights were distributed
pursuant to a dividend distribution declared April 10, 1992, and the Series A
Junior Participating Preferred Stock was reserved for issuance upon exercise of
such rights. As of June 1, 1998, 10,911,720 shares of Common Stock were
outstanding and held by approximately 950 shareholders of record and 70,000
shares of Series B Preferred Stock were outstanding and held by approximately 60
holders of record.
COMMON STOCK
Subject to the prior rights of any shares of Preferred Stock which may be
issued in the future, the holders of the Common Stock are entitled to receive
dividends as and when declared by the Board of Directors out of funds legally
available for dividends, and, in the event of liquidation, dissolution or
winding up of the Company, to share ratably in all assets remaining after
payment of liabilities. The holders of the Common Stock are entitled to one vote
for each share of Common Stock held of record on all matters submitted to a vote
of shareholders. Since holders of Common Stock do not have cumulative voting
rights, holders of more than 50% of the outstanding shares of Common Stock
present and voting at an annual meeting at which a quorum is present can elect
all the directors of the Company to be elected at such meeting. The holders of
Common Stock have no preemptive rights or conversion rights and are not subject
to further calls or assessments by the Company. There are no redemption or
sinking fund provisions applicable to the Common Stock.
The Transfer Agent for the Company's Common Stock is The Bank of New York.
PREFERRED STOCK
The Board of Directors is authorized to issue shares of Preferred Stock from
time to time in one or more classes or series and to fix by resolution or
resolutions (without further stockholder action) the voting rights, if any, and
the designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions thereof,
including, without limitation, the dividend rights, conversion rights, rights
and terms of redemption (including sinking fund provisions) and liquidation
rights of each such class or series. In addition, the Board of Directors is
empowered to determine the number of shares constituting each class and series
of Preferred Stock and, subject to compliance with applicable law, to increase
or decrease the number of shares of each such class or series. The Board of
Directors may, without shareholder approval, issue Preferred Stock with voting
and conversion rights which could adversely affect the voting power of holders
of Common Stock.
SERIES A PREFERRED STOCK PURCHASE RIGHTS
The description of certain Preferred Stock Purchase Rights distributed
pursuant to a dividend distribution declared by the Company's Board of Directors
on April 10, 1992, and of the shares of Series A Junior Participating Preferred
Stock reserved for issuance upon exercise of such Rights, is incorporated by
reference to Item 1 of the Company's Form 8-A, dated April 10, 1992, filed with
the Securities and Exchange Commission on April 13, 1992.
The Preferred Stock Purchase Rights have certain anti-takeover effects. The
Rights will cause substantial dilution to a person or group that attempts to
acquire the Company without conditioning the
13
<PAGE>
offer on a substantial number of the Rights being acquired. The Rights should
not interfere with any merger or other business combination approved by the
Board of Directors since the Rights may be redeemed by the Company.
SERIES B PREFERRED STOCK
The following description of the Series B Preferred Stock is qualified in
its entirety by reference to the Certificate of Designations and the Preferred
Stock Investment Agreements, copies of which are exhibits to the Registration
Statement of which this Prospectus is a part.
DIVIDENDS. The holders of the Series B Preferred Stock are not entitled to
receive dividends.
VOTING RIGHTS. The holders of Series B Preferred Stock have no voting
rights, except (i) as to whether a consolidation or merger of the Company or a
sale of substantially all of the Company's assets is deemed a liquidation or
(ii) as provided by law.
LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution or
winding up of the Company, either voluntary or involuntary, the holders of the
Series B Preferred Stock shall be entitled to receive, prior and in preference
to any distribution of any assets of the Company to the holders of the Common
Stock or any other class or series of shares except any class or series which is
entitled to priority over the Series B Preferred Stock, the amount of $1,000 per
share plus any amounts accrued but unpaid under Section 1.4(b)(iv) of the
Preferred Stock Agreement (the "Liquidation Preference"). A consolidation or
merger of the Company with or into any other corporation or corporations, or a
sale of all or substantially all of the assets of the Company, shall, at the
option of the holders of the Series B Preferred Stock, be deemed a liquidation,
dissolution or winding up of the Company if the shares of stock of the Company
(along with all derivative securities) outstanding immediately prior to such
transaction represent immediately after such transaction less than a majority of
the voting power of the surviving corporation (or of the acquirer of the
Company's assets in the case of a sale of assets). Such option may be exercised
by the vote or written consent of holders of a majority of the Series B
Preferred Stock at any time within thirty calendar days after written notice of
the essential terms of such transaction shall have been given to the holders of
the Series B Preferred Stock. Such notice shall be given by the Company
immediately following determination of such essential terms. If such option is
exercised, the holders of the Series B Preferred Stock shall be entitled to
receive, in cash, immediately upon the occurrence of such transaction, an amount
per share equal to the Liquidation Preference. This provision shall not apply to
a business combination in which substantially all the Common Stock of the
Company is converted into or exchanged for voting common stock of the
corporation surviving such business combination, if (i) such common stock of the
surviving corporation is listed and traded on the NASDAQ National Market or the
New York Stock Exchange, and (ii) the Board of Directors of the Company
determines in good faith that the conversion rights and other rights and
preferences of the Series B Preferred Stock are preserved and not rendered of
less value by the terms of such business combination.
CONVERSION. The shares of Series B Preferred Stock are convertible into
shares of the Company's common stock upon the earlier of April 1, 1998 or the
date on which the registration statement relating to the resale of the Common
Stock issuable upon conversion of the Series B Preferred Stock becomes
effective. The shares of Series B Preferred Stock will automatically convert
into common stock on the fifth anniversary of the date of original issuance to
the extent any shares of Series B Preferred Stock remain outstanding at that
time. Each share of Series B Preferred Stock is convertible into that number of
shares of common stock equal to the quotient of (i) $1,000 divided by (ii) the
Conversion Price. Through May 31, 1998, the Conversion Price will be $25.
Thereafter, subject to the maximum Conversion Price specified below, the
Conversion Price will be equal to the lowest trading price of the common stock
for the 22 trading days immediately preceding the conversion date, less a
discount ranging from 5% (beginning June 1, 1998) to 9% (on or after December 1,
1998). The maximum Conversion Price is the lesser of (i) $30, (ii) 91% of the
average of the daily low trading prices of the common stock for all trading days
in
14
<PAGE>
March, 1999, and (iii) 91% of the average of the daily low trading prices for
all trading days in September, 1999; PROVIDED, HOWEVER, that the maximum
Conversion Price shall not be less than $25 (the "Conversion Cap").
The number of shares that any holder of Series B Preferred Stock may convert
in any calendar month is limited according to a sliding scale percentage of such
holder's shares of Series B Preferred Stock determined by reference to the
highest of the daily low trading prices during such month.
<TABLE>
<CAPTION>
HIGHEST OF DAILY LOW TRADING PERCENTAGE CONVERTIBLE
PRICES DURING MONTH DURING SUCH MONTH
- ---------------------------------------------- ----------------------------------------------
<S> <C>
$25.00 or less.................... 20%
$25.01 to $27.00.................. 25%
$27.01 to $29.00.................. 30%
$29.01 to $31.00.................. 35%
$31.01 to $33.00.................. 40%
$33.01 to $35.00.................. 45%
$35.01 to $37.00.................. 50%
$37.01 or more.................... 100%
</TABLE>
The number of shares which may be converted in any calendar month also
includes the number of shares which might have been but were not converted
during earlier calendar months.
The Certificate of Designations provides that shares of Series B Preferred
Stock shall not be converted into Common Stock if following such conversion the
holder thereof together with affiliates of such holder would be the beneficial
owners (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) of 4.9% or more of the Common Stock of the Company.
If at any time the Conversion Price falls below $25, upon conversion of any
Series B Preferred Stock, the Company may, in lieu of the issuance of common
stock, make a payment in cash in an amount equal to the value of the common
stock based upon the high trading price of the common stock on the conversion
date.
The Company agreed to register the shares of common stock issuable upon
conversion of the Series B Preferred Stock for resale under the Securities Act
of 1933 by April 1, 1998. The Preferred Stock Investment Agreements state that,
if the Registration Statement was not effective by April 1, 1998, the Company
would be required to make a cash payment to the holders equal to 3% of the
purchase price for the Series B Preferred Stock for each 30-day period
thereafter until the Registration Statement is effective (pro-rated as to a
period of less than 30 days). The Registration Statement was declared effective
on June , 1998. Accordingly, under the terms of the Preferred Stock Investment
Agreements, the Company would be required to pay an aggregate amount of
approximately $ million to holders of the Series B Preferred Stock. However,
the Company believes that the liquidated damages provision constitutes an
unenforceable penalty and intends to challenge any attempt to enforce the
provision. The Company is seeking waivers of this provision from the holders of
the Series B Preferred Stock. There can be no assurance that the Company will be
successful in obtaining waivers from the holders of Series B Preferred Stock or
that the Company will prevail in establishing that the provision is
unenforceable. The enforcement of the liquidated damages provision against the
Company could have a material adverse effect on the Company's financial
condition and results of operations.
Each purchaser of the Series B Preferred Stock has agreed not to offer or
sell on any trading day, on a net basis, more than the following number of
shares of common stock: the greater of (i) 10% of the average daily trading
volume of the common stock for the five previous trading days, (ii) 10,000
shares, or (iii) 10% of the trading volume of the common stock on the day of
such sale. In addition, the purchasers of the Series B Preferred Stock and their
affiliates have agreed not to engage in any short sales, swaps, purchasing of
puts, or other hedging activities involving the common stock to hedge their
investment in the Series B Preferred Stock; however, any purchaser may write
call options if the call exercise price is greater
15
<PAGE>
than the lesser of (i) the effective Conversion Price on the day that the call
is written or (ii) the closing price of the common stock on the day prior to the
day that the call is written. These hedging restrictions do not apply to certain
short sales within three days of conversion where the shares issuable upon
conversion are used to cover the short sale.
SERIES B PREFERRED STOCK WARRANTS
In connection with the Private Placement, certain designees of the Placement
Agents received in aggregate 700 Preferred Stock Warrants, which may be
exercised at a purchase price of $1,000 per share to acquire 700 shares of
Series B Preferred Stock. See "--Series B Preferred Stock" for the rights and
preferences of the Series B Preferred Stock. The Preferred Stock Warrants expire
in December 1999 and contain customary anitdilution provisions that provide for
adjustments in the event of stock splits, stock dividends and similar
developments.
NATIONSBANK WARRANTS
The following description of the NationsBank Warrants is qualified in its
entirety by reference to the full text of the Warrant Agreement, a copy of which
is an exhibit to the Registration Statement.
SHARES AVAILABLE FOR ISSUANCE. The maximum number of Shares that may be
issued pursuant to exercise of the NationsBank Warrant, subject to certain
adjustments described below, is 500,150.
EXERCISABILITY. The NationsBank Warrants are exercisable at any time or
from time to time until October 31, 2007. Each of the 500,150 NationsBank
Warrants entitle the holder thereof to purchase one Share at no cost.
ADJUSTMENT OF SHARES ISSUABLE UPON EXERCISE OF THE NATIONSBANK
WARRANTS. The number of Shares issuable upon the exercise of each NationsBank
Warrant is subject to appropriate adjustment to reflect any stock dividends,
subdivision of Shares, combination of Shares or reclassification of Shares. The
number of Shares issuable upon the exercise of each NationsBank Warrant is also
subject to certain adjustments in the event the Company issues Shares, or
options, warrants or other rights to purchase Shares at a price lower than the
then current market value of the Shares.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE AND BY-LAWS
The Company's Restated Certificate of Incorporation (the "Certificate")
provides that the Board of Directors consists of three classes of directors
serving for staggered three-year terms. As a result, one-third of the Company's
Board of Directors will be elected each year. The classified board provision
could prevent a party who acquires control of a majority of the outstanding
voting stock of the Company from obtaining control of the Board of Directors
until the second annual stockholders meeting following the date the acquirer
obtains the controlling interest. Subject to the rights of holders of Preferred
Stock of the Company, any vacancy on the Board of Directors may be filled only
by the remaining directors then in office.
The Company has 9,919,200 authorized and unissued shares of Preferred Stock.
The Certificate grants the Board of Directors broad power to establish the
designations, powers, preferences and rights of any series of Preferred Stock.
Such stock could be used by the Board of Directors for defensive purposes,
including its issuance or sale to third parties or use in recapitalization
transactions.
In order for a stockholder to nominate a candidate for director, under the
Company's By-laws, timely notice of the nomination must be given to the Company
in advance of the meeting. Such notice must be given in respect to an election
to be held at an annual meeting of stockholders not less than 90 days before the
anniversary of the immediately preceding annual meeting, and must be given in
respect to an election to be held at a special meeting of stockholders within 10
days after the notice of the meeting is given to
16
<PAGE>
stockholders. The stockholder filing the notice of nomination must describe
various matters regarding the nominee, including such information as name,
address, occupation and shares held.
In order for a stockholder to bring other business before an annual
stockholder meeting, timely notice must be received by the Company not less than
60 days nor more than 90 days before the meeting (but if the Company gives less
than 70 days notice of the meeting, then such notice must be received within 10
days after the notice of the meeting is mailed or other public disclosure of the
meeting is made). Such notice must include a description of the proposed
business, the reasons therefore, and other specified matters.
Under the By-laws, special meetings of stockholders may be called only by
the Board of Directors or the President of the Company, and may not be called by
stockholders. In addition, the Certificate provides that any action required or
permitted to be taken by the stockholders of the Company at an annual or special
meeting of stockholders must be effected at a duly called meeting and may not be
taken or effected by a written consent of the stockholders in lieu thereof.
The By-laws may be amended by the Board of Directors or by affirmative vote
of the holders of two-thirds of the stock issued and outstanding and entitled to
vote thereon. Certain provisions of the Certificate, including provisions
concerning the classified Board of Directors and the ability of stockholders to
take action only at an annual or special meeting of stockholders, may only be
amended by the affirmative vote of the holders of two-thirds of the stock issued
and outstanding and entitled to vote thereon. The foregoing summary is qualified
in its entirety by reference to the full text of the Company's Certificate and
By-laws.
These provisions are designed in part to make it more difficult and
time-consuming to obtain majority control of the Board of Directors of the
Company or otherwise to bring a matter before stockholders without the Board's
consent, and thus reduce the vulnerability of the Company to an unsolicited
takeover proposal. These provisions are designed to enable the Company to
develop its business in a manner which will foster its long-term growth, with
the threat of a takeover not deemed by the Board to be in the best interest of
the Company and its stockholders and the potential disruption entailed by such a
threat reduced to the extent practicable. On the other hand, these provisions
may have an adverse effect on the ability of stockholders to influence the
governance of the Company and the possibility of stockholders receiving a
premium above market price for their securities from a potential acquiror who is
unfriendly to management.
DELAWARE GENERAL CORPORATION LAW SECTION 203
As a corporation organized under the laws of the State of Delaware, the
Company is subject to Section 203 of the Delaware General Corporation Law which
restricts certain business combinations between the Company and an "interested
stockholder" (in general, a stockholder owning 15% or more of the Company's
outstanding voting stock) or its affiliates or associates for a period of three
years following the date on which the stockholder becomes an "interested
stockholder." The restrictions do not apply if (i) prior to an interested
stockholder becoming such, the Board of Directors approves either the business
combination or the transaction in which the stockholder becomes an interested
stockholder (ii) upon consummation of the transaction in which any person
becomes an interested stockholder, such interested stockholder owns at least 85%
of the voting stock of the Company outstanding at the time the transaction
commences (excluding shares owned by certain employee stock ownership plans and
persons who are both directors and officers of the Company) or (iii) on or
subsequent to the date an interested stockholder becomes such, the business
combination is both approved by the Board of Directors and authorized at an
annual or special meeting of the Company's stockholders, not by written consent,
by the affirmative vote of at least 66 2/3% of the outstanding voting stock not
owned by the interested stockholders.
17
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of June 1, 1998, with
respect to the beneficial ownership of Common Stock by (i) each person known to
the Company to be the beneficial owner of more than 5% of its outstanding shares
of Common Stock, (ii) each director of the Company, (iii) the chief executive
officers of the Company and (iv) all directors and exectuvie officers of the
Company as a group.
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES OUTSTANDING(1)
- ---------------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
John W. Kluge (2)........................................................... 1,500,000 13.7%
c/o Metromedia Company
One Meadowlands Plaza
East Rutherford, NJ 07073
Jack M. Mazur............................................................... 1,269,356(3) 10.9%
11440 Commerce Park Drive
Reston, Virginia 20191
Shamrock Investments (4).................................................... 1,046,419(5) 9.2%
Charles P. Reilly
Michael E. Gallagher
2049 Century Park East, Suite 3330
Los Angeles, CA 90067
Bosko Djordjevic and Elizabeth
Keck Djordjevic, Trustee (6)................................................ 800,000 7.3%
505 S. Beverly Drive, Suite 215
Beverly Hills, CA 90212
Drakefield Corporation...................................................... 789,473 (7)(8 6.7%
c/oWaterton Management
10000 Santa Monica Boulevard, 5th Floor
Los Angeles, California 90067
Angelo, Gordon & Co., L.P................................................... 789,472 (7)(9 6.7%
245 Park Avenue, 26th Floor
New York, NY 10167
Scepter Holdings, Inc. ..................................................... 657,894 (7 (10 5.7%
301 Commerce Street, Suite 2975
Fort Worth, Texas 76102
Ziff Asset Management, L.P.................................................. 657,894(7) 5.7%
c/o PBK Holdings, Inc.
156 Greenwich Avenue, Suite 2A
Greenwich, Connecticut 06830
Strome Susskind (7 (11
Investment Management LP ................................................... 657,893 5.7%
100 Wilshire Boulevard, 15th Floor
Santa Monica, CA 90401
Michael D. Starr............................................................ 425,852 (12 3.8%
11440 Commerce Park Drive
Reston, Virginia 20191
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C>
John P. Cole................................................................ 400,000 3.7%
11440 Commerce Park Drive
Reston, Virginia 20191
Robert L. Bowles, Jr. ...................................................... 157,011 (13 1.4%
820 First Street, N.E., Suite LL100
Washington, D. C. 20002-4205
Frank L. Provato, M.D. ..................................................... 122,916 (14 1.1%
11440 Commerce Park Drive
Reston, Virginia 20191
William J. Lubin............................................................ 113,333 (15 1.0%
11440 Commerce Park Drive
Reston, Virginia 20191
Joseph G. Mathews........................................................... 15,094 *
3510 Highway O
Wright City, MO 63390
Donald J. Ruffing........................................................... 8,503 *
11104 Woodlawn Boulevard
Upper Marlboro, MD 20772
Jerry W. Carlton............................................................ 7,140 *
610 Newport Center Drive, Suite 1700
Newport Beach, CA 92660
John J. McDonnell........................................................... 0 *
11440 Commerce Park Drive
Reston, VA 20191
All directors and executive officers as a group (13 persons)................ 3,286,860 25.8%
</TABLE>
- ------------------------
* Represents less than 1% of the shares of the Company's outstanding stock.
(1) Based upon 10,911,720 shares of Common Stock outstanding as of June 1,
1998. For purposes of computing the percentage of outstanding shares held
by each person or group of persons named in the table, any shares as to
which such person or group has the right to acquire within 60 days after
such date are deemed to be outstanding, but such shares are not deemed to
be outstanding for the purpose of computing the percentage ownership of any
other person.
(2) According to Amendment No. 1 to Schedule 13D filed by John W. Kluge on June
2, 1998.
(3) Includes 720,000 shares which Mr. Mazur could acquire upon the exercise of
options granted by the Company. Also includes 512,014 shares owned by
VACHR, Inc., a corporation owned by Mr. Mazur's spouse, Lynn Mazur, and
other family members, and 30,000 shares owned by the J&J Investment
Partnership, a partnership wholly owned by members of Mr. Mazur's family.
Mr. Mazur disclaims beneficial ownership of the shares owned by Lynn Mazur
(through VACHR, Inc.) and J&J Investment Partnership.
(4) According to the Schedule 13D filed On October 11, 1994 and amended on
October 11, 1997, the persons listed constitute a group within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
(5) Includes 200,000 shares owned by Shamrock Investments, 187,730 shares owned
by Mr. Reilly, 172,220 shares owned by Mr. Gallagher, 22,500 shares which
Shamrock Investments could acquire upon the exercise of options granted by
the Company, 231,596 shares which Mr. Reilly could acquire upon the
exercise of options granted by the Company, 121,262 shares which Mr.
Gallagher could acquire upon
19
<PAGE>
the exercise of options granted by the Company, 59,963 shares which Mr.
Reilly could acquire upon conversion of a promissory note of the Company,
6,173 shares which Mr. Reilly could acquire upon conversion of a promissory
note of the Company issued to Shamrock Investments, and 44,975 shares which
Mr. Gallagher could acquire upon conversion of a promissory note of the
Company.
(6) According to Amendment No. 1 to the Schedule 13D of Bosko Djordjevic and
Elizabeth Keck-Djordjevic, as trustee, filed on September 15, 1995.
(7) Represents an estimate of the number of shares of Common Stock issuable
upon conversion of shares of Series B Convertible Preferred Stock at an
assumed conversion price of $7.60 per share, which is 95% of the lowest
trading price of the Common Stock on June 2, 1998. The actual number of
shares of Common Stock issuable upon conversion of the Series B Preferred
depends upon the Conversion Price, which cannot be predicted by the Company
at this time. The number of shares that any holder of Series B Preferred
Stock may convert in any calendar month is limited according to a sliding
scale percentage of such holder's shares of Series B Preferred Stock
determined by reference to the highest of the daily trading prices during
such month. In addition, shares of Series B Preferred Stock may not be
converted into Common Stock if following such conversion the holder
thereof, together with affiliates of such holder would be beneficial owner
of 4.9% or more of the Common Stock. See "Description of Capital
Stock--Series B Preferred Stock." For purposes of the table above,
beneficial ownership by holders of Series B Preferred Stock has been
calculated without regard to the foregoing limitations.
(8) Excludes 526,315 shares (4.6%) held by Stockwell Corporation, S.A. The
Company believes that Drakefield Corporation and Stockwell Corporation are
affiliated. If the shares owned by Drakefield Corporation and Stockwell
Corporation were beneficially owned by the same person, such person would
beneficially own 1,315,788 shares representing approximately 10.8% of the
outstanding Common Stock.
(9) Includes (i) 289,473 shares (2.6%) beneficially owned by Baldwin
Enterprises, Inc., (ii) 236,842 shares (2.1%) beneficially owned by Ramius
Fund, Ltd., (iii) 157,894 shares (1.4%) beneficially owned by Leonardo,
L.P. and (iv) 105,263 shares (1.0%) beneficially owned by Raphael, L.P.
(10) Includes 427,631 shares beneficially owned by Q Funding, L.P. and 230,263
shares beneficially owned by R(2) Investments, LDC. Scepter Holdings, Inc.
is the general partner of the investment manager for each of Q Funding,
L.P. and R(2) Investments, LDC.
(11) Includes (i) 223,684 shares (2.0%) beneficially owned by Strome, Susskind
Hedgecap, L.P., (ii) 217,105 shares (2.0%) beneficially owned by Strome
Offshore Limited, (iii) 177,631 shares (1.6%) beneficially owned by Strome
Partners, L.P., and (iv) 39,473 shares (0.4%) beneficially owned by Strome
Hedgecap Limited.
(12) Includes 290,000 shares which Mr. Starr presently could acquire upon the
exercise of options granted by the Company.
(13) Includes 53,333 shares which Mr. Bowles presently could acquire upon the
exercise of options granted by the Company.
(14) Includes 101,666 shares which Dr. Provato presently could acquire upon the
exercise of options granted by the Company.
(15) Represents the shares which Mr. Lubin presently could acquire upon the
exercise of options granted by the Company.
SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company, as
of June 1, 1998, regarding the beneficial ownership of Common Stock by the
Selling Stockholders. Because the Selling
20
<PAGE>
Stockholders may sell all, some or none of their shares, no estimate can be made
of the number of shares held by any Selling Stockholder after the completion of
this offering. If, however, each of the Selling Stockholders were to sell all of
the shares offered hereby, then each Selling Stockholder would beneficially own
less than one percent of the shares of Common Stock outstanding. Other than
NationsBank, which has been the Company's principal lender, none of the Selling
Stockholders has had a material relationship with the Company or any of its
predecessors or affiliates within the past three years.
<TABLE>
<CAPTION>
SHARES OF NUMBER OF
COMMON STOCK SHARES BEING
BENEFICIALLY OWNED OFFERED
--------------------- ------------
<S> <C> <C> <C>
NAME NUMBER PERCENT
- ----------------------------------------------------------------------------- ---------- ---------
Drakefield Corporation (1)................................................... 789,473 6.7% 789,473
Angelo, Gordon & Co., L.P. (1)(2)............................................ 789,472 6.7% 789,472
Scepter Holdings, Inc. (1)(3)................................................ 657,894 5.7% 657,894
Ziff Asset Management, L.P. (1).............................................. 657,894 5.7% 657,894
Strome Susskind Investment Management LP (1)(4).............................. 657,893 5.7% 657,893
NationsBank.................................................................. 500,150 4.6% 500,150
Chase Manhattan Bank, John W. Kluge and Stuart Subotnick
Trustees U/A DTD 5/30/84 As Amended made by and for
John W. Kluge.............................................................. 1,500,000 13.7% 500,000
Stockwell Corporation, S.A. (1).............................................. 526,315 4.6% 526,315
Q Funding, L.P. (1).......................................................... 427,631 3.8% 427,631
Elara Ltd. (1)............................................................... 394,736 3.5% 394,736
Southbrook International Investments, Ltd. (1)............................... 394,736 3.5% 394,736
Baldwin Enterprises, Inc. (1)................................................ 289,473 2.6% 289,473
Lakeshore International Ltd. (1)............................................. 263,157 2.4% 263,157
Ramius Capital Group, L.L.C. (1)............................................. 263,157 2.4% 263,157
The Tail Wind Fund Ltd. (1).................................................. 263,157 2.4% 263,157
Ramius Fund, Ltd. (1)........................................................ 236,842 2.1% 236,842
R(2) Investments, LDC (1).................................................... 230,263 2.1% 230,263
Strome, Susskind Hedgecap, L. P. (1)......................................... 223,684 2.0% 223,684
Strome Offshore Limited (1).................................................. 217,105 2.0% 217,105
Saybrook Fund I, L.P. (1).................................................... 209,868 1.9% 209,868
Strome Partners, L.P. (1).................................................... 177,631 1.6% 177,631
Leonardo, L.P. (1)........................................................... 157,894 1.4% 157,894
Lawrence K. Fleischman (1)(5)................................................ 141,180 1.3% 141,180
AGR Halifax Fund, Ltd. (1)................................................... 131,578 1.2% 131,578
ProFutures Special Equities Fund, L.P. (1)................................... 131,578 1.2% 131,578
Kodiak Opportunity, L.P. (1)................................................. 108,552 1.0% 108,552
Raphael, L.P. (1)............................................................ 105,263 1.0% 105,263
Kodiak Opportunity, Offshore, Ltd. (1)....................................... 88,815 0.8% 88,815
Alexander L. and Linda S. Cappello (1)....................................... 68,421 0.6% 68,421
Fortune Fund Ltd.--Seeker 3 (1).............................................. 65,789 0.6% 65,789
Crisotomo B. Garcia (IRA) (1)................................................ 65,789 0.6% 65,789
JMG Capital Partners, L.P. (1)............................................... 65,789 0.6% 65,789
Triton Capital Investments, Ltd. (1)......................................... 65,789 0.6% 65,789
Licap Partners (1)........................................................... 52,631 0.5% 52,631
Gerard K. Cappello (1)....................................................... 45,657 0.4% 45,657
David E. Berman.............................................................. 45,000 0.4% 45,000
Strome Hedgecap Limited (1).................................................. 39,473 0.4% 39,473
Trust Company of America (1)................................................. 39,473 0.4% 39,473
Peter J. Cocoziello (1)...................................................... 33,552 0.3% 33,552
Anvil Investment Partners, L.P. (1).......................................... 32,894 0.3% 32,894
Fayerweather Associates (1).................................................. 32,894 0.3% 32,894
RSP VI Limited Partnership (1)............................................... 32,894 0.3% 32,894
Lawrence K. Fleischman (1)................................................... 29,342 0.3% 29,342
Steven Amos (1).............................................................. 26,315 0.2% 26,315
Laredo Capital Partners (1).................................................. 26,315 0.2% 26,315
Paul Rajewski (1)............................................................ 26,315 0.2% 26,315
Capital Vision Group, Inc. Profit Sharing Plan (1)........................... 13,157 0.1% 13,157
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
SHARES OF NUMBER OF
COMMON STOCK SHARES BEING
BENEFICIALLY OWNED OFFERED
--------------------- ------------
NAME NUMBER PERCENT
- ----------------------------------------------------------------------------- ---------- ---------
<S> <C> <C> <C>
Lawrence Kaplan (1).......................................................... 13,157 0.1% 13,157
Stanley Kaplan (1)........................................................... 13,157 0.1% 13,157
Theodore Meisel (1).......................................................... 13,157 0.1% 13,157
OK Associates Pension Trust (1).............................................. 13,157 0.1% 13,157
Pelain Partners (1).......................................................... 13,157 0.1% 13,157
Alfred Romano (1)............................................................ 13,157 0.1% 13,157
Jeffrey C. Ullman, Trustee Jeffrey C. Ullman Living Trust (1)................ 13,157 0.1% 13,157
RJB Partners L.P. (1)........................................................ 7,894 0.1% 7,894
Loretta Hirsh Shine (1)...................................................... 7,894 0.1% 7,894
Robert Deutschman (1)........................................................ 6,973 0.1% 6,973
Jonathan Thomas (1).......................................................... 6,973 0.1% 6,973
Jonathan Rosenthal (1)....................................................... 6,842 0.1% 6,842
Jon Schotz (1)............................................................... 6,842 0.1% 6,842
Jerry Kaplan (1)............................................................. 6,578 0.1% 6,578
Leslie D. Michelson (1)...................................................... 6,578 0.1% 6,578
NY-DBL Diamond Group (1)..................................................... 6,578 0.1% 6,578
Lisa G. Shine (1)............................................................ 3,947 0.0% 3,947
</TABLE>
- ------------------------
(1) Such beneficial ownership represents an estimate of the number of shares of
Common Stock issuable upon the conversion of shares of Series B Preferred
Stock beneficially owned by such person, assuming (i) a conversion price of
$7.60, which is 95% of the lowest trading price of the Common Stock on June
2, 1998 and (ii) each of the Series B Preferred Stock Warrants is exercised
as of the date of issuance. The actual number of shares of Common Stock
issued upon the conversion of the Series B Preferred Stock depends upon the
Conversion Price, which cannot be predicted by the Company at this time.
After May 31, 1998, the Conversion Price, subject to the maximum Conversion
Price, will be equal to the lowest trading price of the Common Stock for the
22 trading days immediately preceding the conversion date, less a discount
ranging from 5% to 9%. The number of shares that any holder of Series B
Preferred Stock may convert in any calendar month is limited according to a
sliding scale percentage of such holder's shares of Series B Preferred Stock
determined by reference to the highest of the daily trading prices during
such month. In addition, shares of Series B Preferred Stock may not be
converted into Common Stock if following such conversion the holder thereof,
together with affiliates of such holder would be beneficial owner of 4.9% or
more of the Common Stock. See "Description of Capital Stock--Series B
Preferred Stock." For purposes of the table above, beneficial ownership by
holders of Series B Preferred Stock has been calculated without regard to
the foregoing limitations.
(2) Includes (i) 289,473 shares (2.6%) beneficially owned by Baldwin
Enterprises, Inc., (ii) 236,842 shares (2.1%) beneficially owned by Ramius
Fund, Ltd., (iii) 157,894 shares (1.4%) beneficially owned by Leonardo, L.P.
and (iv) 105,263 shares (1.0%) beneficially owned by Raphael, L.P.
(3) Includes 427,631 shares beneficially owned by Q Funding, L.P. and 230,263
shares beneficially owned by R(2) Investments, LDC. Scepter Holdings, Inc.
is the general partner of the investment manager for each of Q Funding, L.P.
and R(2) Investments, LDC.
(4) Includes (i) 223,684 shares (2.0%) beneficially owned by Strome, Susskind,
Hedgecap, L.P., (ii) 217,105 shares (2.0%) beneficially owned by Strome
Offshore Limited, (iii) 177,631 shares (1.6%) beneficially owned by Strome
Partners, L.P., and (iv) 39,473 shares (0.4%) beneficially owned by Strome
Hedgecap Limited.
(5) Includes (i) 52,631 shares held by Licap Partners, a partnership of which
Mr. Fleischman is a general partner, (ii) 26,315 shares held by Laredo
Capital partners, a partnership of which Mr. Fleischman is a general
partner, (iii) 13,157 shares owned by Capital Vision Group, Inc. Profit
Sharing Plan, of which
22
<PAGE>
Mr. Fleischman is the sole beneficiary, (iv) 13,157 shares owned by Pelain
Partners, a partnership of which Mr. Fleischman is a general partner, (v)
6,578 shares owned by NY-DBL Diamond Group, a partnership of which Mr.
Fleischman is a general partner and (vi) 29,342 shares held by Mr.
Fleischman individually.
PLAN OF DISTRIBUTION
WARRANT SHARES
The Warrant Shares may be offered and sold from time to time by or for the
account of the Warrantholder. The decision to offer and sell the Warrant Shares,
and the timing and amount of any offers or sales that are made, is and will be
within the sole discretion of the Warrantholder. Any Warrant Shares may be
offered for sale by the Warrantholder on the New York Stock Exchange, or
otherwise, at prices and on terms then obtainable, at fixed prices then
prevailing at the time of sale, or in negotiated transactions at negotiated
prices, or otherwise. The Warrant Shares offered hereby may be offered in any
manner permitted by law, other than an underwritten public offering, including
through brokers, dealers or agents, and directly to one or more purchasers.
Sales of the Warrant Shares may involve: (a) block transactions in which the
broker or dealer so engaged will attempt to sell the Warrant Shares as an agent,
but may position and resell a portion of the block as principal to facilitate
the transactions; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions; or (d) transactions in which the broker solicits
purchasers. To the extent required, this Prospectus may be amended and
supplemented from time to time to describe a specific plan of distribution. In
connection with such transactions, broker-dealers or other financial
institutions may engage in short sales of the Common Stock, to the extent
permitted by law, in the course of hedging the positions they assume with the
Warrantholder. The Warrantholder may also pledge the Warrant Shares to a
broker-dealer or other financial institution, and, upon a default, such
broker-dealer or other financial institution, may effect sales of the pledged
Warrant Shares pursuant to this Prospectus (as supplemented or amended or
reflect such transaction). In addition, any Warrant Shares that qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
Prospectus. Brokers or dealers engaged to sell the Warrant Shares will receive
compensation from the Warrantholder in the form of commissions or discounts in
amounts to be negotiated immediately prior to the sale. Any gain realized by
such brokers or dealers on the sale of the Warrantholder Shares which they
purchase as a principal may be deemed to be compensation to the brokers or
dealers in addition to any commissions they will receive from the Warrantholder.
Brokers or dealers engaged by the Warrantholder may arrange for other brokers or
dealers to participate. Such broker or dealer and any other participating broker
or dealer may be deemed to be "underwriters" within the meaning of the
Securities Act and any discounts or commissions received by them or any profit
on the resale of shares by them may be deemed to be underwriting discounts and
commissions thereunder.
The Company will bear all expenses in connection with the registration of
the Warrant Shares being offered and sold by the Warrantholder.
The Company has advised the Warrantholder that, unless granted an exemption
by the Commission from Regulation M under the Exchange Act, or unless otherwise
permitted under Regulation M, the Warrantholder cannot engage in any
stabilization activity in connection with the Company's securities and cannot
bid for or purchase any securities of the Company or attempt to induce any
person to purchase any of the Company's securities other than as permitted by
the Exchange Act. In addition, the Company will make copies of this Prospectus
available to the Warrantholder and the Warrantholder will furnish each broker or
dealer engaged by the Warrantholder and each other participating broker or
dealer the number of copies of this Prospectus required by such broker or
dealer.
23
<PAGE>
KLUGE SHARES
The Kluge Shares may be offered and sold from time to time by or for the
account of Kluge or by pledgees, donees, transferees or other successors in
interest. The decision to offer and sell the Kluge Shares, and the timing and
amount of any offers or sales that are made, is and will be within the sole
discretion of Kluge. Any Kluge Shares may be offered for sale by Kluge on the
New York Stock Exchange, or otherwise, at prices and on terms then obtainable,
at fixed prices then prevailing at the time of sale, or in negotiated
transactions at negotiated prices, or otherwise. The Kluge Shares offered hereby
may be offered in any manner permitted by law, other than an underwritten public
offering, including through brokers, dealers or agents, and directly to one or
more purchasers. Sales of the Kluge Shares may involve: (a) block transactions
in which the broker or dealer so engaged will attempt to sell the Kluge Shares
as an agent, but may position and resell a portion of the block as principal to
facilitate the transactions; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(c) ordinary brokerage transactions; or (d) transactions in which the broker
solicits purchasers. To the extent required, this Prospectus may be amended and
supplemented from time to time to describe a specific plan of distribution. In
connection with such transactions, broker-dealers or other financial
institutions may engage in short sales of the Common Stock, to the extent
permitted by law, in the course of hedging the positions they assume with Kluge.
Kluge may also pledge Shares to a broker-dealer or other financial institution,
and, upon a default, such broker-dealer or other financial institution, may
effect sales of the pledged Shares pursuant to this Prospectus (as supplemented
or amended to reflect such transaction). In addition, any Shares that qualify
for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this Prospectus. Brokers or dealers engaged to sell the Kluge Shares will
receive compensation from Kluge in the form of commissions or discounts in
amounts to be negotiated immediately prior to the sale. Any gain realized by
such brokers or dealers on the sale of the Kluge Shares which they purchase as a
principal may be deemed to be compensation to the brokers or dealers in addition
to any commissions they will receive from Kluge. Brokers or dealers engaged by
Kluge may arrange for other brokers or dealers to participate. Any broker or
dealer to be utilized by Kluge will be selected by Kluge. Such broker or dealer
and any other participating broker or dealer may be deemed to be "underwriters"
within the meaning of the Securities Act and any discounts or commissions
received by them or any profit on the resale of shares by them may be deemed to
be underwriting discounts and commissions thereunder.
The Company will bear all expenses in connection with the registration of
the Kluge Shares being offered and sold by Kluge.
The Company has agreed to indemnify Kluge and certain other persons against
certain liabilities, including certain liabilities under the Securities Act.
The Company has advised Kluge that, unless granted an exemption by the
Commission from Regulation M under the Exchange Act, or unless otherwise
permitted under Regulation M, Kluge cannot engage in any stabilization activity
in connection with the Company's securities and cannot bid for or purchase any
securities of the Company or attempt to induce any person to purchase any of the
Company's securities other than as permitted by the Exchange Act. In addition,
the Company will make copies of this Prospectus available to Kluge and Kluge
will furnish each broker or dealer engaged by Kluge and each other participating
broker or dealer the number of copies of this Prospectus required by such broker
or dealer.
NATIONSBANK SHARES
The NationsBank Shares may be offered and sold from time to time by or for
the account of NationsBank. The decision to offer and sell the NationsBank
Shares, and the timing and amount of any offers or sales that are made, is and
will be within the sole discretion of NationsBank. Any NationsBank Shares may be
offered for sale by NationsBank on the New York Stock Exchange, or otherwise, at
prices and on terms then obtainable, at fixed prices then prevailing at the time
of sale, or in negotiated
24
<PAGE>
transactions at negotiated prices, or otherwise. The NationsBank Shares offered
hereby may be offered in any manner permitted by law, other than an underwritten
public offering, including through brokers, dealers or agents, and directly to
one or more purchasers. Sales of the NationsBank Shares may involve: (a) block
transactions in which the broker or dealer so engaged will attempt to sell the
NationsBank Shares as an agent, but may position and resell a portion of the
block as principal to facilitate the transactions; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account pursuant
to this Prospectus; (c) ordinary brokerage transactions; or (d) transactions in
which the broker solicits purchasers. To the extent required, this Prospectus
may be amended and supplemented from time to time to describe a specific plan of
distribution. In connection with such transactions, broker-dealers or other
financial institutions may engage in short sales of the Common Stock, to the
extent permitted by law, in the course of hedging the positions they assume with
NationsBank. NationsBank may also pledge the NationsBank Shares to a
broker-dealer or other financial institution, and, upon a default, such broker-
dealer or other financial institution, may effect sales of the pledged
NationsBank Shares pursuant to this Prospectus (as supplemented or amended or
reflect such transaction). In addition, any NationsBank Shares that qualify for
sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this Prospectus. Brokers or dealers engaged to sell the NationsBank Shares will
receive compensation from NationsBank in the form of commissions or discounts in
amounts to be negotiated immediately prior to the sale. Any gain realized by
such brokers or dealers on the sale of the NationsBank Shares which they
purchase as a principal may be deemed to be compensation to the brokers or
dealers in addition to any commissions they will receive from NationsBank.
