<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1997
Registration No. 333-33817
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 6
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ALLIANCE IMAGING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 8099 33-0239910
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NUMBER)
ORGANIZATION)
---------------
1065 NORTH PACIFICENTER DRIVE, SUITE 200
ANAHEIM, CALIFORNIA 92806
(714) 688-7100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
ROYAL MEDICAL HEALTH SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
PENNSYLVANIA 8099 25-1738355
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NUMBER)
ORGANIZATION)
---------------
1065 NORTH PACIFICENTER DRIVE, SUITE 200
ANAHEIM, CALIFORNIA 92806
(714) 688-7100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
<PAGE>
ALLIANCE IMAGING OF OHIO, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 8099 33-0768045
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NUMBER)
ORGANIZATION)
---------------
1065 NORTH PACIFICENTER DRIVE, SUITE 200
ANAHEIM, CALIFORNIA 92806
(714) 688-7100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
ALLIANCE IMAGING OF MICHIGAN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 8099 33-0779723
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NUMBER)
ORGANIZATION)
---------------
1065 NORTH PACIFICENTER DRIVE, SUITE 200
ANAHEIM, CALIFORNIA 92806
(714) 688-7100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
ALLIANCE IMAGING OF CENTRAL GEORGIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
GEORGIA 8099 33-0606074
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NUMBER)
ORGANIZATION)
---------------
1065 NORTH PACIFICENTER DRIVE, SUITE 200
ANAHEIM, CALIFORNIA 92806
(714) 688-7100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
MR. RICHARD N. ZEHNER, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
1065 NORTH PACIFICENTER DRIVE, SUITE 200
ANAHEIM, CALIFORNIA 92806
(714) 688-7100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
WITH COPIES TO:
ANTHONY T. ILER, ESQ. JOHN J. SUYDAM, ESQ. JAMES J. CLARK, ESQ.
IRELL & MANELLA LLP O'SULLIVAN GRAEV & CAHILL GORDON & REINDEL
333 SOUTH HOPE STREET KARABELL, LLP 80 PINE STREET
SUITE 3300 30 ROCKEFELLER PLAZA NEW YORK, NEW YORK 10005
LOS ANGELES, CALIFORNIA NEW YORK, NEW YORK 10112 (212) 701-3000
90071 (212) 408-2400
(213) 620-1555
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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, check the following box. [_]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. [_]
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(c)
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. [_]
---------------
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 OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 9, 1997
PROSPECTUS
$165,000,000
ALLIANCE IMAGING, INC.
$125,000,000 % SENIOR SUBORDINATED NOTES DUE 2005
$40,000,000 SENIOR SUBORDINATED FLOATING RATE NOTES DUE 2005
----------
Alliance Imaging, Inc. ("Alliance" or the "Company") is offering (the
"Offering") $125,000,000 aggregate principal amount of its % Senior
Subordinated Notes due 2005 (the "Fixed Rate Notes") and $40,000,000 aggregate
principal amount of its Senior Subordinated Floating Rate Notes due 2005 (the
"Floating Rate Notes" and, together with the Fixed Rate Notes, the "Notes").
The Offering is part of the financing that will be used to consummate the
recapitalization of Alliance (the "Recapitalization"). The Recapitalization
will be effected pursuant to an Agreement and Plan of Merger (the
"Recapitalization Merger Agreement"). Under the terms of the Recapitalization
Merger Agreement, an entity formed by affiliates of Apollo Management, L.P.
(collectively, "Apollo") will merge with and into Alliance upon the completion
of the Offering, with Alliance as the surviving corporation. The consummation
of the Offering, the Recapitalization and the transactions contemplated thereby
will be concurrent, and the Offering is conditioned upon the other Transactions
(as defined).
Interest on the Notes will be payable semi-annually on each and , commencing
, 1998, at the rate of % per annum in the case of the Fixed Rate Notes, and
at a rate per annum equal to LIBOR (as defined) plus % in the case of the
Floating Rate Notes. Interest on the Floating Rate Notes will be reset semi-
annually. The Fixed Rate Notes will be redeemable, in whole or in part, at the
option of the Company, on or after , 2001, and the Floating Rate Notes will be
redeemable, in whole or in part, at the option of the Company, at any time, in
each case at the redemption prices set forth herein plus accrued interest to
the date of redemption. In addition, on or prior to , 2000, the Company may, at
its option, redeem up to 40% of the aggregate principal amount of the Fixed
Rate Notes with the net cash proceeds of one or more Equity Offerings (as
defined), at the redemption price set forth herein plus accrued interest to the
date of redemption; provided, however, that after any such redemption, 60% of
the aggregate principal amount of the Fixed Rate Notes issued must remain
outstanding.
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to all Senior Debt (as defined) of the
Company, including indebtedness under the Credit Agreement (as defined). The
Notes will be unconditionally guaranteed (the "Guarantees") on a senior
subordinated basis by substantially all of Alliance's domestic subsidiaries
(the "Guarantors"). The Guarantees will be general unsecured obligations of the
Guarantors and will be subordinated in right of payment to all Guarantor Senior
Debt (as defined) of the Guarantors. As of September 30, 1997, after giving pro
forma effect to the Transactions, the Company would have had approximately
$56.9 million of Senior Debt outstanding (excluding unused commitments of $75.0
million under the Credit Agreement).
Upon a Change of Control (as defined), each holder of the Notes will have the
right to require the Company to repurchase such holder's Notes at a price equal
to 101% of their principal amount plus accrued interest to the date of
repurchase. There can be no assurance that the Company will have the financial
ability or will be permitted by the Credit Agreement to repurchase the Notes.
See "Risk Factors--Repurchase of Notes upon a Change of Control." In addition,
the Company will be obligated to offer to repurchase the Notes at 100% of their
principal amount plus accrued interest to the date of repurchase in the event
of certain asset sales.
There is no existing market for the Notes, and there can be no assurance as
to the liquidity of any markets that may develop for the Notes, the ability of
the holders of the Notes to sell their Notes or the price at which such holders
would be able to sell their Notes. The Company does not intend to apply for
listing of the Notes on any securities exchange. See "Risk Factors--Absence of
Public Market."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES.
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) THE COMPANY(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note................................. % % %
- --------------------------------------------------------------------------------
Total.................................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from the date of original issuance of the
Notes.
(2) The Company and the Guarantors have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(3) Before deducting expenses of the Offering payable by the Company estimated
at $ .
The Notes are offered, subject to prior sale, when, as and if delivered to
and accepted by the Underwriters, and subject to various other conditions,
including the Underwriters' right to reject orders in whole or in part. It is
expected that delivery of the Notes will be made in book-entry form through the
facilities of The Depository Trust Company on or about , 1997.
JOINT BOOK-RUNNING MANAGERS
BT ALEX. BROWN
SALOMON SMITH BARNEY
----------
The date of this Prospectus is , 1997
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-2 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Notes being offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain portions of which have been omitted pursuant to the rules and
regulations promulgated by the Commission. Statements made in this Prospectus,
or in any document incorporated in this Prospectus by reference, as to the
contents of any contract, agreement or other document are not necessarily
complete. With respect to each such contract, agreement or other document
filed or incorporated by reference as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description
of the matter involved, and each such statement is qualified in its entirety
by such reference.
The Registration Statement may be inspected by anyone without charge at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington D.C. 20549, and at the regional offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300,
New York, New York 10048. Copies of such material may also be obtained at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees.
Such materials can also be inspected on the Internet at http://www.sec.gov.
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, proxy statements and other information with the
Commission. The reports, proxy statements and other information filed by the
Company with the Commission can be inspected and copied at the places, and in
the manner, set forth above.
In the event that the Company ceases to be subject to the informational
reporting requirements of the Exchange Act, the Company has agreed that, so
long as the Notes remain outstanding, it will file with the Commission and
distribute to holders of the Notes copies of the financial information that
would have been contained in annual reports and quarterly reports, including
management's discussion and analysis of financial condition and results of
operations, that the Company would have been required to file with the
Commission pursuant to the Exchange Act. Such financial information will
include annual reports containing consolidated financial statements and notes
thereto, together with an opinion thereon expressed by an independent public
accounting firm, as well as quarterly reports containing unaudited condensed
consolidated financial statements for the first three quarters of each fiscal
year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference herein the following documents filed
with the Commission pursuant to the Exchange Act:
I Alliance's Annual Report on Form 10-K for the fiscal year ended December
31, 1996;
II Alliance's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997; and
III Alliance's Current Report on Form 8-K dated August 1, 1997.
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 modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
i
<PAGE>
THIS PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT
TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY,
INCLUDING STATEMENTS UNDER THE CAPTIONS "UNAUDITED PRO FORMA COMBINED
CONSOLIDATED FINANCIAL INFORMATION," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS--COMPETITIVE
STRENGTHS." THESE FORWARD LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH MATTERS WILL BE
REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS,
THE FOLLOWING POSSIBILITIES: (1) COMPETITIVE PRESSURE IN THE COMPANY'S
INDUSTRY INCREASES SIGNIFICANTLY; (2) COSTS OR DIFFICULTIES RELATED TO THE
INTEGRATION OF THE BUSINESSES OF ALLIANCE AND ANY BUSINESSES TO BE ACQUIRED
ARE GREATER THAN EXPECTED; (3) THE ABILITY TO RENEW OR EXTEND EXISTING
CONTRACTS; AND (4) GENERAL ECONOMIC CONDITIONS ARE LESS FAVORABLE THAN
EXPECTED. FURTHER INFORMATION ON OTHER FACTORS WHICH COULD AFFECT THE
FINANCIAL RESULTS OF THE COMPANY AFTER THE MERGER AND SUCH FORWARD LOOKING
STATEMENTS IS INCLUDED IN THE SECTION HEREIN ENTITLED "RISK FACTORS".
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
MAY BID FOR AND PURCHASE NOTES IN THE OPEN MARKET AND MAY IMPOSE PENALTY BIDS.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
ii
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in this
Prospectus or in the documents incorporated herein by reference. Reference is
made to, and this summary is qualified in its entirety by, the more detailed
information contained elsewhere in this Prospectus and in the documents
incorporated by reference herein. Unless the context otherwise requires, the
terms "Alliance" and the "Company" refer to Alliance Imaging, Inc., and its
subsidiaries. The consummation of the Offering is conditioned upon, among other
things, the simultaneous consummation of the other Transactions.
THE COMPANY
The Company is a leading nationwide provider of diagnostic imaging services
and the largest operator of state-of-the-art mobile diagnostic imaging systems
and related outsourced radiology services in the United States. The Company
primarily provides magnetic resonance imaging ("MRI") systems and services to
hospitals and other health care providers on a mobile, shared user basis. The
Company also provides dedicated, full-time MRI systems and services as well as
full-service management of imaging operations for selected hospitals. The
Company's services enable small to mid-size hospitals to gain access to
advanced diagnostic imaging technology and related value-added services without
making a substantial investment in equipment and personnel. The Company
operates a fleet of 98 MRI systems and services 356 MRI customers in 36 states
under exclusive contracts with an average remaining length of approximately 24
months as of September 30, 1997.
Since the beginning of 1995, Alliance has substantially increased revenues by
adding new customers and increasing scan volumes at existing customer sites.
During the same period, the growth rate of Alliance's EBITDA (as defined
herein) and net income has exceeded the growth rate of revenues principally as
a result of spreading costs (which are primarily fixed) over a larger revenue
base and implementing cost reduction and containment measures.
INDUSTRY OVERVIEW
The diagnostic imaging industry, which involves the use of non-surgical
techniques to generate representations of internal structures and organs on
film or video, generates annual revenues in excess of $50 billion in the United
States, or 5% to 6% of total health care spending. MRI services, which involve
the use of high strength magnetic fields to produce cross-sectional images of
the anatomy, constituted approximately $6 to $7 billion of the diagnostic
imaging industry in 1996. The approximately 4,000 MRI systems in the United
States include approximately 2,400 hospital owned systems, 1,000 independent
fixed site systems and 600 mobile systems.
MRI facilitates the early diagnosis of diseases and disorders, often
minimizing the cost and amount of care needed and frequently eliminating the
need for invasive diagnostic procedures. MRI is the preferred imaging modality
for the brain, the spine and soft tissue because it produces a superior image
and does not expose patients to ionizing radiation. As a result of the cost
efficiency and clinical effectiveness of MRI, hospitals and other health care
providers are facing competitive pressures to provide MRI technology and
related services despite budgetary limitations. Increasingly, such providers
are utilizing third parties such as the Company to provide the necessary
imaging systems and related services to avoid substantial equipment and
operating costs. Mobile MRI operators employ systems housed in specially
designed trailers and typically enter into long-term contracts to provide a
specified schedule of service on a fee-per-scan basis. Operators then design
schedules for each system to rotate among multiple hospitals in a manner that
optimizes system utilization.
1
<PAGE>
The MRI services industry has experienced substantial growth in demand as
measured by total scan volumes, which have increased from 5.4 million in 1990
to 8.8 million in 1996. According to an industry consultant, scan volumes are
projected to grow at approximately 7% to 8% per year through 1999 and at 5% per
year thereafter. Growth in the MRI industry is attributable to increased
physician acceptance, substitution of MRI for other imaging modalities
(including x-ray based techniques), expanding applications for MRI technology
and health care reform which encourages outpatient services.
The MRI services industry is highly fragmented. Recently, however, the
industry has begun to undergo consolidation. The Company believes such
consolidation is primarily the result of (i) economies of scale in the
provision of services to a larger customer base; (ii) cost-effective purchasing
of equipment, supplies and services by larger companies; and (iii) the decision
by many smaller, capital constrained operators to sell their MRI businesses
rather than make substantial investments in new imaging systems. Despite the
recent trend, management estimates that as of September 30, 1997, the top eight
MRI service providers operated only 13% of total MRI systems in the United
States.
COMPETITIVE STRENGTHS
The Company attributes its market leadership and its significant
opportunities for continued growth and increased profitability to the following
strengths:
Largest Provider of Mobile MRI Services. The Company operates 98 MRI systems
in 36 states. The Company believes that the next largest mobile operator has a
fleet of approximately 70 MRI systems. Compared to its smaller competitors, the
Company believes it benefits from (i) significant equipment purchasing savings;
(ii) attractive service and maintenance contracts from its primary equipment
suppliers; (iii) strong name recognition and a reputation for quality service;
(iv) substantial financial flexibility and access to lower-cost capital; and
(v) the ability to efficiently deploy systems in a manner which maximizes fleet
utilization while satisfying customer requirements.
Technologically Advanced MRI Fleet. The Company has invested approximately
$78 million since January 1, 1995 to replace and upgrade existing systems and
to purchase new systems. As a result, the Company believes that it has upgraded
substantially all of its systems and expects most of its capital expenditures
for at least the next three to five years to relate to new system purchases. Of
the Company's 98 MRI systems, 73 are state-of-the-art, high-field 1.0 or 1.5
Tesla systems and 13 are state-of-the-art, mid-field 0.5 Tesla systems. The
Company believes its fleet is among the newest and most advanced in the
industry, enabling the Company to perform a wider variety and greater volume of
scans and produce higher quality images, which the Company believes provides a
significant competitive advantage. Moreover, all of the Company's state-of-the-
art systems are designed to facilitate hardware and software upgrades. As a
result, the Company's systems should remain on the leading edge of
technological developments. In addition, while many of its competitors lease
their systems, the Company owns the vast majority of its systems, generally
providing greater flexibility and lower costs over the life of the systems.
Exclusive, Long-Term Contracts in Attractive Markets. The Company generates
substantially all of its revenues from exclusive, long-term contracts with
hospitals and other health care providers, with the price for its services
determined on a fee-per-scan basis. The Company has 20, 84 and 77 contracts
that will expire, if not renewed or extended, in the fourth quarter of 1997,
and the years 1998 and 1999, respectively. The Company anticipates that it will
renew or extend substantially all of these contracts. The Company's contracts
typically offer tiered pricing with lower fees on incremental scans, allowing
customers to benefit from increased scan volumes and the Company to benefit
from the operating leverage associated with increased scan volumes.
Accordingly, tiered pricing enables the Company to retain customers who may be
considering purchasing their own MRI systems rather than renewing a contract
with a mobile provider. As of September 30, 1997, the Company had 356 MRI
customers under exclusive contracts which averaged approximately 24 months in
remaining length. Most of the Company's contracts are with hospitals that have
fewer than 200 beds, many of which may lack the financial resources or patient
volume to justify the purchase of an MRI system.
2
<PAGE>
Superior Customer Service and Strong Customer Relationships. The Company
positions itself as a service company rather than solely as an equipment
provider and competes on the basis of value-added services in addition to
price. The Company differentiates itself from competitors by aggressively
marketing its services to referring physicians, radiologists and hospital
administrators and by having the advanced imaging systems, trained
technologists, fleet management capabilities and fleet size to accommodate the
growing needs of its customers. Value-added services offered by the Company
include patient scheduling and pre-screening, insurance pre-authorization,
appointment confirmation, billing, managed care contracting, and management
reporting services. The Company often provides two technologists per mobile
system per shift and is therefore able to accommodate higher patient volume and
operate with greater efficiency, resulting in high customer satisfaction
levels. As a result, the Company enjoys strong customer relationships, having
added 146 net new MRI customers from January 1, 1995 through September 30, 1997
and renewed or extended 197 of its customer contracts in this period.
Substantial Operating Leverage. Because of the significant amount of fixed
costs associated with operating an MRI system, MRI service providers benefit
from operating leverage, with increased utilization rates resulting in
significant increases in operating earnings and operating margins. The
Company's average scans per system per day increased to 7.2 for the nine months
ended September 30, 1997 from 6.7 for the nine months ended September 30, 1996.
Favorable Payment Terms. Approximately 92% of the Company's billings are
direct to hospitals. The hospitals, in turn, generally pay the Company prior to
collecting from patients and third party payors. Accordingly, the Company's
exposure to uncollectible patient receivables is minimized. In addition,
management believes that the Company's average number of days sales outstanding
("DSO") of receivables, which was 45 days as of September 30, 1997, is among
the most favorable in the mobile MRI industry and more favorable than the DSO
of many health care companies.
Experienced Management Team. The Company's senior management team has an
average of nine years of industry experience and six years of experience with
Alliance. The Company's senior and operating managers have successfully
developed and implemented sophisticated marketing, fleet management and
financial strategies which have enabled the Company to become the largest and
among the most efficient and profitable mobile MRI operators. Upon consummation
of the Transactions and after giving effect to the Company's option plans,
management will own in excess of 11% of the capital stock of the Company on a
fully diluted basis.
BUSINESS STRATEGY
The Company's management team has developed and implemented a business
strategy designed to maximize return on invested capital and in turn increase
revenues and cash flow. The Company's revenues for the nine months ended
September 30, 1997 increased to $62.3 million from $49.1 million for the nine
months ended September 30, 1996. In addition, the Company's income before
extraordinary gain for the nine months ended September 30, 1997 increased to
$6.8 million from $5.1 million for the nine months ended September 30, 1996.
The Company achieved comparable customer revenue growth of 25.9% and 8.8%,
respectively, in the first nine months of 1997 and in the year ended December
31, 1996. In addition, during the three months ended September 30, 1997 the
Company added a total of eight net mobile MRI systems. Management believes that
the recent financial performance of the Company does not yet fully reflect the
benefit of these new systems.
The primary components of the Company's business strategy are to (i) increase
scan volumes; (ii) maximize return on invested capital; (iii) expand the scope
of services provided; and (iv) pursue strategic acquisitions.
Increase Scan Volumes. The Company believes that the demand for MRI
procedures will continue to grow as new applications are developed and MRI
continues to gain acceptance and replace other imaging modalities.
3
<PAGE>
The Company has an opportunity to significantly increase its scan volumes by
both adding new customers and increasing scans performed for existing
customers. In response to the growing demand for MRI procedures, the Company
added 26 net MRI systems and 146 net new MRI customers from January 1, 1995 to
September 30, 1997. The Company expects to add 14 net new MRI systems by the
end of 1998. The Company's decision to purchase new systems is typically
predicated on obtaining new customer contracts which serve as the basis of
demand for the new MRI systems.
Maximize Return on Invested Capital. The Company actively manages the
utilization of its MRI systems to maximize its return on invested capital
(i.e., the amount of cash flow generated by each system relative to the
carrying value of such system). In the nine months ended September 30, 1997,
the Company generated an annualized return on invested capital of 42.9%. The
Company typically upgrades the quality of its fleet in markets where demand is
greatest and redeploys less advanced systems in markets where demand is lower
in order to generate incremental cash flow. The Company estimates that, on
average, a system can be utilized in a high demand market for approximately
eight years when properly maintained and upgraded, after which time the system
can either be utilized in a market with less demand or traded in for a new
system.
Expand the Scope of Services Provided. The Company intends to leverage its
national presence and customer service capabilities by introducing new
services, the demand for which management believes will increase as hospitals
continue to outsource departments and cost centers and seek incremental revenue
sources. The Company expects to expand into open MRI services, lithotripsy
services and full-service management of hospital radiology departments. Open
MRI systems are used on claustrophobic patients and patients whose size
prohibits them from entering traditional MRI systems. Management believes that
with the introduction of its first open MRI system in the fourth quarter of
1997, the Company will be the first operator to offer mobile open MRI service.
Pursue Strategic Acquisitions. Management has designed an acquisition
strategy for the Company which capitalizes on the consolidation occurring in
the industry as well as the Company's ability to (i) access substantial and
lower cost financial resources; (ii) realize significant synergies, operating
expense reductions and overhead cost savings; (iii) apply its consolidation
strategy to expand outside of diagnostic imaging in related services; (iv)
utilize the Company's expertise in logistics and fleet management; and (v)
leverage the Company's existing customer relationships to expand into new
modalities.
On October 20, 1997, Alliance announced the execution of a definitive
agreement to acquire Medical Consultants Imaging Co. ("MCIC"), a Cleveland,
Ohio based provider of mobile MRI services, CT services and other outsourced
healthcare services. The acquisition also includes MCIC's one-half interest in
an operating joint venture in Michigan. The purchase price consists of $13
million cash (subject to certain reductions) plus the assumption of
approximately $5 million in financing arrangements. MCIC operates 14 mobile MRI
systems and several other diagnostic imaging systems primarily in Ohio,
Michigan, Indiana and Pennsylvania. The transaction was completed on November
21, 1997. In addition, the Company is currently engaged in acquisition
discussions with several other MRI service providers. Management believes
future acquisitions will enable the Company to redeploy systems in overlapping
markets, resulting in higher utilization rates and the opportunity to increase
penetration in other markets.
4
<PAGE>
THE TRANSACTIONS
In connection with the completion of the Offering, Alliance intends to
consummate the Recapitalization pursuant to the Recapitalization Merger
Agreement. In connection with the Transactions, the Company expects to enter
into an agreement (the "Credit Agreement") providing for a $50 million term
loan facility (the "Term Loan Facility") and a $75 million revolving loan
facility (the "Revolving Loan Facility"), which will be available for the
Company's working capital requirements and to finance acquisitions.
In connection with the Transactions, Apollo will invest $37.3 million and BT
Capital Partners, an affiliate of BT Alex. Brown Incorporated (the "BT
Investor"), will invest $2.7 million of cash equity in the Company
(collectively, the "Equity Investment"). Immediately following consummation of
the Transactions, Apollo will own approximately 84% of the outstanding common
stock of the Company (approximately 74% on a fully diluted basis) and the BT
Investor will own approximately 6% of the outstanding common stock of the
Company (approximately 5% on a fully diluted basis). In addition, Apollo and
the BT Investor will purchase $14.1 million and $0.9 million, respectively, of
the Company's Series F Preferred Stock. As part of the Recapitalization, common
stock of Alliance with a value of approximately $4.5 million will be retained
by existing stockholders of the Company, representing approximately 10% of the
outstanding common stock of the Company. In addition, immediately following
consummation of the Transactions, through a combination of (i) the continuation
of existing options (having an option value of approximately $0.5 million) to
purchase common stock of Alliance and (ii) the issuance of options pursuant to
the Company's new option plan (the "New Option Plan"), management will own in
excess of 11% of the equity of the Company on a fully-diluted basis.
The Offering, the Recapitalization, the Equity Investment and the related
borrowings under the Credit Agreement are collectively referred to herein as
the "Transactions." The consummation of the Transactions will be concurrent,
and the Offering is conditioned upon the other Transactions. The approximate
sources and uses of funds in connection with the Transactions are presented in
the following table, assuming the Transactions occurred as of September 30,
1997 (dollars in millions):
<TABLE>
<S> <C>
SOURCES OF FUNDS:
Term Loan Facility................................................ $ 50.0
Notes............................................................. 165.0
Redeemable Preferred Stock........................................ 15.0
Equity Investment(1).............................................. 40.0
------
Total Sources................................................... $270.0
======
USES OF FUNDS:
Payment of cash consideration in Recapitalization(2).............. $165.6
Repay outstanding indebtedness, net(3)............................ 75.2
Increase in cash.................................................. 7.9
Estimated fees and expenses....................................... 21.3
------
Total Uses...................................................... $270.0
======
</TABLE>
- --------
(1) Does not include $4.5 million of equity retained by existing stockholders
of the Company and the continuation by certain members of management of
existing options to purchase common stock of Alliance having a value of
approximately $0.5 million.
(2) Comprised of (a) payment for shares of common stock of Alliance
(approximately $149.7 million), (b) payments with respect to outstanding
warrants and options and change of control payments under employment
agreements (approximately $13.8 million) and (c) payments pursuant to
Alliance's Long-Term Incentive Plan (approximately $2.1 million).
(3) Net of approximately $1.1 million of net discounts on early payment of such
indebtedness to which the Company is contractually entitled.
5
<PAGE>
THE OFFERING
Issuer...................... Alliance Imaging, Inc.
Securities Offered..........
$125,000,000 in aggregate principal amount of
% Senior Subordinated Notes due 2005.
$40,000,000 aggregate principal amount of Senior
Subordinated Floating Rate Notes due 2005.
Maturity Date............... , 2005.
Interest Rate and Payment Interest on the Notes will accrue from the date
Dates.................. of issuance and will be payable semi-annually on
each and , commencing , 1998. The
Fixed Rate Notes will bear interest at a rate of
% per annum. The Floating Rate Notes will bear
interest at a rate per annum equal to LIBOR plus
%. Interest on the Floating Rate Notes will be
reset semi-annually.
Ranking..................... The Notes will be general unsecured obligations
of the Company and will be subordinated in right
of payment to all Senior Debt of the Company,
including the indebtedness under the Credit
Agreement. The Guarantees will be general
unsecured obligations of the Guarantors and will
be subordinated in right of payment to all
Guarantor Senior Debt of the Guarantors. As of
September 30, 1997, after giving pro forma effect
to the Transactions, the Company would have had
approximately $56.9 million of Senior Debt
outstanding (excluding unused commitments of
$75.0 million under the Credit Agreement).
Guarantees.................. The Notes will be unconditionally guaranteed on a
senior subordinated basis by the Guarantors.
Optional Redemption......... The Fixed Rate Notes will be redeemable, in whole
or in part, at the option of the Company, at any
time on or after , 2001, and the Floating
Rate Notes will be redeemable, in whole or in
part, at the option of the Company, at any time,
in each case at the redemption prices set forth
herein, plus accrued and unpaid interest, if any,
to the date of redemption. In addition, at any
time on or prior to , 2000, the Company
may redeem up to 40% of the aggregate principal
amount of the Fixed Rate Notes with the net
proceeds of one or more Equity Offerings at the
redemption price set forth herein plus accrued
and unpaid interest, if any, to the date of
redemption; provided, however, that after any
such redemption 60% of the aggregate principal
amount of the Fixed Rate Notes issued must remain
outstanding. See "Description of the Notes--
Redemption."
Change of Control........... Upon the occurrence of a Change of Control, the
Company will be required to offer to purchase all
outstanding Notes at a price in cash equal to
101% of the aggregate principal amount thereof,
plus accrued and unpaid interest, if any, to the
date of purchase. In the
6
<PAGE>
event of a Change of Control, there can be no
assurance that the Company will have the
financial resources or be permitted under the
terms of its other indebtedness to repurchase the
Notes. In addition, the Credit Agreement will
restrict the Company's ability to repurchase the
Notes, including pursuant to a Change of Control
Offer. The occurrence of a default under the
Indenture (as defined) will also cause a default
under the Credit Agreement. See "Description of
the Notes--Change of Control."
Certain Covenants........... The indenture pursuant to which the Notes will be
issued (the "Indenture") will contain certain
covenants that, among other things, limit the
ability of the Company and its Restricted
Subsidiaries (as defined) to: incur additional
indebtedness, incur liens, pay dividends or make
certain other restricted payments, consummate
certain asset sales, enter into certain
transactions with affiliates, merge or
consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets
of the Company and impose restrictions on the
ability of a Restricted Subsidiary to pay certain
dividends or make certain payments to the
Company. See "Description of the Notes--Certain
Covenants."
Offers to Purchase..........
In the event of certain asset sales, the Company
will be required to offer to repurchase the Notes
at a price equal to 100% of their principal
amount plus accrued interest to the date of
purchase. See "Description of the Notes--Certain
Covenants--Limitation on Asset Sales."
Use of Proceeds............. The Company intends to use the net proceeds from
the Offering to partially fund the Transactions.
See "Use of Proceeds."
For more complete information regarding the Notes, including the definitions
of certain capitalized terms used above, see "Description of the Notes."
RISK FACTORS
Prospective purchasers of the Notes should consider carefully the information
set forth under the caption "Risk Factors," and all other information set forth
in this Prospectus, in evaluating an investment in the Notes.
7
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
The summary historical consolidated financial information with respect to
each year in the three-year period ended December 31, 1996 is derived from the
consolidated financial statements of Alliance, which have been audited by Ernst
& Young LLP, independent auditors. The financial information for the three
months and the nine months ended September 30, 1996 and 1997 are unaudited, but
in the opinion of management, reflects all adjustments necessary for a fair
presentation of such information. Operating results for the three months and
the nine months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1997. The
summary historical consolidated financial information provided below should be
read in conjunction with the consolidated financial statements and notes
thereto included elsewhere in this Prospectus. See "Index to Consolidated
Financial Statements."
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------- ---------------------
1994 1995 1996 1996 1997 1996 1997
-------- ------- ------- ------- ------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenues................ $ 57,875 $58,065 $68,482 $49,097 $62,285 $ 17,795 $ 22,374
Operating expenses,
excluding depreciation. 31,093 28,342 32,344 23,549 27,499 8,530 9,684
Selling, general and
administrative
expenses............... 6,284 6,294 8,130 4,879 6,251 1,719 2,261
Depreciation expense.... 13,424 12,202 12,737 9,170 11,222 3,122 4.078
Amortization expense,
primarily goodwill..... 943 1,345 1,952 1,309 1,767 564 602
Interest expense, net... 10,758 5,053 5,758 4,184 5,315 1,501 1,758
Net income (loss)(1).... (19,066) 4,102 12,801 5,051 8,083 1,949 2,636
<CAPTION>
AS OF SEPTEMBER 30,
1997
---------------------
AS
ACTUAL ADJUSTED(2)
-------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA :
Cash and short-term
investments............ $ 10,557 $ 18,427
Total assets............ 151,623 166,300
Total long-term debt,
including current
portion................ 83,073 221,884
Redeemable Preferred
Stock.................. -- 14,400
Stockholders' equity
(deficit).............. 43,825 (88,899)
<CAPTION>
NINE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------- ---------------------
1994 1995 1996 1996 1997 1996 1997
-------- ------- ------- ------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(3)............... $ 20,498 $23,429 $28,008 $20,669 $28,535 $ 7,546 $ 10,429
EBITDA margin(4)........ 35.4% 40.3% 40.9% 42.1% 45.8% 42.4% 46.6%
Pro forma interest ex-
pense, net(2).......... -- -- $20,136 -- $15,102 -- $ 5,034
Cash flows provided by
(used in):
Operating activities... $ 12,784 $18,043 $21,731 $17,348 $22,090 $ 6,482 $ 8,397
Investing activities... (19,861) (7,789) (27,936) (21,865) (33,546) (7,418) (14,001)
Financing activities... 1,135 (1,604) 5,944 5,066 11,146 1,433 2,344
Capital expenditures(5). 22,361 11,383 34,376 24,705 34,175 6,762 13,842
Number of MRI systems at
end of period.......... 72 76 86 86 98 86 98
Comparable customer
revenue growth(6)...... (0.1)% 6.9% 8.8% 11.5% 25.9% 3.9% 18.1%
Average scans per MRI
system per day......... 5.8 5.8 6.7 6.7 7.2 7.0 7.5
Ratio of earnings to
fixed charges(7)....... -- 1.9x 2.1x 2.2x 2.7x 2.3x 3.0x
</TABLE>
(footnotes on following page)
8
<PAGE>
- --------
(1) Net income (loss) includes special charges of $13.3 million for the year
ended December 31, 1994 related to an equipment exchange transaction, the
impairment of certain equipment, debt restructuring and employee
severances; extraordinary gains (net of tax) of $6.3 million for the year
ended December 31, 1996 related to the early extinguishment of debt; and an
extraordinary gain (net of tax) of $1.3 million for the nine months ended
September 30, 1997 related to the early extinguishment of debt.
(2) As adjusted consolidated balance sheet data at September 30, 1997 reflects
the historical consolidated balance sheet of Alliance adjusted to give
effect to the Transactions as if they had occurred at September 30, 1997.
Pro forma interest expense, net, reflects net cash interest expense as
adjusted to give effect to the Transactions as if they had occurred as of
January 1, 1996 for the year ended December 31, 1996, and as of January 1,
1997 for the three and nine month periods ended September 30, 1997. See
"Unaudited Pro Forma Consolidated Financial Information."
(3) EBITDA is defined herein as income before income taxes, plus depreciation,
amortization, net interest expense and other non-recurring items
(principally noncash). EBITDA is presented because the Company believes it
is a widely accepted financial indicator of a company's ability to service
and/or incur indebtedness. However, EBITDA should not be considered as an
alternative to net income as a measure of operating results or to cash
flows as a measure of liquidity in accordance with generally accepted
accounting principles.
(4) EBITDA margin is defined herein as EBITDA divided by revenues. The Company
believes EBITDA margin provides a comparative reference to measure EBITDA
performance from period to period and against comparable sized companies in
the industry and, as such, provides a supplemental mechanism to evaluate
efficiency and overall operating performance.
(5) The substantial majority of Alliance's historical capital expenditures have
related to either major upgrades to existing systems or the replacement of
older, less-advanced systems with new, state-of-the-art technologically
advanced systems. As a result of these historical investments, the Company
believes that it has upgraded substantially all of its systems and expects
most of its capital expenditures for at least the next three to five years
to relate to net fleet additions through new system purchases.
(6) Represents period over period revenue growth for customers that generated
revenues for the entire term of both periods.
(7) For purposes of computing this ratio, earnings consist of income before
income taxes plus fixed charges. Fixed charges consist of interest expense
and one-third of the rent expense from long-term equipment operating
leases, which management believes is a reasonable approximation of an
interest factor. Alliance's earnings were insufficient to cover fixed
charges by $18.0 million for the year ended December 31, 1994.
9
<PAGE>
RISK FACTORS
Prospective purchasers of the Notes should consider carefully the
information set forth below as well as all other information set forth in this
Prospectus, in evaluating an investment in the Notes.
SUBSTANTIAL LEVERAGE
After giving effect to the Transactions, the Company's consolidated
indebtedness will be approximately $221.9 million. This high level of
indebtedness in comparison to historical indebtedness may reduce the
flexibility of the Company to respond to changing business and economic
conditions, as well as limit capital expenditures of the Company. The Credit
Agreement and the Indenture will include significant operating and financial
restrictions, such as limits on the Company's ability to incur indebtedness.
On a pro forma basis, after giving effect to the Transactions, the Company's
earnings would have been insufficient to cover fixed charges by $8.3 million
for the year ended December 31, 1996, and by $0.7 million for the nine months
ended September 30, 1997.
The Company's high degree of leverage may have important consequences for
the Company, including: (i) the ability of the Company to obtain additional
financing for acquisitions, working capital, capital expenditures or other
purposes, if necessary, may be impaired or such financing may not be on terms
favorable to the Company; (ii) a substantial portion of the Company's cash
flow will be used to pay the Company's interest expense, which will reduce the
funds that would otherwise be available to the Company for its operations and
future business opportunities; (iii) a substantial decrease in net operating
cash flows or an increase in expenses of the Company could make it difficult
for the Company to meet its debt service requirements and force it to modify
its operations; (iv) the Company may be more highly leveraged than its
competitors which may place it at a competitive disadvantage; and (v) the
Company's high degree of leverage may make it more vulnerable to a downturn in
its business or the economy generally. Any inability of the Company to service
its indebtedness or obtain additional financing, as needed, would have a
material adverse effect on the Company. A significant portion of the
indebtedness to be incurred by the Company to finance the Transactions will
bear interest at variable rates. Any increase in the interest rates on the
Company's indebtedness will reduce funds available to the Company for its
operations and future business opportunities and will exacerbate the
consequences of the Company's leveraged capital structure.
RESTRICTIVE DEBT COVENANTS
The Indenture will contain certain covenants that, among other things, limit
the ability of the Company and its Restricted Subsidiaries to incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, incur indebtedness that is subordinate in right of payment to any
Senior Debt and senior in right of payment to the Notes, merge or consolidate
with any other person or sell, assign, transfer, lease, convey or otherwise
dispose of all of or substantially all of the assets of the Company and impose
restrictions on the ability of a Restricted Subsidiary to pay certain
dividends or make certain payments to the Company. See "Description of the
Notes--Certain Covenants." In addition, the Credit Agreement is expected to
contain a number of significant covenants that, among other things, will
restrict the ability of the Company to (i) declare dividends or redeem or
repurchase capital stock; (ii) prepay, redeem or purchase debt, including the
Notes; (iii) incur liens and engage in sale-leaseback transactions; (iv) make
loans and investments; (v) incur additional indebtedness; (vi) amend or
otherwise alter debt and other material agreements; (vii) make capital
expenditures; (viii) engage in mergers, acquisitions and asset sales; (ix)
enter into transactions with affiliates; and (x) alter the business it
conducts. The indebtedness outstanding under the Credit Agreement will be
guaranteed by substantially all of the Company's domestic subsidiaries and
will be secured by a first priority lien on substantially all of the
properties and assets of the Company and its subsidiaries, now owned or
acquired later, including a pledge of all of the shares of the Company's
existing and future subsidiaries and up to 65% of the shares of the Company's
future foreign subsidiaries which are owned by the Company or one of its
subsidiaries. In addition, under the Credit Agreement, the Company will also
be required to comply with financial covenants with respect to (i) a maximum
leverage
10
<PAGE>
ratio; (ii) a minimum consolidated EBITDA; (iii) a minimum interest coverage
ratio; and (iv) a minimum fixed charge coverage ratio. If the Company were
unable to borrow under the Credit Agreement due to a default, it would be left
without sufficient liquidity. See "Description of the Credit Agreement."
REGULATION
Many aspects of the medical industry in the United States, including the
Company's business, are subject to extensive federal and state government
regulation. Although the Company believes that its operations comply with
applicable regulations, there can be no assurance that subsequent adoption of
laws or interpretations of existing laws will not regulate, restrict or
otherwise adversely affect the Company's business.
The marketing and operation of the Company's MRI and computed axial
tomography ("CT") systems are subject to state laws prohibiting the practice
of medicine by non-physicians. Management believes that its operations do not
involve the practice of medicine because all professional medical services
relating to its operations, such as the interpretation of the scans and
related diagnoses, are separately provided by licensed physicians not employed
by the Company. Further, the Company believes that its operations do not
violate state laws with respect to the rebate or division of fees.
The Company is subject to federal and state laws which govern financial and
other arrangements between health care providers. These include the federal
Medicare and Medicaid anti-kickback statutes which prohibit bribes, kickbacks,
rebates and any other direct or indirect remuneration in return for or to
induce the referral of an individual to a person for the furnishing, directing
or arranging of services, items or equipment for which payment may be made in
whole or in part under Medicare, Medicaid or other federal health care
programs. Violation of the anti-kickback statute may result in criminal
penalties and exclusion from the Medicare and other federal health care
programs. Many states have enacted similar statutes which are not necessarily
limited to items and services paid for under Medicare or a federally funded
health care program. In recent years, there has been increasing scrutiny by
law enforcement authorities, the U.S. Department of Health and Human Services
("HHS"), the courts and Congress of financial arrangements between health care
providers and potential sources of patient and similar referrals of business
to ensure that such arrangements are not designed as mechanisms to pay for
patient referrals. HHS interprets the anti-kickback statute broadly to apply
to distributions of partnership and corporate profits to investors who refer
federal health care program patients to a corporation or partnership in which
they have an ownership interest and to payments for service contracts and
equipment leases that are designed to provide direct or indirect remuneration
for patient referrals or similar opportunities to furnish reimbursable items
or services. In July 1991, HHS issued "safe harbor" regulations that set forth
certain provisions which, if met, will assure that health care providers and
other parties who refer patients or other business opportunities, or who
provide reimbursable items or services, will be deemed not to violate the
anti-kickback statute. The Company is also subject to separate laws governing
the submission of false claims. The Company is a party to a partnership for
provision of MRI services. The Company believes that the partnership is in
compliance with the anti-kickback statute. The Company believes that its other
operations likewise comply with the anti-kickback statutes.
A federal law, commonly known as the "Stark Law," also imposes civil
penalties and exclusions for referrals for "designated health services" by
physicians to certain entities with which they have a financial relationship
(subject to certain exceptions). "Designated health services" include, among
other things, MRI services. While implementing regulations have been issued
relating to referrals for clinical laboratory services, no implementing
regulations have been issued regarding the other designated health services,
including MRI services. In addition, several states in which the Company
operates have enacted or are considering legislation that prohibits "physician
self-referral" arrangements or requires physicians to disclose any financial
interest they may have with a health care provider to their patients to whom
they recommend that provider. Possible sanctions for violating these
provisions include loss of licensure and civil and criminal sanctions. Such
state laws vary from state to state and seldom have been interpreted by the
courts or regulatory agencies. Nonetheless, strict enforcement of these
requirements is likely. The Company believes its operations comply with these
federal and state physician self-referral laws.
11
<PAGE>
In some states, a certificate of need ("CON") or similar regulatory approval
is required prior to the acquisition of high-cost capital items, including
diagnostic imaging systems or provision of diagnostic imaging services by the
Company or its customers. CON regulations may limit or preclude the Company
from providing diagnostic imaging services or systems. A significant increase
in the number of states regulating the Company's business within the CON or
state licensure framework could adversely affect the Company. Conversely,
repeal of existing CON regulations in jurisdictions where the Company has
obtained or operates under a CON could also adversely affect the Company. This
is an area of continuing legislative activity, and there can be no assurance
that the Company will not be subject to CON and licensing statutes in other
states in which it operates or may operate in the future. See "Business--
Regulation."
REIMBURSEMENT OF HEALTH CARE COSTS; COST CONTAINMENT PRESSURES; CONTRACTS
The majority of payments to the Company are received directly from health
care providers, rather than from private insurers, other third party payors or
governmental entities. To a lesser extent, the Company's revenues are
generated from direct billings to patients or their medical payors which are
recorded net of contractual discounts and other arrangements for providing
services at discounted prices. Under current reimbursement regulations, the
Company is prohibited from billing the insurer or the patient directly for
services provided for hospital inpatients or outpatients. Payment to health
care providers by third party payors for the Company's diagnostic services
depends substantially upon such payors' reimbursement policies. Consequently,
those policies have a direct effect on health care providers' ability to pay
for the Company's services and an indirect effect on the Company's level of
charges. Ongoing concerns about rising health care costs may cause more
restrictive reimbursement policies to be implemented in the future.
Restrictions on reimbursements to health care providers may affect such
providers' ability to pay for the services offered by the Company and could
indirectly adversely affect the Company's financial performance. See
"Business--Reimbursement."
The current health care environment is characterized by cost containment
pressures which the Company believes have resulted in decreasing revenues per
scan. Although scan prices appear to have stabilized, the Company expects
modest continuing downward pressure on pricing levels. Although the Company
has experienced increased scan volumes in 1995, 1996 and 1997, it has also had
periods of declining volumes in prior years, and there can be no assurance
that the recent positive trends will continue. Among other things, the Company
is subject to the risk that customers will cease using the Company's MRI
services upon expiration of contracts and purchase or lease their own MRI
systems. In the past, when this has occurred, the Company has generally been
able to obtain replacement customers. However, it is not always possible to
immediately obtain replacement customers, and some replacement customers have
been smaller facilities and have had lower scan volumes.
ACQUISITION STRATEGY
The Company's expansion and acquisition strategy may require substantial
capital, and no assurance can be given that the Company will be able to raise
any necessary additional funds through bank financing or the issuance of
equity or debt securities. Sufficient funds may not be available on terms
acceptable to the Company, if at all. There can be no assurance that the
Company will be able to successfully integrate the operations of any future
acquisitions.
TECHNOLOGICAL CHANGE AND OBSOLESCENCE
The Company's services require the use of state-of-the-art medical equipment
that has been characterized by rapid technological advances. Although the
Company believes that substantially all the MRI and CT systems it provides can
be upgraded to maintain their state-of-the-art character, the development of
new technologies or refinements of existing ones might make the Company's
existing systems technologically or economically obsolete, or cause a
reduction in the value of, or reduce the need for, the Company's systems. MRI
systems are currently manufactured by numerous companies. Competition among
manufacturers for a greater share of the MRI systems market may result in
technological advances in the capacity of these new systems. Consequently,
12
<PAGE>
the obsolescence of the Company's systems may be accelerated. Although the
Company is aware of no substantial technological change, should such change
occur, there can be no assurance that the Company will be able to acquire the
new or improved systems which may be required to service its customers.
SUBORDINATION OF NOTES AND THE GUARANTEES
The Notes and the Guarantees will be unsecured and subordinated to the prior
payment in full of all Senior Debt of the Company and all Guarantor Senior
Debt of the Guarantors, respectively. As of September 30, 1997, on a pro forma
basis after giving effect to the Transactions, the aggregate outstanding
principal amount of all Senior Debt would have been approximately $56.9
million. In the event of a bankruptcy, liquidation or reorganization of the
Company, the assets of the Company or the Guarantors will be available to pay
obligations on the Notes only after all Senior Debt of the Company or all
Guarantor Senior Debt of the Guarantors, as the case may be, has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on
any or all of the Notes. In addition, the Company may not pay principal or
premium, if any, or interest on the Notes if any Senior Debt is not paid when
due or any other default on any Senior Debt occurs and the maturity of such
Senior Debt is accelerated in accordance with its terms, unless, in either
case, such amount has been paid in full or the default has been cured or
waived and such acceleration has been rescinded. In addition, if any default
occurs with respect to certain Senior Debt and certain other conditions are
satisfied, the Company may not make any payments on the Notes for a designated
period of time. Finally, if any judicial proceeding is pending with respect to
any such default in payment on any Senior Debt or other default with respect
to certain Senior Debt, or if the maturity of the Notes is accelerated because
of a default under the Indenture and such default constitutes a default with
respect to any Senior Debt, the Company may not make any payment on the Notes.
See "Description of the Notes--Subordination."
FRAUDULENT TRANSFER CONSIDERATIONS
The payment of the consideration in the Recapitalization to the stockholders
of Alliance and the related financing (including the issuance of the Notes and
the Guarantees) may be subject to review under federal or state fraudulent
transfer laws. While the relevant laws may vary from state to state, under
such laws, if a court in a lawsuit by a creditor or a representative of
creditors of Alliance, such as a trustee in bankruptcy or one of such entities
as debtor-in-possession, were to find that, at the time of or after and giving
effect to the Transactions, Alliance (i) was insolvent or rendered insolvent
thereby, (ii) was engaged in a business or transaction for which its remaining
assets constituted unreasonably small capital, (iii) intended to incur, or
believed that it would incur, debts beyond its ability to pay as they matured,
or (iv) intended to hinder, delay or defraud creditors and, in the case of
clauses (i), (ii) and (iii), that Alliance did not receive reasonably
equivalent value or fair consideration in the Recapitalization, such court
could avoid all or a part of the payment of the consideration in the
Recapitalization and require that the stockholders, including stockholders
exercising appraisal rights, return such consideration to Alliance or to a
fund for the benefit of their respective creditors. In addition, if a court
were to find that Alliance came within any of clauses (i) through (iv) above,
Alliance, or its respective creditors or trustees in bankruptcy, could seek to
avoid the grant of security interests to the lenders under the Credit
Agreement or to subordinate or void altogether the Notes and the Guarantees.
This would result in an event of default with respect to such indebtedness
which, under the terms of such indebtedness (subject to applicable law), would
allow the lenders to terminate their obligations thereunder and to accelerate
payment of such indebtedness.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the jurisdiction which is being applied. There can be no
certainty as to what law a court would apply pursuant to applicable choice of
law provisions, although it is likely that a court would apply the law of the
state of incorporation of Alliance, federal bankruptcy law, the law of the
jurisdiction in which the headquarters of Alliance is located or the law of
the jurisdiction in which the Recapitalization is deemed to have occurred.
Generally, however, a company would be considered insolvent for purposes of
the foregoing if the sum of such company's debts is greater than all such
company's property at a fair valuation, or if the present fair saleable value
of such company's assets is less than the amount that will be required to pay
its probable liability on its existing debts as they become absolute and
matured. There can be no assurance, however, that a court would not
13
<PAGE>
determine that Alliance was insolvent at the time of or after and giving
effect to the Recapitalization. In addition, there can be no assurance that a
court would not determine, regardless of whether Alliance was solvent, that
the Recapitalization constituted a fraudulent transfer on another of the
grounds listed above. Management believes that Alliance will be solvent
following the consummation of the Transactions.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
In the event of a Change of Control, the Company will be required to offer
to repurchase all of the outstanding Notes at a purchase price equal to 101%
of the aggregate principal amount thereof, plus accrued and unpaid interest,
if any, to the repurchase date. The Credit Agreement will prohibit the
repurchase of the Notes upon a Change of Control unless and until the
indebtedness under the Credit Agreement is repaid in full. There can be no
assurance that the Company will have sufficient funds available or will be
permitted by the Credit Agreement and any other indebtedness to repurchase the
Notes upon the occurrence of a Change of Control. The Change of Control
purchase feature of the Notes may in certain circumstances make more difficult
or discourage a takeover of the Company and, thus, the removal of incumbent
management. See "Description of the Notes--Change of Control."
RELIANCE ON KEY PERSONNEL
The Company's success depends in large part upon a number of key management
personnel, principally Messrs. Zehner and Pino. The loss of the service of one
or more of its executive officers or other key management personnel could have
a material adverse effect on the Company. Messrs. Zehner and Pino have entered
into employment agreements and an agreement not to compete with Alliance which
will become effective at the effective time of the Recapitalization. See
"Management--Employment and Related Agreements."
COMPETITION
The market for diagnostic imaging services and imaging systems is highly
competitive. In addition to direct competition from other mobile providers,
the Company competes with free-standing imaging centers and health care
providers that have their own diagnostic imaging systems and with equipment
manufacturers that sell or lease imaging systems to health care providers for
full-time installation. Some of the Company's direct competitors that provide
contract MRI services may have access to greater financial resources than the
Company. In addition, some of the Company's customers are capable of providing
the same services to their patients directly, subject only to their decision
to acquire a high-cost diagnostic imaging system, assume the associated
financial risk, employ the necessary technologists and satisfy applicable
licensure and CON requirements, if any.
CONTROL BY APOLLO; POTENTIAL CONFLICTS OF INTEREST
Upon consummation of the Transactions, Apollo will own approximately 84% of
the outstanding common stock of the Company (approximately 74% on a fully
diluted basis). Accordingly, Apollo and its general partner will control the
Company and have the power to elect all of its directors, appoint new
management and approve any action requiring the approval of the holders of
shares of Alliance common stock, including adopting amendments to the
Company's certificate of incorporation and approving mergers or sales of
substantially all of the Company's assets. Apollo also holds a controlling
interest in SMT Health Services Inc. ("SMT"), a leading provider of mobile MRI
services in the Mid-Atlantic region of the United States and a competitor of
the Company. If acquisition or other opportunities in the MRI industry are
presented to Apollo, no assurance can be given that Apollo will offer such
opportunities to Alliance and not to SMT.
ABSENCE OF PUBLIC MARKET
The Notes are a new issue of securities which have no established trading
market. It is expected that the Notes will be sold to a limited number of
investors. The Company has been advised by the Underwriters that they intend
to make a market in the Notes after the consummation of this Offering;
however, the Underwriters are not obligated to do so, and any such market-
making, if commenced, may be terminated at any time without notice. No
assurance can be given as to the liquidity of the trading market, if any, that
may develop for the Notes.
14
<PAGE>
THE TRANSACTIONS
In connection with the completion of the Offering, Alliance intends to
consummate the Recapitalization pursuant to the Recapitalization Merger
Agreement. In connection with the Transactions, the Company expects to enter
into the Credit Agreement providing for the $50 million Term Loan Facility and
the $75 million Revolving Loan Facility which will be available to provide for
the Company's working capital requirements and to finance acquisitions.
In connection with the Transactions, Apollo will invest $37.3 million and
the BT Investor will invest $2.7 million of cash equity in the Company.
Immediately following consummation of the Transactions, Apollo will own
approximately 84% of the outstanding common stock of the Company
(approximately 74% on a fully diluted basis) and the BT Investor will own
approximately 6% of the outstanding common stock of the Company (approximately
5% on a dully diluted basis). As part of the Recapitalization, common stock of
Alliance with a value of approximately $4.5 million will be retained by
existing stockholders of the Company, representing approximately 10% of the
outstanding common stock of the Company. In addition, immediately following
consummation of the Transactions, through a combination of (i) the
continuation of existing options (having an option value of approximately $0.5
million) to purchase common stock of Alliance and (ii) the issuance of options
pursuant to the Company's New Option Plan, management will own in excess of
11% of the equity of the Company on a fully-diluted basis.
Also in connection with the Transactions, Apollo and the BT Investor will
purchase $14.1 million and $0.9 million, respectively, of the Company's Series
F Preferred Stock. The Series F Preferred Stock has a dividend rate of 13.50%
per annum, payable quarterly in arrears, is redeemable at the option of the
Company at stated redemption premiums and matures in 2007. Dividends on the
Series F Preferred Stock are payable in kind for the first five years and
thereafter in cash, subject to compliance with the Company's then-existing
debt agreements. Apollo and the BT Investor will receive financing fees equal
to 4% of their respective investments in the Series F Preferred Stock.
A more detailed description of the Transactions is contained in Alliance's
registration statement on Form S-4 (File No. 333-33787). See "Available
Information."
15
<PAGE>
USE OF PROCEEDS
The net proceeds of the Company from the sale of the Notes are estimated to
be $160.0 million. The Company intends to use the net proceeds, together with
borrowings under the Credit Agreement, to fund the Transactions, to repay
certain outstanding indebtedness and to pay fees and expenses relating to the
Transactions. The indebtedness being repaid consists of approximately $76.2
million (comprising Alliance's senior notes and debt incurred to purchase
equipment) that bears interest at rates of 8.0% to 11.4% per annum and matures
from 1997 to 2002. See Note 4 of Notes to Alliance's Consolidated Financial
Statements.
The approximate sources and uses of funds in connection with the
Transactions are set forth in the following table, assuming the Transactions
occurred as of September 30, 1997.
SOURCES AND USES OF FUNDS
(IN MILLIONS)
SOURCES OF FUNDS
<TABLE>
<S> <C>
Term Loan Facility................................................ $ 50.0
Notes............................................................. 165.0
Redeemable Preferred Stock........................................ 15.0
Equity Investment(1).............................................. 40.0
------
Total Sources .................................................. $270.0
======
USES OF FUNDS
Payment of cash consideration in Recapitalization(2).............. $165.6
Repay outstanding indebtedness, net(3)............................ 75.2
Increase in cash.................................................. 7.9
Estimated fees and expenses....................................... 21.3
------
Total Uses...................................................... $270.0
======
</TABLE>
- --------
(1) Does not include $4.5 million of equity retained by existing stockholders
of the Company and the continuation by certain members of management of
existing options to purchase common stock of Alliance having a value of
approximately $0.5 million.
(2) Comprised of (a) payment for shares of common stock of Alliance
(approximately $149.7 million), (b) payments with respect to outstanding
warrants and options and change of control payments under employment
agreements (approximately $13.8 million) and (c) payments pursuant to
Alliance's Long-Term Incentive Plan (approximately $2.1 million).
(3) Net of approximately $1.1 million of net discounts on early payment of
such indebtedness to which the Company is contractually entitled.
16
<PAGE>
PRO FORMA CAPITALIZATION
The following table sets forth the pro forma capitalization of the Company,
assuming the Transactions had occurred on September 30, 1997. This table
should be read in conjunction with the information contained in "Use of
Proceeds," "Unaudited Pro Forma Consolidated Financial Information" and the
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" as well as Alliance's consolidated financial
statements and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
AT SEPTEMBER 30,
1997
----------------
(IN MILLIONS)
<S> <C>
Cash and short-term investments.......................... $ 18.4
======
Long-term debt, including current portion:
Term Loan Facility..................................... $ 50.0
Revolving Loan Facility(1)............................. --
Other debt(2).......................................... 6.9
Notes.................................................. 165.0
------
Total debt........................................... 221.9
Redeemable Preferred Stock(3)............................ 14.4
Stockholders' equity (deficit):
Common stockholders' equity (deficit).................. (57.2)
Accumulated deficit.................................... (31.7)
------
Total stockholders' equity (deficit)................. (88.9)
------
Total capitalization............................... $147.4
======
</TABLE>
- --------
(1) The Revolving Loan Facility provides for borrowings of up to $75 million.
See "Description of the Credit Agreement."
(2) Consists of capitalized lease obligations and purchase money obligations
secured by equipment.
(3) Presented net of $0.6 million of financing fees.
17
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma combined consolidated balance sheet at
September 30, 1997 reflects the historical consolidated balance sheet of
Alliance adjusted to give effect to the Transactions as if they had occurred
at September 30, 1997. The Recapitalization will be treated as a leveraged
recapitalization in which there will be no changes to the carrying values of
Alliance's net assets and the sales and purchases of Alliance's common stock
will be accounted for as capital transactions at amounts received from or paid
to stockholders.
The following unaudited pro forma consolidated statements of operations for
the nine months ended September 30, 1997 and the year ended December 31, 1996,
respectively, reflect the historical operations of Alliance adjusted to give
effect to the Transactions as if they had occurred as of January 1, 1997 for
the nine months ended September 30, 1997, and as of January 1, 1996 for the
year ended December 31, 1996.
The unaudited pro forma consolidated financial information is based on the
consolidated financial statements of Alliance giving effect to the
Transactions under the assumptions and adjustments outlined in the
accompanying Notes to Unaudited Pro Forma Consolidated Financial Information.
Such pro forma adjustments are based upon available information and upon
certain assumptions that the Company's management believes are reasonable
under the circumstances. The unaudited pro forma consolidated balance sheet
and statements of operations are provided for comparative purposes only and do
not purport to represent the results that would have been obtained had the
Transactions occurred on the dates indicated or that may be achieved in the
future.
The unaudited pro forma consolidated balance sheet and statements of
operations and accompanying notes should be read in conjunction with the
historical consolidated financial statements of Alliance included elsewhere in
this Prospectus. See "Index to Consolidated Financial Statements."
18
<PAGE>
ALLIANCE IMAGING, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments........... $ 10,557 $ 7,870 (a) $ 18,427
Receivables, net.......................... 10,712 -- 10,712
Other current assets...................... 997 -- 997
-------- -------- --------
Total current assets.................... 22,266 7,870 30,136
Equipment, net.............................. 99,602 -- 99,602
Intangible assets, net...................... 26,657 -- 26,657
Other assets................................ 3,098 6,807 (b) 9,905
-------- -------- --------
Total assets............................ $151,623 $ 14,677 $166,300
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable.......................... $ 3,039 $ -- $ 3,039
Accrued compensation and related expenses. 3,399 -- 3,399
Other accrued liabilities................. 11,268 (3,744)(c) 7,524
Current portion of long-term debt......... 20,476 (18,206)(d) 2,270
-------- -------- --------
Total current liabilities............... 38,182 (21,950) 16,232
Other liabilities........................... 7,019 (2,066)(e) 4,953
Long-term debt.............................. 62,597 157,017 (d) 219,614
-------- -------- --------
Total liabilities....................... 107,798 133,001 240,799
Redeemable preferred stock.................. -- 14,400 (f) 14,400
Stockholders' equity (deficit):
Preferred stockholders' equity............ 18,000 (18,000)(e) --
Common stockholders' equity (deficit)..... 36,671 (93,875)(e) (57,204)
Retained earnings (accumulated deficit) .. (10,846) (20,849)(e) (31,695)
-------- -------- --------
Total stockholders' equity (deficit).... 43,825 (132,724) (88,899)
-------- -------- --------
Total liabilities and stockholders'
equity................................. $151,623 $ 14,677 $166,300
======== ======== ========
</TABLE>
See accompanying notes.
19
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(a) Reflects the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Sources:
Term Loan Facility........................................... $ 50,000
Notes........................................................ 165,000
Redeemable Preferred Stock................................... 15,000
Equity Investment............................................ 39,954
--------
Total sources............................................. $269,954
========
Uses:
Repurchase Alliance equity................................... $165,573
Repay current debt........................................... 18,706
Repay long-term debt......................................... 57,595
Less discount on prepayment of debt, net..................... (1,140)
Transaction costs............................................ 13,800
Deferred financing fees for the Credit Agreement and the
Notes....................................................... 6,950
Redeemable Preferred Stock financing fees.................... 600
Increase in cash............................................. 7,870
--------
Total uses................................................ $269,954
========
</TABLE>
(b) Reflects financing fees associated with the Credit Agreement and the
Notes, which will be amortized over their respective terms, as shown in the
following table, net of $143,000 of deferred financing costs related to debt
being repaid, which will be charged to expense.
<TABLE>
<CAPTION>
ANNUAL
AMORTIZATION AMORTIZATION
DESCRIPTION AMOUNT PERIOD EXPENSE
----------- ------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Term Loan Facility............................. $ 800 6 years $133
Revolving Loan Facility........................ 1,200 5 years 240
Notes.......................................... 4,950 8 years 619
------ ----
Total...................................... $6,950 $992
====== ====
</TABLE>
(c) Reflects income tax benefit from net tax deductible expenses incurred in
connection with the Transactions.
(d) Reflects the following:
<TABLE>
<CAPTION>
LONG-
CURRENT TERM
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Term Loan Facility.......................................... $ 500 $ 49,500
Notes....................................................... -- 165,000
Retirement of existing debt................................. (18,706) (57,483)
-------- --------
$(18,206) $157,017
======== ========
</TABLE>
20
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET--(CONTINUED)
SEPTEMBER 30, 1997
(e) Reflects the following:
<TABLE>
<CAPTION>
OTHER
PREFERRED COMMON RETAINED TOTAL LONG-TERM
EQUITY* EQUITY EARNINGS EQUITY LIABILITIES TOTAL
--------- --------- -------- --------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Repurchase Alliance
equity................. $(18,000) $(133,829) $(11,678)** $(163,507) $(2,066) $(165,573)
Transaction costs....... -- -- (13,800) (13,800) -- (13,800)
Gain on repayment of
debt................... -- -- 997 997 -- 997
Income tax benefit from
option and other
payments, and gain on
debt repayment, net.... -- -- 3,632 3,632 -- 3,632
Proceeds from sale of
Common Stock in
recapitalization....... -- 39,954 -- 39,954 -- 39,954
-------- --------- -------- --------- ------- ---------
$(18,000) $ (93,875) $(20,849) $(132,724) $(2,066) $(134,790)
======== ========= ======== ========= ======= =========
</TABLE>
- --------
* Alliance's Series D Convertible Preferred Stock will be converted into
shares of Alliance Common Stock prior to the closing of the Transactions.
** Estimated cash used to settle outstanding employee stock options and change
in control payments.
The gross amount to be paid for Alliance Common Stock is $154.3 which
represents the $11.00 per share repurchase price multiplied by 14,023,344
total shares. The total of 14,023,344 shares is comprised of the sum of: (1)
11,023,344 shares of Alliance Common Stock outstanding as of September 30,
1997; and (2) 3,000,000 shares of Alliance Common Stock to be issued with
respect to the conversion of all outstanding shares of Alliance Series D
Convertible Preferred Stock. The gross amount is then increased by $2.1
million in payment of the net value of warrants canceled and reduced by $4.5
million (411,358 shares at $11.00 per share) with respect to the retained
shares, and $18.0 million related to the carrying value of Alliance's
preferred equity converted to common shares, resulting in a net payment for
Alliance equity of $133.8 million.
(f) Reflects the sale of $15.0 million of the Company's Series F Preferred
Stock. The Series F Preferred Stock is required to be redeemed by the Company
ten years from its issue date at its stated value plus accrued and unpaid
dividends. It may also be redeemed at the option of the Company at any time
after its issue date at premiums declining over ten years from 13.5%
(expressed as a percentage of the accreted face value) to 0%.
21
<PAGE>
ALLIANCE IMAGING, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO
HISTORICAL ADJUSTMENTS FORMA(A)(B)
---------- ----------- -----------
<S> <C> <C> <C>
Revenues................................ $62,285 $ -- $62,285
Operating expenses, excluding
depreciation........................... 27,499 -- 27,499
Selling, general and administrative
expenses............................... 6,251 375 6,626
------- -------- -------
Income before items below............... 28,535 375 28,160
Depreciation expense.................... 11,222 -- 11,222
Amortization expense, primarily
goodwill............................... 1,767 744 (c) 2,511
Interest expense, net................... 5,315 9,787 (d) 15,102
------- -------- -------
Income (loss) before income taxes and
extraordinary gain..................... 10,231 (10,906) (675)
Income tax benefit (expense)............ (3,480) 3,480 (e) --
------- -------- -------
Income (loss) before extraordinary gain. $ 6,751 $ (7,426) (675)
======= ========
Redeemable Preferred Stock dividends,
including amortization of related fi-
nancing fees........................... (1,616)(f)
-------
Loss before extraordinary gain attribut-
able to Common Stock................... $(2,291)
=======
Ratio of earnings to fixed charges...... -- (g)
</TABLE>
See accompanying notes.
22
<PAGE>
ALLIANCE IMAGING, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS (A)(B)
---------- ----------- ---------
<S> <C> <C> <C>
Revenues................................. $68,482 $ -- $ 68,482
Operating expenses, excluding
depreciation............................ 32,344 -- 32,344
Selling, general and administrative
expenses................................ 8,130 500 8,630
------- -------- --------
Income before items below................ 28,008 500 27,508
Depreciation expense..................... 12,737 -- 12,737
Amortization expense, primarily goodwill. 1,952 992 (c) 2,944
Interest expense, net.................... 5,758 14,378 (d) 20,136
------- -------- --------
Income (loss) before income taxes and
extraordinary gain...................... 7,561 (15,870) (8,309)
Income tax benefit (expense)............. (1,060) 1,060 (e) --
------- -------- --------
Income (loss) before extraordinary gain.. $ 6,501 $(14,810) (8,309)
======= ========
Redeemable Preferred Stock dividends,
including amortization of related
financing fees.......................... (2,190)(f)
--------
Loss before extraordinary gain
attributable to Common Stock............ $(10,499)
========
Ratio of earnings to fixed charges....... -- (g)
</TABLE>
See accompanying notes.
23
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND YEAR ENDED DECEMBER 31, 1996
(a) Reflects an annual management fee payable to Apollo Management, L.P. of
$0.5 million; does not reflect an equal amount of expected general and
administrative cost savings, primarily related to investor relations and
board of directors fees and expenses.
(b) Non-recurring charges aggregating $20.9 million (comprised of $11.7
million used to settle outstanding employee stock options and other change
in control payments and $13.8 million of transaction costs net of $1.0
million gain on repayment of debt and $3.6 million of estimated tax
benefits) will be charged to operations upon the closing of the
Transactions. These amounts have not been reflected in the unaudited pro
forma consolidated statements of operations.
(c) Reflects amortization of deferred financing fees associated with the
Transactions.
(d) Interest expense, as adjusted, reflects the elimination of historical
interest expense due to the retirement of substantially all of the
existing debt obligations and assumes that the following indebtedness and
cash balance was outstanding as of the beginning of the respective
reporting periods:
<TABLE>
<CAPTION>
ANNUAL
INTEREST
PRINCIPAL EXPENSE
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Term Loan Facility, interest at LIBOR plus 2.50%
(currently 8.25%)..................................... $ 50,000 $ 4,125
Revolving Loan Facility, interest at LIBOR plus 2.25%
(currently 8.00%) (including 0.50% annual commitment
fee on pro forma unutilized balance of $75 million)... -- 375
Notes, assumed interest at 9.75%....................... 165,000 16,088
Other debt, weighted average interest at approximately
9.50%................................................. 6,884 654
Interest income, assumed interest at 6.00%............. 18,427 (1,106)
-------
Interest expense, net................................ $20,136
=======
</TABLE>
A 1/8% variance in interest rates would change annual interest expense by
approximately $246,000.
(e) Income tax adjustments reflect estimated effective tax rates applied to
the pro forma adjustments excluding book/tax differences associated with
nondeductible amortization expense. In accordance with FAS 109,
"Accounting for Income Taxes," due to the occurrence of losses before
income taxes and extraordinary items, no tax benefits have been recorded.
(f) The preferred stock dividend is calculated based on a 13.50% paid-in-kind
rate compounded quarterly, plus amortization of $0.6 million of related
financing fees over the ten year term of the preferred stock.
(g) Pro forma earnings were insufficient to cover fixed charges by $8.3
million for the year ended December 31, 1996, and $0.7 million for the
nine months ended September 30, 1997.
24
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information with
respect to each year in the five-year period ended December 31, 1996 is
derived from the consolidated financial statements of Alliance. The
consolidated financial statements of Alliance for each of the years in the
three-year period ended December 31, 1996, are included elsewhere in this
Prospectus. Such consolidated financial statements have been audited by Ernst
& Young LLP, independent auditors. The financial information for the nine
months ended September 30, 1996 and September 30, 1997 is unaudited, but in
the opinion of management of Alliance reflects all adjustments necessary for a
fair presentation of such information. Operating results for the nine months
ended September 30, 1997 are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1997. The selected
financial information provided below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of Alliance and the
notes thereto included elsewhere in this Prospectus. See "Index to
Consolidated Financial Statements."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenues................ $ 63,695 $ 60,728 $ 57,875 $ 58,065 $ 68,482 $ 49,097 $ 62,285
Costs and expenses:
Operating expenses,
excluding
depreciation.......... 32,043 31,768 31,093 28,342 32,344 23,549 27,499
Selling, general and
administrative
expenses.............. 5,842 6,538 6,284 6,294 8,130 4,879 6,251
Depreciation expense... 12,408 13,617 13,424 12,202 12,737 9,170 11,222
Amortization expense,
primarily goodwill.... 737 790 943 1,345 1,952 1,309 1,767
Interest expense, net.. 10,846 10,507 10,758 5,053 5,758 4,184 5,315
Special charges........ -- 17,500 13,339 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total costs and
expenses............ 61,876 80,720 75,841 53,236 60,921 43,091 52,054
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and
extraordinary gains.... 1,819 (19,992) (17,966) 4,829 7,561 6,006 10,231
Provision (benefit) for
income taxes........... 766 (5,300) 1,100 727 1,060 955 3,480
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary gains.... 1,053 (14,692) (19,066) 4,102 6,501 5,051 6,751
Extraordinary gains, net
of taxes............... -- -- -- -- 6,300 -- 1,332
-------- -------- -------- -------- -------- -------- --------
Net income (loss)(1).... $ 1,053 $(14,692) $(19,066) $ 4,102 $ 12,801 $ 5,051 $ 8,083
======== ======== ======== ======== ======== ======== ========
CONSOLIDATED BALANCE
SHEET DATA
(AT END OF PERIOD):
Cash and short-term
investments............ $ 4,508 $ 8,420 $ 2,478 $ 11,128 $ 10,867 $ 11,677 $ 10,557
Total assets............ 133,920 117,096 102,527 103,327 128,510 125,828 151,623
Long-term debt,
including current
maturities............. 90,456 95,986 79,208 75,880 89,025 88,598 83,073
Redeemable preferred
stock.................. -- -- 15,500 16,430 4,694 16,197 --
Stockholders' equity
(deficit).............. 29,601 14,909 (1,665) 1,604 16,360 6,847 43,825
OTHER DATA:
EBITDA(2)............... $ 25,810 $ 20,022 $ 20,498 $ 23,429 $ 28,008 $ 20,669 $ 28,535
EBITDA margin(3)........ 40.5% 33.0% 35.4% 40.3% 40.9% 42.1% 45.8%
Cash flows provided by
(used in):
Operating activities.. $ 15,952 $ 12,708 $ 12,784 $ 18,043 $ 21,731 $ 17,348 $ 22,090
Investing activities.. (18,650) (14,188) (19,861) (7,789) (27,936) (21,865) (33,546)
Financing activities.. (534) 5,392 1,135 (1,604) 5,944 5,066 11,146
Capital expenditures(4). 21,123 19,184 22,361 11,383 34,376 24,705 34,175
Number of MRI systems at
end of period.......... 70 71 72 76 86 86 98
Comparable customer
revenue growth(5)...... NA NA (0.1)% 6.9% 8.8% 11.5% 25.9%
Average scans per MRI
system per day......... 6.3 5.7 5.8 5.8 6.7 6.7 7.2
Ratio of earnings to
fixed charges(6)....... 1.2x -- -- 1.9x 2.1x 2.2x 2.7x
</TABLE>
(footnotes on following page)
25
<PAGE>
- --------
(1) Net income (loss) includes special charges of $13.3 million for the year
ended December 31, 1994 related to an equipment exchange transaction, the
impairment of certain equipment, debt restructuring and employee
severances; extraordinary gains (net of tax) of $6.3 million for the year
ended December 31, 1996 related to the early extinguishment of debt; and
an extraordinary gain (net of tax) of $1.3 million for the nine months
ended September 30, 1997 related to the early extinguishment of debt.
(2) EBITDA is defined herein as income before income taxes, plus depreciation,
amortization, net interest expense and other non-recurring items
(principally non-cash). EBITDA is presented because the Company believes
it is a widely accepted financial indicator of a company's ability to
service and/or incur indebtedness. However, EBITDA should not be
considered as an alternative to net income as a measure of operating
results or to cash flows as a measure of liquidity in accordance with
generally accepted accounting principles.
(3) EBITDA margin is defined herein as EBITDA divided by revenues. The Company
believes EBITDA margin provides a comparative reference to measure EBITDA
performance from period to period and against comparable sized companies
in the industry and, as such, provides a supplemental mechanism to
evaluate efficiency and overall operating performance.
(4) The substantial majority of historical capital expenditures have related
to either major upgrades to existing systems or the replacement of older,
less-advanced systems with new, state-of-the-art technologically advanced
systems. As a result of these historical investments, the Company believes
that it has upgraded substantially all of its systems and expects most of
its capital expenditures for at least the next three to five years to
relate to net fleet additions through new system purchases.
(5) Represents period over period revenue growth for customers that generated
revenues for the entire term of both periods.
(6) For purposes of computing this ratio, earnings consist of income before
income taxes plus fixed charges. Fixed charges consist of interest expense
and one-third of the rent expense from long-term equipment operating
leases, which management believes is a reasonable approximation of an
interest factor. Earnings were insufficient to cover fixed charges by
$20.0 million and $18.0 million for the years ended December 31, 1993 and
1994, respectively.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition of Alliance should be read in conjunction with Alliance's
consolidated financial statements and notes thereto included elsewhere in this
Prospectus.
OVERVIEW
The Company is a leading nationwide provider of diagnostic imaging services
and the largest operator of state-of-the-art mobile diagnostic imaging systems
and related outsourced radiology services in the United States. The Company
primarily provides MRI systems and services to hospitals and other health care
providers on a mobile, shared user basis. The Company also provides dedicated,
full-time MRI systems and services as well as full-service management of
imaging operations for selected hospitals. The Company's services enable small
to mid-size hospitals to gain access to advanced diagnostic imaging technology
and related value-added services without making a substantial investment in
equipment and personnel. The Company operates a fleet of 98 MRI systems and
services 356 MRI customers in 36 states under exclusive contracts with an
average remaining length of approximately 24 months as of September 30, 1997.
The Company's revenues are principally a function of the number of systems
in service, scan volumes and fees per scan. The Company generates
substantially all of its revenues under exclusive one to eight-year contracts
with hospitals and health care providers. The Company's contracts typically
offer tiered pricing with lower fees per scan on incremental scans, allowing
customers to benefit from increased scan volumes and the Company to benefit
from the operating leverage associated with increased scan volumes. The
Company expects modest continuing downward pressure on pricing levels as a
result of cost containment measures in the health care industry. However, in
many cases higher scan volumes justify lower prices on incremental scans.
The principal components of the Company's operating costs include salaries
paid to technologists and drivers, annual system maintenance costs, insurance
and transportation costs. Because a majority of these expenses are fixed,
increased revenues as a result of higher scan volumes significantly improve
the Company's profitability while lower scan volumes result in lower
profitability.
Since the beginning of 1995, Alliance has substantially increased revenues
by adding new customers and increasing scan volumes at existing customer
sites. During the same period, the growth rate of Alliance's EBITDA and net
income increased more rapidly than the growth rate of revenues as a result of
spreading costs (which are primarily fixed) over a larger revenue base and
implementing cost reduction and containment measures.
Alliance has historically focused on maximizing cash flow and return on
invested capital nationwide, deploying new and upgraded systems in high volume
markets and redeploying older, less advanced systems with lower carrying
values in lower volume markets. Alliance's ongoing equipment trade-in and
upgrade program has substantially improved the marketability and productivity
of its MRI systems. Because Alliance owns substantially all of its MRI
systems, it periodically evaluates its older, less marketable MRI systems to
determine if it is more beneficial to continue to use such systems in lower
volume markets, which are profitable but produce less revenue, or to trade in
such equipment in connection with new system purchases. Since January 1, 1995,
Alliance has invested approximately $78 million to upgrade and expand its
fleet and currently maintains one of the most advanced fleets in the industry.
The Company also provides CT services and imaging systems. Revenues from CT
services and imaging systems accounted for less than 5% of the Company's
revenues for the year ended December 31, 1996.
On July 23, 1997, Alliance entered into the Recapitalization Merger
Agreement, pursuant to which, among other things, a subsidiary of the
Investor, subject to the terms and conditions of the Recapitalization Merger
Agreement, will be merged with and into Alliance. Immediately following the
Recapitalization, Apollo will own
27
<PAGE>
approximately 84% of the issued and outstanding common stock of Alliance and
Alliance's existing shareholders will own approximately 10%. See "The
Transactions." The pro forma effect of the Transactions is set forth under
"Unaudited Pro Forma Consolidated Financial Information" and the notes thereto
included elsewhere in this Prospectus.
On October 20, 1997, the Company announced execution of a definitive
agreement to acquire MCIC, a Cleveland, Ohio based provider of mobile MRI
services, CT services and other outsourced healthcare services. The
acquisition also includes MCIC's one-half interest in an operating joint
venture in Michigan. The purchase price consists of $13 million cash plus the
assumption of approximately $5 million in financing arrangements. MCIC
operates 14 mobile MRI systems and several other diagnostic imaging systems,
primarily in Ohio, Michigan, Indiana and Pennsylvania. The transaction was
completed on November 21, 1997. This transaction will be primarily funded from
existing cash reserves and debt assumed. Additional investments of this nature
may be made in the future (subject to certain conditions contained in the
Company's long-term financing arrangements) from a combination of cash
reserves, cash flow from operations, common or preferred equity and the
Revolving Loan Facility.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996.
Revenues for the first nine months of 1997 were $62,285,000, an increase of
$13,188,000 or 26.9%, over 1996. This increase reflects a scan-based MRI
revenue increase of $11,706,000, or 26.9% ($2,515,000 or 5.8% as a result of
MRI operations acquired subsequent to the first quarter of 1996), resulting
from a 29.2% increase in total scan volume partially offset by a 1.8% decrease
in the average revenue realized per MRI scan. The average daily scan volume
per MRI system increased 7.5% to 7.2 from 6.7 in 1996. Management attributes
the volume increase to the Company's continuing MRI systems upgrade program,
which has enabled the Company to obtain new, long-term contracts from both
existing and new customers, and to the effect of marketing programs
implemented in early 1997. Management believes the decrease in average revenue
realized per scan is the result of: many customers achieving discount price
levels on incremental scan volumes; obtaining contracts with customers that
have high scan volumes which justify lower scan prices; and continuing
competitive pressure in the MRI service industry and cost containment efforts
by health care payors. CT revenues increased $782,000, or 29.4%, as a result
of internal growth and the fourth quarter 1996 acquisition of a small CT
business. Other revenues increased $548,000 primarily as a result of the
implementation in late 1996 of a program providing management services for a
large portfolio of imaging systems owned by others.
The Company operated 98 MRI systems at September 30, 1997 compared to 86 MRI
systems at September 30, 1996. The average number of MRI systems operated by
the Company was 89 during the first nine months of 1997, compared to 84 during
the first nine months of 1996.
Operating expenses, excluding depreciation, totaled $27,499,000 in the first
nine months of 1997, an increase of $3,950,000, or 16.8%, from the first nine
months of 1996. Payroll and related employee expenses increased $2,028,000, or
19.1%, primarily as a result of an increase in operating staffing levels
necessary to support revenue growth. Repairs and maintenance expense increased
$477,000, or 40.0%, due to an increased number of systems in service. Fuel and
other vehicle expenses collectively increased $387,000, or 36.8%, primarily
due to increasing fuel prices and the addition of new mobile MRI systems.
Preventative maintenance and cryogen contract expense increased $186,000, or
2.8%, due to the expiration of the warranties on an increased number of MRI
systems. Other operating expenses (including insurance, site fees, office
expenses, equipment rental, supplies and professional services) increased
$872,000, or 21.0%, as a result of the increased level of operations.
Depreciation expense during the first nine months of 1997 totaled
$11,222,000, an increase of $2,052,000, or 22.4%, from the 1996 level
principally due to a higher amount of depreciable assets associated with
equipment additions and upgrades. Amortization expense during the first nine
months of 1997 increased $458,000, or 35.0%, over the 1996 period as a result
of goodwill amortization associated with recent business acquisitions.
28
<PAGE>
Selling, general and administrative expenses totaled $6,251,000 in the first
nine months of 1997, an increase of $1,372,000, or 28.1%, from the same period
in 1996. Professional services expenses increased $566,000, or 147.0%,
primarily due to costs associated with increased investor relations efforts
and merger and acquisition activity. Payroll and related expenses increased
$436,000, or 12.0%, primarily as a result of increased staffing levels
necessary to support the Company's increased level of operations. Other
expenses increased primarily as a result of expanded marketing programs and
costs associated with relocating the Company's corporate offices.
Interest expense of $5,315,000 in the first nine months of 1997 was
$1,131,000, or 27.0%, higher than the same period in 1996, as a result of
higher average outstanding debt balances during 1997 as compared to 1996. This
increase was primarily related to the senior bridge loan (which was converted
into Series D convertible preferred stock on March 26, 1997) and to the
financing of several new imaging systems during the first nine months of 1997.
An income tax provision of $3,480,000 was recorded in the first nine months
of 1997, which was higher than the tax provision recorded in the same period
in 1996 by $2,525,000, or 264.4%. The increase resulted from the increase in
income before taxes and an increase in the Company's effective tax rate. The
effective income tax rate increased to 34.0% in 1997 from 15.9% in 1996
because the Company's taxable income in 1997 is expected to exceed remaining
available net operating loss carryforwards.
The Company's income before extraordinary gain was $6,751,000 in the first
nine months of 1997 compared to net income of $5,051,000 in the first nine
months of 1996, an increase of $1,700,000, or 33.7%, primarily attributable to
the increase in revenues achieved without a proportionate increase in costs
and administrative expenses. The Company reported an extraordinary gain, net
of income taxes, in the first quarter of 1997 of $1,332,000 on early
extinguishment of debt in January 1997.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues for 1996 were $68,482,000, an increase of $10,417,000, or 17.9%,
over 1995. On April 26, 1996, Alliance acquired all of the outstanding shares
of Royal Medical Health Services, Inc. ("Royal") and certain related assets.
Excluding revenues of $2,895,000 from operations which were sold in the second
half of 1995, the increase in revenues was $13,312,000, or 24.1%, with Royal
accounting for $4,694,000, or 8.5% of the increase. This increase reflects a
scan-based MRI revenues increase of $10,897,000, or 22.0%, ($4,532,000, or
9.2%, as a result of the Royal acquisition), resulting from a 23.4% increase
in total scan volume partially offset by a 1.1% decrease in the average
revenues realized per MRI scan. Royal accounted for 9.8% of the scan volume
increase and 0.1% of the offsetting price per scan decrease. The average
number of scans per day for each MRI system increased 15.5% to 6.7 in 1996
from 5.8 in 1995. Management attributes the non-Royal volume increase to
Alliance's continuing MRI systems upgrade program, which has enabled Alliance
to obtain new long-term contracts from both existing and new customers, and to
the effect of some smaller acquisitions. Management believes the decrease in
average revenues realized per scan is the result of: continuing competitive
pressure in the MRI service industry and cost containment efforts by health
care payors; obtaining contracts with customers that have high scan volumes
which justify lower scan prices; and many customers achieving discount price
levels on incremental scan volumes. Revenues under fixed fee contracts
increased $893,000, or 43.8%, resulting from an increased number of MRI
systems under such arrangements. Other revenues increased $891,000 primarily
as a result of Alliance selling its investment in London-based Alliance
Medical, Ltd. and recording a gain of $750,000. CT revenues increased
$632,000, or 21.8%, primarily as a result of the third quarter 1995 and fourth
quarter 1996 acquisitions of two CT businesses.
Alliance operated 86 MRI systems at December 31, 1996 compared to 76 MRI
systems at December 31, 1995. The average number of MRI systems operated by
Alliance was 85 during 1996, compared to 74 during 1995.
29
<PAGE>
Operating expenses, excluding depreciation, totaled $32,344,000 in 1996, an
increase of $4,002,000, or 14.1%, from 1995. Excluding expenses of $1,008,000
related to operations which were sold in the second half of 1995, the increase
in operating expenses was $5,010,000, or 18.3%, with Royal contributing
$2,333,000, or 8.5% of the increase. Payroll and related employee expenses
increased $1,789,000, or 15.0%, which was in line with the revenue increase.
Equipment rental expense increased $898,000, or 60.4%. The increase resulted
from higher number of rented MRI systems in operation and Alliance's leasing
of 20 new tractors in 1996. Other operating expenses increased $751,000, which
was offset by a $761,000 decrease in preventive maintenance contract and
cryogen expense, primarily as a result of more efficient systems and lower
contract rates associated with Alliance's equipment upgrade program.
Depreciation expense during 1996 totaled $12,737,000, an increase of
$535,000, or 4.4%. Excluding depreciation expense of $638,000 related to
operations which were sold in the second half of 1995, depreciation expense
increased $1,173,000, or 10.1%, from the 1995 level principally due to a
higher amount of depreciable assets associated with equipment additions and
upgrades and the Royal acquisition. Amortization expense in 1996 increased
$607,000, or 45.1%, over the 1995 period as a result of the Royal acquisition
and four smaller acquisitions in late 1995 and 1996.
Selling, general and administrative expenses totaled $8,130,000 in 1996, an
increase of $1,836,000, or 29.2%, from 1995. Excluding expenses of $369,000
related to operations sold in the second half of 1995, selling, general and
administrative expenses increased $2,205,000, or 37.2%. Payroll and related
expenses increased $1,457,000, primarily as a result of increased employee
compensation related to increased sales commissions, performance compensation
in connection with the increase in net income, early achievement of long term
incentive plan objectives and increased staffing levels. Bad debt expense
increase $567,000 in 1996 compared to 1995.
Interest expense of $5,758,000 in 1996 was $705,000, or 14.0%, higher than
1995, primarily as a result of higher average outstanding debt balances during
1996 as compared to 1995. This increase related to debt assumed in connection
with the Royal acquisition and additional borrowing related to equipment
additions.
An income tax provision of $1,060,000 was recorded in 1996. Alliance's pre-
tax income in 1996 was substantially offset by net operating loss
carryforwards; however, certain federal alternative minimum taxes and state
tax liabilities applied to this income, giving rise to the tax provision
recorded. In 1995, an income tax provision of $727,000 was recorded, also
related to certain federal alternative minimum taxes and state tax
liabilities. Alliance's 1996 effective tax rate of approximately 14% of pre-
tax income before extraordinary gains was comparable to the 1995 rate. At
December 31, 1996, Alliance had approximately $26,400,000 of net operating
loss carryovers available for federal regular income tax purposes to offset
future taxable income, subject to certain limitations. Approximately
$4,500,000 of this amount is not subject to such limitations; consequently,
approximately $6,700,000 of operating loss carryovers is available in 1997 for
regular federal income tax purposes. Alliance expects its future effective tax
rate to increase as these net operating loss carryovers are fully utilized.
Alliance's net income before extraordinary gains was $6,501,000 in 1996
compared to net income of $4,102,000 in 1995, an increase of $2,399,000, or
58.5%, primarily attributable to the increase in revenues achieved without a
proportionate increase in operating and selling, general and administrative
expenses. Alliance reported extraordinary gains, net of income taxes, in the
fourth quarter of 1996 of approximately $6,300,000 on early extinguishment of
debt.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues for 1995 were $58,065,000, an increase of $190,000, or 0.3%, over
1994. This increase reflects a $1,557,000 increase in MRI revenues under fixed
fee contracts and an increase in CT and other revenues totaling $125,000,
offset by a $1,492,000, or 2.9%, decrease in scan-based MRI revenues. The
decrease in scan-based MRI revenues resulted from a 5.8% increase in scan
volume offset by an 8.2% decrease in average revenues
30
<PAGE>
realized per MRI scan. Management attributes the volume increases to
Alliance's continuing MRI systems upgrade program, which has enabled Alliance
to obtain new long-term contracts from both existing and new customers. The
average number of scans per day for each MRI system remained unchanged at 5.8.
Management believes the decrease in average revenues realized per scan is the
result of continuing competitive pressure in the MRI service industry and cost
containment efforts by health care payors, as well as obtaining contracts with
customers that have high scan volumes which justify lower scan prices on
incremental scan volume. The increase in MRI revenues under fixed fee
contracts is a result of a higher number of systems deployed in full-time
temporary assignments, including several older systems awaiting trade-in on
new equipment. CT and other revenues increases are generally associated with
the acquisition of a mobile CT business and the gain on sale of equipment and
a related service contract, offset by lower other imaging revenue resulting
from the disposition of Alliance's full-service imaging center in Fresno,
California as of September 30, 1995. Alliance operated 76 MRI systems at
December 31, 1995, compared to 72 systems at December 31, 1994. The average
number of MRI systems operated by Alliance was 74 in 1995, compared with 73
during 1994.
Operating expenses, excluding depreciation, totaled $28,342,000 in 1995, a
decrease of $2,751,000, or 8.8%, from 1994. Payroll and related employee
expenses decreased $336,000, or 2.7%, to $12,153,000 due to more efficient
staffing associated with cost reduction efforts and a larger number of systems
staffed by customer personnel in 1995. Maintenance and cryogen contract
expense declined $288,000, or 3.1%, to $9,079,000, as a result of an increased
number of newer, efficiently-operating systems in the fleet in 1995 and lower
contract rates, partially offset by an increased number of systems. Equipment
rental expense decreased $828,000, or 33.9%, to $1,618,000, as operating
leases expired and Alliance returned the related equipment to the lessor. The
leased equipment was generally replaced with low cost used MRI systems
purchased by Alliance. Professional medical services, supplies, site fees and
repairs expenses collectively decreased $1,443,000 or 40.0%, to $2,805,000,
primarily as a result of reduced physician staffing and other cost control
efforts at Alliance's full-service imaging center in Fresno, California, which
was disposed of effective September 30, 1995.
Depreciation expense during 1995 decreased $1,222,000, or 9.1%, from the
1994 level due to a lower amount of depreciable assets, resulting from
equipment write-downs in late 1994, partially offset by equipment additions in
1995. Amortization expense in 1995 increased $402,000, or 42.6%, over 1994
because of the revision of the amortization period for goodwill from 40 to 25
years, effective October 1, 1994, and a small business acquisition in 1995.
Selling, general and administrative expenses were essentially unchanged from
the prior year. Payroll and related employee expenses increased $629,000, or
15.7%, as a result of long-term deferred incentive compensation costs and
inflationary pressures. Bad debt expense decreased $609,000, or 100.0%, to
zero in 1995 as a result of revised billing practices and continuing intensive
collection efforts, primarily with respect to Alliance's retail accounts
receivable.
Interest expense of $5,053,000 in 1995 was $5,705,000, or 53.0%, lower than
in 1994 primarily as a result of Alliance's comprehensive debt restructuring,
effective as of December 31, 1994, and lower average outstanding debt balances
in 1995.
Alliance recorded special charges totaling $13,339,000 in the fourth quarter
of 1994. No such charges were incurred in 1995. Including these charges, the
loss before taxes totaled ($17,966,000) in 1994, compared to income before
taxes of $4,829,000 in 1995, an improvement of $22,795,000. Although the
preceding amounts before taxes are not representative of operating performance
in accordance with GAAP, they have been provided to highlight the significant
non-recurring element contained within the GAAP net income measurement. This
improvement resulted from significantly reduced operating expenses (including
depreciation), substantially lower interest expense and the absence of special
charges in 1995. Income before taxes in 1995 increased $9,456,000 over 1994's
loss before taxes without the effects of special charges.
An income tax provision of $727,000 was recorded in 1995. Alliance's pre-tax
income in 1995 was substantially offset by net operating loss carryforwards;
however, certain federal alternative minimum taxes and
31
<PAGE>
state tax liabilities applied to this income, giving rise to the tax provision
recorded. In 1994, an income tax provision of $1,100,000 was recorded as a
result of federal alternative minimum tax and certain state income taxes
related to cancellation of debt income for tax purposes associated with
Alliance's financial restructuring, as well as increased valuation allowances
for deferred tax assets. However, these reserved tax assets may be available
to reduce future income tax provisions. At December 31, 1995, Alliance had
approximately $33,000,000 in federal net operating loss carryforwards
available to offset future taxable income, subject to certain limitations.
Alliance's net income was $4,102,000 in 1995, compared to a net loss of
($19,066,000) in 1994, an increase of $23,168,000, primarily attributable to
the increased operating profits, lower interest expense and absence of special
charges in 1995, as explained above. Net income in 1995 increased $9,354,000
over the net loss in 1994 without the effect of the special charges and
related tax impact. Although the preceding amount of net loss excludes the
effects of special charges and income taxes is not representative of operating
performance in accordance with GAAP, it has been provided to highlight the
significant non-recurring element contained within the GAAP net loss
measurement. This increase is attributable to higher operating profit and
lower interest expense in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Alliance generated $12.8 million, $18.0 million and $21.7 million from
operating activities in 1994, 1995 and 1996, respectively, and $17.3 million
and $22.1 million in the first nine months of 1996 and 1997, respectively. The
increase in cash provided by operating activities reflects the increase in
scan volumes and improved operating performance. Capital expenditures,
consisting primarily of new equipment purchases, totaled $22.4 million, $11.4
million and $34.4 million in 1994, 1995 and 1996, respectively, and $34.2
million in the first nine months of 1997. Since January 1, 1995, Alliance has
upgraded 23 MRI systems and purchased 35 new MRI systems, including
replacement systems. As of December 31, 1996, Alliance had binding equipment
purchase commitments totalling approximately $29.2 million. Alliance expects
to purchase the equipment under these commitments in 1997 and finance such
purchases with installment debt primarily provided by the equipment
manufacturers.
The Company's primary cash needs consist of capital expenditures and debt
service. The Company incurs capital expenditures for the purposes of (i)
providing routine upgrades of its MRI systems; (ii) replacing or making major
upgrades to older, less advanced systems with new state-of-the-art systems;
and (iii) purchasing new systems. The Company estimates that routine annual
upgrade expenditures average approximately $25,000 per system or approximately
$2.4 million in the aggregate, based on the fleet size at September 30, 1997.
In addition to these routine expenditures, the Company expects capital
expenditures to be approximately $12 million in the last three months of 1997
which reflects the anticipated purchase of eight new MRI systems, including
replacement systems. The Company expects capital expenditures to be
approximately $20 million in 1998, which includes the anticipated purchase of
10 new MRI systems and routine upgrade expenditures. The Company's decision to
purchase a new system is typically predicated on obtaining new or extending
existing customer contracts which serve as the basis of demand for the new
system.
After giving effect to the Transactions, the Company will be capitalized
with $165.0 million of Notes, a $125.0 million Credit Agreement consisting of
a $50.0 million Term Loan Facility and a $75.0 million Revolving Loan
Facility, $6.9 million of other obligations and $15.0 million of Series F
Preferred Stock. The Notes will bear interest at the rate per annum set forth
on the cover page of this Prospectus, payable semiannually, and will require
no principal repayments until maturity. The Term Loan will mature on the sixth
anniversary of the initial borrowing and will require annual principal
repayments of $0.5 million per year during the first five years and $47.5
million in the sixth year. The Revolving Loan Facility will mature on the
fifth anniversary of the initial borrowing and will have mandatory commitment
reductions of $37.5 million on the fourth and fifth anniversaries of the
initial borrowing. The interest rate under the Credit Agreement is expected to
be based on LIBOR. The Credit Agreement will contain restrictive covenants
which, among other things, limit the incurrence of additional
32
<PAGE>
indebtedness, dividends, transactions with affiliates, asset sales,
acquisitions, mergers and consolidations, liens and encumbrances, and
prepayments of other indebtedness. In addition, the Credit Agreement will
require loans to be prepaid with 100% of the net proceeds of non-ordinary-
course asset sales or other dispositions of property, issuances of debt
obligations and certain preferred stock and certain insurance proceeds, 75% of
annual excess cash flow and 50% of the net proceeds from common equity and
certain preferred stock issuances, in each case subject to limited exceptions.
Voluntary prepayments are permitted in whole or in part. See "Description of
the Credit Agreement". The Series F Preferred Stock will pay dividends at the
rate of 13.5% per annum, payable quarterly in arrears, with such dividends
payable in kind at the option of the Company for the first five years from the
issue date. The Series F Preferred Stock is mandatorily redeemable for its
liquidation preference plus accrued and unpaid dividends on the 10th
anniversary of the issue date. The Series F Preferred Stock is redeemable at
the option of the Company prior to the 10th anniversary at premiums (expressed
as a percentage of the accreted face value) declining over ten years from
13.5% to 0%. The Company does not currently intend to pay dividends in cash on
the Series F Preferred Stock prior to the fifth anniversary of the issue date
and does not currently intend to redeem the Series F Preferred Stock prior to
the mandatory redemption date.
The Company believes that after giving effect to the Transactions and the
incurrence of indebtedness related thereto, based on current levels of
operations and anticipated growth, its cash from operations, together with
other available sources of liquidity, including borrowings available under the
Revolving Loan Facility, will be sufficient over the next several years to
fund anticipated capital expenditures and make required payments of principal
and interest on its debt, including payments due on the Notes and obligations
under the Credit Agreement. In addition, the Company continually evaluates
potential acquisitions and expects to fund such acquisitions from its
available sources of liquidity, including borrowings under the Revolving Loan
Facility.
The Company's expansion and acquisition strategy may require substantial
capital, and no assurance can be given that the Company will be able to raise
any necessary additional funds through bank financing or the issuance of
equity or debt securities on terms acceptable to the Company, if at all.
33
<PAGE>
INDUSTRY
Diagnostic Imaging. Diagnostic imaging involves the use of non-surgical
techniques to generate representations of internal organs on film or video.
Diagnostic imaging systems have evolved from conventional x-rays to the
advanced technologies of MRI, CT, ultrasound, nuclear medicine, mammography,
positron emission tomography ("PET") and fluoroscopy. The market for
diagnostic imaging services in the United States is estimated to be in excess
of $50 billion annually, or 5% to 6% of total health care spending. MRI
services constituted approximately $6 to $7 billion of the diagnostic imaging
industry in 1996.
Patients are typically billed for diagnostic imaging services by their
hospitals. The bill consists of a technical fee or charge for use of the
equipment as well as a professional fee for the services of the radiologist
who interprets the data. Hospitals which outsource diagnostic imaging
equipment and services pay providers directly and collect fees for service and
technical charges from payors.
Magnetic Resonance Imaging. Magnetic resonance imaging involves the use of
high strength magnetic fields to produce computer-processed cross-sectional
images of the anatomy. MRI services are provided by hospitals with in-house
systems, independent fixed site operators and independent mobile operators.
The approximately 4,000 MRI systems in the United States include 2,400
hospital owned systems, 1,000 independent fixed site systems and approximately
600 mobile systems. The MRI industry has experienced rapid growth as a result
of increased physician acceptance of diagnostic imaging, substitution of MRI
for other imaging modalities (including x-ray based techniques), expanding
applications for MRI technology and health care reform which encourages
outpatient services. Total scan volumes have increased from 5.4 million in
1990 to 8.8 million in 1996. According to an industry consultant, scan volumes
are projected to grow at approximately 7% to 8% per year through 1999 and at
5% per year thereafter.
The MRI services industry is highly fragmented. Recently, however, the
industry has begun to undergo consolidation. The Company believes such
consolidation is primarily the result of (i) economies of scale in the
provision of services to a larger customer base; (ii) cost-effective
purchasing of equipment, supplies and services by larger companies; and (iii)
the decision by many smaller, capital constrained operators to sell their MRI
businesses rather than make substantial investments in new imaging systems.
Despite the recent trend, management estimates that as of September 30, 1997,
the top eight MRI service providers operated only 13% of the total MRI systems
in the United States.
The history of the MRI industry can be divided into three periods: (i)
initial growth from 1984-1992; (ii) downturn in 1993-1994; and (iii) renewed
growth and consolidation beginning in 1995-1996. The increased use of MRI as a
diagnostic tool between 1984 and 1992 resulted from a variety of factors
including falling equipment costs, increased physician acceptance of the
technology, increased number of clinical applications and Medicare reform
enacted by Congress in 1983, which encouraged outpatient treatment.
Changes in the health care industry and legislative reform between 1992 and
1994 slowed the growth of the MRI industry. The threat of health care reform
and the desire to control medical costs and pricing, placed physicians under
tremendous scrutiny to control costs and further contributed to the decrease
in use of MRI by the medical profession. Simultaneously, the shift towards
health maintenance organizations and the trend to decrease utilization of
outpatient services and accept declining reimbursement rates (a 20% decline in
reimbursement rates was experienced between 1992-1994) led to a period in
which the use of MRI as a diagnostic tool was limited.
Despite the new cost-conscious environment in which hospitals and physicians
operated, the advantages of MRI as compared to other forms of diagnostic
imaging, development of new practical uses of MRI and increased Medicare
reimbursement (1%-2% increase per year between 1994-1996) resulted in
increased MRI use beginning in 1995-1996. See "Business--Reimbursement."
34
<PAGE>
Imaging Systems and Technology. MRI technology dates back to 1971 when Dr.
Raymond Damadian began applying principles of magnetic resonance to the field
of diagnostic imaging. In 1984, the FDA approved the sale of MRI systems to
community hospitals and private clinics. A principal element underlying
magnetic resonance imaging is that atoms in various kinds of body tissue
behave differently in response to a magnetic field, enabling the
differentiation of internal organs and structures and normal and diseased
tissue. MRI facilitates the diagnosis of diseases and disorders at an early
state, often minimizing the cost and amount of care needed and frequently
eliminates the need for invasive diagnostic procedures. MRI is the preferred
imaging modality for the brain, the spine and other internal organs because it
produces a superior image of soft tissue, without artifacts from bony
structures that are sometimes apparent with x-ray based imaging techniques. In
addition, unlike x-rays and CT, MRI does not expose patients to ionizing
radiation. Applications for MRI include detection of brain lesions, such as
multiple sclerosis, tumors, strokes and infections, spinal injuries, diseases
and congenital disorders, and heart, chest, abdomen, ligament, tendon and
joint injuries or diseases.
The major components of an MRI system are a large magnet, radio wave
equipment, and a computer for data storage and image processing. During an MRI
study, a patient lies on a table which is then placed into the magnet. The
patient spends approximately 15 to 45 minutes inside the magnet, depending
upon the type of MRI system and diagnostic study, during which time images of
multiple planes are acquired. Images obtained from an MRI examination are
displayed on a computer screen in the form of a cross-section of the organ or
tissue. This information can be stored on magnetic media for future access or
printed on film for interpretation by a physician and retention in the
patient's files.
Depending upon type, features and options selected, an MRI system and
related housing and installation generally cost between $1.6 million and $2.2
million. The largest manufacturers of MRI systems are General Electric Medical
Systems, Siemens Medical Systems, Phillips N.V. and Picker International.
These manufacturers also supply maintenance and service under warranties and
contracts. Industry participants typically enter into contracts with the
manufacturers after the expiration of the warranty for comprehensive
maintenance programs on equipment to minimize downtime (the period of time
equipment is unavailable during scheduled use hours because of malfunctions).
Research and Contrast Enhancement. Research is currently being conducted for
additional uses of MRI and the Company believes more applications for MRI may
be developed in the future. Contrast agents enhance the use of MRI in the
detection of neurological lesions, including specific types of brain tumors.
Contrast agents also enhance images of the post-operative spine, and are under
investigation for use in the liver and other organ systems. MRI's role in the
evaluation of cardiac disease and diseases of the bone marrow and joints is
also on the increase. New technological developments are expected to extend
the clinical uses of this technology and to increase the number of scans
performed by the Company's customers. In October 1995, Medicare began to
reimburse MRA procedures on a limited basis. MRA utilizes MRI technology to
view blood flow of the head and neck. Prior to October 1995, MRA procedures
were considered experimental and were not reimbursed by Medicare. Some MRA
procedures have been approved by Medicare; it is expected that additional MRA
procedures will be approved in the near future.
Mobile MRI. Mobile MRI operators provide a cost-effective alternative
enabling hospitals to access MRI technology. Mobile MRI operators use
specially designed vans or trailers to transport MRI systems to hospitals and
provide trained technologists to perform the scans. Operators typically enter
into long-term contracts to provide a scheduled amount of service on a fee-
per-scan basis. Operators then design schedules for each system to rotate
among multiple hospitals in a manner that optimizes the utilization of each
system.
Mobile MRI systems typically operate in non-metropolitan areas, targeting
small to mid-sized hospitals that do not own imaging systems. These hospitals
often cannot afford the significant capital investment associated with MRI
systems or lack the patient volume to utilize the systems in a cost-effective
manner. In addition, CON and other licensing requirements in many states have
further limited hospitals' ability to purchase MRI systems. However, such
hospitals need state-of-the-art diagnostic imaging technology to remain
competitive. In addition, many medical professionals have become increasingly
aware of the risks of medical malpractice suits and believe that such risks
would be reduced by utilizing state-of-the-art medical technology and related
services.
35
<PAGE>
BUSINESS
GENERAL
The Company is a leading nationwide provider of diagnostic imaging services
and the largest operator of state-of-the-art mobile diagnostic imaging systems
and related outsourced radiology services in the United States. The Company
primarily provides MRI systems and services to hospitals and other health care
providers on a mobile, shared user basis. The Company also provides dedicated,
full-time MRI systems and services as well as full-service management of
imaging operations for selected hospitals. The Company's services enable small
to mid-size hospitals to gain access to advanced diagnostic imaging technology
and related value-added services without making a substantial investment in
equipment and personnel. The Company operates a fleet of 98 MRI systems and
services 356 MRI customers in 36 states under exclusive contracts with an
average remaining length of approximately 24 months as of September 30, 1997.
Since the beginning of 1995, Alliance has substantially increased revenues
by adding new customers and increasing scan volumes at existing customer
sites. During the same period, the growth rate of Alliance's EBITDA and net
income has exceeded the growth rate of revenues principally as a result of
spreading costs (which are primarily fixed) over a larger revenue base and
implementing cost reduction and containment measures.
COMPETITIVE STRENGTHS
The Company attributes its market leadership and its significant
opportunities for continued growth and increased profitability to the
following strengths:
Largest Provider of Mobile MRI Services. The Company operates 98 MRI systems
in 36 states. The Company believes that the next largest mobile operator has a
fleet of approximately 70 MRI systems. Compared to its smaller competitors,
the Company believes it benefits from (i) significant equipment purchasing
savings; (ii) attractive service and maintenance contracts from its primary
equipment suppliers; (iii) strong name recognition and a reputation for
quality service; (iv) substantial financial flexibility and access to lower-
cost capital; and (v) the ability to efficiently deploy systems in a manner
which maximizes fleet utilization while satisfying customer requirements.
Technologically Advanced MRI Fleet. The Company has invested approximately
$78 million since January 1, 1995 to replace and upgrade existing systems and
to purchase new systems. As a result, the Company believes that it has
upgraded substantially all of its systems and expects most of its capital
expenditures for at least the next three to five years to relate to new system
purchases. Of the Company's 98 MRI systems, 73 are state-of-the-art, high-
field 1.0 or 1.5 Tesla systems and 13 are state-of-the-art, mid-field 0.5
Tesla systems. The Company believes its fleet is among the newest and most
advanced in the industry, enabling the Company to perform a wider variety and
greater volume of scans and produce higher quality images, which the Company
believes provides a significant competitive advantage. Moreover, all of the
Company's state-of-the-art systems are designed to facilitate hardware and
software upgrades. As a result, the Company's systems should remain on the
leading edge of technological developments. In addition, while many of its
competitors lease their systems, the Company owns the vast majority of its
systems, generally providing greater flexibility and lower costs over the life
of the systems.
Exclusive, Long-Term Contracts in Attractive Markets. The Company generates
substantially all of its revenues from exclusive, long-term contracts with
hospitals and other health care providers, with the price for its services
determined on a fee-per-scan basis. The Company has 20, 84 and 77 contracts
that will expire, if not renewed or extended, in the fourth quarter of 1997,
and the years 1998 and 1999, respectively. The Company anticipates that it
will renew or extend substantially all of these contracts. The Company's
contracts typically offer tiered pricing with lower fees on incremental scans,
allowing customers to benefit from increased scan volumes and the Company to
benefit from the operating leverage associated with increased scan volumes.
Accordingly, tiered pricing enables the Company to retain customers who may be
considering purchasing their
36
<PAGE>
own MRI systems rather than renewing a contract with a mobile provider. As of
September 30, 1997, the Company had 356 MRI customers under exclusive
contracts which averaged approximately 24 months in remaining length. Most of
the Company's contracts are with hospitals that have fewer than 200 beds, many
of which may lack the financial resources or patient volume to justify the
purchase of an MRI system.