Brokers or dealers engaged by NationsBank may arrange for other brokers or
dealers to participate. Such broker or dealer and any other participating broker
or dealer may be deemed to be "underwriters" within the meaning of the
Securities Act and any discounts or commissions received by them or any profit
on the resale of shares by them may be deemed to be underwriting discounts and
commissions thereunder.
The Company will bear all expenses in connection with the registration of
the NationsBank Shares being offered and sold by NationsBank.
The Company has advised NationsBank that, unless granted an exemption by the
Commission from Regulation M under the Exchange Act, or unless otherwise
permitted under Regulation M, NationsBank cannot engage in any stabilization
activity in connection with the Company's securities and cannot bid for or
purchase any securities of the Company or attempt to induce any person to
purchase any of the Company's securities other than as permitted by the Exchange
Act. In addition, the Company will make copies of this Prospectus available to
NationsBank and NationsBank will furnish each broker or dealer engaged by
NationsBank and each other participating broker or dealer the number of copies
of this Prospectus required by such broker or dealer.
CONVERSION SHARES
The Conversion Shares may be offered and sold from time to time by or for
the account of the holders of the Series B Preferred Stock or by pledgees,
donees, transferees or other successors in interest. The Company has agreed to
use its best efforts to keep this Prospectus effective until December 30, 1999.
The decision to offer and sell the Conversion Shares, and the timing and amount
of any offers or sales that are made, is and will be (subject the limitation set
forth below) within the sole discretion of the holders of the Series B Preferred
Stock. Any of the Conversion Shares may be offered for sale on the New York
Stock Exchange, or otherwise, through brokers' transactions at prices then
prevailing at the time of sale, at prices related to such prevailing prices, at
varying prices determined at the time of sale or at negotiated or fixed prices.
Sales of the Conversion Shares may involve: (a) block transactions in which the
broker or dealer so engaged will attempt to sell the Conversion Shares as an
agent, but may position and resell a portion of the block as principal to
facilitate the transactions; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(c) ordinary brokerage transactions; (d) transactions in which the broker
solicits purchasers; or (e) through the writing of options (whether such
25
<PAGE>
options are listed on an options exchange or otherwise) on, or settlement of
short sales of, the Common Stock.
Pursuant to Preferred Stock Investment Agreement, each purchaser of the
Series B Preferred Stock has agreed to refrain from offering or selling publicly
on any trading day on the NYSE or on the principal exchange on which the Common
Stock is traded an amount of Common Stock equal to the greater of (i) 10% of the
average daily trading volume of the Common Stock for the five trading days
immediately prior to such sale as reported by the NYSE or by such principal
exchange, (ii) 10,000 shares of Common Stock or (iii) 10% of the trading volume
of the Common Stock on the day of such sale as reported by the NYSE or by such
principal exchange. In addition, the purchasers of the Series B Preferred Stock
and their affiliates have agreed not to engage in any short sales, swaps,
purchasing of puts, or other hedging activities involving the common stock to
hedge their investment in the Series B Preferred Stock; however, any purchaser
may write call options if the call exercise price is greater than the lesser of
(i) the effective Conversion Price on the day that the call is written or (ii)
the closing price of the common stock on the day prior to the day that the call
is written. These hedging restrictions do not apply to (i) transactions not
solicited or directed by a purchaser of the Series B Preferred Stock and in
which such purchaser has no beneficial interest made on behalf of third-party
clients who are not holders of Series B Preferred Stock or (ii) certain short
sales within three days of conversion in amounts not greater than the number of
shares issuable upon conversion where the shares issuable upon conversion are
used to cover the short sale. To the extent required this Prospectus may be
amended and supplemented from time to time to describe a specific plan of
distribution.
Brokers or dealers engaged by any holder of Series B Preferred Stock may
receive compensation from such holders in the form of commission or discounts in
amounts to be negotiated immediately prior to the sale. Any gain realized by
such brokers or dealers on the sale of the Conversion Shares that they purchase
as a principal may be deemed to be compensation to the brokers or dealers in
addition to any commissions they will receive from such holders of the Series B
Preferred Stock. Brokers or dealers engaged by any holder of the Series B
Preferred Stock may arrange for other brokers or dealers to participate. Such
broker or dealer and any other participating broker or dealer may be deemed to
be "underwriters" within the meaning of the Securities Act and any discounts or
commissions received by them or any profit on the resale of shares by them may
be deemed to be underwriting discounts and commissions thereunder.
Under the securities laws of certain states, the Common Stock may be sold in
such states only through registered or licensed brokers or dealers. In addition,
in certain states, the Common Stock may not be sold unless the Common Stock has
been registered or qualified for sale in such state or pursuant to an exemption
from registration or qualification.
The Company will bear all expenses in connection with the registration of
the Conversion Shares.
The Company has advised the holders of the Series B Preferred Stock that,
unless granted an exemption by the Commission from Regulation M under the
Exchange Act, or unless otherwise permitted under Regulation M, the holders of
the Series B Preferred Stock cannot engage in any stabilization activity in
connection with the Company's securities and cannot bid for or purchase any
securities other than as permitted by the Exchange Act. In addition, the Company
will make copies of this Prospectus available the holders of the Series B
Preferred Stock who will furnish each broker or dealer engaged by any such
holder and other participating broker or dealer the number of copies of this
Prospectus required by such broker or dealer.
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby will be passed
upon for the Company by Fried, Frank, Harris, Shriver & Jacobson (a partnership
including professional corporations), Washington, D.C. 20004.
26
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets as of April 30, 1997 and 1996, and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended April 30, 1997, incorporated by
reference in this Prospectus and in the Registration Statement from the
Company's 1997 Form 10-K/A2 have been incorporated by reference herein in
reliance on the report, which includes an explanatory paragraph regarding the
restatement of previously issued financial statements to reflect revised
accounting for certain contract costs, of Coopers & Lybrand L.L.P., independent
accountants, given upon the authority of that firm as experts in accounting and
auditing. With respect to the unaudited interim financial information as of July
31, 1997, October 31, 1997, and January 31, 1998 and for the three-month,
six-month and nine-month periods then ended, incorporated by reference in this
Prospectus and Registration Statement, the independent accountants have reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate reports,
which include an explanatory paragraph regarding the restatement of previously
issued financial statements to reflect revised accounting for certain contract
costs and certain long-term real estate leases, included in the Company's
quarterly reports on Form 10-Q, as amended, for the quarters ended July 31,
1997, October 31, 1997 and January 31, 1998, and incorporated by reference
herein, state that they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted in light of the limited nature
of the review procedures applied. The independent accountants are not subject to
the liability provisions of Section 11 of the Securities Act of 1933 for their
reports on unaudited interim financial information because that report is not a
"report" or "part" of the Prospectus or Registration Statement prepared or
certified by the independent accountants within the meaning of Sections 7 and 11
of the Securities Act.
The consolidated financial statements of HIP of New Jersey, Inc. and
Subsidiary as of and for the years ended December 31, 1996, 1995 and 1994,
incorporated by reference in this Prospectus and Registration Statement from the
Company's Current Report on Form 8-K/A, have been audited by Ernst & Young LLP,
independent auditors as set forth in their reports incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
27
<PAGE>
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Risk Factors................................... 3
The Company.................................... 11
Use of Proceeds................................ 13
Description of Capital Stock................... 13
Security Ownership of Certain Beneficial Owners
and Management................................ 18
Selling Stockholders........................... 20
Plan of Distribution........................... 23
Legal Matters.................................. 26
Independent Accountants........................ 26
</TABLE>
PHP HEALTHCARE CORPORATION
8,255,639 SHARES
OF COMMON STOCK
---------------------
PROSPECTUS
---------------------
JUNE , 1998
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale of
the Common Stock being registered. All amounts are estimates except the
registration fee.
<TABLE>
<S> <C>
Commission Registration Fee.................................... $25,918.03
Printing and engraving expenses................................ 8,000.00
Legal fees and expenses........................................ 150,000.00
Accounting fees and expenses................................... 100,000.00
Miscellaneous.................................................. 10,000.00
----------
Total...................................................... $293,918.03
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL") empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceedings, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section
145, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; that indemnification provided for by Section
145 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 such persons' heirs, executors and administrators; and
empowers the corporation to purchase and maintain insurance on
II-1
<PAGE>
behalf of a director or officer of the corporation against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under Section 145.
Article IX of the Company's By-laws provides that the Company shall
indemnify its directors and officers to the fullest extent authorized by the
DGCL.
Section 102(b)(7) of DGCL provides that a certificate of incorporation may
contain a provision eliminating or limiting the personal liability of a director
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director provided that such provision shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit. Article X of the Company's
Certificate of Incorporation limits the liability of directors to the fullest
extent permitted by Section 102(b)(7).
ITEM 16. EXHIBITS.
The following exhibits are filed herewith or incorporated by reference.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
* 4.2 Stock Purchase Agreement by and between PHP Healthcare Corporation and David E. Berman and Mary Ellen
Michael-Fleming dated as of November 1, 1992.
* 4.3 Warrant to Purchase Shares of Common Stock of PHP Healthcare Corporation dated as of November 1, 1992.
4.4 Specimen form of the Company's Common Stock certificate (incorporated by reference from Exhibit 7.1 to
the Company's Form 8-A, Amendment 1, filed with the Securities and Exchange Commission on August 11,
1992).
4.5 Specimen form of the Company's Series B Convertible Preferred Stock
4.6 Certificate of Designations of Series B Convertible Preferred Stock (incorporated by reference from
Exhibit 3.1 to the Company's Form 8-K, filed with the Securities and Exchange Commission on January 6,
1998).
4.7 Form of Preferred Stock Investment Agreement (incorporated by reference from Exhibit 4.1 to the Company's
Form 8-K, field with the Securities and Exchange Commission on January 6, 1998).
4.8 Form of Series B Preferred Stock Purchase Warrant
4.9 Warrant Agreement dated as of October 31, 1997 between PHP Healthcare Corporation and First Trust of New
York, N.A., Warrant Agent (incorporated by reference from Exhibit 4.1 to the Company's Form 8-K, filed
with the Securities and Exchange Commission on November 17, 1997).
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson.
10.1 Amended and Restated Credit Agreement, dated May 26, 1998, among PHP Healthcare Corporation as Borrower
and The Initial Lenders and Initial Issuing Bank Named Herein as Initial Lenders and Initial Issuing
Bank and NationsBank, N.A. as Collateral Agent and Administrative Agent.
10.2 Amended and Restated Security Agreement, dated as of May 26, 1998, from PHP Healthcare Corporation, The
Other Grantors Referred to Herein and The Additional Grantors Referred to Herein as Grantors to
NationsBank, N.A. as Administrative Agent.
10.3 Amended and Restated Subsidiary Guaranty, dated as of May 26, 1998, from Each of the Subsidiaries of PHP
Healthcare Corporation Listed on the Signature Pages Hereof and The Additional Subsidiary Guarantors
Referred to Herein as Guarantors in favor of The Secured Parties Referred to in The Amended and Restated
Credit Agreement Referred to Herein.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
15.1 Letter of Coopers & Lybrand L.L.P. re: unaudited interim financial information
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.1).
23.3 Consent of Ernst and Young L.L.P.
* *24.1 Power of Attorney (included on signature page).
</TABLE>
* Previously filed with Form S-3 on April 30, 1997
** Previously filed with Amendment No. 1 to Form S-3 on February 27, 1998.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Reston, Commonwealth of Virginia, on this 5th day of
June, 1998.
PHP HEALTHCARE CORPORATION
(Registrant)
By: /s/ ANTHONY M. PICINI
-----------------------------------
Name: Anthony M. Picini
Title: Executive Vice President
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed below by the following persons in the capacities
indicated on this 5th day of June, 1998.
<TABLE>
<C> <S> <C>
*
- ------------------------------------------- Chairman of the Board
Charles P. Reilly
* President and Director
- ------------------------------------------- (principal executive officer)
Jack M. Mazur
* Senior Executive Vice President
- ------------------------------------------- and Director
Michael D. Starr
* Executive Vice President and
- ------------------------------------------- Chief Financial Officer
Anthony M. Picini (principal accounting officer)
* President, D.C. Chartered
- ------------------------------------------- Health Plan, and Director
Robert L. Bowles, Jr.
* Executive Vice President and
- ------------------------------------------- Director
William J. Lubin
* Executive Vice President,
- ------------------------------------------- Corporate Medical Director,
Frank L. Provato, M.D. and Director
*
- ------------------------------------------- Director
Joseph G. Mathews
*
- ------------------------------------------- Director
Donald J. Ruffing
*
- ------------------------------------------- Director
John J. McDonnell
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S> <C>
*
- ------------------------------------------- Director
Jerry W. Carlton
</TABLE>
*By: /s/ ANTHONY M. PICINI Attorney-in-Fact
-------------------------
Anthony M. Picini
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- --------- ----------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
*4.2 Stock Purchase Agreement by and between PHP Healthcare Corporation and David E. Berman and Mary
Ellen Michael-Fleming dated as of November 1, 1992.
*4.3 Warrant to Purchase Shares of Common Stock of PHP Healthcare Corporation dated as of November
1, 1992.
4.4 Specimen form of the Company's Common Stock certificate (incorporated by reference from Exhibit
7.1 to the Company's Form 8-A, Amendment 1, filed with the Securities and Exchange Commission
on August 11, 1992).
4.5 Specimen form of the Company's Series B Convertible Preferred Stock
4.6 Certificate of Designations of Series B Convertible Preferred Stock (incorporated by reference
from Exhibit 3.1 to the Company's Form 8-K, field with the Securities and Exchange Commission
on January 6, 1998).
4.7 Form of Preferred Stock Investment Agreement (incorporated by reference from Exhibit 4.1 to the
Company's Form 8-K, filed with the Securities and Exchange Commission on January 6, 1998).
4.8 Form of Series B Preferred Stock Purchase Warrant
4.9 Warrant Agreement dated as of October 31, 1997 between PHP Healthcare Corporation and First
Trust of New York, N.A., Warrant Agent (incorporated by reference from Exhibit 4.1 to the
Company's Form 8-K, filed with the Securities and Exchange Commission on November 17, 1997).
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson.
10.1 Amended and Restated Credit Agreement, dated May 26, 1998, among PHP Healthcare Corporation as
Borrower and The Initial Lenders and Initial Issuing Bank Named Herein as Initial Lenders and
Initial Issuing Bank and NationsBank, N.A. as Collateral Agent and Administrative Agent
10.2 Amended and Restated Security Agreement, dated as of May 26, 1998, from PHP Healthcare
Corporation. The Other Grantors Referred to Herein and The Additional Grantors Referred to
Herein as Grantors to NationsBank, N.A. as Administrative Agent
10.3 Amended and Restated Subsidiary Guaranty, dated as of May 26, 1998, from Each of the
Subsidiaries of PHP Healthcare Corporation Listed on the Signature Pages Hereof and The
Additional Subsidiary Guarantors Referred to Herein as Guarantors in favor of The Secured
Parties Referred to in The Amended and Restated Credit Agreement Referred to Herein
15.1 Letter of Coopers & Lybrand L.L.P. re: unaudited interim financial information.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.1).
23.3 Consent of Ernst and Young L.L.P.
**24.1 Power of Attorney (included on signature page).
</TABLE>
- ------------------------
* Previously filed with Form S-3 on April 30, 1997
** Previously filed with Amendment No. 1 to Form S-3 on February 27, 1998.
<PAGE>
This Certifies that _______________________is the owner of
____________________ Shares of the Capital Stock of Series B Preferred Stock,
par value S.01 per share, of PHP Healthcare Corporation transferable only on
the books of the Corporation by the holder hereof in person or by Persons
upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this __ day of __________________ AD 19__/
/s/ Jack M. Mazur
- --------------------
President
/s/ Ben Rosenbaum
- --------------------
Secretary
<PAGE>
For the Value Received, _____ hereby sell, assign and transfer unto
_______________________________________________________________________________
________________ shares of the Capital Stock represented by the within
Certificate and do hereby irrevocably constitute and appoint
___________________________________________ Attorney to transfer the said
Stock on the books of the within named Corporation with full power of
substitution in the promises.
Dated _____________ 19__
In presence of_________________________________
PHP HEALTHCARE CORPORATION
CERTIFICATE
for
SHARES
OF
CAPITAL STOCK
Series B Convertible
Preferred Stock
Issued to
----------------------------
DATED
----------------------------
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR APPLICABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN
A PREFERRED STOCK INVESTMENT AGREEMENT BETWEEN THE CORPORATION AND THE HOLDER
HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE CORPORATION.
THE CORPORATION HAS MORE THAN ONE CLASS OF STOCK AUTHORIZED TO BE ISSUED. THE
CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER UPON WRITTEN
REQUEST A COPY OF THE FULL TEXT OF THE PREFERENCES. VOTING POWERS,
QUALIFICATIONS AND SPECIAL AND RELATIVE RIGHTS OF EACH CLASS OF STOCK (AND
ANY SERIES THEREOF) AUTHORIZED TO BE ISSUED BY THE CORPORATION AS SET FORTH IN
THE CERTIFICATE OF INCORPORATION OF THE CORPORATION AND AMENDMENTS THERETO
FILED WITH THE SECRETARY OF STATE OF THE STATE OF DELAWARE.
<PAGE>
Exhibit 4.8
STOCK PURCHASE WARRANT
WARRANT TO PURCHASE _____ SHARES
of
SERIES B CONVERTIBLE PREFERRED STOCK
No. PW-__ EXPIRES AT 5:00 P.M., NEW YORK TIME, ON DECEMBER ___, 1999
PHP HEALTHCARE CORPORATION
This certifies that _______________________, the registered holder
hereof or assigns (the "Warrantholder") is entitled to purchase from PHP
Healthcare Corporation, a Delaware corporation (the "Company"), at any time
before the expiration time and date shown above (the "Expiration Time") at the
purchase price per share of $1,000 (the "Warrant Price"), the number of shares
shown above of the Series B Convertible Preferred Stock ("Series B Preferred
Stock") of the Company. The number and class of shares purchasable upon
exercise of this Warrant and the Warrant Price per share shall be subject to
adjustment from time to time as set forth below.
Section 1. Transferability and Form of Warrant.
1.1 Registration. This Warrant shall be numbered and shall be
registered on the books of the Company.
1.2 Transfer. This Warrant shall be transferable on the books of the
Company only upon delivery thereof duly endorsed by the Warrantholder or duly
authorized attorney or representative, accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Warrant to the person
entitled thereto. This Warrant may be divided or combined, upon request to the
Company by the Warrantholder, into a certificate or certificates representing
the right to purchase the same aggregate number of shares. Unless the context
indicates otherwise, the term "Warrantholder" shall include any transferee or
transferees of a Warrant and the term "Warrant" shall include any and all
warrants issued upon division, exchange, substitution or transfer of this
Warrant.
1.3 Form of Warrant. The Warrant shall be executed on behalf of the
Company by its President, Vice President or other authorized officer, and shall
be dated as of the date of signature thereof by the Company either upon initial
issuance or upon division, exchange, substitution or transfer. A Warrant
bearing the signature of an individual who was at any time the proper officer of
the Company shall bind the Company, notwithstanding that such individual shall
have ceased to hold such office prior to the delivery of such Warrant. The form
of election to exercise this Warrant and the form of assignment of this Warrant
shall be substantially as attached hereto.
Section 2. Payment of Taxes.
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of shares to the Warrantholder; provided, however, that
the Company shall not be required to pay any tax or taxes which may be payable
in respect of any secondary transfer of the Warrant or the shares.
Section 3. Mutilated or Missing Warrants.
In case this Warrant shall be mutilated, lost, stolen or destroyed,
the Company shall, at the request of the Warrantholder, issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and in substitution for the lost, stolen or destroyed Warrant, a new
Warrant of like tenor, but only upon receipt of evidence satisfactory to the
Company of such loss, theft or destruction of such Warrant. The applicant shall
also comply with such other reasonable regulations and pay such other reasonable
administrative charges as the Company may prescribe.
Section 4. Reservation of Shares.
There has been reserved, and the Company shall at all times keep
reserved so long as this Warrant remains outstanding, out of its authorized
shares of capital stock, such number and class of shares as shall be subject to
purchase under this Warrant. Such reserved shares shall be used solely for
issuances upon exercise of this Warrant. Shares of any class issued upon
exercise of this Warrant shall have all the rights and privileges of other
shares of the same class, whenever issued, subject to the adjustment provisions
set forth below.
<PAGE>
Section 5. Exercise of Warrant.
5.1 Exercise by Cash Payment. The Holder of this Warrant shall have
the right at any time and from time to time during the period that this Warrant
is exercisable to exercise this Warrant in full or in part by surrender of this
Warrant to the Company accompanied by payment to the Company in cash or by
certified or cashier's check or by wire transfer of funds of the aggregate
Warrant Price for the number of shares in respect of which this Warrant is then
exercised.
5.2 Cashless Exercise. With the prior consent of the Company this
Warrant may be exercised in full or in part by surrender of this Warrant to the
Company accompanied by written notice substantially in the form attached hereto
of the holder's election to effect cashless exercise ("Cashless Exercise").
Upon Cashless Exercise, the holder shall be entitled to receive, in respect of
each share for which this Warrant is then exercised, that number of shares of
Series B Preferred Stock (or such other class of shares as may then be issuable
upon exercise hereof) which, valued at Current Value, have a value equal to the
Current Value of each share as to which this Warrant is then being exercised
less the Warrant Price payable for such share. Current Value of a share as to
which this Warrant is being exercised shall be the total Current Market Price of
the number of shares of Common Stock of the Company issuable upon conversion of
such share at the Conversion Price in effect on the date of such Cashless
Exercise. Current Market Price of the Common Stock shall be as defined in
Section 7.
5.3 Delivery of Certificates. Upon exercise of this Warrant the
Company shall issue and cause to be delivered with all reasonable dispatch to or
upon the written order of the Warrantholder and in such name or names as the
Warrantholder may designate, a certificate or certificates for the number of
full shares issuable upon such exercise together with cash, as provided in
Section 7 hereof, in respect of any fractional shares. The Company shall effect
such issuance immediately and shall transmit the certificates by messenger or
overnight delivery service to reach the address designated by the Warrantholder
within two business days after receipt of the Warrant Price or, in the case of a
cashless exercise, after receipt of the Warrant. Such certificate or
certificates 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
shares as of the date of surrender of the Warrant and payment of the Warrant
Price, as aforesaid, notwithstanding that the certificates representing such
shares shall not actually have been delivered or that the stock transfer books
of the Company shall then be closed. In the event of partial exercise a new
Warrant evidencing the remaining portion of this Warrant will be issued by the
Company.
5.4 Simultaneous Conversion. The Warrantholder may elect to convert
the convertible securities issuable upon exercise of this Warrant simultaneously
with the exercise of this Warrant and may give written notice of such election
substantially in the form attached hereto. Upon such election the Company need
not issue certificates representing the convertible securities issuable upon
exercise of this Warrant, but shall issue and deliver as provided in the
foregoing Section certificates representing the securities to which the holder
is entitled upon such conversion.
Section 6. Adjustment of Warrant Price and Number of Shares.
6.1 Adjustments. The number and kind of securities purchasable upon
the exercise of the Warrants and the Warrant Price shall be subject to
adjustment from time to time upon the happening of certain events, as follows:
(a) If the shares purchasable upon exercise of the Warrants are
subdivided, combined or reclassified, or if other shares of the kind so
purchasable are issued in respect thereof as a dividend thereon (excluding
dividends required by the charter provisions governing such shares), the
number and class of shares purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted so that the Warrantholder shall
be entitled to receive the kind and number of shares or other securities of
the Company which it would have owned or would have been entitled to
receive after the happening of any of the events described above, had the
Warrants been exercised immediately prior to the happening of such event or
any record date with respect thereto. Any adjustment made pursuant to this
paragraph (a) shall become effective immediately after the effective date
of such event retroactive to the record date, if any, for such event.
(b) If the shares purchasable upon exercise of the Warrants become
entitled to receive a distribution of evidences of indebtedness or assets
(excluding dividends required by the charter provisions governing such
shares) or rights, options, warrants or convertible securities containing
the right to subscribe for or purchase securities or assets of the Company,
then, in each case, the number of shares thereafter purchasable upon the
exercise of the Warrants shall be determined by multiplying the number of
2
<PAGE>
shares theretofore purchasable upon exercise of the Warrants by a fraction,
of which the numerator shall be the then Current Value on the date of such
distribution, and of which the denominator shall be such Current Value on
such date minus the then fair value of the portion of the assets or
evidence of indebtedness so distributed or of such subscription rights,
options or warrants applicable to one share. 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 shareholders entitled to receive such distribution. Current Value shall
have the meaning set forth in Section 5.2.
(c) No adjustment in the number of 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 shares then purchasable upon the
exercise of a Warrant; provided, however, that any adjustments which by
reason of this paragraph (c) are not required to be made immediately shall
be carried forward and taken into account in any subsequent adjustment.
(d) Whenever the Warrant Price or the number or class of shares
purchasable upon the exercise of a Warrant is adjusted as herein provided,
a corresponding adjustment in the number of shares so purchasable or the
Warrant Price, as the case may be, shall be made so that the aggregate
Warrant Price payable upon full exercise of this Warrant shall remain the
same. If such adjustment results in more than one class of security being
purchasable upon exercise of this Warrant, the adjusted Warrant Price shall
be allocated to such securities on the basis of their respective fair
market values.
(e) Whenever the number or class of shares purchasable upon the
exercise of a Warrant or the Warrant Price is adjusted as herein provided,
the Company shall cause to be promptly mailed to the Warrantholder by first
class mail, postage prepaid, notice of such adjustment or adjustments
setting forth the number and class of shares purchasable upon the exercise
of a Warrant and the Warrant Price after such adjustment, together with a
brief statement of the facts requiring such adjustment and the computation
by which such adjustment was made. If any holder disputes the computation
of such adjustment, the Company shall cause independent public accountants
selected by the Company to verify and, if necessary, correct such
computation.
(f) The term "Common Stock" shall mean (i) the class of stock
designated as the Common Stock of the Company at the issue date of this
Warrant or (ii) any other class of stock resulting from successive changes
or reclassifications of such Common Stock, and the term "Series B Preferred
Stock" shall mean (x) the class or series of stock which is initially
purchasable upon exercise hereof, or (y) any other class or series of stock
resulting from successive reclassifications or changes of such Series B
Preferred Stock. In the event that at any time, as a result of an
adjustment made pursuant to this Section, the Warrantholder shall become
entitled to purchase any securities of the Company other than shares of
Series B Preferred Stock, thereafter the number of such other securities so
purchasable upon exercise of the Warrant and the Warrant Price of such
securities shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect
to the shares contained in this Section.
6.2 No Adjustment for Dividends. Except as provided in
Subsection 6.1, no adjustment in respect of any dividends shall be made during
the term of the Warrant or upon the exercise of the Warrant.
6.3 Preservation of Purchase Rights upon Reclassification,
Consolidation, etc. In case of any reclassification of the securities of the
Company or any consolidation of the Company with or merger of the Company into
another corporation or in case of any sale or conveyance to another corporation
of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall provide by agreement that the
Warrantholder shall have the right thereafter upon payment of the Warrant Price
in effect immediately prior to such action to purchase upon exercise of the
Warrant the kind and amount of shares and other securities and property which he
would have owned or have been entitled to receive after the happening of such
reclassification, consolidation, merger, sale or conveyance had the Warrant been
exercised immediately prior to such action. Such agreement shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section. The provisions of this
subsection shall similarly apply to successive reclassifications,
consolidations, mergers, sales or conveyances.
6.4 Statement on Warrant Certificates. Irrespective of any
adjustments in the Warrant Price or the number of securities purchasable upon
the exercise of the Warrant, the Warrant certificate or certificates theretofore
or thereafter issued may continue to express the same price and number of
securities as are stated in the similar Warrant certificates initially issued.
3
<PAGE>
Section 7. Fractional Interests; Current Market Price; Closing Price.
The Company shall not be required to issue fractional shares on the
exercise of the Warrant. If any fraction of a share would, except for the
provisions of this Section, be issuable on the exercise of the Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal to the
then Current Value (as defined in Section 5.2) multiplied by such fraction. The
term "Current Market Price" of the Common Stock on any day shall mean,
respectively, (i) the per share closing price on the principal stock exchange on
which the Common Stock is listed, or (ii) if the Common Stock is not listed on a
stock exchange, the per share closing price of the Common Stock on the trading
day immediately preceding the date in question, as reported on the principal
automated securities price quotation system on which sale prices of the Common
Stock are reported, or (iii) if the Common Stock is not listed on a stock
exchange and sale prices are not reported on an automated quotation system, the
last bid price for the Common Stock as reported by National Quotation Bureau
Incorporated. If none of the foregoing provisions are applicable, the "Current
Market Price" shall be the fair market value of the Common Stock as determined
in good faith by the board of directors of the Company. The term "closing
price" shall mean the last sale price on the day in question as defined above.
Section 8. No Rights as Shareholder; Notices to Warrantholder.
Nothing contained herein shall be construed as conferring upon the
Warrantholder any rights whatsoever as a shareholder of the Company, including
the right to vote, to receive dividends, to consent or to receive notices as a
shareholder in respect of any meeting of shareholders for the election of
directors of the Company or any other matter. If, however, at any time prior to
the expiration of the Warrant and prior to its exercise, any of the following
events shall occur:
(a) any action which would require an adjustment pursuant to Sections
6.1 or 6.3; or
(b) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger or sale of its property,
assets and business, as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to the Warrantholder at least 20 days prior to the date fixed as a
record date or the date of closing the transfer books or other applicable date
with respect thereto. Such notice shall specify such record date or the date of
closing the transfer books, as the case may be.
Any notice to the Warrantholder shall be given at the address of the
Warrantholder appearing on the books of the Company, and if the Warrantholder
has specified a telecopier address, by facsimile transmission to such address.
Section 9. Registration and Indemnification.
The holder of this Warrant and the holder of shares of Series B
Preferred Stock issued upon exercise of this Warrant shall have the same rights
and obligations with respect to registration under the Securities Act of 1933,
and with respect to indemnification in connection with any such registration, as
if such holder were one of the Investors under the Preferred Stock Investment
Agreements entered into between the Company and the original purchasers of the
Series B Preferred Stock of the Company, excluding, however, the provisions of
the first sentence of Section 1.4(b)(iv) of said Agreements. Such rights and
obligations shall continue until not more than one year after the expiration or
earlier exercise of this Warrant.
Section 10. Expiration of Warrant.
10.1 If not theretofore exercised, this Warrant shall terminate at
5:00 p.m. Pacific time on the date shown in the caption hereof.
Section 11. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrantholder shall bind and inure to the benefit
of their respective successors and assigns hereunder.
Section 12. Merger or Consolidation of the Company.
The Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property to another
corporation, unless the provisions of Section 6.3 are complied with.
4
<PAGE>
Section 13. Applicable Law.
This Agreement shall be deemed to be a contract made under the laws of
the State of Delaware and for all purposes shall be construed in accordance with
the laws of said State.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by a duly authorized officer of the Company.
PHP Healthcare Corporation
By:_______________________________
5
<PAGE>
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant in respect of ______________ of the
shares provided for therein, and requests that certificates be issued in the
name of:
_________________________________________________________________
(Please Print Name, Address and Taxpayer Identification Number)
_________________________________________________________________
and, if said number of shares shall not be all the shares purchasable hereunder,
that a new Warrant certificate for the balance of the shares purchasable under
the within Warrant be registered in the name of the unde
rsigned Warrantholder or his Assignee as below indicated and delivered to the
address stated below.
The undersigned:
/ / elects to pay the full Warrant Price in cash or by certified or cashier's
check or wire funds transfer
/ / elects "cashless exercise" pursuant to Section 5.2 of the Warrant
"Current Value" for purposes of Cashless Exercise is: $__________
Number of shares issuable on Cashless Exercise is: ___________ shares
/ / elects simultaneous conversion pursuant to Section 5.4 of the Warrant
Dated: ________________ _____________________________
Signature of Warrantholder
The above signature must correspond with the name appearing upon the face of
this Warrant in every particular, without alteration or enlargement or any
change whatever.
Name of Assignee, if any: ____________________________
(Please Print)
______________________________________________________
(Please print Name, Address and Taxpayer
Identification Number)
_______________________________________________________
Signature Guaranteed: Signature guarantee is required if certificates are to
be registered in the name of any person other than the
name written upon the face of the Warrant. Signature
must be guaranteed by a commercial bank or trust
company or a member firm of the New York Stock
Exchange.
6
<PAGE>
ASSIGNMENT
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
_________________________________________________________________
(Name and Address of Assignee Must Be Printed or Typewritten)
_________________________________________________________________
_________________________________________________________________
(Taxpayer Identification Number of Assignee)
the within Warrant, hereby irrevocably constituting and appointing
____________________ Attorney to transfer said Warrant on the books of the
Company, with full power of substitution in the premises.
Dated: ________________, 19__ ______________________________
Signature of Registered Holder
Signature Guaranteed: The above signature must correspond with the name
appearing upon the face of this Warrant in every
particular, without alteration or enlargement or any
change whatever, and must be guaranteed by a commercial
bank or trust company or a member firm of the New York
Stock Exchange.
7
<PAGE>
EXHIBIT 5.1
JUNE 4, 1998
202-639-7032
PHP Healthcare Corporation
11440 Commerce Park Drive, Suite 300
Reston, Virginia 20091
Dear Gentleman:
We are acting as counsel to PHP Healthcare Corporation, a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933 (the "Act"), pursuant to a Registration Statement on Form
S-3 (the "Registration Statement"), of the sale of 8,255,639 shares of common
stock, par value $.01 per share, of the Company ("Common Stock"), including (i)
45,000 shares of Common Stock (the "Warrant Shares") issuable upon the exercise
of an outstanding Warrant, dated as of November 1, 1992, issued by the Company
(the "Warrant"), (ii) 500,150 shares of Common Stock (the "NationsBank Shares")
issuable to NationsBank, N.A. ("NationsBank") upon exercise of a warrant granted
to NationsBank (the "NationsBank Warrant"), (iii) 500,000 shares (the "Kluge
Shares") held by Chase Manhattan Bank, John W. Kluge and Stuart Subotnick
Trustees U/A DTD 5/30/84 As Amended made by and for John W. Kluge and (iv)
7,210,489 shares of Common Stock (the "Conversion Shares") issuable upon the
conversion of the Company's Series B Convertible Preferred Stock, par value $.01
(the "Series B Preferred Stock"). With your permission, all assumptions and
statements of reliance herein have been made without any independent
investigation or verification on our part except to the extent otherwise
expressely stated, and we express no opinion with respect to the subject matter
or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have (i) investigated such questions of
law, (ii) examined originals or certified, conformed or reproduced copies of
such agreements, instruments, documents and records of the Company and its
subsidiaries, such certificates of public officials and such other and (iii)
received such information from officers and representatives of the Company and
its subsidiaries and others as we have deemed necessary or appropriate for the
purposes of this opinion.
In all such examinations, we have assumed the legal capacity of all natural
persons executing documents, documents (other than the capacity of officers of
the Company executing documents in such capacity), the genuineness of all
signatures, the authenticity of original and certified documents and the
conformity to original or certified documents of all copies submitted to us as
conformed or reproduction copies. As to various questions of fact relevant to
the opinions expressed herein, we have relied upon, and assume the accuracy of,
representations and warranties contained in documents, certificates and oral or
written statements and other information of or from officers and representatives
of the Company, its subsidiaries and others and assume compliance on the part of
all parties to the documents with their covenants and agreements contained
therein.
Based upon the foregoing, and subject to the limitations, qualifications and
assumptions set forth herein, we are of the opinion that:
1. The Warrant Shares have been duly authorized, and, when issued upon
exercise of the Warrant in accordance with the terms hereof, will be validly
issued, fully paid and non-assessable.
2. The NationsBank Shares have been duly authorized, and, when issued
upon exercise of the NationsBank Warrant in accordance with the terms
thereof, will be validly issued, fully paid and non-assessable.
3. The Kluge Shares have been duly authorized and validly issued and
are fully paid and non-assessable.
<PAGE>
4. The Conversion Shares have been duly authorized, and, when issued
upon conversion of the Series B Preferred Stock in accordance with the terms
thereof, will be validly issued, fully paid and non-assessable.
The opinions expressed herein are limited to the General Corporation Law of
the State of Delaware. We assume no obligation to supplement this letter if any
applicable laws change after the date hereof or if we become aware of any facts
that might change the opinions expressed herein after the date hereof.
The opinions expressed herein are solely for your benefit and may not be
relied upon in any manner or for any purpose by any other person and may not be
quoted in whole or in part without our prior written consent.
We hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the references to this firm under the caption
"Legal Matters" in the Prospectus forming a part of the Registration Statement.
In giving this consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER, &
JACOBSON
By: /s/ ANDREW P. VARNEY
Andrew P. Varney
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 26, 1998
(this "Agreement") among PHP Healthcare Corporation, a Delaware corporation (the
"Borrower"), the banks, financial institutions and other institutional lenders
listed on the signature pages hereof as the Initial Lenders (the "Initial
Lenders"), NationsBank, N.A. ("NationsBank"), as initial issuing bank (in such
capacity, the "Initial Issuing Bank"), NationsBank as administrative agent and
collateral agent (in such capacities and together with any successor appointed
pursuant to Article VII, the "Administrative Agent") for the Lender Parties (as
hereinafter defined), and NationsBanc Montgomery Securities LLC ("NMS"), as sole
arranger and syndication agent (the "Arranger and Syndication Agent").
PRELIMINARY STATEMENTS:
(1) The Borrower entered into a Credit Agreement dated as of
October 31, 1997, as heretofore amended (as so amended, the "Existing Credit
Agreement") with the banks, financial institutions and other institutional
lenders party thereto (the "Existing Lenders"), and NationsBank as
administrative agent for the Existing Lenders. The Borrower intends to refinance
(the "Refinancing") all of the outstanding Debt (as hereinafter defined) under
the Existing Credit Agreement.
(2) The Borrower has requested an increase in the aggregate
amount of the credit facilities under the Existing Credit Agreement and certain
other modifications thereto.
(3) The Lender Parties have indicated their willingness to
agree to amend and restate the Existing Credit Agreement and to lend up to
$80,000,000 to the Borrower on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, 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):
"Administrative Agent" has the meaning specified in the
recital of parties to this Agreement.
"Administrative Agent's Account" means the account of the
Administrative Agent maintained at its office at NationsBank, N.A., 101
North Tryon Street,15th Floor, Charlotte, North Carolina 28255, Account
No. 136621-22506, Attention: Corporate Credit Services.
"Advance" means a Tranche A Revolving Credit Advance, Letter
of Credit Advance, or a Tranche B Revolving Credit Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
<PAGE>
For purposes of this definition, the term "control" (including the
terms "controlling," "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 5% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or
otherwise.
"Alternate Base Rate" means a fluctuating interest rate per
annum in effect from time to time, which rate per annum shall at all
times be equal to the higher of:
(a) the rate of interest announced publicly by
NationsBank in Charlotte, North Carolina, from time to time,
as its prime rate; and
(b) 1/2 of 1% per annum above the Federal Funds Rate.
"Alternate Base Rate Advance" means an Advance that bears
interest as provided in Section 2.07(a)(i).
"Applicable Lending Office" means, with respect to each Lender
Party, such Lender Party's Domestic Lending Office in the case of a
Alternate Base Rate Advance and such Lender Party's Eurodollar Lending
Office in the case of a Eurodollar Rate Advance.
"Applicable Margin" means (x) for the period from the Closing
Date through November 30, 1998, 1-1/2% per annum for Alternate Base
Rate Advances and 2-1/2% per annum for Eurodollar Rate Advances and (y)
thereafter a percentage per annum determined by reference to the
Leverage Ratio as set forth below:
<TABLE>
<CAPTION>
Eurodollar Alternate Base Rate
Rate Advances Advances
<S> <C> <C>
Level I
less than 2.00:1 1.25% 0.25%
Level II
2.00:1 or greater,
but less than 2.50:1 1.50% 0.50%
Level III
2.50:1 or greater,
but less than 3.00:1 1.75% 0.75%
Level IV
3.00:1 or greater 2.00% 1.00%
</TABLE>
2
<PAGE>
The Applicable Margin for each Alternative Base Rate Advance shall be determined
by reference to the Leverage Ratio in effect from time to time and the
Applicable Margin for each Eurodollar Rate Advance shall be determined by
reference to the Leverage Ratio in effect on the first day of each Interest
Period for such Advance; provided, however, that no change in the Applicable
Margin shall be effective until three Business Days after the date on which the
Administrative Agent receives financial statements pursuant to Section 5.03(c)
or (d) and a certificate of the chief financial officer of the Borrower
demonstrating such ratio.