Superior Customer Service and Strong Customer Relationships. The Company
positions itself as a service company rather than solely as an equipment
provider and competes on the basis of value-added services in addition to
price. The Company differentiates itself from competitors by aggressively
marketing its services to referring physicians, radiologists and hospital
administrators and by having the advanced imaging systems, trained
technologists, fleet management capabilities and fleet size to accommodate the
growing needs of its customers. Value-added services offered by the Company
include patient scheduling and pre-screening, insurance pre-authorization,
appointment confirmation, billing, managed care contracting, and management
reporting services. The Company often provides two technologists per mobile
system per shift and is therefore able to accommodate higher patient volume
and operate with greater efficiency, resulting in high customer satisfaction
levels. As a result, the Company enjoys strong customer relationships, having
added 146 net new MRI customers from January 1, 1995 through September 30,
1997 and renewed or extended 197 of its customer contracts in this period.
Substantial Operating Leverage. Because of the significant amount of fixed
costs associated with operating an MRI system, MRI service providers benefit
from operating leverage, with increased utilization rates resulting in
significant increases in operating earnings and operating margins. The
Company's average scans per system per day increased to 7.2 for the nine
months ended September 30, 1997 from 6.7 for the nine months ended September
30, 1996.
Favorable Payment Terms. Approximately 92% of the Company's billings are
direct to hospitals. The hospitals, in turn, generally pay the Company prior
to collecting from patients and third party payors. Accordingly, the Company's
exposure to uncollectible patient receivables is minimized. In addition,
management believes that the Company's average number of DSO of receivables,
which was 45 days as of September 30, 1997, is among the most favorable in the
mobile MRI industry and more favorable than the DSO of many health care
companies.
Experienced Management Team. The Company's senior management team has an
average of nine years of industry experience and six years of experience with
Alliance. The Company's senior and operating managers have successfully
developed and implemented sophisticated marketing, fleet management and
financial strategies which have enabled the Company to become the largest and
among the most efficient and profitable mobile MRI operators. Upon
consummation of the Transactions and after giving effect to the Company's
option plans, management will own in excess of 11% of the capital stock of the
Company on a fully diluted basis.
BUSINESS STRATEGY
The Company's management team has developed and implemented a business
strategy designed to maximize return on invested capital and in turn increase
revenues and cash flow. The Company's revenues for the nine months ended
September 30, 1997 increased to $62.3 million from $49.1 million for the nine
months ended September 30, 1996. In addition, the Company's income before
extraordinary gain for the nine months ended September 30, 1997 increased to
$6.8 million from $5.1 million for the nine months ended September 30, 1996.
The Company achieved comparable customer revenue growth of 25.9% and 8.8%,
respectively, in the first nine months of 1997 and in the year ended December
31, 1996. In addition, during the three months ended September 30, 1997, the
Company added a total of eight net mobile MRI systems. Management believes
that the recent financial performance of the Company does not yet fully
reflect the benefit of these new systems.
The primary components of the Company's business strategy are to (i)
increase scan volumes; (ii) maximize return on invested capital; (iii) expand
the scope of services provided; and (iv) pursue strategic acquisitions.
Increase Scan Volumes. The Company believes that the demand for MRI
procedures will continue to grow as new applications are developed and MRI
continues to gain acceptance and replace other imaging modalities.
37
<PAGE>
The Company has an opportunity to significantly increase its scan volumes by
both adding new customers and increasing scans performed for existing
customers. In response to the growing demand for MRI procedures, the Company
added 26 net MRI systems and 146 net new MRI customers from January 1, 1995 to
September 30, 1997. The Company expects to add 14 net MRI systems by the end
of 1998. The Company's decision to purchase new systems is typically
predicated on obtaining new customer contracts which serve as the basis of
demand for the new MRI systems.
Maximize Return on Invested Capital. The Company actively manages the
utilization of its MRI systems to maximize its return on invested capital
(i.e., the amount of cash flow generated by each system relative to the
carrying value of such system). In the nine months ended September 30, 1997,
the Company generated an annualized return on invested capital of 42.9%. The
Company typically upgrades the quality of its fleet in markets where demand is
greatest and redeploys less advanced systems in markets where demand is lower
in order to generate incremental cash flow. The Company estimates that, on
average, a system can be utilized for approximately eight years in a high
demand market when properly maintained and upgraded, after which time the
system can either be utilized in a market with less demand or traded in for a
new system.
Expand the Scope of Services Provided. The Company intends to leverage its
national presence and customer service capabilities by introducing new
services, the demand for which management believes will increase as hospitals
continue to outsource departments and cost centers and seek incremental
revenue sources. The Company expects to expand into open MRI services,
lithotripsy services (which involves the utilization of sound waves to
eliminate kidney stones and urinary calculus in the bladder) and full-service
management of hospital radiology departments. Open MRI systems are used on
claustrophobic patients and patients whose size prohibits them from entering
traditional MRI systems. Management believes that with the introduction of its
first open MRI system in the fourth quarter of 1997, the Company will be the
first operator to offer mobile open MRI service.
Pursue Strategic Acquisitions. Management has designed an acquisition
strategy for the Company which capitalizes on the consolidation occurring in
the industry as well as the Company's ability to (i) access substantial and
lower cost financial resources; (ii) realize significant synergies, operating
expense reductions and overhead cost savings; (iii) apply its consolidation
strategy to expand outside of diagnostic imaging in related services; (iv)
utilize the Company's expertise in logistics and fleet management; and (v)
leverage the Company's existing customer relationships to expand into new
modalities.
On October 20, 1997, Alliance announced the execution of a definitive
agreement to acquire MCIC, a Cleveland, Ohio based provider of mobile MRI
services, CT services and other outsourced healthcare services. The
acquisition also includes MCIC's one-half interest in an operating joint
venture in Michigan. The purchase price consists of $13 million cash plus the
assumption of approximately $5 million in financing arrangements. MCIC
operates 14 mobile MRI systems and several other diagnostic imaging systems,
primarily in Ohio, Michigan, Indiana and Pennsylvania. The transaction was
completed on November 21, 1997. In addition, the Company is currently engaged
in acquisition discussions with several other MRI service providers.
Management believes future acquisitions will enable the Company to redeploy
systems in overlapping markets, resulting in higher utilization rates and the
opportunity to increase penetration in other markets.
OPERATIONS
Customer Base. The Company believes that many hospitals and other health
care providers require access to MRI services to remain competitive in the
health care marketplace. Regulatory and licensing requirements in many states
may also limit access to MRI systems. In addition, many health care providers
lack sufficient patient volume or financial resources to justify the purchase
of an MRI system. Such providers contract for mobile, shared-user systems or
single-user, full-time systems to gain access to MRI technology and to provide
comprehensive MRI services to their patients. In addition, many health care
providers, regardless of whether their patient utilization levels and
financial resources justify the purchase of an MRI system, prefer to contract
with
38
<PAGE>
the Company for full-time or shared-user imaging systems to (i) obtain the use
of an MRI system without any capital investment or financial risk; (ii) retain
the ability to switch system types and avoid technological risk; (iii) obtain
MRI services in jurisdictions in which the use of the Company's services
facilitates the procurement of regulatory approvals; (iv) avoid future
uncertainty as to reimbursement policies; (v) eliminate the need to recruit,
train and manage qualified technologists; (vi) outsource their entire MRI
service to obtain access to needed technology while avoiding financial
investment or risk and obtaining management expertise; or (vii) provide
additional imaging services when patient demand exceeds their in-house
capability.
The Company's MRI and CT services, which include imaging systems,
technologists and support services, are provided on both a mobile, shared-user
basis and on a full-time basis to single customers. As of September 30, 1997,
the Company provided imaging systems and related technologists and support
services to 389 customers (356 for MRI services and 60 for CT services; some
customers contract for both modalities) consisting primarily of small to mid-
sized hospitals (i.e., hospitals with 50-200 beds). The Company believes that
many of such hospitals lack the patient volume or financial resources to
justify the purchase of an MRI system. As of September 30, 1997, the Company
provided services and equipment to customers in 36 states.
Typically, the Company's MRI systems are contracted on average for five to
six days a week. The Company believes that as customers become familiar with
the basic or expanded technology and its applications, the corresponding MRI
system's rate of usage generally increases, causing the number of scans per
day to increase and eventually leading to requests for additional days of
usage.
Contract Terms. Contract fees are charged on a fee-per-scan, fee-per-day or
fee-per-month basis (with numerous variations within each billing method to
accommodate particular customers' needs). Generally, the Company provides
technologists under contracts billed on a fee-per-scan or fee-per-day basis
but not under contracts billed on a fee-per-month basis. Although a typical
contract offers daily flat-rate options, most customers currently pay on a
fee-per-scan basis. The amount of fees paid on this basis depends upon the
type of imaging system provided, the term of the contract, the types and
number of scans performed as well as the day of the week on which scans are
performed. The contracts typically allow the Company to reduce the number of
days of service provided based upon the customer's scan volume, or to
terminate the contract if the Company is unable to realize a profit on the
services provided. The Company typically enters into exclusive, one to eight
year contracts that include automatic renewal provisions. In addition, the
Company's marketing representatives consistently seek to renew and extend
contracts prior to expiration. From January 1, 1995 through September 30,
1997, the Company renewed or extended 197 of its customer contracts. As of
September 30, 1997, the Company's contracts averaged approximately 24 months
in remaining length.
Imaging Systems. At September 30, 1997, the Company operated 98 MRI systems
and 14 CT systems. Of the 98 MRI systems, 73 are state-of-the-art, high-field
1.0 or 1.5 Tesla systems and 13 are state-of-the-art, mid-field 0.5 Tesla
systems. These systems are designed to facilitate hardware and software
upgrades. As a result, the Company's systems should remain at the leading edge
of technological developments. Further, of the 98 MRI systems, 86 are housed
in mobile coaches and 12 are housed in relocatable modular buildings on
hospital campuses or installed in the hospital facility. Substantially all of
the imaging systems are owned by the Company. One of such systems is a fixed-
site system at a large hospital in Georgia operated by a partnership of which
a subsidiary of the Company is a partner.
The Company orders substantially all of its imaging systems from major
medical device manufacturers, primarily General Electric Medical Systems,
Siemens Medical Systems and Picker International. Generally, the Company
orders its imaging systems from such major manufacturers while simultaneously
contracting with health care providers for their use, thereby reducing the
Company's system utilization risk. The Company's MRI systems are installed in
specially-designed trailers or relocatable, modular buildings. The trailers
and relocatable modular buildings are designed jointly by the imaging system
manufacturer and the housing manufacturer and are designed to provide image
quality identical to those installed in hospital facilities.
39
<PAGE>
Fleet Management. The Company seeks to maximize cash flow and return on
assets by actively managing its fleet to maximize utilization. The Company
employs logistics management systems and redeploys or trades in older MRI
systems when it purchases new MRI systems. MRI systems are currently scheduled
for as little as one-half day and up to seven days per week at any particular
facility. Generally, technologists and a driver are assigned to each of the
mobile operating systems. Movement of the systems typically occurs at night
via a fleet of Company-owned or leased tractors. The drivers move the systems
and activate them upon arrival at each imaging site so that the systems are
operational when the Company's technologists arrive on the following scheduled
imaging day.
Regional Management. The Company's seven regional offices market, manage and
staff the operation of its imaging systems. The Company's regional offices are
located in Anaheim and Roseville, California; Pittsburgh, Pennsylvania;
Chicago, Illinois; Colorado Springs, Colorado; Burlington, Connecticut; and
Macon, Georgia. Each region has individuals responsible for sales and
operations management.
Licensing and JCAHO Accreditation. Most states do not currently license MRI
providers such as the Company, although many do subject such providers to CON
requirements. Hospitals with which the Company has contracted are subject to a
variety of regulations and standards of state licensing and other authorities
and accrediting bodies such as the Joint Commission on Accreditation of
Healthcare Organizations ("JCAHO"). As an outside vendor, the Company may be
required to comply with such regulations and standards to enable the hospitals
with which it has contracted to maintain their permits, approvals and
accreditation. Alliance is in the process of seeking accreditation from JCAHO.
CUSTOMER SUPPORT
As part of its full service package, the Company provides several levels of
support to a hospital or health care provider. The Company's technologists who
staff the MRI systems regularly work with the hospital radiologists, referring
physicians and nursing staff to perform the scans. The technologists also work
with regional technical advisors who are specialists in MRI technology and
consult on specialized technical problems, hold periodic training sessions for
the technologists, radiologists, referring physicians and health care
customers and provide problem-solving services. These specialists play a
central role in the Company's retention of accounts and building of scan
volumes. Management believes that targeted direct marketing at each hospital
with assigned responsibility for support services is a key element for
broadening the awareness of MRI technology, building scan volumes and
obtaining contract renewals.
SALES AND MARKETING
Currently, the Company's sales force consists of 13 members who identify and
contact candidates for the Company's services each with the overall management
and sales responsibility for a specific region of the country. Direct
marketing plays a primary role in the Company's development of new customers.
The Company employs 18 full- and part-time marketing representatives who
develop scan volumes at existing and new customer locations by introducing the
Company's services to referring physicians and keeping such physicians
apprised of the Company's MRI service capabilities. In addition, certain of
the Company's executive officers and regional vice presidents spend a portion
of their time marketing the Company's services. The Company believes that
having senior managers involved in sales and contract negotiations enhances
its ability to obtain new and retain existing customers.
MAINTENANCE
For its MRI and CT systems, the Company primarily relies upon the
manufacturer to provide maintenance and service under warranties and service
contracts. These service contracts require the Company to pay fixed monthly
fees or variable fees on a risk-sharing basis.
Timely, effective service is essential to maintaining high utilization rates
on the Company's MRI systems. If the Company experiences greater than
anticipated malfunctions of its equipment or if it is unable to promptly
obtain the service necessary to keep its systems functioning effectively, its
business could be adversely affected.
40
<PAGE>
The Company contracts with the MRI equipment manufacturers for comprehensive
maintenance programs on its systems to minimize downtime (the period of time
equipment is unavailable during scheduled use hours because of malfunctions).
These maintenance contracts commence upon the expiration of the applicable
warranty period. The systems are generally warranted by the systems
manufacturer for a specified period of time, usually one year to eighteen
months from the date of purchase. During the warranty period and maintenance
contract term, the Company receives uptime guarantees (a guarantee that
equipment will function for a specified percentage of scheduled use hours.)
However, these guarantees are not expected to substantially compensate the
Company for loss of revenue for downtime.
REIMBURSEMENT
Substantially all the Company's revenues are derived directly from health
care providers rather than from private insurers, other third party payors or
governmental entities. Consequently, the Company historically has not had
material direct exposure to, or direct connection with, patient billing,
collections or reimbursement by insurance companies, other third parties or
Medicare. However, to a lesser extent, the Company's revenues are generated
from direct billings to patients or their third party payors which are
recorded net of contractual discounts and other arrangements for providing
services at less than established patient billing rates. Net revenues from
direct patient billing amounted to approximately 8% of the Company's revenue
in 1996.
Most private health care insurers, including various Blue Cross and Blue
Shield Plans, reimburse approximately 70% to 100% of the health care
provider's charge for MRI and CT scans. Such insurers may impose limits on
reimbursement for imaging services or deny reimbursement for tests that do not
follow recommended diagnostic procedures. Because patient reimbursement may
indirectly affect the levels of fees the Company can charge its customers by
constricting the health care providers' profit margin, widespread application
of restricted or denied reimbursement schedules could adversely affect the
Company's business. Conversely, at lower reimbursement rates, a health care
provider might find it financially unattractive to own an MRI or CT system,
but could benefit from purchasing the Company's services.
Congress has attempted to restrict rising federal reimbursement costs under
the Medicare program by setting predetermined payment amounts for
reimbursement of inpatient services according to each patient's diagnosis
related group ("DRG"). Because a DRG rate compensates a hospital for all
services rendered to a patient, a hospital cannot be separately reimbursed by
Medicare for an MRI scan or other procedure performed on an inpatient. DRG
payment rates for inpatient services became effective in the early 1980's and
have been adjusted downward since then. Currently, those payment rates are not
applicable to outpatient services; instead, Medicare reimbursement for imaging
services furnished in a hospital outpatient setting is subject to alternative,
generally more favorable, payment limits tied to the physician fee schedule
described below. However, it is possible that DRG payment rates or other
limits might be implemented with respect to outpatient services in the future.
Because payments have generally been less restricted in non-hospital
outpatient settings, in prior years there has been rapid growth in MRI systems
at non-hospital free-standing facilities which provide outpatient services.
HHS, as required by statute, has issued fee schedules for reimbursing
physicians who treat Medicare patients. Under these fee schedules, physician
reimbursement for professional services is based on a set of values assigned
to each service provided by a physician. The fee schedules also generally
apply to reimbursement for technical services (such as those provided by the
Company) except in limited circumstances. There can be no assurance that
Medicare payments will remain comparable to present levels. In particular, on
June 18, 1997, the Health Care Financing Administration ("HCFA") issued a
proposed rule affecting, among other things, the practice expense component of
the physician fee schedule, physician supervision requirements for certain
diagnostic tests and the adoption of a new definition of an independent
diagnostic testing facility. Under the proposed rule, the Relative Value Units
("RVU") for MRI scans would be relatively unchanged, but the RVUs for MRI
scans with contrast would be reduced significantly. The proposed effective
date of the rule is January 1, 1998. However, as part of federal budget
legislation recently signed into law, implementation of the practice expense
41
<PAGE>
changes will be delayed until January 1, 1999, with a three year transition
period for implementing the new method for calculating practice expenses.
While the impact of the proposed changes is dependent on numerous factors,
including whether the proposed rule is adopted substantially in the proposed
form and whether the Company's hospital customers will seek similar
adjustments in payments to the Company for scans with contrast agents to the
extent they are currently charged additional amounts for contrast exams, there
can be no assurance that such practice expense changes will not, directly or
indirectly, have a material adverse effect on the Company's business or
results of operations.
The Budget Reconciliation Act for 1998 that was recently signed into law
contains a number of changes to the Medicare program which will adversely
affect hospitals and which could therefore potentially have an impact on
suppliers of goods and services to hospitals, including the Company. In
particular, among other things, the Act requires implementation of a
prospective payment system for outpatient services beginning in 1999; and
reduces hospital inpatient reimbursement for both operating and capital
expenses compared with reimbursement levels that would have prevailed absent
any change in law. The Company believes that approximately 15% to 20% of its
hospital customers' MRI revenues are derived from Medicare patients.
REGULATION
Many aspects of the health care industry in the United States, including the
Company's business, are subject to extensive federal and state government
regulation. Although the Company believes that its operations comply with
applicable regulations, there can be no assurance that subsequent adoption of
laws or interpretations of existing laws will not regulate, restrict or
otherwise adversely affect the Company's business.
The marketing and operation of the Company's MRI and CT systems are subject
to state laws prohibiting the practice of medicine by non-physicians and the
rebate or division of fees between physicians and non-physicians. Management
believes that its operations do not involve the practice of medicine because
all professional medical services relating to its operations, such as the
interpretation of the scans and related diagnoses, are separately provided by
licensed physicians not employed by the Company. Further, the Company believes
that its operations do not violate state laws with respect to the rebate or
division of fees.
The Company is subject to federal and state laws which govern financial and
other arrangements between health care providers. These include the federal
Medicare and Medicaid anti-kickback statutes which prohibit bribes, kickbacks,
rebates and any other direct or indirect remuneration in return for or to
induce the referral of an individual to a person for the furnishing, directing
or arranging of services, items or equipment for which payment may be made in
whole or in part under the Medicare, Medicaid or other federal health care
programs. Violation of the anti-kickback statute may result in criminal
penalties and exclusion from the Medicare and other federal health care
programs. Many states have enacted similar statutes which are not necessarily
limited to items and services paid for under the Medicare or a federally
funded health care program. In recent years, there has been increasing
scrutiny by law enforcement authorities, HHS, the courts and Congress of
financial arrangements between health care providers and potential sources of
patient and similar referrals of business to ensure that such arrangements are
not designed as mechanisms to pay for patient referrals. HHS interprets the
anti-kickback statute broadly to apply to distributions of partnership and
corporate profits to investors who refer federal health care program patients
to a corporation or partnership in which they have an ownership interest and
to payments for service contracts and equipment leases that are designed to
provide direct or indirect remuneration for patient referrals or similar
opportunities to furnish reimbursable items or services. In July 1991, HHS
issued "safe harbor" regulations that set forth certain provisions which, if
met, will assure that health care providers and other parties who refer
patients or other business opportunities, or who provide reimbursable items or
services, will be deemed not to violate the anti-kickback statute. The Company
is also subject to separate laws governing the submission of false claims. The
Company is a party to a partnership for the provision of MRI services. The
Company believes that the partnership is in compliance with the anti-kickback
statute. The Company believes that its other operations likewise comply with
the anti-kickback statutes.
42
<PAGE>
A federal law, commonly known as the "Stark Law," also imposes civil
penalties and exclusions for referrals for "designated health services" by
physicians to certain entities with which they have a financial relationship
subject to certain exceptions. "Designated health services" include, among
others, MRI services. While implementing regulations have been issued relating
to referrals for clinical laboratory services, no implementing regulations
have been issued regarding the other designated health services, including MRI
services. In addition, several states in which the Company operates have
enacted or are considering legislation that prohibits "physician self-
referral" arrangements or requires physicians to disclose any financial
interest they may have with a health care provider to their patients to whom
they recommend that provider. Possible sanctions for violating these
provisions include loss of licensure and civil and criminal sanctions. Such
state laws vary from state to state and seldom have been interpreted by the
courts or regulatory agencies. Nonetheless, strict enforcement of these
requirements is likely. The Company believes its operations comply with these
federal and state physician self-referral laws.
In some states, a CON or similar regulatory approval is required prior to
the acquisition of high-cost capital items, including diagnostic imaging
systems or provision of diagnostic imaging services by the Company or its
customers. CON regulations may limit or preclude the Company from providing
diagnostic imaging services or systems. A significant increase in the number
of states regulating the Company's business within the CON or state licensure
framework could adversely affect the Company. Conversely, repeal of existing
CON regulations in jurisdictions where the Company has obtained or operates
under a CON could also adversely affect the Company. This is an area of
continuing legislative activity, and there can be no assurance that the
Company will not be subject to CON and licensing statutes in other states in
which it operates or may operate in the future.
LIABILITY INSURANCE
While the Company's imaging systems are at a customer's facility, they
operate only under the direction of licensed physicians on the customer's
staff who direct the procedures, supervise the Company's technologists and
interpret the results of the examinations. Currently, there are no known
biological hazards associated with MRI. However, there is a risk of harm to a
patient who has a ferrous material or certain types of cardiac pacemakers
within his or her body. Patients are carefully screened to safeguard against
this risk. To protect against possible exposure for professional liability,
the Company maintains professional liability insurance.
COMPETITION
The market for diagnostic imaging services and imaging systems is highly
competitive. In addition to direct competition from other mobile providers,
the Company competes with free-standing imaging centers and health care
providers that have their own diagnostic imaging systems and with equipment
manufacturers that sell or lease imaging systems to health care providers for
full-time installation. Some of the Company's direct competitors which provide
contract MRI services may have access to greater financial resources than the
Company. In addition, some of the Company's customers are capable of providing
the same services to their patients directly, subject only to their decision
to acquire a high-cost diagnostic imaging system, assume the associated
financial risk, employ the necessary technologists and satisfy applicable
licensure and CON requirements, if any. The Company competes against other MRI
service providers on the basis of quality of services, quality and magnetic
field strength of imaging systems, price, availability and reliability.
EMPLOYEES
As of September 30, 1997, the Company had 501 employees, of whom
approximately 405 were trained diagnostic imaging technologists, patient
coordinators, technical support staff or other field operations personnel. Of
the Company's employees, 153 are employed on a part-time or "as needed" basis.
None of the Company's employees are represented by a labor organization and
the Company is not aware of any activity seeking such organization. The
Company considers its relations with its employees to be satisfactory.
43
<PAGE>
PROPERTIES
The Company leases approximately 15,000 square feet of space in an office
building in Anaheim, California for its executive and principal administrative
offices. This office will be expanded to a total of approximately 24,500
square feet during the fourth quarter of 1997. The Company also leases a
15,600 square foot operations warehouse in Orange, California, as well as
space for its other regional offices.
LEGAL PROCEEDINGS
The Company from time to time is involved in routine litigation incidental
to the conduct of its business. The Company believes that no litigation
pending against it will have a material adverse effect on its consolidated
financial position or results of operations.
44
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The following table sets forth information concerning the individuals who
will be the executive officers and directors of the Company upon consummation
of the Transactions.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Richard N. Zehner................ 44 Chairman, President,
Chief Executive Officer and
Director
Vincent S. Pino.................. 49 Executive Vice President,
Chief Operating Officer and
Director
Terrence M. White................ 43 Senior Vice President,
Chief Financial Officer and
Secretary
Terry A. Andrues................. 45 Senior Vice President
Jay A. Mericle................... 42 Senior Vice President
Robert H. Falk................... 58 Director
Michael S. Gross................. 35 Director
Joshua J. Harris................. 32 Director
Michael D. Weiner................ 44 Director
</TABLE>
Richard N. Zehner has been the Chairman, President and Chief Executive
Officer of Alliance since November 1988. Mr. Zehner was a founder and has been
the President of Alliance and its predecessors since 1983. From 1987 until
November 1988 he served as a director and President and Chief Operating
Officer of Alliance.
Vincent S. Pino has been the Executive Vice President and Chief Operating
Officer of Alliance since December 1991 and August 1993, respectively, and a
director since June 1991. From November 1988 to August 1993, he was the Chief
Financial Officer of Alliance.
Terrence M. White joined Alliance in July 1993 as Senior Vice President,
Chief Financial Officer and Secretary. From 1975 through May 1993, he was
employed by Ernst & Young LLP and its predecessor, and was a partner in such
firms since 1987.
Terry A. Andrues was Vice President of Customer Support since 1988 and was
appointed Senior Vice President in 1991. From 1987 to 1988, Mr. Andrues acted
as a marketing representative of the Company.
Jay A. Mericle has acted as Senior Vice President of the Company since 1988
and technical marketing manager of the Company since 1986.
Robert H. Falk has been an officer of certain affiliates of Apollo since
1992. Prior to 1992, Mr. Falk was a partner in the law firm of Skadden, Arps,
Slate, Meagher & Flom LLP. Mr. Falk is also a director of Converse Inc.,
Culligan Water Technologies, Inc., Florsheim Group Inc. and Samsonite
Corporation.
Michael S. Gross is a founding principal of Apollo and has served as an
officer of certain affiliates of Apollo since 1990. Mr. Gross is also a
director of Allied Waste Industries, Inc., Breuners Home Furnishings
Corporation, Converse Inc., Florsheim Group Inc., Furniture Brands
International, Inc., Proffitt's, Inc. and Urohealth, Inc.
Joshua J. Harris is a principal of Apollo and has served as an officer of
certain affiliates of Apollo since 1990. Mr. Harris is a director of Converse
Inc., Breuners Home Furnishings Corporation, Florsheim Group Inc. and NRT
Incorporated.
Michael D. Weiner has been an officer of certain affiliates of Apollo since
1992. Prior to 1992, Mr. Weiner was a partner in the law firm of Morgan, Lewis
& Bockius LLP. Mr. Weiner is also a director of Converse Inc.,
45
<PAGE>
Capital Apartment Properties, Inc., Continental Graphics Holdings, Inc.,
Florsheim Group Inc., NRT Incorporated and WMC Finance Co.
EXECUTIVE COMPENSATION
The following sets forth historical executive compensation information of
the Company's Chief Executive Officer and the other four most highly
compensated executive officers whose total cash compensation exceeded $100,000
during the fiscal year ended December 31, 1996 (collectively, the "Named
Executive Officers") and who will serve as executive officers of the Company
upon consummation of the Transactions.
SUMMARY COMPENSATION TABLE
The following table sets forth for the fiscal years indicated the annual and
long-term compensation of the Named Executive Officers who will serve as
executive officers of the Company upon consummation of the Transactions.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------------- -------------------------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL STOCK ALL OTHER
POSITION YEAR(1) SALARY BONUS COMPENSATION(2) OPTIONS/SARS(3) COMPENSATION(4)
------------------ ------- -------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard N. Zehner....... 1996 $296,000 $419,025 -- 155,000 $15,596
Chairman, President,
Chief
Executive Officer and 1995 278,750 191,544 -- -- 15,495
Director 1994 260,000 280,462 -- 205,000 15,490
Vincent S. Pino......... 1996 208,000 192,140 -- 125,025 3,596
Executive Vice Presi-
dent, Chief
Operating Officer and 1995 195,500 113,666 -- -- 3,486
Director 1994 182,000 230,393 -- 125,000 2,125
Terrence M. White....... 1996 150,000 108,150 -- 90,025 3,488
Senior Vice President,
Chief
Financial Officer and 1995 131,250 70,605 -- -- 3,351
Secretary 1994 120,000 209,083 -- 45,000 1,402
Terry A. Andrues........ 1996 126,000 73,392 -- 33,050 3,411
Senior Vice President 1995 116,000 58,000 -- -- 3,320
1994 104,000 36,844 -- 70,000 1,851
Jay A. Mericle.......... 1996 126,000 70,691 -- 33,050 3,436
Senior Vice President 1995 117,300 66,540 -- -- 3,323
1994 109,200 38,816 -- 70,000 2,269
</TABLE>
- --------
(1) Rows specified "1996," "1995" and "1994" represent fiscal years ended
December 31, 1996, 1995 and 1994, respectively.
(2) With respect to each Named Executive Officer for each fiscal year,
excludes perquisites, which did not exceed the lesser of $50,000 or 10% of
the Named Executive Officer's salary and bonus for the fiscal year.
(3) All stock options granted to these Named Executive Officers were granted
under Alliance's 1991 Stock Option Plan. Option grant figures for 1994
include replacement options for previously granted options, in addition to
new issuances.
(4) Includes 401(k) matching contributions (for 1996, 1995 and 1994,
respectively: Mr. Zehner--$3,164, $3,077 and $3,077; Mr. Pino--$3,164,
$3,077 and $1,749; Mr. White--$3,164, $3,077 and $1,154; Mr. Andrues--
$3,139, $3,077 and $1,636; and Mr. Mericle--$3,164, $3,077 and $2,041); the
balance for each of these Named Executive Officers represents life insurance
premiums paid by Alliance.
46
<PAGE>
EXECUTIVE COMPENSATION PLAN
Alliance compensates its executive officers using a plan that includes a
predetermined target level of annual cash compensation for each officer. The
plan is set by the Compensation Committee of Alliance's Board of Directors
(the "Compensation Committee") at the beginning of the fiscal year. The actual
total level of compensation for the fiscal year is determined after the end of
the fiscal year based on the level of achievement of various criteria. The
compensation plan establishes a minimum annual remuneration (i.e., base
salary), a maximum compensation level and a target compensation amount.
The annual minimum, target and maximum compensation levels established for
Alliance's Named Executive Officers for 1996 is presented in the following
table, together with the total actual cash compensation earned.
<TABLE>
<CAPTION>
1996
1996 1996 1996 AMOUNT
NAME MINIMUM MAXIMUM TARGET EARNED
- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Richard N. Zehner........................... $296,000 $740,000 $518,000 $715,025
Vincent S. Pino............................. 208,000 416,000 312,000 400,140
Terrence M. White........................... 150,000 270,000 210,000 258,150
Terry A. Andrues............................ 126,000 226,800 176,400 199,392
Jay A. Mericle.............................. 126,000 226,800 176,400 196,691
</TABLE>
The actual amounts of cash compensation to Mr. Zehner, Mr. Pino and Mr.
White, Alliance's Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer, respectively, were determined by the Compensation Committee
based on its evaluation of the extent to which Alliance's 1996 earnings per
share and cash flow budgets and individual objectives applicable to each
executive were achieved. The actual amounts of cash compensation to executives
responsible for the Company's various operating regions were determined by the
Compensation Committee based on its evaluation of the extent to which regional
operating profit budgets and individual objectives applicable to each such
executive were achieved. These amounts were generally more than the target
amounts because Alliance significantly exceeded its earnings per share, cash
flow and regional operating budgets. A predetermined percentage of the
possible compensation award above the minimum amount is determined with
respect to each of the criteria mentioned above for the respective officers.
NEW OPTION PLAN
After the consummation of the Recapitalization, the Company will adopt an
employee option plan pursuant to which options with respect to a total of
454,545 shares of Alliance common stock will be available for grant, and Mr.
Zehner and Mr. Pino will be granted options to purchase 145,000 and 130,000
shares of Alliance common stock, respectively. Fifty percent of the option
shares will vest in equal increments over four years. Fifty percent of the
option shares will vest after seven and one half years (subject to
acceleration if certain per share equity targets are achieved). Vesting of the
options occurs only during an employee's term of employment. The exercise
price for the options is $11.00 per share and the options will expire ten
years from the date of grant.
47
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options during 1996 to
Alliance's Named Executive Officers pursuant to Alliance's 1991 Stock Option
Plan. No stock appreciation rights have ever been granted to Alliance's Named
Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
PERCENTAGE OF ASSUMED ANNUAL RATE OF STOCK
NUMBER OF OPTIONS/SARS EXERCISE OR PRICE APPRECIATION FOR
SHARES GRANTED TO BASE RICE OPTION TERM(3)
UNDERLYING EMPLOYEES IN PER SHARE EXPIRATION ------------------------------
NAME OPTIONS/SARS(1) FISCAL YEAR ($/SH)(2) DATE 0% 5% 10%
---- --------------- ------------- ----------- ---------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard N. Zehner....... 155,000 31.7% $3.5625 3/1/06 $ 0 $ 347,268 $ 880,045
Vincent S. Pino......... 125,025 25.6% 3.5625 3/1/06 0 280,111 709,855
Terrence M. White....... 90,025 18.4% 3.5625 3/1/06 0 201,695 511,136
Terry A. Andrues........ 33,050 6.8% 3.5625 3/1/06 0 74,046 187,648
Jay A. Mericle.......... 33,050 6.8% 3.5625 3/1/06 0 74,046 187,648
</TABLE>
- --------
(1) All options granted in 1996 vest on March 1, 2003; however, vesting of the
1996 option shares will be accelerated based on achievement of the
following per share stock prices for 15 consecutive trading days, as
reported by Nasdaq: $4.75--25%; $5.50--50%; $6.25--75%; $7.00--100%;
subject to a maximum vesting of one-third per year from February 29, 1996
regardless of stock price (no limits after year three). As of March 15,
1997, Alliance's stock price had achieved the first three accelerated
vesting hurdles, and the 1996 options were two-thirds vested at such date.
(2) All options were granted at market value (based on the closing price as
reported on the Nasdaq SmallCap Market on the business day prior to the
grant date) at the date of grant.
(3) Valuations based upon the assumed rates of stock price appreciation are
based upon appreciation over a ten-year period from the $3.5625 exercise
price of the options. The 5% and 10% assumed annual rates of appreciation
would result in the price of the Alliance's common stock increasing to
$5.80 and $9.24 per share, respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE
The following table presents information with respect to options exercised
by each of Alliance's Named Executive Officers in 1996, as well as the
unexercised options to purchase the Alliance Common Stock granted under
Alliance's 1991 Stock Option Plan to Alliance's Named Executive Officers and
held by them as of December 31, 1996. The value of unexercised in-the-money
options as of the end of the fiscal year is based on the last reported sales
price of the Alliance Common Stock on the Nasdaq SmallCap Market on December
31, 1996 of $5.75 per share.
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS/SARS IN-THE MONEY OPTIONS/
ACQUIRED AT YEAR-END SARS AT FISCAL YEAR-END
NAME AND PRINCIPAL ON VALUE --------------------------- -------------------------
POSITION EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ -------- -------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard N. Zehner....... -- -- 243,750 116,250 $1,401,563 $668,438
Vincent S. Pino......... -- -- 31,256 93,769 179,722 539,172
Terrence M. White....... 45,000 $230,625 22,506 67,519 129,375 388,234
Terry A. Andrues........ -- -- 78,263 24,787 450,012 142,525
Jay A. Mericle.......... -- -- 78,263 24,787 450,012 142,525
</TABLE>
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
In addition to the annual plan described above under "--Executive
Compensation Plan," Alliance instituted a long-term executive incentive plan
("LTIP") in 1995 to provide future awards in cash or equivalent amounts of
Alliance common stock to key executives. The objective of the plan is to
advance the long-term interests of Alliance and its stockholders by providing
substantial incentives to meet or exceed certain cash flow
48
<PAGE>
goals necessary to ensure that Alliance would be able to service its long-term
obligations on a continuing basis, and that it would be able to pay certain
preferred stock dividends in cash, thereby avoiding the substantial dilution
to existing common stockholders if such dividends were paid in common stock
equivalents. As of January 2, 1997, Alliance had retired all of its Series A
6% Redeemable Preferred Stock (the "Series A Preferred Stock"), thereby fully
satisfying the second objective of the LTIP.
The following awards under the plan were earned by the Named Executive
Officers in 1996:
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAY-OUTS
UNDER NON-STOCK PRICE-BASED
NUMBER SHARES, PERFORMANCE OR PLAN(1)
UNITS OR OTHER PERIOD UNTIL ---------------------------
NAME OTHER RIGHTS MATURATION OR PAY-OUT THRESHOLD TARGET MAXIMUM
- ---- -------------- -------------------------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Richard N. Zehner....... $356,250 Four-Year Period Ending 12/31/98 $ 0 $356,250 $356,250
Vincent S. Pino......... 285,000 Four-Year Period Ending 12/31/98 0 285,000 285,000
Terrence M. White....... 213,750 Four-Year Period Ending 12/31/98 0 213,750 213,750
Terry A. Andrues........ 142,500 Four-Year Period Ending 12/31/98 0 142,500 142,500
Jay A. Mericle.......... 142,500 Four-Year Period Ending 12/31/98 0 142,500 142,500
</TABLE>
- --------
(1) Under the LTIP, amounts may be accrued with respect to each of the fiscal
years from 1995 to 1998 based upon two factors: (a) the extent to which
Alliance's actual earnings before depreciation, amortization, interest,
taxes and equipment charges (as more precisely defined in the LTIP,
"EBDIT") exceeds targeted EBDIT for such year and (b) the extent to which
Alliance pays dividends on its Series A Preferred Stock in cash for such
year (thereby avoiding the potential dilution to holders of common stock
from the payment of dividends in common stock equivalents). As noted
above, Alliance retired all of the Series A Preferred Stock as of January
2, 1997, thereby satisfying the Series A Preferred Stock dividend criteria
of the LTIP. Therefore, the cumulative amount of the dividend component of
the award was deemed earned and was accrued in fiscal 1996. Amounts
accrued under the LTIP are allocated to specified senior officers. Amounts
in the table reflect the potential pool amounts accrued in 1996 allocable
to each of Alliance's Named Executive Officers based upon the two criteria
summarized above as applied to fiscal 1996.
Pursuant to the terms of the LTIP, at the effective time of the
Recapitalization, Messrs. Zehner, Pino, White, Andrues and Mericle will be
paid $543,750, $435,000 and $326,250, $217,500 and $217,500, respectively
(before federal and state income taxes) earned by them pursuant to the LTIP
through the date of the Recapitalization.
EMPLOYMENT AND RELATED AGREEMENTS
Payments Under Existing Employment Agreements. Each of the Named Executive
Officers has an employment agreement with Alliance. The Recapitalization will
constitute a "change of control" for the purposes of such employment
agreements.
The employment agreements for Messrs. Andrues and Mericle provide that (i)
if Alliance takes actions which constitute Constructive Discharge (as defined
in such agreements) or terminates such executive without Just Cause (as
defined in such agreements) within one year before or one year after a change
of control or (ii) the executive quits for any reason within one year
following a change of control, then such executive shall be entitled to
receive: (x) a cash amount equal to the sum of the executive's salary at the
time of termination and the executive's target bonus for the year of
termination and (y) a continuation of benefits (including car allowance,
health insurance and 401(k) plan benefits) for a period of 12 months following
termination.
The existing employment agreements for Messrs. Zehner, Pino and White were
amended on May 15, 1997 to provide that upon the occurrence of a change in
control, such executives are entitled to receive (i) a cash amount equal to
2.5 times (two times in the case of Mr. White) the sum of the executive's
salary at the time of the change of control and the executive's target bonus
for the year in which the change of control occurs, and (ii) continuation of
benefits (including car allowance, health insurance and 401(k) plan benefits)
for a period of 30 months (24 months in the case of Mr. White) following the
change of control. Prior to the May 15, 1997 amendments, such payments would
have been made, and such benefits would have been provided, only if (i)
Alliance were to take actions which constitute constructive discharge (as
defined in such agreements) or to terminate such executive without just cause
(as defined in such agreements) within one year before or one year after the
change of control, or (ii) the executive were to quit for any reason within
one year following a change of control.
49
<PAGE>
Each of the employment agreements discussed above prohibit the provision of
payments and benefits to the extent such payments or benefits would cause
Alliance to be unable to deduct amounts pursuant to the provisions of Section
280G of the Internal Revenue Code of 1986, which imposes a limit on certain
payments made by a corporation that are contingent upon a change of control.
As a result of such limits, it is estimated that the amount of payments that
Alliance will make to Messrs. Zehner, Pino and White as a result of the
Recapitalization pursuant to the existing employment agreements (prior to
federal and state income taxes) will be reduced to approximately $850,000,
$500,000 and $420,000, respectively.
New Employment Agreements for Messrs. Zehner and Pino. Alliance has entered
into employment agreements dated as of July 23, 1997 with Richard N. Zehner to
act as Chief Executive Officer and with Vincent S. Pino to act as Chief
Operating Officer (the "New Employment Agreements"). Base compensation under
the New Employment Agreements is $315,000 per year for Mr. Zehner and $275,000
per year for Mr. Pino, subject in each case to increase by the Board of
Directors. In addition, Mr. Zehner and Mr. Pino are entitled to receive an
annual cash bonus based upon Alliance's achievement of certain operating
and/or financial goals, with an annual target bonus amount equal to a
specified percentage of their then current annual base salary (75% in the case
of Mr. Zehner and 60% in the case of Mr. Pino). In connection with the New
Employment Agreements, Mr. Zehner and Mr. Pino are entitled to receive 145,000
and 130,000 options, respectively, under the New Stock Option Plan.
The term of each New Employment Agreement is initially three years. After
the first year, the New Employment Agreements will have a term of two years,
with automatic extensions for additional three month periods if neither party
gives notice that the term will not be so extended. Alliance may terminate Mr.
Zehner's or Mr. Pino's employment at any time and for any reason and Mr.
Zehner and Mr. Pino may resign at any time and for any reason.
Agreements Not to Compete. Mr. Zehner and Mr. Pino have also entered into an
agreement not to compete with Alliance. Pursuant to such agreement, Mr. Zehner
and Mr. Pino have each agreed that they will not, prior to the later of five
years following the Recapitalization and two years after the date of their
termination, (i) engage in any Competitive Business in the United States or
(ii) compete or participate as an agent, consultant, advisor, representative,
owner, investor or otherwise in any enterprise engaged in a Competitive
Business in the United States. Ownership of less than 5% of a publicly-traded
entity engaged in a Competitive Business would not be a violation of the
covenant to compete. For these purposes, "Competitive Business" means any
imaging business or other business that becomes material to Alliance during
the term of Mr. Zehner's or Mr. Pino's employment.
In addition, prior to 24 months after the later of the date of his
termination or the date of ceasing to receive payments under the agreement not
to compete, Mr. Zehner and Mr. Pino, as the case may be, have each agreed not
to make any contact with any customer of Alliance with respect to the
provision of any service that is the same or substantially similar to any
service provided to such customer by Alliance. Furthermore, prior to 12 months
after the later of the date of their respective terminations of employment or
the date of ceasing to receive payments under the agreements not to compete,
Mr. Zehner and Mr. Pino, as the case may be, have each agreed not to solicit
or make any contact with any employee of Alliance with respect to any
employment, service or other business relationship. In consideration of the
non-competition and non-solicitation agreements of Mr. Zehner and Mr. Pino,
Alliance has agreed to make certain payments to Mr. Zehner and Mr. Pino
following the termination of their employment. However, in the event of a
termination with cause or a resignation without good reason (as defined in the
New Employment Agreements), Alliance will be under no obligation to make such
payments.
50
<PAGE>
PRINCIPAL STOCKHOLDERS
Immediately after the Transactions, Apollo will own approximately 84% of the
outstanding shares of common stock of the Company (the "Company Common Stock")
(approximately 74% on a fully diluted basis) and the BT Investor will own
approximately 6% of the outstanding shares of Company Common Stock
(approximately 5% on a fully diluted basis). In addition, immediately
following consummation of the Transactions, through a combination of (i) the
rollover of existing options to purchase shares of Company Common Stock and
(ii) the issuance of options pursuant to the Company's New Option Plan,
management will own in excess of 11% of the shares of Company Common Stock on
a fully diluted basis.
51
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At the effective time of the Recapitalization, Alliance will pay to Apollo
Management L.P. a fee of $2.5 million in connection with arranging the
transactions contemplated by the Recapitalization (including the financings
thereof). Thereafter, the Company will pay Apollo Management, L.P. an annual
management fee of $500,000 and will continue to receive financial advisory
services from Apollo Management L.P. on an ongoing basis, with compensation to
be determined. In connection with the Transactions, Apollo will purchase $14.1
million of the Company's Series F Preferred Stock and will receive a financing
fee of $564,000.
Pursuant to an engagement letter, Alliance will pay Salomon Brothers Inc
("Salomon") the following fees: (a) $100,000, which was earned upon Alliance's
execution of the Recapitalization Merger Agreement; plus (b) an additional fee
of $400,000, which was earned upon the initial submission of Salomon's
fairness opinion to the Board of Directors on July 22, 1997; plus (c) an
additional fee of $2.4 million, which is contingent upon the consummation of
the Recapitalization and payable at the closing thereof. In addition, Salomon
will be a lender under the Credit Agreement.
Smith Barney Inc. ("Smith Barney") acted as an advisor to an affiliate of
Apollo with respect to the Recapitalization of Alliance, for which Smith
Barney will receive a fee of $1.75 million.
The BT Investor, an affiliate of BT Alex. Brown Incorporated ("BT Alex.
Brown"), will invest approximately $2.7 million in the Company's Common Stock
concurrently with the consummation of the Transactions. Bankers Trust Company,
also an affiliate of BT Alex. Brown, will be an agent and lender under the
Credit Agreement. In connection with the Transactions, the BT Investor will
purchase $0.9 million of the Company's Series F Preferred Stock and will
receive a financing fee of $36,000.
For a description of certain management arrangements in connection with the
Transactions, see "Management--Employment and Related Agreements."
52
<PAGE>
DESCRIPTION OF THE CREDIT AGREEMENT
CREDIT AGREEMENT
General. Pursuant to a commitment letter dated as of November 10, 1997 from
Bankers Trust Company (the "Agent") to Apollo (the "Commitment Letter") and
subject to the negotiation, execution and delivery of definitive
documentation, the Agent has committed to lend to the Company (the "Loans"),
$50 million in the form of the Term Loan Facility and up to $75 million in the
form of the Revolving Loan Facility for an aggregate principal amount of up to
$125 million (the "Commitment").
Pursuant to the Commitment Letter, the Agent reserves the right to syndicate
all or a portion of the Commitment to one or more financial institutions
(including the Agent, each, a "Lender"), such institutions being subject to
the Company's approval. Upon the acceptance of the commitment of any Lender to
provide a portion of the Commitment, the Agent will be released from that
portion of the Commitment. In addition, the Agent agrees to serve as
administrative and syndication agent in connection with the Loans, as well as
fronting bank in connection with the letters of credit issued under the
Revolving Loan Facility.
The following terms and descriptions of the Loans are based upon the terms
set forth in the Commitment Letter and are subject to the final negotiation
and execution of the Credit Agreement and related documents. As a result, the
final terms of the Loans may vary from those set forth below.
Use of Proceeds; Maturity. The Loans are expected to be made available to
the Company to finance in part the Transactions and certain related costs and
expenses, and to refinance certain existing indebtedness of Alliance. The full
amount to be borrowed under the Term Loan Facility must be drawn in a single
drawing on the date the Term Loan Facility is closed, which is expected to be
the date on which the Transactions close (the "Closing Date"). The Revolving
Loan Facility is expected to be available at the Closing Date and thereafter
to finance (including through the making of revolving loans and the issuance
of letters of credit) working capital requirements and general corporate
purposes of the Company. The Term Loan Facility matures on the sixth
anniversary of the Closing Date. The Revolving Loan Facility will mature on
the fifth anniversary of the Closing Date. The Credit Agreement will require
the Company to reduce the commitments under the Revolving Loan Facility to
$37.5 million on the fourth anniversary of the Closing Date and to make annual
amortization payments with respect to the Term Loan Facility of $0.5 million
per year in the first five years and $47.5 million in the sixth year.
Prepayments. Loans are required to be prepaid with (a) 100% of the net
proceeds of all non-ordinary-course asset sales or other dispositions of the
property by the Company and its subsidiaries, subject to limited exceptions,
(b) 100% of the net proceeds of issuances of debt obligations and certain
preferred stock by the Company and its subsidiaries, subject to limited
exceptions, (c) 50% of the net proceeds from common equity and certain
preferred stock issuances by the Company and its subsidiaries, subject to
limited exceptions, (d) 75% of annual excess cash flow and (e) 100% of certain
insurance proceeds, subject to limited exceptions. Such mandatory prepayments
will be allocated as follows: first, to the Term Loan Facility and second, to
the Revolving Loan Facility.
Voluntary prepayments will be permitted in whole or in part, at the option
of the Company, in minimum principal amounts to be agreed upon, without
premium or penalty, subject to reimbursement of the Lender's re-deployment
costs in the case of prepayment of Reserve Adjusted Eurodollar Loans (as
defined in the Commitment Letter) other than on the last day of the relevant
interest period.
Interest and Fees. The interest rates under the Loans will be as follows:
(a) Term Loan Facility: At the option of the Company, (i) 1.50% in excess of
the higher of (A) 1/2 of 1% in excess of the Federal Reserve reported
certificate of deposit rate and (B) the rate that the Agent announces from
time to time as its prime lending rate, as in effect from time to time, and
(ii) 2.50% in excess of the Reserve Adjusted Eurodollar Rate, in each case,
subject to decreases based upon the Company's leverage ratio.
53
<PAGE>
(b) Revolving Loan Facility: At the option of the Company, (i) 1.25% in
excess of the higher of (A) 1/2 of 1% in excess of the Federal Reserve
reported certificate of deposit rate and (B) the rate that the Agent announces
from time to time as its prime lending rate, as in effect from time to time,
and (ii) 2.25% in excess of the Reserve Adjusted Eurodollar Rate, in each
case, subject to decreases based upon the Company's leverage ratio.
The Company may elect interest periods of 1, 2, 3 or 6 months for Reserve
Adjusted Eurodollar Loans. With respect to Reserve Adjusted Eurodollar Loans,
interest will be payable at the end of each interest period and, in any event,
at least every 3 months. With respect to Base Rate Loans (as defined in the
Commitment Letter), interest will be payable quarterly on the last business
day of each fiscal quarter. In each case, calculation of interest will be on
the basis of actual number of days elapsed in a year of 360 days.
The Commitment Letter provides for payment by the Company in respect of
outstanding letters of credit of (i) a per annum fee equal to the spread over
the Reserve Adjusted Eurodollar Rate for the Revolving Loan Facility from time
to time in effect, (ii) a fronting fee equal to 1/4 of 1% on the aggregate
outstanding stated amounts of such letters of credit, plus (iii) customary
administrative charges. The Company will also pay a commitment fee equal to
1/2 of 1% per annum on the undrawn portion of the available Commitment,
subject to decreases based on the Company's leverage ratio.
Collateral and Guarantees. The Loans will be guaranteed by all of the
Company's existing and future direct and indirect wholly owned domestic
subsidiaries. The Loans will be secured by a first priority lien in
substantially all of the properties and assets of the Company and its direct
and indirect wholly owned domestic subsidiaries, now owned or acquired later,
including a pledge of all capital stock and notes owned by the Company and its
subsidiaries; provided that, in certain cases, no more than 65% of the stock
of foreign subsidiaries of the Company shall be required to be pledged.
Representations and Warranties and Covenants. The Commitment Letter provides
that the Credit Agreement documentation will contain certain customary
representations and warranties by the Company. In addition, the Credit
Agreement is expected to contain customary covenants restricting the ability
of the Company to, among others (i) declare dividends or redeem or repurchase
capital stock; (ii) prepay, redeem or purchase debt; (iii) incur liens and
engage in sale-leaseback transactions; (iv) make loans and investments; (v)
incur additional indebtedness; (vi) amend or otherwise alter debt and other
material agreements; (vii) make capital expenditures; (viii) engage in
mergers, acquisitions and asset sales; (ix) transact with affiliates; and (x)
alter the business it conducts. It is also expected that the Company will be
required to indemnify the Agent and comply with specified financial covenants
and make certain customary affirmative covenants.
Events of Default. Events of default under the Credit Agreement are expected
to include (i) the Company's failure to pay principal or interest when due;
(ii) the Company's material breach of any representation or warranty contained
in the loan documents; (iii) covenant defaults; (iv) events of bankruptcy; and
(v) a change of control of the Company.
54
<PAGE>
DESCRIPTION OF THE NOTES
The Notes will be issued under an indenture (the "Indenture"), to be dated
as of , 1997 by and among Alliance Imaging, Inc., the Guarantors and IBJ
Schroder Bank & Trust Company, as Trustee (the "Trustee"). The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of
the Indenture (a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part), including the
definitions of certain terms therein and those terms made a part of the
Indenture by reference to the TIA as in effect on the date of the Indenture.
The definitions of certain capitalized terms used in the following summary are
set forth below under "--Certain Definitions." For purposes of this section,
references to the "Company" include only Alliance Imaging, Inc. and not its
Subsidiaries.
The Notes will be unsecured obligations of the Company, ranking subordinate
in right of payment to all Senior Debt of the Company.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be
presented for registration or transfer and exchange at the offices of the
Registrar, which initially will be the Trustee's corporate trust office. The
Company may change any Paying Agent and Registrar without notice to holders of
the Notes (the "Holders"). The Company will pay principal (and premium, if
any) on the Notes at the Trustee's corporate office in New York, New York. At
the Company's option, interest may be paid at the Trustee's corporate trust
office or by check mailed to the registered address of Holders.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $265.0 million,
$125.0 million of which will be issued in the Offering as Fixed Rate Notes and
$40.0 million of which will be issued in the Offering as Floating Rate Notes,
and all of which will mature on , 2005. Interest on the Notes will be
payable semi-annually in cash on each and (each an "Interest Payment
Date") commencing on , 1998, for the period commencing on and including
the immediately preceding Interest Payment Date and ending on and including
the day next preceding the Interest Payment Date (an "Interest Period"), with
the exception that the first Interest Period will commence on and include
December , 1997 and end on and include , 1998. Interest is payable to
the persons who are registered Holders at the close of business on the
and immediately preceding the applicable Interest Payment Date.
The Notes will not be entitled to the benefit of any mandatory sinking fund.
Fixed Rate Notes
Interest on the Fixed Rate Notes will accrue at the rate of % per annum.