"Applicable Percentage" means (x) for the period from the
Closing Date through November 30, 1998, 0.50% and (y) thereafter, a
percentage per annum determined by the Leverage Ratio as set forth
below:
<TABLE>
<CAPTION>
Percentage
Level I
<S> <C>
Less than 2.50:1 0.375%
Level II
2.50:1 or greater 0.50%
</TABLE>
The Applicable Percentage shall be determined by reference to the
Leverage Ratio in effect from time to time; provided, however, that no
change in the Applicable Percentage shall be effective until three
Business Days after the date on which the Administrative Agent receives
financial statements pursuant to Section 5.03(c) or (d) and a
certificate of the chief financial officer of the Borrower
demonstrating such ratio.
"Appropriate Lender" means, at any time, with respect to (a)
either the Tranche A Revolving Credit Facility or the Tranche B
Revolving Credit Facility, a Lender that has a Commitment with respect
to such Facility at such time, and (b) the Letter of Credit Facility,
(i) the Issuing Bank and (ii) if the other Tranche A Revolving Credit
Lenders have made Letter of Credit Advances pursuant to Section 2.03
(b) that are outstanding at such times, each such Tranche A Revolving
Credit Lender.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender Party and an Eligible Assignee, and accepted
by the Administrative Agent, in accordance with Section 8.07 and in
substantially the form of Exhibit C hereto.
"Available Amount" of any Letter of Credit means, at any time,
the maximum amount available to be drawn under such Letter of Credit at
such time (assuming compliance at such time with all conditions to
drawing).
"Borrower" has the meaning specified in the recital of parties
to this Agreement.
"Borrower's Account" means the account of the Borrower
maintained by the Borrower with NationsBank, N.A. at its office at
100 North Tryon Street, Charlotte, North Carolina 28255, Account
No. 3750527254.
"Borrowing" means a Tranche A Revolving Credit
Borrowing or a Tranche B Revolving Credit
3
<PAGE>
Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in Charlotte, North Carolina
and, if the applicable Business Day relates to any Eurodollar Rate
Advances, on which dealings are carried on in the London interbank
market.
"Capital Expenditures" means, for any Person for any period,
the sum of (a) all cash expenditures made, directly or indirectly, by
such Person or any of its Subsidiaries during such period for
equipment, fixed assets, real property or improvements, or for
replacements or substitutions therefor or additions thereto, that have
been or should be, in accordance with GAAP, reflected as additions to
property, plant or equipment on a Consolidated balance sheet of such
Person or have a useful life of more than one year plus (b) the
aggregate principal amount of all Debt (including Obligations under
Capitalized Leases) assumed or incurred in connection with any such
expenditures.
"Capitalized Leases" means all leases that have been or should
be, in accordance with GAAP, recorded as capitalized leases.
"Cash Collateral Account" has the meaning specified in the
Security Agreement.
"Cash Equivalents" means any of the following, to the extent
owned by the Borrower or any of its Subsidiaries free and clear of all
Liens other than Liens created under the Collateral Documents and
having a maturity of not greater than 180 days from the date of
issuance thereof: (a) readily marketable direct obligations of the
Government of the United States or any agency or instrumentality
thereof or obligations unconditionally guaranteed by the full faith and
credit of the Government of the United States, (b) insured certificates
of deposit of or time deposits with any commercial bank that is a
Lender Party or a member of the Federal Reserve System, issues (or the
parent of which issues) commercial paper rated as described in clause
(c), is organized under the laws of the United States or any State
thereof and has total assets in excess of $500,000,000, (c) commercial
paper in an aggregate amount of no more than $5,000,000 per issuer
outstanding at any time, issued by any corporation organized under the
laws of any State of the United States and rated at least "Prime-1" (or
the then equivalent grade) by Moody's Investors Service, Inc. or "A-1"
(or the then equivalent grade) by Standard & Poor's Ratings Group, (d)
investments in money market or mutual funds which invest solely in
assets of the type described in clauses (a), (b) or (c) above or (e)
unleveraged repurchase obligations with respect to any security
described in clause (a) above and entered into with a depositary
institution or trust company (acting as principal) whose long-term
credit rating is at least "A1" (or the then equivalent grade) by
Moody's Investors Service or "A+" (or the then equivalent grade) by
Standard & Poor's Ratings Group or whose short-term credit rating is at
least "Prime-1" (or the then equivalent grade) by Moody's Investors
Service, Inc. or "A-1" (the then equivalent grade) by Standard & Poor's
Ratings Group.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency.
"Closing Date" means May 26, 1998.
"Collateral" means all "Collateral" referred to in the
Collateral Documents and all other property that is or is intended to
be subject to any Lien in favor of the Administrative Agent for the
benefit of the Secured Parties.
4
<PAGE>
"Collateral Documents" means the Security Agreement, the
Mortgages and any other agreement that creates or purports to create a
Lien in favor of the Administrative Agent for the benefit of the
Secured Parties.
"Collateral Grantor" means each of the Borrower and each
Subsidiary Guarantor.
"Commitment" means a Tranche A Revolving Credit Commitment, a
Tranche B Revolving Credit Commitment or a Letter of Credit Commitment.
"Confidential Information" means the Information and any
further information that the Borrower furnishes to the Administrative
Agent or any Lender Party in a writing designated as confidential, but
does not include any such information that is or becomes generally
available to the public or that is or becomes available to the
Administrative Agent or such Lender Party from a source other than the
Borrower.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Constitutive Documents" means, with respect to any Person,
the certificate of incorporation or registration (including, if
applicable, certificate of change of name), articles of incorporation
or association, memorandum of association, charter, bylaws, partnership
agreement, trust agreement, joint venture agreement, limited liability
company operating or members agreement, joint venture agreement or one
or more similar agreements, instruments or documents constituting the
organization or formation of such Person.
"Conversion", "Convert" and "Converted" each refer to a
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.09 or 2.10.
"Convertible Preferred Stock" means the shares of Class B
Convertible Preferred Stock, par value $.01 per share, of the Borrower
(including shares issuable upon the exercise of warrants to purchase
Series B Convertible Preferred Stock).
"Convertible Preferred Stock Documents" means the Certificate
of Designations of Series B Convertible Preferred Stock of PHP
Healthcare Corporation dated December 23, 1997, the Preferred Stock
Investment Agreements and any other agreement, document or instrument
which governs the terms of the Convertible Preferred Stock.
"Current Assets" of any Person means all assets of such Person
that would, in accordance with GAAP, be classified as current assets of
a company conducting a business the same as or similar to that of such
Person, after deducting adequate reserves in each case in which a
reserve is proper in accordance with GAAP.
"Current Liabilities" of any Person means (a) all Debt of such
Person except Funded Debt that by its terms is payable on demand or
matures within one year after the date of determination (excluding any
Debt renewable or extendible, at the option of such Person, to a date
more than one year from such date or arising under a revolving credit
or similar agreement that obligates the lender or lenders to extend
credit during a period of more than one year from such date) and (b)
all other items (including taxes accrued as estimated) that in
accordance with GAAP would be classified as current liabilities of such
Person.
5
<PAGE>
"Debt" of any Person means (a) all indebtedness of such Person
for borrowed money, (b) all Obligations of such Person for the deferred
purchase price of property or services (other than trade payables not
overdue by more than 60 days incurred in the ordinary course of such
Person's business), (c) all Obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments, (d) all
Obligations of such Person created or arising under any conditional
sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all Obligations
of such Person as lessee under Capitalized Leases, (f) all Obligations,
contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities, (g) all Obligations of such Person to
purchase, redeem, retire, defease or otherwise make any payment in
respect of any capital stock of or other ownership or profit interest
in such Person or any other Person or any warrants, rights or options
to acquire such capital stock, valued, in the case of Redeemable
Preferred Stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (h) all
Obligations of such Person in respect of Hedge Agreements, (i) all Debt
of others referred to in clauses (a) through (h) above or clause (j)
below guaranteed directly or indirectly in any manner by such Person,
or in effect guaranteed directly or indirectly by such Person through
an agreement (i) to pay or purchase such Debt or to advance or supply
funds for the payment or purchase of such Debt, (ii) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make
payment of such Debt or to assure the holder of such Debt against loss,
(iii) to supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services irrespective
of whether such property is received or such services are rendered) or
(iv) otherwise to assure a creditor against loss, and (j) all Debt
referred to in clauses (a) through (i) above of another Person secured
by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property
(including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable
for the payment of such Debt.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Defaulted Advance" means, with respect to any Lender Party at
any time, the portion of any Advance required to be made by such Lender
Party to the Borrower pursuant to Section 2.01 or 2.02 at or prior to
such time which has not been made by such Lender Party or by the
Administrative Agent for the account of such Lender Party pursuant to
Section 2.02(d) as of such time. In the event that a portion of a
Defaulted Advance shall be deemed made pursuant to Section 2.15(a), the
remaining portion of such Defaulted Advance shall be considered a
Defaulted Advance originally required to be made pursuant to Section
2.01 on the same date as the Defaulted Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Lender Party at
any time, any amount required to be paid by such Lender Party to the
Administrative Agent or any other Lender Party hereunder or under any
other Loan Document at or prior to such time which has not been so paid
as of such time, including, without limitation, any amount required to
be paid by such Lender Party to (a) the Issuing Bank pursuant to
Section 2.03(b) to purchase a portion of a Letter of Credit Advance
made by the Issuing Bank, (b) the Administrative Agent pursuant to
Section 2.02(d) to reimburse the Administrative Agent for the amount of
any Advance made by the Administrative Agent for the account of such
Lender Party, (c) any other Lender Party pursuant to Section 2.13 to
purchase any participation in Advances owing to such other Lender Party
and (d) the Administrative Agent or the Issuing Bank pursuant to
Section 7.05 to reimburse the Administrative Agent or the Issuing Bank
for such Lender Party's ratable share of any amount required to be paid
by the Lender Parties to the Administrative Agent or the Issuing Bank
as provided therein. In the event that a portion of a Defaulted Amount
shall be deemed paid pursuant to
6
<PAGE>
Section 2.15(b), the remaining portion of such Defaulted Amount shall
be considered a Defaulted Amount originally required to be paid
hereunder or under any other Loan Document on the same date as the
Defaulted Amount so deemed paid in part.
"Defaulting Lender" means, at any time, any Lender Party that,
at such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b)
shall take any action or be the subject of any action or proceeding of
a type described in Section 6.01(f).
"Disclosed Litigation" has the meaning specified in Section
3.01(e).
"Domestic Lending Office" means, with respect to any Lender
Party, the office of such Lender Party specified as its "Domestic
Lending Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender Party,
as the case may be, or such other office of such Lender Party as such
Lender Party may from time to time specify to the Borrower and the
Administrative Agent.
"EBITDA" means, for any period, the sum, determined on a
Consolidated basis, of (a) net income (or net loss) plus (b) interest
expense plus (c) income tax expense plus (d) depreciation expense plus
(e) amortization expense plus (f) accretion related to the Convertible
Preferred Stock, in each case of the Borrower and its Subsidiaries,
determined in accordance with GAAP for such period, and excluding from
net income (or net loss) any extraordinary items (determined in
accordance with GAAP) for such period.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (a) a Lender; (b) an Affiliate of a
Lender; (c) a commercial bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of
$500,000,000; (d) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof,
and having total assets in excess of $500,000,000; (e) a commercial
bank organized under the laws of any other country that is a member of
the OECD or has concluded special lending arrangements with the
International Monetary Fund associated with its General Arrangements to
Borrow, or a political subdivision of any such country, and having
total assets in excess of $500,000,000, so long as such bank is acting
through a branch or agency located in the United States; (f) the
central bank of any country that is a member of the OECD; (g) a finance
company, insurance company or other financial institution or fund
(whether a corporation, partnership, trust or other entity) that is
engaged in making, purchasing or otherwise investing in commercial
loans in the ordinary course of its business and having total assets in
excess of $500,000,000; and (h) any other Person approved by the
Administrative Agent such approval not to be unreasonably withheld or
delayed and; provided, however, that neither the Borrower nor any
Affiliate of the Borrower shall qualify as an Eligible Assignee under
this definition.
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement relating in any way to any Environmental
Law, any Environmental Permit or Hazardous Material or arising from
alleged injury or threat to health, safety or the environment,
including, without limitation, (a) by any governmental or regulatory
authority for enforcement, cleanup, removal, response, remedial or
other actions or damages and (b) by any governmental or regulatory
authority or third party for damages, contribution, indemnification,
cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule,
7
<PAGE>
regulation, code, order, writ, judgment, injunction, decree or
judicial or agency interpretation, policy or guidance relating to
pollution or protection of the environment, health, safety or natural
resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title
IV of ERISA is a member of the controlled group of any Loan Party, or
under common control with any Loan Party, within the meaning of Section
414 of the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect to such event
has been waived by the PBGC, or (ii) the requirements of subsection (1)
of Section 4043(b) of ERISA (without regard to subsection (2) of such
Section) are met with respect to a contributing sponsor, as defined in
Section 4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is
reasonably expected to occur with respect to such Plan within the
following 30 days; (b) the application for a minimum funding waiver
with respect to a Plan; (c) the provision by the administrator of any
Plan of a notice of intent to terminate such Plan, pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 4041(e) of ERISA); (d) the cessation
of operations at a facility of any Loan Party or any ERISA Affiliate in
the circumstances described in Section 4062(e) of ERISA; (e) the
withdrawal by any Loan Party or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions
for imposition of a lien under Section 302(f) of ERISA shall have been
met with respect to any Plan; (g) the adoption of an amendment to a
Plan requiring the provision of security to such Plan pursuant to
Section 307 of ERISA; or (h) the institution by the PBGC of proceedings
to terminate a Plan pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA
that constitutes grounds for the termination of, or the appointment of
a trustee to administer, such Plan.
"Eurocurrency Liabilities" has the meaning specified in
Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender
Party, the office of such Lender Party specified as its "Eurodollar
Lending Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender Party
(or, if no such office is specified, its Domestic Lending Office), or
such other office of such Lender Party as such Lender Party may from
time to time specify to the Borrower and the Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in U.S. dollars
at 11:00 A.M. (London time) two Business Days before the first day of
such Interest Period in an amount substantially equal to NationsBank's
Eurodollar Rate Advance comprising part of such Borrowing to be
outstanding during such Interest Period (or, if NationsBank shall not
have such a Eurodollar Rate
8
<PAGE>
Advance, $1,000,000) and for a period equal to such Interest Period
(provided that if for any reason such rate is not available, the term
"Eurodollar Rate" shall mean, for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) appearing on Reuters Screen LIBO Page as the London interbank
offered rate for deposits in Dollars at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates) by (b) a percentage equal to 100% minus the Eurodollar
Rate Reserve Percentage for such Interest Period.
"Eurodollar Rate Advance" means an Advance that bears interest
as provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" means, for any Interest
Period for all Eurodollar Rate Advances comprising part of the same
Borrowing, the reserve percentage applicable two Business Days before
the first day of such Interest Period under regulations issued from
time to time by the Board of Governors of the Federal Reserve System
(or any successor) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for a member bank of the Federal Reserve
System in New York City with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or with respect to
any other category of liabilities that includes deposits by reference
to which the interest rate on Eurodollar Rate Advances is determined)
having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Excess Cash Flow" means, for any period, an amount equal to
(i) Consolidated net income (or loss) of the Borrower and its
Subsidiaries for such period plus (ii) the aggregate amount of all
non-cash charges deducted in arriving at such Consolidated net income
(or loss) plus (iii) if there was a net increase in Consolidated
Current Liabilities of the Borrower and its Subsidiaries during such
period, the amount of such net increase plus (iv) if there was a net
decrease in Consolidated Current Assets (excluding cash and Cash
Equivalents) of the Borrower and its Subsidiaries during such period,
the amount of such net decrease less (v) the aggregate amount of all
non-cash credits included in arriving at such Consolidated net income
(or loss) less (vi) if there was a net decrease in Consolidated Current
Liabilities of the Borrower and its Subsidiaries during such period
since the date of the initial Borrowing, the amount of such net
decrease less (vii) if there was a net increase in Consolidated Current
Assets (excluding cash and Cash Equivalents) of the Borrower and its
Subsidiaries during such period, the amount of such net increase less
(viii) the aggregate amount of cash Capital Expenditures (including any
payments made under Capital Leases) made by the Borrower and its
Subsidiaries during such period less (ix) the aggregate principal
amount of all Advances paid by the Borrower during such period (which
are accompanied, in the case of any repayment of the Revolving Credit
Advances, with a similar permanent reduction of the Revolving Credit
Commitments) less (x) the aggregate amount of payments made by the
Borrower in respect of the repurchase of shares of capital stock of the
Borrower, provided that the aggregate amount of all payments deducted
from Excess Cash Flow pursuant to this clause (x) shall not exceed $65
million.
"Existing Credit Agreement" has the meaning specified in
Preliminary Statement 1 hereof.
"Existing Debt" has the meaning specified in Section 4.01(gg)
hereof.
"Extraordinary Receipt" means any cash received by or paid to
or for the account of any Person
9
<PAGE>
not in the ordinary course of business to the extent that such
receipts or payments are not taken into account in calculating Excess
Cash Flow for the related period, including, without limitation, any
payments made in respect of past due claims which are owing from the
District of Columbia in respect of the contract periods from 1991 to
1994 and from 1994 to 1996, pension plan reversions, proceeds of
insurance (other than (x) proceeds of business interruption insurance
to the extent such proceeds constitute compensation for lost earnings
and (y) proceeds from stop loss reinsurance), condemnation awards (and
payments in lieu thereof) and indemnity payments.
"Facility" means the Tranche A Revolving Credit Facility, the
Tranche B Revolving Credit Facility or the Letter of Credit Facility.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day for such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Fiscal Year" means a fiscal year of the Borrower and its
Consolidated Subsidiaries ending on April 30 in any calendar year.
"Founders" means Jack M. Mazur and his "affiliates" and
"associates" (within the meanings ascribed to such terms in Rule 12b-2
of the Securities and Exchange Commission under the Securities Exchange
Act of 1934).
"Funded Debt" of any Person means Debt in respect of the
Advances, in the case of the Borrower, and all other Debt of such
Person that by its terms matures more than one year after the date of
determination or matures within one year from such date but is
renewable or extendible, at the option of such Person, to a date more
than one year after such date or arises under a revolving credit or
similar agreement that obligates the lender or lenders to extend credit
during a period of more than one year after such date, including,
without limitation, all amounts of Funded Debt of such Person required
to be paid or prepaid within one year after the date of its creation.
"GAAP" has the meaning specified in Section 1.03.
"Hazardous Materials" means (a) petroleum or petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements.
"Indemnified Party" has the meaning specified in Section
8.04(b).
"Information" means the Information and Projections as defined
in the Senior Bank Facilities Commitment Letter dated as of May 5, 1998
between the Borrower, NationsBank and NMS.
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"Initial Extension of Credit" means the earlier to occur of
the initial Borrowing and the initial issuance of a Letter of Credit
hereunder.
"Initial Issuing Bank" has the meaning specified in the
recital of parties to this Agreement.
"Initial Lenders" has the meaning specified in the recital of
parties to this Agreement.
"Insufficiency" means, with respect to any Plan, the amount,
if any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of the Conversion of
any Alternate Base Rate Advance into such Eurodollar Rate Advance, and
ending on the last day of the period selected by the Borrower pursuant
to the provisions below and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period
and ending on the last day of the period selected by the Borrower
pursuant to the provisions below. The duration of each such Interest
Period shall be one, two or three months (or such other period as each
Lender and the Borrower may agree), as the Borrower may, upon notice
received by the Administrative Agent not later than 10:00 A.M.
(Charlotte, North Carolina time) on the third Business Day prior to the
first day of such Interest Period, select; provided, however, that:
(a) the Borrower may not select any Interest Period
with respect to any Eurodollar Rate Advance under a Facility
that ends after any principal repayment installment date for
such Facility unless, after giving effect to such selection,
the aggregate principal amount of Alternate Base Rate Advances
and of Eurodollar Rate Advances having Interest Periods that
end on or prior to such principal repayment installment date
for such Facility shall be at least equal to the aggregate
principal amount of Advances under such Facility due and
payable on or prior to such date;
(b) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing
shall be of the same duration;
(c) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day; provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day; and
(d) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Investment" in any Person means any loan or advance to such
Person, any purchase or other acquisition of any capital stock or other
ownership or profit interest, warrants, rights, options, obligations or
other securities of such Person, any capital contribution to such
Person or any other investment in such
11
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Person, including, without limitation, any arrangement pursuant to
which the investor incurs Debt of the types referred to in clause (i)
or (j) of the definition of "Debt" in respect of such Person.
"Issuing Bank" means the Initial Issuing Bank and each
Eligible Assignee to which the Letter of Credit Commitment has been
assigned pursuant to Section 8.07.
"L/C Cash Collateral Account" has the meaning specified in the
Security Agreement.
"L/C Related Documents" has the meaning specified in Section
2.04(c)(ii)(A).
"Lender Party" means the Administrative Agent, any Lender or
the Issuing Bank.
"Lenders" means the Initial Lenders and each Person that shall
become a Lender hereunder pursuant to Section 8.07.
"Letter of Credit" has the meaning specified in Section
2.01(c).
"Letter of Credit Advance" means an advance made by the
Issuing Bank or any Tranche A Revolving Credit Lender pursuant to
Section 2.03(b).
"Letter of Credit Commitment" means, with respect to the
Issuing Bank at any time, the amount set forth opposite the Issuing
Bank's name on Schedule I hereto under the caption "Letter of Credit
Commitment" or, if the Issuing Bank has entered into one or more
Assignments and Acceptances, set forth for the Issuing Bank on the
Register maintained by the Administrative Agent pursuant to Section
8.07(d) as such Issuing Bank's "Letter of Credit Commitment", as such
amount may be reduced at or prior to such time pursuant to Section
2.05.
"Letter of Credit Facility" means, at any time, an amount
equal to the amount of the Issuing Bank's Letter of Credit Commitment
at such time, as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Leverage Ratio" means, for any fiscal quarter of the
Borrower, a ratio of Funded Debt as at the end of such fiscal quarter
to Consolidated EBITDA for the most recently completed four fiscal
quarters of the Borrower and its Subsidiaries; provided, however, that
for the fiscal quarter ending on July 31, 1998, Consolidated EBITDA for
the fiscal quarter then ended shall be the actual Consolidated EBITDA
for the period since November 1, 1997 multiplied by a fraction the
numerator of which is four and the denominator of which is the number
of fiscal quarters that have elapsed since November 1, 1997.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"Loan Documents" means (a) for purposes of this Agreement and
the Notes and any amendment or modification hereof or thereof and for
all other purposes other than for purposes of the Subsidiary Guaranty
and the Collateral Documents, (i) this Agreement, (ii) the Notes, (iii)
the Subsidiary Guaranty, (iv) the Collateral Documents and (v) each
Letter of Credit Agreement, and (b) for purposes of the Subsidiary
Guaranty and the Collateral Documents, (i) this Agreement, (ii) the
Notes, (iii) the Subsidiary Guaranty, (iv) the Collateral Documents,
and (v) each Letter of Credit Agreement and in each case as amended or
otherwise modified from time to time.
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<PAGE>
"Loan Parties" means the Borrower and each Subsidiary
Guarantor.
"Lockbox Account" has the meaning specified in the Security
Agreement.
"Lockbox Bank" has the meaning specified in the Security
Agreement.
"Lockbox Letter" has the meaning specified in the Security
Agreement.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means, with respect to any Person or
group of Persons, any material adverse change in the business,
condition (financial or otherwise), operations, performance, properties
or prospects of such Person or group of Persons.
"Material Adverse Effect" means, with respect to any Person or
group of Persons, a material adverse effect on (a) the business,
condition (financial or otherwise), operations, performance, properties
or prospects of such Person or group of Persons, (b) the rights and
remedies of such Person or group of Persons under any Loan Document or
(c) the ability of such Person or group of Persons to perform its
Obligations under any Loan Document to which it is or is to be a party.
"Material Contract" means, with respect to any Loan Party,
each contract to which such Person is a party involving aggregate
consideration payable to or by such Person of $10,000,000 or more in
any year or otherwise material to the business, condition (financial or
otherwise), operations, performance, properties or prospects of such
Loan Party.
"Material Subsidiary" means all domestic wholly-owned
Subsidiaries of the Borrower other than any such Subsidiary which does
not account for 5% of the Borrower's Consolidated total assets or gross
revenues, provided that all such excluded Subsidiaries do not, in the
aggregate, account for 10% of the Borrower's Consolidated total assets
or gross revenues.
"Mortgage" has the meaning specified in Section 5.01(q)(iii).
"Mortgage Policy" has the meaning specified in Section
5.01(q)(iii).
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of any Loan Party or any ERISA Affiliate and at least one
Person other than the Loan Parties and the ERISA Affiliates or (b) was
so maintained and in respect of which any Loan Party or any ERISA
Affiliate could have liability under Section 4064 or 4069 of ERISA in
the event such plan has been or were to be terminated.
"Net Cash Proceeds" means, with respect to any sale, lease,
transfer or other disposition of any asset or the sale or issuance of
any Debt or capital stock or other ownership or profit interest, any
securities convertible into or exchangeable for capital stock or other
ownership or profit interest or any warrants, rights, options or other
securities to acquire capital stock or other ownership or profit
interest by any Person, or any Extraordinary Receipt received by or
paid to or for the account of any Person, the
13
<PAGE>
aggregate amount of cash received from time to time (whether as
initial consideration or through payment or disposition of deferred
consideration) by or on behalf of such Person in connection with such
transaction after deducting therefrom only (without duplication) (a)
reasonable and customary brokerage commissions, underwriting fees and
discounts, legal fees, finder's fees and other similar fees and
commissions and (b) the amount of taxes payable in connection with or
as a result of such transaction and (c) the amount of any Debt secured
by a Lien on such asset that, by the terms of the agreement or
instrument governing such Debt, is required to be repaid upon such
disposition, in each case to the extent, but only to the extent, that
the amounts so deducted are, at the time of receipt of such cash,
actually paid or are accrued and owing to a Person that is not an
Affiliate of such Person or any Loan Party or any Affiliate of any
Loan Party and are properly attributable to such transaction or to the
asset that is the subject thereof.
"Nonratable Assignment" means an assignment by a Lender Party
pursuant to Section 8.07(a) of a portion of its rights and obligations
under this Agreement, other than an assignment of a uniform, and not a
varying, percentage of all of the rights and obligations of such Lender
Party under and in respect of all of the Facilities (other than the
Letter of Credit Facility).
"Note" means a Tranche A Revolving Credit Note or a Tranche B
Revolving Credit Note.
"Notice of Borrowing" has the meaning specified in Section
2.02(a).
"Notice of Issuance" has the meaning specified in Section
2.03(a).
"Notice of Renewal" has the meaning specified in Section
2.01(c).
"Notice of Termination" has the meaning specified in Section
2.01(c).
"NPL" means the National Priorities List under CERCLA.
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether
or not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured or unsecured,
and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding referred to in Section 6.01(f). Without
limiting the generality of the foregoing, the Obligations of the Loan
Parties under the Loan Documents include (a) the obligation to pay
principal, interest, Letter of Credit commissions, charges, expenses,
fees, attorneys' fees and disbursements, indemnities and other amounts
payable by any Loan Party under any Loan Document and (b) the
obligation of any Loan Party to reimburse any amount in respect of any
of the foregoing that any Lender Party, in its sole discretion, may
elect to pay or advance on behalf of such Loan Party.
"OECD" means the Organization for Economic Cooperation and
Development.
"Open Year" has the meaning specified in Section 4.01(aa).
"Other Taxes" has the meaning specified in Section 2.12(b).
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Permitted Encumbrances" has the meaning specified in the
Mortgages.
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<PAGE>
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) Liens for taxes, assessments and
governmental charges or levies not yet due and payable; (b) Liens
imposed by law, such as materialmen's, mechanics', carriers', workmen's
and repairmen's Liens and other similar Liens arising in the ordinary
course of business securing obligations that are not overdue for a
period of more than 30 days; (c) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation or
to secure public or statutory obligations; and (d) easements, rights of
way and other encumbrances on title to real property that do not render
title to the property encumbered thereby unmarketable or materially
adversely affect the use of such property for its present purposes.
"Person" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Preferred Stock" means, with respect to any corporation,
capital stock issued by such corporation that is entitled to a
preference or priority over any other capital stock issued by such
corporation upon any distribution of such corporation's assets, whether
by dividend or upon liquidation.
"Preferred Stock Investment Agreements" means the Preferred
Stock Investment Agreements, dated as of December 23, 1997, entered
into between the Borrower and each of the holders of the Convertible
Preferred Stock.
"Pro Rata Share" of any amount means, with respect to any
Revolving Credit Lender at any time, the product of such amount times a
fraction the numerator of which is the amount of such Lender's Tranche
A Revolving Credit Commitment at such time and the denominator of which
is the Tranche A Revolving Credit Facility at such time.
"Redeemable" means, with respect to any capital stock or other
ownership or profit interest, Debt or other right or Obligation, any
such right or Obligation that (a) the issuer has undertaken to redeem
at a fixed or determinable date or dates, whether by operation of a
sinking fund or otherwise, or upon the occurrence of a condition not
solely within the control of the issuer or (b) is redeemable at the
option of the holder.
"Register" has the meaning specified in Section 8.07(d).
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Required Lenders" means at any time Lenders owed or holding
more than 50% of the sum of (a) the aggregate principal amount of the
Advances outstanding at such time, (b) the aggregate Available Amount
of all Letters of Credit outstanding at such time, (c) the aggregate
unused Commitments under the Term Facility at such time and (d) the
aggregate Unused Revolving Credit Commitments at such time; provided,
however, that if any Lender shall be a Defaulting Lender at such time,
there shall be excluded from the determination of Required Lenders at
such time (A) the aggregate principal amount of the Advances owing to
such Lender (in its capacity as a Lender) and outstanding at such time,
(B) such Lender's Pro Rata Share of the aggregate Available Amount of
all Letters of Credit issued by such Lender and outstanding at such
time, (C) the aggregate unused Term Commitment of such Lender at such
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time and (D) the Unused Revolving Credit Commitment of such Lender at
such time. For purposes of this definition, the aggregate principal
amount of Letter of Credit Advances owing to the Issuing Bank and the
Available Amount of each Letter of Credit shall be considered to be
owed to the Revolving Credit Lenders ratably in accordance with their
respective Revolving Credit Commitments.
"Requirements of Law" means, with respect to any Person, all
laws, constitutions, statutes, treaties, ordinances, rules and
regulations, all orders, writs, decrees, injunctions, judgments,
determinations or awards of an arbitrator, a court or any other
governmental authority, and all governmental authorizations, binding
upon or applicable to such Person or to any of its properties, assets
or businesses.
"Responsible Officer" means any officer of any Loan Party or
any of its Subsidiaries.
"Security Agreement" has the meaning specified in Section
3.01(k)(viii).
"Senior Debt" means all Debt of the Borrower and its
Subsidiaries other than Subordinated Debentures.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of any Loan Party or any ERISA Affiliate and no Person other
than the Loan Parties and the ERISA Affiliates or (b) was so maintained
and in respect of which any Loan Party or any ERISA Affiliate could
have liability under Section 4069 of ERISA in the event such plan has
been or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property
of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person,
(b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that
it will, incur debts or liabilities beyond such Person's ability to pay
such debts and liabilities as they mature and (d) such Person is not
engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent
liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an
actual or matured liability.
"Subordinated Debentures" means the 6-1/2% Convertible
Subordinated Debentures due 2002 of the Borrower in an aggregate
principal amount of $69,000,000.
"Subordinated Debenture Documents" means the Indenture dated
December 15, 1995 between the Borrower and IBJ Schroder Bank & Trust
Company and all other agreements, indentures and instruments pursuant
to which the Subordinated Debentures were issued.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such partnership, joint
venture or limited liability company or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or
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more of its other Subsidiaries or by one or more of such Person's
other Subsidiaries.
"Subsidiary Guarantors" means, all existing and hereafter
acquired direct or indirect domestic Material Subsidiaries of the
Borrower which are permitted by law to guarantee Debt; provided that in
the case of D.C. Chartered Health Plan, Inc. and Virginia Chartered
Health Plan, Inc., such Subsidiaries shall not be Subsidiary Guarantors
unless, in each case, prior regulatory approval has been obtained.
"Subsidiary Guaranty" has the meaning set forth in Section
3.01(k)(ix).
"Surviving Debt" has the meaning specified in Section 3.01(d).
"Tax Certificate" has the meaning specified in Section
5.03(o).
"Taxes" has the meaning specified in Section 2.12(a).
"Termination Date" means the earlier of May 26, 2001 and the
date of termination in whole of the Tranche A Revolving Credit
Commitments, the Tranche B Revolving Credit Commitments and the Letter
of Credit Commitments pursuant to Section 2.05 or 6.01.
"Tranche A Letter of Credit Agreement" has the meaning
specified in Section 2.03(a).
"Tranche A Reduction Amount" has the meaning specified in
Section 2.06(b)(v).
"Tranche A Revolving Credit Advance" has the meaning specified
in Section 2.01(a).
"Tranche A Revolving Credit Borrowing" means a borrowing
consisting of simultaneous Tranche A Revolving Credit Advances of the
same Type made by the Tranche A Revolving Credit Lenders.
"Tranche A Revolving Credit Commitment" means, with respect to
any Tranche A Revolving Credit Lender at any time, the amount set forth
opposite such Lender's name on Schedule I hereto under the caption
"Tranche A Revolving Credit Commitment" or, if such Lender has entered
into one or more Assignments and Acceptances, set forth for such Lender
in the Register maintained by the Administrative Agent pursuant to
Section 8.07(d) as such Lender's "Tranche A Revolving Credit
Commitment," as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Tranche A Revolving Credit Facility" means, at any time, the
aggregate amount of the Tranche A Revolving Credit Lenders' Tranche A
Revolving Credit Commitments.
"Tranche A Revolving Credit Note" means a promissory note of
the Borrower payable to the order of any Tranche A Revolving Credit
Lender, in substantially the form of Exhibit A-1 hereto, evidencing the
aggregate indebtedness of the Borrower to such Lender resulting from
the Tranche A Revolving Credit Advances made by such Lender.
"Tranche A Revolving Credit Lender" means any Lender that has
a Tranche A Revolving Credit Commitment.
"Tranche B Reduction Amount" has the meaning specified in
Section 2.06(b)(vi).
"Tranche B Revolving Credit Advance" has the meaning specified
in Section 2.01(b) .
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"Tranche B Revolving Credit Borrowing" means a borrowing
consisting of simultaneous Tranche B Revolving Credit Advances of the
same Type made by the Tranche B Revolving Credit Lenders.
"Tranche B Revolving Credit Commitment" means, with respect to
any Tranche B Revolving Credit Lender at any time, the amount set forth
opposite such Lender's name on Schedule I hereto under the caption
"Tranche B Revolving Credit Commitment" or, if such Lender has entered
into one or more Assignments and Acceptances, set forth for such Lender
in the Register maintained by the Administrative Agent pursuant to
Section 8.07(d) as such Lender's "Tranche B Revolving Credit
Commitment", as such accounting may be reduced at or prior to such time
pursuant to Section 2.05.
"Tranche B Revolving Credit Facility" means, at any time, the
aggregate amount of the Tranche B Revolving Credit Lenders' Tranche B
Revolving Credit Commitments.
"Tranche B Revolving Credit Lender" means any Lender that has
a Tranche B Revolving Credit Commitment.
"Tranche B Revolving Credit Note" means a promissory note of
the Borrower payable to the order of any Tranche B Revolving Credit
Lender, in substantially the form of Exhibit A-2 hereto, evidencing the
aggregate indebtedness of the Borrower to such Lender resulting from
the Tranche B Revolving Credit Advances made by such Lender.
"Tranche B Quarterly Repayment Amount" means an amount equal
to 1/9 of the Tranche B Term Out Amount.
"Tranche B Term Out Amount" means the aggregate amount of
Tranche B Revolving Credit Advances outstanding on January 31, 1999
(after giving effect to any prepayment of the Tranche B Advances on
such date and any Tranche B Borrowing on such date), as such aggregate
amount may be reduced pursuant to the provisions of Section 2.04(b).
"Type" refers to the distinction between Advances bearing
interest at the Alternate Base Rate and Advances bearing interest at
the Eurodollar Rate.
"Unused Tranche A Revolving Credit Commitment" means, with
respect to any Tranche A Revolving Credit Lender at any time, (a) such
Lender's Tranche A Revolving Credit Commitment at such time minus (b)
the sum of (i) the aggregate principal amount of all Tranche A
Revolving Credit Advances and Letter of Credit Advances made by such
Lender (in its capacity as a Lender) and outstanding at such time, plus
(ii) such Lender's Pro Rata Share of (A) the aggregate Available Amount
of all Letters of Credit outstanding at such time and (B) the aggregate
principal amount of all Letter of Credit Advances made by the Issuing
Bank pursuant to Section 2.03(b) and outstanding of such time.
"Unused Tranche B Revolving Credit Commitment" means, with
respect to any Tranche B Revolving Credit Lender at any time, (a) such
Lender's Tranche B Revolving Credit Commitment at such time minus (b)
the aggregate principal amount of all Tranche B Revolving Credit
Advances made by such Lender and outstanding at such time.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote
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has been suspended by the happening of such a contingency.
"Welfare Plan" means a welfare plan, as defined in Section
3(1) of ERISA, that is maintained for employees of any Loan Party or in
respect of which any Loan Party could have liability.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(f) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. The Advances. (a) The Tranche A Revolving Credit
Advances. Each Tranche A Revolving Credit Lender severally agrees, on the terms
and conditions hereinafter set forth, to make advances (each a "Tranche A
Revolving Credit Advance") to the Borrower from time to time on any Business Day
during the period from the date hereof until the Termination Date in an amount
for each such Advance not to exceed such Lender's Unused Tranche A Revolving
Credit Commitment at such time. Each Tranche A Revolving Credit Borrowing shall
be in an aggregate amount of $1,000,000 or an integral multiple of $100,000 in
excess thereof (other than a Borrowing the proceeds of which shall be used
solely to repay or prepay in full outstanding Letter of Credit Advances) and
shall consist of Tranche A Revolving Credit Advances made simultaneously by the
Tranche A Revolving Credit Lenders ratably according to their Tranche A
Revolving Credit Commitments. Within the limits of each Tranche A Lender's
Unused Tranche A Revolving Credit Commitment in effect from time to time, the
Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.06
and reborrow under this Section 2.01(a).
(b) The Tranche B Revolving Credit Advances. Each Tranche B
Revolving Credit Lender severally agrees, on the terms and conditions
hereinafter set forth, to make advances (each a "Tranche B Revolving Credit
Advance") to the Borrower from time to time on any Business Day during the
period from the date hereof until the Termination Date in an amount for each
such Advance not to exceed such Lender's Unused Tranche B Revolving Credit
Commitment at such time. Each Tranche B Revolving Credit Borrowing shall be in
an aggregate amount of $1,000,000 or an integral multiple of $100,000 in excess
thereof and shall consist of Tranche B Revolving Credit Advances made
simultaneously by the Tranche B Revolving Credit Lenders ratably according to
their Tranche B Revolving Credit Commitments. Within the limits of each Tranche
B Revolving Credit Lender's Unused Tranche B Revolving Credit Commitment in
effect from time to time, the Borrower may borrow under this Section 2.01(b),
prepay pursuant to Section 2.06 and reborrow under this Section 2.01(b).
(c) Letters of Credit. The Issuing Bank agrees, on the terms
and conditions hereinafter set forth, to issue standby letters of credit (the
"Letters of Credit") for the account of the Borrower from time to time on any
Business Day during the period from the date hereof until 45 days before the
Termination Date (i) in an aggregate Available Amount for all Letters of Credit
issued by the Issuing Bank not to exceed at any time the Issuing Bank's Letter
of Credit Commitment at such time and (ii) in an Available Amount for each such
Letter of
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Credit not to exceed the lesser of (x) the Letter of Credit Facility at such
time and (y) the Unused Tranche A Revolving Credit Commitments of the Tranche A
Revolving Credit Lenders at such time. No Letter of Credit shall have an
expiration date (including all rights of the Borrower or the beneficiary to
require renewal) later than the earlier of 45 days before the Termination Date
and one year after the date of issuance thereof, but may by its terms be
renewable annually upon notice (a "Notice of Renewal") given to the Issuing
Banks and the Administrative Agent on or prior to any date for notice of renewal
set forth in such Letter of Credit but in any event at least three Business Days
prior to the date of the proposed renewal of such Letter of Credit and upon
fulfillment of the applicable conditions set forth in Article III unless the
Issuing Bank has notified the Borrower (with a copy to the Administrative Agent)
on or prior to the date for notice of termination set forth in such Letter of
Credit but in any event at least 30 Business Days prior to the date of automatic
renewal of its election not to renew such Letter of Credit (a "Notice of
Termination"); provided that the terms of each Letter of Credit that is
automatically renewable annually shall (x) require the Issuing Bank to give the
beneficiary named in such Letter of Credit notice of any Notice of Termination,
(y) permit such beneficiary, upon receipt of such notice, to draw under such
Letter of Credit prior to the date such Letter of Credit otherwise would have
been automatically renewed and (z) not permit the expiration date (after giving
effect to any renewal) of such Letter of Credit in any event to be extended to a
date later than 45 days before the Termination Date. If either a Notice of
Renewal is not given by the Borrower or a Notice of Termination is given by the
Issuing Bank pursuant to the immediately preceding sentence, such Letter of
Credit shall expire on the date on which it otherwise would have been
automatically renewed; provided, however, that even in the absence of receipt of
a Notice of Renewal the Issuing Bank may in its discretion, unless instructed to
the contrary by the Administrative Agent or the Borrower, deem that a Notice of
Renewal had been timely delivered and in such case, a Notice of Renewal shall be
deemed to have been so delivered for all purposes of this Agreement. Within the
limits of the Letter of Credit Facility, and subject to the limits referred to
above, the Borrower may request the issuance of Letters of Credit under this
Section 2.01(c), repay any Letter of Credit Advances resulting from drawings
thereunder pursuant to Section 2.03(c) and request the issuance of additional
Letters of Credit under this Section 2.01(c).
SECTION 2.02. Making the Advances. (a) Except as otherwise
provided in Section 2.02(b) or 2.03, each Borrowing shall be made on notice,
given not later than 11:00 A.M. (Charlotte, North Carolina time) on the third
Business Day prior to the date of the proposed Borrowing in the case of a
Borrowing consisting of Eurodollar Rate Advances, or on the date of the proposed
Borrowing in the case of a Borrowing consisting of Alternate Base Rate Advances,
by the Borrower to the Administrative Agent, which shall give to each
Appropriate Lender prompt notice thereof by telex or telecopier. Each such
notice of a Borrowing (a "Notice of Borrowing") shall be by telephone, confirmed
immediately in writing, or telex or telecopier, in substantially the form of
Exhibit B hereto, specifying therein the requested (i) date of such Borrowing,
(ii) Facility under which such Borrowing is to be made, (iii) Type of Advances
comprising such Borrowing, (iv) aggregate amount of such Borrowing and (v) in
the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest
Period for each such Advance. Each Appropriate Lender shall, before 10:00 A.M.
(Charlotte, North Carolina time) on the date of such Borrowing, make available
for the account of its Applicable Lending Office to the Administrative Agent at
the Administrative Agent's Account, in same day funds, such Lender's ratable
portion of such Borrowing in accordance with the respective Commitments under
the applicable Facility of such Lender and the other Appropriate Lenders. After
the Administrative Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Administrative Agent will
make such funds available to the Borrower by crediting the Borrower's Account;
provided, however, that, in the case of any Tranche A Revolving Credit
Borrowing, the Administrative Agent shall first make a portion of such funds
equal to the aggregate principal amount of any Letter of Credit Advances made by
the Issuing Bank and by any other Tranche A Revolving Credit Lender and
outstanding on the date of such Tranche A Revolving Credit Borrowing, plus
interest accrued and unpaid thereon to and as of such date, available to the
Issuing Bank and such other Tranche A Revolving Credit Lenders for repayment of
such Letter of Credit Advances.
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(b) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for
the initial Borrowing hereunder or for any Borrowing if the aggregate amount of
such Borrowing is less than $1,000,000 or if the obligation of the Appropriate
Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to
Section 2.09 or Section 2.10 and (ii) the Tranche A Revolving Credit Advances
may not be outstanding as part of more than ten separate Borrowings and the
Tranche B Revolving Credit Advances made on any date may not be outstanding as
part of more than ten separate Borrowings.
(c) Each Notice of Borrowing shall be irrevocable and binding
on the Borrower. In the case of any Borrowing that the related Notice of
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower
shall indemnify each Appropriate Lender against any loss, cost or expense
incurred by such Lender as a result of any failure to fulfill on or before the
date specified in such Notice of Borrowing for such Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Advance to be made by such Lender as part of such Borrowing
when such Advance, as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice
from an Appropriate Lender prior to the date of any Borrowing under a Facility
under which such Lender has a Commitment that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) or (b) of this Section 2.02 and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have so made such ratable portion available to the
Administrative Agent, such Lender and the Borrower severally agree to repay or
pay to the Administrative Agent forthwith on demand such corresponding amount
and to pay interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid or paid to the
Administrative Agent, at (i) in the case of the Borrower, the interest rate
applicable at such time under Section 2.07 to Advances comprising such Borrowing
and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender
shall pay to the Administrative Agent such corresponding amount, such amount so
paid shall constitute such Lender's Advance as part of such Borrowing for all
purposes.
(e) The failure of any Lender to make the Advance to be made
by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under
Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be
issued upon notice, given not later than 11:00 A.M. (Charlotte, North Carolina
time) on the fifth Business Day prior to the date of the proposed issuance of
such Letter of Credit, by the Borrower to the Issuing Bank, which shall give to
the Administrative Agent and each Revolving Credit Lender prompt notice thereof
by telex or telecopier. Each such notice of issuance of a Letter of Credit (a
"Notice of Issuance") shall be by telephone, confirmed immediately in writing,
or telex or telecopier, specifying therein the requested (A) date of such
issuance (which shall be a Business Day), (B) Available Amount of such Letter of
Credit, (C) expiration date of such Letter of Credit, (D) name and address of
the beneficiary of such Letter of Credit and (E) form of such Letter of Credit,
and shall be accompanied by such application and agreement for letters of credit
as the Issuing Bank may specify to the Borrower for use in connection with such
requested Letter of Credit (a "Letter of Credit Agreement"). If (x) the
requested form of such Letter of Credit is acceptable to the Issuing Bank in its
sole discretion and (y) it has not received notice of objection to such issuance
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from Lenders holding more than 50% of the Tranche A Revolving Credit
Commitments, the Issuing Bank will, upon fulfillment of the applicable
conditions set forth in Article III, make such Letter of Credit available to
the Borrower at its office referred to in Section 8.02 or as otherwise agreed
with the Borrower in connection with such issuance. In the event and to the
extent that the provisions of any Letter of Credit Agreement shall conflict
with this Agreement, the provisions of this Agreement shall govern.
(b) Drawing and Reimbursement. The payment by the Issuing Bank
of a draft drawn under any Letter of Credit shall constitute for all purposes of
this Agreement the making by the Issuing Bank of a Letter of Credit Advance,
which shall be a Alternate Base Rate Advance, in the amount of such draft. Upon
written demand by the Issuing Bank with an outstanding Letter of Credit Advance,
with a copy of such demand to the Administrative Agent, each Revolving Credit
Lender shall purchase from the Issuing Bank, and the Issuing Bank shall sell and
assign to each such Revolving Credit Lender, such Lender's Pro Rata Share of
such outstanding Letter of Credit Advance as of the date of such purchase, by
making available for the account of its Applicable Lending Office to the
Administrative Agent for the account of the Issuing Bank, by deposit to the
Administrative Agent's Account, in same day funds, an amount equal to the
portion of the outstanding principal amount of such Letter of Credit Advance to
be purchased by such Lender. Promptly after receipt thereof, the Administrative
Agent shall transfer such funds to the Issuing Bank. The Borrower hereby agrees
to each such sale and assignment. Each Revolving Credit Lender agrees to
purchase its Pro Rata Share of an outstanding Letter of Credit Advance on (i)
the Business Day on which demand therefor is made by the Issuing Bank provided
notice of such demand is given not later than 10:00 A.M. (Charlotte, North
Carolina time) on such Business Day or (ii) the first Business Day next
succeeding such demand if notice of such demand is given after such time. Upon
any such assignment by the Issuing Bank to any other Revolving Credit Lender of
a portion of a Letter of Credit Advance, the Issuing Bank represents and
warrants to such other Lender that the Issuing Bank is the legal and beneficial
owner of such interest being assigned by it, free and clear of any liens, but
makes no other representation or warranty and assumes no responsibility with
respect to such Letter of Credit Advance, the Loan Documents or any Loan Party.
If and to the extent that any Revolving Credit Lender shall not have so made the
amount of such Letter of Credit Advance available to the Administrative Agent,
such Revolving Credit Lender agrees to pay to the Administrative Agent forthwith
on demand such amount together with interest thereon, for each day from the date
of demand by the Issuing Bank until the date such amount is paid to the
Administrative Agent, at the Federal Funds Rate for its account or the account
of the Issuing Bank, as applicable. If such Lender shall pay to the
Administrative Agent such amount for the account of the Issuing Bank on any
Business Day, such amount so paid in respect of principal shall constitute a
Letter of Credit Advance made by such Lender on such Business Day for purposes
of this Agreement, and the outstanding principal amount of the Letter of Credit
Advance made by the Issuing Bank shall be reduced by such amount on such
Business Day.
(c) Failure to Make Letter of Credit Advances. The failure of
any Lender to make the Letter of Credit Advance to be made by it on the date
specified in Section 2.03(b) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
SECTION 2.04. Repayment of Advances. (a) Tranche A Revolving
Credit Advances. The Borrower shall repay to the Administrative Agent for the
ratable account of the Tranche A Revolving Credit Lenders on the Termination
Date the aggregate outstanding principal amount of the Tranche A Revolving
Credit Advances then outstanding.
(b) Tranche B Revolving Credit Advances. The Borrower shall
pay to the Administrative Agent for the ratable account of the Tranche B
Revolving Credit Lenders the aggregate outstanding principal amounts of the
Tranche B Revolving Credit Advances on the following dates in an amount equal to
the Tranche B Quarterly Repayment Amount (which amounts shall be reduced as a
result of the application of prepayments in
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accordance with the order of priority set forth in Section 2.06):
Date
----
April 30, 1999
July 31, 1999
October 31, 1999
January 31, 2000
April 30, 2000
July 31, 2000
October 31, 2000
January 31, 2001
April 30, 2001
(c) Letter of Credit Advances. (i) The Borrower shall repay to
the Administrative Agent for the account of the Issuing Bank and each other
Tranche A Revolving Credit Lender that has made a Letter of Credit Advance on
the earlier of demand and the Termination Date the outstanding principal amount
of each Letter of Credit Advance made by each of them.
(ii)The Obligations of the Borrower under this Agreement, any
Letter of Credit Agreement and any other agreement or instrument
relating to any Letter of Credit shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of
this Agreement, such Letter of Credit Agreement and such other
agreement or instrument under all circumstances, including, without
limitation, the following circumstances (it being understood that any
such payment by the Borrower is without prejudice to, and does not
constitute a waiver of, any rights the Borrower might have or might
acquire as a result of the payment by the Issuing Bank of any draft or
the reimbursement by the Borrower thereof):
(A) any lack of validity or enforceability of any Loan
Document, any Letter of Credit Agreement, any Letter of Credit or any
other agreement or instrument relating thereto (all of the foregoing
being, collectively, the "L/C Related Documents");
(B) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations of the Borrower in
respect of any L/C Related Document or any other amendment or waiver of
or any consent to departure from all or any of the L/C Related
Documents;
(C) the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against any beneficiary or
any transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank or
any other Person, whether in connection with the transactions
contemplated by the L/C Related Documents or any unrelated transaction;
(D) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(E) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of such Letter of Credit, provided that such
noncompliance is not material;
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(F) any exchange, release or non-perfection of any Collateral
or other collateral, or any release or amendment or waiver of or
consent to departure from the Guaranty or any other guarantee, for all
or any of the Obligations of the Borrower in respect of the L/C Related
Documents; or
(G) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including, without limitation, any
other circumstance that might otherwise constitute a defense available
to, or a discharge of, the Borrower or a guarantor.
SECTION 2.05. Termination or Reduction of the Commitments.(a)
Optional. The Borrower may, upon at least five Business Days' notice to the
Administrative Agent, terminate in whole or reduce in part the Unused Tranche A
Revolving Credit Commitments and the Tranche B Revolving Credit Commitments;
provided, however, that each partial reduction of a Facility (i) shall be in an
aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof and (ii) shall be made ratably among the Appropriate Lenders in
accordance with their Commitments with respect to such Facility.
(b) Mandatory. (i) The Tranche B Revolving Credit Facility
shall be automatically and permanently reduced, on a pro rata basis, on January
31, 1999, by an amount equal to the Tranche B Term Out Amount (after giving
effect to all reductions in accordance with subsection (a) of this Section
2.05); provided, however, that, notwithstanding the foregoing provisions of this
clause (i), the Commitments of the Tranche B Revolving Credit Lenders shall be
terminated in whole on the Termination Date.
(ii)The Letter of Credit Facility shall be permanently reduced
from time to time on the date of each reduction in the Tranche A
Revolving Credit Facility by the amount, if any, by which the amount of
the Letter of Credit Facility exceeds the Tranche A Revolving Credit
Facility after giving effect to such reduction of the Tranche A
Revolving Credit Facility.
SECTION 2.06. Prepayments. (a) Optional. The Borrower may,
upon same day notice in the case of Alternate Base Rate Advances and three
Business Days' notice in the case of Eurodollar Rate Advances, in each case to
the Administrative Agent stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given the Borrower shall, prepay
the outstanding aggregate principal amount of the Advances comprising part of
the same Borrowing in whole or ratably in part, together with (i) accrued
interest to the date of such prepayment on the aggregate principal amount
prepaid; provided, however, that (x) each partial prepayment shall be in an
aggregate principal amount of $1,000,000 or an integral multiple of $100,000 in
excess thereof and (y) if any prepayment of a Eurodollar Rate Advance is made on
a date other than the last day of an Interest Period for such Advance the
Borrower shall also pay any amounts owing pursuant to Section 8.04(c).
(b) Mandatory. (i) The Borrower shall, on the 45th day
following the end of each of the first three fiscal quarters of each fiscal year
of the Borrower and on the 90th day following the end of the fourth fiscal
quarter of each fiscal year of the Borrower, commencing with the fiscal quarter
ended July 31, 1998, prepay an aggregate principal amount of the Advances
comprising part of the same Borrowings equal to seventy-five per cent (75%) of
the amount of Excess Cash Flow for such fiscal quarter. Each such prepayment
shall be applied ratably first (on and after January 31, 1999) to the Tranche B
Term Out Amount and to the installments thereof pro rata, second to the Tranche
B Revolving Credit Facility, and third, to the Tranche A Revolving Credit
Facility as set forth in clause (v) below.
(ii) The Borrower shall, on the date of receipt of the Net
Cash Proceeds by the Borrower
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or any of its Subsidiaries from (A) the sale, lease, transfer or other
disposition of any assets of the Borrower or any of its Subsidiaries
(other than any sale, lease, transfer or other disposition of assets
pursuant to clause (i) of Section 5.02(e)), (B) the incurrence or
issuance by the Borrower or any of its Subsidiaries of any Debt (other
than Debt incurred or issued pursuant to Section 5.02(b)), (C) the
sale or issuance by the Borrower or any of its Subsidiaries of any
capital stock or other ownership or profit interest, any securities
convertible into or exchangeable for capital stock or other ownership
or profit interest or any warrants, rights or options to acquire
capital stock or other ownership or profit interest (other than in
respect of stock options or warrants currently outstanding or
hereafter issued pursuant to any stock option, plan or other
compensation arrangement approved by the Borrower's Board of
Directors) and (D) any Extraordinary Receipt received by or paid to or
for the account of the Borrower or any of its Subsidiaries and not
otherwise included in clause (A), (B) or (C) above, prepay an
aggregate principal amount of the Advances comprising part of the same
Borrowings equal to (x) in the case of clauses (A) and (D), 75% of the
amount of such Net Cash Proceeds and (y) in the case of clauses (B)
and (C), 100% of the amount of such Net Cash Proceeds. Each such
prepayment shall be applied first (on and after January 31, 1999) to
the Tranche B Term Out Amount and to the installments thereof pro
rata, second to the Tranche B Revolving Credit Facility, and third to
the Tranche A Revolving Credit Facility as set forth in clause (v)
below.
(iii) The Borrower shall (A) on each Business Day, prepay an
aggregate principal amount of the Tranche A Revolving Credit Advances
comprising part of the same Borrowings and the Letter of Credit
Advances equal to the amount by which (1) the sum of the aggregate
principal amount of (x) the Tranche A Revolving Credit Advances and (y)
the Letter of Credit Advances then outstanding plus the aggregate
Available Amount of all Letters of Credit then outstanding exceeds (2)
the Tranche A Revolving Credit Facility on such Business Day and (B) on
each Business Day, prepay an aggregate principal amount of the Tranche
B Revolving Credit Advances comprising part of the same Borrowings
equal to the amount by which (1) the Tranche B Revolving Credit
Advances then outstanding exceeds (2) the sum of the Tranche B
Revolving Credit Facility on such Business Day plus on and after
January 31, 1999, the Tranche B Term Out Amount outstanding on such
Business Day.
(iv) The Borrower shall, on each Business Day, pay to the
Administrative Agent for deposit in the L/C Cash Collateral Account an
amount sufficient to cause the aggregate amount on deposit in such
Account to equal the amount by which the aggregate Available Amount of
all Letters of Credit then outstanding exceeds the Letter of Credit
Facility on such Business Day.
(v) Prepayments of the Tranche A Revolving Credit Facility
made pursuant to clause (i), (ii) or (iii) above shall be first applied
to prepay Letter of Credit Advances then outstanding until such
Advances are paid in full, and second applied to prepay Tranche A
Revolving Credit Advances then outstanding comprising part of the same
Borrowings until such Advances are paid in full.
(vi) All prepayments under this subsection (b) shall be made
together with accrued interest to the date of such prepayment on the
principal amount prepaid.
SECTION 2.07. Interest. (a) Scheduled Interest. The Borrower
shall pay interest on the unpaid principal amount of each Advance owing to each
Lender from the date of such Advance until such principal amount shall be paid
in full, at the following rates per annum:
(i) Alternate Base Rate Advances. During such periods as such
Advance is a Alternate Base Rate Advance, a rate per annum equal at all
times to the sum of (A) the Alternate Base Rate in effect from time to
time plus (B) the Applicable Margin in effect from time to time,
payable in arrears quarterly on the last day of each fiscal quarter
during such periods and on the date such Alternate Base Rate Advance
shall be Converted or paid in full;
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(ii) Eurodollar Rate Advances. During such periods as such
Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during each Interest Period for such Advance to the sum of (A)
the Eurodollar Rate for such Interest Period for such Advance plus (B)
the Applicable Margin in effect from time to time, payable in arrears
on the last day of such Interest Period and, if such Interest Period
has a duration of more than three months, on each day that occurs
during such Interest Period every three months from the first day of
such Interest Period and on the date such Eurodollar Rate Advance shall
be Converted or paid in full;
provided, however, that, except as otherwise provided in Section 2.07(b), in no
event shall the rate of interest payable on any Advance exceed 17% per annum at
any time.
(b) Default Interest. Upon the occurrence and during the
continuance of a Default, the Borrower shall pay interest on (i) the unpaid
principal amount of each Advance owing to each Lender, payable in arrears on the
dates referred to in clause (a)(i) or (a)(ii) above and on demand, at a rate per
annum equal at all times to 2% per annum above the rate per annum required to be
paid on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the
fullest extent permitted by law, the amount of any interest, fee or other amount
payable hereunder that is not paid when due, from the date such amount shall be
due until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full and on demand, at a rate per annum equal at all
times to 2% per annum above the rate per annum required to be paid, in the case
of interest, on the Type of Advance on which such interest has accrued pursuant
to clause (a)(i) or (a)(ii) above, and, in all other cases, on Alternate Base
Rate Advances pursuant to clause (a)(i) above.
(c) Notice of Interest Rate. Promptly after receipt of a
Notice of Borrowing pursuant to Section 2.02(a), the Administrative Agent shall
give notice to the Borrower and each Appropriate Lender of the applicable
interest rate determined by the Administrative Agent for purposes of clause
(a)(i) or (ii).
SECTION 2.08. Fees. (a) Commitment Fee. The Borrower shall pay
to the Administrative Agent for the account of the Lenders a commitment fee,
from the date of the side letter referred to in Section 3.01(i) in the case of
each Initial Lender and from the effective date specified in the Assignment and
Acceptance pursuant to which it became a Lender in the case of each other Lender
until the Termination Date, payable in arrears on the date of the initial
Borrowing hereunder, thereafter quarterly on the last Business Day of each
fiscal quarter, commencing July 31, 1998, and on the Termination Date, at a rate
equal to the Applicable Percentage on the average daily Unused Revolving Credit
Commitment of such Lender; provided, however, that any commitment fee accrued
with respect to any of the Commitments of a Defaulting Lender during the period
prior to the time such Lender became a Defaulting Lender and unpaid at such time
shall not be payable by the Borrower so long as such Lender shall be a
Defaulting Lender except to the extent that such commitment fee shall otherwise
have been due and payable by the Borrower prior to such time; and provided
further that no commitment fee shall accrue on any of the Commitments of a
Defaulting Lender so long as such Lender shall be a Defaulting Lender.
(b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to
the Administrative Agent for the account of each Tranche A Revolving Credit
Lender a commission, payable in arrears quarterly on the last Business Day of
each fiscal quarter, commencing July 31, 1998, and on the earliest to occur of
the full drawing expiration, termination or cancellation of any such Letter of
Credit and on the Termination Date, on such Lender's Pro Rata Share of the
average daily aggregate Available Amount during such quarter of the sum of all
Letters of Credit then outstanding at a per annum rate equal to the Applicable
Margin for Eurodollar Advances in effect for such quarter.
(ii) The Borrower shall pay to the Issuing Bank, for its own
account, (A) a fronting fee, payable in arrears quarterly on the last
Business Day of each fiscal quarter, commencing July 31, 1998,
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and on the Termination Date, on the average daily amount of its Letter
of Credit Commitment during such quarter, from the date hereof until
the Termination Date, at the rate of 0.125% per annum, and (B) such
other commissions, transfer fees and other fees and charges in
connection with the issuance or administration of each Letter of Credit
as the Borrower and the Issuing Bank shall agree.
(c) Administrative Agent's Fees. The Borrower shall pay to the
Administrative Agent for its own account such fees as may from time to time be
agreed between the Borrower and the Administrative Agent.
SECTION 2.09. Conversion of Advances. (a) Optional. The
Borrower may on any Business Day, upon notice given to the Administrative Agent
not later than 11:00 A.M. (Charlotte, North Carolina time) on the third Business
Day prior to the date of the proposed Conversion and subject to the provisions
of Sections 2.07 and 2.10, Convert all or any portion of the Advances of one
Type comprising the same Borrowing into Advances of the other Type; provided,
however, that any Conversion of Eurodollar Rate Advances into Alternate Base
Rate Advances shall be made only on the last day of an Interest Period for such
Eurodollar Rate Advances, any Conversion of Alternate Base Rate Advances into
Eurodollar Rate Advances shall be in an amount not less than the minimum amount
specified in Section 2.02(b), no Conversion of any Advances shall result in more
separate Borrowings than permitted under Section 2.02(b) and each Conversion of
Advances comprising part of the same Borrowing under any Facility shall be made
ratably among the Appropriate Lenders in accordance with their Commitments under
such Facility. Each such notice of Conversion shall, within the restrictions
specified above, specify (i) the date of such Conversion, (ii) the Advances to
be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for such Advances. Each notice of
Conversion shall be irrevocable and binding on the Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid
principal amount of Eurodollar Rate Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to less than $5,000,000, such
Advances shall automatically Convert into Alternate Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section
1.01, the Administrative Agent will forthwith so notify the Borrower
and the Appropriate Lenders, whereupon each such Eurodollar Rate
Advance will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Alternate Base Rate Advance.
(iii) Upon the occurrence and during the continuance of any
Default, (x) each Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a
Alternate Base Rate Advance and (y) the obligation of the Lenders to
make, or to Convert Advances into, Eurodollar Rate Advances shall be
suspended.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i)
the introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender Party of agreeing to make
or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to
issue or of issuing or maintaining Letters of Credit or of agreeing to make or
of making or maintaining Letter of Credit Advances (excluding for purposes of
this Section 2.10 any such increased costs resulting from (i) Taxes or Other
Taxes (as to which Section 2.12 shall govern) and (ii) changes in the basis of
taxation of overall net income or overall gross income by the United States or
by the foreign jurisdiction or state under the laws of which such Lender Party
is organized or has its Applicable Lending Office or any political subdivision
thereof), then the Borrower shall from time to time, upon demand by such Lender
Party (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender
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Party additional amounts sufficient to compensate such Lender Party for such
increased cost. A certificate as to the amount of such increased cost, submitted
to the Borrower by such Lender Party, shall be conclusive and binding for all
purposes, absent manifest error.
(b) If any Lender Party determines that compliance with any
law or regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender Party or any corporation controlling such Lender Party and that the
amount of such capital is increased by or based upon the existence of such
Lender Party's commitment to lend or to issue Letters of Credit hereunder and
other commitments of such type or the issuance or maintenance of the Letters of
Credit (or similar contingent obligations), then, upon demand by such Lender
Party (with a copy of such demand to the Administrative Agent), the Borrower
shall pay to the Administrative Agent for the account of such Lender Party, from
time to time as specified by such Lender Party, additional amounts sufficient to
compensate such Lender Party in the light of such circumstances, to the extent
that such Lender Party reasonably determines such increase in capital to be
allocable to the existence of such Lender Party's commitment to lend or to issue
Letters of Credit hereunder or to the issuance or maintenance of any Letters of
Credit. A certificate as to such amounts submitted to the Borrower by such
Lender Party shall be conclusive and binding for all purposes, absent manifest
error.
(c) If, with respect to any Eurodollar Rate Advances under any
Facility, Lenders notify the Administrative Agent that the Eurodollar Rate for
any Interest Period for such Advances will not adequately reflect the cost to
such Lenders of making, funding or maintaining their Eurodollar Rate Advances
for such Interest Period, the Administrative Agent shall forthwith so notify the
Borrower and the Appropriate Lenders, whereupon (i) each such Eurodollar Rate
Advance under any Facility will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Alternate Base Rate Advance
and (ii) the obligation of the Appropriate Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower that such Lenders have determined
that the circumstances causing such suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if
the introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower
through the Administrative Agent, (i) each Eurodollar Rate Advance under each
Facility under which such Lender has a Commitment will automatically, upon such
demand, Convert into a Alternate Base Rate Advance and (ii) the obligation of
the Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower that such Lender has determined that the circumstances causing such
suspension no longer exist.
SECTION 2.11. Payments and Computations. (a) The Borrower
shall make each payment hereunder and under the Notes, irrespective of any right
of counterclaim or set-off (except as otherwise provided in Section 2.15), not
later than 12:00 Noon (Charlotte, North Carolina time) on the day when due in
U.S. dollars to the Administrative Agent at the Agent's Account in same day
funds. The Administrative Agent will promptly thereafter cause like funds to be
distributed (i) if such payment by the Borrower is in respect of principal,
interest, commitment fees or any other Obligation then payable hereunder and
under the Notes to more than one Lender Party, to such Lender Parties for the
account of their respective Applicable Lending Offices ratably in accordance
with the amounts of such respective Obligations then payable to such Lender
Parties and (ii) if such payment by the Borrower is in respect of any Obligation
then payable hereunder to one Lender Party, to such Lender Party for the account
of its Applicable Lending Office, in each case to be applied in accordance with
the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance
and recording of the information contained
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therein in the Register pursuant to Section 8.07(d), from and after the
effective date of such Assignment and Acceptance, the Administrative Agent shall
make all payments hereunder and under the Notes in respect of the interest
assigned thereby to the Lender Party assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) If the Administrative Agent receives funds for application
to the Obligations under the Loan Documents under circumstances for which the
Loan Documents do not specify the Advances or the Facility to which, or the
manner in which, such funds are to be applied, the Administrative Agent may, but
shall not be obligated to, elect to distribute such funds to each Lender Party
ratably in accordance with such Lender Party's proportionate share of the
principal amount of all outstanding Advances and the Available Amount of all
Letters of Credit then outstanding, in repayment or prepayment of such of the
outstanding Advances or other Obligations owed to such Lender Party, and for
application to such principal installments, as the Administrative Agent shall
direct.
(c) The Borrower hereby authorizes each Lender Party, if and
to the extent payment owed to such Lender Party is not made when due hereunder
or, in the case of a Lender, under the Note held by such Lender, to charge from
time to time against any or all of the Borrower's accounts with such Lender
Party any amount so due. Each Lender Party agrees promptly to notify the
Borrower after any such charge; provided, however, that the failure to give such
notice shall not affect the validity of such charge.
(d) All computations of interest, fees and Letter of Credit
commissions shall be made by the Administrative Agent on the basis of a year of
360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest,
fees or commissions are payable. Each determination by the Administrative Agent
of an interest rate, fee or commission hereunder shall be conclusive and binding
for all purposes, absent manifest error.
(e) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or commitment fee, as
the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(f) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to any Lender
Party hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender Party
on such due date an amount equal to the amount then due such Lender Party. If
and to the extent the Borrower shall not have so made such payment in full to
the Administrative Agent, each such Lender Party shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Lender
Party together with interest thereon, for each day from the date such amount is
distributed to such Lender Party until the date such Lender Party repays such
amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.12. Taxes. (a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in accordance with Section 2.11,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender Party and the
Administrative Agent, taxes that are imposed on its overall net income by the
United States and taxes that are imposed on its overall net income (and
franchise taxes
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imposed in lieu thereof) by the state or foreign jurisdiction under the laws of
which such Lender Party or the Administrative Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each Lender
Party, taxes that are imposed on its overall net income (and franchise taxes
imposed in lieu thereof) that are imposed on such Lender Party by the state or
foreign jurisdiction of such Lender Party's Applicable Lending Office or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities in respect of payments
hereunder or under the Notes being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note to any Lender Party or the
Administrative Agent, (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.12) such Lender Party or the
Administrative Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
(b) In addition, the Borrower shall pay any present or future
stamp, documentary, excise, property or similar taxes, charges or levies that
arise from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, performing under, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c) The Borrower shall indemnify each Lender Party and the
Administrative Agent for and hold it harmless against the full amount of Taxes
and Other Taxes, and for the full amount of taxes of any kind imposed by any
jurisdiction on amounts payable under this Section 2.12, imposed on or paid by
such Lender Party or the Administrative Agent (as the case may be) and any
liability (including penalties, additions to tax, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be made within 30
days from the date such Lender Party or the Administrative Agent (as the case
may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Administrative Agent, at its address referred to
in Section 8.02, the original or a certified copy of a receipt evidencing such
payment. In the case of any payment hereunder or under the Notes by or on behalf
of the Borrower through an account or branch outside the United States or by or
on behalf of the Borrower by a payor that is not a United States person, if the
Borrower determines that no Taxes are payable in respect thereof, the Borrower
shall furnish, or shall cause such payor to furnish, to the Administrative
Agent, at such address, an opinion of counsel acceptable to the Administrative
Agent stating that such payment is exempt from Taxes. For purposes of this
subsection (d) and subsection (e), the terms "United States" and "United States
person" shall have the meanings specified in Section 7701 of the Internal
Revenue Code.
(e) Each Lender Party organized under the laws of a
jurisdiction outside the United States shall, on or prior to the date of its
execution and delivery of this Agreement in the case of each Initial Lender or
Initial Issuing Bank, as the case may be, and on the date of the Assignment and
Acceptance pursuant to which it becomes a Lender Party in the case of each other
Lender Party, and from time to time thereafter as requested in writing by the
Borrower (but only so long thereafter as such Lender Party remains lawfully able
to do so), provide each of the Administrative Agent and the Borrower with two
original Internal Revenue Service forms 1001 or 4224. If the forms provided by a
Lender Party at the time such Lender Party first becomes a party to this
Agreement indicates a United States interest withholding tax rate in excess of
zero, withholding tax at such rate shall be considered excluded from Taxes
unless and until such Lender Party provides the appropriate form certifying that
a lesser rate applies, whereupon withholding tax at such lesser rate only shall
be considered excluded from Taxes for periods governed by such form; provided,
however, that, if at the date of the Assignment and Acceptance pursuant to which
a Lender Party becomes a party to this Agreement, the Lender Party assignor was
entitled to payments under subsection (a) in respect of United States
withholding tax with respect to interest paid at such date, then, to such
extent, the term Taxes shall include (in addition to withholding
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taxes that may be imposed in the future or other amounts otherwise includable in
Taxes) United States withholding tax, if any, applicable with respect to the
Lender Party assignee on such date. If any form or document referred to in this
subsection (e) requires the disclosure of information, other than information
necessary to compute the tax payable and information required on the date hereof
by Internal Revenue Service form 1001 or 4224, that the Lender Party reasonably
considers to be confidential, the Lender Party shall give notice thereof to the
Borrower and shall not be obligated to include in such form or document such
confidential information.
(f) For any period with respect to which a Lender Party has
failed to provide the Borrower with the appropriate form described in subsection
(e) above (other than if such failure is due to a change in law occurring after
the date on which a form originally was required to be provided or if such form
otherwise is not required under subsection (e) above), such Lender Party shall
not be entitled to indemnification under subsection (a) or (c) with respect to
Taxes imposed by the United States by reason of such failure; provided, however,
that should a Lender Party become subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Lender Party shall reasonably request to assist such Lender Party to recover
such Taxes.
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party
shall obtain at any time any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise) (a) on account of
Obligations due and payable to such Lender Party hereunder and under the Notes
at such time in excess of its ratable share (according to the proportion of (i)
the amount of such Obligations due and payable to such Lender Party at such time
to (ii) the aggregate amount of the Obligations due and payable to all Lender
Parties hereunder and under the Notes at such time) of payments on account of
the Obligations due and payable to all Lender Parties hereunder and under the
Notes at such time obtained by all the Lender Parties at such time or (b) on
account of Obligations owing (but not due and payable) to such Lender Party
hereunder and under the Notes at such time in excess of its ratable share
(according to the proportion of (i) the amount of such Obligations owing to such
Lender Party at such time to (ii) the aggregate amount of the Obligations owing
(but not due and payable) to all Lender Parties hereunder and under the Notes at
such time) of payments on account of the Obligations owing (but not due and
payable) to all Lender Parties hereunder and under the Notes at such time
obtained by all of the Lender Parties at such time, such Lender Party shall
forthwith purchase from the other Lender Parties such participations in the
Obligations due and payable or owing to them, as the case may be, as shall be
necessary to cause such purchasing Lender Party to share the excess payment with
each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender Party, such purchase
from each other Lender Party shall be rescinded and such other Lender Party
shall repay to the purchasing Lender Party the purchase price to the extent of
such Lender Party's ratable share (according to the proportion of (i) the
purchase price paid to such Lender Party to (ii) the aggregate purchase price
paid to all Lender Parties) of such recovery together with an amount equal to
such Lender Party's ratable share (according to the proportion of (i) the amount
of such other Lender Party's required repayment to (ii) the total amount so
recovered from the purchasing Lender Party) of any interest or other amount paid
or payable by the purchasing Lender Party in respect of the total amount so
recovered. The Borrower agrees that any Lender Party so purchasing a
participation from another Lender Party pursuant to this Section 2.13 may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender Party were the direct creditor of the Borrower in the amount of
such participation.
SECTION 2.14. Use of Proceeds. The proceeds of Advances and
issuances of Letters of Credit shall be available (and the Borrower agrees that
it shall use such proceeds and Letters of Credit) solely to provide working
capital for the Borrower and its Subsidiaries, to repurchase capital stock, to
pay transaction fees and expenses and to finance other corporate purposes of the
Borrower and its Subsidiaries; provided, however, that no proceeds of the
Tranche A Revolving Credit Facility shall be used to repurchase any capital
stock of the Borrower.
SECTION 2.15. Defaulting Lenders. (a) In the event that, at
any one time, (i) any Lender
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Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a
Defaulted Advance to the Borrower and (iii) the Borrower shall be required to
make any payment hereunder or under any other Loan Document to or for the
account of such Defaulting Lender, then the Borrower may, so long as no Default
shall occur or be continuing at such time and to the fullest extent permitted by
applicable law, set off and otherwise apply the Obligation of the Borrower to
make such payment to or for the account of such Defaulting Lender against the
obligation of such Defaulting Lender to make such Defaulted Advance. In the
event that, on any date, the Borrower shall so set off and otherwise apply its
obligation to make any such payment against the obligation of such Defaulting
Lender to make any such Defaulted Advance on or prior to such date, the amount
so set off and otherwise applied by the Borrower shall constitute for all
purposes of this Agreement and the other Loan Documents an Advance by such
Defaulting Lender made on the date under the Facility pursuant to which such
Defaulted Advance was originally required to have been made pursuant to Section
2.01. Such Advance shall be a Alternate Base Rate Advance and shall be
considered, for all purposes of this Agreement, to comprise part of the
Borrowing in connection with which such Defaulted Advance was originally
required to have been made pursuant to Section 2.01, even if the other Advances
comprising such Borrowing shall be Eurodollar Rate Advances on the date such
Advance is deemed to be made pursuant to this subsection (a). The Borrower shall
notify the Administrative Agent at any time the Borrower exercises its right of
set-off pursuant to this subsection (a) and shall set forth in such notice (A)
the name of the Defaulting Lender and the Defaulted Advance required to be made
by such Defaulting Lender and (B) the amount set off and otherwise applied in
respect of such Defaulted Advance pursuant to this subsection (a). Any portion
of such payment otherwise required to be made by the Borrower to or for the
account of such Defaulting Lender which is paid by the Borrower, after giving
effect to the amount set off and otherwise applied by the Borrower pursuant to
this subsection (a), shall be applied by the Administrative Agent as specified
in subsection (b) or (c) of this Section 2.15.
(b) In the event that, at any one time, (i) any Lender Party
shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted
Amount to the Administrative Agent or any of the other Lender Parties and (iii)
the Borrower shall make any payment hereunder or under any other Loan Document
to the Administrative Agent for the account of such Defaulting Lender, then the
Administrative Agent may, on its behalf or on behalf of such other Lender
Parties and to the fullest extent permitted by applicable law, apply at such
time the amount so paid by the Borrower to or for the account of such Defaulting
Lender to the payment of each such Defaulted Amount to the extent required to
pay such Defaulted Amount. In the event that the Administrative Agent shall so
apply any such amount to the payment of any such Defaulted Amount on any date,
the amount so applied by the Administrative Agent shall constitute for all
purposes of this Agreement and the other Loan Documents payment, to such extent,
of such Defaulted Amount on such date. Any such amount so applied by the
Administrative Agent shall be retained by the Administrative Agent or
distributed by the Administrative Agent to such other Lender Parties, ratably in
accordance with the respective portions of such Defaulted Amounts payable at
such time to the Administrative Agent and such other Lender Parties and, if the
amount of such payment made by the Borrower shall at such time be insufficient
to pay all Defaulted Amounts owing at such time to the Administrative Agent and
the other Lender Parties, in the following order of priority:
(i) first, to the Administrative Agent for any Defaulted
Amount then owing to the Administrative Agent; and
(ii) second, to any other Lender Parties for any Defaulted
Amounts then owing to such other Lender Parties, ratably in accordance
with such respective Defaulted Amounts then owing to such other Lender
Parties.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.
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(c) In the event that, at any one time, (i) any Lender Party
shall be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a
Defaulted Advance or a Defaulted Amount and (iii) the Borrower, the
Administrative Agent or any other Lender Party shall be required to pay or
distribute any amount hereunder or under any other Loan Document to or for the
account of such Defaulting Lender, then the Borrower or such other Lender Party
shall pay such amount to the Administrative Agent to be held by the
Administrative Agent, to the fullest extent permitted by applicable law, in
escrow or the Administrative Agent shall, to the fullest extent permitted by
applicable law, hold in escrow such amount otherwise held by it. Any funds held
by the Administrative Agent in escrow under this subsection (c) shall be
deposited by the Administrative Agent in an account with NationsBank, in the
name and under the control of the Administrative Agent, but subject to the
provisions of this subsection (c). The terms applicable to such account,
including the rate of interest payable with respect to the credit balance of
such account from time to time, shall be NationsBank's standard terms applicable
to escrow accounts maintained with it. Any interest credited to such account
from time to time shall be held by the Administrative Agent in escrow under, and
applied by the Administrative Agent from time to time in accordance with the
provisions of, this subsection (c). The Administrative Agent shall, to the
fullest extent permitted by applicable law, apply all funds so held in escrow
from time to time to the extent necessary to make any Advances required to be
made by such Defaulting Lender and to pay any amount payable by such Defaulting
Lender hereunder and under the other Loan Documents to the Administrative Agent
or any other Lender Party, as and when such Advances or amounts are required to
be made or paid and, if the amount so held in escrow shall at any time be
insufficient to make and pay all such Advances and amounts required to be made
or paid at such time, in the following order of priority:
(i) first, to the Administrative Agent for any amount then due
and payable by such Defaulting Lender to the Administrative Agent
hereunder;
(ii) second, to any other Lender Parties for any amount then
due and payable by such Defaulting Lender to such other Lender Parties
hereunder, ratably in accordance with such respective amounts then due
and payable to such other Lender Parties; and
(iii) third, to the Borrower for any Advance then required to
be made by such Defaulting Lender pursuant to a Commitment of such
Defaulting Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender Party to the Obligations owing to such Lender Party at such time under
this Agreement and the other Loan Documents ratably in accordance with the
respective amounts of such Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender under
this Section 2.15 are in addition to other rights and remedies that the Borrower
may have against such Defaulting Lender with respect to any Defaulted Advance
and that the Administrative Agent or any Lender Party may have against such
Defaulting Lender with respect to any Defaulted Amount.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Effective Date. Article
II hereof shall be effective on and as of the date (the "Effective Date"), on
which each of the following conditions precedent shall have been satisfied or
duly waived.