Floating Rate Notes
The Floating Rate Notes will bear interest at a rate per annum, reset semi-
annually, equal to LIBOR (as defined) plus %, as determined by the
Calculation Agent (the "Calculation Agent"), which shall initially be the
Trustee.
"LIBOR", with respect to an Interest Period, will be the rate (expressed as
a percentage per annum) for deposits in United States dollars for a six-month
period beginning on the second London Banking Day (as defined) after the
Determination Date (as defined) that appears on Telerate Page 3750 (as
defined) as of 11:00 a.m., London time, on the Determination Date. If Telerate
Page 3750 does not include such a rate or is unavailable on a Determination
Date, LIBOR for the Interest Period shall be the arithmetic mean of the rates
(expressed as a percentage per annum) for deposits in a Representative Amount
(as defined) in United States
55
<PAGE>
dollars for a six-month period beginning on the second London Banking Day
after the Determination Date that appears on Reuters Screen LIBO Page (as
defined) as of 11:00 a.m., London time, on the Determination Date. If Reuters
Screen LIBO Page does not include two or more rates or is unavailable on a
Determination Date, the Calculation Agent will request the principal London
office of each of four major banks in the London interbank market, as selected
by the Calculation Agent, to provide such bank's offered quotation (expressed
as a percentage per annum), as of approximately 11:00 a.m., London time, on
such Determination Date, to prime banks in the London interbank market for
deposits in a Representative Amount in United States dollars for a six-month
period beginning on the second London Banking Day after the Determination
Date. If at least two such offered quotations are so provided, LIBOR for the
Interest Period will be the arithmetic mean of such quotations. If fewer than
two such quotations are so provided, the Calculation Agent will request each
of three major banks in New York City, as selected by the Calculation Agent,
to provide such bank's rate (expressed as a percentage per annum), as of
approximately 11:00 a.m., New York City time, on such Determination Date, for
loans in a Representative Amount in United States dollars to leading European
banks for a six-month period beginning on the second London Banking Day after
the Determination Date. If at least two such rates are so provided, LIBOR for
the Interest Period will be the arithmetic mean of such rates. If fewer than
two such rates are so provided, then LIBOR for the Interest Period will be
LIBOR in effect with respect to the immediately preceding Interest Period.
"Determination Date," with respect to an Interest Period, will be the second
London Banking Day preceding the first day of the Interest Period.
"London Banking Day" is any day in which dealings in United States dollars
are transacted or, with respect to any future date, are expected to be
transacted in the London interbank market.
"Representative Amount" means a principal amount of not less than U.S.
$1,000,000 for a single transaction in the relevant market at the relevant
time.
"Telerate Page 3750" means the display designated as "Page 3750" on the Dow
Jones Telerate Service (or such other page as may replace Page 3750 on that
service).
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on
The Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service).
The amount of interest for each day that the Floating Rate Notes are
outstanding (the "Daily Interest Amount") will be calculated by dividing the
interest rate in effect for such day by 360 and multiplying the result by the
principal amount of the Floating Rate Notes. The amount of interest to be paid
on the Floating Rate Notes for each Interest Period will be calculated by
adding the Daily Interest Amounts for each day in the Interest Period.
All percentages resulting from any of the above calculations will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all
dollar amounts used in or resulting from such calculations will be rounded to
the nearest cent (with one-half cent being rounded upwards).
The interest rate on the Floating Rate Notes will in no event be higher than
the maximum rate permitted by New York law as the same may be modified by
United States law of general application. Under current New York law, the
maximum rate of interest is 25% per annum on a simple interest basis. This
limit may not apply to Floating Rate Notes in which $2,500,000 or more has
been invested.
The Calculation Agent will, upon the request of the holder of any Floating
Rate Note, provide the interest rate then in effect with respect to the
Floating Rate Notes. All calculations made by the Calculation Agent in the
absence of manifest error will be conclusive for all purposes and binding on
the Company and the Holders of the Floating Rate Notes.
56
<PAGE>
REDEMPTION
Optional Redemption. The Fixed Rate Notes will be redeemable, at the
Company's option, in whole at any time or in part from time to time, on and
after , 2001, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the principal amount
thereof) if redeemed during the twelve-month period commencing on of the
year set forth below, plus, in each case, accrued and unpaid interest thereon,
if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001........................................................... %
2002........................................................... %
2003........................................................... %
2004........................................................... 100.000%
</TABLE>
The Floating Rate Notes will be redeemable, at the Company's option, in
whole at any time or in part from time to time, upon not less than 30 nor more
than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the twelve-
month period commencing on of the year set forth below, plus, in each
case, accrued and unpaid interest thereon, if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1997........................................................... %
1998........................................................... %
1999........................................................... %
2000........................................................... %
2001........................................................... %
2002 and thereafter............................................ 100.000%
</TABLE>
Optional Redemption of Fixed Rate Notes upon Equity Offerings. At any time,
or from time to time, on or prior to , 2000, the Company may, at its
option, use the net cash proceeds of one or more Equity Offerings (as defined
below) to redeem up to 40% in aggregate principal amount of the Fixed Rate
Notes at a redemption price equal to % of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the date of redemption;
provided, however, that after any such redemption the aggregate principal
amount of the Fixed Rate Notes outstanding must equal at least 60% of the
aggregate amount of the Fixed Rate Notes issued in the Offering plus any
additional Fixed Rate Notes issued after the Issue Date pursuant to the
Indenture. In order to effect the foregoing redemption with the net cash
proceeds of any Equity Offering, the Company shall make such redemption not
more than 120 days after the consummation of any such Equity Offering.
As used in the preceding paragraph, "Equity Offering" means a public or
private offering of Qualified Capital Stock (other than public offerings with
respect to the Company's Common Stock on Form S-8) of the Company for
aggregate net cash proceeds to the Company of at least $25.0 million.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not
then listed on a national securities exchange, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be
redeemed in part; provided, further, that if a partial redemption is made with
the net cash proceeds of an Equity Offering, selection of the Fixed Rate Notes
or portions thereof for redemption shall be made by the Trustee only on a pro
rata basis or on as nearly a pro rata basis as is practicable (subject to DTC
procedures), unless such method is otherwise prohibited. Notice of redemption
shall be mailed by first-class mail at least 30 but not more than 60 days
before the redemption
57
<PAGE>
date to each Holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the
Company has deposited with the Paying Agent funds in satisfaction of the
applicable redemption price pursuant to the Indenture.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt. Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash or Cash Equivalents, or such payment duly
provided for to the satisfaction of the holders of Senior Debt, before any
payment or distribution of any kind or character is made on account of any
Obligations on the Notes, or for the acquisition of any of the Notes for cash
or property or otherwise. If any default occurs and is continuing in the
payment when due, whether at maturity, upon any redemption, by declaration or
otherwise, of any principal of, interest on, unpaid drawings for letters of
credit issued in respect of, or regularly accruing fees with respect to, any
Senior Debt, no payment of any kind or character shall be made by or on behalf
of the Company or any other Person on its or their behalf with respect to any
Obligations on the Notes or to acquire any of the Notes for cash or property
or otherwise.
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Debt, as such event of default is defined in
the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Default Notice"), then, unless and until all events of default
have been cured or waived or have ceased to exist or the Trustee receives
notice from the Representative for the respective issue of Designated Senior
Debt terminating the Blockage Period (as defined below), during the 180 days
after the delivery of such Default Notice (the "Blockage Period"), neither the
Company nor any other Person on its behalf shall (x) make any payment of any
kind or character with respect to any Obligations on the Notes or (y) acquire
any of the Notes for cash or property or otherwise. Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 180
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced within any 360 consecutive days. No event of default
which existed or was continuing on the date of the commencement of any
Blockage Period with respect to the Designated Senior Debt shall be, or be
made, the basis for commencement of a second Blockage Period by the
Representative of such Designated Senior Debt whether or not within a period
of 360 consecutive days, unless such event of default shall have been cured or
waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period that, in either case, would give rise to an event of default
pursuant to any provisions under which an event of default previously existed
or was continuing shall constitute a new event of default for this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt,
including the Holders of the Notes, may recover less, ratably, than holders of
Senior Debt.
After giving effect to the Transactions, on a pro forma basis, at September
30, 1997, the Company would have had approximately $56.9 million of Senior
Debt outstanding.
58
<PAGE>
GUARANTEES
Each Guarantor unconditionally guarantees, on a senior subordinated basis,
jointly and severally, to each Holder and the Trustee, the full and prompt
performance of the Company's obligations under the Indenture and the Notes,
including the payment of principal of and interest on the Notes. The
Guarantees will be subordinated to Guarantor Senior Debt on the same basis as
the Notes are subordinated to Senior Debt. The obligations of each Guarantor
are limited to the maximum amount which, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indenture, will result in
the obligations of such Guarantor under the Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law. Each
Guarantor that makes a payment or distribution under a Guarantee shall be
entitled to a contribution from each other Guarantor in an amount pro rata,
based on the net assets of each Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor that is a Wholly Owned Restricted Subsidiary of
the Company without limitation, or with other Persons upon the terms and
conditions set forth in the Indenture. See "Certain Covenants--Merger,
Consolidation and Sale of Assets." In the event all of the Capital Stock of a
Guarantor is sold by the Company and the sale complies with the provisions set
forth in "Certain Covenants--Limitation on Asset Sales," the Guarantor's
Guarantee will be released.
Separate financial statements of the Guarantors are not included herein
because such Guarantors are jointly and severally liable with respect to the
Company's obligations pursuant to the Notes, and the aggregate net assets,
earnings and equity of the Guarantors and the Company are substantially
equivalent to the net assets, earnings and equity of the Company on a
consolidated basis. Accordingly, management has determined that separate
financial statements of each Guarantor would not provide any material
information to prospective purchasers of the Notes.
CHANGE OF CONTROL
The Indenture will provide that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest to the date of purchase.
The Indenture will provide that, prior to the mailing of the notice referred
to below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement and all other Senior Debt the terms of
which require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit Agreement
and all other such Senior Debt and to repay the Indebtedness owed to each
lender which has accepted such offer or (ii) obtain the requisite consents
under the Credit Agreement and all other Senior Debt to permit the repurchase
of the Notes as provided below. The Company shall first comply with the
covenant in the immediately preceding sentence before it shall be required to
repurchase Notes pursuant to the provisions described below. The Company's
failure to comply with the covenant described in the immediately preceding
sentence shall constitute an Event of Default described in clause (iii) and
not in clause (ii) under "Events of Default" below.
Within 30 days following the date upon which the Change of Control occurred,
the Company must send, by first class mail, a notice to each Holder, with a
copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date
such notice is mailed, other than as may be required by law (the "Change of
Control Payment Date"). Holders electing to have a Note purchased pursuant to
a Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect
59
<PAGE>
Purchase" on the reverse of the Note completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the third
business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not
have available funds to meet its purchase obligations. However, there can be
no assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company
and its Restricted Subsidiaries to incur additional Indebtedness, to grant
liens on its property, to make Restricted Payments and to make Asset Sales may
also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of
the Notes, and there can be no assurance that the Company or the acquiring
party will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage
any leveraged buyout of the Company or any of its Restricted Subsidiaries by
the management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
The definition of "Change of Control" includes, among other transactions, a
disposition of all or substantially all of the property and assets of the
Company. With respect to the disposition of property or assets, the phrase
"all or substantially all" as used in the Indenture varies according to the
facts and circumstances of the subject transaction, has no clearly established
meaning under New York law (which is the choice of law under the Indenture)
and is subject to judicial interpretation. Accordingly, in certain
circumstances, there may be a degree of uncertainty in ascertaining whether a
particular transaction would involve a disposition of "all or substantially
all" of the property or assets of a Person, and therefore it may be unclear
whether a Change of Control has occurred and whether the Company is required
to make an offer to repurchase the Notes as described above.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible
for payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any of the Guarantors may
incur Indebtedness (including, without limitation, Acquired Indebtedness) and
Restricted Subsidiaries of the Company may incur Acquired Indebtedness, in
each case if on the date of the incurrence of such Indebtedness, after giving
effect to the incurrence thereof, the
60
<PAGE>
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 1.75
to 1.0 if such incurrence is on or prior to December 31, 1999 and 2.0 to 1.0
if such incurrence is thereafter.
Limitation on Restricted Payments. The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's Capital Stock to holders of such Capital
Stock, (b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock, (c) make any principal
payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire
or retire for value, prior to any scheduled final maturity, scheduled
repayment or scheduled sinking fund payment, any Indebtedness of the Company
that is subordinate or junior in right of payment to the Notes or (d) make any
Investment (other than Permitted Investments) (each of the foregoing actions
set forth in clauses (a), (b), (c) and (d) being referred to as a "Restricted
Payment"), if at the time of such Restricted Payment or immediately after
giving effect thereto, (i) a Default or an Event of Default shall have
occurred and be continuing or (ii) the Company is not able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant or (iii) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Issue Date (the amount
expended for such purposes, if other than in cash, being the fair market value
of such property as determined reasonably and in good faith by the Board of
Directors of the Company) shall exceed the sum of: (w) 50% of the cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) of the Company earned subsequent to the Issue
Date and on or prior to the date the Restricted Payment occurs (the "Reference
Date") (treating such period as a single accounting period); plus (x) 100% of
the aggregate net cash proceeds received by the Company from any Person (other
than a Subsidiary of the Company) from the issuance and sale subsequent to the
Issue Date and on or prior to the Reference Date of Qualified Capital Stock of
the Company; plus (y) without duplication of any amounts included in clause
(iii)(x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock; plus (z) without duplication, the sum of (1) the aggregate amount
returned in cash on or with respect to Investments (other than Permitted
Investments) made subsequent to the Issue Date whether through interest
payments, principal payments, dividends or other distributions or payments,
(2) the net cash proceeds received by the Company or any Restricted Subsidiary
of the Company from the disposition of all or any portion of such Investments
(other than to a Subsidiary of the Company) and (3) upon redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary, the fair market value of
such Subsidiary; provided, however, that the sum of clauses (1), (2) and (3)
above shall not exceed the aggregate amount of all such Investments made
subsequent to the Issue Date.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) if no Default or Event of
Default shall have occurred and be continuing, the acquisition of any shares
of Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock of the
Company; (3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes either (i) solely in
exchange for shares of Qualified Capital Stock of the Company, or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of (A) shares of Qualified Capital
Stock of the Company or (B) Refinancing Indebtedness; (4) so long as no
Default or Event of Default shall have occurred and be continuing, repurchases
by the Company of Common Stock of the Company from employees of the Company or
any of its Subsidiaries or their authorized representatives upon the death,
disability or termination of employment of such employees, in an amount not to
exceed $5.0 million in any calendar year or $15.0 million in the aggregate;
(5) so long as no Default or Event of Default shall have occurred or be
continuing, the declaration and payment of dividends to holders of any class
or series of Preferred
61
<PAGE>
Stock (other than Disqualified Capital Stock) issued after the Issue Date,
provided that after giving effect to such issuance on a pro forma basis, the
Company would have had a Consolidated Fixed Charge Coverage Ratio of at least
1.75 to 1.00; (6) the payment of dividends on the Company's Common Stock,
following the first public offering of the Company's Common Stock after the
Issue Date, of up to 6% per annum of the net proceeds received by the Company
in such public offering, other than public offerings with respect to the
Company's Common Stock registered on Form S-8; (7) the repurchase, retirement
or other acquisition or retirement for value of equity interests of the
Company in existence on the Issue Date and from the persons holding such
equity interests on the Issue Date and which are not held by Apollo or any of
its Affiliates or members of management of the Company and its Subsidiaries on
the Issue Date (including any equity interests issued in respect of such
equity interests as a result of a stock split, recapitalization, merger,
combination, consolidation or similar transaction), provided, however, that
the Company shall be permitted to make Restricted Payments under this clause
only if after giving effect thereto, the Company would be permitted to incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the "Limitation on Incurrence of Additional Indebtedness"
covenant; (8) so long as no Default or Event of Default shall have occurred
and be continuing, the repurchase, retirement or other acquisition or
retirement for value of the Company's Series F Preferred Stock, provided that
after giving effect to such repurchase, retirement or other acquisition or
retirement for value on a pro forma basis, the Company would have had a
Consolidated Fixed Charge Coverage Ratio of at least 2.5 to 1.0; and (9) other
Restricted Payments in an aggregate amount not to exceed $5.0 million. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2), (4), (5), (6), (7),
(8) and (9) shall be included in such calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations
may be based upon the Company's latest available internal quarterly financial
statements.
Limitation on Asset Sales. The Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents and is
received at the time of such disposition; provided that the amount of (a) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes) that are
assumed by the transferee of any such assets, and (b) any notes or other
obligations received by the Company or any such Restricted Subsidiary from
such transferee that are converted by the Company or such Restricted
Subsidiary into cash within 180 days after such Asset Sale (to the extent of
the cash received) shall be deemed to be cash for the purposes of this
provision; and (iii) upon the consummation of an Asset Sale, the Company shall
apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 360 days of receipt thereof either (A) to
prepay any Senior Debt or Guarantor Senior Debt and, in the case of any Senior
Debt or Guarantor Senior Debt under any revolving credit facility, effect a
permanent reduction in the availability under such revolving credit facility,
(B) to make an Investment in properties and assets that replace the properties
and assets that were the subject of such Asset Sale or in properties and
assets that will be used in the business of the Company and its Restricted
Subsidiaries as existing on the Issue Date or in businesses the same, similar
or reasonably related thereto ("Replacement Assets"), or (C) a combination of
prepayment and investment permitted by the foregoing clauses (iii)(A) and
(iii)(B). On the 361st day after an Asset Sale or such earlier date, if any,
as the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as
set forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding
sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of
Net Cash Proceeds which have not been applied on or before such Net Proceeds
Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of
the next preceding sentence (each a "Net
62
<PAGE>
Proceeds Offer Amount") shall be applied by the Company or such Restricted
Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date
(the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on
a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount
at a price equal to 100% of the principal amount of the Notes to be purchased,
plus accrued and unpaid interest thereon, if any, to the date of purchase;
provided, however, that if at any time any non-cash consideration received by
the Company or any Restricted Subsidiary of the Company, as the case may be,
in connection with any Asset Sale is converted into or sold or otherwise
disposed of for cash (other than interest received with respect to any such
non-cash consideration), then such conversion or disposition shall be deemed
to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall
be applied in accordance with this covenant. The Company may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5.0 million resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5.0 million, shall be applied as required
pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold
the properties and assets of the Company and its Restricted Subsidiaries not
so transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to such deemed sale as if it were an
Asset Sale. In addition, the fair market value of such properties and assets
of the Company or its Restricted Subsidiaries deemed to be sold shall be
deemed to be Net Cash Proceeds for purposes of this covenant.
Each Net Proceeds Offer will be mailed to the record Holders as shown on the
register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly
tender Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of
tendering Holders will be purchased on a pro rata basis (based on amounts
tendered). A Net Proceeds Offer shall remain open for a period of 20 business
days or such longer period as may be required by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset
Sale" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or
make any other distributions on or in respect of its Capital Stock; (b) make
loans or advances or to pay any Indebtedness or other obligation owed to the
Company or any other Restricted Subsidiary of the Company; or (c) transfer any
of its property or assets to the Company or any other Restricted Subsidiary of
the Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture; (3) the Credit Agreement;
(4) customary non-assignment provisions of any contract or any lease governing
a leasehold interest of any Restricted Subsidiary of the Company; (5) any
instrument governing Acquired Indebtedness, which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person or the properties or assets of the Person so acquired;
(6) agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; (7) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions
of the nature discussed in clause (c) above on the property so acquired; (8)
contracts for the sale of assets, including, without limitation, customary
restrictions with respect to a Restricted Subsidiary of the Company pursuant
to an agreement that has been entered into for the sale or disposition of all
or substantially all
63
<PAGE>
of the Capital Stock or assets of such Restricted Subsidiary; (9) secured
Indebtedness otherwise permitted to be incurred pursuant to the covenants
described under "Limitation on Incurrence of Additional Indebtedness" and
"Limitation on Liens" that limit the right of the debtor to dispose of the
assets securing such Indebtedness; (10) customary provisions in joint venture
agreements and other similar agreements entered into in the ordinary course of
business; (11) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement referred to
in clauses (1) through (10) above; provided, however, that the provisions
relating to such encumbrance or restriction contained in any such Indebtedness
are no less favorable to the Company in any material respect as determined by
the Board of Directors of the Company in their reasonable and good faith
judgment than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clauses; or (12) an agreement
governing Indebtedness permitted to be incurred pursuant to the "Limitation on
Incurrence on Additional Indebtedness" covenant; provided that the provisions
relating to such encumbrance or restriction contained in such Indebtedness are
no less favorable to the Company in any material respect as determined by the
Board of Directors of the Company in their reasonable and good faith judgment
than the provisions contained in the Credit Agreement as in effect on the
Issue Date.
Limitation on Liens. The Company will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon any
property or assets of the Company or any of its Restricted Subsidiaries
whether owned on the Issue Date or acquired after the Issue Date, or any
proceeds therefrom, or assign or otherwise convey any right to receive income
or profits therefrom unless (i) in the case of Liens securing Indebtedness
that is expressly subordinate or junior in right of payment to the Notes, the
Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Liens and (ii) in all other cases, the Notes are
equally and ratably secured, except for (A) Liens existing as of the Issue
Date to the extent and in the manner such Liens are in effect on the Issue
Date; (B) Liens securing Senior Debt and Liens securing Guarantor Senior Debt;
(C) Liens securing the Notes and the Guarantees; (D) Liens of the Company or a
Wholly Owned Restricted Subsidiary of the Company on assets of any Restricted
Subsidiary of the Company; (E) Liens securing Refinancing Indebtedness which
is incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in accordance with
the provisions of the Indenture; provided, however, that such Liens (A) are no
less favorable to the Holders and are not more favorable to the lienholders
with respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (B) do not extend to or cover any property or assets of the
Company or any of its Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and (F) Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. The Company and the
Guarantors will not incur or suffer to exist Indebtedness that is senior in
right of payment to the Notes or the Guarantees, as the case may be, and
subordinate in right of payment by its terms to any other Indebtedness of the
Company or such Guarantor, as the case may be.
Merger, Consolidation and Sale of Assets. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or
into any Person, or sell, assign, transfer, lease, convey or otherwise dispose
of (or cause or permit any Restricted Subsidiary of the Company to sell,
assign, transfer, lease, convey or otherwise dispose of) all or substantially
all of the Company's assets (determined on a consolidated basis for the
Company and the Company's Restricted Subsidiaries) whether as an entirety or
substantially as an entirety to any Person unless (i) either (1) the Company
shall be the surviving or continuing corporation or (2) the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of the Company and
of the Company's Restricted Subsidiaries substantially as an entirety (the
"Surviving Entity") (x) shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the District of
Columbia and (y) shall expressly assume, by supplemental indenture (in form
and substance satisfactory to the Trustee), executed and delivered to the
Trustee, the due and punctual payment of the principal of, and premium, if
any, and interest on all of the Notes and the performance of every covenant of
the Notes and the Indenture on the part of the Company to be performed or
observed; (ii)
64
<PAGE>
immediately after giving effect to such transaction on a pro forma basis and
the assumption contemplated by clause (i)(2)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, shall be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant
to the "Limitation on Incurrence of Additional Indebtedness" covenant; (iii)
immediately before and immediately after giving effect to such transaction and
the assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred and any Lien granted in connection with
or in respect of the transaction), no Default or Event of Default shall have
occurred or be continuing; and (iv) the Company or the Surviving Entity, as
the case may be, shall have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of the Indenture
and that all conditions precedent in the Indenture relating to such
transaction have been satisfied.
Notwithstanding the foregoing, the merger of the Company with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
jurisdiction shall be permitted.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The Indenture will provide that upon any consolidation, combination or
merger or any transfer of all or substantially all of the assets of the
Company in accordance with the foregoing, in which the Company is not the
continuing corporation, the successor Person formed by such consolidation or
into which the Company is merged or to which such conveyance, lease or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture and the Notes with
the same effect as if such Surviving Entity had been named as such.
Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture in connection
with any transaction complying with the provisions of "--Limitation on Asset
Sales") will not, and the Company will not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Company or
any other Guarantor unless (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any State
thereof or the District of Columbia; (ii) such entity assumes by supplemental
indenture all of the obligations of the Guarantor on the Guarantee; (iii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (iv) immediately after
giving effect to such transaction and the use of any net proceeds therefrom on
a pro forma basis, the Company could satisfy the provisions of clause (ii) of
the first paragraph of this covenant. Any merger or consolidation of a
Guarantor with and into the Company (with the Company being the surviving
entity) or another Guarantor that is a Wholly Owned Restricted Subsidiary of
the Company need only comply with clause (iv) of the first paragraph of this
covenant.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), other
than (x) Affiliate Transactions permitted under paragraph (b) below and (y)
Affiliate Transactions on terms that are no less favorable than those that
might reasonably have been obtained in a comparable transaction at such time
on an arm's-length basis from a Person that is not an Affiliate of the Company
or such Restricted Subsidiary. All
65
<PAGE>
Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $1.0 million shall be
approved by the Board of Directors of the Company or such Restricted
Subsidiary, as the case may be, such approval to be evidenced by a Board
Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary of the Company enters into an Affiliate Transaction (or
a series of related Affiliate Transactions related to a common plan) that
involves an aggregate fair market value of more than $10.0 million, the
Company or such Restricted Subsidiary, as the case may be, shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view,
from an Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the Company's Board
of Directors; (ii) transactions exclusively between or among the Company and
any of its Wholly Owned Restricted Subsidiaries or exclusively between or
among such Wholly Owned Restricted Subsidiaries, provided such transactions
are not otherwise prohibited by the Indenture; (iii) any agreement as in
effect as of the Issue Date or any amendment thereto or any transaction
contemplated thereby (including pursuant to any amendment thereto) in any
replacement agreement thereto so long as any such amendment or replacement
agreement is not more disadvantageous to the Holders in any material respect
than the original agreement as in effect on the Issue Date; (iv) Restricted
Payments permitted by the Indenture; (v) transactions in which the Company or
any of its Restricted Subsidiaries, as the case may be, delivers to the
Trustee a letter from an Independent Financial Advisor stating that such
transaction is fair to the Company or such Restricted Subsidiary from a
financial point of view or meets the requirements of the first sentence of
paragraph (a) above; (vi) the existence of, or the performance by the Company
or any of its Restricted Subsidiaries of its obligations under the terms of,
any stockholders agreement (including any registration rights agreement or
purchase agreement related thereto) to which it is a party as of the Issue
Date and any similar agreements which it may enter into thereafter; provided,
however, that the existence of, or the performance by the Company or any of
its Restricted Subsidiaries of obligations under, any future amendment to any
such existing agreement or under any similar agreement entered into after that
Issue Date shall only be permitted by this clause to the extent that the terms
of any such, amendment or new agreement are not otherwise disadvantageous to
the holders of the Notes in any material respect; (vii) loans to employees of
the Company and its Subsidiaries which are approved by the Board of Directors
of the Company in good faith; (viii) the payment of all fees and expenses
related to the Transactions; and (ix) transactions with customers, clients,
suppliers, or purchasers or sellers of goods or services, in each case in the
ordinary course of business and otherwise in compliance with the terms of the
Indenture, which are fair to the Company or its Restricted Subsidiaries, in
the reasonable determination of the Board of Directors of the Company or the
senior management thereof, or are on terms at least as favorable as might
reasonably have been obtained at such time from an unaffiliated party.
Additional Subsidiary Guarantees. If the Company or any of its Restricted
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any domestic Restricted
Subsidiary that is not a Guarantor, or if the Company or any of its Restricted
Subsidiaries shall organize, acquire or otherwise invest in another domestic
Restricted Subsidiary having total equity value in excess of $1.0 million,
then such transferee or acquired or other Restricted Subsidiary shall (i)
execute and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Notes and
the Indenture on the terms set forth in the Indenture and (ii) deliver to the
Trustee an opinion of counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary. Thereafter, such Restricted Subsidiary shall be a
Guarantor for all purposes of the Indenture.
66
<PAGE>
Reports to Holders. The Indenture will provide that the Company will deliver
to the Trustee within 15 days after the filing of the same with the
Commission, copies of the quarterly and annual reports and of the information,
documents and other reports, if any, which the Company is required to file
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. The
Indenture further provides that, notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company will file with the Commission, to the extent permitted, and
provide the Trustee and Holders with such annual reports and such information,
documents and other reports specified in Sections 13 and 15(d) of the Exchange
Act. The Company will also comply with the other provisions of TIA (S) 314(a).
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered
pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(iii) a default in the observance or performance of any other covenant or
agreement contained in the Indenture which default continues for a period
of 30 days after the Company receives written notice specifying the default
(and demanding that such default be remedied) from the Trustee or the
Holders of at least 25% of the outstanding principal amount of the Notes;
(iv) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final stated maturity or which has
been accelerated, aggregates $5.0 million or more at any time;
(v) one or more judgments in an aggregate amount in excess of $5.0
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries; or
(vii) any of the Guarantees ceases to be in full force and effect or any
of the Guarantees is declared to be null and void and unenforceable or any
of the Guarantees is found to be invalid or any of the Guarantors denies
its liability under its Guarantee (other than by reason of release of a
Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding
Notes may declare the principal of and accrued interest on all the Notes to be
due and payable by notice in writing to the Company and the Trustee specifying
the respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Credit
Agreement, shall become immediately due and payable upon the first to occur of
an acceleration under the Credit Agreement or 5 business days after receipt by
the Company and the Representative under the Credit Agreement of such
Acceleration Notice. If an Event of Default specified in clause (vi) above
with respect to the Company occurs and is continuing, then all unpaid
principal of, and premium, if any, and accrued and unpaid interest on all of
the outstanding Notes shall ipso
67
<PAGE>
facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
The Indenture will provide that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding
paragraph, the Holders of a majority in principal amount of the Notes may
rescind and cancel such declaration and its consequences (i) if the rescission
would not conflict with any judgment or decree, (ii) if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration, (iii) to the extent
the payment of such interest is lawful, interest on overdue installments of
interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid, (iv) if the Company has paid the
Trustee its reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances and (v) in the event of the cure or
waiver of an Event of Default of the type described in clause (vi) of the
description above of Events of Default, the Trustee shall have received an
officers' certificate and an opinion of counsel that such Event of Default has
been cured or waived. No such rescission shall affect any subsequent Default
or impair any right consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest
on any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge
of any Default or Event of Default (provided that such officers shall provide
such certification at least annually whether or not they know of any Default
or Event of Default) that has occurred and, if applicable, describe such
Default or Event of Default and the status thereof.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee or stockholder of the Company, as such, shall
have any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to
the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that
the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, except for (i) the rights
of Holders to receive payments in respect of the principal of, premium, if
any, and interest on the Notes when such payments are due, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Trustee and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the
Indenture. In addition, the Company may, at its option and at any time, elect
to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
68
<PAGE>
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, non-callable U.S. government obligations,
or a combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants, to
pay the principal of, premium, if any, and interest on the Notes on the stated
date for payment thereof or on the applicable redemption date, as the case may
be; (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the date
of the Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance had
not occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under the Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others; (vii) the Company shall have delivered to
the Trustee an officers' certificate and an opinion of counsel, each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with; (viii) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that (A) the
trust funds will not be subject to any rights of holders of Senior Debt,
including, without limitation, those arising under the Indenture and (B)
assuming no intervening bankruptcy of the Company between the date of deposit
and the 91st day following the date of the deposit and that no Holder is an
insider of the Company, after the 91st day following the date of the deposit,
the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; and (ix) certain other customary conditions precedent are
satisfied. Notwithstanding the foregoing, the opinion of counsel required by
clause (ii) above need not be delivered if all Notes not theretofore delivered
to the Trustee for cancellation (x) have become due and payable, (y) will
become due and payable on the maturity date within one year or (z) are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration or transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to
69
<PAGE>
be deposited with the Trustee funds in an amount sufficient to pay and
discharge the entire Indebtedness on the Notes not theretofore delivered to
the Trustee for cancellation, for principal of, premium, if any, and interest
on the Notes to the date of deposit together with irrevocable instructions
from the Company directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be; (ii) the Company has
paid all other sums payable under the Indenture by the Company; and (iii) the
Company has delivered to the Trustee an officers' certificate and an opinion
of counsel stating that all conditions precedent under the Indenture relating
to the satisfaction and discharge of the Indenture have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Guarantors and the Trustee, without the
consent of the Holders, may amend the Indenture for certain specified
purposes, including curing ambiguities, defects or inconsistencies, so long as
such change does not, in the opinion of the Trustee, adversely affect the
rights of any of the Holders in any material respect. In formulating its
opinion on such matters, the Trustee will be entitled to rely on such evidence
as it deems appropriate, including, without limitation, solely on an opinion
of counsel. Other modifications and amendments of the Indenture may be made
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes issued under the Indenture, except that, without the consent
of each Holder affected thereby, no amendment may (i) reduce the amount of
Notes whose Holders must consent to an amendment; (ii) reduce the rate of or
change or have the effect of changing the time for payment of interest,
including defaulted interest, on any Notes; (iii) reduce the principal of or
change or have the effect of changing the fixed maturity of any Notes, or
change the date on which any Notes may be subject to redemption or repurchase,
or reduce the redemption or repurchase price therefor; (iv) make any Notes
payable in money other than that stated in the Notes; (v) make any change in
provisions of the Indenture protecting the right of each Holder to receive
payment of principal of and interest on such Note on or after the due date
thereof or to bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of Notes to waive Defaults or Events of Default;
(vi) amend, change or modify in any material respect the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control which has occurred or make and consummate a Net Proceeds
Offer with respect to any Asset Sale that has been consummated or modify any
of the provisions or definitions with respect thereto after a Change of
Control has occurred or the subject Asset Sale has been consummated; (vii)
modify or change any provision of the Indenture or the related definitions
affecting the subordination or ranking of the Notes or any Guarantee in a
manner which adversely affects the Holders; or (viii) release any Guarantor
from any of its obligations under its Guarantee or the Indenture otherwise
than in accordance with the terms of the Indenture.
GOVERNING LAW
The Indenture will provide that it, the Notes and the Guarantees will be
governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the law of another jurisdiction would be
required thereby.
THE TRUSTEE
The Indenture will provide that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it by the Indenture,
and use the same degree of care and skill in its exercise as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to
obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
TIA, the Trustee will be permitted to engage in other transactions; provided
that if the Trustee acquires any conflicting interest as described in the TIA,
it must eliminate such conflict or resign.
70
<PAGE>
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of the Company or at the time it merges or consolidates with the Company or
any of its Restricted Subsidiaries or assumed in connection with the
acquisition of assets from such Person and in each case not incurred by such
Person in connection with, or in anticipation or contemplation of, such Person
becoming a Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Asset Acquisition" means (a) an Investment by the Company or any Restricted
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other
than a Restricted Subsidiary of the Company) which constitute all or
substantially all of the assets of such Person or comprises any division or
line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted
Subsidiary of the Company; or (b) any other property or assets of the Company
or any Restricted Subsidiary of the Company other than in the ordinary course
of business; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $1.0
million, (ii) the sale or exchange of equipment in connection with the
purchase or other acquisition of other equipment, in each case used in the
business of the Company and its Restricted Subsidiaries and (iii) the sale,
lease, conveyance, disposition or other transfer of all or substantially all
of the assets of the Company as permitted under "Merger, Consolidation and
Sale of Assets."
"Board of Directors" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to
any Person that is not a corporation, any and all partnership or other equity
interests of such Person.
71
<PAGE>
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Services ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the date
of acquisition thereof combined capital and surplus of not less than $250.0
million; (v) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) above entered
into with any bank meeting the qualifications specified in clause (iv) above;
and (vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company to any Person or group of related Persons for purposes of Section
13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof
(whether or not otherwise in compliance with the provisions of the Indenture)
other than to the Permitted Holders; (ii) the approval by the holders of
Capital Stock of the Company of any plan or proposal for the liquidation or
dissolution of the Company (whether or not otherwise in compliance with the
provisions of the Indenture); (iii) any Person or Group (other than the
Permitted Holders) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing more than 50% of the
aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the replacement of a majority of the
Board of Directors of the Company over a two-year period from the directors
who constituted the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by the Permitted
Holders or a vote of at least a majority of the Board of Directors of the
Company then still in office who either were members of such Board of
Directors at the beginning of such period or whose election as a member of
such Board of Directors was previously so approved.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes
of such Person and its Restricted Subsidiaries paid or accrued in accordance
with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses), (B) Consolidated
Interest Expense and (C) Consolidated Non-cash Charges less any non-cash items
increasing Consolidated Net Income for such period, all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in
accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the two full
fiscal quarters (the "Two Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges
of such Person for the Two Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
incurrence or repayment of any Indebtedness of such Person or any of its
Restricted Subsidiaries (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), other than
the
72
<PAGE>
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Two Quarter Period or at any time subsequent to the last day of the
Two Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the
proceeds thereof), occurred on the first day of the Two Quarter Period and
(ii) any Asset Sales or Asset Acquisitions (including, without limitation, any
Asset Acquisition giving rise to the need to make such calculation as a result
of such Person or one of its Restricted Subsidiaries (including any Person who
becomes a Restricted Subsidiary as a result of the Asset Acquisition)
incurring, assuming or otherwise being liable for Acquired Indebtedness and
also including any Consolidated EBITDA (including any pro forma expense and
cost reductions and other operating improvements as determined in good faith
by a responsible financial or accounting officer of the Company) attributable
to the assets which are the subject of the Asset Acquisition or Asset Sale
during the Two Quarter Period) occurring during the Two Quarter Period or at
any time subsequent to the last day of the Two Quarter Period and on or prior
to the Transaction Date, as if such Asset Sale or Asset Acquisition (including
the incurrence, assumption or liability for any such Acquired Indebtedness)
occurred on the first day of the Two Quarter Period. If such Person or any of
its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of
a third Person, the preceding sentence shall give effect to the incurrence of
such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of
such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness. For purposes of calculating the Company's Consolidated Fixed
Charge Coverage Ratio, 50% of the Consolidated Fixed Charges and 50% of the
Consolidated EBITDA of any joint venture in which the Company or any of its
Restricted Subsidiaries has a 50% ownership interest shall be included in
determining the Company's Consolidated Fixed Charges and Consolidated EBITDA,
respectively. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(excluding amortization or write-off of deferred financing costs), plus (ii)
the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period
times (y) a fraction, the numerator of which is one and the denominator of
which is one minus the then current effective consolidated federal, state and
local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or write-
off of deferred financing costs (including the amortization of costs relating
to interest rate caps or other similar agreements), (b) the net costs under
Interest Swap Obligations, (c) all capitalized interest and (d) the interest
portion of any deferred payment obligation; and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP, minus interest
income for such period.
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
or losses from Asset Sales (without regard to the $1.0 million limitation set
forth in the definition thereof) or abandonments or reserves relating thereto,
(b) after-tax items classified as extraordinary or nonrecurring gains or
losses, (c) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a
73
<PAGE>
Restricted Subsidiary of the referent Person or is merged or consolidated with
the referent Person or any Restricted Subsidiary of the referent Person, (d)
the net income (but not loss) of any Restricted Subsidiary of the referent
Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by a
contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the
extent of cash dividends or distributions paid to the referent Person or to a
Wholly Owned Restricted Subsidiary of the referent Person by such Person, (f)
income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued), and (g) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings of the successor corporation
prior to such consolidation, merger or transfer of assets.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net
Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"Credit Agreement" means the Credit Agreement to be dated as of the Issue
Date, between the Company, the lenders party thereto in their capacities as
lenders thereunder and Bankers Trust Company, as administrative agent,
together with the related documents thereto (including, without limitation,
any guarantee agreements and security documents), in each case as such
agreements may be amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
(including increasing the amount of available borrowings thereunder (provided
that such increase in borrowings is permitted by the "Limitation on Incurrence
of Additional Indebtedness" covenant above) or adding Restricted Subsidiaries
of the Company as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt
which, at the time of determination, has an aggregate principal amount of at
least $25.0 million and is specifically designated in the instrument
evidencing such Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or
is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is redeemable at the sole option of the holder thereof on or prior to the
final maturity date of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of
the Board of Directors of the Company delivered to the Trustee.
74
<PAGE>
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Guarantor" means (i) each of Royal Medical Health Services, Inc., Alliance
Imaging of Ohio, Inc., Alliance Imaging of Michigan, Inc. and Alliance Imaging
of Central Georgia, Inc. and (ii) each of the Company's Restricted
Subsidiaries that in the future executes a supplemental indenture in which
such Restricted Subsidiary agrees to be bound by the terms of the Indenture as
a Guarantor; provided that any Person constituting a Guarantor as described
above shall cease to constitute a Guarantor when its respective Guarantee is
released in accordance with the terms of the Indenture.
"Guarantor Senior Debt" means with respect to any Guarantor, (i) the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of a Guarantor,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Guarantor. Without limiting the generality of
the foregoing, "Guarantor Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on, and all other amounts owing by any Guarantor
in respect of, (x) all monetary obligations of every nature of a Guarantor
under, or with respect to, the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities, (y) all
Interest Swap Obligations (including guarantees thereof) and (z) all
obligations under Currency Agreements (including guarantees thereof), in each
case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include (i)
any Indebtedness of such Guarantor to a Restricted Subsidiary of such
Guarantor, (ii) Indebtedness to, or guaranteed on behalf of, any director,
officer or employee of such Guarantor or any Restricted Subsidiary of such
Guarantor (including, without limitation, amounts owed for compensation),
(iii) Indebtedness to trade creditors and other amounts incurred in connection
with obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or
other taxes owed or owing by such Guarantor, (vi) that portion of any
Indebtedness incurred in violation of the Indenture provisions set forth under
"Limitation on Incurrence of Additional Indebtedness" (but, as to any such
obligation, no such violation shall be deemed to exist for purposes of this
clause (vi) if the holder(s) of such obligation or their representative and
the Trustee shall have received an officers' certificate of the Company to the
effect that the incurrence of such Indebtedness does not (or, in the case of
revolving credit Indebtedness, that the incurrence of the entire committed
amount thereof at the date on which the initial borrowing thereunder is made
would not) violate such provisions of the Indenture), (vii) Indebtedness
which, when incurred and without respect to any election under Section 1111(b)
of Title 11, United States Code, is without recourse to the Company or any
Guarantor and (viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of such Guarantor.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all
Obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all Obligations under any title
retention agreement (but excluding trade accounts payable and other accrued
liabilities arising in the ordinary course of business), (v) all Obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all Obligations of any other
75
<PAGE>
Person of the type referred to in clauses (i) through (vi) which are secured
by any lien on any property or asset of such Person, the amount of such
Obligation being deemed to be the lesser of the fair market value of such
property or asset or the amount of the Obligation so secured, (viii) all
Obligations under currency agreements and interest swap agreements of such
Person and (ix) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued dividends, if
any. For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Capital Stock
as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
to perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated
by applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit
by the Company and its Restricted Subsidiaries on commercially reasonable
terms in accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be. For purposes of the "Limitation on
Restricted Payments" covenant, (i) "Investment" shall include and be valued at
the fair market value of the net assets of any Restricted Subsidiary of the
Company at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary of the Company and shall exclude the fair market value
of the net assets of any Unrestricted Subsidiary of the Company at the time
that such Unrestricted Subsidiary is designated a Restricted Subsidiary of the
Company and (ii) the amount of any Investment shall be the original cost of
such Investment plus the cost of all additional Investments by the Company or
any of its Restricted Subsidiaries, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to
such Investment, reduced by the payment of dividends or distributions in
connection with such Investment or any other amounts received in respect of
such Investment; provided that no such payment of dividends or distributions
or receipt of any such other amounts shall reduce the amount of any Investment
if such payment of dividends or distributions or receipt of any such amounts
would be included in Consolidated Net Income. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Common Stock of
any direct or indirect Restricted Subsidiary of the Company such that, after
giving effect to any such sale or disposition, the Company no longer owns,
directly or indirectly, 100% of the outstanding Common Stock of such
Restricted Subsidiary, the Company shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the Common Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
76
<PAGE>
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement
to give any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of its Restricted Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking
into account any reduction in consolidated tax liability due to available tax
credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Permitted Holders" means Apollo Management, L.P. and its affiliates.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes and the Guarantees issued in the
Offering;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $125.0
million less the amount of all repayments and permanent commitment
reductions under the Credit Agreement with Net Cash Proceeds of Asset Sales
applied thereto as required by the "Limitation on Asset Sales" covenant;
(iii) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(iv) Interest Swap Obligations covering Indebtedness of the Company or
any of its Restricted Subsidiaries; provided, however, that such Interest
Swap Obligations are entered into to protect the Company and its Restricted
Subsidiaries from fluctuations in interest rates on Indebtedness incurred
in accordance with the Indenture to the extent the notional principal
amount of such Interest Swap Obligation does not, at the time of the
incurrence thereof, exceed the principal amount of the Indebtedness to
which such Interest Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in the case of
Currency Agreements which relate to Indebtedness, such Currency Agreements
do not increase the Indebtedness of the Company and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(vi) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Wholly Owned Restricted Subsidiary of the Company for so
long as such Indebtedness is held by the Company or a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Lien held
by a Person other than the Company or a Wholly Owned Restricted Subsidiary
of the Company; provided that if as of any date any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company owns or
holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;
77
<PAGE>
(vii) Indebtedness of the Company to a Wholly Owned Restricted Subsidiary
of the Company for so long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary of the Company and is subject to no Lien; provided
that (a) any Indebtedness of the Company to any Wholly Owned Restricted
Subsidiary of the Company is unsecured and subordinated, pursuant to a
written agreement, to the Company's obligations under the Indenture and the
Notes and (b) if as of any date any Person other than a Wholly Owned
Restricted Subsidiary of the Company owns or holds any such Indebtedness or
any Person holds a Lien in respect of such Indebtedness, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with self-
insurance or similar requirements in the ordinary course of business;
(x) Indebtedness represented by Capitalized Lease Obligations and
Purchase Money Indebtedness of the Company and its Restricted Subsidiaries
incurred in the ordinary course of business not to exceed $25.0 million at
any one time outstanding; provided that all or a portion of the $25.0
million permitted to be incurred under this clause (x) may, at the option
of the Company, be incurred under the Credit Agreement instead of pursuant
to Capitalized Lease Obligations or Purchase Money Indebtedness;
(xi) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary of the Company providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or a Subsidiary,
other than guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; provided, however, that (a) such Indebtedness
is not reflected on the balance sheet of the Company or any Restricted
Subsidiary of the Company (contingent obligations referred to in a footnote
to financial statements and not otherwise reflected on the balance sheet
will not be deemed to be reflected on such balance sheet for purposes of
this clause (a)) and (b) the maximum assumable liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds including
noncash proceeds (the fair market value of such noncash proceeds being
measured at the time it is received and without giving effect to any
subsequent changes in value) actually received by the Company and its
Restricted Subsidiaries in connection with such disposition;
(xii) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business;
(xiii) Refinancing Indebtedness; and
(xiv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $15.0 million
at any one time outstanding (which amount may, but need not, be incurred in
whole or in part under the Credit Agreement).
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company, provided that such Wholly Owned
Restricted Subsidiary of the Company is not restricted from making dividends
or similar distributions by contract, operation of law or otherwise; (ii)
Investments in the Company by any Restricted Subsidiary of the Company;
provided that any Indebtedness evidencing such Investment is unsecured and
subordinated, pursuant to a written agreement, to the Company's obligations
under the Notes and the Indenture; (iii) Investments in cash and Cash
Equivalents; (iv) loans and advances to employees and officers of the Company
and its Restricted Subsidiaries in the ordinary course of
78
<PAGE>
business for bona fide business purposes not to exceed $1.0 million at any one
time outstanding; (v) Currency Agreements and Interest Swap Obligations
entered into in the ordinary course of the Company's or its Restricted
Subsidiaries' businesses and otherwise in compliance with the Indenture; (vi)
additional Investments (including joint ventures) not to exceed $20.0 million
at any one time outstanding; (vii) Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors
or customers; (viii) Investments made by the Company or its Restricted
Subsidiaries as a result of consideration received in connection with an Asset
Sale made in compliance with the "Limitation on Asset Sales" covenant; and
(ix) Investments of a Person or any of its Subsidiaries existing at the time
such Person becomes a Restricted Subsidiary of the Company or at the time such
Person merges or consolidates with the Company or any of its Restricted
Subsidiaries, in either case in compliance with the Indenture; provided that
such Investments were not made by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
of the Company or such merger or consolidation.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or asset
which is not leased property subject to such Capitalized Lease Obligation;
(vii) Liens securing Capitalized Lease Obligations and Purchase Money
Indebtedness permitted pursuant to clause (x) of the definition of
"Permitted Indebtedness"; provided, however, that in the case of Purchase
Money Indebtedness (A) the Indebtedness shall not exceed the cost of such
property or assets and shall not be secured by any property or assets of
the Company or any Restricted Subsidiary of the Company other than the
property and assets so acquired or constructed and (B) the Lien securing
such Indebtedness shall be created within 180 days of such acquisition or
construction or, in the case of a refinancing of any Purchase Money
Indebtedness, within 180 days of such refinancing;
(viii) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
79
<PAGE>
(ix) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and set-
off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens in the ordinary course of business not exceeding $5.0 million
at any one time outstanding that (a) are not incurred in connection with
borrowing of money and (b) do not materially detract from the value of the
property or materially impair its use;
(xiii) Liens by reason of judgment or decree not otherwise resulting in
an Event of Default;
(xiv) Liens securing Indebtedness permitted to be incurred pursuant to
clause (xiv) of the definition of "Permitted Indebtedness";
(xv) Liens securing Indebtedness under Currency Agreements permitted
under the Indenture; and
(xvi) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the
Company or of any of its Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary of the Company and are no more favorable to the lienholders than
those securing the Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred or existing in
accordance with the "Limitation on Incurrence of Additional Indebtedness"
covenant (other than pursuant to clause (ii), (iv), (v), (vi), (vii), (viii),
(ix), (x), (xi), (xii) or (xiv) of the definition of Permitted Indebtedness),
in each case that does not (1) result in an increase in the aggregate
principal amount of Indebtedness of such Person as of the date of such
proposed Refinancing (plus the amount of any premium required to be paid under
the terms of the instrument governing such Indebtedness and plus the amount of
reasonable expenses incurred by the Company in connection with such
Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to
80
<PAGE>
Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; provided that
(x) if such Indebtedness being Refinanced is Indebtedness of the Company, then
such Refinancing Indebtedness shall be Indebtedness solely of the Company and
(y) if such Indebtedness being Refinanced is subordinate or junior to the
Notes, then such Refinancing Indebtedness shall be subordinate to the Notes at
least to the same extent and in the same manner as the Indebtedness being
Refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of such
property.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the
generality of the foregoing, "Senior Debt" shall also include the principal
of, premium, if any, interest (including any interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on, and all other amounts owing by the Company in
respect of, (x) all monetary obligations of every nature of the Company under
the Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit,
fees, expenses and indemnities, (y) all Interest Swap Obligations (including
guarantees thereof) and (z) all obligations under Currency Agreements
(including guarantees thereof), in each case whether outstanding on the Issue
Date or thereafter incurred. Notwithstanding the foregoing, "Senior Debt"
shall not include (i) any Indebtedness of the Company to a Subsidiary of the
Company, (ii) Indebtedness to, or guaranteed on behalf of, any director,
officer or employee of the Company or any Subsidiary of the Company
(including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or
other taxes owed or owing by the Company, (vi) that portion of any
Indebtedness incurred in violation of the Indenture provisions set forth under
"Limitation on Incurrence of Additional Indebtedness" (but, as to any such
obligation, no such violation shall be deemed to exist for purposes of this
clause (vi) if the holder(s) of such obligation or their representative and
the Trustee shall have received an officers' certificate of the Company to the
effect that the incurrence of such Indebtedness does not (or, in the case of
revolving credit Indebtedness, that the incurrence of the entire committed
amount thereof at the date on which the initial borrowing thereunder is made
would not) violate such provisions of the Indenture), (vii) Indebtedness
which, when incurred and without respect to any election under Section 1111(b)
of Title 11, United States Code, is without recourse to the Company and (viii)
any Indebtedness which is, by its express terms, subordinated in right of
payment to any other Indebtedness of the Company.
81
<PAGE>
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act.
"Subsidiary", with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, the Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided that (x) the Company
certifies to the Trustee that such designation complies with the "Limitation on
Restricted Payments" covenant and (y) each Subsidiary to be so designated and
each of its Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to
which the lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving
effect to such designation, the Company is able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
the "Limitation on Incurrence of Additional Indebtedness" covenant and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an officers' certificate certifying that such
designation complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than in the case of a foreign Restricted Subsidiary, directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law) are owned by such Person or any Wholly Owned
Restricted Subsidiary of such Person.
82
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the underwriting agreement
(the "Underwriting Agreement") among Alliance, the Guarantors and BT Alex.
Brown and Salomon (together, the "Underwriters"), the Underwriters have
severally agreed to purchase from Alliance, and Alliance has agreed to sell to
the Underwriters severally, the entire principal amount of the Notes offered
hereby.
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the Notes is subject to the approval of
certain legal matters by counsel and to various other conditions. The nature
of each Underwriter's obligation is such that each is committed to purchase
the aggregate principal amount of Notes set forth opposite its name if any
Notes are purchased.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
------------ ----------------
<S> <C>
BT Alex. Brown Incorporated................................. $
Salomon Brothers Inc .......................................
------------
Total..................................................... $165,000,000
============
</TABLE>
The Underwriters propose to offer the Notes directly to the public at the
public offering price set forth on the cover page hereof, and to certain
dealers at such price less a concession not in excess of % of the principal
amount of the Notes offered hereby. After the public offering of the Notes
offered hereby, the public offering price and other selling terms may be
changed.
Alliance does not intend to apply for listing of the Notes on a national
securities exchange. Alliance has been advised by the Underwriters that they
presently intend to make a market in the Notes, as permitted by applicable
laws and regulations. The Underwriters are not obligated, however, to make a
market in the Notes, and any such market making may be discontinued at any
time in the sole discretion of the Underwriters. There can be no assurance
that an active public market for the Notes will develop.
Alliance and the Guarantors have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act,
or to contribute to payments that the Underwriters may be required to make in
respect thereof.
Bankers Trust Company, an affiliate of BT Alex. Brown, will be an agent and
lender under the Credit Agreement. See "Description of the Credit Agreement."
The BT Investor, also an affiliate of BT Alex. Brown, will invest
approximately $3.6 million in the Company concurrently with the consummation
of the Transactions, and will receive a financing fee of $36,000 in connection
with the Company's issuance of Series F Preferred Stock. Salomon has acted as
financial advisor to Alliance in connection with the Recapitalization for
which it will receive certain fees and be reimbursed for certain of its
expenses. In addition, Salomon will be a lender under the Credit Agreement.
See "Certain Relationships and Related Transactions." Smith Barney acted as an
advisor to an affiliate of Apollo with respect to the Recapitalization of
Alliance, for which Smith Barney will receive a fee of $1.75 million.
In connection with the Offering, certain persons participating in the
Offering may engage in transactions that stabilize, maintain or otherwise
affect the price of the Notes. Specifically, the Underwriters may bid for and
purchase Notes in the open market to stabilize the price of the Notes. The
Underwriters may also overallot the Offering, creating a syndicate short
position, and may bid for and purchase Notes in the open market to cover the
syndicate short position. In addition, the Underwriters may bid for and
purchase the Notes in market making transactions and impose penalty bids.