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(a) The Lender Parties shall be satisfied with the corporate
and legal structure and capitalization of each Loan Party and each of
its Subsidiaries, including the terms and conditions of the
Constitutive Documents and each class of capital stock or other equity
interest of each Loan Party and each such Subsidiary and of each
agreement or instrument relating to such structure or capitalization.
(b) All of the governmental authorizations, and all of the
consents, approvals and authorizations of, and notices and filings to
or with, and other actions by, any other Person necessary in connection
with any of the Loan Documents or any of the other transactions
contemplated thereby, other than the governmental authorizations, and
the consents, approvals, authorizations, notices, filings and other
actions described on Schedule 4.01(d) hereto, shall have been obtained
(without the imposition of any conditions that are not reasonably
acceptable to the Lender Parties) and shall remain in full force and
effect; and all applicable waiting periods shall have expired without
any action being taken by any competent authority.
(c) The Lender Parties shall be satisfied that all Existing
Debt other than the Debt identified on Schedule 4.01(ff) (the
"Surviving Debt") shall have been prepaid, redeemed or defeased in full
or otherwise satisfied and extinguished and that all such Surviving
Debt shall be on terms and conditions satisfactory to the Lender
Parties.
(d) There shall have occurred no Material Adverse Change in
(i) the Borrower, together with its Subsidiaries, taken as a whole,
since April 30, 1997, (ii) the Information provided to the Lender
Parties prior to the Closing Date, or (iii) the financial markets,
which, in the judgment of the Lender Parties, would make it impractical
or inadvisable to proceed with the funding of the Facilities.
(e) There shall exist no action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of its
Subsidiaries pending or threatened before any court, governmental
agency or arbitrator that (i) could be reasonably likely to have a
Material Adverse Effect with respect to any Loan Party or any Lender
Party other than the matters described on Schedule 3.01(e) (the
"Disclosed Litigation") or (ii) purports to affect the legality,
validity or enforceability of this Agreement, any Note, any other Loan
Document or the consummation of the transactions contemplated hereby.
(f) The Borrower shall have paid all accrued fees and expenses
of the Administrative Agent and the Lender Parties (including the
accrued fees and expenses of counsel to the Administrative Agent and
local counsel to the Lender Parties).
(g) All amounts under the Existing Credit Agreement shall have
been paid in full and all commitments thereunder shall have been
terminated.
(h) The Administrative Agent shall have received on or before
the day of the Initial Extension of Credit the following, each dated
such day (unless otherwise specified), in form and substance
satisfactory to the Administrative Agent (unless otherwise specified)
and (except for the Notes) in sufficient copies for each Lender Party:
(i) The Notes payable to the order of the
Lenders.
(ii) Certified copies of the resolutions of the Board
of Directors (or persons performing similar functions) of the
Borrower and each other Loan Party approving this Agreement,
the Notes and each other Loan Document to which it is or is to
be a party, and of all documents evidencing other necessary
corporate (or the equivalent thereof) action and
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governmental and other third party approvals and consents, if
any, with respect to this Agreement, the Notes and each other
Loan Document.
(iii) A copy of the Constitutive Documents of the
Borrower and each other Loan Party and each amendment thereto,
certified (as of a date reasonably near the date of the
Initial Extension of Credit) by the Secretary of State (or
similar governmental authority) of the jurisdiction of its
organization as being a true and correct copy thereof.
(iv) A copy of a certificate of the Secretary of
State (or similar governmental authority) of the jurisdiction
of its organization, dated reasonably near the date of the
Initial Extension of Credit, listing the charter (or similar
Constitutive Document) of the Borrower and each other Loan
Party and each amendment thereto on file in his office and
certifying that (A) such amendments are the only amendments to
the Borrower's, or such other Loan Party's charter (or similar
Constitutive Document) on file in his office, (B) the Borrower
and each other Loan Party have paid all franchise taxes (or
the equivalent thereof) to the date of such certificate and
(C) the Borrower, and each other Loan Party are duly organized
and in good standing under the laws of the State of the
jurisdiction of its organization.
(v) A copy of a certificate of the Secretary of State
(or the equivalent governmental authority) of each
jurisdiction in which any Loan Party is qualified or licensed
as a foreign corporation, partnership, limited liability
company or other Person, dated reasonably near the date of the
Initial Extension of Credit, stating that the Borrower and
each other Loan Party are duly qualified and in good standing
as a foreign corporation, partnership, limited liability
company or other Person in such State and have filed all
annual reports required to be filed to the date of such
certificate.
(vi) A certificate of the Borrower, and each other
Loan Party, signed on behalf of the Borrower and such other
Loan Party by its President or a Vice President and its
Secretary or any Assistant Secretary (or persons performing
similar functions), dated the date of the Initial Extension of
Credit (the statements made in which certificate shall be true
on and as of the date of the Initial Extension of Credit),
certifying as to (A) the absence of any amendments to the
charter (or similar Constitutive Document) of the Borrower or
such other Loan Party since the date of the Secretary of
State's (or equivalent authority's) certificate referred to in
Section 3.01(k)(iv), (B) a true and correct copy of the bylaws
(or similar Constitutive Document) of the Borrower, and such
other Loan Party as in effect on the date of the Initial
Extension of Credit, (C) the due organization and good
standing of the Borrower and such other Loan Party as a Person
organized under the laws of the State of the jurisdiction of
its organization, and the absence of any proceeding for the
dissolution or liquidation of the Borrower or such other Loan
Party, (D) the truth of the representations and warranties
contained in the Loan Documents as though made on and as of
the date of the Initial Extension of Credit and (E) the
absence of any event occurring and continuing, or resulting
from the Initial Extension of Credit, that constitutes a
Default.
(vii) A certificate of the Secretary or an Assistant
Secretary (or persons performing similar functions) of the
Borrower, and each other Loan Party certifying the names and
true signatures of the officers of the Borrower and such other
Loan Party authorized to sign this Agreement, the Notes, each
other Loan Document and each Related Document to which they
are or are to be parties and the other documents to be
delivered hereunder and thereunder.
(viii) A security agreement in substantially the form
of Exhibit D (together with each
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other security agreement delivered pursuant to Section
5.01(p), in each case as amended, supplemented or otherwise
modified from time to time in accordance with its terms, the
"Security Agreement"), duly executed by the Borrower and each
other Collateral Grantor, together with:
(A) certificates representing the Pledged
Shares referred to therein accompanied by undated
stock powers executed in blank and instruments
evidencing the Pledged Debt referred to therein
indorsed in blank,
(B) proper financing statements, completed
in a manner satisfactory to the Lender Parties and
duly executed by the applicable Loan Party on or
before the day of the Initial Extension of Credit
under the Uniform Commercial Code of all
jurisdictions that the Administrative Agent may deem
necessary or desirable in order to perfect and
protect the first priority liens and security
interests created under the Security Agreement,
covering the Collateral described in the Security
Agreement,
(C) completed requests for information,
dated on or before the date of the Initial Extension
of Credit, listing all of the effective financing
statements filed in the jurisdictions referred to in
clause (B) above that name the Borrower or any other
Loan Party as debtor, together with copies of such
other financing statements,
(D) evidence of the completion of all other
recordings and filings of or with respect to the
Security Agreement that the Administrative Agent may
deem necessary or desirable in order to perfect and
protect the Liens created thereby,
(E) evidence of the insurance required by
the terms of the Security Agreement,
(F) copies of the Assigned Agreements
referred to in the Security Agreement, together with
a consent to such assignment, in substantially the
form of Exhibit B to the Security Agreement, duly
executed by each party to such Assigned Agreements
other than the Borrower,
(G) evidence that all other action that the
Administrative Agent may deem necessary or desirable
in order to perfect and protect the first priority
liens and security interests created under the
Security Agreement has been taken.
(ix) A guaranty in substantially the form of Exhibit
E duly executed by each of the Subsidiary Guarantors (together
with each other guaranty of any such entity delivered pursuant
to Section 5.01(p), in each case as amended, supplemented or
otherwise modified from time to time in accordance with its
terms, the "Subsidiary Guaranty").
(x) Certificates, in the form attached hereto as
Exhibit F, attesting to the Solvency of each of the Borrower
and each Subsidiary Guarantor after giving effect to the
Transaction and the other transactions contemplated hereby,
from its chief financial officer.
(xi) Evidence of insurance naming the Administrative
Agent as insured and loss payee with such responsible and
reputable insurance companies or associations, and in such
amounts and covering such risks, as is satisfactory to the
Lender Parties.
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(xii) Certified copies of all Material Contracts of
each Loan Party and its Subsidiaries.
(xiii) A favorable opinion of Fried, Frank, Harris,
Shriver & Jacobson, counsel for the Loan Parties, in
substantially the form of Exhibit G hereto and as to such
other matters as any Lender Party through the Administrative
Agent may reasonably request.
(xiv) A favorable opinion of Shearman & Sterling,
counsel for the Administrative Agent, in form and substance
satisfactory to the Lender Parties.
(xv) A certificate of the chief financial officer of
the Borrower to the effect that Consolidated EBITDA of the
Borrower and its Subsidiaries for the 12-month period ended
April 30, 1998 is at least $29,700,000.
SECTION 3.02. Conditions Precedent to Each Borrowing and
Issuance. The obligation of each Appropriate Lender to make an Advance (other
than a Letter of Credit Advance made by an Issuing Bank or a Tranche A Revolving
Credit Lender pursuant to Section 2.03(b)) on the occasion of each Borrowing
(including the Initial Extension of Credit), and the obligation of the Issuing
Bank to issue a Letter of Credit (including the initial issuance) or renew a
Letter of Credit, shall be subject to the further conditions precedent that on
the date of such Borrowing or issuance or renewal (a) the following statements
shall be true (and each of the giving of the applicable Notice of Borrowing,
Notice of Issuance or Notice of Renewal and the acceptance by the Borrower of
the proceeds of such Borrowing or of such Letter of Credit or the renewal of
such Letter of Credit shall constitute a representation and warranty by the
Borrower that both on the date of such notice and on the date of such Borrowing
or issuance or renewal such statements are true):
(i) the representations and warranties contained in each Loan
Document are correct in all material respects on and as of such date,
before and after giving effect to such Borrowing or issuance or renewal
and to the application of the proceeds therefrom, as though made on and
as of such date other than any such representations or warranties that,
by their terms, refer to a specific date other than the date of such
Borrowing or issuance or renewal, in which case as of such specific
date; and
(ii) no event has occurred and is continuing, or would result
from such Borrowing or issuance or renewal or from the application of
the proceeds therefrom, that constitutes a Default;
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as any Appropriate Lender through the Administrative Agent
may reasonably request.
SECTION 3.03. Determinations Under Section 3.01. For purposes
of determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties unless an
officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Lender
Party prior to the Initial Extension of Credit specifying its objection thereto
and if the Initial Extension of Credit consists of a Borrowing, such Lender
Party shall not have made available to the Administrative Agent such Lender
Party's ratable portion of such Borrowing.
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) Each Loan Party (i) is a corporation, a limited liability
company or a partnership duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (ii)
is duly qualified and in good standing as a foreign corporation,
limited liability company or partnership in each other jurisdiction in
which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed except where the
failure to so qualify or be licensed would not be reasonably likely to
have a Material Adverse Effect with respect to any Loan Party or any
Lender Party and (iii) has all requisite power and authority
(including, without limitation, all governmental licenses, permits and
other approvals) to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be conducted
except where the absence of such power or authority would not be
reasonably likely to have a Material Adverse Effect with respect to any
Loan Party or any Lender Party.
(b) Set forth on Schedule 4.01(b) hereto is a complete and
accurate list of all Subsidiaries of each Loan Party, showing as of the
date hereof (as to each such Subsidiary) the jurisdiction of its
organization, the number of shares of each class of capital stock or
other equity interest authorized, and the number outstanding, on the
date hereof and the percentage of the outstanding shares or other
equity interest of each such class owned (directly or indirectly) by
such Loan Party and the number of shares or other equity interest
covered by all outstanding options, warrants, rights of conversion or
purchase and similar rights at the date hereof. All of the outstanding
capital stock or other equity interest of all of such Subsidiaries has
been validly issued, is fully paid and non-assessable and is owned by
such Loan Party or one or more of its Subsidiaries free and clear of
all Liens, except those created under the Loan Documents or as
disclosed in such Schedule. Each such Subsidiary (i) is a corporation,
limited liability company or partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (ii) is duly qualified and in good standing as a foreign
corporation, limited liability company or partnership in each other
jurisdiction in which it owns or leases property or in which the
conduct of its business requires it to so qualify or be licensed except
where the failure to so qualify or be licensed would not be reasonably
likely to have a Material Adverse Effect with respect to any Loan Party
or any Lender Party and (iii) has all requisite power and authority
(including, without limitation, all governmental licenses, permits and
other approvals) to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be conducted
except where the absence of such power of authority would not be
reasonably likely to have a Material Adverse Effect with respect to any
Loan Party or any Lender Party.
(c) The execution, delivery and performance by each Loan Party
of this Agreement, the Notes, each other Loan Document to which it is
or is to be a party, and the consummation of the transactions
contemplated hereby, are within such Loan Party's corporate (or
equivalent thereof) powers, have been duly authorized by all necessary
action, and do not (i) contravene such Loan Party's Constitutive
Documents, (ii) violate any law (including, without limitation, the
Securities Exchange Act of 1934 and the Racketeer Influenced and
Corrupt Organizations Chapter of the Organized Crime Control Act of
1970), rule, regulation (including, without limitation, Regulation X of
the Board of Governors of the Federal Reserve System), order, writ,
judgment, injunction, decree, determination or award, (iii) conflict
with or result in the breach of, or constitute a default under, any
contract, loan agreement, indenture, mortgage, deed of trust, lease or
other instrument binding on or affecting any Loan Party, any of its
Subsidiaries or any of their properties or (iv) except for the Liens
created under the Loan Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the
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properties of any Loan Party or any of its Subsidiaries. No Loan Party
or any of its Subsidiaries is in violation of any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award or in breach of any such contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument, the violation or
breach of which could be reasonably likely to have a Material Adverse
Effect with respect to any Loan Party or any Lender Party.
(d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for (i) the due execution,
delivery, recordation, filing or performance by any Loan Party of this
Agreement, the Notes or any other Loan Document to which it is or is to
be a party, or for the consummation of the transactions contemplated
hereby, (ii) the grant by any Loan Party of the Liens granted by it
pursuant to the Collateral Documents, (iii) the perfection or
maintenance of the Liens created by the Collateral Documents (including
the first priority nature thereof) or (iv) the exercise by the
Administrative Agent or any Lender Party of its rights under the Loan
Documents or the remedies in respect of the Collateral pursuant to the
Collateral Documents, except for the authorizations, approvals,
actions, notices and filings listed on Schedule 4.01(d), all of which
have been duly obtained, taken, given or made and are in full force and
effect. All applicable waiting periods in connection with the
transactions contemplated hereby have expired without any action having
been taken by any competent authority restraining, preventing or
imposing materially adverse conditions upon the rights of the Loan
Parties or their Subsidiaries freely to transfer or otherwise dispose
of, or to create any Lien on, any properties now owned or hereafter
acquired by any of them.
(e) This Agreement has been, and each of the Notes and each
other Loan Document when delivered hereunder will have been, duly
executed and delivered by each Loan Party thereto. This Agreement is,
and each of the Notes and each other Loan Document when delivered
hereunder will be, the legal, valid and binding obligation of each Loan
Party thereto, enforceable against such Loan Party in accordance with
its terms except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect that affect creditors' rights
generally, general principles of equity (including, without limitation,
standards of materiality, good faith, fair dealing and reasonableness)
whether such principles are considered in a proceeding in equity or at
law, and the application of any fraudulent conveyance, fraudulent
transfer, fraudulent obligation, or preferential transfer law or any
law governing the distribution of assets of any Person.
(f) The Consolidated balance sheets of the Borrower and its
Subsidiaries as at April 30, 1997, and the related Consolidated
statements of income and Consolidated statement of cash flows of the
Borrower and its Subsidiaries for the fiscal year then ended,
accompanied by an opinion of Coopers & Lybrand L.L.P., independent
public accountants, and the Consolidated balance sheet of the Borrower
and its Subsidiaries as at January 31, 1998, and the related
Consolidated statement of income and Consolidated statement of cash
flows of the Borrower and its Subsidiaries for the nine months then
ended, duly certified by the chief financial officer of the Borrower,
copies of which have been furnished to each Lender Party, fairly
present, subject, in the case of said balance sheet as at January 31,
1998, and said statement of income and cash flows for the nine months
then ended, to year-end audit adjustments, the Consolidated financial
condition of the Borrower and its Subsidiaries as at such dates and the
Consolidated results of the operations of the Borrower and its
Subsidiaries for the periods ended on such dates, all in accordance
with generally accepted accounting principles applied on a consistent
basis, and since April 30, 1997, there has been no Material Adverse
Change with respect to the Borrower and its Subsidiaries, taken as a
whole.
(g) The Consolidated forecasted balance sheets, income
statements and cash flows statements of the Borrower and its
Subsidiaries delivered to the Lender Parties pursuant to Section 5.03
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were prepared in good faith on the basis of the assumptions stated
therein, which assumptions were fair in the light of conditions
existing at the time of delivery of such forecasts, and represented, at
the time of delivery, the Borrower's best estimate of its future
financial performance.
(h) Neither the Information nor any other information, exhibit
or report furnished by any Loan Party to the Administrative Agent or
any Lender Party in connection with the negotiation of the Loan
Documents or pursuant to the terms of the Loan Documents contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements made therein not misleading.
(i) Except as set forth on Schedule 3.01(e), there is no
action, suit, investigation, litigation or proceeding affecting any
Loan Party or any of its Subsidiaries, including any Environmental
Action, pending or, to the best of any Loan Party's knowledge,
threatened before any court, governmental agency or arbitrator that (i)
could be reasonably likely to have a Material Adverse Effect with
respect to any Loan Party or any Lender Party or (ii) purports to
affect the legality, validity or enforceability of this Agreement, any
Note or any other Loan Document or the consummation of the transactions
contemplated thereby.
(j) No proceeds of any Advance or drawings under any Letter of
Credit will be used to acquire any equity security of a class that is
registered pursuant to Section 12 of the Securities Exchange Act of
1934, other than equity securities issued by the Borrower.
(k) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock, and no
proceeds of any Advance or drawings under any Letter of Credit will be
used to purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin Stock,
except for repurchases by the Borrower of its capital stock as
permitted under this Agreement.
(l) Following application of the proceeds of each Advance or
drawing under each Letter of Credit, not more than 25% of the value of
the assets (either of the Borrower only or of the Borrower and its
Subsidiaries on a Consolidated basis) subject to the provisions of
Section 5.02(a) or 5.02(e) or subject to any restriction contained in
any agreement or instrument between the Borrower and any Lender Party
or any Affiliate of any Lender Party relating to Debt and within the
scope of Section 6.01(e) will be Margin Stock.
(m) Set forth on Schedule 4.01(m) hereto is a complete and
accurate list of all material Plans, Multiemployer Plans and Welfare
Plans.
(n) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan that has resulted in or is reasonably
expected to result in a material liability of any Loan Party or any
ERISA Affiliate.
(o) As of the last annual actuarial valuation date, the funded
current liability percentage, as defined in Section 302(d)(8) of ERISA,
of each Plan exceeds 90% and there has been no material adverse change
in the funding status of any such Plan since such date.
(p) Neither any Loan Party nor any ERISA Affiliate has
incurred or is reasonably expected to incur any Withdrawal Liability to
any Multiemployer Plan.
(q) Neither any Loan Party nor any ERISA Affiliate has been
notified by the sponsor of a
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Multiemployer Plan that such Multiemployer Plan is in reorganization or
has been terminated, within the meaning of Title IV of ERISA, and no
such Multiemployer Plan is reasonably expected to be in reorganization
or to be terminated, within the meaning of Title IV of ERISA.
(r) Except as set forth in the financial statements
referred to in this Section 4.01 and in Section 5.03, the Loan
Parties and their respective Subsidiaries have no material
liability with respect to "expected post retirement benefit
obligations" within the meaning of Statement of Financial
Accounting Standards No. 106.
(s) Neither the business nor the properties of any Loan Party
or any of its Subsidiaries are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance) that could be reasonably
likely to have a Material Adverse Effect with respect to any Loan Party
or any Lender Party.
(t) The operations and properties of each Loan Party and each
of its Subsidiaries comply in all material respects with all applicable
Environmental Laws and Environmental Permits, all past non-compliance
with such Environmental Laws and Environmental Permits has been
resolved without ongoing obligations or costs, and no circumstances
exist that could be reasonably likely to (i) form the basis of an
Environmental Action against any Loan Party or any of its Subsidiaries
or any of their properties that is likely to have a Material Adverse
Effect with respect to any Loan Party or any Lender Party or (ii) cause
any such property to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental Law that is
likely to have a Material Adverse Effect with respect to any Loan Party
or any Lender Party.
(u) None of the properties currently or formerly owned or
operated by any Loan Party or any of its Subsidiaries is listed or
proposed for listing on the NPL or on the CERCLIS or any analogous
foreign, state or local list or is adjacent to any such property; there
are no and never have been any underground or aboveground storage tanks
or any surface impoundments, septic tanks, pits, sumps or lagoons in
which Hazardous Materials are being or have been treated, stored or
disposed on any property currently owned or operated by any Loan Party
or any of its Subsidiaries or, to the best of its knowledge, on any
property formerly owned or operated by any Loan Party or any of its
Subsidiaries; there is no asbestos or asbestos-containing material on
any property currently owned or operated by any Loan Party or any of
its Subsidiaries; and Hazardous Materials have not been released,
discharged or disposed of on any property currently or formerly owned
or operated by any Loan Party or any of its Subsidiaries.
(v) Neither any Loan Party nor any of its Subsidiaries is
undertaking, and has not completed, either individually or together
with other potentially responsible parties, any investigation or
assessment or remedial or response action relating to any actual or
threatened release, discharge or disposal of Hazardous Materials at any
site, location or operation, either voluntarily or pursuant to the
order of any governmental or regulatory authority or the requirements
of any Environmental Law; and all Hazardous Materials generated, used,
treated, handled or stored at, or transported to or from, any property
currently or formerly owned or operated by any Loan Party or any of its
Subsidiaries have been disposed of in a manner not reasonably expected
to result in material liability to any Loan Party or any of its
Subsidiaries.
(w) Neither any Loan Party nor any of its Subsidiaries is a
party to any indenture, loan or credit agreement or any lease or other
agreement or instrument or subject to any charter or corporate
restriction that could be reasonably likely to have a Material Adverse
Effect with respect to any Loan Party or any Lender Party.
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(x) The Collateral Documents create a valid and perfected
first priority security interest in the Collateral, securing the
payment of the Secured Obligations (as defined therein), and all
filings and other actions necessary or desirable to perfect and protect
such security interest have been duly taken. The Loan Parties are the
legal and beneficial owners of the Collateral free and clear of any
Lien, except for the liens and security interests created or permitted
under the Loan Documents.
(y) Each Loan Party and each of its Subsidiaries and
Affiliates has filed, has caused to be filed or has been included in
all tax returns (Federal, state, local and foreign) required to be
filed and has paid all taxes shown thereon to be due, together with
applicable interest and penalties.
(z) Set forth on Schedule 4.01(z) hereto is a complete and
accurate list, as of the date hereof, of each taxable year of each Loan
Party and each of its Subsidiaries and Affiliates for which Federal
income tax returns have been filed and for which the expiration of the
applicable statute of limitations for assessment or collection has not
occurred by reason of extension or otherwise (an "Open Year").
(aa) The aggregate unpaid amount, as of the date hereof, of
adjustments to the Federal income tax liability of each Loan Party and
each of its Subsidiaries and Affiliates proposed by the Internal
Revenue Service with respect to Open Years does not exceed $500,000. No
issues have been raised by the Internal Revenue Service in respect of
Open Years that, in the aggregate, could be reasonably likely to have a
Material Adverse Effect with respect to any Loan Party or any Lender
Party.
(bb) The aggregate unpaid amount, as of the date hereof, of
adjustments to the state, local and foreign tax liability of each Loan
Party and its Subsidiaries and Affiliates proposed by all state, local
and foreign taxing authorities (other than amounts arising from
adjustments to Federal income tax returns) does not exceed $250,000. No
issues have been raised by such taxing authorities that, in the
aggregate, could be reasonably likely to have a Material Adverse Effect
with respect to any Loan Party or any Lender Party.
(cc) Neither any Loan Party nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
making of any Advances, nor the issuance of any Letters of Credit, nor
the application of the proceeds or repayment thereof by the Borrower,
nor the consummation of the other transactions contemplated hereby,
will violate any provision of such Act or any rule, regulation or order
of the Securities and Exchange Commission thereunder.
(dd) Each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(ee) Set forth on Schedule 4.01(ee) hereto is a complete and
accurate list of all Existing Debt (other than Surviving Debt), showing
as of the date hereof the principal amount outstanding thereunder.
(ff) Set forth on Schedule 4.01(ff) hereto is a complete and
accurate list of all Surviving Debt, showing as of the date hereof the
principal amount outstanding thereunder, the maturity date thereof and
the amortization schedule therefor.
(gg) Set forth on Schedule 4.01(gg) hereto is a complete and
accurate list of all real property owned by any Loan Party or any of
its Subsidiaries, showing as of the date hereof the street address,
county or other relevant jurisdiction, state, record owner and book and
estimated fair value thereof.
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Each Loan Party or such Subsidiary has good, marketable and insurable
fee simple title to such real property, free and clear of all Liens,
other than Liens created or permitted by the Loan Documents.
(hh) Set forth on Schedule 4.01(hh) hereto is a complete and
accurate list of all leases of real property under which any Loan Party
or any of its Subsidiaries is the lessee, showing as of the date hereof
the street address, county or other relevant jurisdiction, state,
lessor, lessee, expiration date and annual rental cost thereof. Each
such lease is the legal, valid and binding obligation of the lessor
thereof, enforceable in accordance with its terms except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect that affect creditors' rights generally, general principles of
equity (including, without limitation, standards of materiality, good
faith, fair dealing and reasonableness) whether such principles are
considered in a proceeding in equity or at law, and the application of
any fraudulent conveyance, fraudulent transfer, fraudulent obligation,
or preferential transfer law or any law governing the distribution of
assets of any Person.
(ii) Set forth on Schedule 4.01(ii) hereto is a complete and
accurate list of all Material Contracts of each Loan Party and its
Subsidiaries, showing as of the date hereof the parties, subject matter
and term thereof. Each such Material Contract has been duly authorized,
executed and delivered by all parties thereto, has not been amended or
otherwise modified (other than as specified on Schedule 4.01(ii)), is
in full force and effect and is binding upon and enforceable against
all parties thereto in accordance with its terms except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect that affect creditors' rights generally, general principles of
equity (including, without limitation, standards of materiality, good
faith, fair dealing and reasonableness) whether such principles are
considered in a proceeding in equity or at law, and the application of
any fraudulent conveyance, fraudulent transfer, fraudulent obligation,
or preferential transfer law or any law governing the distribution of
assets of any Person; and there exists no material default under any
such Material Contract by any party thereto.
(jj) Set forth on Schedule 4.01(jj) hereto is a complete and
accurate list of all Investments held by any Loan Party or any of its
Subsidiaries, showing as of the date hereof the amount, obligor or
issuer and maturity, if any, thereof.
(kk) Set forth on Schedule 4.01(kk) hereto is a complete and
accurate list of all material patents, trademarks, trade names, service
marks and copyrights, and all applications therefor and licenses
thereof, of each Loan Party or any of its Subsidiaries, showing as of
the date hereof the jurisdiction in which registered, the registration
number, the date of registration and the expiration date.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
Party shall have any Commitment hereunder, the Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, compliance with ERISA and the Racketeer Influenced
and Corrupt Organizations
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Chapter of the Organized Crime Control Act of 1970.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each
of its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its property and (ii) all lawful claims
that, if unpaid, might by law become a Lien upon its property;
provided, however, that neither the Borrower nor any of its
Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and
by proper proceedings and as to which appropriate reserves are being
maintained, unless and until any Lien resulting therefrom attaches to
its property and becomes enforceable against its other creditors.
(c) Compliance with Environmental Laws. Comply, and cause each
of its Subsidiaries and all lessees and other Persons operating or
occupying its properties to comply, in all material respects, with all
applicable Environmental Laws and Environmental Permits; obtain and
renew and cause each of its Subsidiaries to obtain and renew all
Environmental Permits necessary for its operations and properties; and
conduct, and cause each of its Subsidiaries to conduct, any
investigation, study, sampling and testing, and undertake any cleanup,
removal, remedial or other action necessary to remove and clean up all
Hazardous Materials from any of its properties, in accordance with the
requirements of all Environmental Laws; provided, however, that neither
the Borrower nor any of its Subsidiaries shall be required to undertake
any such cleanup, removal, remedial or other action to the extent that
its obligation to do so is being contested in good faith and by proper
proceedings and appropriate reserves are being maintained with respect
to such circumstances.
(d) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations 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
Borrower or such Subsidiary operates.
(e) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain,
its existence, legal structure, legal name, rights (charter and
statutory), permits, licenses, approvals, privileges and franchises;
provided, however, that neither the Borrower nor any of its
Subsidiaries shall be required to preserve any right, permit, license,
approval, privilege or franchise if the Board of Directors of the
Borrower or such Subsidiary shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the
Borrower or such Subsidiary, as the case may be, and that the loss
thereof is not disadvantageous in any material respect to the Borrower,
and its Subsidiaries, taken as a whole, or the Lender Parties; provided
further that nothing in this Section 5.01(e) shall prevent the
consummation of any merger or consolidation permitted pursuant to
Section 5.02(d).
(f) Visitation Rights. At any reasonable time and from time to
time, permit the Administrative Agent or any of the Lender Parties or
any agents or representatives thereof to examine and make copies of and
abstracts from the records and books of account of, and visit the
properties of, the Borrower and any of its Subsidiaries, and to discuss
the affairs, finances and accounts of the Borrower and any of its
Subsidiaries with any of their officers or directors and with their
independent certified public accountants.
(g) Preparation of Environmental Reports. At the reasonable
request of the Administrative Agent from time to time, provide to the
Lender Parties within 60 days after such request, at the expense of the
Borrower, an environmental site assessment report for any of its or its
Subsidiaries' properties described in such request, prepared by an
environmental consulting firm acceptable to the Administrative
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Agent, indicating the presence or absence of Hazardous Materials and
the estimated cost of any compliance, removal or remedial action in
connection with any Hazardous Materials on such properties; without
limiting the generality of the foregoing, if the Administrative Agent
determines at any time that a material risk exists that any such report
will not be provided within the time referred to above, the
Administrative Agent may retain an environmental consulting firm to
prepare such report at the expense of the Borrower, and the Borrower
hereby grants and agrees to cause any Subsidiary that owns any property
described in such request to grant at the time of such request, to the
Administrative Agent, the Lender Parties, such firm and any agents or
representatives thereof an irrevocable non-exclusive license, subject
to the rights of tenants, to enter onto their respective properties to
undertake such an assessment.
(h) Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Borrower and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(i) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in
good working order and condition, ordinary wear and tear excepted;
provided, however, that neither the Borrower nor any of its
Subsidiaries shall be required to maintain and preserve any such
property if the Board of Directors of the Borrower or such Subsidiary
shall determine that the maintenance and preservation thereof is no
longer desirable in the conduct of the business of the Borrower or such
Subsidiary, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to the Borrower and its
Subsidiaries, taken as a whole, or the Lender Parties.
(j) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases of real
property to which the Borrower or any of its Subsidiaries is a party,
keep such leases in full force and effect and not allow such leases to
lapse or be terminated or any rights to renew such leases to be
forfeited or cancelled, notify the Administrative Agent of any default
by any party with respect to such leases and cooperate with the
Administrative Agent in all respects to cure any such default, and
cause each of its Subsidiaries to do so except, in any case, where the
failure to do so, either individually or in the aggregate, could not be
reasonably likely to have a Material Adverse Effect with respect to any
Loan Party or any Lender Party.
(k) Performance of Convertible Preferred Stock Documents and
Subordinated Debt Documents. Perform and observe all of the terms and
provisions of each Convertible Preferred Stock Document and each
Subordinated Debenture Document to be performed or observed by it,
maintain each such Convertible Preferred Stock Document and each such
Subordinated Debenture Document in full force and effect, enforce each
such Convertible Preferred Stock Document and each such Subordinated
Debenture Document in accordance with its terms, take all such action
to such end as may be from time to time requested by the Administrative
Agent and, upon request of the Administrative Agent, make to each other
party to each such Convertible Preferred Stock Document and each such
Subordinated Debenture Document such demands and requests for
information and reports or for action as the Borrower is entitled to
make under such Convertible Preferred Stock Document and such
Subordinated Debenture Document, as the case may be; provided, however,
that notwithstanding the foregoing provisions of this Section 5.01(k),
the Borrower shall not be obligated to pay the fee required to be paid
pursuant to the provisions of Section 1.4(b)(iv) of each of the
Preferred Stock Investment Agreements.
(l) Performance of Material Contracts. Perform and observe all
the terms and provisions of each Material Contract to be performed or
observed by it, maintain each such Material Contract in full force and
effect, enforce each such Material Contract in accordance with its
terms, take all such action to
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such end as may be from time to time requested by the Administrative
Agent and, upon request of the Administrative Agent, make to each other
party to each such Material Contract such demands and requests for
information and reports or for action as the Borrower is entitled to
make under such Material Contract, and cause each of its Subsidiaries
to do so except, in any case, where the failure to do so, either
individually or in the aggregate, could not be reasonably likely to
have a Material Adverse Effect with respect to any Loan Party or any
Lender Party.
(m) Transactions with Affiliates. Conduct, and cause each of
its Subsidiaries to conduct, all transactions otherwise permitted under
the Loan Documents with any of their Affiliates on terms that are fair
and reasonable and no less favorable to the Borrower or such Subsidiary
than it would obtain in a comparable arm's-length transaction with a
Person not an Affiliate.
(n) Cash Concentration Accounts. Maintain and cause each
Collateral Grantor to maintain main cash concentration accounts with
NationsBank and, on and after November 15, 1997, maintain and cause
each Collateral Grantor to maintain Lockbox Accounts into which all
proceeds of Collateral are paid with NationsBank or one or more banks
acceptable to the Administrative Agent that have accepted the
assignment of such accounts to the Administrative Agent pursuant to the
terms of the Security Agreement.
(o) Termination of Financing Statements. Upon the request of
the Administrative Agent, and at the expense of the Borrower, within 10
days after such request, furnish to the Administrative Agent proper
termination statements on Form UCC-3 covering such financing statements
as the Administrative Agent may reasonably request.
(p) Covenant to Give Security. Upon the request of the
Administrative Agent following the occurrence and during the
continuance of a Default, and at the expense of the Borrower, (i)
within 10 days after such request, furnish to the Administrative Agent
a description of the real and personal properties of the Borrower and
the Subsidiary Guarantors in detail satisfactory to the Administrative
Agent, (ii) within 15 days after such request, duly execute and deliver
to the Administrative Agent mortgages, pledges, assignments and other
security agreements, as specified by and in form and substance
satisfactory to the Administrative Agent, securing payment of all the
Obligations of the Borrower under the Loan Documents and constituting
Liens on all such properties, (iii) within 30 days after such request,
take whatever action (including, without limitation, the recording of
mortgages, the filing of Uniform Commercial Code financing statements,
the giving of notices and the endorsement of notices on title
documents) may be necessary or advisable in the opinion of the
Administrative Agent to vest in the Administrative Agent (or in any
representative of the Administrative Agent designated by it) valid and
subsisting Liens on the properties purported to be subject to the
security agreements delivered pursuant to this Section 5.01(p),
enforceable against all third parties in accordance with their terms,
(iv) within 60 days after such request, deliver to the Administrative
Agent a signed copy of a favorable opinion of counsel for the Borrower,
addressed to and acceptable to the Administrative Agent, as to the
matters contained in clauses (i), (ii) and (iii) above, as to such
security agreements being legal, valid and binding obligations of the
Borrower and the Subsidiary Guarantors enforceable in accordance with
their terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect that affect creditors' rights
generally, general principles of equity (including, without limitation,
standards of materiality, good faith, fair dealing and reasonableness)
whether such principles are considered in a proceeding in equity or at
law, and the application of any fraudulent conveyance, fraudulent,
transfer, fraudulent obligation or preferential transfer law or any law
governing the distribution of assets of any Person) and as to such
other matters as the Administrative Agent may reasonably request, (v)
as promptly as practicable after such request, deliver to the
Administrative Agent surveys meeting the criteria specified in Section
5.01(r)(iii) and
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Mortgage Policies as to each parcel of real property subject to such
request and (vi) at any time and from time to time, promptly execute
and deliver any and all further instruments and documents and take all
such other action as the Administrative Agent may reasonably deem
desirable in obtaining the full benefits of, or in preserving the Liens
of, such security agreements.
(q) Further Assurances. Promptly upon the request of the
Administrative Agent, or any of the Lender Parties through the
Administrative Agent, at any time and from time to time, do, execute,
acknowledge, deliver, record, rerecord, file, refile, register and
reregister, and cause of each of its Subsidiaries promptly to do,
execute, acknowledge, deliver, rerecord, record, file, refile, register
and reregister, any and all further acts, conveyances, security
agreements, assignments, floating and fixed debentures, pledge
agreements, estoppel certificates, financing statements and
continuations thereof, termination statements, notices of assignment,
transfers, mortgages, deeds of trust, certificates, assurances and
other instruments as the Administration Agent, or any of the Lender
Parties through the Administrative Agent, may reasonably require from
time to time in order to (A) carry out more effectively the purposes of
this Agreement, the Notes or any of the other Loan Documents, (B)
subject any of the property, assets, rights or interests of the
Borrower or any of its domestic Subsidiaries included or intended to be
included in the Collateral to the Liens created or now or hereafter
intended to be created under any of the Collateral Documents, (C)
perfect and maintain the validity, effectiveness and priority of any of
the Collateral Documents or any of the Liens created or intended to be
created thereunder and (D) assure, convey, grant, assign, transfer,
preserve, protect and confirm more effectively unto the Administrative
Agent and the Secured Parties the rights granted or now or hereafter
intended to be granted to the Administrative Agent and the Secured
Parties under any of the Loan Documents or under any of the other
instruments executed in connection with any of the Loan Documents to
which the Borrower or any of its domestic Subsidiaries is or is to be a
party.
(r) Material Subsidiary. Promptly upon a Subsidiary becoming a
Material Subsidiary (whether through a change in law, the receipt of
requisite regulatory approval or an increase in such Subsidiary's total
assets or gross revenues), such Subsidiary shall become an additional
grantor pursuant to the terms of the Security Agreement and shall
become a Subsidiary Guarantor pursuant to the terms of the Subsidiary
Guaranty.
SECTION 5.02. Negative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the Borrower will not, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Lien on or with respect to any of its properties of any
character (including, without limitation, accounts) whether now owned
or hereafter acquired, or sign or file or suffer to exist, or permit
any of its Subsidiaries to sign or file or suffer to exist, under the
Uniform Commercial Code of any jurisdiction, a financing statement that
names the Borrower or any of its Subsidiaries as debtor, or sign or
suffer to exist, or permit any of its Subsidiaries to sign or suffer to
exist, any security agreement authorizing any secured party thereunder
to file such financing statement, or assign, or permit any of its
Subsidiaries to assign, any accounts or other right to receive income,
excluding, however, from the operation of the foregoing restrictions
the following:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
(iii) Liens existing on the date hereof and
described on Schedule 5.02(a) hereto;
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(iv) purchase money Liens upon or in real property or
equipment acquired or held by the Borrower or any of its Subsidiaries
(other than D.C. Chartered Health Plan, Inc.) in the ordinary course of
business to secure the purchase price of such property or equipment or
to secure Debt incurred solely for the purpose of financing the
acquisition of any such property or equipment to be subject to such
Liens, or Liens existing on any such property or equipment at the time
of acquisition (other than any such Liens created in contemplation of
such acquisition that do not secure the purchase price), or extensions,
renewals or replacements of any of the foregoing for the same or a
lesser amount; provided, however, that no such Lien shall extend to or
cover any property other than the property or equipment being acquired,
and no such extension, renewal or replacement shall extend to or cover
any property not theretofore subject to the Lien being extended,
renewed or replaced; and provided further that the aggregate principal
amount of the Debt secured by Liens permitted by this clause (iv) shall
not exceed the amount permitted under Section 5.02(b)(iii)(B) at any
time outstanding and that any such Debt shall not otherwise be
prohibited by the terms of the Loan Documents;
(v) Liens arising in connection with Capitalized
Leases permitted under Section 5.02(b)(iii)(C); provided that no such
Lien shall extend to or cover any Collateral or assets other than the
assets subject to such Capitalized Leases;
(vi) other Liens affecting property of the Borrower
and its Subsidiaries (other than D.C. Chartered Health Plan, Inc.) with
an aggregate fair value not to exceed $1,000,000, provided that no such
Lien shall extend to or cover any Collateral;
(vii) the replacement, extension or renewal of any
Lien permitted by clause (iii) above upon or in the same property
theretofore subject thereto or the replacement, extension or renewal
(without increase in the amount or change in any direct or contingent
obligor) of the Debt secured thereby;
(viii) Liens in connection with attachments or
judgments (including judgment or appeal bonds), provided that the
judgments secured shall, within 60 days after the entry thereof, have
been discharged or execution thereof stayed pending appeal, or shall
have been discharged within 60 days after the expiration of such stay;
or shall be covered (subject to a customary deductible) by insurance
maintained with responsible insurance companies;
(ix) leases or subleases granted to others not
interfering in any material respect with the business of the Borrower
or any of its Consolidated Subsidiaries; and
(x) any interest of a title of a lessor under, and
Liens arising from UCC financing statements (or equivalent filings,
registrations or agreements in foreign jurisdictions) relating to,
leases permitted by this Agreement.
(b) Debt. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist,
any Debt other than:
(i) in the case of the Borrower, the Subordinated
Debentures and the Convertible Preferred Stock;
(ii) in the case of any of the Subsidiary Guarantors,
Debt owed to the Borrower or to another Subsidiary Guarantor, provided
that (x) such Debt is subordinated to any Debt of such Subsidiary
Guarantor under the Loan Documents on terms and conditions acceptable
to the Required
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Lenders and (y) such Debt is evidenced by a promissory note and such
promissory note is pledged in favor of the Secured Parties pursuant to
the terms of the Security Agreement; and
(iii) in the case of the Borrower and any of its
Subsidiaries,
(A) Debt under the Loan Documents,
(B) Debt of the Borrower and its Subsidiaries
(other than D.C. Chartered Health Plan, Inc.) secured
by Liens permitted by Section 5.02(a)(iv) not to exceed in the
aggregate $1,000,000 at any time outstanding,
(C) (i) Capitalized Leases (other than any
Capitalized Leases included in Surviving Debt) entered into by
the Borrower and its Subsidiaries (other than D.C. Chartered
Health Plan, Inc.) not to exceed in the aggregate $5,000,000
at any time outstanding, and (ii) in the case of Capitalized
Leases to which any such Subsidiary of the Borrower is a
party, Debt of the Borrower of the type described in clause
(j) of the definition of "Debt" guaranteeing the Obligations
of such Subsidiary under such Capitalized Leases,
(D) the Surviving Debt, and
(E) endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course
of business.
(c) Lease Obligations. Create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume or
suffer to exist, any obligations as lessee (i) for the rental or hire
of real or personal property in connection with any sale and leaseback
transaction, or (ii) for the rental or hire of other real or personal
property of any kind under leases or agreements to lease including
Capitalized Leases having an original term of one year or more that
would cause the direct and contingent liabilities of the Borrower and
its Subsidiaries, on a Consolidated basis, in respect of all such
obligations to exceed $16,500,000 payable in any period of 12
consecutive months.
(d) Mergers, Etc. Merge into or consolidate with any Person or
permit any Person to merge into it, or permit any of its Subsidiaries
to do so, except that (i) any Subsidiary of the Borrower may merge into
or consolidate with the Borrower, (ii) any Subsidiary Guarantor may
merge into or consolidate with any other Subsidiary Guarantor and (iii)
any foreign Subsidiary may merge into or consolidate with any other
foreign Subsidiary; provided, however, that in each case, immediately
after giving effect thereto, no event shall occur and be continuing
that constitutes a Default.
(e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, transfer
or otherwise dispose of, any assets, or grant any option or other right
to purchase, lease or otherwise acquire any assets other than Inventory
to be sold in the ordinary course of its business, except:
(i) sales of Inventory in the ordinary course of its
business,
(ii) in a transaction authorized by subsection (d)
of this Section,
(iii) sales of assets for cash and for fair value in
an aggregate amount not to exceed $5,000,000 in any Fiscal
Year,
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provided that in the case of sales of assets pursuant to clause (iii)
above, the Borrower shall, on the date of receipt by the Borrower or
any of its Subsidiaries of the Net Cash Proceeds from such sale, prepay
the Advances pursuant to, and in the amount and order of priority set
forth in, Section 2.06(b)(ii), as specified therein.
(f) Investments in Other Persons. Make or hold, or permit any
of its Subsidiaries to make or hold, any Investment in any Person other
than:
(i) (A) Investments by the Borrower and its
Subsidiaries in their Subsidiaries outstanding on the date
hereof, (B) Investments by the Borrower or any Subsidiary in
any Subsidiary Guarantor, (C) additional Investments by the
Borrower and the Subsidiary Guarantors in wholly-owned
domestic Subsidiaries in an aggregate amount invested from the
date hereof not to exceed $5,000,000, provided that, with
respect to Investments in any newly acquired or created
wholly-owned Subsidiary, such Subsidiary (x) shall become an
additional grantor pursuant to the terms of the Security
Agreement and shall become a Subsidiary Guarantor pursuant to
the terms of the Subsidiary Guaranty, in each case if such
Subsidiary is a Material Subsidiary and (y) shall engage in a
business similar to that engaged in by the Borrower and its
Subsidiaries on the date hereof and (C) additional Investments
by foreign Subsidiaries of the Borrower in wholly-owned
Subsidiaries in an aggregate amount invested from the date
hereof not to exceed $500,000;
(ii) loans and advances (other than loans and
advances set forth on Schedule 5.02(f)) to employees in the
ordinary course of the business of the Borrower and its
Subsidiaries as presently conducted in an aggregate principal
amount not to exceed $1,000,000 at any time outstanding;
(iii) (A) Investments by the Borrower and its
Subsidiaries in Cash Equivalents of amounts on deposit in the
Cash Collateral Account, (B) Investments by D.C. Chartered
Health Plan, Inc. and Virginia Chartered Health Plan, Inc. in
Cash Equivalents of amounts on deposit in deposit accounts
that are required to be kept on deposit by such Person by its
respective governmental regulatory authority and (C)
Investments by the Borrower and its Subsidiaries (other than
the Investments described in clause (A)) in an aggregate
principal amount not to exceed $2,500,000 at any time
outstanding;
(iv) Investments consisting of intercompany Debt
permitted under Section 5.02(b)(ii);
(v) Investments existing on the date hereof and
described on Schedule 5.02(f) hereto; and
(vi) other Investments in an aggregate amount
invested not to exceed $500,000; provided that with respect to
Investments made under this clause (vii), (1) any newly
acquired or created Subsidiary of the Borrower or any of its
Subsidiaries shall be a wholly owned Subsidiary thereof; (2)
immediately before and after giving effect thereto, no Default
shall have occurred and be continuing or would result
therefrom; (3) any newly acquired or created domestic
Subsidiary of the Borrower or any of its Subsidiaries shall
become an additional grantor pursuant to the terms of the
Security Agreement and shall become a Subsidiary Guarantor
pursuant to the terms of the Subsidiary Guaranty, in each case
if such Subsidiary is a Material Subsidiary and (4) any
business acquired or invested in pursuant to this clause (vii)
shall be in the same line of business as the business of the
Borrower or any of its Subsidiaries.
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(g) DIVIDENDS, ETC. Declare or pay any dividends, purchase,
redeem, retire, defease or otherwise acquire for value any of its
capital stock or any warrants, rights or options to acquire such
capital stock, now or hereafter outstanding, return any capital to its
stockholders as such, make any distribution of assets, capital stock,
warrants, rights, options, obligations or securities to its
stockholders as such or issue or sell any capital stock or any
warrants, rights or options to acquire such capital stock, or permit
any of its Subsidiaries to do any of the foregoing or permit any of its
Subsidiaries to purchase, redeem, retire, defease or otherwise acquire
for value any capital stock of the Borrower or any warrants, rights or
options to acquire such capital stock or to issue or sell any capital
stock or any warrants, rights or options to acquire such capital stock,
except that, so long as no Default shall have occurred and be
continuing at the time of any action described in clauses (i), (ii),
(iii) and (iv) below or would result therefrom, (i) the Borrower may
declare and pay dividends and distributions payable only in common
stock of the Borrower, (ii) any Subsidiary of the Borrower may (A)
declare and pay cash dividends to the Borrower and (B) declare and pay
cash dividends to any other wholly-owned Subsidiary of the Borrower of
which it is a Subsidiary, (iii) the Borrower may issue (A) capital
stock in respect of the exercise of outstanding warrants, rights or
options to acquire capital stock or the exercise of stock options
issued pursuant to existing stock option plans of the Borrower, (B)
options to acquire capital stock of the Borrower pursuant to existing
stock option plans of the Borrower, (C) capital stock or any warrants,
rights or options to acquire such capital stock in the ordinary course
of business in order to enter into joint venture arrangements with
other third party Persons with the consent of the Required Lenders
(which consent shall not be unreasonably withheld), (D) capital stock
for cash and fair value, (E) any warrants, rights or options to acquire
its capital stock, in each case exercisable for cash and for fair value
(determined at the time such warrants, rights or options are granted)
and (F) capital stock issued in respect of warrants, rights or options
referred to in clause (E) and (iv) the Borrower or any Subsidiary of
the Borrower may purchase or otherwise acquire capital stock of the
Borrower in an aggregate amount not to exceed $65,000,000 from and
after April 28, 1998.
(h) CHANGE IN NATURE OF BUSINESS. Make, or permit any of its
Material Subsidiaries to make, any material change in the nature of its
business as carried on at the date hereof.
(i) CONSTITUTIVE DOCUMENT AMENDMENTS. Amend, or permit any of
its Subsidiaries to amend, its Constitutive Documents if such amendment
would have a Material Adverse Effect with respect to any Loan Party or
Lender Party.
(j) ACCOUNTING CHANGES. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in (i) accounting policies
or reporting practices, except as required or permitted by generally
accepted accounting principles or (ii) Fiscal Year.
(k) PREPAYMENTS, ETC. of Debt. Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in
any manner, or make any payment in violation of any subordination terms
of, any Debt, other than (i) the prepayment of the Advances in
accordance with the terms of this Agreement and (ii) regularly
scheduled or required repayments or redemptions of Surviving Debt, or
amend, modify or change in any manner any term or condition of any
Surviving Debt or the Subordinated Debentures, or permit any of its
Subsidiaries to do any of the foregoing other than to prepay any Debt
payable to the Borrower or any other Loan Party.
(l) AMENDMENT, ETC. of Convertible Preferred Stock Documents
and Subordinated Debenture Documents. Cancel or terminate any
Convertible Preferred Stock Document or any Subordinated Debenture
Document or consent to or accept any cancellation or termination
thereof, amend, modify or change in any manner any term or condition of
any Convertible Preferred Stock
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Document or any Subordinated Debenture Document or give any consent,
waiver or approval thereunder, waive any default under or any breach of
any term or condition of any Convertible Preferred Stock Document or
any Subordinated Debenture Document, agree in any manner to any other
amendment, modification or change of any term or condition of any
Convertible Preferred Stock Document or any Subordinated Debenture
Document or take any other action in connection with any Convertible
Preferred Stock Document or any Subordinated Debenture Document, in
each case in a manner that would materially impair the value of the
interest or rights of the Borrower thereunder or that would materially
impair the rights or interests of the Administrative Agent or any
Lender Party, or permit any of its Subsidiaries to do any of the
foregoing.
(m) AMENDMENT, ETC. OF MATERIAL CONTRACTS. Cancel or terminate
any Material Contract or consent to or accept any cancellation or
termination thereof, amend or otherwise modify any Material Contract or
give any consent, waiver or approval thereunder, waive any default
under or breach of any Material Contract, agree in any manner to any
other amendment, modification or change of any term or condition of any
Material Contract or take any other action in connection with any
Material Contract that would materially impair the value of the
interest or rights of the Borrower thereunder or that would materially
impair the interest or rights of the Administrative Agent or any Lender
Party, or permit any of its Subsidiaries to do any of the foregoing.
(n) NEGATIVE PLEDGE. Enter into or suffer to exist, or permit
any of its Subsidiaries to enter into or suffer to exist, any agreement
prohibiting or conditioning the creation or assumption of any Lien upon
any of its property or assets other than (i) in favor of the Secured
Parties or (ii) in connection with any Surviving Debt.
(o) PARTNERSHIPS, ETC.. Become a general partner in any
general or limited partnership or joint venture, or permit any of its
Subsidiaries to do so, other than any Subsidiary the sole assets of
which consist of its interest in such partnership or joint venture.
(p) SPECULATIVE TRANSACTIONS. Engage, or permit any of its
Subsidiaries to engage, in any transaction involving commodity options
or futures contracts or any similar speculative transactions
(including, without limitation, take-or-pay contracts).
(q) CAPITAL EXPENDITURES. Make, or permit any of its
Subsidiaries to make, any Capital Expenditures that would cause the
aggregate of all such Capital Expenditures made by the Borrower and its
Subsidiaries in any Fiscal Year to exceed $10,000,000, beginning with
the 1999 Fiscal Year.
SECTION 5.03. REPORTING REQUIREMENTS. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
Party shall have any Commitment hereunder, the Borrower will furnish to the
Lender Parties:
(a) DEFAULT NOTICE. As soon as possible and in any event
within two days after the occurrence of each Default or any event,
development or occurrence that is reasonably likely to have a Material
Adverse Effect with respect to any Loan Party or any Lender Party
continuing on the date of such statement, a statement of the chief
financial officer of the Borrower setting forth details of such Default
and the action that the Borrower has taken and proposes to take with
respect thereto.
(b) QUARTERLY FINANCIALS. 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, Consolidated and consolidating balance sheets of
the Borrower and its Subsidiaries as of the end of such quarter and
Consolidated and consolidating statements of income and a Consolidated
statement of cash flows of the Borrower and its Subsidiaries for the
period commencing at the end of the previous fiscal quarter and ending
with the end of such fiscal quarter and Consolidated and consolidating
statements of income and a Consolidated statement of cash flows of the
Borrower and its Subsidiaries for
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the period commencing at the end of the previous Fiscal Year and ending
with the end of such quarter, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the
preceding Fiscal Year, all in reasonable detail and duly certified
(subject to year-end audit adjustments) by the chief financial officer
of the Borrower as having been prepared in accordance with GAAP,
together with (i) a certificate of said officer stating that no Default
has occurred and is continuing or, if a Default has occurred and is
continuing, a statement as to the nature thereof and the action that
the Borrower has taken and proposes to take with respect thereto and
(ii) a schedule in form satisfactory to the Administrative Agent of the
computations used by the Borrower in determining compliance with the
covenants contained in Sections 5.04(a) through (f), provided that in
the event of any change in GAAP used in the preparation of such
financial statements, the Borrower shall also provide, if necessary for
the determination of compliance with Section 5.04, a statement of
reconciliation conforming such financial statements to GAAP.
(c) ANNUAL FINANCIALS. As soon as available and in any event
within 90 days after the end of each Fiscal Year, a copy of the annual
audit report for such year for the Borrower and its Subsidiaries,
including therein Consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such Fiscal Year and
Consolidated and consolidating statements of income and a Consolidated
statement of cash flows of the Borrower and its Subsidiaries for such
Fiscal Year, in each case accompanied by an opinion acceptable to the
Required Lenders of Coopers & Lybrand L.L.P. or other independent
public accountants of recognized standing acceptable to the Required
Lenders, together with (i) a certificate of such accounting firm to the
Lender Parties stating that in the course of the regular audit of the
business of the Borrower and its Subsidiaries, which audit was
conducted by such accounting firm in accordance with generally accepted
auditing standards, such accounting firm has obtained no knowledge that
a Default under Section 5.04 has occurred and is continuing, or if, in
the opinion of such accounting firm, a Default has occurred and is
continuing, a statement as to the nature thereof, (ii) a schedule in
form satisfactory to the Administrative Agent of the computations used
by such accountants in determining, as of the end of such Fiscal Year,
compliance with the covenants contained in Sections 5.04(a) through
(f), provided that in the event of any change in GAAP used in the
preparation of such financial statements, the Borrower shall also
provide, if necessary for the determination of compliance with Section
5.04, a statement of reconciliation conforming such financial
statements to GAAP and (iii) a certificate of the chief financial
officer of the Borrower stating that no Default has occurred and is
continuing or, if a default has occurred and is continuing, a statement
as to the nature thereof and the action that the Borrower has taken and
proposes to take with respect thereto.
(d) ANNUAL FORECASTS. As soon as available and in any event no
later than 15 days before the end of each Fiscal Year, forecasts
prepared by management of the Borrower, in form satisfactory to the
Administrative Agent, of balance sheets, income statements and cash
flow statements on a quarterly basis for each Fiscal Year until the
Termination Date.
(e) ERISA EVENTS AND ERISA REPORTS. Promptly and in any event
within 10 days after any Loan Party or any ERISA Affiliate knows or has
reason to know that any ERISA Event has occurred, a statement of the
chief financial officer of the Borrower describing such ERISA Event and
the action, if any, that such Loan Party or such ERISA Affiliate has
taken and proposes to take with respect thereto and on the date any
records, documents or other information must be furnished to the PBGC
with respect to any Plan pursuant to Section 4010 of ERISA, a copy of
such records, documents and information.
(f) PLAN TERMINATIONS. Promptly and in any event within two
Business Days after receipt
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thereof by any Loan Party or any ERISA Affiliate, copies of each notice
from the PBGC stating its intention to terminate any Plan or to have a
trustee appointed to administer any Plan.
(g) MULTIEMPLOYER PLAN NOTICES. Promptly and in any event
within five Business Days after receipt thereof by any Loan Party or
any ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of
each notice concerning (i) the imposition of Withdrawal Liability by
any such Multiemployer Plan, (ii) the reorganization or termination,
within the meaning of Title IV of ERISA, of any such Multiemployer Plan
or (iii) the amount of liability incurred, or that may be incurred, by
such Loan Party or any ERISA Affiliate in connection with any event
described in clause (i) or (ii).
(h) LITIGATION. Promptly after the commencement thereof,
notice of all actions, suits, investigations, litigation and
proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign,
affecting any Loan Party or any of its Subsidiaries of the type
described in Section 4.01(j), and promptly after the occurrence
thereof, notice of any adverse change in the status or the financial
effect on any Loan Party or any of its Subsidiaries of the Disclosed
Litigation from that described on Schedule 3.01(f).
(i) SECURITIES REPORTS. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and
reports that any Loan Party or any of its Subsidiaries sends to its
stockholders, and copies of all regular, periodic and special reports,
and all registration statements, that any Loan Party or any of its
Subsidiaries files with the Securities and Exchange Commission or any
governmental authority that may be substituted therefor, or with any
national securities exchange.
(j) CREDITOR REPORTS. Promptly after the furnishing thereof,
copies of any statement or report furnished to any other holder of the
securities of any Loan Party or of any of its Subsidiaries pursuant to
the terms of any indenture, loan or credit or similar agreement and not
otherwise required to be furnished to the Lender Parties pursuant to
any other clause of this Section 5.03.
(k) AGREEMENT NOTICES. Promptly upon receipt thereof, copies
of all notices, requests and other documents received by any Loan Party
or any of its Subsidiaries under or pursuant to any Material Contract
or indenture, loan or credit or similar agreement regarding or related
to any breach or default by any party thereto or any other event that
could materially impair the value of the interests or the rights of any
Loan Party or otherwise have a Material Adverse Effect with respect to
any Loan Party or any Lender Party and copies of any amendment,
modification or waiver of any provision of any Material Contract or
indenture, loan or credit or similar agreement and, from time to time
upon request by the Administrative Agent, such information and reports
regarding the Material Contracts as the Administrative Agent may
reasonably request.
(l) TAX CERTIFICATES. Promptly, and in any event within five
Business Days after the due date (with extensions) for filing the final
Federal income tax return in respect of each taxable year, a
certificate (a "TAX CERTIFICATE"), signed by the President or the chief
financial officer of the Borrower, stating that the common parent of
the affiliated group (within the meaning of Section 1504(a)(1) of the
Internal Revenue Code) of which the Borrower is a member has paid to
the Internal Revenue Service or other taxing authority, or to the
Borrower, the full amount that such affiliated group is required to pay
in respect of Federal income tax for such year and that the Borrower
and its Subsidiaries have received any amounts payable to them, and
have not paid amounts in respect of taxes (Federal, state, local or
foreign) in excess of the amount they are required to pay, under the
Tax Agreements in respect of such taxable year.
(m) ENVIRONMENTAL CONDITIONS. Promptly after the assertion or
occurrence thereof, notice of any Environmental Action against or of
any noncompliance by any Loan Party or any of its
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Subsidiaries with any Environmental Law or Environmental Permit that
(i) could reasonably be expected to have a Material Adverse Effect with
respect to the Borrower and its Subsidiaries, taken as a whole, or any
Lender Party or (ii) cause any property described in the Mortgages to
be subject to any restrictions on ownership, occupancy, use or
transferability under any Environmental Law.
(n) REAL PROPERTY. As soon as available and in any event
within 30 days after the end of each Fiscal Year, a report
supplementing Schedules 4.01(gg) and 4.01(hh) hereto, including an
identification of all material real and leased property disposed of by
the Borrower or any of its Subsidiaries during such Fiscal Year, a list
and description (including the street address, county or other relevant
jurisdiction, state, record owner, book value thereof, and in the case
of leases of property, lessor, lessee, expiration date and annual
rental cost thereof) of all material real property acquired or leased
during such Fiscal Year and a description of such other changes in the
information included in such Schedules as may be necessary for such
Schedules to be accurate and complete in all material respects.
(o) INSURANCE. As soon as available and in any event within 30
days after the end of each Fiscal Year, a report summarizing the
insurance coverage (specifying type, amount and carrier) in effect for
the Borrower and its Subsidiaries and containing such additional
information as any Lender Party (through the Administrative Agent) may
reasonably specify.
(p) OTHER INFORMATION. Such other information respecting the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party or any of its Subsidiaries as
any Lender Party (through the Administrative Agent) may from time to
time reasonably request.
SECTION 5.04. FINANCIAL COVENANTS. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
Party shall have any Commitment hereunder, the Borrower will:
(a) MINIMUM EBITDA. Maintain at the end of each fiscal quarter
of the Borrower Consolidated EBITDA of the Borrower and its
Subsidiaries of not less than the amount set forth below for such
fiscal quarter set forth below:
<TABLE>
<CAPTION>
Minimum
Quarter Ending On EBITDA
<S> <C>
July 31, 1998 $10,800,000
October 31, 1998 $13,400,000
January 31, 1999 $13,800,000
and thereafter
</TABLE>
(b) FIXED CHARGE COVERAGE RATIO. Maintain at the end of each fiscal
quarter of the Borrower commencing with the fiscal quarter ending July 31, 1998
a ratio of Consolidated EBITDA for the most recently completed four fiscal
quarters of the Borrower and its Subsidiary LESS the aggregate amount of cash
Capital Expenditures made by the Borrower and its Subsidiaries during such four
fiscal quarter period to the sum of (i) interest payable on, and amortization
of debt discount in respect of, all Debt PLUS (ii) principal amounts of all
Funded Debt payable, in each case, by the Borrower and its Subsidiaries during
such four fiscal quarter period of not less than 1.25 to 1.
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<PAGE>
(c) LEVERAGE RATIO. Maintain at the end of each fiscal quarter of the
Borrower a Leverage Ratio of not more than the ratio set forth below for such
fiscal quarter:
<TABLE>
<CAPTION>
Quarter Ending On Ratio
<S> <C>
July 31, 1998 3.50 : 1.00
October 31, 1998 3.25 : 1.00
January 31, 1999 3.00 : 1.00
and thereafter
</TABLE>
(d) MINIMUM NET WORTH. Maintain at the end of each fiscal quarter of
the Borrower commencing with the fiscal quarter ending July 31, 1998 an excess
of Consolidated total assets over Consolidated total liabilities, in each case
of the Borrower and its Subsidiaries of not less than $85,500,000 PLUS 75% of
Consolidated net income of the Borrower and its Subsidiaries for the period
after April 30, 1998 to and including each date of determination computed on a
cumulative basis for said entire period PLUS 100% of all net proceeds from the
sale or issuance by the Borrower or any of its Subsidiaries of capital stock or
other ownership or profit interest, any securities convertible into or
exchangeable for capital stock or other ownership or profit interest or any
warrants, rights, options or other securities to acquire capital stock or other
ownership or profit interest; PROVIDED, HOWEVER, that, in calculating the net
worth of the Borrower in accordance with the provisions of this Section
5.04(d), any purchase or other acquisition of capital stock of the Borrower
permitted by the provisions of Section 5.02(g) shall be excluded.
(g) MINIMUM LIQUIDITY RATIO. Maintain at the end of each fiscal quarter
of the Borrower a ratio of (i) the sum of cash of the Borrower and its
Subsidiaries plus accounts receivable of the Borrower and its Subsidiaries as of
the end of such fiscal quarter less accounts receivable of the Borrower and its
Subsidiaries relating to D.C. Chartered Health Plan, Inc. as of the end of such
fiscal quarter to (ii) the sum of accounts payable of the Borrower and its
Subsidiaries as of the end of such fiscal quarter plus claims payable of the
Borrower and its Subsidiaries as of the end of such fiscal quarter, of not less
than 1.25:1:00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT. If any of the following events
("EVENTS OF DEFAULT") shall occur and be continuing:
(a) (i) the Borrower shall fail to pay any principal of any Advance
when the same shall become due and payable or (ii) the Borrower shall fail to
pay any interest on any Advance, or any Loan Party shall fail to make any other
payment under any Loan Document, in each case under this clause (ii) within 3
Business Day(s) after the same becomes due and payable; or
(b) any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to have
been incorrect in any material respect when made; or
(c) the Borrower shall fail to perform or observe any term, covenant or
agreement contained in Section 2.14, 5.01(e), (f), (g), (n), (o), (p) or (q),
5.02, 5.03 or 5.04; or
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(d) any Loan Party shall fail to perform any other term, covenant or
agreement contained in any Loan Document on its part to be performed or
observed if such failure shall remain unremedied for 20 days after the earlier
of the date on which (A) a Responsible Officer of the Borrower becomes aware of
such failure or (B) written notice thereof shall have been given to the
Borrower by the Administrative Agent or any Lender Party; or
(e) any Loan Party or any of such Loan Party's Subsidiaries shall fail
to pay any principal of, premium or interest on or any other amount payable in
respect of any Debt that is outstanding in a principal or notional amount of at
least $2,500,000 either individually or in the aggregate (but excluding Debt
outstanding hereunder) of such Loan Party or such Subsidiary (as the case may
be), 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
otherwise to cause, or to permit the holder thereof to cause, such Debt to
mature; or any such Debt shall be declared to be due and payable or required to
be prepaid or redeemed (other than by a regularly scheduled required prepayment
or redemption), purchased or defeased, or an offer to prepay, redeem, purchase
or defease such Debt shall be required to be made, in each case prior to the
stated maturity thereof; or
(f) any Loan Party or any of such Loan Party's 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 any Loan Party or any of such Loan Party's 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, 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) that is being
diligently contested by it in good faith, either such proceeding shall remain
undismissed or unstayed for a period of 30 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 any substantial part of its property) shall occur;
or any Loan Party or any of such Loan Party's Subsidiaries shall take any
corporate (or the equivalent thereof) action to authorize any of the actions
set forth above in this subsection (f); or
(g) any judgment or order for the payment of money in excess of
$2,500,000 shall be rendered against any Loan Party or any of such Loan Party's
Subsidiaries and either (i) enforcement proceedings shall have been commenced
by any creditor upon such judgment or order or (ii) there shall be any period
of 30 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; or
(h) any non-monetary judgment or order shall be rendered against any
Loan Party or any of such Loan Party's Subsidiaries that could be reasonably
likely to have a Material Adverse Effect with respect to any Loan Party or any
Lender Party, and there shall be any period of 30 consecutive days during which
a stay of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect; or
(i) any provision of any Loan Document after delivery thereof pursuant
to Section 3.01 or 5.01(p) shall for any reason cease to be valid and binding
on or enforceable against any Loan Party party to it, or any such Loan Party
shall so state in writing; or
(j) any ERISA Event shall have occurred with respect to a Plan and the
sum (determined as of the
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date of occurrence of such ERISA Event) of the Insufficiency of such Plan and
the Insufficiency of any and all other Plans with respect to which an ERISA
Event shall have occurred and then exist (or the liability of the Loan Parties
and the ERISA Affiliates related to such ERISA Event) exceeds $1,000,000; or
(k) any Loan Party or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability
to such Multiemployer Plan in an amount that, when aggregated with all other
amounts required to be paid to Multiemployer Plans by the Loan Parties and the
ERISA Affiliates as Withdrawal Liability (determined as of the date of such
notification), exceeds $1,000,000 or requires payments exceeding $200,000 per
annum; or
(l) any Loan Party or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of ERISA,
and as a result of such reorganization or termination the aggregate annual
contributions of the Loan Parties and the ERISA Affiliates to all Multiemployer
Plans that are then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for the plan
years of such Multiemployer Plans immediately preceding the plan year in which
such reorganization or termination occurs by an amount exceeding $200,000; or
(m) (i) any Person or two or more Persons acting in concert other than
the Founders shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934), directly or indirectly, of Voting Stock of the Borrower
(or other Securities convertible into such Voting Stock) representing 25% or
more of the combined voting power of all Voting Stock of the Borrower; or (ii)
any Person or two or more Persons acting in concert other than the Founders
shall have acquired by contract or otherwise, or shall have entered into a
contract or arrangement that, upon consummation, will result in its or their
acquisition of control over Voting Stock of the Borrower (or other securities
convertible into such securities) representing 25% or more of the combined
voting power of all Voting Stock of the Borrower;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Appropriate Lender to make Advances (other than
Letter of Credit Advances by an Issuing Bank or a Revolving Credit Lender
pursuant to Section 2.03(c)) and of the Issuing Bank to issue Letters of Credit
to be terminated, whereupon the same shall forthwith terminate, and (ii) shall
at the request, or may with the consent, of the Required Lenders, by notice to
the Borrower, declare the Notes, all interest thereon and all other amounts
payable under this Agreement and the other Loan Documents to be forthwith due
and payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that in the event of an actual or deemed entry of
an order for relief with respect to the Borrower under the Federal Bankruptcy
Code, (x) the obligation of each Lender to make Advances (other than Letter of
Credit Advances by the Issuing Bank or a Revolving Credit Lender pursuant to
Section 2.03(c)) and of the Issuing Bank to issue Letters of Credit shall
automatically be terminated and (y) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrower.
SECTION 6.02. ACTIONS IN RESPECT OF THE LETTERS OF CREDIT UPON
DEFAULT. If any Event of Default shall have occurred and be continuing, the
Administrative Agent may, or shall at the request of the Required Lenders,
irrespective of whether it is taking any of the actions described in Section
6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such
demand the Borrower will, pay to the Administrative Agent on behalf of the
Lender Parties in same day funds at the Administrative Agent's office designated
in such demand, for deposit in the L/C Cash Collateral Account, an amount equal
to the aggregate Available Amount of all Letters of Credit
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<PAGE>
then outstanding. If at any time the Administrative Agent determines that any
funds held in the L/C Cash Collateral Account are subject to any right or claim
of any Person other than the Administrative Agent and the Lender Parties or that
the total amount of such funds is less than the aggregate Available Amount of
all Letters of Credit, the Borrower will, forthwith upon demand by the
Administrative Agent, pay to the Administrative Agent, as additional funds to be
deposited and held in the L/C Cash Collateral Account, an amount equal to the
excess of (a) such aggregate Available Amount over (b) the total amount of
funds, if any, then held in the L/C Cash Collateral Account that the
Administrative Agent determines to be free and clear of any such right and
claim.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. AUTHORIZATION AND ACTION. Each Lender Party (in its
capacities as a Lender, an Issuing Bank (if applicable)) hereby appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers and discretion under this Agreement and the other
Loan Documents as are delegated to the Administrative Agent by the terms hereof
and thereof, together with such powers and discretion as are reasonably
incidental thereto. As to any matters not expressly provided for by the Loan
Documents (including, without limitation, enforcement or collection of the
Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding upon all Lender Parties and all holders of Notes; provided, however,
that the Administrative Agent shall not be required to take any action that
exposes the Administrative Agent to personal liability or that is contrary to
this Agreement or applicable law. The Administrative Agent agrees to give to
each Lender Party prompt notice of each notice given to it by the Borrower
pursuant to the terms of this Agreement.
SECTION 7.02. ADMINISTRATIVE AGENT'S RELIANCE, ETC. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with the Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent: (a) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Lender that is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07;
(b) may consult with legal counsel (including counsel for any Loan Party),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender Party and shall not be responsible to
any Lender Party for any statements, warranties or representations (whether
written or oral) made in or in connection with the Loan Documents; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of any Loan Document on the part of
any Loan Party or to inspect the property (including the books and records) of
any Loan Party; (e) shall not be responsible to any Lender Party for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of, or the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, any Loan Document or any
other instrument or document furnished pursuant thereto; and (f) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
telecopy or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 7.03. NATIONSBANK AND AFFILIATES. With respect to its
Commitments, the Advances made by it and the Notes issued to it, NationsBank
shall have the same rights and powers under the Loan Documents as any other
Lender Party and may exercise the same as though it were not the Administrative
Agent; and the term "Lender Party" or "Lenders Parties" shall, unless otherwise
expressly indicated, include NationsBank in its
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individual capacity. NationsBank and its affiliates may accept deposits from,
lend money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, any Loan
Party, any of its Subsidiaries and any Person who may do business with or own
securities of any Loan Party or any such Subsidiary, all as if NationsBank were
not the Administrative Agent and without any duty to account therefor to the
Lender Parties.
SECTION 7.04. LENDER PARTY CREDIT DECISION. Each Lender Party
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender Party and based on the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender Party also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other
Lender Party and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 7.05. IDEMNIFICATION. (a) Each Lender Party severally agrees to
indemnify the Administrative Agent (to the extent not promptly reimbursed by the
Borrower) from and against such Lender Party's ratable share (determined as
provided below) of any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against the Administrative Agent in any way relating to or arising out of the
Loan Documents or any action taken or omitted by the Administrative Agent under
the Loan Documents; PROVIDED, HOWEVER, that no Lender Party shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender Party agrees to reimburse the
Administrative Agent promptly upon demand for its ratable share of any costs and
expenses (including, without limitation, fees and expenses of counsel) payable
by the Borrower under Section 8.04, to the extent that the Administrative Agent
is not promptly reimbursed for such costs and expenses by the Borrower. For
purposes of this Section 7.05(a), the Lender Parties' respective ratable shares
of any amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of the Advances outstanding at such time and owing to
the respective Lender Parties, (b) their respective Pro Rata Shares of the
aggregate Available Amount of all Letters of Credit outstanding at such time,
(c) respective Unused Tranche A Revolving Credit Commitments at such time and
(d) their respective Unused Tranche A Revolving Credit Commitments at such time;
PROVIDED that the aggregate principal amount of Letter of Credit Advances owing
to the Issuing Bank shall be considered to be owed to the Tranche A Revolving
Credit Lenders ratably in accordance with their respective Tranche A Revolving
Credit Commitments. In the event that any Defaulted Advance shall be owing by
any Defaulting Lender at any time, such Lender Party's Commitment with respect
to the Facility under which such Defaulted Advance was required to have been
made shall be considered to be unused for purposes of this Section 7.05(a) to
the extent of the amount of such Defaulted Advance. The failure of any Lender
Party to reimburse the Administrative Agent promptly upon demand for its ratable
share of any amount required to be paid by the Lender Party to the
Administrative Agent as provided herein shall not relieve any other Lender Party
of its obligation hereunder to reimburse the Administrative Agent for its
ratable share of such amount, but no Lender Party shall be responsible for the
failure of any other Lender Party to reimburse the Administrative Agent for such
other Lender Party's ratable share of such amount. Without prejudice to the
survival of any other agreement of any Lender Party hereunder, the agreement and
obligations of each Lender Party contained in this Section 7.05(a) shall survive
the payment in full of principal, interest and all other amounts payable
hereunder and under the other Loan Documents.
(b) Each Lender Party severally agrees to indemnify the Issuing Bank
(to the extent not promptly reimbursed by the Borrower) from and against such
Lender Party's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the
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Issuing Bank in any way relating to or arising out of the Loan Documents or any
action taken or omitted by the Issuing Bank under the Loan Documents; provided,
however, that no Lender Party shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Issuing Bank's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender Party agrees to reimburse the Issuing Bank promptly upon demand for its
ratable share of any costs and expenses (including, without limitation, fees and
expenses of counsel) payable by the Borrower under Section 8.04, to the extent
that the Issuing Bank is not promptly reimbursed for such costs and expenses by
the Borrower. For purposes of this Section 7.05(b), the Lender Parties'
respective ratable shares of any amount shall be determined, at any time,
according to the sum of (a) the aggregate principal amount of the Advances
outstanding at such time and owing to the respective Lender Parties, (b) their
respective Pro Rata Shares of the aggregate Available Amount of all Letters of
Credit outstanding at such time, (c) their respective Unused Tranche B Revolving
Credit Commitments at such time plus (d) their respective Unused Tranche B
Revolving Credit Commitments at such time; provided, that the aggregate
principal amount of Letter of Credit Advances owing to the Issuing Bank shall be
considered to be owed to the Tranche A Revolving Credit Lenders ratably in
accordance with their respective Revolving Tranche A Credit Commitments. In the
event that any Defaulted Advance shall be owing by any Defaulting Lender at any
time, such Lender Party's Commitment with respect to the Facility under which
such Defaulted Advance was required to have been made shall be considered to be
unused for purposes of this Section 7.05(b) to the extent of the amount of such
Defaulted Advance. The failure of any Lender Party to reimburse the Issuing Bank
promptly upon demand for its ratable share of any amount required to be paid by
the Lender Parties to the Issuing Bank as provided herein shall not relieve any
other Lender Party of its obligation hereunder to reimburse the Issuing Bank for
its ratable share of such amount, but no Lender Party shall be responsible for
the failure of any other Lender Party to reimburse the Issuing Bank for such
other Lender Party's ratable share of such amount. Without prejudice to the
survival of any other agreement of any Lender Party hereunder, the agreement and
obligations of each Lender Party contained in this Section 7.05(b) shall survive
the payment in full of principal, interest and all other amounts payable
hereunder and under the other Loan Documents.
SECTION 7.06. Successor Administrative Agents. The Administrative Agent
may resign as to any or all of the Facilities at any time by giving written
notice thereof to the Lender Parties and the Borrower and may be removed as to
all of the Facilities at any time with or without cause by the Required Lenders.