These activities may stabilize or maintain the market price of the Notes above
market levels that may otherwise prevail. The Underwriters are not required to
engage in these activities, and may end these activities at any time.
83
<PAGE>
LEGAL MATTERS
The validity of the Notes offered hereby are being passed upon for the
Company by O'Sullivan Graev & Karabell, LLP, New York, New York. Certain legal
matters relating to the Notes are being passed upon for the Underwriters by
Cahill Gordon & Reindel (a partnership including a professional corporation),
New York, New York. Cahill Gordon & Reindel has represented in the past and
continues to represent Apollo and its affiliates with respect to various
matters.
EXPERTS
The consolidated financial statements of Alliance at December 31, 1995 and
1996, and for each of the three years in the period ended December 31, 1996,
appearing in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing
elsewhere herein, and are included in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
84
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors........................................... F-2
Consolidated Balance Sheets at December 31, 1995 and 1996 and at
September 30, 1997 (unaudited).......................................... F-3
Consolidated Statements of Operations for the years ended December 31,
1994, 1995
and 1996 and for the nine months ended September 30, 1996 and 1997
(unaudited)............................................................. F-4
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995
and 1996 and for the nine months ended September 30, 1996 and 1997
(unaudited)............................................................. F-5
Consolidated Statements of Preferred Stock, Common Stock, Additional
Paid-In Capital
and Accumulated Deficit for the years ended December 31, 1994, 1995 and
1996 and for the nine months ended September 30, 1997 (unaudited)....... F-7
Notes to Consolidated Financial Statements............................... F-8
Quarterly Financial Data (unaudited)..................................... F-20
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Alliance Imaging, Inc.
We have audited the accompanying consolidated balance sheets of Alliance
Imaging, Inc. as of December 31, 1995 and 1996 and the related consolidated
statements of operations, cash flows and preferred stock, common stock,
additional paid-in capital and accumulated deficit for each of the three years
in the period ended December 31, 1996. These financial statements are the
responsibility of Alliance's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Alliance Imaging, Inc. at December 31, 1995 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Orange County, California
February 21, 1997, except for Note 4, as to
which the date is March 26, 1997, and Note 9,
as to which the date is November 21, 1997
F-2
<PAGE>
ALLIANCE IMAGING, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30,
-------------------------- ------------
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments.... $ 11,128,000 $ 10,867,000 $ 10,557,000
Accounts receivable, net of
allowance for doubtful accounts of
$367,000 in 1995 and $513,000 in
1996 (Note 4)..................... 5,583,000 8,889,000 10,597,000
Prepaid expenses................... 369,000 710,000 997,000
Other receivables.................. 109,000 345,000 115,000
------------ ------------ ------------
Total current assets............. 17,189,000 20,811,000 22,266,000
Equipment, at cost (Note 4).......... 112,014,000 121,354,000 152,113,000
Less accumulated depreciation........ (52,368,000) (43,735,000) (52,511,000)
------------ ------------ ------------
59,646,000 77,619,000 99,602,000
Goodwill, net of accumulated amorti-
zation of $5,690,000 in 1995 and
$7,568,000 in 1996.................. 23,971,000 27,990,000 26,657,000
Deposits and other assets............ 2,521,000 2,090,000 3,098,000
------------ ------------ ------------
Total assets..................... $103,327,000 $128,510,000 $151,623,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................... $ 692,000 $ 1,765,000 $ 3,039,000
Accrued compensation and related
expenses.......................... 2,310,000 3,465,000 3,399,000
Other accrued liabilities.......... 5,025,000 6,341,000 11,268,000
Current portion of long-term debt
(Note 4).......................... 9,948,000 16,323,000 20,476,000
------------ ------------ ------------
Total current liabilities........ 17,975,000 27,894,000 38,182,000
Long-term debt, net of current por-
tion (Note 4)....................... 65,932,000 72,702,000 62,597,000
Other liabilities.................... 596,000 2,029,000 2,188,000
Deferred income taxes (Note 3)....... 790,000 4,831,000 4,831,000
------------ ------------ ------------
Total liabilities................ 85,293,000 107,456,000 107,798,000
Commitments (Note 6)
Redeemable preferred stock, Series A,
$.01 par value;
155,000 shares authorized; shares
issued and outstanding
(at liquidation and redemption
value)--155,000 in 1995
and 44,286 in 1996.................. 16,430,000 4,694,000 --
Convertible preferred stock, $.01 par
value; 22,000 shares authorized;
shares issued and outstanding 3,876
in 1996 and 18,000 at September 30,
1997 (Note 5)....................... -- 388,000 18,000,000
Common stock, $.01 par value;
25,000,000 shares authorized; shares
issued and outstanding--10,836,171
in 1995, 10,913,388 in 1996, and
11,023,344 at September 30, 1997
(Note 5)............................ 108,000 109,000 110,000
Additional paid-in capital........... 31,908,000 34,404,000 36,561,000
Accumulated deficit.................. (30,412,000) (18,541,000) (10,846,000)
------------ ------------ ------------
Total liabilities and
stockholders' equity............. $103,327,000 $128,510,000 $151,623,000
============ ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
ALLIANCE IMAGING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- -----------------------
1994 1995 1996 1996 1997
------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 57,875,000 $58,065,000 $68,482,000 $49,097,000 $62,285,000
Costs and expenses:
Operating expenses,
excluding
depreciation......... 31,093,000 28,342,000 32,344,000 23,549,000 27,499,000
Depreciation expense.. 13,424,000 12,202,000 12,737,000 9,170,000 11,222,000
Selling, general and
administrative
expenses............. 6,284,000 6,294,000 8,130,000 4,879,000 6,251,000
Amortization expense,
primarily goodwill... 943,000 1,345,000 1,952,000 1,309,000 1,767,000
Interest expense, net
of interest income of
$253,000 in 1994,
$437,000 in 1995 and
$502,000 in 1996..... 10,758,000 5,053,000 5,758,000 4,184,000 5,315,000
Asset impairment and
other special
charges.............. 13,339,000 -- -- -- --
------------ ----------- ----------- ----------- -----------
Total costs and
expenses........... 75,841,000 53,236,000 60,921,000 43,091,000 52,054,000
Income (loss) before
income taxes and
extraordinary gains.... (17,966,000) 4,829,000 7,561,000 6,006,000 10,231,000
Provision for income
taxes (Note 3)......... 1,100,000 727,000 1,060,000 955,000 3,480,000
------------ ----------- ----------- ----------- -----------
Income (loss) before
extraordinary gains.... (19,066,000) 4,102,000 6,501,000 5,051,000 6,751,000
Extraordinary gains, net
of taxes............... -- -- 6,300,000 -- 1,332,000
------------ ----------- ----------- ----------- -----------
Net income (loss)....... (19,066,000) 4,102,000 12,801,000 5,051,000 8,083,000
Less: Preferred stock
dividends.............. -- 930,000 943,000 706,000 --
Add: Excess of carrying
amount of preferred
stock repurchased over
consideration paid..... -- -- 1,764,000 -- 1,906,000
------------ ----------- ----------- ----------- -----------
Income (loss) applicable
to common stock........ $(19,066,000) $ 3,172,000 $13,622,000 $ 4,345,000 $ 9,989,000
============ =========== =========== =========== ===========
Weighted average common
and common equivalent
shares outstanding..... 7,124,000 11,158,000 11,494,000 11,463,000 14,028,000
============ =========== =========== =========== ===========
Earnings per share:
Income before items
below................ $ (2.68) $ 0.28 $ 0.48 $ 0.38 $ 0.48
Excess of carrying
amount of preferred
stock repurchased
over consideration
paid................. -- -- 0.15 -- 0.14
------------ ----------- ----------- ----------- -----------
Income (loss) before
extraordinary gains.. (2.68) 0.28 0.63 0.38 0.62
Extraordinary gains,
net of taxes......... -- -- 0.55 -- 0.09
------------ ----------- ----------- ----------- -----------
Income (loss) applicable
to common stock........ $ (2.68) $ 0.28 $ 1.18 $ 0.38 $ 0.71
============ =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
ALLIANCE IMAGING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- ------------------------
1994 1995 1996 1996 1997
------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....... $(19,066,000) $ 4,102,000 $12,801,000 $ 5,051,000 $ 8,083,000
Adjustments to reconcile
net income (loss) to
net cash
provided by operating
activities:
Extraordinary gains.... -- -- (6,300,000) -- (1,332,000)
Depreciation and amor-
tization.............. 14,367,000 13,547,000 14,689,000 10,479,000 12,989,000
Amortization of de-
ferred financing
charges............... 406,000 85,000 411,000 325,000 42,000
Distributions in excess
of (undistributed) in-
come of investee...... 69,000 (262,000) (91,000) (74,000) 85,000
Special charges........ 13,339,000 -- -- -- --
Increase (decrease) in
deferred income taxes. 665,000 (173,000) 1,041,000 -- --
Gain on disposal of
equipment............. -- (335,000) -- -- --
Gain on sale of invest-
ment.................. -- -- (750,000) -- --
Changes in operating as-
sets and liabilities:
Accounts receivable,
net................... (527,000) 1,261,000 (2,474,000) (1,696,000) (1,630,000)
Prepaid expenses....... 167,000 (78,000) (306,000) (566,000) (287,000)
Other receivables...... 151,000 (18,000) (49,000) 247,000 230,000
Other assets........... (71,000) (96,000) (72,000) (31,000) (1,302,000)
Accounts payable, ac-
crued compensation and
other accrued liabili-
ties.................. 3,344,000 (520,000) 2,115,000 2,496,000 5,053,000
Other liabilities...... (60,000) 530,000 716,000 1,117,000 159,000
------------ ----------- ----------- ----------- -----------
Net cash provided by op-
erating activities..... 12,784,000 18,043,000 21,731,000 17,348,000 22,090,000
INVESTING ACTIVITIES
Equipment purchases..... (20,093,000) (10,243,000) (26,510,000) (20,504,000) (32,940,000)
Decrease in deposits on
equipment.............. 232,000 448,000 264,000 1,297,000 150,000
Purchase of contracts
and related assets of
Mobile M.R. Venture,
Ltd.................... -- -- (455,000) (455,000) --
Purchase of common stock
of Royal Medical Health
Services, Inc. and
related assets, net of
cash acquired.......... -- -- (1,844,000) (1,844,000) --
Purchase of common stock
of Sun MRI Services,
Inc.,
net of cash acquired... -- -- (269,000) (269,000) --
Purchase of contracts
and related assets of
West Coast
Mobile Imaging......... -- -- (90,000) (90,000) --
Purchase of contracts
and related assets of
Advanced Healthcare
Diagnostic Service,
Inc.................... -- (412,000) -- -- --
Purchase of MRI
contracts and related
assets of Pacific
Medical Imaging, Inc... -- -- -- -- (756,000)
Proceeds from sale of
investment............. -- -- 968,000 -- --
Proceeds from sale of
equipment.............. -- 2,418,000 -- -- --
------------ ----------- ----------- ----------- -----------
Net cash used in invest-
ing activities......... (19,861,000) (7,789,000) (27,936,000) (21,865,000) (33,546,000)
</TABLE>
(continued)
F-5
<PAGE>
ALLIANCE IMAGING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- -------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
FINANCING ACTIVITIES
Payment of preferred
stock dividends........ $ -- $ -- $ (1,594,000) $ (930,000) $ (653,000)
Purchase of senior sub-
ordinated debentures... -- -- (5,714,000) -- (2,286,000)
Partial prepayment of
senior notes........... -- -- (3,537,000) -- --
Repurchase of Series A
preferred stock........ -- -- (6,307,000) -- (2,523,000)
Principal payments on
long-term debt......... (11,141,000) (12,763,000) (13,630,000) (9,567,000) (14,324,000)
Proceeds from long-term
debt................... 12,276,000 11,116,000 23,889,000 15,618,000 25,782,000
Proceeds from senior
bridge loan............ -- -- 12,872,000 -- 5,128,000
Increase in deferred fi-
nancing charges........ -- (54,000) (76,000) (76,000) --
Proceeds from exercise
of employee stock op-
tions.................. -- 97,000 41,000 21,000 22,000
------------ ------------ ------------ ----------- ------------
Net cash provided by fi-
nancing activities..... 1,135,000 (1,604,000) 5,944,000 5,066,000 11,146,000
------------ ------------ ------------ ----------- ------------
Net increase (decrease)
in cash and short-term
investments............ (5,942,000) 8,650,000 (261,000) 549,000 (310,000)
Cash and short-term in-
vestments at beginning
of year................ 8,420,000 2,478,000 11,128,000 11,128,000 10,867,000
------------ ------------ ------------ ----------- ------------
Cash and short-term in-
vestments at end of
year................... $ 2,478,000 $ 11,128,000 $ 10,867,000 $11,677,000 $ 10,557,000
============ ============ ============ =========== ============
<CAPTION>
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMA-
TION
<S> <C> <C> <C> <C> <C>
Cash paid during year
for:
Interest................ $ 8,690,000 $ 5,483,000 $ 5,562,000 $ 4,176,000 $ 5,562,000
Income Taxes............ 104,000 629,000 378,000 307,000 337,000
<CAPTION>
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net book value of assets
exchanged.............. 2,291,000 1,104,000 3,521,000 2,491,000 1,434,000
Issuance of common and
Series A preferred
stock in connection
with debt restructur-
ing.................... 18,125,000 -- -- -- --
Preferred Stock dividend
accrued................ -- 930,000 266,000 468,000 --
Excess of carrying
amount of preferred
stock repurchased over
consideration paid..... -- -- 1,764,000 -- 1,906,000
Conversion of senior
bridge loan into Series
D 4% convertible pre-
ferred stock........... -- -- -- -- 18,000,000
Conversion of Series C
5% convertible pre-
ferred stock into com-
mon stock.............. -- -- -- -- $ 388,000
</TABLE>
During the 1996 second quarter, Alliance purchased all of the common stock
of Royal Medical Health Services, Inc. and related assets for cash
consideration of approximately $1,914,000. In conjunction with the
acquisition, liabilities were assumed as follows:
<TABLE>
<CAPTION>
<S> <C>
Fair value of assets acquired.............................. $ 8,601,000
Cash paid for common stock................................. (1,914,000)
-----------
Liabilities assumed...................................... $ 6,687,000
===========
</TABLE>
As additional consideration for the above purchase, Alliance issued
convertible stock in the amount of $388,000 and common stock warrants valued
at $212,000. As a result of this transaction, Alliance recorded goodwill of
approximately $3,945,000.
During the 1996 third quarter, Alliance purchased all of the common stock of
Sun MRI Services, Inc. for cash consideration of approximately $391,000. In
connection with the acquisition, liabilities were assumed as follows:
<TABLE>
<CAPTION>
<S> <C>
Fair value of assets acquired............................... $1,602,000
Cash paid for common stock.................................. (391,000)
----------
Liabilities assumed....................................... $1,211,000
==========
</TABLE>
See accompanying notes.
F-6
<PAGE>
ALLIANCE IMAGING, INC.
CONSOLIDATED STATEMENTS OF PREFERRED STOCK,
COMMON STOCK, ADDITIONAL PAID-IN-CAPITAL
AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
SERIES C AND D
SERIES A REDEEMABLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------------- ------------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
-------- ------------ ------ ----------- ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... -- $ -- -- $ -- 7,114,371 $ 71,000 $29,356,000 $(14,518,000)
Issuance of common and
Series A preferred
stock in connection
with debt restructuring
(Note 5)............... 155,000 15,500,000 -- -- 3,500,000 35,000 2,457,000 --
Net loss for year ended
December 31, 1994...... -- -- -- -- -- -- -- (19,066,000)
-------- ------------ ------ ----------- ---------- -------- ----------- ------------
Balance at December 31,
1994................... 155,000 15,500,000 -- -- 10,614,371 106,000 31,813,000 (33,584,000)
Exercise of common stock
options................ -- -- -- -- 221,800 2,000 95,000 --
Preferred stock divi-
dends.................. -- 930,000 -- -- -- -- -- (930,000)
Net income for year
ended December 31,
1995................... -- -- -- -- -- -- -- 4,102,000
-------- ------------ ------ ----------- ---------- -------- ----------- ------------
Balance at December 31,
1995................... 155,000 16,430,000 -- -- 10,836,171 108,000 31,908,000 (30,412,000)
Payment of 1995 pre-
ferred stock dividends. -- (930,000) -- -- -- -- -- --
Exercise of common stock
options................ -- -- -- -- 77,217 1,000 39,000 --
Issuance of common stock
warrants in connection
with senior and subor-
dinated debt amendment. -- -- -- -- -- -- 259,000 --
Issuance of common stock
warrants in connection
with transfer and
amendment of senior
notes.................. -- -- -- -- -- -- 222,000 --
Issuance of Series C
preferred stock in
connection with
acquisition of Royal
Medical Health
Services, Inc.......... -- -- 3,876 388,000 -- -- -- --
Issuance of common stock
warrants in connection
with acquisition of
Royal Medical Health
Services, Inc.......... -- -- -- -- -- -- 212,000 --
Preferred stock divi-
dends.................. -- 930,000 -- -- -- -- -- (930,000)
Payment of 1996 pre-
ferred stock dividends. -- (664,000) -- -- -- -- -- --
Repurchase of Series A
preferred stock........ (110,714) (11,072,000) -- -- -- -- 1,764,000 --
Net income for year
ended December 31,
1996................... -- -- -- -- -- -- -- 12,801,000
-------- ------------ ------ ----------- ---------- -------- ----------- ------------
Balance at December 31,
1996................... 44,286 4,694,000 3,876 388,000 10,913,388 109,000 34,404,000 (18,541,000)
Exercise of common stock
options (unaudited).... -- -- -- -- 29,750 -- 22,000 --
Repurchase of Series A
redeemable preferred
stock (unaudited)...... (44,286) (4,694,000) -- -- -- -- 1,906,000 --
Transaction costs asso-
ciated with conversion
of senior bridge loan
into Series D preferred
stock (unaudited)...... -- -- -- -- -- -- (160,000) --
Conversion of senior
bridge loan into Series
D preferred stock (un-
audited)............... -- -- 18,000 18,000,000 -- -- -- --
Series C preferred stock
dividend (unaudited)... -- -- -- -- -- -- -- (16,000)
Series D preferred stock
dividend (unaudited)... -- -- -- -- -- -- -- (372,000)
Conversion of Series C
preferred stock into
common stock (unau-
dited)................. -- -- (3,876) (388,000) 80,206 1,000 389,000 --
Net income for the nine
months ended September
30, 1997 (unaudited)... -- -- -- -- -- -- -- 8,083,000
-------- ------------ ------ ----------- ---------- -------- ----------- ------------
Balance at September 30,
1997 (unaudited)....... -- $ -- 18,000 $18,000,000 11,023,344 $110,000 $36,561,000 $(10,846,000)
======== ============ ====== =========== ========== ======== =========== ============
</TABLE>
See accompanying notes.
F-7
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
1. DESCRIPTION OF ALLIANCE AND BASIS OF FINANCIAL STATEMENT PRESENTATION
DESCRIPTION OF ALLIANCE--Alliance Imaging, Inc. (Alliance) provides
outsourced radiology services and high technology diagnostic imaging systems
and related technical support services, as well as management and information
services, to hospitals and other healthcare providers. Diagnostic imaging
services are provided on both a mobile, shared-user basis as well as on a
full-time basis to single customers. Alliance operates entirely within the
United States and is one of the largest providers of magnetic resonance
imaging (MRI) and computed tomography (CT) services in the country. The
equipment used by Alliance is sophisticated and subject to accelerated
obsolescence in the event of significant technological change.
BASIS OF FINANCIAL STATEMENT PRESENTATION--The accompanying consolidated
financial statements include the accounts of Alliance and its consolidated
subsidiaries. The accompanying unaudited consolidated financial statements
have been prepared by Alliance in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities
and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Alliance, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended September 30, 1997 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1997.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
DEBT RESTRUCTURING--Effective December 31, 1994, Alliance completed a
comprehensive debt restructuring with the holders of its senior notes and
senior subordinated debentures. The restructuring included a reduction in
interest rates, an exchange of a portion of the debentures for issuance of
redeemable preferred and common stock and the extension of the repayment terms
on all of the remaining debt. These transactions were accounted for as a
troubled debt restructuring. Supplemental loss per common share for the year
ended December 31, 1994, based on historical loss per share adjusted to give
effect to the issuance of common shares in exchange for debt in the debt
restructuring and a reduction of related interest expense assuming the
exchange had occurred on January 1, 1994, is ($1.77) based on 10,614,000
weighted average common shares outstanding.
SPECIAL CHARGES--During the fourth quarter of 1994, Alliance recorded
special charges totaling $13,339,000 related to an equipment exchange
transaction, the impairment of certain equipment, debt restructuring and
employee severances. Alliance entered into an agreement with one of its major
equipment vendors to exchange several older MRI scanners for more
technologically advanced scanners which had been refurbished. The fair value
of the assets received, net of related debt incurred, was less than the net
book value of the assets exchanged, resulting in a non-cash pre-tax charge of
$2,156,000. Alliance also evaluated the carrying values of all of its
remaining older mid-field mobile MRI scanners. An impairment analysis of these
scanners resulted in an $8,670,000 non-cash pre-tax charge to reduce the net
book values to their estimated current market value. Alliance then identified
assets to be held for sale or other disposition and recorded a non-cash pre-
tax charge of $1,831,000 to write these assets down to their estimated net
realizable value on disposition. In addition, Alliance recorded pre-tax
special charges of $440,000 related to debt restructuring and $242,000 for
employee severances.
F-8
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND SHORT-TERM INVESTMENTS--Alliance considers short-term investments
with original maturities of three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE--Alliance provides shared and single-user diagnostic
imaging equipment and technical support services to the healthcare industry
and directly to patients on an outpatient basis. Substantially all of
Alliance's accounts receivable are due from hospitals, other healthcare
providers and health insurance providers located throughout the United States.
Services are generally provided pursuant to long-term contracts and directly
to patients, and generally collateral is not required. Receivables generally
are collected within industry norms for third-party payers. Credit losses are
provided for in the consolidated financial statements.
EQUIPMENT--Equipment is stated at cost and is generally depreciated using
the straight-line method over an initial estimated life of three to eight
years to an estimated residual value, generally approximating between five and
20 percent of original cost. If Alliance continues to operate the equipment
beyond its initial estimated life, the residual value is then depreciated to a
nominal salvage value over three years.
Routine maintenance and repairs are charged to expense as incurred. Major
repairs and purchased software and hardware upgrades, which extend the life or
add value to the equipment, are capitalized and depreciated over the remaining
useful life.
With the exception of a small amount of office furniture and equipment,
substantially all of the property owned by Alliance relates to diagnostic
imaging equipment, tractors and trailers used in the business.
GOODWILL--Alliance amortizes goodwill over a period of one to 25 years. For
acquired entities, the amortization period selected is primarily based upon
the estimated life of the customer contracts, including expected renewals, and
related other assets acquired, not to exceed 20 years. The Financial
Accounting Standards Board (FASB) issued Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of", in March 1995. Statement 121 requires long-lived assets and certain
intangibles held and used by Alliance to be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The recoverability test is to be performed at
the lowest level at which undiscounted net cash flows can be directly
attributable to long-lived assets. Alliance adopted Statement 121 in the first
quarter of 1996 with no material effect on Alliance's financial statements.
REVENUE RECOGNITION--The majority of Alliance's revenues are derived
directly from healthcare providers. To a lesser extent, revenues are generated
from direct billings to patients or their medical payers which are recorded
net of contractual discounts and other arrangements for providing services at
less than established patient billing rates. Net revenues from direct patient
billing amounted to approximately 13%, 10% and 8% of revenues in the years
ended December 31, 1994, 1995 and 1996, respectively. No single customer
accounted for 3% or more of consolidated revenues in each of the three years
in the period ended December 31, 1996. All revenues are recognized at the time
the service is performed.
INCOME TAXES--Alliance calculates deferred taxes and related income tax
expense using the liability method. This method determines deferred taxes by
applying the current tax rate to the cumulative temporary differences between
recorded carrying amounts and the corresponding tax basis of assets and
liabilities. A
F-9
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
valuation allowance is established for deferred tax assets unless their
realization is considered more likely than not. Alliance's provision for
income taxes is the sum of the change in the balance of deferred taxes between
the beginning and the end of the period plus income taxes currently payable.
INVESTMENT TAX CREDITS--Alliance accounts for investment tax credits under
the flow through method.
FAIR VALUES OF FINANCIAL INSTRUMENTS--FASB Statement No. 107, "Disclosures
about Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. In that regard, the derived fair
value estimated cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in immediate settlement of the
instrument. Statement 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value
of Alliance.
The following methods and assumptions were used by Alliance in estimating
its fair value disclosures for financial instruments:
Cash and short-term investments--The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Long-term debt--The fair values of Alliance's long-term debt are estimated
using discounted cash flow analyses, based on Alliance's current incremental
rates for similar types of borrowing arrangements.
The carrying amounts and estimated fair values of Alliance's financial
instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1996
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and short-term invest-
ments........................ $11,128,000 $11,128,000 $10,867,000 $10,867,000
Long-term debt................ 75,880,000 61,500,000 89,025,000 84,150,000
Redeemable preferred stock.... 16,430,000 (See Below) 4,694,000 2,788,000
</TABLE>
As more fully discussed in Note 4, Alliance has repurchased all of its
redeemable preferred stock. Alliance paid approximately $2,788,000 to retire
the December 31, 1996 balance and consequently believes $2,788,000 reasonably
approximates the fair value of its redeemable preferred stock balance at
December 31, 1996. The original fair value of Alliance's redeemable preferred
stock of $15,500,000 was determined by independent valuation consultants as of
December 31, 1994. Although it was not practicable to reevaluate the estimated
fair value of the preferred stock as of December 31, 1995 because of the lack
of a quoted market price and the inability to estimate fair value without
incurring excessive costs, Alliance believes the $16,430,000 carrying amount
at December 31, 1995, which represents the original fair value of the
preferred stock increased for the 1995 cumulative dividend, reasonably
approximates its fair value at that date.
F-10
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
EARNINGS PER COMMON SHARE--Earnings per common share have been computed
based on the weighted average number of shares outstanding during each period
plus the weighted average number of common equivalent shares outstanding that
are determined by the assumed exercise of dilutive stock options and warrants
less the number of treasury shares assumed to be purchased from the proceeds
using the average market price of Alliance's common stock. For the nine month
period ended September 30, 1997 common equivalent shares also include the
assumed conversion of the Series D convertible preferred stock into common
shares. Supplemental earnings per share for the nine months ended September
30, 1997 based on historical earnings per share adjusted assuming the
conversion of the senior bridge loan into Series D convertible preferred stock
had occurred on January 1, 1997 is $0.47 per share. This calculation ignores
amounts reported in the 1997 historical results as gain arising from the
repurchase of the senior subordinated debentures and as the earnings per share
benefit arising from the excess of carrying value of the preferred stock
repurchased over the consideration paid. Therefore, this supplemental earnings
per share calculation is the most comparable to the $0.48 per share "income
before items below" reported in Alliance's nine months ended September 30,
1997 historical results of operations. In February 1997, the FASB issued
Statement No. 128, "Earnings per Share", which is required to be adopted on
December 31, 1997. At that time, Alliance will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating basic earnings per share,
the dilutive effect of stock options, warrants and the Series D convertible
preferred stock will be excluded. The impact is expected to result in an
increase to basic earnings per share for the nine months ended September 30,
1996 and 1997 of $0.02 and $0.10 per share, respectively.
3. INCOME TAXES
The provision for income taxes shown in the consolidated statements of
operations consists of the following:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal.............................. $ -- $ 960,000 $ 2,958,000
State................................ 120,000 970,000 735,000
---------- ----------- -----------
120,000 1,930,000 3,693,000
Utilization of net operating loss car-
ryovers............................... -- (1,029,000) (2,649,000)
---------- ----------- -----------
120,000 901,000 1,044,000
Deferred:
Federal.............................. 181,000 (181,000) --
State................................ 799,000 7,000 731,000
---------- ----------- -----------
980,000 (174,000) 731,000
---------- ----------- -----------
$1,100,000 $ 727,000 $ 1,775,000
========== =========== ===========
</TABLE>
F-11
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
The provision for income taxes applicable to income before extraordinary
gains and attributed to the extraordinary gains is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- -------- ----------
<S> <C> <C> <C>
Provision for taxes on income before extraordi-
nary gains:
Current...................................... $ 120,000 $901,000 $ 329,000
Deferred..................................... 980,000 (174,000) 731,000
---------- -------- ----------
Total provision for taxes on income before ex-
traordinary gains............................. 1,100,000 727,000 1,060,000
Provision for taxes on extraordinary gains
(current)..................................... -- -- 715,000
---------- -------- ----------
$1,100,000 $727,000 $1,775,000
========== ======== ==========
</TABLE>
Significant components of Alliance's deferred tax assets and (liabilities)
at December 31 are as follows:
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Deferred Tax Liabilities:
Equipment basis differences......................... $(10,738,000) $(12,981,000)
Cancellation of indebtedness........................ -- (2,258,000)
------------ ------------
Total deferred tax liabilities.................... (10,738,000) (15,239,000)
Deferred Tax Assets:
Net operating losses................................ 12,549,000 9,900,000
Cancellation of indebtedness........................ 3,265,000 --
Accounts receivable................................. 266,000 266,000
Basis differences associated with other assets...... 1,015,000 2,105,000
Other............................................... 1,174,000 330,000
------------ ------------
Total deferred tax assets......................... 18,269,000 12,601,000
Valuation allowance................................. (8,631,000) (2,193,000)
------------ ------------
Net deferred tax assets........................... 9,638,000 10,408,000
------------ ------------
Net deferred taxes.................................. (1,100,000) (4,831,000)
Current deferred tax liability...................... 310,000 --
------------ ------------
Noncurrent deferred tax liability................... $ (790,000) $ (4,831,000)
============ ============
</TABLE>
The net change in Alliance's valuation allowance on deferred tax assets
during the year ended December 31, 1996 totaled $4,664,000 and $1,774,000 for
federal and state purposes, respectively.
At December 31, 1996, for federal regular income tax purposes, Alliance had
approximately $26,400,000 of operating loss carryovers expiring through 2006.
Due to a change in ownership in November 1991, utilization of $19,700,000 of
these net operating losses is subject to an annual limitation of approximately
$2,200,000. Any unutilized annual limitation may be carried forward to future
years. The annual limitation may be increased if built-in gains which existed
on the date of the change in ownership are recognized by sale or other
disposal of equipment. As a result of these limitations, Alliance has
approximately $6,700,000 of operating loss carryovers available in 1997 for
federal regular income tax purposes. Future changes in the ownership of
Alliance could result in additional limitations on the utilization of its
operating loss carryovers.
F-12
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
A reconciliation of the expected total provision for income taxes, computed
using the federal statutory rate on income before extraordinary gains, is as
follows:
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Computed expected provision
(benefit).......................... $(6,288,000) $ 1,690,000 $ 2,646,000
State income taxes, net of federal
benefit............................ 919,000 313,000 572,000
Amortization of goodwill............ 310,000 458,000 487,000
Alternative minimum tax............. 181,000 34,000 182,000
Increase (decrease) in valuation
allowance on federal deferred
tax assets......................... 5,936,000 (1,710,000) (2,798,000)
Other............................... 42,000 (58,000) (29,000)
----------- ----------- -----------
$ 1,100,000 $ 727,000 $ 1,060,000
=========== =========== ===========
4. INDEBTEDNESS
Long-term debt consisted of the following at December 31:
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C> <C>
Obligations to lending institutions, secured by
equipment, due in monthly installments through
December 2001 with weighted average interest
rates of 9.62% and 9.77% at December 31, 1995
and 1996, respectively......................... $32,547,000 $51,695,000
Senior notes, secured by equipment (see below).. 26,700,000 19,866,000
Senior bridge loan, due March 31, 1997 if not
converted into preferred stock (see below),
interest at 10% payable at maturity............ -- 12,872,000
Senior subordinated debentures, unsecured, due
in quarterly installments through 2005 with an
effective interest rate of 0% (7.5% stated
interest rate)................................. 16,633,000 4,592,000
----------- -----------
75,880,000 89,025,000
Less current portion............................ 9,948,000 16,323,000
----------- -----------
$65,932,000 $72,702,000
=========== ===========
</TABLE>
Installment obligations to lending institutions and the senior notes are
collateralized by equipment with a net book value of $77,339,000 at December
31, 1996.
On December 31, 1996, Alliance entered into a Bridge Loan Agreement
(enabling Alliance to borrow up to $18,000,000) and borrowed $12,872,000 under
a senior bridge loan; an additional $5,128,000 was borrowed on January 2,
1997. The senior bridge loan is convertible into 18,000 shares of a new Series
D convertible preferred stock (see Note 5). On December 31, 1996, Alliance
used the proceeds of the senior bridge loan to repurchase $11,345,000 carrying
value of its senior subordinated debentures (debentures) and $11,071,000 of
its Series A redeemable preferred stock at a discount (plus related accrued
interest and dividends). As a result, in the fourth quarter of 1996, Alliance
recorded an extraordinary gain of $4,935,000, net of taxes of $560,000, from
this early extinguishment of debt. In addition, the excess of carrying amount
of preferred stock repurchased over consideration paid and other charges
amounted to $1,764,000, which has been recognized as an increase in additional
paid-in capital. In connection with this transaction, on January 2, 1997,
Alliance used the additional senior bridge loan proceeds to repurchase the
remaining balance of its debentures and Series A redeemable preferred stock at
a discount (plus related accrued interest and dividends). Accordingly, in
January 1997, Alliance
F-13
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
recorded an extraordinary gain of $1,332,000, net of taxes of $920,000, from
this early extinguishment of debt. The excess of carrying amount of preferred
stock repurchased over consideration paid in January 1997 amounted to
$1,906,000.
On March 26, 1997, the holder of the senior bridge loan exercised its option
to convert the senior bridge loan into 18,000 shares of Series D convertible
preferred stock. At that time, senior notes not to exceed $9,000,000 held by
the same lender become convertible into a new Series E preferred stock on or
after January 1, 1998 (see Note 5). Supplemental earnings per share for the
year ended December 31, 1996, based on historical earnings per share adjusted
to give effect to (1) the issuance of the Series D preferred stock, and (2)
the use of the $18 million proceeds therefrom on a pro rata basis to
repurchase the debentures and Series A redeemable preferred stock repurchased
in December 1996 and January 1997, and assuming the transactions had occurred
on January 1, 1996, is $0.45 per share. This calculation ignores amounts
reported in the historical results for 1996 as gains arising from the
repurchase of the senior notes and debentures and as the earnings per share
benefit arising from the excess of the carrying value of the preferred stock
repurchased over the consideration paid. Therefore, this supplemental earnings
per share calculation is most comparable to the $0.48 per share "income before
items below" reported in Alliance's 1996 historical results of operations.
In November 1996, Alliance arranged for the sale of all of its senior notes
by the original holders to new owners. In connection with the sale, Alliance
prepaid $5,300,000 of the senior notes at a discount and recorded an
extraordinary gain of $1,365,000, net of taxes of $155,000, from this early
extinguishment of debt. In addition, the new holders and Alliance agreed to
remove or modify various restrictive covenants contained in the note purchase
agreement governing the senior notes. The amended senior notes bear interest
at a stated annual rate of 7.5%, with interest payable monthly, and require
minimum mandatory quarterly principal payments of $150,000 in 1997 increasing
to $1,800,000 in 2003. Alternatively, Alliance may make voluntary monthly
principal and interest payments of $335,000 through October 2002 to fully
retire the notes. Alliance may also prepay the notes at any month end at
specified discounts from their face amount. The senior notes agreement
contains limitations on equipment additions, incurrence of debt and other
similar items.
The carrying amount of long-term debt as of December 31, 1996 is due as
follows (assuming voluntary prepayments of Alliance's senior notes, and
excluding the senior bridge loan, which was converted to preferred stock in
March 1997, and the debentures refinanced thereby):
<TABLE>
<S> <C>
Year ending December 31:
1997...................................................... $16,323,000
1998...................................................... 17,263,000
1999...................................................... 14,914,000
2000...................................................... 11,403,000
2001...................................................... 8,097,000
2002...................................................... 3,561,000
-----------
$71,561,000
===========
</TABLE>
Of Alliance's total indebtedness at December 31, 1996, $83,552,000 is an
obligation of Alliance and $5,473,000 is an obligation of Alliance's
consolidated subsidiaries.
F-14
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
Alliance has a $3 million revolving line of credit with a bank. The line
bears interest at the bank's prime rate (8.5% at December 31, 1995 and 8.25%
at December 31, 1996) plus two percent, with a commitment fee of 0.375% per
year on the unused balance, and is secured by substantially all of Alliance's
accounts receivable. The line of credit had not been utilized through December
31, 1996.
5. PREFERRED AND COMMON STOCK
PREFERRED STOCK--Alliance is authorized to issue 1,000,000 shares of
preferred stock, undesignated as to series. The Board of Directors has the
authority to establish the voting powers, designations, preferences and other
special rights for each series of preferred stock issued.
In connection with Alliance's debt refinancing effective December 31, 1996
(see Note 4), Alliance authorized 18,000 shares of a new Series D convertible
preferred stock and 9,000 shares of a new Series E convertible preferred
stock. The holders of the Series D and E convertible preferred stock, when
issued, are entitled to receive cumulative dividends at the rate of 4% per
annum of the stated liquidation value (subject to increase, to a maximum of
8%, under certain circumstances). Unpaid dividends accumulate and are payable
quarterly by Alliance in cash. Shares of Series D convertible preferred stock
are convertible at the option of the holder at any time on or before December
31, 2006 into shares of common stock at a conversion price of $6.00 per common
share, subject to adjustment. Shares of Series E convertible preferred stock
are convertible at the option of the holder at any time on or before December
31, 2006 into shares of common stock at a conversion price of the greater of
$6.00 per share of common stock or the market price (as defined) per common
share at date of issuance of the Series E convertible preferred stock. Shares
of Series D and E convertible preferred stock are subject to redemption at the
option of Alliance after December 31, 2006.
In connection with the Royal acquisition (Note 8), Alliance issued 3,876
shares of a new Series C convertible preferred stock. The Series C convertible
preferred stock bears a dividend of 5% of its original liquidation value
($388,000) payable annually in cash and is redeemable at Alliance's option.
Holders of Series C convertible preferred stock may convert their stock into
common stock at a price of $5.00 per common share.
In the event of liquidation, dissolution or winding up of Alliance, the
holders of Series C, D and E convertible preferred stock shall be entitled to
receive an amount equal to the stated liquidation value per share (plus
accumulated but unpaid dividends) prior to any distributions to common
stockholders. No sinking fund has been or will be established for the
retirement or redemption of shares of Series C, D or E convertible preferred
stock.
The holders of shares of preferred stock are not entitled to any voting
rights with respect to any matters voted upon by the common stockholders.
However, a majority of preferred stockholders (with each series voting as a
single class) must approve certain corporate transactions including the
authorization of additional classes or series of stock ranking prior to their
stock, any increase in the number of authorized shares of their preferred
stock series, any amendment to the terms of such preferred stock series and
similar actions.
STOCK OPTIONS AND AWARDS--Alliance has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and related Interpretations in accounting for its employee stock
options because, as discussed below, the alternative fair value accounting
provided for under FASB Statement No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of Alliance's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
F-15
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
Alliance's 1991 Stock Option Plan provides that up to 2,000,000 shares may
be granted to management and key employees. Options are granted at their fair
market value at the date of grant. All options granted have 10 year terms and
vest and become fully exercisable at the end of three to four years of
continued employment. The weighted-average remaining contractual life of
options outstanding as of December 31, 1996 is 9.6 years. The following table
summarizes the activity under this plan.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
-------- ----------------
<S> <C> <C>
Outstanding at December 31, 1993................ 509,000 $3.5423
Granted....................................... 738,400 0.4375
Canceled...................................... (505,000) 3.5535
-------- -------
Outstanding at December 31, 1994................ 742,400 0.4375
Granted....................................... 32,000 2.1172
Exercised..................................... (221,800) 0.4375
Canceled...................................... (11,600) 0.4375
-------- -------
Outstanding at December 31, 1995................ 541,000 0.5369
Granted....................................... 489,200 3.5625
Exercised..................................... (77,217) 0.5151
Canceled...................................... (2,000) 1.6875
-------- -------
Outstanding at December 31, 1996................ 950,983 $2.0926
======== =======
</TABLE>
At December 31, 1996, 430,700 of these options were exercisable at $0.4375,
121,050 were exercisable at $3.5625, and 12,667 were exercisable at prices
between $1.6875 and $2.375.
In 1991, options for 30,000 shares not covered by the 1991 Stock Option Plan
were granted to three non-employee directors at an exercise price of $8.25 per
share. In 1993, options for 40,000 shares were granted at exercise prices
ranging from $1.125 to $2.50 per share. In 1995, options for an additional
10,000 shares were granted at an exercise price of $1.6875 per share. These
options vest over a four year period. At December 31, 1996, options for 40,000
shares had been canceled and options for 30,000 shares were exercisable.
Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if Alliance has accounted for its employee stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value for these options was estimated as of the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1996: risk-free interest rate of 5.72%; no dividend yield;
volatility factor of the expected market price of Alliance's common stock of
.43; and a weighted-average expected life of the option of seven years. The
weighted-average fair value of options granted during 1996 is $1.93.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because Alliance's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
F-16
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' maximum vesting period.
Alliance's pro forma information for the year ended December 31, 1996 follows:
<TABLE>
<S> <C>
Pro forma net income........................................ $12,577,000
Pro forma earnings per share................................ $1.17
</TABLE>
At December 31, 1996 Alliance had 328,900 warrants outstanding to purchase
common stock with exercise prices ranging from $2.50 to $5.00 per share over
terms of three to ten years. The weighted-average grant-date fair value of the
warrants was $2.13.
6. COMMITMENTS
Alliance has contracts with its equipment vendors for comprehensive
maintenance and cryogen coverage for its MRI and CT systems. The contracts are
between one and five years and extend through December 2001, but may be
canceled by Alliance under certain circumstances. Contract payments are
approximately $9,200,000 per year. At December 31, 1996, Alliance had binding
equipment purchase commitments totaling approximately $29,200,000.
Alliance leases office and warehouse space and certain equipment under non-
cancelable operating leases. The office and warehouse leases generally call
for minimum monthly payments plus maintenance and inflationary increases. The
future minimum payments under such leases are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1997....................................................... $1,478,000
1998....................................................... 960,000
1999....................................................... 668,000
2000....................................................... 141,000
2001....................................................... 34,000
----------
$3,281,000
==========
</TABLE>
Alliance's total rental expense, which includes short-term equipment
rentals, for the years ended December 31, 1994, 1995 and 1996 was $2,781,000,
$1,923,000 and $3,380,000, respectively.
7. 401(K) SAVINGS PLAN
Alliance established a 401(k) Savings Plan in January 1990. All employees of
Alliance are eligible to participate after a six month waiting period.
Employees may contribute between 1% and 15% of their annual compensation.
Alliance matches 33.3 cents for every dollar of employee contributions up to
7% of their compensation, subject to the limitations imposed by the Internal
Revenue Code. Alliance may also make discretionary contributions depending on
profitability. Alliance incurred and charged to expense $119,000, $140,000 and
$157,000 during 1994, 1995 and 1996, respectively, related to the plan.
8. ACQUISITION
On April 26, 1996, Alliance acquired all of the outstanding shares of Royal
Medical Health Services, Inc. (Royal) of Pittsburgh, Pennsylvania. Like
Alliance, Royal is a provider of comprehensive MRI services. Alliance issued
3,876 shares of Series C convertible preferred stock valued at $388,000,
common stock warrants valued at $212,000, and paid $1,914,000 in cash as
consideration for the acquisition of Royal and certain related assets. The
acquisition has been accounted for as a purchase and, accordingly, the results
of operations of Royal have been included in Alliance's consolidated financial
statements from the date of acquisition.
F-17
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
The unaudited pro forma information below presents combined results of
operations as if the Royal acquisition had occurred at the beginning of the
respective periods presented. The unaudited pro forma information is not
necessarily indicative of the results of operations of the combined company
had the acquisition actually occurred at the beginning of the periods
presented, nor is it necessarily indicative of future results.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996
----------- -----------
<S> <C> <C>
Revenues.......................................... $63,621,000 $70,518,000
Income before extraordinary gains................. 4,492,000 6,487,000
Net income........................................ 4,492,000 12,787,000
Earnings per share:
Income before extraordinary gains................ $ 0.32 $ 0.48
Income applicable to common stock................ 0.32 1.18
</TABLE>
9. SUBSEQUENT EVENTS
On July 23, 1997, Alliance entered into an Agreement and Plan of Merger as
amended, (the "Recapitalization Merger Agreement"). Under the terms of the
Recapitalization Merger Agreement, an entity formed by affiliates of Apollo
Management, L.P. (collectively, "Apollo") will merge with and into Alliance
(the "Recapitalization"). Each share of Alliance common stock, par value $.01
per share, issued and outstanding immediately prior to the effective time of
the Recapitalization, other than dissenting shares, either (1) will be
converted into the right to receive $11.00 in cash or (2) will be retained by
such stockholder. The Recapitalization Merger Agreement requires that 411,358
shares in the aggregate of common stock be retained by Alliance's existing
shareholders; therefore, the right to receive either $11.00 in cash for each
share or to retain that share of Alliance common stock is subject to
proration.
The proposed Recapitalization is subject to stockholder approval. However,
pursuant to a Stockholder Agreement, stockholders representing beneficial
ownership of not less than 54.4% of Alliance common stock (the "Stockholders")
have agreed to vote all shares beneficially owned by them in favor of the
approval of the Recapitalization Merger Agreement and the Recapitalization and
to convert or exercise all securities they hold that are convertible into or
exercisable for shares of Alliance common stock prior to the time of the
special meeting of shareholders called in connection with the
Recapitalization. In addition, each Stockholder has granted to Apollo an
option to acquire their shares of common stock, and a proxy to vote such
shares in favor of the Recapitalization. At the closing of the
Recapitalization, significant new sources of financing will be provided to
Alliance for the purchase of shares of common stock in the Recapitalization,
repayment of indebtedness, and for working capital purposes, among other uses.
The Recapitalization Merger Agreement originally contemplated that, in
connection with the closing of the Recapitalization, Alliance would also
acquire all of the capital stock of the parent corporation of SMT Health
Services, Inc. ("SMT") from Apollo, in exchange for additional shares of
Alliance common stock. The Recapitalization Merger Agreement has been amended
to eliminate that transaction; as a result, SMT will not be acquired by
Alliance in connection with the Recapitalization, and instead will remain an
independent company owned by Apollo.
After the consummation of the Recapitalization, the Company will adopt a new
employee stock option plan pursuant to which options (the "New Options") with
respect to a total of 454,545 shares of Alliance common
F-18
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
stock (the "New Option Shares") will be available for grant. The New Option
Shares will be allocated in amounts agreed upon between Apollo and the
Company. Of the New Option Shares, 50% will vest in equal increments over four
years ending on the fourth anniversary of the last day of the consummation of
the Recapitalization. The remaining 50% will vest seven and one-half years
after the date of grant, subject to acceleration if certain per-share equity
targets are achieved. Vesting of New Options occurs only during an employee's
term of employment. The exercise price for the New Options is expected to be
at the fair market value at a grant date (i.e., $11.00 per share at the
consummation of the Recapitalization)."
As a part of the new financing to be provided, Alliance plans to sell $165
million of Senior Subordinated Notes (the "Notes") in an underwritten public
offering. The Notes are to be unconditionally guaranteed, on a senior
subordinated basis, jointly and severally, by all significant direct and
indirect consolidated subsidiaries of Alliance, which consist of Royal Medical
Health Services, Inc., Alliance Imaging of Central Georgia, Inc., Alliance
Imaging of Ohio, Inc. and Alliance Imaging of Michigan, Inc. (collectively,
the "Subsidiary Guarantors"). Separate financial statements of the Subsidiary
Guarantors are not included herein because such guarantors are jointly and
severally liable with respect to Alliance's obligations pursuant to the Notes,
and the aggregate net assets, earnings and equity of the Subsidiary Guarantors
and Alliance are substantially equivalent to the net assets, earnings and
equity of Alliance on a consolidated basis. Accordingly, management has
determined that separate financial statements and other disclosures concerning
the Subsidiary Guarantors would not provide material information to
prospective purchasers of the Notes. Combined summarized financial information
for the Subsidiary Guarantors is set forth below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
<S> <C> <C> <C>
Current assets...................................... $ -- $ 131 $ 122
Noncurrent assets................................... 1,450 8,163 8,105
------ ------ ------
Total assets...................................... $1,450 $8,294 $8,227
====== ====== ======
Current liabilities................................. $ -- $1,621 $1,572
Noncurrent liabilities.............................. 641 4,238 4,697
Equity.............................................. 809 2,435 1,958
------ ------ ------
Total liabilities and equity...................... $1,450 $8,294 $8,227
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- -------------
1994 1995 1996 1996 1997
---- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues........................................ $408 $558 $7,142 $3,963 $5,908
Costs and expenses.............................. 183 225 5,676 3,124 4,785
---- ---- ------ ------ ------
Operating margin................................ 225 333 1,466 839 1,123
Provision for income taxes...................... 14 50 205 117 383
---- ---- ------ ------ ------
Net income...................................... $211 $283 $1,261 $ 722 $ 740
==== ==== ====== ====== ======
</TABLE>
The total assets, revenues and income before extraordinary items of the
Company's non-guarantor subsidiaries on an individual and combined basis are
less than 3% and therefore considered inconsequential.
F-19
<PAGE>
ALLIANCE IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
The Notes will be issued in connection with the Recapitalization, the
repayment of certain existing Alliance debt, and the establishment of a new
$50 million term loan and a new $75 million revolving credit line, which will
remain fully available based on the eligible borrowing base at September 30,
1997, in connection with the consummation of the Transactions. The following
table sets forth the pro forma capitalization of Alliance, assuming the
Transactions had occurred on September 30, 1997 (in millions):
<TABLE>
<S> <C>
Long-term debt, including current portion:
Term Loan Facility.............................................. $ 50.0
Other debt...................................................... 6.9
Notes........................................................... 165.0
------
Total debt.................................................... 221.9
Redeemable preferred stock........................................ 14.4
Stockholders' equity (deficit):
Common stockholders' equity (deficit)........................... (57.2)
Accumulated deficit............................................. (31.7)
------
Total stockholders' equity (deficit).......................... (88.9)
------
Total capitalization........................................ $147.4
======
</TABLE>
On October 20, 1997, the Company announced execution of a definitive
agreement to acquire Medical Consultants Imaging Co. (MCIC), a Cleveland, Ohio
based provider of mobile MRI services, CT services and other outsourced
healthcare services. The acquisition also includes MCIC's one-half interest in
an operating joint venture in Michigan. The purchase price consists of $13
million in cash (subject to certain reductions) plus the assumption of
approximately $5 million in financing arrangements. MCIC operates 14 mobile
MRI systems and several other diagnostic imaging systems, primarily in Ohio,
Michigan, Indiana and Pennsylvania. The transaction was completed on November
21, 1997.
F-20
<PAGE>
ALLIANCE IMAGING, INC.
QUARTERLY FINANCIAL DATA
Summarized quarterly unaudited financial data for the years ended December
31, 1995 and 1996, and the nine month period ended September 30, 1997 follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------
JUNE 30,
MARCH 31, 1995 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995
-------------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues................ $14,481,000 $14,766,000 $15,058,000 $13,760,000
Operating expenses,
excluding depreciation. 7,169,000 7,148,000 7,121,000 6,904,000
Depreciation expense.... 2,992,000 3,024,000 3,074,000 3,112,000
Selling, general and
administrative
expenses............... 1,542,000 1,597,000 1,549,000 1,606,000
Amortization expense,
primarily goodwill..... 331,000 332,000 340,000 342,000
Interest expense, net... 1,254,000 1,349,000 1,273,000 1,177,000
Income before income
taxes.................. 1,193,000 1,316,000 1,701,000 619,000
Net income.............. 1,021,000 1,112,000 1,447,000 522,000
Earnings per common
share:.................
Net income per common
share................ $ 0.07 $ 0.08 $ 0.11 $ 0.02
=========== =========== =========== ===========
Weighted average common
and common equivalent
shares outstanding..... 10,881,000 11,202,000 11,267,000 11,283,000
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------
JUNE 30,
MARCH 31, 1996 1996 SEPTEMBER 30, 1996 DECEMBER 31, 1996
-------------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues................ $14,686,000 $16,616,000 $17,795,000 $19,385,000
Operating expenses,
excluding depreciation. 7,181,000 7,838,000 8,530,000 8,795,000
Depreciation expense.... 2,866,000 3,182,000 3,122,000 3,567,000
Selling, general and
administrative
expenses............... 1,507,000 1,653,000 1,719,000 3,251,000
Amortization expense,
primarily goodwill..... 344,000 401,000 564,000 643,000
Interest expense, net... 1,185,000 1,498,000 1,501,000 1,574,000
Income before income
taxes and extraordinary
gains.................. 1,603,000 2,044,000 2,359,000 1,555,000
Extraordinary gains, net
of taxes............... -- -- -- 6,300,000
Net income.............. 1,364,000 1,738,000 1,949,000 7,750,000
Earnings per common
share:
Income before items
below................ $ 0.10 $ 0.13 $ 0.15 $ 0.10
Excess of carrying
amount of preferred
stock repurchased
over consideration
paid................. -- -- -- 0.15
----------- ----------- ----------- -----------
Income before
extraordinary gains.. 0.10 0.13 0.15 0.25
Extraordinary gains,
net.................. -- -- -- 0.55
----------- ----------- ----------- -----------
Income applicable to
common stock......... $ 0.10 $ 0.13 $ 0.15 $ 0.80
=========== =========== =========== ===========
Weighted average common
and common equivalent
shares outstanding..... 11,309,000 11,522,000 11,558,000 11,560,000
=========== =========== =========== ===========
</TABLE>
F-21
<PAGE>
ALLIANCE IMAGING, INC.
QUARTERLY FINANCIAL DATA--(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30,
1997 1997 1997
----------- ----------- -------------
<S> <C> <C> <C>
Revenues................................. $19,106,000 $20,805,000 $22,374,000
Operating expenses, excluding
depreciation............................ 8,681,000 9,134,000 9,684,000
Depreciation expense..................... 3,485,000 3,659,000 4,078,000
Selling, general and administrative
expenses................................ 1,897,000 2,093,000 2,261,000
Amortization expense, primarily goodwill. 571,000 594,000 602,000
Interest expense, net.................... 1,933,000 1,624,000 1,758,000
Income before income taxes and
extraordinary gain...................... 2,539,000 3,701,000 3,991,000
Extraordinary gain, net of taxes......... 1,332,000 -- --
Net income............................... 3,036,000 2,411,000 2,636,000
Earnings per common share:
Income before items below.............. $ 0.14 $ 0.16 $ 0.17
Excess of carrying amount of preferred
stock repurchased over consideration
paid.................................. 0.16 -- --
----------- ----------- -----------
Income before extraordinary gain....... 0.30 0.16 0.17
Extraordinary gain, net................ 0.11 -- --
----------- ----------- -----------
Income applicable to common stock...... $ 0.41 $ 0.16 $ 0.17
=========== =========== ===========
Weighted average common and common
equivalent shares outstanding........... 11,985,000 14,934,000 $15,130,000
=========== =========== ===========
</TABLE>
F-22
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE NOTES OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE NOTES BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
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
PAGE
<TABLE>
<S> <C>
Available Information...................................................... i
Incorporation of Certain Documents by Reference............................ i
Prospectus Summary......................................................... 1
Risk Factors............................................................... 10
The Transactions........................................................... 15
Use of Proceeds............................................................ 16
Pro Forma Capitalization................................................... 17
Unaudited Pro Forma Consolidated Financial Information..................... 18
Selected Historical Consolidated Financial Information..................... 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 27
Industry................................................................... 34
Business................................................................... 36
Management................................................................. 45
Principal Stockholders..................................................... 51
Certain Relationships and Related Transactions............................. 52
Description of the Credit Agreement........................................ 53
Description of the Notes................................................... 55
Underwriting............................................................... 83
Legal Matters.............................................................. 84
Experts.................................................................... 84
Index to Consolidated Financial Statements................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
--------------
PROSPECTUS
--------------
$165,000,000
ALLIANCE IMAGING, INC.