Upon any such resignation or removal, the Required Lenders shall have the right
to appoint a successor Administrative Agent as to such of the Facilities as to
which the Administrative Agent has resigned or been removed. If no successor
Administrative Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Lender Parties, appoint a successor Administrative
Agent, which shall be a commercial bank organized under the laws of the United
States or of any State thereof and having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent as to all of the Facilities
and upon the execution and filing or recording of such financing statements, or
amendments thereto, and such amendments or supplements to the Mortgages, and
such other instruments or notices, as may be necessary or desirable, or as the
Required Lenders may request, in order to continue the perfection of the Liens
granted or purported to be granted by the Collateral Documents, such successor
Administrative Agent shall succeed to and become vested with all the rights,
powers, discretion, privileges and duties of the retiring Administrative Agent,
and the retiring Administrative Agent shall be discharged from its duties and
obligations under the Loan Documents. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent as to less
than all of the Facilities and upon the execution and filing or recording of
such financing statements, or amendments thereto, and such amendments or
supplements to the Mortgages, and such other instruments or notices, as may be
necessary or desirable, or as the Required Lenders may request, in order to
continue the perfection of the Liens granted or purported to be granted by the
Collateral Documents, such successor Administrative Agent shall succeed to and
become vested
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with all the rights, powers, discretion, privileges and duties of the retiring
Administrative Agent as to such Facilities, other than with respect to funds
transfers and other similar aspects of the administration of Borrowings under
such Facilities, issuances of Letters of Credit (notwithstanding any resignation
as Administrative Agent with respect to the Letter of Credit Facility) and
payments by the Borrower in respect of such Facilities, and the retiring
Administrative Agent shall be discharged from its duties and obligations under
this Agreement as to such Facilities, other than as aforesaid. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent as to all of the Facilities, the provisions of this Article
VII shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Administrative Agent as to any Facilities under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or the Notes or any other Loan Document, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed (or, in the case of the Collateral
Documents, consented to) by the Required Lenders (except as provided by clause
(a) below) and, in the case of any amendment of, or a waiver in respect of, a
Loan Document, each Loan Party party to such Loan Document, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that (a) any amendment, waiver or
consent of any provision of Section 5.03 shall be in writing and signed by
NationsBank, (b) no amendment, waiver or consent shall, unless in writing and
signed by all of the Lenders (other than any Lender Party that is, at such time,
a Defaulting Lender), do any of the following at any time: (i) waive any of the
conditions specified in Section 3.01 or, in the case of the Initial Extension of
Credit, Section 3.02, (ii) change the number of Lenders or the percentage of (x)
the Commitments, (y) the aggregate unpaid principal amount of the Advances or
(z) the aggregate Available Amount of outstanding Letters of Credit that, in
each case, shall be required for the Lenders or any of them to take any action
hereunder, (iii) reduce or limit the obligations of the Subsidiary Guarantors
under Section 1 of the Subsidiary Guaranty or otherwise limit the Subsidiary
Guarantors' liability with respect to the Obligations owing to the
Administrative Agent and the Lender Parties, (iv) release any material portion
of the Collateral in any transaction or series of related transactions or permit
the creation, incurrence, assumption or existence of any Lien on any material
portion of the Collateral in any transaction or series of related transactions
to secure any Obligations other than Obligations owing to the Secured Parties
under the Loan Documents and other than Debt owing to any other Person, provided
that, in the case of any Lien on any material portion of the Collateral to
secure Debt owing to any other Person, (A) the Borrower shall, on the date such
Debt shall be incurred or issued, prepay the Advances pursuant to, and in the
order of priority set forth in, Section 2.06(b)(ii) in an aggregate principal
amount equal to the amount of such Net Cash Proceeds to the extent required to
do so under Section 2.06(b)(ii), (B) such Lien shall be subordinated to the
Liens created under the Loan Documents on terms acceptable to the Required
Lenders and (C) the Required Lenders shall otherwise permit the creation,
incurrence, assumption or existence of such Lien and, to the extent not
otherwise permitted under Section 5.02(b), of such Debt, (v) amend this Section
8.01, or (vi) limit the liability of any Loan Party under any of the Loan
Documents and (c) no amendment, waiver or consent shall, unless in writing and
signed by the Required Lenders and each Lender that has a Commitment under the
Term Facility or Revolving Credit Facility if affected by such amendment, waiver
or consent, (i) increase the Commitments of such Lender or subject such Lender
to any additional obligations, (ii) reduce the principal of, or interest on, the
Notes held by such Lender or any fees or other amounts payable hereunder to such
Lender, (iii) postpone any date fixed for any payment of principal of, or
interest on, the Notes held by such Lender or any fees or other amounts payable
hereunder to such Lender or (iv) change the order of application of any
prepayment set forth in Section 2.06 in any manner that materially affects such
Lender; provided further that no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Bank, in addition to the Lenders required
above to take
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such action, affect the rights or obligations of the Issuing Bank under this
Agreement; and provided further that no amendment, waiver or consent shall,
unless in writing and signed by the Administrative Agent in addition to the
Lenders required above to take such action, affect the rights or duties of the
Administrative Agent under this Agreement.
SECTION 8.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered,
if to the Borrower, at its address at 11440 Commerce Park Drive, Reston, VA
20191, Attention: Anthony M. Picini; if to any Initial Lender or the Initial
Issuing Bank, at its Domestic Lending Office specified opposite its name on
Schedule I hereto; if to any other Lender Party, at its Domestic Lending Office
specified in the Assignment and Acceptance pursuant to which it became a Lender
Party; and if to the Administrative Agent, at its address at NationsBank, N.A.,
1 NationsBank Plaza, 7th Floor, Nashville, TN, Attention: Kevin Wagley; or, as
to the Borrower or the Administrative Agent, at such other address as shall be
designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to the Borrower and the Administrative Agent. All such notices
and communications shall, when mailed, telegraphed, telecopied or telexed, be
effective when deposited in the mails, delivered to the telegraph company,
transmitted by telecopier or confirmed by telex answerback, respectively, except
that notices and communications to the Administrative Agent pursuant to Article
II, III or VII shall not be effective until received by the Administrative
Agent. Delivery by telecopier of an executed counterpart of any amendment or
waiver of any provision of this Agreement or the Notes or of any Exhibit hereto
to be executed and delivered hereunder shall be effective as delivery of a
manually executed counterpart thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender
Party or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder or under any Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on
demand (i) all costs and expenses of the Administrative Agent in connection with
the preparation, execution, delivery, administration, modification and amendment
of the Loan Documents (including, without limitation, (A) all due diligence,
collateral review, syndication, transportation, computer, duplication,
appraisal, audit, insurance, consultant, search, filing and recording fees and
expenses and (B) the reasonable fees and expenses of counsel for the
Administrative Agent with respect thereto, with respect to advising the
Administrative Agent as to its rights and responsibilities, or the perfection,
protection or preservation of rights or interests, under the Loan Documents,
with respect to negotiations with any Loan Party or with other creditors of any
Loan Party or any of its Subsidiaries arising out of any Default or any events
or circumstances that may give rise to a Default and with respect to presenting
claims in or otherwise participating in or monitoring any bankruptcy, insolvency
or other similar proceeding involving creditors' rights generally and any
proceeding ancillary thereto) and (ii) all costs and expenses of the
Administrative Agent and the Lender Parties in connection with the enforcement
of the Loan Documents, whether in any action, suit or litigation, any
bankruptcy, insolvency or other similar proceeding affecting creditors' rights
generally (including, without limitation, the reasonable fees and expenses of
counsel for the Administrative Agent and each Lender Party with respect
thereto).
(b) The Borrower agrees to indemnify and hold harmless the
Administrative Agent, each Lender Party and each of their Affiliates and their
officers, directors, employees, agents and advisors (each, an "Indemnified
Party") from and against (and will reimburse each Indemnified Party as the same
are incurred) any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees, disbursements and other charges
of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of (including, without limitation,
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in connection with any investigation, litigation or proceeding or preparation of
a defense in connection therewith) (A) (i) the Transaction or (ii) the
Facilities or any other financing or any actual or proposed use of the proceeds
of the Advances or the Letters of Credit, the Loan Documents or (B) the actual
or alleged presence of Hazardous Materials on any property of any Loan Party or
any of its Subsidiaries or any Environmental Action relating in any way to any
Loan Party or any of its Subsidiaries, except to the extent such claim, damage,
loss, liability or expense is found in a final, non-appealable judgment by a
court of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct. In the case of an investigation,
litigation or other proceeding to which the indemnity in this Section 8.04(b)
applies, such indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by any Loan Party, its directors,
shareholders or creditors or an Indemnified Party or any Indemnified Party is
otherwise a party thereto and whether or not the Transaction and other
transactions contemplated hereby are consummated. The Borrower also agrees not
to assert any claim against the Administrative Agent, any Lender Party or any of
their Affiliates, or any of their respective officers, directors, employees,
attorneys and agents, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
Facilities, the actual or proposed use of the proceeds of the Advances or the
Letters of Credit, the Loan Documents or any of the transactions contemplated
thereby.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by the Borrower to or for the account of a Lender Party
other than on the last day of the Interest Period for such Advance, as a result
of a payment or Conversion pursuant to Section 2.09(b)(i) or 2.10(d),
acceleration of the maturity of the Notes pursuant to Section 6.01 or for any
other reason, the Borrower shall, upon demand by such Lender Party (with a copy
of such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender Party any amounts required to compensate such Lender
Party for any additional losses, costs or expenses that it may reasonably incur
as a result of such payment, including, without limitation, any loss (including
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any Lender
Party to fund or maintain such Advance.
(d) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, fees and expenses of counsel and indemnities, such amount may be
paid on behalf of such Loan Party by the Administrative Agent or any Lender
Party, in its sole discretion.
(e) Without prejudice to the survival of any other agreement of any
Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in Sections 2.10 and 2.12 and this Section
8.04 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under any of the other Loan Documents.
SECTION 8.05. Right of Set-off. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender Party and each of its respective
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender Party or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the Obligations of the Borrower now or hereafter existing under this
Agreement and the Note or Notes (if any) held by such Lender Party, irrespective
of whether such Lender Party shall have made any demand under this Agreement or
such Note or Notes and although such obligations may be unmatured. Each Lender
Party agrees promptly to notify the Borrower after any such set-off and
application; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Lender
Party and its respective Affiliates under this Section are in addition to other
rights and remedies (including, without limitation, other rights of
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set-off) that such Lender Party and its respective Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Administrative Agent
and when the Administrative Agent shall have been notified by each Initial
Lender and the Initial Issuing Bank that such Initial Lender and the Initial
Issuing Bank have executed it and thereafter shall be binding upon and inure to
the benefit of the Borrower, the Administrative Agent and each Lender Party and
their respective successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lender Parties.
SECTION 8.07. Assignments and Participations. (a) Each Lender may
assign to one or more Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment or Commitments, the Advances owing to it and the Note
or Notes held by it); provided, however, that (i) each such assignment shall be
of a uniform, and not a varying, percentage of all rights and obligations under
and in respect of one or more Facilities, (ii) except in the case of an
assignment to a Person that, immediately prior to such assignment, was a Lender
or an assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
$5,000,000, (iii) each such assignment shall be to an Eligible Assignee, and
(iv) the parties to each such assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Note or Notes subject to such
assignment and a processing and recordation fee of $3,500.
(b) Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in such Assignment and Acceptance, (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender or Issuing Bank, as the
case may be, hereunder and (y) the Lender or Issuing Bank assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's or Issuing Bank's rights and obligations under this Agreement, such
Lender or Issuing Bank shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, the
Lender Party assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, this Agreement or any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto; (ii) such
assigning Lender Party makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any
other Loan Party or the performance or observance by any Loan Party of any of
its obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Administrative Agent, such assigning Lender Party or
any other Lender Party and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that
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it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Loan Documents as are delegated to the
Administrative Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender or
Issuing Bank, as the case may be.
(d) The Administrative Agent shall maintain at its address referred to
in Section 8.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lender Parties and the Commitment under each Facility of, and principal
amount of the Advances owing under each Facility to, each Lender Party from time
to time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Administrative Agent and the Lender Parties may treat each Person whose name is
recorded in the Register as a Lender Party hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender Party at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower. In the case of any assignment by a Lender, within five Business Days
after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent in exchange for the surrendered
Note or Notes a new Note to the order of such Eligible Assignee in an amount
equal to the Commitment assumed by it under a Facility pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
hereunder under such Facility, a new Note to the order of the assigning Lender
in an amount equal to the Commitment retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit A-1 or A-2 hereto, as the case may be.
(f) The Issuing Bank may assign to an Eligible Assignee all of its
rights and obligations under the undrawn portion of its Letter of Credit
Commitment at any time; provided, however, that (i) each such assignment shall
be to an Eligible Assignee and (ii) the parties to such assignment shall execute
and deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with a processing and
recordation fee of $3,500.
(g) Each Lender Party may sell participations to one or more Persons
(other than any Loan Party or any of its Affiliates) in or to all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes (if any) held by it); provided, however, that (i) such Lender
Party's obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender Party shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the
other Lender Parties shall continue to deal solely and directly with such Lender
Party in connection with such Lender Party's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment or waiver of any provision of any Loan Document,
or any consent to any departure by any Loan Party therefrom, except to the
extent that such amendment, waiver or consent would reduce the principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, postpone any date fixed for
any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or
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release all or substantially all of the Collateral.
(h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower; provided, however, that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party.
(i) Notwithstanding any other provision set forth in this Agreement,
any Lender Party may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 8.08. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 8.09. No Liability of the Issuing Bank. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither the
Issuing Bank nor any of its officers or directors shall be liable or responsible
for: (a) the use that may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit, except that the
Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall
be liable to the Borrower, to the extent of any direct, but not consequential,
damages suffered by the Borrower that the Borrower proves were caused by (i) the
Issuing Bank's willful misconduct or gross negligence in determining whether
documents presented under any Letter of Credit comply with the terms of the
Letter of Credit or (ii) the Issuing Bank's willful failure to make lawful
payment under a Letter of Credit after the presentation to it of a draft and
certificates strictly complying with the terms and conditions of the Letter of
Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION 8.10. Confidentiality. Neither the Administrative Agent nor
any Lender Party shall disclose any Confidential Information to any Person
without the consent of the Borrower, other than (a) to the Administrative
Agent's or such Lender Party's Affiliates and their officers, directors,
employees, agents and advisors and to actual or prospective Eligible
Assignees and participants, and then only on a confidential basis, (b) as
required by any law, rule or regulation or judicial process and (c) as
requested or required by any state, federal or foreign authority or examiner
regulating banks or banking.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or any of the other Loan Documents to which it is a party, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. Each of the
parties
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hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that any party may otherwise have to bring any action or proceeding
relating to this Agreement or any of the other Loan Documents in the courts of
any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any of the other Loan
Documents to which it is a party in any New York State or federal court. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
SECTION 8.12. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 8.13. Waiver of Jury Trial. Each of the Borrower, the
Administrative Agent and the Lender Parties irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to any of the Loan
Documents, the Advances or the actions of the Administrative Agent or any Lender
Party in the negotiation, administration, performance or enforcement thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PHP HEALTHCARE CORPORATION
By /s/ Anthony M. Picini
-----------------------
Title: Executive Vice President
Chief Financial Officer
NATIONSBANK, N.A.,
as Administrative Agent
By /s/ Kevin Wagley
----------------------
Title: Vice President
Initial Lenders
NATIONSBANK, N.A.
By /s/ Kevin Wagley
----------------------
Title: Vice President
69
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Exhibit 10.2
AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT dated as of May 26,
1998 made by PHP HEALTHCARE CORPORATION, a Delaware corporation (the
"Borrower"), each of the other Persons listed on the signature pages hereof
under the caption "Grantors" and the Additional Grantors (as defined in Section
25(c)) (the Borrower, the other Persons so listed and the Additional Grantors
being, collectively, the "Grantors") to NationsBank, N.A. ("NationsBank"), as
administrative agent (the "Administrative Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
PRELIMINARY STATEMENTS.
(1) The Borrower entered into a Credit Agreement dated as of
October 31, 1997, as heretofore amended (as so amended, the "Existing Credit
Agreement") with the banks, financial institutions and other institutional
lenders party thereto (the "Existing Lenders") and NationsBank as administrative
agent (the "Existing Administrative Agent"). In connection with the Existing
Credit Agreement, the Grantors entered into a Security Agreement dated as of
October 31, 1997 (the "Existing Security Agreement") in favor of the Existing
Administrative Agent.
(2) The Borrower has entered into an Amended and Restated
Credit Agreement dated as of May 26, 1998 (said Agreement, as it may hereafter
be amended or otherwise modified from time to time, being the "Credit
Agreement"; the terms defined therein and not otherwise defined herein being
used herein as therein defined) with the banks, financial institutions and other
institutional lenders party thereto (the "Lenders"), NationsBank, as initial
issuing bank and the Administrative Agent.
(3) Each Grantor is the owner of the shares (the "Pledged
Shares") of stock set forth opposite such Grantor's name in Part I of Schedule I
hereto and issued by the corporations named therein and of the indebtedness (the
"Pledged Debt") set forth opposite such Grantor's name in Part II of said
Schedule I and issued by the obligors named therein.
(4) The Borrower has opened a non-interest bearing cash
collateral account (the "Cash Collateral Account") with NationsBank at its
office at 100 North Tryon Street, Charlotte, North Carolina 28255 Account No.
375-052-7254, in the name of the Borrower but under the sole control and
dominion of the Administrative Agent and subject to the terms of this Agreement.
(5) The Borrower has opened a non-interest bearing cash
collateral account (the "L/C Cash Collateral Account") with NationsBank at its
office at 100 North Tryon Street, Charlotte, North Carolina 28255 Account No.
375-089-7418, in the name of the Borrower but under the sole control and
dominion of the Administrative Agent and subject to the terms of this Agreement.
(6) It is a condition precedent to the effectiveness of the
Credit Agreement, that the Grantors shall have amended and restated the Existing
Security Agreement as set forth herein.
NOW THEREFORE, in consideration of the premises and in order
to induce the Lender Parties to enter into the Credit Agreement, each of the
Grantors hereby agrees with the Administrative Agent for its benefit and the
ratable benefit of the Secured Parties to amend and restate the Existing
Security Agreement as follows:
<PAGE>
2
Section 1. Grant of Security. Each of the Grantors hereby
assigns and pledges to the Administrative Agent for its benefit and the ratable
benefit of the Secured Parties, and hereby grants to the Administrative Agent
for its benefit and the ratable benefit of the Secured Parties a security
interest in, the following (collectively, the "Collateral"):
(a) all of such Grantor's right, title and interest, whether
now owned or hereafter acquired, in and to all equipment in all of its
forms, wherever located, now or hereafter existing, all fixtures and
all parts thereof and all accessions thereto (any and all such
equipment, fixtures, parts and accessions being the "Equipment");
(b) all of such Grantor's right, title and interest, whether
now owned or hereafter acquired, in and to all inventory in all of its
forms, wherever located, now or hereafter existing (including, but not
limited to, (i) all raw materials and work in process therefor,
finished goods thereof and materials used or consumed in the
manufacture or production thereof, (ii) goods in which such Grantor has
an interest in mass or a joint or other interest or right of any kind
(including, without limitation, goods in which such Grantor has an
interest or right as consignee) and (iii) goods that are returned to or
repossessed by such Grantor), and all accessions thereto and products
thereof and documents therefor (any and all such inventory, accessions,
products and documents being the "Inventory");
(c) all of such Grantor's right, title and interest, whether
now owned or hereafter acquired, in and to all accounts, contract
rights, chattel paper, instruments, deposit accounts, general
intangibles and other obligations of any kind, now or hereafter
existing, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights now or
hereafter existing in and to all security agreements, leases and other
contracts securing or otherwise relating to any such accounts, contract
rights, chattel paper, instruments, deposit accounts, general
intangibles or obligations (any and all such accounts, contract rights,
chattel paper, instruments, deposit accounts, general intangibles and
obligations, to the extent not referred to in clause (d), (e) or (f)
below, being the "Receivables", and any and all such leases, security
agreements and other contracts being the "Related Contracts");
(d) all of the following (the "Security Collateral"):
(i) the Pledged Shares and the certificates
representing the Pledged Shares, and all dividends, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares;
(ii) the Pledged Debt and the instruments evidencing
the Pledged Debt, and all interest, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all of the Pledged Debt;
(iii) all additional shares of stock of any issuer of
the Pledged Shares from time to time acquired by such Grantor
in any manner, and the certificates representing such
additional shares, and all dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all of such shares;
(iv) all additional indebtedness from time to time
owed to such Grantor by any obligor of the Pledged Debt and
the instruments evidencing such indebtedness, and all
interest, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such indebtedness; and
<PAGE>
3
(v) all of such Grantor's right, title and interest
in and to the membership interests in any Person and all
dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such membership interests.
(e) all of such Grantor's right, title and interest in and to
each of the agreements listed on Schedule II, and each Hedge Agreement
to which such Grantor is now or may hereafter become a party, in each
case as such agreements may be amended or otherwise modified from time
to time (collectively, the "Assigned Agreements"), including, without
limitation, (i) all rights of such Grantor to receive moneys due and to
become due under or pursuant to the Assigned Agreements, (ii) all
rights of such Grantor to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to the Assigned Agreements, (iii)
claims of such Grantor for damages arising out of or for breach of or
default under the Assigned Agreements and (iv) the right of such
Grantor to terminate the Assigned Agreements, to perform thereunder and
to compel performance and otherwise exercise all remedies thereunder
(all such Collateral being the "Agreement Collateral");
(f) all of the following (collectively, the "Account
Collateral"):
(i) the Cash Collateral Account, all funds held
therein and all certificates and instruments, if any, from
time to time representing or evidencing the Cash Collateral
Account;
(ii) the L/C Cash Collateral Account, all funds held
therein and all certificates and instruments, if any, from
time to time representing or evidencing the L/C Cash
Collateral Account;
(iii) all Lockbox Accounts (as hereinafter defined),
all funds held therein and all certificates and instruments,
if any, from time to time representing or evidencing the
Lockbox Accounts;
(iv) all other deposit accounts of such Grantor, all
funds held therein and all certificates and instruments, if
any, from time to time representing or evidencing such deposit
accounts;
(v) all Collateral Investments (as hereinafter
defined) from time to time and all certificates and
instruments, if any, from time to time representing or
evidencing the Collateral Investments;
(vi) all notes, certificates of deposit, deposit
accounts, checks and other instruments from time to time
hereafter delivered to or otherwise possessed by the
Administrative Agent for or on behalf of such Grantor in
substitution for or in addition to any or all of the then
existing Account Collateral; and
(vii) all interest, dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all of the then existing Account Collateral; and
(g) all proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds that constitute property of
the types described in clauses (a) - (f) of this Section 1) and, to the
extent not otherwise included, all (i) payments under insurance
(whether or not the Administrative Agent
<PAGE>
4
is the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral and (ii) cash.
Section 2. Security for Obligations. This Agreement secures
the payment of all Obligations of each Grantor now or hereafter existing under
the Loan Documents, whether for principal, interest, fees, expenses or otherwise
(all such Obligations being the "Secured Obligations"). Without limiting the
generality of the foregoing, this Agreement secures the payment of all amounts
that constitute part of the Secured Obligations and would be owed by each
Grantor to the Administrative Agent or the Secured Parties under the Loan
Documents but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
such Grantor.
Section 3. Grantors Remain Liable. Anything herein to the
contrary notwithstanding, (a) each Grantor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Administrative Agent of any of the rights hereunder shall not release any
Grantor from any of its duties or obligations under the contracts and agreements
included in the Collateral and (c) neither the Administrative Agent nor any
Secured Party shall have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement, nor shall the
Administrative Agent or any Secured Party be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
Section 4. Delivery of Security Collateral and Account
Collateral. All certificates or instruments representing or evidencing Security
Collateral or Account Collateral shall be delivered to and held by or on behalf
of the Administrative Agent pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to the Administrative Agent. The Administrative Agent shall have
the right, at any time after the occurrence and during the continuance of an
Event of Default, in its discretion and without notice to any Grantor, to
transfer to or to register in the name of the Administrative Agent or any of its
nominees any or all of the Security Collateral and Account Collateral, subject
only to the revocable rights specified in Section 14(a). In addition, the
Administrative Agent shall have the right at any time to exchange certificates
or instruments representing or evidencing Security Collateral or Account
Collateral for certificates or instruments of smaller or larger denominations.
Section 5. Maintaining the Cash Collateral Account and the L/C
Cash Collateral Account. So long as any Advance shall remain unpaid, any Letter
of Credit shall be outstanding or any Secured Party shall have any Commitment
under the Credit Agreement:
(a) The Borrower will maintain the Cash Collateral Account and
the L/C Cash Collateral Account with NationsBank.
(b) It shall be a term and condition of each of the Cash
Collateral Account and the L/C Cash Collateral Account, notwithstanding
any term or condition to the contrary in any other agreement relating
to the Cash Collateral Account or the L/C Cash Collateral Account, as
the case may be, and except as otherwise provided by the provisions of
Section 8 and Section 21, that no amount (including interest on
Collateral Investments) shall be paid or released to or for the account
of, or withdrawn by or for the account of, any Grantor or any other
Person from the Cash Collateral Account or the L/C Cash Collateral
Account, as the case may be.
The Cash Collateral Account and the L/C Cash Collateral Account shall be subject
to such applicable laws, and such applicable regulations of the Board of
Governors of the Federal Reserve System and of any other appropriate
<PAGE>
5
banking or governmental authority, as may now or hereafter be in effect.
Section 6. Maintaining the Lockbox Accounts. So long as any
Advance shall remain unpaid, any Letter of Credit shall be outstanding or any
Secured Party shall have any Commitment under the Credit Agreement:
(a) Each Grantor shall maintain lockboxes and blocked deposit
accounts ("Lockbox Accounts") only with banks ("Lockbox Banks") that
have entered into letter agreements in substantially the form of
Exhibit A with such Grantor and the Administrative Agent ("Lockbox
Letters").
(b) Each Grantor shall immediately instruct each Person
obligated at any time to make any payment to such Grantor for any
reason (an "Obligor") to make such payment to a Lockbox Account or to
the Cash Collateral Account and shall pay to the Administrative Agent
for deposit in the Cash Collateral Account, at the end of each Business
Day, all proceeds of Collateral and all other cash of such Grantor in
excess of $500,000 in the aggregate; provided, however, that D.C.
Chartered Health Plan, Inc. may keep on deposit in a deposit account
any amount that is required to be kept on deposit by it by its
governmental regulatory authority.
(c) Each Grantor shall instruct each Lockbox Bank maintained
by such Grantor to transfer to the Cash Collateral Account, at the end
of each Business Day, in same day funds, an amount equal to the credit
balance of the Lockbox Account in such Lockbox Bank.
(d) Upon any termination of any Lockbox Letter or other
agreement with respect to the maintenance of a Lockbox Account by any
Grantor or any Lockbox Bank, such Grantor shall immediately notify all
Obligors that were making payments to such Lockbox Account to make all
future payments to another Lockbox Account or to the Cash Collateral
Account. Each Grantor agrees to terminate any or all Lockbox Accounts
and Lockbox Letters upon request by the Administrative Agent.
Section 7. Investing of Amounts in the Cash Collateral Account
and the L/C Cash Collateral Account. If requested by the Borrower, the
Administrative Agent will, subject to the provisions of Section 8 and Section
21, from time to time (a) invest amounts on deposit in the Cash Collateral
Account and the L/C Cash Collateral Account in such Cash Equivalents in the name
of the Administrative Agent as the Borrower may select and the Administrative
Agent may approve and (b) invest interest paid on the Cash Equivalents referred
to in clause (a) above, and reinvest other proceeds of any such Cash Equivalents
that may mature or be sold, in each case in such Cash Equivalents in the name of
the Administrative Agent as the Borrower may select and the Administrative Agent
may approve (the Cash Equivalents referred to in clauses (a) and (b) above being
collectively "Collateral Investments"). Interest and proceeds that are not
invested or reinvested in Collateral Investments as provided above shall be
deposited and held in the Cash Collateral Account or the L/C Cash Collateral
Account, as the case may be.
Section 8. Release of Amounts. So long as no Default shall
have occurred and be continuing, the Administrative Agent will pay and release
to the Borrower or at its order and at the request of the Borrower, the amount,
if any, by which the credit balance of the Cash Collateral Account exceeds the
aggregate unpaid principal amount of the Revolving Credit Advances.
Section 9. Representations and Warranties. Each Grantor
represents and warrants as follows:
(a) All of such Grantor's Equipment and Inventory are located
at one or more of the places specified in Schedule III hereto. The
chief place of business and chief executive office of such Grantor and
the office where such Grantor keeps its records concerning the
Receivables, and the original copies
<PAGE>
6
of each Assigned Agreement and all originals of all chattel paper that
evidence Receivables, are located at the address specified below the
name of such Grantor on the signature pages hereof (or in the case of
any Additional Grantor at the address listed below the name of such
Additional Grantor on the signature page of the Security Agreement
Supplement (as defined in Section 25(c)) executed and delivered by
such Additional Grantor). Original copies of each Assigned Agreement
and all originals of all chattel paper that evidence Receivables have
been delivered to the Administrative Agent. None of the Receivables or
Agreement Collateral is evidenced by a promissory note or other
instrument unless the same has been delivered to the Administrative
Agent.
(b) Such Grantor is the legal and beneficial owner of the
Collateral pledged by such Grantor hereunder free and clear of any
Lien, except for the security interest created by this Agreement and
Permitted Liens. No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file
in any recording office, except such as may have been filed in favor of
the Administrative Agent relating to this Agreement or as permitted by
the Credit Agreement. Each Grantor has no trade names other than the
trade names listed on Schedule IV.
(c) Such Grantor has possession and control of the Equipment
and Inventory pledged by such Grantor hereunder.
(d) The Pledged Shares pledged by such Grantor hereunder have
been duly authorized and validly issued and are fully paid and
non-assessable. The Pledged Debt pledged by such Grantor hereunder has
been duly authorized, authenticated or issued and delivered, is the
legal, valid and binding obligation of the issuers thereof and is not
in default.
(e) Except as disclosed in the Credit Agreement, the Pledged
Shares pledged by such Grantor hereunder constitute the percentage of
the issued and outstanding shares of stock of the issuers thereof
indicated on Schedule I. The Pledged Debt pledged by such Grantor
hereunder is outstanding in the principal amount indicated on Schedule
I.
(f) The Assigned Agreements to which such Grantor is a party,
true and complete copies of which have been furnished to each Secured
Party, have been (to the best knowledge of such Grantor, in the case of
any parties other than such Grantor) duly authorized, executed and
delivered by all parties thereto, have not been amended or otherwise
modified, are in full force and effect and are binding upon and
enforceable against all parties thereto in accordance with their terms
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect that affect creditors' rights generally, general
principles of equity (including, without limitation, standards of
materiality, good faith, fair dealing and reasonableness) whether such
principles are considered in a proceeding in equity or at law, and the
application of any fraudulent conveyance, fraudulent transfer,
fraudulent obligation, or preferential transfer or any law governing
the distribution of assets of any Person. To the best knowledge of such
Grantor, there exists no default under any Assigned Agreement to which
such Grantor is a party by any party thereto. Each party to the
Assigned Agreements to which such Grantor is a party (other than such
Grantor) has executed and delivered to such Grantor a consent, in
substantially the form of Exhibit B, to the assignment of the Agreement
Collateral to the Administrative Agent pursuant to this Agreement.
(g) Such Grantor has no Lockbox Accounts or other deposit
accounts other than the Lockbox Accounts listed below such Grantor's
name on Schedule V and the permitted unblocked accounts listed below
such Grantor's name on Schedule VI. Such Grantor has instructed all
existing Obligors to make all payments to either a Lockbox Account or
the Cash Collateral Account.
<PAGE>
7
(h) This Agreement, the pledge of the Security Collateral by
such Grantor pursuant hereto and the pledge and assignment of the
Account Collateral by such Grantor pursuant hereto create a valid first
priority security interest in the Collateral of such Grantor (subject
only to Permitted Liens and Liens permitted by Section 5.02(a)(iii),
(vii), (viii) or (ix of the Credit Agreement)), securing the payment of
the Secured Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly
taken.
(i) No consent of any other Person (except consents already
obtained) and no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or other third party is required either (i) for the grant by such
Grantor of the assignment and security interest granted hereby, for the
pledge by such Grantor of the Security Collateral pursuant hereto or
for the execution, delivery or performance of this Agreement by such
Grantor, (ii) for the perfection or maintenance of the pledge,
assignment and security interest created hereby (including the first
priority nature of such pledge, assignment or security interest (except
as set forth in Section 9(h) above), except for the filing of financing
and continuation statements under the Uniform Commercial Code, which
financing statements have been duly filed, or (iii) for the exercise by
the Administrative Agent of its voting or other rights provided for in
this Agreement or the remedies in respect of the Collateral pursuant to
this Agreement, except (i) as may be required in connection with the
disposition of any portion of the Security Collateral by laws affecting
the offering and sale of securities generally, (ii) the approval of the
Commissioner of Insurance and Securities as to the Pledged Shares
issued by D.C. Chartered Health Plan, Inc. and (iii) the approval of
the Bureau of Insurance as to the Pledged Shares issued by Virginia
Chartered Health Plan, Inc.
(j) The Inventory has been produced by such Grantor in
compliance with all requirements of the Fair Labor Standards Act.
Section 10. Further Assurances. (a) Each Grantor agrees that
from time to time, at its own expense, such Grantor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Administrative Agent may reasonably
request, in order to perfect and protect any pledge, assignment or security
interest granted or purported to be granted hereby or to enable the
Administrative Agent to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the generality of the
foregoing, each Grantor will: (i) mark conspicuously each document included in
the Inventory pledged by such Grantor hereunder, each chattel paper included in
the Receivables pledged by such Grantor hereunder, each Related Contract pledged
by such Grantor hereunder, each Assigned Agreement to which such Grantor is a
party and, at the request of the Administrative Agent, each of its records
pertaining to the Collateral with a legend, in form and substance satisfactory
to the Administrative Agent, indicating that such document, chattel paper,
Related Contract, Assigned Agreement or Collateral is subject to the security
interest granted hereby; (ii) if any Collateral shall be evidenced by a
promissory note or other instrument or chattel paper, deliver and pledge to the
Administrative Agent hereunder such note or instrument or chattel paper duly
indorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance reasonably satisfactory to the Administrative Agent;
and (iii) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as the Administrative Agent may reasonably request, in order to
perfect and preserve the pledge, assignment and security interest granted or
purported to be granted hereby.
(b) Each Grantor hereby authorizes the Administrative Agent to
file one or more financing or continuation statements, and amendments thereto,
relating to all or any part of the Collateral pledged by such Grantor hereunder
without the signature of such Grantor where permitted by law. A photocopy or
other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
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8
(c) Each Grantor will furnish to the Administrative Agent from
time to time statements and schedules further identifying and describing the
Collateral pledged by such Grantor hereunder and such other reports in
connection with the Collateral pledged by such Grantor hereunder as the
Administrative Agent may reasonably request, all in reasonable detail.
Section 11. As to Equipment and Inventory. (a) Each Grantor
shall keep the Equipment and Inventory (other than Inventory sold in the
ordinary course of business) pledged by such Grantor hereunder at the places
therefor specified in Section 9(a) or, upon 30 days' prior written notice to the
Administrative Agent, at such other places in a jurisdiction where all action
required by Section 10 shall have been taken with respect to such Equipment and
Inventory.
(b) Each Grantor shall cause the Equipment pledged by such
Grantor hereunder to be maintained and preserved in the same condition, repair
and working order as exists on the date hereof or, with respect to Equipment
acquired after the date hereof, as when new, ordinary wear and tear excepted,
and in accordance with any manufacturer's manual, and shall forthwith, or in the
case of any material loss or damage to any of such Equipment as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements and other improvements in connection therewith that are necessary
or desirable to such end. Each Grantor shall promptly furnish to the
Administrative Agent a statement respecting any material loss or damage to any
of the Equipment pledged by such Grantor hereunder.
(c) Each Grantor shall pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against, the
Equipment and Inventory pledged by such Grantor hereunder, except as permitted
by the provisions of the Credit Agreement. In producing the Inventory pledged by
such Grantor hereunder, each Grantor shall comply with all requirements of the
Fair Labor Standards Act.
Section 12. Insurance. (a) Each Grantor shall, at its own
expense, maintain insurance with respect to the Equipment and Inventory pledged
by such Grantor hereunder in such amounts, against such risks, in such form and
with such insurers, as shall be reasonably satisfactory to the Administrative
Agent from time to time. Each such policy shall provide for all losses to be
paid on behalf of the Administrative Agent and such Grantor as their interests
may appear, and each policy for property damage insurance shall provide for all
losses (except for losses of less than $250,000 per occurrence) to be paid
directly to the Administrative Agent. Each such policy shall in addition (i)
name such Grantor and the Administrative Agents as insured parties thereunder
(without any representation or warranty by or obligation upon the Administrative
Agent) as their interests may appear, (ii) contain the agreement by the insurer
that any loss thereunder shall be payable to the Administrative Agent
notwithstanding any action, inaction or breach of representation or warranty by
such Grantor, (iii) provide that there shall be no recourse against the
Administrative Agent for payment of premiums or other amounts with respect
thereto and (iv) provide that at least 10 days' prior written notice of
cancellation or of lapse shall be given to the Administrative Agent by the
issuer. Each Grantor shall, if so requested by the Administrative Agent, deliver
to the Administrative Agent original or duplicate policies of such insurance
and, as often as the Administrative Agent may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Further, each Grantor
shall, at the request of the Administrative Agent, duly exercise and deliver
instruments of assignment of such insurance policies to comply with the
requirements of Section 10 and cause the insurers to acknowledge notice of such
assignment.
(b) Reimbursement under any liability insurance maintained by
any Grantor pursuant to this Section 12 may be paid directly to the Person who
shall have incurred liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when subsection (c) of this Section
12 is not applicable, the Grantor that owns such Equipment or Inventory shall
make or cause to be made the necessary repairs to or
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9
replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by such Grantor pursuant to this Section 12 shall be paid to such
Grantor as reimbursement for the costs of such repairs or replacements.
(c) Upon the occurrence and during the continuance of any
Default or the actual or constructive total loss (in excess of $250,000 per
occurrence) of any Equipment or Inventory, all insurance payments in respect of
such Equipment or Inventory shall be paid to and applied by the Administrative
Agent as specified in Section 21(b).
Section 13. Place of Perfection; Records; Collection of
Receivables. (a) Each Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Collateral, and the original copies of the Assigned Agreements to which such
Grantor is a party and all originals of all chattel paper that evidence
Receivables pledged by such Grantor hereunder, at the location therefor
specified in Section 9(a) or, upon 30 days' prior written notice to the
Administrative Agent, at such other locations in a jurisdiction where all
actions required by Section 10 shall have been taken with respect to the
Collateral. Each Grantor will hold and preserve such records, Assigned
Agreements and chattel paper and will permit representatives of the
Administrative Agent at any time during normal business hours to inspect and
make abstracts from such records and chattel paper.
(b) Except as otherwise provided in this subsection (b), each
Grantor shall continue to collect, at its own expense, all amounts due or to
become due such Grantor under the Receivables. In connection with such
collections, each Grantor may take (and, at the Administrative Agent's
direction, shall take) such action as such Grantor or the Administrative Agent
may deem necessary or advisable to enforce collection of the Receivables pledged
by such Grantor hereunder; provided, however, that the Administrative Agent
shall have the right at any time, upon the occurrence and during the continuance
of an Event of Default and upon written notice to such Grantor of its intention
to do so, to notify the Obligors under any Receivables of the assignment of such
Receivables to the Administrative Agent and to direct such Obligors to make
payment of all amounts due or to become due to such Grantor thereunder directly
to the Administrative Agent and, upon such notification and at the expense of
such Grantor, to enforce collection of any such Receivables, and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as such Grantor might have done. After receipt by any Grantor of
the notice from the Administrative Agent referred to in the proviso to the
preceding sentence, (i) all amounts and proceeds (including instruments)
received by such Grantor in respect of such Receivables shall be received in
trust for the benefit of the Administrative Agent hereunder, shall be segregated
from other funds of such Grantor and shall be forthwith paid over to the
Administrative Agent in the same form as so received (with any necessary
indorsement) to be deposited in the Cash Collateral Account and either (A)
released to such Grantor on the terms set forth in Section 8 so long as no
Default shall have occurred and be continuing or (B) if any Event of Default
shall have occurred and be continuing, applied as provided by Section 21(b) and
(ii) such Grantor shall not adjust, settle or compromise the amount or payment
of any such Receivable pledged by such Grantor hereunder, release wholly or
partly any Obligor thereof, or allow any credit or discount thereon.
Section 14. Voting Rights; Dividends; Etc. (a) So long as no
Event of Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Security
Collateral pledged by such Grantor hereunder or any part thereof for
any purpose not inconsistent with the terms of this Agreement or the
other Loan Documents; provided, however, that each Grantor shall not
exercise or refrain from exercising any such right if, in the
Administrative Agent's judgment, such action would have a material
adverse effect on the value of the Security Collateral or any part
thereof.
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10
(ii) Each Grantor shall be entitled to receive and retain any
and all dividends and interest paid in respect of the Security
Collateral pledged by such Grantor hereunder; provided, however, that
any and all
(A) dividends and interest paid or payable other than
in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of,
or in exchange for, any Security Collateral,
(B) dividends and other distributions paid or payable
in cash in respect of any Security Collateral in connection
with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or
paid-in-surplus and
(C) cash paid, payable or otherwise distributed in
respect of principal of, or in redemption of, or in exchange
for, any Security Collateral
shall be, and shall be forthwith delivered to the Administrative Agent
to hold as, Security Collateral and shall, if received by such Grantor,
be received in trust for the benefit of the Administrative Agent, be
segregated from the other property or funds of such Grantor and be
forthwith delivered to the Administrative Agent as Security Collateral
in the same form as so received (with any necessary indorsement).
(iii) The Administrative Agent shall execute and deliver (or
cause to be executed and delivered) to each Grantor all such proxies
and other instruments as such Grantor may reasonably request for the
purpose of enabling such Grantor to exercise the voting and other
rights that it is entitled to exercise pursuant to paragraph (i) above
and to receive the dividends or interest payments that it is authorized
to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event
of Default:
(i) All rights of each Grantor (x) to exercise or refrain from
exercising the voting and other consensual rights that it would
otherwise be entitled to exercise pursuant to Section 14(a)(i) shall,
upon notice to the Borrower by the Administrative Agent, cease and (y)
to receive the dividends and interest payments that it would otherwise
be authorized to receive and retain pursuant to Section 14(a)(ii) shall
automatically cease, and all such rights shall thereupon become vested
in the Administrative Agent, which shall thereupon have the sole right
to exercise or refrain from exercising such voting and other consensual
rights and to receive and hold as Security Collateral such dividends
and interest payments.
(ii) All dividends and interest payments that are received by
any Grantor contrary to the provisions of paragraph (i) of this Section
14(b) shall be received in trust for the benefit of the Administrative
Agent, shall be segregated from other funds of such Grantor and shall
be forthwith paid over to the Administrative Agent as Security
Collateral in the same form as so received (with any necessary
indorsement).