$125,000,000 % SENIOR SUBORDINATED NOTES DUE 2005
$40,000,000 SENIOR SUBORDINATED FLOATING RATE NOTES DUE 2005
JOINT BOOK-RUNNING MANAGERS
BT ALEX. BROWN
SALOMON SMITH BARNEY
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee and the
National Association of Securities Dealers, Inc. filing fee.
<TABLE>
<S> <C>
SEC registration fee......................................... $ 51,515
NASD filing fee.............................................. 17,500
Blue sky fees and expenses................................... 65,000
Printing and engraving expenses.............................. 700,000
Legal fees and expenses...................................... 1,100,000
Accounting fees and expenses................................. 400,000
Trustee fees and expenses.................................... 10,000
Miscellaneous................................................ 55,985
----------
Total...................................................... $2,400,000
==========
</TABLE>
- --------
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Restated Certificate of Incorporation, By-Laws and
indemnification agreements with officers and directors provide for
indemnification to the full extent permitted by the laws of the State of
Delaware against and with respect to threatened, pending or completed actions,
suits or proceedings arising from or alleged to arise from, a party's actions
or omissions as a director, officer, employee or agent of the Company or of
any other corporation, partnership, joint venture, trust or other enterprise
which has served in such capacity at the request of the Company if such acts
or omissions occurred or were or are alleged to have occurred, while said
party was a director or officer of the Company; provided, however, the Company
shall not indemnify any director or officer in an action against the Company
unless the Company shall have consented to such action. Generally, under
Delaware law, indemnification will only be available where an officer or
director can establish that he/she acted in good faith and in a manner which
was reasonably believed to be in or not opposed to the best interests of the
Company.
Section 145 of the Delaware Law provides that a corporation may indemnify a
director, officer, employee or agent made a party to an action by reason of
the fact that such person was a director, officer, employee or agent of the
corporation or was serving at the request of the corporation against expenses
actually incurred by such person in connection with such action if such person
acted in good faith and in a manner such person reasonably believed to be in,
or not opposed to, the best interest of the corporation with respect to any
criminal action, and had no reasonable cause to believe his conduct was
unlawful. Delaware Law does not permit a corporation to eliminate a director's
duty of care, and the provisions of the Company's Amended and Restated
Certificate of Incorporation have no effect on the availability of equitable
remedies such as injunction or rescission, based upon a director's breach of
the duty of care. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions and agreements, the Company
has been informed that in the opinion of the Staff of the Securities and
Exchange Commission such indemnification is against policy as expressed in the
Securities Act and is therefore unenforceable.
Reference is made to the form of Underwriting Agreement filed as Exhibit 1
to this Registration Statement, which provides for indemnification of the
directors and officers of the Company signing the Registration Statement and
certain controlling persons of the Company against certain liabilities,
including those arising under the Securities Act, in certain instances by the
Underwriters.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. NOTE EXHIBIT DESCRIPTION
- ----------- ---- --------------------------------------------------------------------------
<S> <C> <C>
1 (12) Form of Underwriting Agreement.
2.1 (10) Agreement and Plan of Merger dated as of July 23, 1997 between Alliance
and Newport Investment LLC (the "Recapitalization Merger Agreement").
2.2 (11) Amendment No. 1 dated as of August 13, 1997 to the Recapitalization Merger
Agreement.
2.3 (11) Amendment No. 2 dated as of October 13, 1997 to the Recapitalization
Merger Agreement.
2.4 (11) Amendment No. 3 dated as of November 10, 1997 to the Recapitalization
Merger Agreement.
2.5 (11) Guaranty Letter dated July 22, 1997, from AIF III to Alliance.
3.1 (14) Form of Amended and Restated Certificate of Incorporation of Alliance.
3.2 (14) By-Laws of Alliance, as amended.
4.1 (12) Form of Indenture for the % Senior Subordinated Notes due 2005 and the
Senior Subordinated Floating Rate Notes due 2005 (including the Forms of
Notes as Exhibits A and B thereto) between the Company and IBJ Schroder
Bank & Trust Company, as trustee.
5 (12) Opinion of O'Sullivan Graev & Karabell, LLP.
9.1 (1) Amended and Restated Voting Trust Agreement between Donaldson, Lufkin &
Jenrette Capital Corporation and Meridian Trust Company dated December 29,
1988.
10.1 (10) Stockholder Agreement dated as of July 23, 1997 among Newport Investment
LLC and the stockholders of Alliance party thereto.
10.2 (4) Registration Rights Agreement dated as of December 31, 1994 among the
Registrant, the Senior Noteholders and the Senior Subordinated
Debentureholders.
10.3 (7) Amended and Restated 1991 Stock Option Plan of Alliance, including forms
of agreement used thereunder.
10.4 (1) Form of Indemnification Agreement between Alliance and its directors
and/or officers.
10.5 (2) Georgia Magnetic Imaging Center, Ltd. Limited Partnership Agreement dated
as of March 22, 1985.
10.6 (2) Amendment to Georgia Magnetic Imaging Center, Ltd., Limited Partnership
Agreement, dated as of July 1, 1993.
10.7 (3) Employment Agreement dated as of September 9, 1993 between Alliance and
Terry A. Andrues.
10.8 (3) Employment Agreement dated as of September 9, 1993 between Alliance and
Jay A. Mericle.
10.9 (9) Amended and Restated Employment Agreement dated as of May 15, 1997 between
Alliance and Terrence M. White.
10.10 (3) Employment Agreement dated as of June 6, 1994 between Alliance and Neil M.
Cullinan.
10.11 (3) Employment Agreement dated as of June 6, 1994 between Alliance and Cheryl
A. Ford.
10.12 (5) Employment Agreement dated July 7, 1995 between Alliance and Michael W.
Grismer.
10.13 (14) Employment Agreement dated as of July 23, 1997 between Alliance and
Richard N. Zehner.
10.14 (14) Employment Agreement dated as of July 23, 1997 between Alliance and
Vincent S. Pino.
10.15 (14) Agreement Not to Compete dated as of July 23, 1997 among Newport
Investment LLC, Alliance, Richard N. Zehner and Vincent S. Pino.
10.16 (9) Amended and Restated Long-Term Executive Incentive Plan dated as of July
22, 1997.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C> <C>
10.17 (6) Agreement and Plan of Merger, dated as of April 16, 1996, among Alliance,
Alliance Imaging of Pennsylvania, Inc. and Royal Medical Health Services
Inc.
10.18 (6) Acquisition Agreement, among Alliance, A&M Trucking Inc. and each of Mark
J. Graham and Albert F. Calfo, II, dated April 16, 1996.
10.19 (8) Stock Purchase Agreement, dated as of March 25, 1997, between Alliance and
General Electric Company.
10.20 (12) Form of Credit Agreement.
10.21 (15) Acquisition Agreement dated as of October 17, 1997 among Medical
Consultants Imaging Corp., Bondcat Corp., Chip-Cat Corp., Medical
Consultants Scanning Systems,
Inc., Alliance Imaging of Ohio, Inc., Alliance Imaging of Michigan, Inc.,
and Alliance Imaging, Inc.
11 (14) Statement of Computation of Per Share Earnings.
12.1 (11) Statement of Computation of Earnings to Fixed Charges.
21 (11) List of Subsidiaries.
23.1 (14) Consent of Ernst & Young LLP.
23.3 Consent of O'Sullivan Graev & Karabell, LLP (included in Exhibit 5).
23.4 (14) Consent of industry consultant.
24.1 (14) Power of Attorney.
25 (12) Statement of Eligibility of IBJ Schroder Bank & Trust Company.
27.1 (14) Financial Data Schedule.
</TABLE>
- --------
(1) Incorporated by reference herein to the indicated exhibits filed in
response to Item 16, "Exhibits" of Alliance's Registration Statement on
Form S-1, No. 33-40805, initially filed on May 24, 1991.
(2) Incorporated by reference herein to the indicated exhibits filed in
response to Item 6(a), "Exhibits" of Alliance's Quarterly Report on Form
10-Q for the quarter ended September 30, 1993.
(3) Incorporated by reference herein to the indicated exhibit filed in
response to Item 6(a), "Exhibits" of Alliance's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994.
(4) Incorporated by reference herein to Exhibit 4.5 filed in response to Item
7, "Exhibits" of Alliance's Form 8-K Current Report dated January 25,
1995.
(5) Incorporated by reference herein to Exhibit 10.36 filed in response to
Item 6(a), "Exhibits" of Alliance's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995.
(6) Incorporated by reference herein to the indicated Exhibit filed in
response to Item 6(a), "Exhibits" of Alliance's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996.
(7) Incorporated by reference herein to Exhibits filed with Alliance's
Registration Statement on Form S-1, No. 33-40805, initially filed on May
24, 1991 and Alliance's definitive Proxy Statement with respect to its
Annual Meeting of Shareholders held May 16, 1996.
(8) Incorporated by reference herein to the indicated Exhibit in response to
Item 14(a)(3), "Exhibits" of Alliance's Annual Report on Form 10-K for
the year ending December 31, 1996.
(9) Incorporated by reference to indicated exhibits filed in response to Item
6, "Exhibits" of Alliance's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.
(10) Incorporated by reference herein to the indicated exhibits filed in
response to Item 5, "Exhibits" of Alliance's Form 8-K Current Report
dated August 1, 1997.
(11) Incorporated by reference to the indicated exhibits filed in response to
Item 21, "Exhibits" of Alliance's Registration Statement on Form S-4, No
333-33787, initially filed on August 15, 1997.
(12) Filed herewith.
(13) To be filed by amendment.
(14) Previously filed.
(15) Incorporated by reference to the indicated exhibits filed in response to
Item 6, "Exhibits" of Alliance's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.
II-3
<PAGE>
(b) Financial Statement Schedules
Report of Independent Auditors on Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the DGCL, the Certificate of Incorporation and By-laws,
or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than 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
Securities Act and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 6 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Anaheim, State of California, on the 9th day of December, 1997.
Alliance Imaging, Inc.
By: /s/ Terrence M. White
___________________________________
Name: Terrence M. White
Title:Senior Vice President, Chief
Financial Officer and
Secretary
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 6 to the Registration Statement has been signed on the 9th day of December,
1997, by the following persons in the capacities indicated:
SIGNATURE TITLE
Chairman of the
* Board of
- ------------------------------------- Directors,
RICHARD N. ZEHNER President and
Chief Executive
Officer (Principal
Executive Officer)
* Executive Vice
- ------------------------------------- President, Chief
VINCENT S. PINO Operating Officer
and Director
/s/ Terrence M. White Senior Vice
- ------------------------------------- President, Chief
TERRENCE M. WHITE Financial Officer
and Secretary
(Principal
Financial Officer)
* Controller
- ------------------------------------- (Principal
MICHAEL W. GRISMER Accounting
Officer)
* Director
- -------------------------------------
JAMES E. BUNCHER
* Director
- -------------------------------------
DOUGLAS M. HAYES
Director
- -------------------------------------
ROBERT B. WALEY-COHEN
* Director
- -------------------------------------
JOHN C. WALLACE
/s/ Terrence M. White
- -------------------------------------
*BY: TERRENCE M. WHITE
ATTORNEY-IN-FACT
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 6 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Anaheim, State of California, on the 9th day of December, 1997.
Royal Medical Health Services, Inc.
/s/ Terrence M. White
By:__________________________________
Name: Terrence M. White
Title:Senior Vice President,
Chief Financial Officer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 6 to the Registration Statement has been signed on the 9th day of
December, 1997, by the following persons in the capacities indicated:
SIGNATURES TITLE
* Chairman of the
- ------------------------------------- Board of Directors,
RICHARD N. ZEHNER President and Chief
Executive Officer
(Principal
Executive Officer)
* Executive Vice
- ------------------------------------- President, Chief
VINCENT S. PINO Operating Officer
and Director
/s/ Terrence M. White Senior Vice
- ------------------------------------- President, Chief
TERRENCE M. WHITE Financial Officer,
Secretary and
Director (Principal
Financial Officer)
* Controller
- ------------------------------------- (Principal
MICHAEL W. GRISMER Accounting Officer)
/s/ Terrence M. White
_____________________________________
*By: Terrence M. White
Attorney-in-Fact
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 6 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Anaheim, State of California, on the 9th day of December, 1997.
Alliance Imaging of Central Georgia,
Inc.
/s/ Terrence M. White
By: _________________________________
Name: Terrence M. White
Title:Senior Vice President, Chief
Financial Officer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 6 to the Registration Statement has been signed on the 9th day of
December, 1997, by the following persons in the capacities indicated:
SIGNATURE TITLE
* Chairman of the
- ------------------------------------- Board of Directors,
RICHARD N. ZEHNER President and Chief
Executive Officer
(Principal
Executive Officer)
* Executive Vice
- ------------------------------------- President, Chief
VINCENT S. PINO Operating Officer
and Director
/s/ Terrence M. White Senior Vice
- ------------------------------------- President, Chief
TERRENCE M. WHITE Financial Officer,
Secretary and
Director (Principal
Financial Officer)
* Controller
- ------------------------------------- (Principal
MICHAEL W. GRISMER Accounting Officer)
/s/ Terrence M. White
_____________________________________
*By: Terrence M. White
Attorney-in-Fact
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 6 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Anaheim, State of California, on the 9th day of December, 1997.
Alliance Imaging of Ohio, Inc.
/s/ Terrence M. White
By: _________________________________
Name: Terrence M. White
Title:Senior Vice President, Chief
Financial Officer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 6 to the Registration Statement has been signed on the 9th day of
December, 1997, by the following persons in the capacities indicated:
SIGNATURE TITLE
* Chairman of the
- ------------------------------------- Board of Directors,
RICHARD N. ZEHNER President and Chief
Executive Officer
(Principal
Executive Officer)
* Executive Vice
- ------------------------------------- President, Chief
VINCENT S. PINO Operating Officer
and Director
/s/ Terrence M. White Senior Vice
- ------------------------------------- President, Chief
TERRENCE M. WHITE Financial Officer,
Secretary and
Director (Principal
Financial Officer)
* Controller
- ------------------------------------- (Principal
MICHAEL W. GRISMER Accounting Officer)
/s/ Terrence M. White
_____________________________________
*By: Terrence M. White
Attorney-in-Fact
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 6 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Anaheim, State of California, on the 9th day of December, 1997.
Alliance Imaging of Michigan, Inc.
/s/ Terrence M. White
By: _________________________________
Name: Terrence M. White
Title:Senior Vice President, Chief
Financial Officer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 6 to the Registration Statement has been signed on the 9th day of
December, 1997, by the following persons in the capacities indicated:
SIGNATURE TITLE
* Chairman of the
- ------------------------------------- Board of Directors,
RICHARD N. ZEHNER President and Chief
Executive Officer
(Principal
Executive Officer)
* Executive Vice
- ------------------------------------- President, Chief
VINCENT S. PINO Operating Officer
and Director
/s/ Terrence M. White Senior Vice
- ------------------------------------- President, Chief
TERRENCE M. WHITE Financial Officer,
Secretary and
Director (Principal
Financial Officer)
* Controller
- ------------------------------------- (Principal
MICHAEL W. GRISMER Accounting Officer)
/s/ Terrence M. White
_____________________________________
*By: Terrence M. White
Attorney-in-Fact
II-10
<PAGE>
INDEPENDENT AUDITORS REPORT ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors
Alliance Imaging, Inc.
We have audited the consolidated financial statements of Alliance Imaging,
Inc. as of December 31, 1995 and 1996, and for each of the three years in the
period ended December 31, 1996, and have issued our report thereon dated
February 21, 1997, except for Note 4, as to which the date is March 26, 1997,
and Note 9, as to which the date is July 23, 1997 (included elsewhere in this
Registration Statement). Our audits also included the financial statement
schedule listed in Item 16(b) of this Registration Statement. This schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Orange County, California
February 21, 1997, except for Note 4, as to
which the date is March 26, 1997, and Note 9,
as to which the date is November 21, 1997
S-1
<PAGE>
ALLIANCE IMAGING, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE DEDUCTIONS BALANCE
AT ADDITIONS (BAD DEBT AT END
BEGINNING CHARGED TO WRITE- OF
OF PERIOD EXPENSE OFFS) PERIOD
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for Doubtful Accounts....... $360,000 $609,000 $(581,000) $388,000
======== ======== ========= ========
Year ended December 31, 1995
Allowance for Doubtful Accounts....... $388,000 $ -- $ (21,000) $367,000
======== ======== ========= ========
Year ended December 31, 1996
Allowance for Doubtful Accounts....... $367,000 $567,000 $(421,000) $513,000
======== ======== ========= ========
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. NOTE EXHIBIT DESCRIPTION
- ----------- ---- --------------------------------------------------------------------------
<S> <C> <C>
1 (12) Form of Underwriting Agreement.
2.1 (10) Agreement and Plan of Merger dated as of July 23, 1997 between Alliance
and Newport Investment LLC (the "Recapitalization Merger Agreement").
2.2 (11) Amendment No. 1 dated as of August 13, 1997 to the Recapitalization Merger
Agreement.
2.3 (11) Amendment No. 2 dated as of October 13, 1997 to the Recapitalization
Merger Agreement.
2.4 (11) Amendment No. 3 dated as of November 10, 1997 to the Recapitalization
Merger Agreement.
2.5 (11) Guaranty Letter dated July 22, 1997, from AIF III to Alliance.
3.1 (14) Form of Amended and Restated Certificate of Incorporation of Alliance.
3.2 (14) By-Laws of Alliance, as amended.
4.1 (12) Form of Indenture for the % Senior Subordinated Notes due 2005 and the
Senior Subordinated Floating Rate Notes due 2005 (including the Forms of
Notes as Exhibits A and B thereto) between the Company and IBJ Schroder
Bank & Trust Company, as trustee.
5 (12) Opinion of O'Sullivan Graev & Karabell, LLP.
9.1 (1) Amended and Restated Voting Trust Agreement between Donaldson, Lufkin &
Jenrette Capital Corporation and Meridian Trust Company dated December 29,
1988.
10.1 (10) Stockholder Agreement dated as of July 23, 1997 among Newport Investment
LLC and the stockholders of Alliance party thereto.
10.2 (4) Registration Rights Agreement dated as of December 31, 1994 among the
Registrant, the Senior Noteholders and the Senior Subordinated
Debentureholders.
10.3 (7) Amended and Restated 1991 Stock Option Plan of Alliance, including forms
of agreement used thereunder.
10.4 (1) Form of Indemnification Agreement between Alliance and its directors
and/or officers.
10.5 (2) Georgia Magnetic Imaging Center, Ltd. Limited Partnership Agreement dated
as of March 22, 1985.
10.6 (2) Amendment to Georgia Magnetic Imaging Center, Ltd., Limited Partnership
Agreement, dated as of July 1, 1993.
10.7 (3) Employment Agreement dated as of September 9, 1993 between Alliance and
Terry A. Andrues.
10.8 (3) Employment Agreement dated as of September 9, 1993 between Alliance and
Jay A. Mericle.
10.9 (9) Amended and Restated Employment Agreement dated as of May 15, 1997 between
Alliance and Terrence M. White.
10.10 (3) Employment Agreement dated as of June 6, 1994 between Alliance and Neil M.
Cullinan.
10.11 (3) Employment Agreement dated as of June 6, 1994 between Alliance and Cheryl
A. Ford.
10.12 (5) Employment Agreement dated July 7, 1995 between Alliance and Michael W.
Grismer.
10.13 (14) Employment Agreement dated as of July 23, 1997 between Alliance and
Richard N. Zehner.
10.14 (14) Employment Agreement dated as of July 23, 1997 between Alliance and
Vincent S. Pino.
10.15 (14) Agreement Not to Compete dated as of July 23, 1997 among Newport
Investment LLC, Alliance, Richard N. Zehner and Vincent S. Pino.
10.16 (9) Amended and Restated Long-Term Executive Incentive Plan dated as of July
22, 1997.
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C>
10.17 (6) Agreement and Plan of Merger, dated as of April 16, 1996, among Alliance,
Alliance Imaging of Pennsylvania, Inc. and Royal Medical Health Services
Inc.
10.18 (6) Acquisition Agreement, among Alliance, A&M Trucking Inc. and each of Mark
J. Graham and Albert F. Calfo, II, dated April 16, 1996.
10.19 (8) Stock Purchase Agreement, dated as of March 25, 1997, between Alliance and
General Electric Company.
10.20 (12) Form of Credit Agreement.
10.21 (15) Acquisition Agreement dated as of October 17, 1997 among Medical
Consultants Imaging Corp., Bondcat Corp., Chip-Cat Corp., Medical
Consultants Scanning Systems,
Inc., Alliance Imaging of Ohio, Inc., Alliance Imaging of Michigan, Inc.,
and Alliance Imaging, Inc.
11 (14) Statement of Computation of Per Share Earnings.
12.1 (11) Statement of Computation of Earnings to Fixed Charges.
21 (11) List of Subsidiaries.
23.1 (14) Consent of Ernst & Young LLP.
23.3 Consent of O'Sullivan Graev & Karabell, LLP (included in Exhibit 5).
23.4 (14) Consent of industry consultants.
24.1 (14) Power of Attorney.
25 (12) Statement of Eligibility of IBJ Schroder Bank & Trust Company.
27.1 (14) Financial Data Schedule.
</TABLE>
- --------
(1) Incorporated by reference herein to the indicated exhibits filed in
response to Item 16, "Exhibits" of Alliance's Registration Statement on
Form S-1, No. 33-40805, initially filed on May 24, 1991.
(2) Incorporated by reference herein to the indicated exhibits filed in
response to Item 6(a), "Exhibits" of Alliance's Quarterly Report on Form
10-Q for the quarter ended September 30, 1993.
(3) Incorporated by reference herein to the indicated exhibit filed in
response to Item 6(a), "Exhibits" of Alliance's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994.
(4) Incorporated by reference herein to Exhibit 4.5 filed in response to Item
7, "Exhibits" of Alliance's Form 8-K Current Report dated January 25,
1995.
(5) Incorporated by reference herein to Exhibit 10.36 filed in response to
Item 6(a), "Exhibits" of Alliance's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995.
(6) Incorporated by reference herein to the indicated Exhibit filed in
response to Item 6(a), "Exhibits" of Alliance's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996.
(7) Incorporated by reference herein to Exhibits filed with Alliance's
Registration Statement on Form S-1, No. 33-40805, initially filed on May
24, 1991 and Alliance's definitive Proxy Statement with respect to its
Annual Meeting of Shareholders held May 16, 1996.
(8) Incorporated by reference herein to the indicated Exhibit in response to
Item 14(a)(3), "Exhibits" of Alliance's Annual Report on Form 10-K for
the year ending December 31, 1996.
(9) Incorporated by reference to indicated exhibits filed in response to Item
6, "Exhibits" of Alliance's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.
(10) Incorporated by reference herein to the indicated exhibits filed in
response to Item 5, "Exhibits" of Alliance's Form 8-K Current Report
dated August 1, 1997.
(11) Incorporated by reference to the indicated exhibits filed in response to
Item 21, "Exhibits" of Alliance's Registration Statement on Form S-4, No
333-33787, initially filed on August 15, 1997.
(12) Filed herewith.
(13) To be filed by amendment.
(14) Previously filed.
(15) Incorporated by reference to the indicated exhibits filed in response to
Item 6, "Exhibits" of Alliance's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.
2
<PAGE>
EXHIBIT 1
ALLIANCE IMAGING, INC.
$125,000,000 [ ]% Senior Subordinated Notes due 2005
$40,000,000 Senior Subordinated Floating Rate Notes due 2005
UNDERWRITING AGREEMENT
----------------------
[ ], 1997
BT Alex. Brown Incorporated
Salomon Brothers Inc
c/o BT Alex. Brown Incorporated
One Bankers Trust Plaza
New York, New York 10005
Ladies and Gentlemen:
Alliance Imaging, Inc., a Delaware corporation ("Alliance"), hereby
--------
confirms its agreement with you (the "Underwriters") as set forth below.
------------
1. The Securities. Subject to the terms and conditions herein
--------------
contained, Alliance proposes to issue and sell to the Underwriters (the
"Offering") $125,000,000 aggregate principal amount of its Senior Subordinated
--------
Notes due 2005 (the "Fixed Rate Notes") and $40,000,000 aggregate principal
----------------
amount of its Senior Subordinated Floating Rate Notes due 2005 (the "Floating
--------
Rate Notes" and together with the Fixed Rate Notes, the "Notes"). The Notes
- ---------- -----
will be issued pursuant to an indenture (the "Indenture") to be entered into
---------
among Alliance, as issuer, the Guarantors (as defined below) and [ ], as trustee
(the "Trustee").
-------
The Notes will be unconditionally guaranteed (the "Guarantees") on a
----------
senior subordinated basis by Alliance Imaging of Ohio, Inc., a Delaware
corporation, Alliance Imaging of Michigan, Inc., a Delaware corporation, Royal
Medical Health Services, Inc., a Pennsylvania corporation, and Alliance Imaging
<PAGE>
-2-
of Central Georgia, Inc., a Georgia corporation (collectively, the
"Guarantors"), each of which is a wholly owned subsidiary of Alliance. The Notes
----------
and the Guarantees are collectively referred to as the "Securities". Alliance
----------
and the Guarantors are collectively referred to as the "Issuers".
-------
The Notes are being sold in connection with the recapitalization of
Alliance (the "Recapitalization") which will be effected pursuant to an
----------------
Agreement and Plan of Merger dated as of July 23, 1997, as amended, whereby
Newport Acquisition Company ("Newco"), a Delaware corporation, will be merged
-----
with and into Alliance with Alliance being the surviving corporation. The
Recapitalization will be consummated concurrently with the Offering.
In connection with the Recapitalization, Alliance will execute an
agreement (the "Credit Agreement") with Bankers Trust Company, as agent, and
----------------
certain lenders thereto to provide Alliance a loan commitment of up to $125
million.
The Offering, the Recapitalization and the related borrowings under
the Credit Agreement are collectively referred to as the "Transactions". The
------------
Securities, the Indenture and this Agreement are collectively referred to herein
as the "Operative Documents".
-------------------
The consummation of the Transactions, and other transactions
contemplated thereby, will be concurrent, and the Offering is conditioned upon
consummation of the other components of the Transactions.
2. Representations and Warranties. The Issuers represent and
------------------------------
warrant to and agree with the Underwriters that:
(a) A registration statement on Form S-2, including a prospectus,
subject to completion, has been filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
----------
(together with the rules and regulations of the Commission promulgated
thereunder, the "Act"), by Alliance with respect to the Securities (File
---
No. 333-33817), and one or more
<PAGE>
-3-
amendments to such registration statement also have been so
filed. After the execution of this Agreement, Alliance will file with the
Commission either (x) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act,
a prospectus in the form most recently included in an amendment to such
registration statement (or, if no such amendment shall have been filed, in
such registration statement) with such changes or insertions as are
required by Rule 430A under the Act or permitted by Rule 424(b) under the
Act and as have been provided to and approved by the Underwriters prior to
the execution of this Agreement, or (y) if such registration statement, as
it may have been amended, has not been declared by the Commission to be
effective under the Act, an amendment to such registration statement, and
including a form of prospectus, a copy of which amendment has been
furnished to and approved by the Underwriters prior to the execution of
this Agreement. As used in this Agreement, the term "Registration
------------
Statement" means such registration statement, as amended at the time when
---------
it was or is declared effective, and including all financial schedules and
exhibits thereto and including any information omitted therefrom pursuant
to Rule 430A under the Act and included in the Prospectus (as hereinafter
defined); the term "Preliminary Prospectus" means each prospectus, subject
----------------------
to completion, filed with such registration statement or any amendment
thereto (including the prospectus, subject to completion, if any, included
in such Registration Statement or any amendment thereto at the time it was
or is declared effective); and the term "Prospectus" means the prospectus
----------
included in the Registration Statement, in the form in which such
prospectus was filed with the Commission pursuant to Rule 424(b) under the
Act or, if no prospectus is required to be filed pursuant to said Rule
424(b) with respect to any such Registration Statement, such term means the
prospectus included in such Registration Statement. Any reference herein
to any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto shall be deemed to refer to and include the documents
incorporated therein by
<PAGE>
-4-
reference pursuant to Item 12 of Form S-2 under the Act, as of the date of
such Preliminary Prospectus or the Prospectus (all such incorporated
------------
documents being herein called the "Incorporated Documents").
---------
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus. When any Preliminary Prospectus was
filed with the Commission it (x) complied in all material respects with the
requirements of the Act and (y) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. When the Registration Statement or any amendment
thereto was or is declared effective, it (1) contained or will contain all
statements required to be stated therein in accordance with, and complied
or will comply in all material respects with, the requirements of the Act
and (2) did not or will not include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein
not misleading. When the Prospectus or any amendment or supplement thereto
is filed with the Commission pursuant to Rule 424(b) (or, if the Prospectus
or such amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing the Prospectus
or amendment or supplement to the Prospectus was or is declared effective)
and on the Closing Date (as defined in Section 3), the Prospectus, as
amended or supplemented at such time, (i) complied or will comply in all
material respects with the requirements of the Act and (ii) did not or will
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. Each
document incorporated by reference in any Preliminary Prospectus or the
Prospectus, when filed with the Commission, (A) complied in all material
respects with the requirements of the Act and the Exchange Act and (B) did
not include any untrue statement of a material fact or omit to
<PAGE>
-5-
state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
foregoing provisions of this paragraph (b) do not apply to statements or
omissions made in any Preliminary Prospectus, the Registration Statement or
any amendment thereto or the Prospectus or any amendment or supplement
thereto in reliance upon and in conformity with written information
furnished to Alliance by the Underwriters specifically for use therein or
to the Statement of Eligibility and Qualification (the
"Form T-1") under the Trust Indenture Act of 1939, as amended (the "Trust
-------- -----
Indenture Act"), of the Trustee filed as an exhibit to the Registration
-------------
Statement.
(c) At the Closing Date after giving effect to the Transactions,
Alliance will have the authorized, issued and outstanding capitalization
set forth in the Prospectus under the caption "Pro Forma Capitalization";
all of the outstanding shares of capital stock of Alliance are duly
authorized and validly issued, fully paid and nonassessable and not issued
in violation of any preemptive or similar rights. Except as described in
the Prospectus, all of the outstanding shares of capital stock of Alliance
when issued were free and clear of all liens, encumbrances, equities and
claims or restrictions on transferability (other than those imposed by the
Act and the securities or "Blue Sky" laws of certain jurisdictions), or
voting; except as described in the Prospectus, there are no (i) options,
warrants or other rights to purchase, (ii) agreements or other obligations
to issue or (iii) other rights to convert any obligation into, or exchange
any securities for, shares of capital stock of or ownership interests in
Alliance. Except as described in the Registration Statement, Alliance does
not own, directly or indirectly, any shares of capital stock or any other
equity or long-term debt securities or have any equity interest in any
firm, partnership, joint venture or other entity.
(d) Alliance and the subsidiaries of Alliance listed on Exhibit A
attached hereto (each, a "Subsidiary" and collectively, the "Subsidiaries")
---------- ------------
are duly incorporated,
<PAGE>
-6-
validly existing and in good standing as corporations under the laws of
their respective jurisdictions of incorporation, with all requisite
corporate power and authority (corporate or otherwise) to own or lease
their properties and conduct their businesses as now conducted. Each of
Alliance and the Subsidiaries is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions where the ownership
or leasing of its properties or the conduct of its businesses requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, condition (financial or other) or
results of operations or prospects of Alliance and the Subsidiaries, taken
as a whole (any such event, a "Material Adverse Effect").
-----------------------
(e) Alliance and each of the Guarantors has all requisite corporate
power and authority to execute, deliver and perform its respective
obligations under this Agreement and the other Operative Documents and to
consummate the transactions contemplated hereby and thereby, including,
without limitation, the power and authority to issue, sell and deliver the
Securities as contemplated by this Agreement.
(f) This Agreement has been duly and validly authorized, executed
and delivered by Alliance and each of the Guarantors.
(g) The Notes have been duly and validly authorized by Alliance for
issuance and conform in all material respects to the description thereof in
the Prospectus. The Notes, when executed by Alliance and authenticated by
the Trustee in accordance with the provisions of the Indenture, and
delivered to and paid for by the Underwriters in accordance with the terms
hereof, will have been duly executed, issued and delivered and will
constitute valid and binding obligations of Alliance, entitled to the
benefits of the Indenture enforceable against Alliance in accordance with
their terms, except that (i) the enforcement thereof may be subject to (A)
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
or other
<PAGE>
-7-
similar laws now or hereafter in effect relating to creditors' rights
generally and (B) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought (regardless of
whether such enforcement is considered in a proceeding in equity or at
law), (each of clauses (A) and (B), an "Enforceability Limitation") and
-------------------------
(ii) the enforceability of any indemnification or contribution provisions
thereof may be limited under applicable securities laws or the public
policies underlying such laws.
(h) The Guarantees have been duly and validly authorized for
issuance and sale to the Underwriters by the Guarantors and, when the Notes
are duly and validly authorized, executed, issued and authenticated in
accordance with the terms of the Indenture and delivered against payment
therefor in accordance with the terms hereof, will be the valid and binding
obligations of each of the Guarantors, enforceable against each of the
Guarantors in accordance with their terms and entitled to the benefits of
the Indenture, except that the enforcement thereof may be subject to the
Enforceability Limitations and the enforceability of any indemnification or
contribution provisions thereof may be limited under applicable securities
laws or the public policies underlying such laws.
(i) The Indenture has been duly authorized by Alliance and each of
the Guarantors and, when executed and delivered by Alliance and each of the
Guarantors (assuming the due authorization, execution and delivery thereof
by the Trustee), will constitute a valid and binding agreement of Alliance
and the Guarantors, enforceable against each of them in accordance with its
terms, except that the enforcement thereof may be subject to the
Enforceability Limitations and the enforceability of any indemnification or
contribution provisions thereof may be limited under applicable securities
laws or the public policies underlying such laws. The Indenture has been
qualified under the Trust Indenture Act and complies as to form in all
material
<PAGE>
-8-
respects with the requirements of the Trust Indenture Act.
(j) The Credit Agreement has been duly authorized by Alliance and
each of the Guarantors and, when duly executed and delivered by Alliance,
will be the valid and binding obligation of Alliance and the Guarantors
enforceable against each of them in accordance with its terms, except that
the enforcement thereof may be subject to the Enforceability Limitations
and the enforceability of any indemnification or contribution provisions
thereof may be limited under applicable securities laws or the public
policies underlying such laws.
(k) Alliance and each of the Guarantors has the requisite corporate
power and authority to enter into the Transactions (to the extent each is a
party thereto).
(l) Except as described in the Prospectus, no consent, approval,
authorization or order of any court or governmental agency or body is
required for the performance of the Operative Documents or the Transactions
by Alliance and the Guarantors or of any of the transactions contemplated
hereby or thereby, except such as have been obtained or are contemplated to
be obtained by the Prospectus and such as may be required under the Act,
the Trust Indenture Act or state securities or "Blue Sky" laws in
connection with the purchase and distribution of the Securities by the
Underwriters and in connection with the Transactions. Neither Alliance or
any of the Subsidiaries is (i) in violation of its certificate of
incorporation or bylaws, (ii) in violation of any statute, judgment,
decree, order, rule or regulation applicable to any of them or any of their
respective properties or assets which violation would have a Material
Adverse Effect, or (iii) in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate or other agreement or instrument
to which any
<PAGE>
-9-
of them is subject (collectively, the "Contracts"), which default would
---------
have a Material Adverse Effect.
(m) The execution, delivery and performance by Alliance and the
Guarantors of the Operative Documents and the consummation of the
Transactions (to the extent each such person is a party thereto) and the
transactions contemplated hereby and thereby will not conflict with or
constitute or result in a breach or violation of any of (x) the terms or
provisions of, or constitute a default by any of them under, any of the
Contracts, which conflict, breach, violation or default, individually or in
the aggregate, would have a Material Adverse Effect, (y) the certificate of
incorporation or bylaws of any such person, or (z) any statute, judgment,
decree, order, rule or regulation (excluding state securities and "Blue
Sky" laws) of any court or governmental agency or other body applicable to
any such person, or any of their respective properties, which conflict,
breach, violation or default, individually or in the aggregate, would have
a Material Adverse Effect.
(n) Each of the Transactions conforms in all material respects to
the description thereof in the Prospectus.
(o) The fair value and present fair saleable value of the assets of
Alliance and each of the Guarantors exceeds the sum of its stated
liabilities and identified contingent liabilities; and after giving effect
to the Transactions and the consummation of the transactions contemplated
thereby and by the Prospectus, Alliance and each of the Guarantors will not
be (a) left with unreasonably small capital with which to carry on its
business as it is proposed to be conducted, (b) unable to pay its debts
(contingent or otherwise) as they mature or (c) insolvent.
(p) The audited and unaudited consolidated financial statements of
Alliance and the related notes included in the Prospectus present fairly in
all material respects the consolidated financial position, results of
operations and cash flows of Alliance at the dates and for the periods to
<PAGE>
-10-
which they relate, and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis.
(q) The pro forma financial statements and other pro forma financial
information (including the notes thereto) included in the Prospectus have
been prepared in accordance with applicable requirements of Regulation S-X
promulgated under the Exchange Act and have been properly computed on the
bases described therein. The assumptions used in the preparation of the
pro forma financial statements and other pro forma financial information
included in the Prospectus are reasonable and the adjustments used therein
are appropriate to give effect to the transactions or circumstances
referred to therein in all material respects.
(r) Ernst & Young LLP, which has audited certain of such financial
statements and schedules as set forth in their reports included in the
Registration Statement and the Prospectus, is an independent public
accounting firm as required by the Act.
(s) Except as described in the Prospectus, there is not pending or,
to the knowledge of Alliance, threatened any action, suit, proceeding,
inquiry or investigation to which Alliance or the Guarantors or any of
their respective property is subject, before or brought by any court or
governmental agency or body, which could reasonably be expected to have a
Material Adverse Effect.
(t) Alliance and the Guarantors have obtained all licenses, permits,
franchises and other governmental authorizations necessary to conduct their
respective business as described in the Prospectus and the lack of which
would have a Material Adverse Effect.
(u) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and except as
described therein or contemplated thereby, none of Alliance or the
Guarantors has incurred
<PAGE>
-11-
any material liabilities or obligations, direct or contingent, or entered
into any material transactions, not in the ordinary course of business.
(v) Except as described in the Prospectus, (A) each of Alliance and
the Guarantors is in compliance with and not subject to liability under
applicable Environmental Laws (as defined below), (B) each of Alliance and
the Guarantors has made all filings and provided all notices required under
any applicable Environmental Law, and is in compliance with all permits
required under any applicable Environmental Laws, (C) there is no civil,
criminal or administrative action, suit, demand, claim, hearing, notice of
violation, investigation, proceeding, notice or demand letter or request
for information pending or threatened against Alliance or any of the
Guarantors under any Environmental Law, (D) no lien, charge, encumbrance or
restriction has been recorded under any Environmental Law with respect to
any assets, facility or property owned, operated, leased or controlled by
Alliance or any of the Guarantors, (E) none of Alliance or the Guarantors
has received notice that it has been identified as a potentially
responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or any
------
comparable state law, and (F) no property or facility of Alliance or any of
the Guarantors is (i) listed or, to Alliance's knowledge, proposed for
listing on the National Priorities List under CERCLA or is (ii) listed in
the Comprehensive Environmental Response, Compensation, Liability
Information System List promulgated pursuant to CERCLA, or, to Alliance's
knowledge, on any comparable list maintained by any state or local
governmental authority; except, in the case of clauses (A), (B) and (D) for
such noncompliance with applicable Environmental Laws, failures to make
filings and provide notices under applicable Environmental Laws and
recording of liens, charges, encumbrances or restrictions under any
Environmental Laws that, individually or in the aggregate, has not had a
Material Adverse Effect and would
<PAGE>
-12-
not reasonably be expected to have a Material Adverse Effect
For purposes of this Agreement, "Environmental Laws" means the common law
------------------
and all applicable federal, state and local laws or regulations, codes,
orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder, relating to pollution or protection of public health
and safety or the environment, including, without limitation, laws relating
to (i) emissions, discharges, releases or threatened releases of hazardous
materials into the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata), (ii)
the manufacture, processing, distribution, use, generation, treatment,
storage, disposal, transport or handling of hazardous materials, and (iii)
underground and above ground storage tanks and related piping, and
emissions, discharges, releases or threatened releases therefrom.
(w) There is no strike, labor dispute, slowdown or work stoppage
with the employees of Alliance or any of the Guarantors which is pending
or, to the knowledge of Alliance, threatened.
(x) Each of Alliance and the Guarantors carries insurance (including
self-insurance) in such amounts and covering such risks as would be
obtained by companies in the same or similar businesses in the ordinary
course for the conduct of its business and the value of its properties.
(y) Each of Alliance and the Guarantors has good title to all
personal property described in the Prospectus as being owned by it and good
and marketable title to a leasehold estate in the real and personal
property described in the Prospectus as being leased by it free and clear
of all liens, charges, encumbrances or restrictions, except as described in
the Prospectus or to the extent the failure to have such title or the
existence of such liens,
<PAGE>
-13-
charges, encumbrances or restrictions would not, individually or in the
aggregate, have a Material Adverse Effect.
(z) None of Alliance or the Guarantors has any liability for any
prohibited transaction or accumulated funding deficiency (within the
meaning of Section 412 of the Code) or any complete or partial withdrawal
liability with respect to any pension, profit sharing or other plan which
is subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), to which Alliance or any of the Guarantors makes or
-----
ever has made a contribution and in which any employee of Alliance or any
of the Guarantors is or has ever been a participant. With respect to such
plans, Alliance and each of the Guarantors is in compliance in all material
respects with all applicable provisions of ERISA.
(aa) Neither Alliance nor any of the Guarantors or any agent acting
on behalf of them, has taken or will take any action that might cause this
Agreement or the issuance or sale of the Securities to violate Regulation
G, T, U or X of the Board of Governors of the Federal Reserve System as in
effect on the Closing Date.
(bb) Neither Alliance nor any of the Guarantors is now, and after
giving effect to the Transactions and the other transactions contemplated
by the Prospectus will be, required to register as an "investment company"
or a company "controlled by" an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(cc) All taxes, assessments, fees and other charges (including,
without limitation, withholding taxes, penalties, and interest) due or
claimed to be due from Alliance and the Guarantors that are due and payable
have been paid, other than those being contested in good faith or those
currently payable without penalty or interest and for which an adequate
reserve or accrual has been established in accordance with generally
accepted accounting principles, and except where the failure so to pay
would not, individually or in the aggregate, have a Material Adverse
<PAGE>
-14-
Effect. Neither Alliance or any of the Guarantors knows of any actual or
proposed additional tax assessments for any fiscal period against Alliance
or the Guarantors, individually or in the aggregate, which would have a
Material Adverse Effect.
(dd) Alliance has delivered to the Underwriters a true and correct
copy of each of the documents contemplated by the Transactions, together
with all related agreements and all schedules and exhibits thereto, and
there shall have been no material amendments, alterations, modifications or
waivers of any of the provisions of any such documents since their
respective dates of execution, other than any such amendments, alterations,
modifications and waivers as to which the Underwriters have been advised in
writing and which would be required to be disclosed in the Prospectus; and
to the best knowledge of Alliance and the Guarantors there exists no event
or condition which would constitute a default or an event of default under
any of the documents contemplated by the Transactions which would result in
a Material Adverse Effect or materially adversely affect the ability of
Alliance and the Guarantors to consummate the Transactions.
Any certificate signed by any officer of Alliance or any of the
Guarantors and delivered to the Underwriters or to counsel for the Underwriters
shall be deemed a joint and several representation and warranty by Alliance and
the Guarantors to each Underwriter as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Securities. On the basis of the
----------------------------------------------
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, Alliance agrees to issue
and sell to the Underwriters, and each of the Underwriters severally agrees to
purchase from Alliance, at [ ]% of their principal amount, the respective
aggregate principal amounts of the Notes set forth opposite their respective
names on Exhibit B hereto. The obligations of the Underwriters under this
Agreement are several and not joint. One or more certificates in definitive
form for the Notes that the Underwriters have agreed to purchase
<PAGE>
-15-
hereunder, and in such denomination or denominations and registered in such name
or names as the Underwriters request upon notice to Alliance at least two
business days prior to the Closing Date, shall be delivered by or on behalf of
Alliance, against payment by or on behalf of the Underwriters, of the purchase
price therefor by wire transfer of immediately available funds to the account of
Alliance previously designated by it in writing. Such delivery of and payment
for the Securities shall be made at the offices of Cahill Gordon & Reindel, 80
Pine Street, New York, New York 10005, at 10:00 a.m. New York time, on [ ],
1997, or at such other place, time or date as the Underwriters and Alliance may
agree upon, such time and date of delivery against payment being herein referred
to as the "Closing Date." Alliance will make such certificate or certificates
------------
for the Notes available for checking and packaging by the Underwriters at the
offices in New York, New York of BT Securities Corporation at least 24 hours
prior to the Closing Date.
4. Offering by the Underwriters. After the Registration Statement
----------------------------
becomes effective, the Underwriters propose to offer for sale to the public the
Securities at the price and upon the terms set forth in the Prospectus.
5. Certain Covenants. Each of the Issuers covenants and agrees
-----------------
with the Underwriters that:
(a) The Issuers will use all reasonable efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, and any amendments thereto, to become effective promptly. If, at
the time the Registration Statement becomes effective, any information
shall have been omitted therefrom in reliance upon Rule 430A of the rules
and regulations of the Commission under the Act, then immediately following
the execution of this Agreement, the Issuers will prepare, and thereafter
the Issuers will file or transmit for filing with the Commission in
accordance with such Rule 430A and Rule 424(b) of the rules and regulations
of the Commission under the Act, copies of an amended Prospectus relating
to such Registration Statement, or, if required by such Rule 430A, a
<PAGE>
-16-
post-effective amendment to such Registration Statement (including an
amended Prospectus), containing all information so omitted. The Issuers
will give each Underwriter notice of their intention to file any amendment
to any Registration Statement (including any post-effective amendment) or
any amendment or supplement to any Prospectus (including any revised
prospectus which the Issuers propose for use by the Underwriters in
connection with the offering of the Securities which differs from any
prospectus on file at the Commission at the time the Registration Statement
including such prospectus becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the rules and
regulations of the Commission under the Act), will furnish the Underwriters
with copies of any such amendment or supplement a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file
any such amendment or supplement or use any such prospectus to which the
Underwriters shall reasonably object in writing or which is not in
compliance with the Act unless the Company is advised that in the opinion
of counsel such filing is required by applicable law. The Issuers will
advise the Underwriters, promptly after any of them receive notice thereof,
of the time when the Registration Statement or any amendment thereto has
been filed or declared effective or the Prospectus or any amendment or
supplement thereto has been filed and will provide evidence satisfactory to
the Underwriters of such filing or effectiveness.
(b) The Issuers will advise the Underwriters, promptly after
receiving notice or obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any amendment thereto or any order preventing or
suspending the use of any Preliminary Prospectus or any Prospectus, or any
amendment or supplement thereto, (ii) the suspension of the qualification
of the Securities for offering or sale in any jurisdiction, (iii) the
institution, threatening or contemplation of any proceeding for any such
purpose or (iv) any request made by the Commission
<PAGE>
-17-
for amending any Registration Statement, for amending or supplementing the
Prospectus or for additional information. The Issuers will use their best
efforts to prevent the issuance of any such stop order and, if any such
stop order is issued, to obtain the withdrawal thereof as promptly as
possible.
(c) The Issuers will cooperate with the Underwriters in arranging
for the qualification of the Notes for offering and sale under the
securities or "Blue Sky" laws of such jurisdictions as the Underwriters may
designate and will continue such qualifications in effect for as long as
may be necessary to complete the initial distribution of the Notes by the
Underwriters; provided, however, that in connection therewith the Issuers
-------- -------
shall not be required to qualify as a foreign corporation or to execute a
general consent to service of process in any jurisdiction, to take any
other action that would subject it to general service of process or to
taxation in respect of doing business.
(d) If, at any time when a Prospectus relating to the Securities is
required to be delivered under the Act, any event shall occur as a result
of which it is necessary, in the opinion of counsel for the Underwriters,
to amend or supplement any Prospectus in order to make such Prospectus not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if for any other reason it shall be necessary
to amend or supplement the Prospectus in order to comply with the Act and
the Exchange Act, the Issuers shall (subject to Section 5(a)) forthwith
amend or supplement such Prospectus so that, as so amended or supplemented,
such Prospectus will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is
delivered to a purchaser, not misleading and will comply with the Act and
the Exchange Act, and the Issuers will furnish to the Underwriters a
reasonable number of copies of such amendment or supplement.
<PAGE>
-18-
(e) The Issuers will without charge, provide (i) to each Underwriter
and to counsel for the Underwriters a signed copy of each registration
statement originally filed with respect to the Securities and each
amendment thereto (in each case including exhibits thereto) and (ii) so
long as a prospectus relating to the Securities is required to be delivered
under the Act, as many copies of the Preliminary Prospectus or Prospectus
or any amendment or supplement thereto as the Underwriters may reasonably
request.
(f) Subject to Section 5(a), the Issuers will timely complete all
required filings and otherwise comply fully in a timely manner with all
provisions of the Exchange Act and promptly file all reports and any
definitive proxy or information statements required to be filed by the
Issuers with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and for so
long as the delivery of a prospectus is required in connection with the
offer or sale of any of the Notes.
(g) The Issuers will make generally available to its security
holders as soon as practicable, but not later than 90 days after the close
of the period covered thereby, an earning statement (in form complying with
the provisions of Rule 158 of the rules and regulations of the Commission
under the Act) covering a twelve-month period beginning not later than the
first day of the fiscal quarter of the Issuers next following the
"effective date" (as defined in Rule 158) of the Registration Statement.
(h) The Issuers will apply the net proceeds from the sale of the
Securities as set forth in the Prospectus.
(i) Prior to the Closing Date, the Issuers will furnish to the
Underwriters, as soon as they have been prepared by or are available to the
Issuers, a copy of any unaudited interim financial statements of the
Issuers for any period subsequent to the period covered by the most
<PAGE>
-19-
recent financial statements appearing in the Registration Statement and the
Prospectus.
6. Expenses. The Issuers agree to pay all costs and expenses
--------
incident to the performance of their obligations under this Agreement, whether
or not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 10 hereof, including, but not limited to, all
costs and expenses incident to (i) the printing, word processing or other
production of documents with respect to such transactions, including any costs
of printing the registration statement originally filed with respect to the
Securities and any amendments thereto, any Preliminary Prospectus and any
Prospectus and any amendments or supplements thereto, and any "Blue Sky"
memoranda, (ii) all arrangements relating to the delivery to the Underwriters of
copies of the foregoing documents, (iii) the fees and disbursements of the
counsel, the accountants and any other experts or advisors retained by the
Issuers, (iv) the preparation, issuance and delivery to the Underwriters of any
certificates evidencing the Securities, (v) the qualification of the Securities
under state securities and "Blue Sky" laws, including filing fees and reasonable
fees and disbursements of counsel for the Underwriters relating thereto, (vi)
the filing fees of the Commission and the National Association of Securities
Dealers, Inc. relating to the Securities, (vii) expenses in connection with any
meetings with prospective investors in the Securities, (viii) fees and expenses
of the Trustee, including fees and expenses of its counsel, (ix) advertising
relating to the offering of the Securities (other than as shall have been
specifically approved by the Underwriters to be paid for by the Underwriters),
and (x) any fees charged by investment rating agencies for the rating of the
Securities. If the sale of the Securities provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 7 hereof is not satisfied, because this Agreement is terminated or
because of any failure, refusal or inability on the part of the Issuers to
perform all obligations and satisfy all conditions on their part to be performed
or satisfied hereunder (other than solely by reason of a default by the
Underwriters of their obligations
<PAGE>
-20-
hereunder after all conditions hereunder have been satisfied in accordance
herewith), the Issuers agree to promptly reimburse the Underwriters upon demand
for all out-of-pocket expenses (including all counsel fees and disbursements)
that shall have been incurred by the Underwriters in connection with the
proposed purchase and sale of the Securities and any other transactions
contemplated by this Agreement.
7. Conditions of the Underwriters' Obligations. The obligation of the
-------------------------------------------
Underwriters to purchase and pay for the Securities are subject to the accuracy
of the representations and warranties contained herein, to the performance by
the Issuers of their covenants and agreements hereunder and in satisfaction of
the following additional conditions:
(a) If the registration statement originally filed with respect to
the Securities, or any amendment thereto filed prior to the Closing Date
has not been declared effective as of the time of execution hereof, such
registration statement or such amendment shall have been declared effective
not later than 10:00 a.m., New York City time, on the date on which the
amendment to such registration statement originally filed with respect to
the Securities, or to the Registration Statement, as the case may be,
containing information regarding the initial public offering price of the
Securities has been filed with the Commission, or such later time and date
as shall have been consented to by the Underwriters; if required, the
Prospectus and any amendment or supplement thereto shall have been filed in
accordance with Rule 424(b) under the Act; no amendment to the Registration
Statement shall have been filed to which the Underwriters have objected
pursuant to Section 5(a) hereto; no stop order suspending the effectiveness
of the Registration Statement or any amendment thereto or the qualification
of the Indenture under the Trust Indenture Act shall have been issued and
no proceedings for that purpose shall have been instituted or to the
knowledge of the Issuers or the Underwriters, shall be threatened or
contemplated by the Commission.
<PAGE>
-21-
(b) The Underwriters shall have received an opinion in form and
substance satisfactory to the Underwriters, dated the Closing Date, of
O'Sullivan Graev and Karabell LLP, special counsel to the Issuers,
substantially in the form of Exhibit C hereto.
(c) The Underwriters shall have received an opinion in form and
substance satisfactory to the Underwriters, dated the Closing Date, of
Irell & Manella LLP, counsel to the Issuers, substantially in the form of
Exhibit D hereto.
(d) The Underwriters shall have received an opinion in form and
substance satisfactory to the Underwriters, dated the Closing Date, of [ ],
Pennsylvania counsel to Alliance, substantially in the form of Exhibit E
hereto.
(e) The Underwriters shall have received an opinion in form and
substance satisfactory to the Underwriters, dated the Closing Date, of [ ],
Georgia counsel to the Issuers, substantially in the form of Exhibit F
hereto.
(f) The Underwriters shall have received an opinion, dated the
Closing Date, of Cahill Gordon & Reindel, counsel for the Underwriters,
with respect to the sufficiency of certain corporate proceedings and other
legal matters relating to this Agreement, and such other related matters as
the Underwriters may require. In rendering such opinion, Cahill Gordon &
Reindel shall have received and may rely upon such certificates and other
documents and information as they may reasonably request to pass upon such
matters. In addition, in rendering their opinion, Cahill Gordon & Reindel
may state that their opinion is limited to matters of New York, Delaware
corporate and federal law.
(g) The Underwriters shall have received from Ernst & Young LLP,
independent public accountants for Alliance, letters dated, respectively,
the date hereof and the Closing
<PAGE>
-22-
Date, in form and substance satisfactory to the Underwriters.
(h) The Underwriters shall have received a certificate, dated the
Closing Date, of the Chief Financial Officer of Alliance, to the effect
that the representations and warranties contained in Section 2(o) of this
Agreement are true and correct in all material respects as if made on and
as of the Closing Date.
(i) The representations and warranties of the Issuers contained in
this Agreement shall be true and correct in all material respects on and as
of the Closing Date (other than to the extent any such representation or
warranty is expressly made as to a certain date); and the Issuers shall
have complied in all material respects with all agreements and satisfied
all conditions on their part to be performed or satisfied hereunder at or
prior to the Closing Date.
(j) The Recapitalization and the transactions contemplated thereby
shall have been consummated concurrently with the Offering.
(k) The Credit Agreement shall have been executed and delivered by
all parties thereto.
(l) Subsequent to the respective dates of the most recent financial
statements of Alliance contained in the Prospectus, there shall have been
no material adverse change in the business, condition (financial or other)
results of operations or prospects of Alliance and the Subsidiaries taken
as a whole (a "Material Adverse Change") or any development which could
-----------------------
reasonably be expected to result in a Material Adverse Change, except as
set forth in, or contemplated by, the Prospectus.
(m) None of the issuance and sale of the Securities pursuant to this
Agreement or the other Transactions shall be enjoined (temporarily or
permanently) and no restraining order or other injunctive order shall have
been issued
<PAGE>
-23-
or any action, suit or proceeding shall have been commenced
with respect to this Agreement or the Transactions before any court or
governmental authority.
(n) The Underwriters shall have received certificates, dated the
Closing Date, of the appropriate officers of Alliance and each of the
Guarantors as to such person, to the effect that:
(A) The representations and warranties of such person in this Agreement
are true and correct in all material respects as if made on and as of the
Closing Date and such person has performed in all material respects all
covenants and agreements and satisfied in all material respects all
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(B) No stop order suspending the effectiveness of the Registration
Statement or any amendment thereto or the qualification of the Indenture
under the Trust Indenture Act has been issued, and no proceedings for those
purposes have been instituted or, to the best of such person's knowledge,
are threatened or contemplated by the Commission; and
(C) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been any
Material Adverse Change except as set forth in or contemplated by the
Prospectus.
(o) On the Closing Date, Alliance shall have, to the extent a party
thereto, complied in all material respects with all agreements and
covenants in all documents contemplated by the Transactions and satisfied
all conditions specified therein to be complied with or performed at or
prior to the Closing Date, and each of the documents contemplated by the
Transactions shall be in full force and effect.
<PAGE>
-24-
(p) On the Closing Date, the Underwriters shall have received copies
of all certificates, documents and opinions, reasonably requested by the
Underwriters, delivered by Alliance or any of its counsel and such other
certificates, documents and opinions reasonably obtainable by Alliance
pursuant to the Transactions.
On or before the Closing Date, the Underwriters shall have received
such further documents, opinions, certificates and schedules or instruments
relating to the business, corporate, legal and financial affairs of Alliance and
Newco as they shall have theretofore reasonably requested.
All such opinions, certificates, letters, schedules, documents or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Underwriters. The Issuers shall furnish to the Underwriters such conformed
copies of such opinions, certificates, letters, schedules, documents and
instruments in such quantities as the Underwriters shall reasonably request.
8. Indemnification and Contribution. (a) Each of the Issuers
--------------------------------
agree, jointly and severally, to indemnify and hold harmless each Underwriter,
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter or
such controlling person may become subject under the Act, the Exchange Act or
otherwise, insofar as any such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or any amendment thereto or
any Preliminary Prospectus or any Prospectus or any amendment or supplement
thereto or
(ii) the omission or alleged omission to state, in the Registration
Statement or any amendment thereto, any
<PAGE>
-25-
Preliminary Prospectus or any Prospectus or any amendment or supplement
thereto, a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, and will reimburse, as incurred, each
Underwriter and each such controlling person for any reasonable and
documented out-of-pocket legal or other expenses reasonably incurred by the
Underwriters or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with
any such loss, claim, damage, liability or action; provided, however, that
-------- -------
none of the Issuers will be liable in any such case to an Underwriter to
the extent that any such loss, claim, damage or liability arises out of or
is based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in the Registration Statement or any amendment
thereto, any Preliminary Prospectus or any Prospectus or any amendment or
supplement thereto, or any Application in reliance upon and in conformity
with written information furnished to the Issuers by or on behalf of any of
such Underwriter specifically for use therein; and provided, further, that
-------- -------
none of the Issuers will be liable to an Underwriter or any person
controlling such Underwriter with respect to any such untrue statement or
omission made in any Preliminary Prospectus that is corrected in the
Prospectus (or any amendment or supplement thereto) if the person asserting
any such loss, claim, damage or liability purchased Securities from such
Underwriter in reliance upon the Preliminary Prospectus or Prospectus but
was not sent or given a copy of the Prospectus (as amended or supplemented)
at or prior to the written confirmation of the sale of such Securities to
such person in any case where such delivery of such Prospectus or
Prospectus (as so amended or supplemented) is required by the Act, unless
such failure to deliver such Prospectus (as amended or supplemented) was a
result of noncompliance by the Issuers with Section 5(e)(ii) of this
Agreement. This indemnity agreement will be in addition to any liability
that the Issuers may otherwise have to the indemnified parties.
<PAGE>
-26-
None of the Issuers will, without the prior written consent of the
Underwriters, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect
of which indemnification from the Underwriters may be sought hereunder
(whether or not the Underwriters or any person who controls either of the
Underwriters within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act is a party to such claim, action, suit or proceeding),
unless such settlement, compromise or consent includes an unconditional
release of the Underwriters and each such controlling person from all
liability arising out of such claim, action, suit or proceeding.
(b) Each Underwriter will severally and not jointly indemnify and
hold harmless the Issuers, their directors, officers who signed the
Registration Statement and each person, if any, who controls any of the
Issuers within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any losses, claims, damages or liabilities to which
any of the Issuers or any such director, officer or controlling person may
become subject under the Act, the Exchange Act, or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or
any amendment thereto, any Preliminary Prospectus or any Prospectus or any
amendment or supplement thereto or (ii) the omission or the alleged
omission to state therein a material fact required to be stated in the
Registration Statement or any amendment thereto, any Preliminary Prospectus
or any Prospectus or any amendment or supplement thereto, or necessary to
make the statements therein (in the case of any Preliminary Prospectus, any
Prospectus or any amendment or supplement thereto, in the light of the
circumstances under which such statements were made) not misleading, in
each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Issuers by or on behalf of such Underwriter specifically for use
<PAGE>
-27-
therein; and, subject to the limitation set forth immediately preceding
this clause, will reimburse, as incurred, any reasonable and documented
out-of-pocket legal or other expenses reasonably incurred by the Issuers or
any such director, officer or controlling person in connection with
investigating or defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action in
respect thereof. This indemnity agreement will be in addition to any
liability that the Underwriters may otherwise have to the indemnified
parties. The Underwriters will not, without the prior written consent of
the Issuers, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect
of which indemnification from the Issuers may be sought hereunder (whether
or not any of the Issuers or any person who controls any of the Issuers
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release any of
the Issuers and each such controlling person from all liability arising out
of such claim, action, suit or proceeding.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party of
the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 8 except to the extent
that such omission results in the forfeiture by the indemnifying party of
substantial rights and defenses. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided,
--------
however, that if the defendants in any such action include both the
-------
indemnified party and the indemnifying
<PAGE>
-28-
party and the indemnified party shall have reasonably concluded that there
may be one or more legal defenses available to it and/or other indemnified
parties that are different from or in addition to those available to any
such indemnifying party such that representation of both the indemnified
parties and the indemnifying parties by the same counsel is inappropriate
then the indemnifying parties shall not have the right to direct the
defense of such action on behalf of such indemnified party or parties and
such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses, other than reasonable and
documented out-of-pocket costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof, unless (i)
the indemnified party shall have employed separate counsel in accordance
with the proviso to the immediately preceding sentence (it being
understood, however, that in connection with such action the indemnifying
party shall not be liable for the expenses of more than one separate
counsel (in addition to local counsel) in any one action or separate but
substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Underwriters
in the case of paragraph (a) of this Section 8 or Alliance in the case of
paragraph (b) of this Section 8, representing the indemnified parties under
such paragraph (a) or paragraph (b), as the case may be, who are parties to
such action or actions) or (ii) the indemnifying party has authorized in
writing the employment of counsel for the indemnified party at the expense
of the indemnifying parties. After such notice from the indemnifying
parties to such indemnified party (so long as the indemnified party shall
have informed the indemnifying parties of such action in accordance with
this Section 8 on a timely basis prior to the indemnified party seeking
indemnification hereunder), the indemnifying parties will not be liable for
the costs and expenses of any settlement of such action
<PAGE>
-29-
effected by such indemnified party without the consent of the indemnifying
party, unless such indemnified party waived its rights under this Section
8, in which case the indemnified party may effect such a settlement without
such consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 8 is unavailable or insufficient
to hold harmless an indemnified party in respect of any losses, claims,
damages or liabilities (or actions in respect thereof), each indemnifying
party, in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect (i) the
relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the offering of the
Securities or (ii) if the allocation provided by the foregoing clause (i)
is not permitted by applicable law, not only such relative benefits but
also the relative fault of the indemnifying party or parties on the one
hand and the indemnified party on the other in connection with the
statements or omissions or alleged statements or omissions that resulted in
such losses, claims, damages or liabilities (or actions in respect
thereof). The relative benefits received by the Issuers on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion
as the total proceeds from the offering of the Securities (before deducting
expenses other than underwriting discounts and commissions) received by the
Issuers bear to the total underwriting discounts and commissions received
by the Underwriters. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuers on the one
hand, or the Underwriters on the other, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and any other equitable considerations appropriate
in the circumstances. The Issuers and the Underwriters agree that it would
not be equitable if the
<PAGE>
-30-
amount of such contribution were determined by pro rata or per capita
allocation (even if the Issuers on the one hand and the Underwriters on the
other hand were treated as one entity for such purpose) or by any other
method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), the Underwriters
shall not be obligated to make contributions hereunder that in the
aggregate exceed the total underwriting discounts and commissions received
by the Underwriters under this Agreement, less the aggregate amount of any
damages that the Underwriters have otherwise been required to pay by reason
of the untrue or alleged untrue statements or the omissions or alleged
omissions to state a material fact, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each
person, if any, who controls any of the Underwriters within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Underwriters, and each director and each
officer of the Issuers who signed the Registration Statement and each
person, if any, who controls the Issuers within the meaning of Section 15
of the Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Issuers.
9. Survival Clause. The respective representations, warranties,
---------------
agreements, covenants, indemnities and other statements of the Issuers, their
officers and the Underwriters set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Issuers, any of their officers or directors, the Underwriters or any
controlling person referred to in Section 8 hereof and (ii) delivery of and
payment for the Securities, and shall be binding upon and shall inure to the
benefit of, any successors, assigns, heirs, personal representatives of the
Issuers, the Issuers, the Underwriters and indemnified parties referred to in
Section 8 hereof. The respective agreements, covenants, indemnities and other
statements set
<PAGE>
-31-
forth in Sections 6 and 8 hereof shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement.
10. Termination. (a) This Agreement may be terminated in the sole
-----------
discretion of the Underwriters by notice to Alliance given in the event that the
Issuers shall have failed, refused or been unable to satisfy all conditions on
their part to be performed or satisfied hereunder on or prior to the Closing
Date or, if at or prior to the Closing Date:
(i) The Issuers shall have sustained any loss or interference with
respect to their respective businesses or properties from fire, flood,
hurricane, earthquake, accident or other calamity, whether or not covered
by insurance, or from any labor dispute or any legal or governmental
proceeding, which loss or interference has had or has a Material Adverse
Effect, or there shall have been any Material Adverse Change, or any
development involving a prospective Material Adverse Change (including
without limitation a change in management or control of any of the
Issuers), except as described in or contemplated by the Prospectus
(exclusive of any amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock Exchange,
Inc., the American Stock Exchange or the Nasdaq Stock Market shall have
been suspended or minimum or maximum prices shall have been established on
any such exchange;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (c) any material change in the financial
markets of the United States which, in the sole judgment of the
Underwriters, makes it impracticable or inadvisable to proceed
<PAGE>
-32-
with the public offering or the delivery of the Securities as contemplated
by the Registration Statement, as amended as of the date hereof; or
(v) any securities of the Issuers shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 10 shall
be without liability of any party to any other party except as provided in
Section 9 hereof.
11. Information Supplied by the Underwriters. The statements set
----------------------------------------
forth in the last paragraph on the front cover page, the last paragraph on page
ii, and the third paragraph, the second sentence in the fourth paragraph and the
sixth and seventh paragraphs under the caption "Underwriting" in the Prospectus
constitute the only information furnished by the Underwriters to the Issuers for
the purposes of Section 8 hereof.
12. Notices. All communications hereunder shall be in writing and,
-------
if sent to the Underwriters, shall be mailed, delivered or telecopied and
confirmed in writing to the Underwriters c/o BT Alex. Brown Incorporated, One
Bankers Trust Plaza, 130 Liberty Street, New York, New York 10005, Attention:
Corporate Finance Department, and with a copy to Cahill Gordon & Reindel, 80
Pine Street, New York, New York 10005, Attention: James J. Clark. If sent to the
Issuers, shall be mailed, delivered or telecopied confirmed in writing, to
Alliance Imaging, Inc., 1065 North PacifiCenter Drive, Suite 200, Anaheim,
California 92806, and with copies to O'Sullivan Graev & Karabell, LLP, 30
Rockefeller Plaza, New York, New York 10112, Attention: John J. Suydam, and
Irell & Manella LLP, 333 South Hope Street, Suite 3300, Los Angeles, California
90071, Attention: Anthony T. Iler.
13. Successors. This Agreement shall inure to the benefit of and
----------
be binding upon the Underwriters, the Issuers and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or
<PAGE>
-33-
shall be construed to give any other person any legal or equitable right, remedy
or claim under or in respect of this Agreement, or any provisions herein
contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (i) the indemnities of the
Issuers contained in Section 8 of this Agreement shall also be for the benefit
of any person or persons who control the Underwriters within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnities
of the Underwriters contained in Section 8 of this Agreement shall also be for
the benefit of the directors of the Issuers, their officers who have signed the
Registration Statement and any person or persons who controls the Issuers within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No
purchaser of Securities from the Underwriters will be deemed a successor because
of such purchase.
14. Entire Agreement. This Agreement constitutes the entire
----------------
agreement among the parties hereto and supersedes all prior agreements,
understandings and arrangements, oral or written, among the parties hereto with
respect to the subject matter hereof.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
--------------
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Issuers and
the Underwriters.
Very truly yours,
ISSUER:
ALLIANCE IMAGING, INC.
By:
================================
Name:
Title:
GUARANTORS:
ALLIANCE IMAGING OF OHIO, INC.
By:
================================
Name:
Title:
ALLIANCE IMAGING OF MICHIGAN, INC.
By:
================================
Name:
Title:
<PAGE>
-2-
ROYAL MEDICAL HEALTH SERVICES, INC.
By:
================================
Name:
Title:
ALLIANCE IMAGING OF CENTRAL GEORGIA, INC.
By:
================================
Name:
Title:
<PAGE>
-3-
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
BT ALEX. BROWN INCORPORATED
By:____________________________
Name:
Title:
SALOMON BROTHERS INC
By:____________________________
Name:
Title:
<PAGE>
Exhibit A
Subsidiaries
------------
[To be provided by O'Sullivan Graev & Karabell]
<PAGE>
Exhibit B
Underwriter Principal Amount of Notes
- ----------- -------------------------
Fixed Rate Notes Floating Rate Notes
---------------- -------------------
BT Alex. Brown Incorporated
Salomon Brothers Inc
<PAGE>
Exhibit C
---------
Form of Opinion of O'Sullivan Graev & Karabell, LLP
---------------------------------------------------
1. To the best of our knowledge, there is no action, suit, proceeding
or investigation pending or threatened against or affecting any of Alliance or
the Guarantors, any of their respective subsidiaries or any of their respective
properties or assets in any court or before any governmental authority or
arbitration board or tribunal that seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge any of the Transactions.
2. Assuming due authorization, execution and delivery by Alliance and
the Guarantors, the Indenture is the valid and legally binding agreement of
Alliance and each of the Guarantors, enforceable against Alliance and each of
the Guarantors in accordance with its terms, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
3. Assuming due authorization, execution and delivery by Alliance,
the Notes will conform in all material respects to the description thereof in
the Registration Statement and will be the legally valid and binding obligations
of Alliance, enforceable against Alliance in accordance with their terms, except
that the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a proceeding in
equity or at law).
<PAGE>
-2-
4. Assuming due authorization, execution and delivery by the
Guarantors, the Guarantees will conform in all material respects to the
description thereof in the Registration Statement and will be the legally valid
and binding obligations of each of the Guarantors, enforceable against each of
the Guarantors in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
5. To the best of our knowledge, no consent, approval, authorization
or order of, or filing with any or governmental entity or body is required for
the issuance and sale of the Securities by Alliance and the Guarantors pursuant
to the Underwriting Agreement or pursuant to the Indenture, except (i) such as
have been obtained or made under the Act or the Trust Indenture Act or
otherwise, and (ii) such as may be required under state securities laws in
connection with the purchase and distribution of the Securities by the
Underwriters.
6. The Indenture has been duly qualified under the Trust Indenture
Act.
7. The Registration Statement has become effective under the Act and,
to the best of our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued under the Act and no proceedings therefor
have been initiated by the Commission. Any required filing of the Prospectus
pursuant to Rule 424(b) under the Act has been made in accordance with Rules
424(b) and 430A under the Act.
8. The Registration Statement and the Prospectus comply as to form in
all material respects with the applicable requirements for registration
statements on Form S-2 under the Act, the Trust Indenture Act and the rules and
regulations of the Commission thereunder; it being understood, however, that we
express no opinion with respect to the financial statements,
<PAGE>
-3-
schedules and other financial and statistical data included in or omitted from
the Registration Statement or Prospectus.
9. To the best of our knowledge, there are no contracts or documents
of a character required to be described in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration Statement that are not
described or filed as required.
10. The Transactions conform in all material respects to the
descriptions thereof in the Prospectus.
11. Neither the Company nor any of its subsidiaries is subject to
registration and regulation as an "investment company" or a company "controlled
by" and "investment company" within the meaning of the Investment Company Act
and the rules and regulations of the Commission thereunder.
12. Neither the issuance or sale of the Notes nor the application of
the net proceeds thereof as set forth in the Prospectus will violate Regulation
G, T, U or X of the Board of Governors of the Federal Reserve System.
In addition, we have participated in conferences with officers and
other representatives of Alliance and the Guarantors, representatives of the
independent public accountants for Alliance and the Guarantors and your
representatives, at which the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although we are not passing
upon, and do not assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus and have not made any independent check or verification thereof,
during the course of such participation (relying as to materiality to a large
extent upon the statements of officers and other representatives of Alliance and
the Guarantors), no facts came to our attention that caused us to believe that
the Registration Statement, at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus, as
<PAGE>
-4-
of its date or as of the Closing Date, contained or contains an untrue statement
of a material fact or omitted or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; it being understood that we express no opinion with
respect to the financial statements, schedules and other financial and
statistical data included in or omitted from the Registration Statement or the
Prospectus or with respect to the Form T-1.
<PAGE>
Exhibit D
---------
Form of Opinion of Irell & Manella LLP
--------------------------------------
1. Each of Alliance, Alliance of Ohio, Inc. and Alliance of Michigan,
Inc. (collectively, the "Delaware Companies") are corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware
with corporate power and authority to own or lease their properties and to
conduct their businesses as now conducted as described in each Prospectus.
2. Each of Alliance and the Guarantors has the corporate power and
authority to execute, deliver and perform its respective obligations under the
Underwriting Agreement, the Indenture and the Securities and to issue the
Securities to be issued by it pursuant to the Indenture.
3. The Indenture has been duly authorized, executed and delivered by
the Delaware Companies.
4. The Notes have been duly and validly authorized by Alliance for
issuance.
5. The Guarantees have been duly authorized by each of Alliance
Imaging of Ohio, Inc. and Alliance Imaging of Michigan, Inc.
6. The Underwriting Agreement has been duly authorized, executed and
delivered by the Delaware Companies; the execution and delivery of the
Underwriting Agreement, the Indenture and the Securities by Alliance and the
Guarantors, and the issuance and sale of the Securities pursuant to the
Underwriting Agreement and the performance of the Transactions do not and will
not conflict with or constitute or result in a breach or a default under (or an
event which with notice or passage of time or both would constitute a default
under) or violation of or cause an acceleration of any obligation under, or on
any properties or assets of Alliance or any Guarantor with respect to (i) the
terms or provisions of any Contract set
<PAGE>
-2-
forth as an exhibit to such counsel's opinion, except for any such conflict,
breach, violation, default or event which would not, individually or in the
aggregate, have a Material Adverse Effect, or (ii) the certificate of
incorporation or bylaws of the Delaware Companies, or (iii) any statute, rule or
regulation known to such counsel to be of general applicability to, or any
judgment, decree or order known to such counsel to be applicable to, Alliance or
any Guarantor or any of their respective properties or assets, except for any
such conflict, breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect.
7. To the best of our knowledge, there are no contracts or documents
of a character required to be described in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration Statement that are not
described or filed as required.
In addition, we have participated in conferences with officers and
other representatives of Alliance and the Guarantors, representatives of the
independent public accountants for Alliance and the Guarantors and your
representatives, at which the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although we are not passing
upon, and do not assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus and have not made any independent check or verification thereof,
during the course of such participation (relying as to materiality to a large
extent upon the statements of officers and other representatives of Alliance and
the Guarantors), no facts came to our attention that caused us to believe that
the Registration Statement, at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus, as of its date or as of the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made,
<PAGE>
-3-
not misleading; it being understood that we express no opinion with respect to
the financial statements, schedules and other financial and statistical data
included in or omitted from the Registration Statement or the Prospectus or with
respect to the Form T-1.
<PAGE>
================================================================================
ALLIANCE IMAGING, INC.,
as Issuer,
the GUARANTORS named herein,
as Guarantors,
and
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
__________________
INDENTURE
Dated as of , 1997
__________________
up to $265,000,000
__________________
$125,000,000 [ ]% Senior Subordinated Notes due 2005
$40,000,000 Senior Subordinated Floating Rate Notes due 2005
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- --------------
310(a)(1)................................... 7.10
(a)(2)................................... 7.10
(a)(3)................................... N.A.
(a)(4)................................... N.A.
(a)(5)................................... 7.08; 7.10
(b)...................................... 7.08; 7.10; 13.02
(c)...................................... N.A.
311(a)...................................... 7.11
(b)...................................... 7.11
(c)...................................... N.A.
312(a)................................... 2.05
(b)...................................... 13.03
(c)...................................... 13.03
313(a)...................................... 7.06
(b)(1)................................... 7.06
(b)(2)................................... 7.06
(c)...................................... 7.06; 13.02
(d)...................................... 7.06
314(a)...................................... 4.08; 4.10; 13.02
(b)...................................... N.A.
(c)(1)................................... 7.02; 13.04; 13.05
(c)(2)................................... 7.02; 13.04; 13.05
(c)(3)................................... N.A.
(d)...................................... N.A.
(e)...................................... 13.05
(f)...................................... N.A.
315(a)...................................... 7.01(b)
(b)...................................... 7.05
(c)...................................... 7.01
(d)...................................... 6.05; 7.01(c)
(e)...................................... 6.11
316(a)(last sentence)....................... 2.09
(a)(1)(A)................................ 6.05
(a)(1)(B)................................ 6.04
====================
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of the Indenture
<PAGE>
(a)(2)................................... 9.05
(b)...................................... 6.07
(c)...................................... 9.05
317(a)(1)................................... 6.08
(a)(2)................................... 6.09
(b)...................................... 2.04
318(a)...................................... 13.01
(c)...................................... 13.01
====================
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of the Indenture
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C>
SECTION 1.01. Definitions.................................................................... 1
SECTION 1.02. Incorporation by Reference of TIA.............................................. 26
SECTION 1.03. Rules of Construction.......................................................... 27
</TABLE>
ARTICLE TWO
THE SECURITIES
<TABLE>
<S> <C>
SECTION 2.01. Form and Dating................................................................ 28
SECTION 2.02. Execution and Authentication................................................... 28
SECTION 2.03. Registrar and Paying Agent..................................................... 29
SECTION 2.04. Paying Agent To Hold Assets in Trust........................................... 30
SECTION 2.05. Holder Lists................................................................... 31
SECTION 2.06. Transfer and Exchange.......................................................... 31
SECTION 2.07. Replacement Securities......................................................... 33
SECTION 2.08. Outstanding Securities......................................................... 33
SECTION 2.09. Treasury Securities............................................................ 34
SECTION 2.10. Temporary Securities........................................................... 34
SECTION 2.11. Cancellation................................................................... 34
SECTION 2.12. Defaulted Interest............................................................. 35
SECTION 2.13. CUSIP Number................................................................... 35
</TABLE>
ARTICLE THREE
REDEMPTION
<TABLE>
<S> <C>
SECTION 3.01. Notices to Trustee............................................................. 36
SECTION 3.02. Selection of Securities To Be Redeemed......................................... 36
SECTION 3.03. Notice of Redemption........................................................... 36
SECTION 3.04. Effect of Notice of Redemption................................................. 37
</TABLE>
-i-
<PAGE>
<TABLE>
Page
----
<S> <C>
SECTION 3.05. Deposit of Redemption Price.................................................... 38
SECTION 3.06. Securities Redeemed in Part.................................................... 38
</TABLE>
ARTICLE FOUR
COVENANTS
<TABLE>
<S> <C>
SECTION 4.01. Payment of Securities.......................................................... 38
SECTION 4.02. Maintenance of Office or Agency................................................ 39
SECTION 4.03. Limitation on Restricted Payments.............................................. 39
SECTION 4.04. Limitation on Incurrence of Additional Indebtedness............................ 42
SECTION 4.05. Corporate Existence............................................................ 42
SECTION 4.06. Payment of Taxes and Other Claims.............................................. 43
SECTION 4.07. Maintenance of Properties and Insurance........................................ 43
SECTION 4.08. Compliance Certificate; Notice of Default...................................... 44
SECTION 4.09. Compliance with Laws........................................................... 45
SECTION 4.10. Reports to Holders............................................................. 45
SECTION 4.11. Waiver of Stay, Extension or Usury Laws........................................ 45
SECTION 4.12. Limitations on Transactions with Affiliates.................................... 46
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries... 47
SECTION 4.14. Limitation on Liens............................................................ 49
SECTION 4.15. Change of Control.............................................................. 49
SECTION 4.16. Limitation on Asset Sales...................................................... 52
SECTION 4.17. Prohibition on Incurrence of Senior Subordinated Debt.......................... 55
SECTION 4.18. Additional Subsidiary Guarantees............................................... 55
</TABLE>
ARTICLE FIVE
SUCCESSOR CORPORATION
<TABLE>
<S> <C>
SECTION 5.01. Merger, Consolidation and Sale of Assets....................................... 56
SECTION 5.02. Successor Corporation Substituted.............................................. 57
</TABLE>
-ii-
<PAGE>
ARTICLE SIX
DEFAULT AND REMEDIES
<TABLE>
<S> <C>
SECTION 6.01. Events of Default.............................................................. 58
SECTION 6.02. Acceleration................................................................... 60
SECTION 6.03. Other Remedies................................................................. 61
SECTION 6.04. Waiver of Past Defaults........................................................ 61
SECTION 6.05. Control by Majority............................................................ 62
SECTION 6.06. Limitation on Suits............................................................ 62
SECTION 6.07. Rights of Holders To Receive Payment........................................... 63
SECTION 6.08. Collection Suit by Trustee..................................................... 63
SECTION 6.09. Trustee May File Proofs of Claim............................................... 63
SECTION 6.10. Priorities..................................................................... 64
SECTION 6.11. Undertaking for Costs.......................................................... 64
</TABLE>
ARTICLE SEVEN
TRUSTEE
<TABLE>
<S> <C>
SECTION 7.01. Duties of Trustee.............................................................. 65
SECTION 7.02. Rights of Trustee.............................................................. 66
SECTION 7.03. Individual Rights of Trustee................................................... 67
SECTION 7.04. Trustee's Disclaimer........................................................... 68
SECTION 7.05. Notice of Default.............................................................. 68
SECTION 7.06. Reports by Trustee to Holders.................................................. 68
SECTION 7.07. Compensation and Indemnity..................................................... 69
SECTION 7.08. Replacement of Trustee......................................................... 70
SECTION 7.09. Successor Trustee by Merger, Etc............................................... 71
SECTION 7.10. Eligibility; Disqualification.................................................. 71
SECTION 7.11. Preferential Collection of Claims Against Company.............................. 72
</TABLE>
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
<TABLE>
<S> <C>
SECTION 8.01. Termination of the Company's Obligations....................................... 72
SECTION 8.02. Legal Defeasance and Covenant Defeasance....................................... 73
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance.......................... 75
SECTION 8.04. Application of Trust Money..................................................... 77
SECTION 8.05. Repayment to the Company....................................................... 78
SECTION 8.06. Reinstatement.................................................................. 78
</TABLE>
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
<TABLE>
<S> <C>
SECTION 9.01. Without Consent of Holders..................................................... 79
SECTION 9.02. With Consent of Holders........................................................ 79
SECTION 9.03. Effect on Senior Debt.......................................................... 81
SECTION 9.04. Compliance with TIA............................................................ 81
SECTION 9.05. Revocation and Effect of Consents.............................................. 81
SECTION 9.06. Notation on or Exchange of Securities.......................................... 82
SECTION 9.07. Trustee To Sign Amendments, Etc................................................ 82
</TABLE>
ARTICLE TEN
SUBORDINATION OF SECURITIES
<TABLE>
<S> <C>
SECTION 10.01. Securities Subordinated to Senior Debt........................................ 83
SECTION 10.02. Suspension of Payment When Senior Debt Is in Default.......................... 83
SECTION 10.03. Securities Subordinated to Prior Payment of All Senior Debt on Dissolution,
Liquidation or Reorganization of Company.................................................... 85
SECTION 10.04. Payments May Be Paid Prior to Dissolution..................................... 87
SECTION 10.05. Holders To Be Subrogated to Rights of Holders of Senior Debt.................. 87
SECTION 10.06. Obligations of the Company Unconditional...................................... 88
SECTION 10.07. Notice to Trustee............................................................. 88
SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent................ 89
SECTION 10.09. Trustee's Relation to Senior Debt............................................. 89
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the Company or
Holders of Senior Debt...................................................................... 90
SECTION 10.11. Securityholders Authorize Trustee To Effectuate Subordination of Securities... 90
SECTION 10.12. This Article Ten Not To Prevent Events of Default............................. 91
SECTION 10.13. Trustee's Compensation Not Prejudiced......................................... 91
</TABLE>
ARTICLE ELEVEN
GUARANTEE OF SECURITIES
<TABLE>
<S> <C>
SECTION 11.01. Unconditional Guarantee....................................................... 91
SECTION 11.02. Limitations on Guarantees..................................................... 93
SECTION 11.03. Execution and Delivery of Guarantee........................................... 94
SECTION 11.04. Release of a Guarantor........................................................ 94
SECTION 11.05. Waiver of Subrogation......................................................... 95
SECTION 11.06. Immediate Payment............................................................. 96
SECTION 11.07. No Set-Off.................................................................... 96
SECTION 11.08. Obligations Absolute.......................................................... 96
SECTION 11.09. Obligations Continuing........................................................ 96
SECTION 11.10. Obligations Not Reduced....................................................... 97
SECTION 11.11. Obligations Reinstated........................................................ 97
SECTION 11.12. Obligations Not Affected...................................................... 97
SECTION 11.13. Waiver........................................................................ 99
SECTION 11.14. No Obligation To Take Action Against the Company.............................. 99
SECTION 11.15. Dealing with the Company and Others........................................... 99
SECTION 11.16. Default and Enforcement....................................................... 100
SECTION 11.17. Amendment, Etc................................................................ 100
SECTION 11.18. Acknowledgment................................................................ 101
SECTION 11.19. Costs and Expenses............................................................ 101
SECTION 11.20. No Merger or Waiver; Cumulative Remedies...................................... 101
SECTION 11.21. Survival of Obligations....................................................... 101
</TABLE>
-v-
<PAGE>
<TABLE>
<S> <C>
SECTION 11.22. Guarantee in Addition to Other Obligations.................................... 101
SECTION 11.23. Severability.................................................................. 102
SECTION 11.24. Successors and Assigns........................................................ 102
</TABLE>
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
<TABLE>
<S> <C>
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Debt................... 102
SECTION 12.02. Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default.. 103
SECTION 12.03. Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior
Debt on Dissolution, Liquidation or Reorganization of Such Guarantor........................ 104
SECTION 12.04. Payments May Be Paid Prior to Dissolution..................................... 106
SECTION 12.05. Holders of Guarantee Obligations To Be Subrogated to Rights of Holders of
Guarantor Senior Debt....................................................................... 106
SECTION 12.06. Obligations of the Guarantors Unconditional................................... 107
SECTION 12.07. Notice to Trustee............................................................. 107
SECTION 12.08. Reliance on Judicial Order or Certificate of Liquidating Agent................ 108
SECTION 12.09. Trustee's Relation to Guarantor Senior Debt................................... 108
SECTION 12.10. Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or
Holders of Guarantor Senior Debt............................................................ 109
SECTION 12.11. Holders Authorize Trustee To Effectuate Subordination of Guarantee
Obligations.................................................................................. 110
</TABLE>
-vi-
<PAGE>
<TABLE>
<S> <C>
SECTION 12.12. This Article Twelve Not To Prevent Events of Default.......................... 110
SECTION 12.13. Trustee's Compensation Not Prejudiced......................................... 111
</TABLE>
ARTICLE THIRTEEN
MISCELLANEOUS
<TABLE>
<S> <C>
SECTION 13.01. TIA Controls.................................................................. 111
SECTION 13.02. Notices....................................................................... 111
SECTION 13.03. Communications by Holders with Other Holders.................................. 112
SECTION 13.04. Certificate and Opinion as to Conditions Precedent............................ 113
SECTION 13.05. Statements Required in Certificate or Opinion................................. 113
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar..................................... 114
SECTION 13.07. Legal Holidays................................................................ 114
SECTION 13.08. Governing Law................................................................. 114
SECTION 13.09. No Adverse Interpretation of Other Agreements................................. 114
SECTION 13.10. No Recourse Against Others.................................................... 114
SECTION 13.11. Successors.................................................................... 114
SECTION 13.12. Duplicate Originals........................................................... 115
SECTION 13.13. Severability.................................................................. 115
Signatures................................................................................... S-1
Exhibit A - Form of Fixed Rate Note
Exhibit B - Form of Floating Rate Note
Exhibit C - Form of Guarantee
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be
part of the Indenture
-vii-
<PAGE>
INDENTURE dated as of , 1997 among ALLIANCE IMAGING,
INC., a Delaware corporation (the "Company"), as Issuer, each of the Guarantors
-------
named herein, as Guarantors, and IBJ Schroder Bank & Trust Company, a
, as Trustee (the "Trustee").
-------
The Company has duly authorized the creation of an issue of [ ]%
Senior Subordinated Notes due 2005 (the "Fixed Rate Notes") and Senior
----------------
Subordinated Floating Rates Notes due 2005 (the "Floating Rate Notes," and
-------------------
together with the Fixed Rate Notes, the "Securities") and, to provide therefor,
----------
the Company has duly authorized the execution and delivery of this Indenture.
All things necessary to make the Securities, when duly issued and executed by
the Company and authenticated and delivered hereunder, the valid and binding
obligations of the Company and to make this Indenture a valid and binding
agreement of the Company have been done.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness of a Person or any of its
---------------------
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
<PAGE>
-2-
"Affiliate" means, with respect to any specified Person, any other
---------
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person.
The term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Affiliate Transaction" has the meaning set forth in Section 4.12.
---------------------
"Agent" means any Registrar, Paying Agent or co-Registrar.
-----
"Apollo" means Apollo Management, L.P. and its affiliates.
------
"Asset Acquisition" means (a) an Investment by the Company or any
-----------------
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
----------
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary of the
Company of (a) any Capital Stock of any Restricted Subsidiary of the Company; or
(b) any other property or assets of the Company or any Restricted Subsidiary
<PAGE>
-3-
of the Company other than in the ordinary course of business; provided, however,
-------- -------
that Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $1.0 million, (ii) the sale or exchange of
equipment in connection with the purchase or other acquisition of other
equipment, in each case used in the business of the Company and its Restricted
Subsidiaries, and (iii) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company as permitted
under Section 5.01.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
--------------
state or foreign law for the relief of debtors.
"Board of Directors" means, as to any Person, the board of directors
------------------
of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
----------------
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any
------------
other day on which banking institutions in the City of New York are required or
authorized by law or other governmental action to be closed.
"Calculation Agent" means the Person appointed by the Company to
-----------------
calculate the interest rate on the Floating Rate Notes. The Calculation Agent
shall initially be the Trustee.
"Capitalized Lease Obligation" means, as to any Person, the
----------------------------
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
<PAGE>
-4-
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
-------------
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person, and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by,
----------------
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Services ("S&P") or Moody's
---
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
-------
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250.0 million; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
<PAGE>
-5-
"Change of Control" means the occurrence of one or more of the
-----------------
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
-----
thereof (whether or not otherwise in compliance with the provisions of this
Indenture), other than to the Permitted Holders; (ii) the approval by the
holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of this Indenture); (iii) any Person or Group
(other than the Permitted Holders) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 50% of
the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the replacement of a majority of the Board
of Directors of the Company over a two-year period from the directors who
constituted the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by the Permitted
Holders or a vote of at least a majority of the Board of Directors of the
Company then still in office who either were members of such Board of Directors
at the beginning of such period or whose election as a member of such Board of
Directors was previously so approved.
"Change of Control Date" has the meaning set forth in Section 4.16.
----------------------
"Change of Control Offer" has the meaning set forth in Section 4.16.
-----------------------
"Change of Control Payment Date" has the meaning set forth in
------------------------------
Section 4.16.
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" of any Person means any and all shares, interests or
------------
other participations in, and other equivalents
<PAGE>
-6-
(however designated and whether voting or non-voting) of such Person's common
stock, whether outstanding on the Issue Date or issued after the Issue Date, and
includes, without limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
-------
successor replaces it pursuant to this Indenture.
"Consolidated EBITDA" means, with respect to any Person, for any
-------------------
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses), (B) Consolidated
Interest Expense and (C) Consolidated Non-cash Charges less any non-cash items
----
increasing Consolidated Net Income for such period, all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in accordance
with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
----------------------------------------
Person, the ratio of Consolidated EBITDA of such Person during the two full
fiscal quarters (the "Two Quarter Period") ending on or prior to the date of the
------------------
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such
----------------
Person for the Two Quarter Period. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
---
forma basis for the period of such calculation to (i) the incurrence or
- -----
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Two Quarter
<PAGE>
-7-
Period or at any time subsequent to the last day of the Two Quarter Period and
on or prior to the Transaction Date, as if such incurrence or repayment, as the
case may be (and the application of the proceeds thereof), occurred on the first
day of the Two Quarter Period and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness and also including any Consolidated EBITDA (including
any pro forma expense and cost reductions and other operating improvements as
---------
determined in good faith by a responsible financial or accounting officer of the
Company) attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Two Quarter Period) occurring during the
Two Quarter Period or at any time subsequent to the last day of the Two Quarter
Period and on or prior to the Transaction Date, as if such Asset Sale or Asset
Acquisition (including the incurrence, assumption or liability for any such
Acquired Indebtedness) occurred on the first day of the Two Quarter Period. If
such Person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Restricted Subsidiary of such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness. For purposes of calculating the Company's
Consolidated Fixed Charge Coverage Ratio, 50% of the Consolidated Fixed Charges
and 50% of the Consolidated EBITDA of any joint venture in which the Company or
any of its Restricted Subsidiaries has a 50% ownership interest shall be
included in determining the Company's Consolidated Fixed Charges and
Consolidated EBITDA, respectively. Furthermore, in calculating "Consolidated
Fixed Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on
outstanding Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal
<PAGE>
-8-
to the rate of interest on such Indebtedness in effect on the Transaction Date;
and (2) notwithstanding clause (1) above, interest on Indebtedness determined on
a fluctuating basis, to the extent such interest is covered by agreements
relating to Interest Swap Obligations, shall be deemed to accrue at the rate per
annum resulting after giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
--------------------------
period, the sum, without duplication, of (i) Consolidated Interest Expense
(excluding amortization or write-off of deferred financing costs), plus (ii) the
product of (x) the amount of all dividend payments on any series of Preferred
Stock of such Person (other than dividends paid in Qualified Capital Stock)
paid, accrued or scheduled to be paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated federal, state and local tax rate
of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
-----------------------------
any period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including, without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs (including the amortization of costs relating to
interest rate caps or other similar agreements), (b) the net costs under
Interest Swap Obligations, (c) all capitalized interest and (d) the interest
portion of any deferred payment obligation; and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP, minus interest
income for such period.
"Consolidated Net Income" means, with respect to any Person, for any
-----------------------
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided
--------
<PAGE>
-9-
that there shall be excluded therefrom (a) after-tax gains or losses from Asset
Sales (without regard to the $1.0 million limitation set forth in the definition
thereof) or abandonments or reserves relating thereto, (b) after-tax items
classified as extraordinary or nonrecurring gains or losses, (c) the net income
of any Person acquired in a "pooling of interests" transaction accrued prior to
the date it becomes a Restricted Subsidiary of the referent Person or is merged
or consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the extent
of cash dividends or distributions paid to the referent Person or to a Wholly
Owned Restricted Subsidiary of the referent Person by such Person, (f) income or
loss attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued), and (g) in the case of a successor to the referent
Person by consolidation or merger or as a transferee of the referent Person's
assets, any earnings of the successor corporation prior to such consolidation,
merger or transfer of assets.
"Consolidated Non-cash Charges" means, with respect to any Person, for
-----------------------------
any period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net Income
of such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
"Covenant Defeasance" has the meaning set forth in Section 8.02.
-------------------
"Credit Agreement" means the Credit Agreement to be dated as of the
----------------
Issue Date, between the Company, the lenders party thereto in their capacities
as lenders thereunder and Bankers Trust Company, as administrative agent,
together with the related documents thereto (including, without limitation,
<PAGE>
-10-
any guarantee agreements and security documents), in each case as such
agreements may be amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
(including increasing the amount of available borrowings thereunder (provided
--------
that such increase in borrowings is permitted by Section 4.04) or adding
Restricted Subsidiaries of the Company as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency
------------------
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
-------
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depository" shall mean The Depository Trust Company, New York, New
----------
York, or a successor thereto registered under the Exchange Act or other
applicable statute or regulation.
"Designated Senior Debt" means (i) Indebtedness under or in respect of
----------------------
the Credit Agreement and (ii) any other Indebtedness constituting Senior Debt
which, at the time of determination, has an aggregate principal amount of at
least $25.0 million and is specifically designated in the instrument evidencing
such Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means that portion of any Capital Stock
--------------------------
which, by its terms (or by the terms of any
<PAGE>
-11-
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of the
holder thereof, on or prior to the Maturity Date of the Securities.
"Equity Offering" means a public or private offering of Qualified
---------------
Capital Stock (other than public offerings with respect to the Company's Common
Stock on Form S-8) of the Company for aggregate net cash proceeds to the Company
of at least $25.0 million.
"Event of Default" has the meaning set forth in Section 6.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the
-----------------
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of the
Board of Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Global Security" shall mean a Security which is executed by the
---------------
Company and authenticated and delivered by the Trustee to the Depository or
pursuant to the Depository's instruction, all in accordance with this Indenture
and pursuant
<PAGE>
-12-
to a written order, which shall be registered in the name of the Depository or
its nominee.
"Guarantees" means the guarantees of the Securities of the
----------
Company by the Guarantors.
"Guarantor" means (i) each of Royal Medical Health Services, Inc.,
---------
Alliance Imaging of Ohio, Inc., Alliance Imaging of Michigan, Inc. and Alliance
Imaging of Central Georgia, Inc. and (ii) each of the Company's Restricted
Subsidiaries that in the future executes a supplemental indenture in which such
Restricted Subsidiary agrees to be bound by the terms of this Indenture as a
Guarantor; provided that any Person constituting a Guarantor as described above
--------
shall cease to constitute a Guarantor when its respective Guarantee is released
in accordance with the terms of this Indenture.
"Guarantor Senior Debt" means with respect to any Guarantor, (i) the
---------------------
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of a Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Guarantee of such Guarantor. Without limiting the generality of the foregoing,
"Guarantor Senior Debt" shall also include the principal of, premium, if any,
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable law)
on, and all other amounts owing by any Guarantor in respect of, (x) all monetary
obligations of every nature of a Guarantor under, or with respect to, the Credit
Agreement, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations (including guarantees thereof)
<PAGE>
-13-
and (z) all obligations under Currency Agreements (including guarantees
thereof), in each case whether outstanding on the Issue Date or thereafter
incurred. Notwithstanding the foregoing, "Guarantor Senior Debt" shall not
include (i) any Indebtedness of such Guarantor to a Restricted Subsidiary of
such Guarantor, (ii) Indebtedness to, or guaranteed on behalf of, any director,
officer or employee of such Guarantor or any Restricted Subsidiary of such
Guarantor (including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or other
taxes owed or owing by such Guarantor, (vi) that portion of any Indebtedness
incurred in violation of the provisions of Section 4.04 (but, as to any such
obligation, no such violation shall be deemed to exist for purposes of this
clause (vi) if the holder(s) of such obligation or their representative and the
Trustee shall have received an officers' certificate of the Company to the
effect that the incurrence of such Indebtedness does not (or, in the case of
revolving credit Indebtedness, that the incurrence of the entire committed
amount thereof at the date on which the initial borrowing thereunder is made
would not) violate such provisions of this Indenture), (vii) Indebtedness which,
when incurred and without respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse to the Company or any Guarantor and
(viii) any Indebtedness which is, by its express terms, subordinated in right of
payment to any other Indebtedness of such Guarantor.
"incur" has the meaning set forth in Section 4.04.
-----
"Indebtedness" means with respect to any Person, without duplication,
------------
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement
<PAGE>
-14-
(but excluding trade accounts payable and other accrued liabilities arising in
the ordinary course of business), (v) all Obligations for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under currency agreements and interest swap
agreements of such Person and (ix) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.
"Indenture" means this Indenture, as amended or supplemented from
---------
time to time in accordance with the terms hereof.
"Independent Financial Advisor" means a firm (i) which does not, and
-----------------------------
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
<PAGE>
-15-
"Interest Payment Date" means the stated maturity of an installment of
---------------------
interest on the Securities.
"Interest Swap Obligations" means the obligations of any Person
-------------------------
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect
----------
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For purposes of Section 4.03, (i) "Investment"
shall include and be valued at the fair market value of the net assets of any
Restricted Subsidiary of the Company at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary of the Company and shall exclude the
fair market value of the net assets of any Unrestricted Subsidiary of the
Company at the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary of the Company and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments by
the Company or any of its Restricted Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment, reduced by the payment of dividends or distributions
in connection with such Investment
<PAGE>
-16-
or any other amounts received in respect of such Investment; provided that no
--------
such payment of dividends or distributions or receipt of any such other amounts
shall reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Common Stock of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, 100% of the
outstanding Common Stock of such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such Restricted Subsidiary
not sold or disposed of.
"Issue Date" means , 1997.
----------
"Legal Defeasance" has the meaning set forth in Section 8.02.
----------------
"Lien" means any lien, mortgage, deed of trust, pledge, security
----
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Maturity Date" means , 2005.
-------------
"Net Cash Proceeds" means, with respect to any Asset Sale, the
-----------------
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and
<PAGE>
-17-
any tax sharing arrangements, (c) repayment of Indebtedness that is required to
be repaid in connection with such Asset Sale and (d) appropriate amounts to be
provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted Subsidiary, as the case
may be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"Net Proceeds Offer" has the meaning set forth in Section 4.17.
------------------
"Net Proceeds Offer Amount" has the meaning set forth in Section 4.17.
-------------------------
"Net Proceeds Offer Payment Date" has the meaning set forth in
-------------------------------
Section 4.17.
"Net Proceeds Offer Trigger Date" has the meaning set forth in
-------------------------------
Section 4.17.
"Obligations" means all obligations for principal, premium, interest,
-----------
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
-------
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Controller, or the Secretary of such Person.
"Officers' Certificate" means a certificate signed by two
---------------------
Officers of the Company.
"Opinion of Counsel" means a written opinion from legal counsel which
------------------
opinion and counsel are reasonably acceptable to the Trustee.
<PAGE>
-18-
"Paying Agent" has the meaning set forth in Section 2.03.
------------
"Permitted Holders" means Apollo Management, L.P. and its affiliates.
-----------------
"Permitted Indebtedness" means, without duplication, each of
----------------------
the following:
(i) Indebtedness represented by $165.0 million aggregate principal
amount of the Securities and the related Guarantees issued on the Issue
Date;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $125.0
million less the amount of all repayments and permanent commitment
reductions under the Credit Agreement with Net Cash Proceeds of Asset Sales
applied thereto as required by Section 4.16;
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereon;
(iv) Interest Swap Obligations covering Indebtedness of the Company
or any of its Restricted Subsidiaries; provided, however, that such
-------- -------
Interest Swap Obligations are entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with this Indenture to the extent the notional
principal amount of such Interest Swap Obligation does not, at the time of
the incurrence thereof, exceed the principal amount of the Indebtedness to
which such Interest Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in the
--------
case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in
<PAGE>
-19-
foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vi) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Wholly Owned Restricted Subsidiary of the Company for so
long as such Indebtedness is held by the Company or a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Lien held
by a Person other than the Company or a Wholly Owned Restricted Subsidiary
of the Company; provided that if as of any date any Person other than the
--------
Company or a Wholly Owned Restricted Subsidiary of the Company owns or
holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company and is subject to no
Lien; provided that (a) any Indebtedness of the Company to any Wholly Owned
--------
Restricted Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under this
Indenture and the Securities and (b) if as of any date any Person other
than a Wholly Owned Restricted Subsidiary of the Company owns or holds any
such Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
-------- -------
Indebtedness is extinguished within two business days of incurrence;
<PAGE>
-20-
(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(x) Indebtedness represented by Capitalized Lease Obligations and
Purchase Money Indebtedness of the Company and its Restricted Subsidiaries
incurred in the ordinary course of business not to exceed $25.0 million at
any one time outstanding; provided that all or a portion of the $25.0
--------
million permitted to be incurred under this clause (x) may, at the option
of the Company, be incurred under the Credit Agreement instead of pursuant
to Capitalized Lease Obligations or Purchase Money Indebtedness;
(xi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price or similar obligations, in each case, incurred
or assumed in connection with the disposition of any business, assets or a
Subsidiary, other than guarantees of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or a Subsidiary for
the purpose of financing such acquisition; provided, however, that (a) such
-------- -------
Indebtedness is not reflected on the balance sheet of the Company or any
Restricted Subsidiary of the Company (contingent obligations referred to in
a footnote to financial statements and not otherwise reflected on the
balance sheet will not be deemed to be reflected on such balance sheet for
purposes of this clause (a)) and (b) the maximum assumable liability in
respect of all such Indebtedness shall at no time exceed the gross proceeds
including non-cash proceeds (the fair market value of such noncash proceeds
being measured at the time it is received and without giving effect to any
subsequent changes in value) actually received by the Company and its
Restricted Subsidiaries in connection with such disposition;
<PAGE>
-21-
(xii) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business;
(xiii) Refinancing Indebtedness; and
(xiv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $15.0 million
at any one time outstanding (which amount may, but need not, be incurred in
whole or in part under the Credit Agreement).
"Permitted Investments" means (i) Investments by the Company or any
---------------------
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company, provided that such Wholly Owned Restricted
--------
Subsidiary of the Company is not restricted from making dividends or similar
distributions by contract, operation of law or otherwise; (ii) Investments in
the Company by any Restricted Subsidiary of the Company; provided that any
--------
Indebtedness evidencing such Investment is unsecured and subordinated, pursuant
to a written agreement, to the Company's obligations under the Securities and
this Indenture; (iii) Investments in cash and Cash Equivalents; (iv) loans and
advances to employees and officers of the Company and its Restricted
Subsidiaries in the ordinary course of business for bona fide business purposes
not to exceed $1.0 million at any one time outstanding; (v) Currency Agreements
and Interest Swap Obligations entered into in the ordinary course of the
Company's or its Restricted Subsidiaries' businesses and otherwise in compliance
with this Indenture; (vi) additional Investments (including joint ventures) not
to exceed $20.0 million at any one time outstanding; (vii) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; (viii) Investments made by the Company or its
Restricted Subsidiaries as a result of consideration received in connection with
an Asset Sale made
<PAGE>
-22-
in compliance with Section 4.16; and (ix) Investments of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time such Person merges or consolidates with the Company
or any of its Restricted Subsidiaries, in either case in compliance with this
Indenture; provided that such Investments were not made by such Person in
--------
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such merger or consolidation.
"Permitted Liens" means the following types of Liens:
---------------
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long
as such Lien is adequately bonded and any
<PAGE>
-23-
appropriate legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or asset
--------
which is not leased property subject to such Capitalized Lease Obligation;
(vii) Liens securing Capitalized Lease Obligations and Purchase
Money Indebtedness permitted pursuant to clause (x) of the definition of
"Permitted Indebtedness"; provided, however, that in the case of Purchase
-------- -------
Money Indebtedness (A) the Indebtedness shall not exceed the cost of such
property or assets and shall not be secured by any property or assets of
the Company or any Restricted Subsidiary of the Company other than the
property and assets so acquired or constructed and (B) the Lien securing
such Indebtedness shall be created within 180 days of such acquisition or
construction or, in the case of a refinancing of any Purchase Money
Indebtedness, within 180 days of such refinancing;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
<PAGE>
-24-
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xii) Liens in the ordinary course of business not exceeding $5.0
million at any one time outstanding that (a) are not incurred in connection
with borrowing of money and (b) do not materially detract from the value of
the property or materially impair its use;
(xiii) Liens by reason of a judgment or decree not otherwise
resulting in an Event of Default;
(xiv) Liens securing Indebtedness permitted to be incurred
pursuant to clause (xiv) of the definition of "Permitted Indebtedness";
(xv) Liens securing Indebtedness under Currency Agreements
permitted under this Indenture; and
(xvi) Liens securing Acquired Indebtedness incurred in accordance
with Section 4.04; provided that (A) such Liens secured such Acquired
--------
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
were not granted in connection with, or in anticipation of, the incurrence
of such Acquired Indebtedness by the Company or a Restricted Subsidiary of
the Company and (B) such Liens do not extend to or cover any property or
assets of the Company or of any of its Restricted Subsidiaries other than
the property or assets that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of the Company or a
Restricted Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired
<PAGE>
-25-
Indebtedness prior to the incurrence of such Acquired Indebtedness by the
Company or a Restricted Subsidiary of the Company.