Section 15. As to the Assigned Agreements. (a) Each Grantor
shall at its expense:
(i) perform and observe all the terms and provisions of the
Assigned Agreements to which such Grantor is a party to be performed or
observed by it, use reasonable efforts to maintain such Assigned
Agreements in full force and effect, use reasonable efforts to enforce
such Assigned Agreements in accordance with their terms and take all
such action to such end as may be from time to time reasonably
requested by the Administrative Agent; and
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11
(ii) furnish to the Administrative Agent promptly upon receipt
thereof copies of all notices, requests and other documents received by
such Grantor under or pursuant to the Assigned Agreements to which such
Grantor is a party, and from time to time (A) furnish to the
Administrative Agent such information and reports regarding the
Collateral pledged by such Grantor hereunder as the Administrative
Agent may reasonably request and (B) upon request of the Administrative
Agent make to each other party to any such Assigned Agreement such
demands and requests for information and reports or for action as such
Grantor is entitled to make thereunder.
(b) Each Grantor agrees that it shall not:
(i) cancel or terminate any Assigned Agreement to which such
Grantor is a party or consent to or accept any cancellation or
termination thereof;
(ii) amend or otherwise modify any Assigned Agreement to which
such Grantor is a party or give any consent, waiver or approval
thereunder;
(iii) waive any default under or breach of any Assigned
Agreement to which such Grantor is a party;
(iv) consent to or permit or accept any prepayment of amounts
to become due under or in connection with any Assigned Agreement to
which such Grantor is a party, except as expressly provided therein; or
(v) take any other action in connection with any Assigned
Agreement to which such Grantor is a party that would materially impair
the value of the interest or rights of such Grantor thereunder or that
would materially impair the interest or rights of the Administrative
Agent.
Section 16. Payments Under the Assigned Agreements and the
Material Contracts. (a) Each Grantor agrees, and has effectively so instructed
(or will, within five Business Days following the Closing Date, effectively so
instruct) each other party to each Assigned Agreement and each Material Contract
to which such Grantor is a party, that all payments due or to become due under
or in connection with such Assigned Agreement shall be made directly to the Cash
Collateral Account or to a Lockbox Account.
(b) Except as set forth in Section 21, all moneys received or
collected pursuant to subsection (a) above shall be applied as set forth in
Section 8.
Section 17. Transfers and Other Liens; Additional Shares. (a)
Each Grantor agrees that it shall not, other than in accordance with the terms
of the Credit Agreement, (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Collateral, except sales of Inventory pledged by such Grantor hereunder in the
ordinary course of business, or (ii) create or suffer to exist any Lien upon or
with respect to any of the Collateral except for the pledge, assignment and
security interest created by this Agreement.
(b) Each Grantor agrees that it shall (i) cause each issuer of
the Pledged Shares pledged by such Grantor hereunder not to issue any stock or
other securities in addition to or in substitution for the Pledged Shares issued
by such issuer, except to such Grantor, and (ii) pledge hereunder, immediately
upon its acquisition (directly or indirectly) thereof, any and all additional
shares of stock or other securities owned by such Grantor of each issuer of the
Pledged Shares.
Section 18. Administrative Agent Appointed Attorney-in-Fact.
Each Grantor hereby
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12
irrevocably appoints the Administrative Agent such Grantor's attorney-in-fact,
with full authority in the place and stead of such Grantor and in the name of
such Grantor or otherwise, from time to time in the Administrative Agent's
discretion upon the occurrence and during the continuance of an Event of
Default, to take any action and to execute any instrument that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to the
Administrative Agent pursuant to Section 12,
(b) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral,
(c) to receive, indorse and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a)
or (b) above, and
(d) to file any claims or take any action or institute any
proceedings that the Administrative Agent may deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce compliance with the terms and conditions of any Assigned
Agreement or the rights of the Administrative Agent with respect to any
of the Collateral.
Section 19. Administrative Agent May Perform. If any Grantor
fails to perform any agreement contained herein, the Administrative Agent may
itself perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by such
Grantor under Section 23(b).
Section 20. The Administrative Agent's Duties. The powers
conferred on the Administrative Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the safe custody of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Administrative
Agent shall have no duty as to any Collateral, as to ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Security Collateral, whether or not the
Administrative Agent or any Secured Party has or is deemed to have knowledge of
such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Collateral. The
Administrative Agent shall be deemed to have exercised reasonable care in the
custody and preservation of any Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which NationsBank accords its
own property.
Section 21. Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party upon default under the Uniform Commercial Code in effect
in the State of New York at such time (the "New York Uniform Commercial
Code") (whether or not the New York Uniform Commercial Code applies to
the affected Collateral) and also may (i) require any or all of the
Grantors to, and each Grantor hereby agrees that it will at its expense
and upon request of the Administrative Agent forthwith, assemble all or
part of the Collateral pledged by such Grantor hereunder as directed by
the Administrative Agent and make it available to the Administrative
Agent at a place to be designated by the Administrative Agent that is
reasonably convenient to both parties and (ii) without notice except as
specified below, sell the Collateral pledged by such Grantor hereunder
or any part thereof in one or more parcels at public or private sale,
at any of the Administrative Agent's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the
Administrative Agent may deem
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13
commercially reasonable. Each Grantor agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to
such Grantor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Administrative Agent shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given.
The Administrative Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place
to which it was so adjourned.
(b) All cash proceeds received by the Administrative Agent in
respect of any sale of, collection from, or other realization upon all
or any part of the Collateral may, in the discretion of the
Administrative Agent, be held by the Administrative Agent as collateral
for, and/or then or at any time thereafter applied (after payment of
any amounts payable to the Administrative Agent pursuant to Section 23)
in whole or in part by the Administrative Agent for the ratable benefit
of the Secured Parties against, all or any part of the Secured
Obligations in such order as the Administrative Agent shall elect. Any
surplus of such cash or cash proceeds held by the Administrative Agent
and remaining after payment in full of all the Secured Obligations
shall be paid over to the applicable Grantor or to whomsoever may be
lawfully entitled to receive such surplus.
(c) The Administrative Agent may exercise any and all rights
and remedies of any Grantor under or in connection with the Assigned
Agreements or otherwise in respect of the Collateral, including,
without limitation, any and all rights of any Grantor to demand or
otherwise require payment of any amount under, or performance of any
provision of, any Assigned Agreement.
(d) All payments received by any Grantor under or in
connection with any Assigned Agreement or otherwise in respect of the
Collateral shall be received in trust for the benefit of the
Administrative Agent, shall be segregated from other funds of such
Grantor and shall be forthwith paid over to the Administrative Agent in
the same form as so received (with any necessary indorsement).
(e) The Administrative Agent may, without notice to any
Grantor except as required by law and at any time or from time to time,
charge, set-off and otherwise apply all or any part of the Secured
Obligations against the Cash Collateral Account or the L/C Cash
Collateral Account or any part thereof.
Section 22. Registration Rights. If the Administrative Agent
shall determine to exercise its right to sell all or any of the Security
Collateral pursuant to Section 21, each Grantor agrees that, upon request of the
Administrative Agent, such Grantor will, at its own expense:
(a) execute and deliver, and cause each issuer of the Security
Collateral pledged by such Grantor hereunder contemplated to be sold
and the directors and officers thereof to execute and deliver, all such
instruments and documents, and do or cause to be done all such other
acts and things, as may be necessary or, in the opinion of the
Administrative Agent, advisable to register such Security Collateral
under the provisions of the Securities Act of 1933, as from time to
time amended (the "Securities Act"), to cause the registration
statement relating thereto to become effective and to remain effective
for such period as prospectuses are required by law to be furnished and
to make all amendments and supplements thereto and to the related
prospectus that, in the opinion of the Administrative Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto;
(b) use its reasonable efforts to qualify the Security
Collateral pledged by such Grantor hereunder under the state securities
or "Blue Sky" laws and to obtain all necessary governmental approvals
for the sale of such Security Collateral, as requested by the
Administrative Agent;
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14
(c) cause each such issuer of the Security Collateral pledged
by such Grantor hereunder to make available to its security holders, as
soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act;
(d) provide the Administrative Agent with such other
information and projections as may be necessary or, in the opinion of
the Administrative Agent, advisable to enable the Administrative Agent
to effect the sale of the Security Collateral pledged by such Grantor
hereunder; and
(e) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Security Collateral pledged
by such Grantor hereunder or any part thereof valid and binding and in
compliance with applicable law.
The Administrative Agent is authorized, in connection with any sale of the
Security Collateral pursuant to Section 21, to deliver or otherwise disclose to
any prospective purchaser of the Security Collateral (i) any registration
statement or prospectus, and all supplements and amendments thereto, prepared
pursuant to clause (a) above, (ii) any information and projections provided to
it pursuant to clause (d) above and (iii) any other information in its
possession relating to the Security Collateral.
Section 23. Indemnity and Expenses. (a) Each Grantor agrees to
indemnify the Administrative Agent from and against any and all claims, losses
and liabilities growing out of or resulting from this Agreement (including,
without limitation, enforcement of this Agreement), except claims, losses or
liabilities resulting from the Administrative Agent's gross negligence or
willful misconduct as determined by a final judgment of a court of competent
jurisdiction.
(b) The Borrower will upon demand pay to the Administrative
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that the
Administrative Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of the Administrative Agent or the
Secured Parties hereunder or (iv) the failure by any Grantor to perform or
observe any of the provisions hereof.
Section 24. Security Interest Absolute. The obligations of
each Grantor under this Agreement are independent of the Secured Obligations,
and a separate action or actions may be brought and prosecuted against any
Grantor to enforce this Agreement, irrespective of whether any action is brought
against the Borrower or any other Loan Party or whether the Borrower is joined
in any such action or actions. All rights of the Administrative Agent and the
pledge, assignment and security interest hereunder, and all obligations of the
each Grantor hereunder, shall be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of any Loan
Document or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations or any
other amendment or waiver of or any consent to any departure from any
Loan Document, including, without limitation, any increase in the
Secured Obligations resulting from the extension of additional credit
to the Borrower, any other Loan Party, or any of their subsidiaries or
otherwise;
(c) any taking, exchange, release or non-perfection of any
other collateral, or any taking, release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the Secured
Obligations;
<PAGE>
15
(d) any manner of application of collateral, or proceeds
thereof, to all or any of the Secured Obligations, or any manner of
sale or other disposition of any collateral for all or any of the
Secured Obligations or any other assets of any Grantor or any of their
subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any Grantor or any of their subsidiaries; or
(f) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Grantor or a third party
grantor of a security interest.
Section 25. Amendments; Waivers; Etc. (a) No amendment or
waiver of any provision of this Agreement, and no consent to any departure by
any Grantor herefrom, shall in any event be effective unless the same shall be
in writing and signed by each Grantor and the Administrative Agent, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
(b) No failure on the part of the Administrative Agent 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 such right
preclude any other or further exercise thereof or the exercise of any other
right.
(c) Upon the execution and delivery by any Person of a
supplement to this Agreement, in each case in substantially the form of Exhibit
C hereto (each a "Security Agreement Supplement"), (i) such Person shall be
referred to as an "Additional Grantor" and shall be and become a Grantor, and
each reference in this Agreement to an "Additional Grantor" or a "Grantor" shall
also mean and be a reference to such Additional Grantor and each reference in
any other Loan Document to a "Grantor" or a "Loan Party" shall also mean and be
a reference to such Additional Grantor, and (ii) the schedule supplements
attached to each Security Agreement Supplement shall be incorporated into and
become a part of and supplement the Schedules to this Agreement, as appropriate,
and the Administrative Agent may attach such supplements to such Schedules, and
each reference to such Schedules shall mean and be a reference to such
Schedules, as supplemented pursuant hereto.
Section 26. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telegraphed, telecopied,
telexed, cabled or delivered if to any Grantor, addressed to it at the address
set forth below its name on the signature pages hereof, if to any Additional
Grantor, addressed to it at the address set forth below its name on the
signature pages to the Security Agreement Supplement executed and delivered by
such Additional Grantor, if to the Administrative Agent, addressed to it at its
address set forth in Section 8.02 of the Credit Agreement or, as to any party,
at such other address as shall be designated by such party in a written notice
to the Grantors and the Administrative Agent. All such notices and other
communications shall, when mailed, telecopied, telegraphed, telexed or cabled,
respectively, be effective three days after being deposited in the mails or, if
sent by overnight courier, on the day following the day of delivery to the
overnight courier, or when telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company, respectively,
addressed as aforesaid.
Section 27. Continuing Security Interest; Assignments under
the Credit Agreement. This Agreement shall create a continuing security interest
in the Collateral and shall (a) remain in full force and effect until the later
of the payment in full in cash of the Secured Obligations and the Termination
Date, (b) be binding upon each Grantor, its successors and assigns and (c)
inure, together with the rights and remedies of the Administrative Agent
hereunder, to the benefit of the Administrative Agent, the Secured Parties and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), any Secured Party may assign or
otherwise transfer all or any portion of its rights and obligations under the
Credit Agreement (including, without limitation, all or any portion of its
Commitment, the Advances owing to it and the
<PAGE>
16
Note or Notes held by it to any other Person), and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to such
Lender herein or otherwise, in each case as provided in Section 8.07 of the
Credit Agreement.
Section 28. Release and Termination. (a) Upon any sale, lease,
transfer or other disposition of any item of Collateral in accordance with the
terms of the Loan Documents (other than sales of Inventory in the ordinary
course of business), the Administrative Agent will, at the expense of the
Grantor pledging such item of Collateral hereunder, execute and deliver to such
Grantor such documents as such Grantor shall reasonably request to evidence the
release of such item of Collateral from the assignment and security interest
granted hereby; provided, however, that (i) at the time of such request and such
release no Default shall have occurred and be continuing, (ii) such Grantor
shall have delivered to the Administrative Agent, at least ten days prior to the
date of the proposed release, a written request for release describing the item
of Collateral and the terms of the sale, lease, transfer or other disposition in
reasonable detail, including the price thereof and any expenses in connection
therewith, together with a form of release for execution by the Administrative
Agent and a certification by such Grantor to the effect that the transaction is
in compliance with the Loan Documents and as to such other matters as the
Administrative Agent may request, and (iii) the proceeds of any such sale,
lease, transfer or other disposition required to be applied in accordance with
Section 2.06 of the Credit Agreement shall be paid to, or in accordance with the
instructions of, the Administrative Agent at the closing.
(b) Upon the later of the payment in full in cash of the
Secured Obligations and the Termination Date, the pledge, assignment and
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the appropriate Grantor. Upon any such termination,
the Administrative Agent will, at such Grantor's expense, execute and deliver to
such Grantor such documents as such Grantor shall reasonably request to evidence
such termination.
Section 29. The Mortgages. In the event that any of the
Collateral hereunder is also subject to a valid and enforceable Lien under the
terms of any Mortgage and the terms of such Mortgage are inconsistent with the
terms of this Agreement, then with respect to such Collateral, the terms of such
Mortgage shall be controlling in the case of fixtures and leases, letting and
licenses of, and contracts and agreements relating to the lease of real
property, and the terms of this Agreement shall be controlling in the case of
all other Collateral.
Section 30. Governing Law; Terms. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
except to the extent that the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the State of New York. Unless
otherwise defined herein or in the Credit Agreement, terms used in Article 9 of
the New York Uniform Commercial Code are used herein as therein defined.
<PAGE>
IN WITNESS WHEREOF, each Grantor has caused this Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
GRANTORS
PHP HEALTHCARE CORPORATION
By /s/ Anthony M. Picini
----------------------------
Title: Executive Vice President
and CFO
Address: 11440 Commerce Park Drive
Reston, VA 20191
HEALTH COST CONSULTANTS, INC.
By /s/ Anthony M. Picini
----------------------------
Title: Treasurer
Address: 11440 Commerce Park Drive
Reston, VA 20191
PHP LOUISIANA, INC.
By /s/ Anthony M. Picini
----------------------------
Title: Treasurer
Address: 11440 Commerce Park Drive
Reston, VA 20191
PHP NJ MSO, INC.
By /s/ Anthony M. Picini
----------------------------
Title: Treasurer
Address: 11440 Commerce Park Drive
Reston, VA 20191
<PAGE>
PINNACLE HEALTH ENTERPRISES, L.L.C.
By PHP HEALTHCARE CORPORATION
as Member
By /s/ Anthony M. Picini
----------------------------
Title: Executive Vice President
and CFO
Address: 11440 Commerce Park Drive
Reston, VA 20191
By PHP NJ MSO, Inc.
as Member
By /s/ Anthony M. Picini
----------------------------
Title: Treasurer
Address: 11440 Commerce Park Drive
Reston, VA 20191
<PAGE>
Exhibit 10.3
AMENDED AND RESTATED SUBSIDIARY GUARANTY
AMENDED AND RESTATED SUBSIDIARY GUARANTY dated as of May 26,
1998 made by each of the Persons listed on the signature pages hereof under the
caption "Subsidiary Guarantors" and the Additional Guarantors (as defined in
Section 8(b)) (such Persons so listed and the Additional Guarantors being,
collectively, the "Guarantors"), in favor of the Secured Parties (as defined in
the Credit Agreement referred to below).
PRELIMINARY STATEMENT.
(1) PHP Healthcare Corporation, a Delaware corporation (the
"Borrower") entered into a Credit Agreement dated as of October 1, 1997, as
heretofore amended (as so amended, the "Existing Credit Agreement"), with the
banks, financial institutions and other institutional lenders party thereto (the
"Existing Lenders") and NationsBank, as Administrative Agent (the "Existing
Administrative Agent"). In connection with the Existing Credit Agreement, the
Guarantors entered into a Subsidiary Guaranty dated as of October 31, 1997 (the
"Existing Subsidiary Guaranty") in favor of the Existing Lenders and the
Existing Administrative Agent.
(2) The Borrower has entered into an Amended and Restated
Credit Agreement dated as of May 26, 1998 (said Agreement, as it may hereafter
be amended or otherwise modified from time to time, being the "Credit
Agreement"; the terms defined therein and not otherwise defined herein being
used herein as therein defined) with the banks, financial institutions and other
institutional lenders party thereto (the "Lenders"), NationsBank, N.A.
("NationsBank"), as initial issuing bank, and NationsBank, as the Administrative
Agent for the Lender Parties. It is a condition precedent that the Guarantors
(as wholly-owned domestic Subsidiaries of the Borrower) shall have amended and
restated the Existing Subsidiary Guaranty.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lender Parties to enter into the Credit Agreement, each Guarantor
hereby agrees to amend and restate the Existing Subsidiary Guaranty as follows:
Section 1. GUARANTY; LIMITATION OF LIABILITY. (a) Each
---------------------------------
Guarantor, jointly and severally, hereby unconditionally and irrevocably
guarantees the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations of the Borrower now or
hereafter existing under the Loan Documents, whether for principal, interest,
fees, expenses or otherwise (such Obligations being the "Guaranteed
Obligations"), and agrees to pay any and all reasonable expenses (including
reasonable counsel fees and expenses) incurred by the Administrative Agent or
any other Secured Party in enforcing any rights under this Guaranty. Without
limiting the generality of the foregoing, each Guarantor's liability shall
extend to all amounts that constitute part of the Guaranteed Obligations and
would be owed by the Borrower to the Administrative Agent or any other
Secured Party under the Loan Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower.
(b) Each Guarantor, and by its acceptance of this Guaranty,
the Administrative Agent and each other Secured Party, hereby confirms that it
is the intention of all such parties that this Guaranty not constitute a
fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
federal or state law to the extent applicable to this Guaranty. To effectuate
the foregoing intention, the Administrative Agent, the other Secured Parties and
the Guarantors hereby irrevocably agree that the Obligations of each Guarantor
under this Guaranty shall be
<PAGE>
limited to the maximum amount as will, after giving effect to such maximum
amount and all other contingent and fixed liabilities of such Guarantor that are
relevant under such laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf of any
other Guarantor in respect of the Obligations of such other Guarantor under this
Guaranty, result in the Obligations of such Guarantor under this Guaranty not
constituting a fraudulent transfer or conveyance. For purposes hereof,
"Bankruptcy Law" means Title 11, U.S. Code, or any similar Federal or state law
for the relief of debtors.
Section 2. GUARANTY ABSOLUTE. Each Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
the Loan Documents, regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting any of such terms or the rights of the
Administrative Agent or any other Secured Party with respect thereto. The
Obligations of each Guarantor under this Guaranty are independent of the
Guaranteed Obligations or any other Obligations of any other Loan Party under
the Loan Documents, and a separate action or actions may be brought and
prosecuted against such Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against the Borrower or any other Loan Party or
whether the Borrower or any other Loan Party is joined in any such action or
actions. The liability of each Guarantor under this Guaranty shall be
irrevocable, absolute and unconditional irrespective of, and each Guarantor
hereby irrevocably waives any defenses it may now or hereafter have in any way
relating to, any or all of the following:
(a) any lack of validity or enforceability of any Loan
Document or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations or any
other Obligations of any other Loan Party under the Loan Documents, or
any other amendment or waiver of or any consent to departure from any
Loan Document, including, without limitation, any increase in the
Guaranteed Obligations resulting from the extension of additional
credit to the Borrower or any of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent
to departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any manner of application of Collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any Collateral for all or any of the
Guaranteed Obligations or any other Obligations of any other Loan Party
under the Loan Documents or any other assets of the Borrower or any of
its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of the Borrower or any of its Subsidiaries;
(f) any failure of any Secured Party to disclose to the
Borrower or such Guarantor any information relating to the financial
condition, operations, properties or prospects of any other Loan Party
now or in the future known to any Secured Party (such Guarantor waiving
any duty on the part of the Secured Parties to disclose such
information);
(g) the failure of any other Person to execute this Guaranty
or any other guaranty or agreement or the release or reduction of
liability of any of the other Guarantors or any other guarantor or
surety with respect to the Guaranteed Obligations; or
(h) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Administrative Agent or any other Secured Party
2
<PAGE>
that might otherwise constitute a defense available to, or a discharge
of, the Borrower, such Guarantor or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by any Secured Party or any other Person upon the
insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party
or otherwise, all as though such payment had not been made.
Section 3. WAIVERS AND ACKNOWLEDGMENTS. (a) Each Guarantor
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that the Administrative Agent or any other Secured Party protect,
secure, perfect or insure any Lien or any property subject thereto or exhaust
any right or take any action against the Borrower or any other Person or any
Collateral.
(b) Each Guarantor hereby waives any right to revoke this
Guaranty, and acknowledges that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future.
(c) Each Guarantor acknowledges that the Administrative Agent
may, upon the terms and conditions set forth in any Mortgage, without notice to
or demand upon such Guarantor and without affecting the liability of such
Guarantor under this Guaranty, foreclose under any Mortgage by nonjudicial sale,
and such Guarantor hereby waives any defense to the recovery by the
Administrative Agent and the other Secured Parties against such Guarantor of any
deficiency after such nonjudicial sale and any defense or benefits that may be
afforded by applicable law.
(d) Each Guarantor acknowledges that it will receive
substantial direct and indirect benefits from the financing arrangements
contemplated by the Loan Documents and that the waivers set forth in this
Section 3 are knowingly made in contemplation of such benefits.
(e) Each Guarantor hereby waives (i) any defense arising by
reason of any claim or defense based upon an election of remedies by the
Administrative Agent or the other Secured Parties which in any manner impairs,
reduces, releases or otherwise adversely affects the subrogation, reimbursement,
exoneration, contribution or indemnification rights of such Guarantor or any
other rights of such Guarantor to proceed against any of the other Loan Parties,
any other guarantor or any other Person or any Collateral and (ii) any defense
based on any right of setoff or counterclaim against or in respect of the
Obligations of such Guarantor under this Guaranty.
Section 4. SUBROGATION. Each Guarantor will not exercise any
rights that it may now or hereafter acquire against the Borrower or any other
insider guarantor that arise from the existence, payment, performance or
enforcement of such Guarantor's Obligations under this Guaranty or any other
Loan Document, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Administrative Agent or any other
Secured Party against the Borrower or any other insider guarantor or any
Collateral, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Borrower or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and until
all of the Obligations and all other amounts payable under this Guaranty shall
have been paid in full in cash and the Commitments shall have expired or
terminated. If any amount shall be paid to any Guarantor in violation of the
preceding sentence at any time prior to the later of (i) the payment in full in
cash of the Guaranteed Obligations and all other amounts payable under this
Guaranty and (ii) the Termination Date, such
3
<PAGE>
amount shall be held in trust for the benefit of the Administrative Agent and
the other Secured Parties and shall forthwith be paid to the Administrative
Agent to be credited and applied to the Guaranteed Obligations and all other
amounts payable under this Guaranty, whether matured or unmatured, in accordance
with the terms of the Loan Documents, or to be held as Collateral for any
Guaranteed Obligations or other amounts payable under this Guaranty thereafter
arising. If (i) any Guarantor shall make payment to the Administrative Agent or
any other Secured Party of all or any part of the Guaranteed Obligations, (ii)
all of the Guaranteed Obligations and all other amounts payable under this
Guaranty shall be paid in full in cash and (iii) the Termination Date shall have
occurred, the Administrative Agent and the other Secured Parties will, at such
Guarantor's request and expense, execute and deliver to such Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to such Guarantor of an
interest in the Guaranteed Obligations resulting from such payment by such
Guarantor.
Section 5. PAYMENTS FREE AND CLEAR OF TAXES, ETC. (a) Any and
all payments made by any Guarantor hereunder shall be made, in accordance with
Section 2.12 of the Credit Agreement, free and clear of and without deduction
for any and all present or future Taxes. If any Guarantor shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder to the
Administrative Agent or any other Secured Party, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
the Administrative Agent or such other Secured Party (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Guarantor shall make such deductions and (iii)
such Guarantor shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, each Guarantor agrees to pay any present or
future Other Taxes.
(c) Each Guarantor will indemnify the Administrative Agent and
each other Secured Party for the full amount of Taxes or Other Taxes, and for
the full amount of taxes imposed by any jurisdiction on amounts payable under
this Section, imposed on or paid by the Administrative Agent or such other
Secured Party (as the case may be) and any liability (including penalties,
additions to tax, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be made within 30 days from the date the
Administrative Agent or such other Secured Party (as the case may be) makes
written demand therefor.
(d) Within 30 days after the date of any payment of Taxes by
or on behalf of any Guarantor, such Guarantor will furnish to the Administrative
Agent, at its address referred to in Section 8.02 of the Credit Agreement, the
original receipt of payment thereof or a certified copy of such receipt. In the
case of any payment hereunder by or on behalf of any Guarantor through an
account or branch outside the United States or on behalf of any Guarantor by a
payor that is not a United States person, if such Guarantor determines that no
Taxes are payable in respect thereof, such Guarantor shall furnish, or shall
cause such payor to furnish, to the Administrative Agent, at such address, an
opinion of counsel acceptable to the Administrative Agent stating that such
payment is exempt from Taxes. For purposes of this subsection (d) and subsection
(e), the terms "United States" and "United States person" shall have the
meanings specified in Section 7701 of the Internal Revenue Code.
(e) Each Secured Party organized under the laws of a
jurisdiction outside the United States shall, on or prior to the date of its
execution and delivery of the Credit Agreement, in the case of each Initial
Lender or the Initial Issuing Bank, as the case may be, and on the date of the
Assignment and Acceptance or other agreement pursuant to which it became a
Secured Party, in the case of each other Secured Party, and from time to time
thereafter as requested in writing by any Guarantor or the Administrative Agent
(but only so long thereafter as such Secured Party remains lawfully able to do
so), provide the Administrative Agent and such Guarantor with Internal Revenue
Service form 1001 or 4224, as appropriate, or any successor or other form
prescribed by the
4
<PAGE>
Internal Revenue Service, certifying that such Secured Party is exempt from or
is entitled to a reduced rate of United States withholding tax on payments under
the Credit Agreement or the Notes. If the forms provided by a Secured Party at
the time such Secured Party first becomes a party to the Credit Agreement
indicates a United States interest withholding tax rate in excess of zero,
withholding tax at such rate shall be considered excluded from Taxes unless and
until such Secured Party provides the appropriate form certifying that a lesser
rate applies, whereupon withholding tax at such lesser rate only shall be
considered excluded from Taxes for periods governed by such form; provided,
however, that, if at the date of the Assignment and Acceptance pursuant to which
a Secured Party assignee becomes a party to the Credit Agreement, the Secured
Party assignor was entitled to payments under subsection (a) in respect of
United States withholding tax with respect to interest paid at such date, then,
to such extent, the term Taxes shall include (in addition to withholding taxes
that may be imposed in the future or other amounts otherwise includable in
Taxes) United States withholding tax, if any, applicable with respect to the
Secured Party assignee on such date. If any form or document referred to in this
subsection (e) and requested by any Guarantor pursuant to this subsection (e)
requires the disclosure of information, other than information necessary to
compute the tax payable and information required by Internal Revenue Service
form 1001 or 4224 or other similar form, that the Secured Party reasonably
considers to be confidential, the Secured Party shall give notice thereof to
such Guarantor and shall not be obligated to include in such form or document
such confidential information.
(f) For any period with respect to which a Secured Party has
failed to provide any Guarantor with the appropriate form described in
subsection (e) (other than if such failure is due to a change in law occurring
after the date on which a form originally was required to be provided or if such
form otherwise is not required under subsection (e)), such Secured Party shall
not be entitled to indemnification under subsection (a) or (c) with respect to
Taxes imposed by the United States; provided, however, that should a Secured
Party become subject to Taxes because of its failure to deliver a form required
hereunder, each Guarantor shall take such steps as such Secured Party shall
reasonably request to assist such Secured Party to recover such Taxes.
(g) Any Secured Party claiming any additional amounts payable
pursuant to this Section 5 agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Eurodollar Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Secured Party, be otherwise disadvantageous to such Secured Party.
(h) Without prejudice to the survival of any other agreement
of any Guarantor hereunder or under any other Loan Document, the agreements and
obligations of each Guarantor contained in this Section 5 shall survive the
payment in full of the Guaranteed Obligations and all other amounts payable
under this Guaranty.
Section 6. REPRESENTATIONS AND WARRANTIES. Each Guarantor
hereby represents and warrants as follows:
(a) There are no conditions precedent to the effectiveness of
this Guaranty that have not been satisfied or waived.
(b) Such Guarantor has, independently and without reliance
upon the Administrative Agent or any other Secured Party and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Guaranty, and such Guarantor has
established adequate means of obtaining from any other Loan Parties on a
continuing basis information pertaining to, and is now and on a continuing basis
will be completely familiar with, the financial condition, operations,
properties and prospects of such other Loan Parties.
Section 7. CONFIRMATION OF CERTAIN PROVISIONS OF THE LOAN
DOCUMENTS. Each Guarantor hereby
5
<PAGE>
confirms to the Administrative Agent and the other Secured Parties that each of
the representations and warranties set forth in the Loan Documents that is made
on behalf of such Guarantor by the Borrower is true and correct in all material
respects. Each Guarantor covenants and agrees that, so long as any part of the
Guaranteed Obligations shall remain unpaid, any Letter of Credit shall be
outstanding or any Lender Party shall have any Commitment, such Guarantor will,
unless the Required Lenders shall otherwise consent in writing, perform or
observe all of the terms, covenants and agreements that the Loan Documents state
such Guarantor shall perform or observe.
Section 8. AMENDMENTS, ETC. (a) No amendment or waiver of any
provision of this Guaranty and no consent to any departure by any Guarantor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent and the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all of the Secured Parties
(other than any Lender Party that is, at such time, a Defaulting Lender), (a)
limit the liability of any Guarantor hereunder, (b) postpone any date fixed for
payment hereunder or (c) change the number of Secured Parties required to take
any action hereunder.
(b) Upon the execution and delivery by any Person of a
supplemental guaranty in substantially the form of Exhibit A hereto (each, a
"GUARANTY SUPPLEMENT"), such Person shall be referred to as an "Additional
Guarantor" and shall be and become a Guarantor hereunder and each reference in
this Guaranty to a "Guarantor" shall also mean and be a reference to such
Additional Guarantor and each reference in any other Loan Document to a
"Subsidiary Guarantor" shall also mean and be a reference to such Additional
Guarantor.
Section 9. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
to it, if to a Guarantor, addressed to it at the address listed for such
Guarantor on the signature pages hereof (or in the applicable Guaranty
Supplement), if to the Administrative Agent or any Lender Party, at its address
specified in the Credit Agreement, or as to any party at such other address as
shall be designated by such party in a written notice to each other party. All
such notices and other communications shall, when mailed, telegraphed,
telecopied or telexed, be effective when deposited in the mails, delivered to
the telegraph company, transmitted by telecopier or confirmed by telex
answerback, respectively.
Section 10. NO WAIVER; REMEDIES. No failure on the part of the
Administrative Agent or any other Secured Party 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 such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 11. RIGHT OF SET-OFF. Upon (a) the occurrence and
during the continuance of any Event of Default and (b) the making of the request
or the granting of the consent specified by Section 6.01 of the Credit Agreement
to authorize the Administrative Agent to declare the Notes due and payable
pursuant to the provisions of said Section 6.01, each Lender Party and each of
its respective Affiliates is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender Party or such
Affiliate to or for the credit or the account of any Guarantor against any and
all of the Obligations of such Guarantor now or hereafter existing under this
Guaranty, irrespective of whether such Lender Party shall have made any demand
under this Guaranty and although such Obligations may be unmatured. Each Lender
Party agrees promptly to notify the applicable Guarantor after any such set-off
and application; provided, however, that the failure to give such notice shall
not affect the validity of such set-off and application. The rights of each
Lender Party and its respective Affiliates under this Section are in addition to
other rights and remedies
6
<PAGE>
(including, without limitation, other rights of set-off) that such Lender Party
and its respective Affiliates may have.
Section 12. INDEMNIFICATION. (a) Without limitation on any
other Obligations of any Guarantor or remedies of the Secured Parties under this
Guaranty, each Guarantor hereby agrees, to the fullest extent permitted by law,
to indemnify and hold harmless the Administrative Agent and each of the other
Secured Parties from and against (and will reimburse each Secured Party as the
same are incurred) any and all claims, losses, liabilities, damages and expenses
(including, without limitation, reasonable fees, disbursements and other charges
of counsel) that may be incurred or asserted or awarded against the
Administrative Agent or such Secured Party as a result of any failure of any
Guaranteed Obligations to be the legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their terms.
(b) Each Guarantor hereby also severally agrees that neither
the Administrative Agent nor any of the other Secured Parties shall have any
liability (whether direct or indirect, in contract, tort or otherwise) to any of
the Guarantors or any of their respective Affiliates or any of their respective
officers, directors, employees, attorneys and agents, and each Guarantor hereby
severally agrees not to assert any claim against the Administrative Agent or any
of the other Secured Parties on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
Facilities, the actual or proposed use of the proceeds of the Advances or the
Letters of Credit, the Loan Documents or any of the transactions contemplated
thereby.
(c) Without prejudice to the survival of any of the other
agreements of any of the Guarantors under this Guaranty or any of the other Loan
Documents, the agreements and obligations of each of the Guarantors contained in
Section 1(a) (with respect to enforcement expenses), the last sentence of
Section 2(a), Section 5 and this Section 12 shall survive the payment in full of
the Guaranteed Obligations and all of the other amounts payable under this
Guaranty.
Section 13. CONTINUING GUARANTY; ASSIGNMENTS UNDER THE CREDIT
AGREEMENT. This Guaranty is a continuing guaranty and shall (a) remain in full
force and effect until the later of (i) the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Guaranty and
(ii) the Termination Date, (b) be binding upon each Guarantor and its successors
and assigns and (c) inure to the benefit of and be enforceable by the
Administrative Agent and the other Secured Parties and their successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), any Secured Party may assign or otherwise transfer all or any portion of
its rights and obligations under the Credit Agreement (including, without
limitation, all or any portion of its Commitment, the Advances owing to it and
the Note or Notes held by it) to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to such
Secured Party herein or otherwise, in each case as and to the extent provided in
Section 8.07 of the Credit Agreement.
Section 14. EXECUTION IN COUNTERPARTS. This Guaranty may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Guaranty by telecopier shall be effective as delivery of a manually executed
counterpart of this Guaranty.
Section 15. GOVERNING LAW; JURISDICTION; WAIVER OF JURY
TRIAL, ETC. (a) This Guaranty shall be governed by, and construed in
accordance with, the laws of the State of New York.
(b) Each Guarantor hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or federal court of the United States of
7
<PAGE>
America sitting in New York City, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Guaranty or any of
the other Loan Documents to which it is or is to be a party, or for recognition
or enforcement of any judgment, and each Guarantor hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such State of New York court or,
to the extent permitted by law, in such federal court. Each Guarantor agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Guaranty shall affect any right that any
party may otherwise have to bring any action or proceeding relating to this
Guaranty or any of the other Loan Documents to which it is or is to be a party
in the courts of any jurisdiction.
(c) Each Guarantor irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Guaranty or any of the other Loan
Documents to which it is or is to be a party in any State of New York or federal
court. Each Guarantor hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.
(d) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE (ARISING OUT OF OR RELATING TO ANY OF THE LOAN
DOCUMENTS, THE ADVANCES OR THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY OTHER
SECURED PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
8
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be duly executed and delivered under seal by its officer thereunto duly
authorized as of the date first above written.
SUBSIDIARY GUARANTORS
HEALTH COST CONSULTANTS, INC.
By /s/ Anthony M. Picini
----------------------------------
Title: Treasurer
Address: 11440 Commerce Park Drive
Reston, VA 20191
PHP LOUISIANA, INC.
By /s/ Anthony M. Picini
--------------------------------
Title: Treasurer
Address: 11440 Commerce Park Drive
Reston, VA 20191
PHP NJ MSO, INC.
By /s/ Anthony M. Picini
-------------------------------
Title: Treasurer
Address: 11440 Commerce Park Drive
Reston, VA 20191
<PAGE>
PINNACLE HEALTH ENTERPRISES, L.L.C.
By PHP HEALTHCARE CORPORATION
as Member
By /s/ Anthony M. Picini
--------------------------------
Title: Executive Vice President
and CEO
Address: 11440 Commerce Park Drive
Reston, VA 20191
By PHP NJ MSO, Inc.
as Member
By /s/ Anthony M. Picini
------------------------------
Title: Treasurer
Address: 11440 Commerce Park Drive
Reston, VA 20191
<PAGE>
EXHIBIT 15.1
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Re: PHP Healthcare Corporation
Registration on Form S-3
We are aware that our report, which includes an explanatory paragraph
regarding the restatement of previously issued financial statements to reflect
revised accounting for certain contract costs and certain long-term real estate
leases, dated March 17, 1998, on our review of interim financial information of
PHP Healthcare Corporation and consolidated subsidiaries (the Company) as of
January 31, 1998, and for the three-month and nine-month periods ended January
31, 1998 and 1997, and included in the Company's quarterly report on Form 10-Q
for the quarter ended January 31, 1998, is incorporated by reference in this
registration statement. In addition, we are aware that our report, which
includes an explanatory paragraph regarding the restatement of previously issued
financial statements to reflect revised accounting for certain contract costs
and certain long-term real estate leases, dated December 17, 1997, on our review
of interim financial information of the Company as of October 31, 1997, and for
the three-month and six-month periods ended October 31, 1997 and 1996, and
included in the Company's quarterly report on Form 10-Q for the quarter ended
October 31, 1997, is incorporated by reference in this registration statement.
We are also aware that our report, which includes an explanatory paragraph
regarding the restatement of previously issued financial statements to reflect
revised accounting for certain contract costs, dated September 18, 1997, on our
review of interim financial information of the Company as of July 31, 1997, and
for the three-month periods ended July 31, 1997 and 1996, and included in the
Company's quarterly report on Form 10-Q for the quarter ended July 31, 1997, is
also incorporated by reference in this registration statement. Pursuant to Rule
436(c) under the Securities Act of 1933, this report should not be considered a
part of the prospectus and registration statement prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
Coopers & Lybrand L.L.P.
Washington, D.C.
June 2, 1998
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-3 (File No. 333-26207) of our report, which includes an explanatory
paragraph regarding the restatement of previously issued financial statements to
reflect revised accounting for certain contract costs, dated July 25, 1997, on
our audits of the consolidated financial statements and financial statement
schedule of PHP Healthcare Corporation and Subsidiaries as of April 30, 1997 and
1996, and for the years ended April 30, 1997, 1996 and 1995, which report is
included in the Company's 1997 Form 10-K, as amended. We also consent to the
reference to our firm under the caption "Independent Public Accountants."
COOPERS & LYBRAND L.L.P.
Washington, D.C.
June 2, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption Independent
Accountants and to the use of our reports dated February 14, 1997, except for
Note 4 which is dated April 29, 1997, and March 6, 1996, in Amendment No. 2 to
the Registration Statement Form S-3 No. 333-26207 and related Prospectus of PHP
Healthcare Corporation for the registration of 8,255,639 shares of its common
stock.
/s/ Ernst & Young LLP
Iselin, New Jersey
June 2, 1998