"Person" means an individual, partnership, corporation, unincorporated
------
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person
---------------
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Purchase Money Indebtedness" means Indebtedness of the Company and
---------------------------
its Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment.
"Qualified Capital Stock" means any Capital Stock that is not
-----------------------
Disqualified Capital Stock.
"Record Date" means the applicable Record Date specified in the
-----------
Securities; provided that if any such date is not a Business Day, the Record
--------
Date shall be the first day immediately preceding such specified day that is a
Business Day.
"Redemption Date," when used with respect to any Security to be
---------------
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Securities.
"Redemption Price," when used with respect to any Security to be
----------------
redeemed, means the price fixed for such redemption, payable in immediately
available funds, pursuant to this Indenture and the Securities.
"Reference Date" has the meaning set forth in Section 4.03.
--------------
"Refinance" means, in respect of any security or Indebtedness, to
---------
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness
<PAGE>
-26-
in exchange or replacement for, such security or Indebtedness in whole or in
part. "Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
------------------------
Restricted Subsidiary of the Company of Indebtedness incurred or existing in
accordance with Section 4.04 (other than pursuant to clause (ii), (iv), (v),
(vi), (vii), (viii), (ix), (x), (xi), (xii) or (xiv) of the definition of
"Permitted Indebtedness"), in each case that does not (1) result in an increase
in the aggregate principal amount of Indebtedness of such Person as of the date
of such proposed Refinancing (plus the amount of any premium required to be paid
under the terms of the instrument governing such Indebtedness and plus the
amount of reasonable expenses incurred by the Company in connection with such
Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided that (x) if such
--------
Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Securities,
then such Refinancing Indebtedness shall be subordinate to the Securities at
least to the same extent and in the same manner as the Indebtedness being
Refinanced.
"Registrar" has the meaning set forth in Section 2.03.
---------
"Replacement Assets" has the meaning set forth in Section 4.16.
------------------
"Representative" means the indenture trustee or other trustee, agent
--------------
or representative in respect of any Designated Senior Debt; provided that if,
--------
and for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times constitute
the holders of a majority in outstanding principal
<PAGE>
-27-
amount of such Designated Senior Debt in respect of any Designated Senior Debt.
"Responsible Officer" means, when used with respect to the Trustee,
-------------------
any officer in the Corporate Trust Office of the Trustee including any vice
president, assistant vice president, assistant secretary, treasurer, assistant
treasurer, or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"Restricted Payment" has the meaning set forth in Section 4.03.
------------------
"Restricted Subsidiary" of any Person means any Subsidiary of such
---------------------
Person which at the time of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect
------------------------------
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such property.
"Securities Act" means the Securities Act of 1933, as amended,
--------------
or any successor statute or statutes thereto.
"Securityholder" or "Holder" means the Person in whose name a
-------------- ------
Security is registered on the Registrar's books.
"Senior Debt" means the principal of, premium, if any, and interest
-----------
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
<PAGE>
-28-
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Securities. Without limiting the
generality of the foregoing, "Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing by the Company in respect of,
(x) all monetary obligations of every nature of the Company under the Credit
Agreement, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations (including guarantees thereof)
and (z) all obligations under Currency Agreements (including guarantees
thereof), in each case whether outstanding on the Issue Date or thereafter
incurred. Notwithstanding the foregoing, "Senior Debt" shall not include (i)
any Indebtedness of the Company to a Subsidiary of the Company, (ii)
Indebtedness to, or guaranteed on behalf of, any director, officer or employee
of the Company or any Subsidiary of the Company (including, without limitation,
amounts owed for compensation), (iii) Indebtedness to trade creditors and other
amounts incurred in connection with obtaining goods, materials or services, (iv)
Indebtedness represented by Disqualified Capital Stock, (v) any liability for
federal, state, local or other taxes owed or owing by the Company, (vi) that
portion of any Indebtedness incurred in violation of Section 4.04 (but, as to
any such obligation, no such violation shall be deemed to exist for purposes of
this clause (vi) if the holder(s) of such obligation or their representative and
the Trustee shall have received an officers' certificate of the Company to the
effect that the incurrence of such Indebtedness does not (or, in the case of
revolving credit Indebtedness, that the incurrence of the entire committed
amount thereof at the date on which the initial borrowing thereunder is made
would not) violate such provisions of this Indenture),
<PAGE>
-29-
(vii) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without recourse to
the Company and (viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company.
"Series F Preferred Stock" means the Company's Series F Preferred
------------------------
Stock with a dividend rate of 13.50% maturing in 2007.
"Significant Subsidiary" shall have the meaning set forth in Rule
----------------------
1.02(w) of Regulation S-X under the Securities Act.
"Subsidiary", with respect to any Person, means (i) any corporation of
----------
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Surviving Entity" has the meaning set forth in Section 5.01.
----------------
"TIA" means the Trust Indenture act of 1939 (15 U.S.C. (S)(S) 77aaa-
---
77bbbb), as amended, as in effect on the date of the execution of this Indenture
until such time as this Indenture is qualified under the TIA, and thereafter as
in effect on the date on which this Indenture is qualified under the TIA, except
as otherwise provided in Section 9.03.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of
-----------------------
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary
<PAGE>
-30-
by the Board of Directors of such Person in the manner provided below and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary
to be so designated; provided that (x) the Company certifies to the Trustee
--------
that such designation complies with Section 4.03 and (y) each Subsidiary to be
so designated and each of its Subsidiaries has not at the time of designation,
and does not thereafter, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to any Indebtedness pursuant
to which the lender has recourse to any of the assets of the Company or any of
its Restricted Subsidiaries. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately
after giving effect to such designation, the Company is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.04 and (y) immediately before and immediately after
giving effect to such designation, no Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
Board Resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations of, and
---------------------------
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged and which
are not callable or redeemable at the issuer's option.
"U.S. Legal Tender" means such coin or currency of the United States
-----------------
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained
<PAGE>
-31-
by dividing (a) the then outstanding aggregate principal amount of such
Indebtedness into (b) the sum of the total of the products obtained by
multiplying (i) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (ii) the number of years (calculated to
the nearest one-twelfth) which will elapse between such date and the making of
such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
----------------------------------
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities.
--------------------
"indenture security holder" means a Holder or a Securityholder.
-------------------------
"indenture to be qualified" means this Indenture.
-------------------------
"indenture trustee" or "institutional trustee" means the Trustee.
----------------- ---------------------
"obligor" on the indenture securities means the Company, any
-------
Guarantor or any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
<PAGE>
-32-
SECTION 1.03. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
---------------
The Fixed Rate Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A and the Floating Rate Notes and
the Trustee's certificate of authentication shall be substantially in the form
of Exhibit B. The Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage. The Company and the Trustee
shall approve the form of the Securities and any notation, legend or endorsement
on them. Each Security shall be dated the date of its issuance and show the
date of its authentication. Each Security shall have an executed Guarantee from
each of the Guarantors endorsed thereon substantially in the form of Exhibit C.
<PAGE>
-33-
The terms and provisions contained in the Securities and the
Guarantees shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company, the Guarantors and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
SECTION 2.02. Execution and Authentication.
----------------------------
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company and the Guarantees for
each of the Guarantors by manual or facsimile signature.
If an Officer whose signature is on a Security or Guarantee, as the
case may be, was an Officer at the time of such execution but no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall nevertheless be valid.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Fixed Rate Notes for original issue
on the Issue Date in the aggregate principal amount of $125,000,000 and (ii)
Floating Rate Notes for original issue on the Issue Date in the aggregate
principal amount of $40,000,000, upon a written order of the Company in the form
of an Officers' Certificate. In addition, the Trustee shall authenticate
Securities for original issue after the Issue Date in the aggregate principal
amount of up to $100,000,000 upon a written order of the Company in the form of
an Officers' Certificate. Each such Officers' Certificate shall specify the
amount of Securities to be authenticated, the date on which the Securities are
to be authenticated and whether the Securities are to be Fixed Rate Notes or
Floating Rate Notes. Such Securities
<PAGE>
-34-
shall initially be in the form of one or more Global Securities, which (i) shall
represent, and shall be denominated in an amount equal to the aggregate
principal amount of, the Securities to be issued, (ii) shall be registered in
the name of the Depository for such Global Security or Securities or its
nominee, (iii) shall be delivered by the Trustee to the Depository or pursuant
to the Depository's instruction and (iv) shall bear a legend substantially to
the following effect: "Unless and until this Global Security is exchanged in
whole or in part for the individual Securities represented hereby, this Global
Security may not be transferred except as a whole by the Depository to a nominee
of the Depository or by a nominee of the Depository to the Depository or by a
Depository or any such nominee to a successor Depository or a nominee of a
successor Depository." The aggregate principal amount of Securities outstanding
at any time may not exceed $265,000,000, except as provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof.
SECTION 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (b)
---------
Securities may be presented or surrendered for payment ("Paying Agent") and (c)
------------
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company may also from time to time designate one
or more other offices
<PAGE>
-35-
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
--------
however, that no such designation or rescission shall in
- -------
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York, for such purposes. The
Company may act as its own Registrar or Paying Agent except that for the
purposes of Articles Three and Eight and Sections 4.15 and 4.16, neither the
Company nor any Affiliate of the Company shall act as Paying Agent. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company, upon notice to the Trustee, may have one or more co-
Registrars and one or more additional paying agents reasonably acceptable to
the Trustee. The term "Paying Agent" includes any additional paying agent. The
------------
Company initially appoints the Trustee as Registrar and Paying Agent until such
time as the Trustee has resigned or a successor has been appointed.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee, in advance, of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act
as such.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that, subject to Article Four and Article Twelve, each Paying
Agent shall hold in trust for the benefit of Holders or the Trustee all assets
held by the Paying Agent for the payment of principal of, or interest on, the
Securities (whether such assets have been distributed to it by the Company or
any other obligor on the Securities), and shall notify the Trustee of any
Default by the Company (or any other obligor on the Securities) in making any
such payment. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate such assets and hold them as a separate trust fund. The Company at
any time may require a Paying Agent to
<PAGE>
-36-
distribute all assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent, the Paying Agent shall have no
further liability for such assets.
SECTION 2.05. Holder Lists.
------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before each Interest Payment Date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders, which
list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
---------------------
(a) When Securities are presented to the Registrar or a co-Registrar
with a request to register the transfer of such Securities or to exchange such
Securities for an equal principal amount of Securities of other authorized
denominations, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
- -------- -------
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
request. No service charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
transfer tax or
<PAGE>
-37-
similar governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Sections 2.02, 2.10, 3.06, 4.15, 4.16 or 9.06). The
Registrar or co-Registrar shall not be required to register the transfer of or
exchange of any Security (i) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Securities and
ending at the close of business on the day of such mailing, (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Security being redeemed in part, and (iii) during a Change of
Control Offer or an Net Proceeds Offer if such Security is tendered pursuant to
such Change of Control Offer or Net Proceeds Offer and not withdrawn. A Global
Security may be transferred, in whole but not in part, in the manner provided in
this Section 2.06(a), only to a nominee of the Depository for such Global
Security, or to the Depository, or a successor Depository for such Global
Security selected or approved by the Company, or to a nominee of such successor
Depository.
(b) If at any time the Depository for the Global Security or
Securities notifies the Company that it is unwilling or unable to continue as
Depository for such Global Security or Securities or the Company becomes aware
that the Depository has ceased to be a clearing agency registered under the
Exchange Act, the Company shall appoint a successor Depository with respect to
such Global Security or Securities. If a successor Depository for such Global
Security or Securities has not been appointed within 120 days after the Company
receives such notice or becomes aware of such ineligibility, the Company shall
execute, and the Trustee, upon receipt of an Officers' Certificate for the
authentication and delivery of Securities, shall authenticate and deliver,
Securities in definitive form, in an aggregate principal amount at maturity
equal to the principal amount at maturity of the Global Security representing
such Securities, in exchange for such Global Security. The Company shall
reimburse the Registrar, the Depository and the Trustee for expenses they incur
in documenting such exchanges and issuances of Securities in definitive form.
<PAGE>
-38-
The Company may at any time and in its sole discretion determine that
the Securities shall no longer be represented by such Global Security or
Securities. In such event the Company will execute, and the Trustee, upon
receipt of a written order for the authentication and delivery of individual
Securities in exchange in whole or in part for such Global Security or
Securities, will authenticate and deliver individual Securities in definitive
form in an aggregate principal amount equal to the principal amount of such
Global Security or Securities in exchange for such Global Security or
Securities.
In any exchange provided for in any of the preceding two paragraphs,
the Company will execute and the Trustee will authenticate and deliver
individual Securities in definitive registered form in authorized denominations.
Upon the exchange of a Global Security for individual Securities, such Global
Security shall be cancelled by the Trustee. Securities issued in exchange for a
Global Security pursuant to this Section 2.06(b) shall be registered in such
names and in such authorized denominations as the Depository for such Global
Security, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall deliver such
Securities to the persons in whose names such Securities are so registered.
None of the Company, the Trustee, any Paying Agent or the Registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests of a Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
SECTION 2.07. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. If required by the Trustee or
the Company, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both the
<PAGE>
-39-
Company and the Trustee, to protect the Company, the Trustee or any Agent from
any loss which any of them may suffer if a Security is replaced. The Company may
charge such Holder for its reasonable out-of-pocket expenses in replacing a
Security pursuant to this Section 2.07, including reasonable fees and expenses
of counsel.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
A Security does not cease to be outstanding because the Company, the Guarantors
or any of their respective Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
---- ----
upon surrender of such Security and replacement thereof pursuant to Section
2.07. If the principal amount of any Security is considered paid under Section
4.01, it ceases to be outstanding and interest ceases to accrue.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or a Subsidiary) holds U.S. Legal Tender or U.S. Government
obligations sufficient to pay all of the principal and interest due on the
Securities payable on that date, then on and after that date such Securities
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction,
<PAGE>
-40-
waiver or consent, Securities owned by the Company, any of its Subsidiaries or
any of their respective Affiliates shall be disregarded, except that, for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Securities that the Trustee knows or has
reason to know are so owned shall be disregarded.
SECTION 2.10. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities. Until
such exchange, temporary Securities shall be entitled to the same rights,
benefits and privileges as definitive Securities. Notwithstanding the
foregoing, so long as the Securities are represented by a Global Security, such
Global Security may be in typewritten form.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or a Subsidiary), and no one else, shall cancel and, at
the written direction of the Company, shall dispose of all Securities
surrendered for transfer, exchange, payment or cancellation. Subject to Section
2.07, the Company may not issue new Securities to replace Securities that it has
paid or delivered to the Trustee for cancellation. If the Company or any
Guarantor shall acquire any of the Securities, such acquisition shall not
operate as a redemption or satisfaction of the Indebtedness represented by such
Securities unless and until the same are surrendered to the Trustee for
cancellation pursuant to this Section 2.11.
<PAGE>
-41-
SECTION 2.12. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Securities, it
shall, unless the Trustee fixes another record date pursuant to Section 6.10,
pay the defaulted interest, plus (to the extent lawful) any interest payable on
the defaulted interest, in any lawful manner. The Company may pay the defaulted
interest to the persons who are Holders on a subsequent special record date,
which date shall be the fifteenth day next preceding the date fixed by the
Company for the payment of defaulted interest or the next succeeding Business
Day if such date is not a Business Day. At least 15 days before any such
subsequent special record date, the Company shall mail to each Holder, with a
copy to the Trustee, a notice that states the subsequent special record date,
the payment date and the amount of defaulted interest, and interest payable on
such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP Number.
------------
The Company in issuing the Securities may use a "CUSIP" number, and if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided, however, that any such notice may state
-------- -------
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Securities, and that reliance may be
placed only on the other identification numbers printed on the Securities.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
------------------
If the Company elects to redeem Securities pursuant to Paragraph 6 or
Paragraph 7 of the Securities, it shall notify the Trustee in writing of the
Redemption Date, the Redemption Price and the principal amount of Securities to
be redeemed.
<PAGE>
-42-
The Company shall give notice of redemption to the Paying Agent and Trustee at
least 30 days but not more than 60 days before the Redemption Date (unless a
shorter notice shall be agreed to by the Trustee in writing), together with an
Officers' Certificate stating that such redemption will comply with the
conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
--------------------------------------
In the event that less than all of the Fixed Rate Notes or Floating
Rate Notes are to be redeemed at any time, selection of such Securities for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which such Securities are
listed or, if such Securities are not then listed on a national securities
exchange, on a pro rata basis, by lot or by such method as the Trustee shall
--- ----
deem fair and appropriate; provided, however, that no Securities of a principal
-------- -------
amount of $1,000 or less shall be redeemed in part; and provided, further, that
-------- -------
if a partial redemption is made with the net cash proceeds of an Equity
Offering, selection of the Fixed Rate Notes or portions thereof for redemption
shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata
--- ---- --- ----
basis as is practicable (subject to the procedures of the Depository), unless
such method is otherwise prohibited.
SECTION 3.03. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first class mail, postage
prepaid, to each Holder whose Securities are to be redeemed at its registered
address. At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. Each notice for
redemption shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if
any, to be paid;
<PAGE>
-43-
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date, and the only remaining right of the Holders
of such Securities is to receive payment of the Redemption Price upon
surrender to the Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, and upon surrender of such Security, a new Security or
Securities in aggregate principal amount equal to the unredeemed portion
thereof will be issued;
(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption; and
(8) the Paragraph of the Securities pursuant to which the
Securities are to be redeemed.
The notice, if mailed in a manner herein provided, shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Security designated for redemption in whole or
in part shall not affect the validity of the proceedings for the redemption of
any other Security.
<PAGE>
-44-
SECTION 3.04. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price plus accrued interest, if any. Upon surrender to
the Trustee or Paying Agent, such Securities called for redemption shall be paid
at the Redemption Price (which shall include accrued interest thereon to the
Redemption Date), but installments of interest, the maturity of which is on or
prior to the Redemption Date, shall be payable to Holders of record at the close
of business on the relevant Record Dates.
SECTION 3.05. Deposit of Redemption Price.
---------------------------
On or before 11:00 a.m New York time on the Redemption Date, the
Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Securities to be
redeemed on that date.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, interest on the Securities to be redeemed will cease to accrue on and
after the applicable Redemption Date, whether or not such Securities are
presented for payment.
SECTION 3.06. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is to be redeemed in part only, the
Trustee shall upon written instruction from the Company authenticate for the
Holder a new Security or Securities in a principal amount equal to the
unredeemed portion of the Security surrendered.
<PAGE>
-45-
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
---------------------
The Company shall pay the principal of and interest on the Securities
in the manner provided in the Securities. An installment of principal of or
interest on the Securities shall be considered paid on the date it is due if the
Trustee or Paying Agent holds on that date U.S. Legal Tender designated for and
sufficient to pay the installment. Interest on the Fixed Rate Notes will be
computed on the basis of a 360-day year comprised of twelve 30-day months and
interest on the Floating Rate Notes will be computed as set forth in Exhibit B.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in the Borough of Manhattan, The City of
New York, the office or agency required under Section 2.03. The Company shall
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 11.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
The Company hereby initially designates the Corporate Trust Office of
the Trustee located in the Borough of Manhattan, The City of New York, as such
office of the Company in accordance with Section 2.03.
<PAGE>
-46-
SECTION 4.03. Limitation on Restricted Payments.
---------------------------------
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
in Qualified Capital Stock of the Company) on or in respect of shares of the
Company's Capital Stock to holders of such Capital Stock, (b) purchase, redeem
or otherwise acquire or retire for value any Capital Stock of the Company or any
warrants, rights or options to purchase or acquire shares of any class of such
Capital Stock, (c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Indebtedness of the Company that is subordinate or junior in right of
payment to the Securities or (d) make any Investment (other than Permitted
Investments) (each of the foregoing actions set forth in clauses (a), (b), (c)
and (d) being referred to as a "Restricted Payment"), if at the time of such
------------------
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default shall have occurred and be continuing or (ii) the Company is
not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.04 or (iii) the aggregate
amount of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property as determined
reasonably and in good faith by the Board of Directors of the Company) shall
exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of
the Company earned subsequent to the Issue Date and on or prior to the date the
Restricted Payment occurs (the "Reference Date") (treating such period as a
--------------
single accounting period); plus (x) 100% of the aggregate net cash proceeds
received by the Company from any Person (other than a Subsidiary of the Company)
from the issuance and sale subsequent to the Issue Date and on or prior to the
Reference Date of Qualified Capital Stock of the Company; plus (y) without
duplication of
<PAGE>
-47-
any amounts included in clause (iii)(x) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of the
Company's Capital Stock; plus (z) without duplication, the sum of (1) the
aggregate amount returned in cash on or with respect to Investments (other than
Permitted Investments) made subsequent to the Issue Date whether through
interest payments, principal payments, dividends or other distributions or
payments, (2) the net cash proceeds received by the Company or any Restricted
Subsidiary of the Company from the disposition of all or any portion of such
Investments (other than to a Subsidiary of the Company) and (3) upon
redesignation of an Unrestricted Subsidiary of the Company as a Restricted
Subsidiary of the Company, the fair market value of such Subsidiary; provided,
--------
however, that the sum of clauses (1), (2) and (3) above shall not exceed the
- -------
aggregate amount of all such Investments made subsequent to the Issue Date.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
within 60 days after the date of declaration of such dividend if the dividend
would have been permitted on the date of declaration; (2) if no Default or Event
of Default shall have occurred and be continuing, the acquisition of any shares
of Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of shares of Qualified Capital Stock of the Company; (3) if no
Default or Event of Default shall have occurred and be continuing, the
acquisition of any Indebtedness of the Company that is subordinate or junior in
right of payment to the Securities either (i) solely in exchange for shares of
Qualified Capital Stock of the Company, or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of (A) shares of Qualified Capital Stock of the Company or (B)
Refinancing Indebtedness; (4) so long as no Default or Event of Default shall
have occurred and be continuing, repurchases by the Company of Common Stock of
the Company from employees of the Company or any of its Subsidiaries or their
authorized representatives upon the death, disability or termination of
employment of such employees, in an amount not to exceed $5.0 million in any
calendar year or $15.0 million in the aggregate; (5) so long as no Default or
Event of Default shall have occurred and
<PAGE>
-48-
be continuing, the declaration and payment of dividends to holders of any class
or series of Preferred Stock (other than Disqualified Capital Stock) issued
after the Issue Date, provided that after giving effect to such issuance on a
pro forma basis, the Company would have had a Consolidated Fixed Charge
- --- -----
Coverage Ratio of at least 1.75 to 1.00; (6) the payment of dividends on the
Company's Common Stock, following the first public offering of the Company's
Common Stock after the Issue Date, of up to 6% per annum of the net proceeds
received by the Company in such public offering, other than public offerings
with respect to the Company's Common Stock registered on Form S-8; (7) the
repurchase, retirement or other acquisition or retirement for value of equity
interests of the Company in existence on the Issue Date and from the persons
holding such equity interests on the Issue Date and which are not held by Apollo
or any of its Affiliates or members of management of the Company and its
Subsidiaries on the Issue Date (including any equity interests issued in respect
of such equity interests as a result of a stock split, recapitalization, merger,
combination, consolidation or similar transaction), provided, however, that the
-------- -------
Company shall be permitted to make Restricted Payments under this clause only if
after giving effect thereto, the Company would be permitted to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 4.04; (8) so long as no Default or Event of Default shall have occurred
and be continuing, the repurchase, retirement or other acquisition or retirement
for value of the Company's Series F Preferred Stock, provided that after giving
effect to such repurchase, retirement or other acquisition or retirement for
value on a pro forma basis, the Company would have had a
--- -----
Consolidated Fixed Charge Coverage Ratio of at least 2.5 to 1.0; and (9) other
Restricted Payments in an aggregate amount not to exceed $5.0 million. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2), (4), (5), (6), (7),
(8) and (9) shall be included in such calculation.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an officers' certificate stating that such
Restricted Payment complies with the Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal quarterly
financial statements.
<PAGE>
-49-
SECTION 4.04. Limitation on Incurrence of
Additional Indebtedness.
------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "incur") any Indebtedness
-----
(other than Permitted Indebtedness); provided, however, that if no Default or
-------- -------
Event of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company or any of
the Guarantors may incur Indebtedness (including, without limitation, Acquired
Indebtedness) and Restricted Subsidiaries of the Company may incur Acquired
Indebtedness, in each case if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the Consolidated
Fixed Charge Coverage Ratio of the Company is greater than 1.75 to 1.0 if such
incurrence is on or prior to December 31, 1999 and 2.0 to 1.0 if such incurrence
is thereafter.
SECTION 4.05. Corporate Existence.
-------------------
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other existence
of each of its Restricted Subsidiaries in accordance with the respective
organizational documents of each such Restricted Subsidiary and the rights
(charter and statutory) and material franchises of the Company and each of its
Restricted Subsidiaries; provided, however, that the Company shall not be
-------- -------
required to preserve any such right, franchise or corporate existence with
respect to each such Restricted Subsidiary if the Board of Directors of the
Company shall determine that the loss thereof is not, and will not be, adverse
in any material respect to the Holders.
SECTION 4.06. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon it or any of its Subsidiaries or
upon
<PAGE>
-50-
the income, profits or property of it or any of its Restricted Subsidiaries
and (b) all lawful claims for labor, materials and supplies which, in each case,
if unpaid, might by law become a material liability or Lien upon the property of
it or any of its Restricted Subsidiaries; provided, however, that the Company
-------- -------
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, (i) the applicability or
validity is being contested in good faith by appropriate proceedings and for
which appropriate provision has been made or (ii) where the failure to effect
such payment or discharge is not adverse in any material respect to the Holders.
SECTION 4.07. Maintenance of Properties and Insurance.
---------------------------------------
(a) The Company shall cause all material properties owned by or
leased by it or any of its Restricted Subsidiaries used or useful to the conduct
of its business or the business of any of its Restricted Subsidiaries to be
maintained and kept in normal condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all repairs, renewals,
replacements, and betterments thereof, all as in its judgment may be necessary,
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
-------- -------
Section 4.07 shall prevent the Company or any of its Restricted Subsidiaries
from discontinuing the use, operation or maintenance of any of such properties,
or disposing of any of them, if such discontinuance or disposal is, in the
judgment of the Board of Directors of the Company or any such Restricted
Subsidiary desirable in the conduct of the business of the Company or any such
Restricted Subsidiary, and if such discontinuance or disposal is not adverse in
any material respect to the Holders; provided, further, that nothing in this
-------- -------
Section 4.07 shall prevent the Company or any of its Restricted Subsidiaries
from discontinuing or disposing of any properties to the extent otherwise
permitted by this Indenture.
(b) The Company shall maintain, and shall cause its Restricted
Subsidiaries to maintain, insurance with responsible carriers against such risks
and in such amounts, and with such
<PAGE>
-51-
deductibles, retentions, self-insured amounts and co-insurance provisions, as
are customarily carried by similar businesses of similar size, including
property and casualty loss, workers' compensation and interruption of business
insurance.
SECTION 4.08. Compliance Certificate; Notice of Default.
-----------------------------------------
(a) The Company shall deliver to the Trustee, within 120 days after
the close of each fiscal year an Officers' Certificate stating that a review of
the activities of the Company has been made under the supervision of the signing
officers with a view to determining whether it has kept, observed, performed and
fulfilled its obligations under this Indenture and further stating, as to each
such Officer signing such certificate, that to the best of his knowledge the
Company during such preceding fiscal year has kept, observed, performed and
fulfilled each and every such covenant and no Default or Event of Default
occurred during such year and at the date of such certificate there is no
Default or Event of Default that has occurred and is continuing or, if such
signers do know of such Default or Event of Default, the certificate shall
describe its status with particularity. The Officers' Certificate shall also
notify the Trustee should the Company elect to change the manner in which it
fixes its fiscal year end.
(b) The annual financial statements delivered pursuant to Section
4.10 shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article Four, Five or Six of this Indenture insofar as they relate
to accounting matters or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company shall deliver to the Trustee, forthwith upon becoming
aware of any Default or Event of Default in the performance of any covenant,
agreement or condition
<PAGE>
-52-
contained in this Indenture, an Officers' Certificate specifying the Default or
Event of Default and describing its status with particularity.
SECTION 4.09. Compliance with Laws.
--------------------
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States, all states and municipalities thereof, and of
any governmental department, commission, board, regulatory authority, bureau,
agency and instrumentality of the foregoing, in respect of the conduct of their
respective businesses and the ownership of their respective properties, except
for such noncompliances as would not in the aggregate have a material adverse
effect on the financial condition or results of operations of the Company and
its Subsidiaries taken as a whole.
SECTION 4.10. Reports to Holders.
------------------
The Company will deliver to the Trustee within 15 days after the
filing of the same with the Commission, copies of the quarterly and annual
reports and of the information, documents and other reports, if any, which the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company
will also comply with the other provisions of TIA (S) 314(a).
SECTION 4.11. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Each of the Company and each Guarantor covenants (to the extent that
it may lawfully do so) that it will not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
<PAGE>
-53-
Company or such Guarantor from paying all or any portion of the principal of
and/or interest on the Securities or the Guarantee of any such Guarantor as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture, and (to the
extent that it may lawfully do so) each hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.12. Limitations on Transactions with Affiliates.
-------------------------------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an "Affiliate
---------
Transaction"), other than (x) Affiliate Transactions permitted under paragraph
- -----------
(b) below and (y) Affiliate Transactions on terms that are no less favorable
than those that might reasonably have been obtained in a comparable transaction
at such time on an arm's-length basis from a Person that is not an Affiliate of
the Company or such Restricted Subsidiary. All Affiliate Transactions (and each
series of related Affiliate Transactions which are similar or part of a common
plan) involving aggregate payments or other property with a fair market value in
excess of $1.0 million shall be approved by the Board of Directors of the
Company or such Restricted Subsidiary, as the case may be, such approval to be
evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If the
Company or any Restricted Subsidiary of the Company enters into an Affiliate
Transaction (or a series of related Affiliate Transactions related to a common
plan) that involves an aggregate fair market value of more than $10.0 million,
the Company or such Restricted Subsidiary, as the case may be, shall, prior to
the consummation thereof,
<PAGE>
-54-
obtain a favorable opinion as to the fairness of such transaction or series of
related transactions to the Company or the relevant Restricted Subsidiary, as
the case may be, from a financial point of view, from an Independent Financial
Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the Company's Board of
Directors; (ii) transactions exclusively between or among the Company and any of
its Wholly Owned Restricted Subsidiaries or exclusively between or among such
Wholly Owned Restricted Subsidiaries, provided such transactions are not
--------
otherwise prohibited by this Indenture; (iii) any agreement as in effect as of
the Issue Date or any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) in any replacement agreement
thereto so long as any such amendment or replacement agreement is not more
disadvantageous to the Holders in any material respect than the original
agreement as in effect on the Issue Date; (iv) Restricted Payments permitted by
this Indenture; (v) transactions in which the Company or any of its Restricted
Subsidiaries, as the case may be, delivers to the Trustee a letter from an
Independent Financial Advisor stating that such transaction is fair to the
Company or such Restricted Subsidiary from a financial point of view or meets
the requirements of the first sentence of paragraph (a) above; (vi) the
existence of, or the performance by the Company or any of its Restricted
Subsidiaries of its obligations under the terms of, any stockholders agreement
(including any registration rights agreement or purchase agreement related
thereto) to which it is a party as of the Issue Date and any similar agreements
which it may enter into thereafter; provided, however, that the existence of, or
-------- -------
the performance by the Company or any of its Restricted Subsidiaries of
obligations under, any future amendment to any such existing agreement or under
any similar agreement entered into after that Issue Date shall only be permitted
by this clause to the extent that the terms of any such, amendment or new
agreement
<PAGE>
-55-
are not otherwise disadvantageous to the holders of the Securities in any
material respect; (vii) loans to employees of the Company and its Subsidiaries
which are approved by the Board of Directors of the Company in good faith;
(viii) the payment of all fees and expenses related to the Transactions; and
(ix) transactions with customers, clients, suppliers, or purchasers or sellers
of goods or services, in each case in the ordinary course of business and
otherwise in compliance with the terms of this Indenture, which are fair to the
Company or its Restricted Subsidiaries, in the reasonable determination of the
Board of Directors of the Company or the senior management thereof, or are on
terms at least as favorable as might reasonably have been obtained at such time
from an unaffiliated party.
SECTION 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.
------------------------------------
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture; (3) the Credit Agreement;
(4) customary non-assignment provisions of any contract or any lease governing a
leasehold interest of any Restricted Subsidiary of the Company; (5) any
instrument governing Acquired Indebtedness, which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired; (6)
agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; (7) purchase money obligations for
property acquired in the ordinary course of
<PAGE>
-56-
business that impose restrictions of the nature discussed in clause (c) above on
the property so acquired; (8) contracts for the sale of assets, including,
without limitation, customary restrictions with respect to a Restricted
Subsidiary of the Company pursuant to an agreement that has been entered into
for the sale or disposition of all or substantially all of the Capital Stock or
assets of such Restricted Subsidiary; (9) secured Indebtedness otherwise
permitted to be incurred pursuant to Section 4.04 and Section 4.14; (10)
customary provisions in joint venture agreements and other similar agreements
entered into in the ordinary course of business; (11) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred
pursuant to an agreement referred to in clauses (1) through (10) above;
provided, however, that the provisions relating to such encumbrance or
- -------- -------
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the provisions relating
to such encumbrance or restriction contained in agreements referred to in such
clauses; or (12) an agreement governing Indebtedness permitted to be incurred
pursuant to Section 4.04; provided that the provisions relating to such
--------
encumbrance or restriction contained in such Indebtedness are no less favorable
to the Company in any material respect as determined by the Board of Directors
of the Company in their reasonable and good faith judgment than the provisions
contained in the Credit Agreement as in effect on the Issue Date.
SECTION 4.14. Limitation on Liens.
-------------------
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in
<PAGE>
-57-
right of payment to the Securities, the Securities are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and (ii)
in all other cases, the Securities are equally and ratably secured, except for
(A) Liens existing as of the Issue Date to the extent and in the manner such
Liens are in effect on the Issue Date; (B) Liens securing Senior Debt and Liens
securing Guarantor Senior Debt; (C) Liens securing the Securities and the
Guarantees; (D) Liens of the Company or a Wholly Owned Restricted Subsidiary of
the Company on assets of any Restricted Subsidiary of the Company; (E) Liens
securing Refinancing Indebtedness which is incurred to Refinance any
Indebtedness which has been secured by a Lien permitted under this Indenture and
which has been incurred in accordance with the provisions of this Indenture;
provided, however, that such Liens (A) are no less favorable to the Holders
- -------- -------
and are not more favorable to the lienholders with respect to such Liens than
the Liens in respect of the Indebtedness being Refinanced and (B) do not extend
to or cover any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so Refinanced; and (F) Permitted
Liens.
SECTION 4.15. Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control, the Company shall be
obligated to make an offer to purchase (the "Change of Control Offer"), and
-----------------------
shall purchase, on a Business Day (the "Change of Control Payment Date") as
------------------------------
described below, all of the then outstanding Securities at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, thereon to the Change of Control Payment Date. The Change of Control
Offer shall remain open for at least 20 Business Days and until the close of
business on the Change of Control Payment Date.
(b) Prior to the mailing of the notice referred to below, but in any
event within 30 days following any Change of Control, the Company covenants to
(i) repay in full and terminate all commitments under Indebtedness under the
Credit Agreement and all other Senior Debt the terms of which require repayment
upon a Change of Control or offer to repay in full and
<PAGE>
-58-
terminate all commitments under all Indebtedness under the Credit Agreement and
all other such Senior Debt and to repay the Indebtedness owed to each lender
which has accepted such offer or (ii) obtain the requisite consents under the
Credit Agreement and all other Senior Debt to permit the repurchase of the
Securities as provided below. The Company shall first comply with the covenant
in the immediately preceding sentence before it shall be required to repurchase
Securities pursuant to the provisions described below. The Company's failure to
comply with the covenant described in the immediately preceding sentence shall
constitute an Event of Default described in clause (c) and not in clause (b) of
Section 6.01.
(c) Within 30 days following the date upon which a Change of Control
occurs (the "Change of Control Date"), the Company shall send, by first class
----------------------
mail, a notice to each Holder, with a copy to the Trustee, which notice shall
govern the terms of the Change of Control Offer. The notice to the Holders
shall contain all instructions and materials necessary to enable such Holders to
tender Securities pursuant to the Change of Control Offer. Such notice shall
state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Securities tendered and not withdrawn will be
accepted for payment;
(2) the purchase price (including the amount of accrued interest)
and the Change of Control Payment Date, which shall be a Business Day, that
is not earlier than 30 days or later than 60 days from the date such notice
is mailed;
(3) that any Security not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date;
<PAGE>
-59-
(5) that Holders electing to have a Security purchased pursuant to
a Change of Control Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Change of Control Payment
Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Security purchased;
(7) that Holders whose Securities are purchased only in part will
be issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price plus accrued interest, if any, of all
Securities so tendered and (iii) deliver to the Trustee Securities so accepted
together with an Officers' Certificate stating the Securities or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
the Holders of Securities so accepted payment in an amount equal to the purchase
price plus accrued interest, if any, and the Trustee shall promptly authenticate
and mail to such Holders new Securities equal in principal amount to any
unpurchased portion of the Securities surrendered. Any Securities not so
accepted shall be promptly mailed by the Company to the Holder thereof.
<PAGE>
-60-
For purposes of this Section 4.15, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Securities pursuant to a
Change of Control Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to a Change of Control Offer. To the extent
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.15, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.15 by virtue thereof.
SECTION 4.16. Limitation on Asset Sales.
-------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors), (ii) at least 75% of the consideration received
by the Company or the Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of cash or Cash Equivalents and is received at the
time of such disposition; provided that the amount of (a) any liabilities (as
--------
shown on the Company's or such Restricted Subsidiary's most recent balance
sheet) of the Company or any Restricted Subsidiary (other than liabilities that
are by their terms subordinated to the Securities) that are assumed by the
transferee of any such assets, and (b) any notes or other obligations received
by the Company or any such Restricted Subsidiary from such transferee that are
converted by the Company or such Restricted Subsidiary into cash within 180 days
after such Asset Sale (to the extent of the cash received) shall be deemed to be
cash for the purposes of this provision; and (iii) upon the consummation of an
Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to
apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of
receipt thereof either (A) to prepay any Senior Debt or Guarantor
<PAGE>
-61-
Senior Debt and, in the case of any Senior Debt or Guarantor Senior Debt under
any revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (B) to make an Investment in properties
and assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Restricted Subsidiaries as existing on the Issue Date or in
businesses the same, similar or reasonably related thereto ("Replacement
-----------
Assets"), or (C) a combination of prepayment and investment permitted by the
- ------
foregoing clauses (iii)(A) and (iii)(B). On the 361st day after an Asset Sale or
such earlier date, if any, as the Board of Directors of the Company or of such
Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to
such Asset Sale as set forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the
next preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such
-------------------------------
aggregate amount of Net Cash Proceeds which have not been applied on or before
such Net Proceeds Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B)
and (iii)(C) of the next preceding sentence (each a "Net Proceeds Offer Amount")
-------------------------
shall be applied by the Company or such Restricted Subsidiary to make an offer
to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer
------------------ ------------------
Payment Date") not less than 30 nor more than 45 days following the applicable
- ------------
Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis, that
--------
amount of Securities equal to the Net Proceeds Offer Amount at a price equal to
100% of the principal amount of the Securities to be purchased, plus accrued and
unpaid interest thereon, if any, to the date of purchase; provided, however,
-------- -------
that if at any time any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant. The Company may defer the Net Proceeds Offer until there is an
aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $5.0
million resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of $5.0
million, shall be applied as required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction
<PAGE>
-62-
permitted by Section 5.01, the successor corporation shall be deemed to have
sold the properties and assets of the Company and its Restricted Subsidiaries
not so transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to such deemed sale as if it were an
Asset Sale. In addition, the fair market value of such properties and assets of
the Company or its Restricted Subsidiaries deemed to be sold shall be deemed to
be Net Cash Proceeds for purposes of this covenant.
Notice of each Net Proceeds Offer pursuant to this Section 4.16 shall
be mailed or caused to be mailed, by first class mail, by the Company within 25
days following the applicable Net Proceeds Offer Trigger Date to all Holders at
their last registered addresses, with a copy to the Trustee. A Net Proceeds
Offer shall remain open for a period of 20 Business Days or such longer period
as may be required by law. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Securities pursuant to the
Net Proceeds Offer and shall state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to this
Section 4.16 and that all Securities tendered will be accepted for payment;
provided, however, that if the principal amount of Securities tendered in
-------- -------
the Net Proceeds Offer exceeds the aggregate amount of Net Proceeds Offer
Amount, the Company shall select the Securities to be purchased on a pro
rata basis;
(2) the purchase price (including the amount of accrued interest,
if any) and the purchase date (which shall be no earlier than 30 days nor
later than 45 days from the date such notice is mailed, other than as may
be required by applicable law);
(3) that any Security not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant
<PAGE>
-63-
to the Net Proceeds Offer shall cease to accrue interest after the Net
Proceeds Offer Payment Date;
(5) that Holders electing to have a Security purchased pursuant to
the Net Proceeds Offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Net Proceeds Offer Payment
Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Net Proceeds Offer Payment Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased; and
(7) that Holders whose Securities are purchased only in part will
be issued new Securities in a principal amount at maturity equal to the
unpurchased portion of the Securities surrendered.
On or before the Net Proceeds Offer Payment Date, the Company shall
(i) accept for payment Securities or portions thereof tendered pursuant to the
Net Proceeds Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price, plus accrued interest, if any, of all
Securities to be purchased and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to the Holders of Securities so accepted payment in an amount
equal to the purchase price, plus accrued interest, if any, thereon. Any
Security not so accepted shall be promptly mailed by the Company to the Holder
thereof. For purposes of this Section 4.16, the Trustee shall act as the Paying
Agent. Any amounts remaining after the purchase of Securities pursuant to a Net
Proceeds Offer shall be returned by the Trustee to the Company.
<PAGE>
-64-
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to a Net Proceeds Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.16, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.16 by virtue thereof.
SECTION 4.17. Prohibition on Incurrence of
Senior Subordinated Debt.
-------------------------
The Company and the Guarantors shall not incur or suffer to exist
Indebtedness that is senior in right of payment to the Securities or the
Guarantees, as the case may be, and subordinate in right of payment by its terms
to any other Indebtedness of the Company or such Guarantor, as the case may be.
SECTION 4.18. Additional Subsidiary Guarantees.
--------------------------------
If the Company or any of its Restricted Subsidiaries transfers or
causes to be transferred, in one transaction or a series of related
transactions, any property to any domestic Restricted Subsidiary that is not a
Guarantor, or if the Company or any of its Restricted Subsidiaries shall
organize, acquire or otherwise invest in another domestic Restricted Subsidiary
having total equity value in excess of $1.0 million, then such transferee or
acquired or other Restricted Subsidiary shall (i) execute and deliver to the
Trustee a supplemental indenture in form reasonably satisfactory to the Trustee
pursuant to which such Restricted Subsidiary shall unconditionally guarantee all
of the Company's obligations under the Securities and this Indenture on the
terms set forth in this Indenture and (ii) deliver to the Trustee an Opinion of
Counsel that such supplemental indenture has been duly authorized, executed and
delivered by such Restricted Subsidiary and constitutes a legal, valid, binding
and enforceable obligation of such Restricted Subsidiary. Thereafter, such
Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture.
<PAGE>
-65-
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.
----------------------------------------
(a) The Company shall not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Company's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless: (i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
----------------
a corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Securities and the
performance of every covenant of the Securities and this Indenture on the part
of the Company to be performed or observed; (ii) immediately after
<PAGE>
-66-
giving effect to such transaction on a pro forma basis and the assumption
--- -----
contemplated by clause (i)(2)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction), the Company or such
Surviving Entity, as the case may be, shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.04; (iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred or be continuing; and (iv) the Company or the
Surviving Entity, as the case may be, shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with the applicable provisions
of this Indenture and that all conditions precedent in this Indenture relating
to such transaction have been satisfied.
Notwithstanding the foregoing, the merger of the Company with an
Affiliate incorporated solely for the purpose of reincorporating the Company in
another jurisdiction shall be permitted.
(b) For purposes of the foregoing paragraph (a), the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of the Company the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
SECTION 5.02. Successor Corporation Substituted.
---------------------------------
(a) Upon any consolidation, combination or merger or any transfer of
all or substantially all of the assets of the Company in accordance with Section
5.01 in which the Company is not the continuing corporation, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Securities
<PAGE>
-67-
with the same effect as if such Surviving Entity had been named as such.
(b) Each Guarantor (other than any Guarantor whose Guarantee is to be
released in accordance with the terms of the Guarantee and this Indenture in
connection with any transaction complying with the provisions of Section 4.16)
shall not, and the Company shall not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Company or any
other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia; (ii) such entity assumes by supplemental indenture
all of the obligations of the Guarantor on the Guarantee; (iii) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; and (iv) immediately after giving effect to
such transaction and the use of any net proceeds therefrom on a pro forma basis,
--- -----
the Company could satisfy the provisions of clause (ii) of Section 5.01(a). Any
merger or consolidation of a Guarantor with and into the Company (with the
Company being the surviving entity) or another Guarantor that is a Wholly Owned
Restricted Subsidiary of the Company need only comply with clause (iv) of
Section 5.01(a).
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
Each of the following shall be an "Event of Default":
----------------
(a) the failure to pay interest on any Securities when the same
becomes due and payable and the default continues for a period of 30 days
(whether or not such payment
<PAGE>
-68-
shall be prohibited by Articles Ten and Twelve of this Indenture);
(b) the failure to pay the principal on any Securities, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Securities
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by Articles Ten and Twelve
of this Indenture);
(c) a default in the observance or performance of any other
covenant or agreement contained in this Indenture, which default continues
for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Securities;
(d) the failure to pay at final stated maturity (giving effect to
any applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of the Company or any Restricted Subsidiary of
the Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final stated maturity or which has
been accelerated, aggregates $5.0 million or more at any time;
(e) one or more judgments in an aggregate amount in excess of $5.0
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(f) the Company or any of its Significant Subsidiaries (i)
commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (ii) consents to the entry of a judgment, decree or
order for relief
<PAGE>
-69-
against it in an involuntary case or proceeding under any Bankruptcy Law,
(iii) consents to the appointment of a custodian of it or for substantially
all of its property, (iv) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it, (v) makes a general
assignment for the benefit of its creditors or (vi) takes any corporate
action to authorize or effect any of the foregoing;
(g) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case or proceeding under any Bankruptcy Law,
which shall (i) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Company or any of its Significant Subsidiaries, (ii) appoint a Custodian of
the Company or any of its Significant Subsidiaries or for substantially all
of any of its property or (iii) order the winding-up or liquidation of its
affairs; and such judgment, decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(h) any of the Guarantees ceases to be in full force and effect or
any of the Guarantees is declared to be null and void and unenforceable or
any of the Guarantees is found to be invalid or any of the Guarantors
denies its liability under its Guarantee (other than by reason of release
of such Guarantor in accordance with the terms of this Indenture).
SECTION 6.02. Acceleration.
------------
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) of Section 6.01 above with respect to the Company) shall occur
and be continuing, the Trustee or the Holders of at least 25% in principal
amount of outstanding Securities may declare the principal of and accrued
interest on all the Securities to be due and payable by notice in writing to the
Company and the Trustee specifying the respective Event of Default and that it
is a "notice of acceleration"
<PAGE>
-70-
(the "Acceleration Notice"), and the same (i) shall become immediately due and
-------------------
payable or (ii) if there are any amounts outstanding under the Credit Agreement,
shall become immediately due and payable upon the first to occur of an
acceleration under the Credit Agreement or 5 business days after receipt by the
Company and the Representative under the Credit Agreement of such Acceleration
Notice. If an Event of Default specified in clause (f) or (g) of Section 6.01
above with respect to the Company occurs and is continuing, then all unpaid
principal of, and premium, if any, and accrued and unpaid interest on all of
the outstanding Securities shall ipso facto become and be immediately due and
---- -----
payable without any declaration or other act on the part of the Trustee or any
Holder.
At any time after a declaration of acceleration with respect to the
Securities as described in the preceding paragraph, the Holders of a majority in
principal amount of the Securities may rescind and cancel such declaration and
its consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances and (v) in
the event of the cure or waiver of an Event of Default of the type described in
clause (f) or (g) of Section 6.01, the Trustee shall have received an Officers'
Certificate and an Opinion of Counsel that such Event of Default has been cured
or waived. No such rescission shall affect any subsequent Default or impair any
right consequent thereto.
SECTION 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on
<PAGE>
-71-
the Securities or to enforce the performance of any provision of the Securities
or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
-----------------------
Subject to Sections 2.09, 6.07 and 9.02, the Holders of not less than
a majority in principal amount of the outstanding Securities by notice to the
Trustee may waive an existing Default or Event of Default and its consequences,
except a Default in the payment of principal of or interest on any Security as
specified in clauses (a) and (b) of Section 6.01. The Company shall deliver to
the Trustee an Officers' Certificate stating that the requisite percentage of
Holders have consented to such waiver and attaching copies of such consents.
When a Default or Event of Default is waived, it is cured and ceases.
SECTION 6.05. Control by Majority.
-------------------
The Holders of not less than a majority in principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. Subject to Section 7.01, however, the Trustee may refuse
to follow any direction that conflicts with any law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability; provided
--------
that the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction.
<PAGE>
-72-
In the event the Trustee takes any action or follows any direction
pursuant to this Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against any loss or expense caused by
taking such action or following such direction.
SECTION 6.06. Limitation on Suits.
-------------------
A Securityholder may not pursue any remedy with respect to
this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holder or Holders of at least 25% in principal amount of
the outstanding Securities make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 45 days
after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(5) during such 45-day period the Holder or Holders of a majority
in principal amount of the outstanding Securities do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective
<PAGE>
-73-
dates, shall not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal or interest specified
in clause (a) or (b) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of principal
and accrued interest and fees remaining unpaid, together with interest on
overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per annum
--- -----
borne by the Securities and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relating to the Company, its
creditors or its property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any Custodian in any such judicial proceedings
is hereby authorized by each Securityholder to make such payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Securityholders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting
<PAGE>
-74-
the Securities or the rights of any Holder thereof, or to authorize the Trustee
to vote in respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for interest accrued on the Securities,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for interest;
Third: to Holders for principal amounts due and unpaid on the
Securities, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Securities for principal; and
Fourth: to the Company or, if applicable, the Guarantors, as their
respective interests may appear.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Securityholders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a
<PAGE>
-75-
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in principal amount of the outstanding Securities.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
-----------------
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the conduct
of his or her own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are specifically
set forth herein or in the TIA and no duties, covenants, responsibilities
or obligations shall be implied in this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates (including Officers'
Certificates) or opinions (including Opinions of Counsel) furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein, the Trustee may
not be relieved from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
<PAGE>
-76-
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to this Section 7.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(g) In the absence of bad faith, negligence or willful misconduct on
the part of the Trustee, the Trustee shall not be responsible for the
application of any money by any Paying Agent other than the Trustee.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by
<PAGE>
-77-
the proper Person. The Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and an Opinion of Counsel, which shall
conform to the provisions of Section 13.05. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance
on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other
than an agent who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion
of such counsel as to matters of law shall be full and complete
authorization and protection from liability in respect of any action taken,
omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order
or direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may
be incurred therein or thereby.
(g) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate (including any
Officers' Certificate), statement, instrument, opinion (including any
Opinion of Counsel), notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee,
<PAGE>
-78-
in its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled, upon
reasonable notice to the Company, to examine the books, records, and
premises of the Company, personally or by agent or attorney.
(h) The Trustee shall not be required to give any bond or surety
in respect of the performance of its powers and duties hereunder.
(i) The permissive rights of the Trustee to do things enumerated
in this Indenture shall not be construed as duties.
SECTION 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, its
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
any document issued in connection with the sale of Securities or any statement
in the Securities other than the Trustee's certificate of authentication. The
Trustee makes no representations with respect to the effectiveness or adequacy
of this Indenture.
<PAGE>
-79-
SECTION 7.05. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and the
Trustee receives actual notice of such Default or Event of Default, the Trustee
shall mail to each Securityholder notice of the uncured Default or Event of
Default within 60 days after such Default or Event of Default occurs. Except in
the case of a Default or an Event of Default in payment of principal of, or
interest on, any Security, including an accelerated payment and the failure to
make payment on the Change of Control Payment Date pursuant to a Change of
Control Offer or the Net Proceeds Offer Payment Date pursuant to a Net Proceeds
Offer, the Trustee may withhold the notice if and so long as the Board of
Directors, the executive committee, or a trust committee of directors and/or
Responsible Officers, of the Trustee in good faith determines that withholding
the notice is in the interest of the Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15, beginning with the first May 15
following the date of this Indenture, the Trustee shall, to the extent that any
of the events described in TIA (S) 313(a) occurred within the previous twelve
months, but not otherwise, mail to each Securityholder a brief report dated as
of such date that complies with TIA (S) 313(a). The Trustee also shall comply
with TIA (S)(S) 313(b), 313(c) and 313(d).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the Commission and each securities
exchange, if any, on which the Securities are listed.
The Company shall notify the Trustee if the Securities become listed
on any securities exchange or of any delisting thereof and the Trustee shall
comply with TIA (S) 313(d).
SECTION 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The
<PAGE>
-80-
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable disbursements, expenses and advances (including
reasonable fees and expenses of counsel) incurred or made by it in addition to
the compensation for its services, except any such disbursements, expenses and
advances as may be attributable to the Trustee's negligence, bad faith or
willful misconduct. Such expenses shall include the reasonable fees and expenses
of the Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents, employees,
officers, stockholders and directors for, and hold them harmless against, any
loss, liability or expense incurred by them except for such actions to the
extent caused by any negligence, bad faith or willful misconduct on their part,
arising out of or in connection with the acceptance or administration of this
trust including the reasonable costs and expenses of defending themselves
against or investigating any claim or liability in connection with the exercise
or performance of any of the Trustee's rights, powers or duties hereunder. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee or any of its agents, employees, officers, stockholders and directors
for which it may seek indemnity. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee and its agents, employees,
officers, stockholders and directors subject to the claim may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel; provided, however, that the Company will not be required to pay such
-------- -------
fees and expenses if it assumes the Trustee's defense and there is no conflict
of interest between the Company and the Trustee and its agents, employees,
officers, stockholders and directors subject to the claim in connection with
such defense as reasonably determined by the Trustee. The Company need not pay
for any settlement made without its written consent. The Company need not
reimburse any expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence, bad faith or willful misconduct.
<PAGE>
-81-
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a senior claim prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee, except
assets or money held in trust to pay principal of or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (f) or (g) of Section 6.01 occurs, such expenses and
the compensation for such services shall be paid to the extent allowed under any
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee
and may appoint a successor Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall
<PAGE>
-82-
transfer, after payment of all sums then owing to the Trustee pursuant to
Section 7.07, all property held by it as Trustee to the successor Trustee,
subject to the Lien provided in Section 7.07, the resignation or removal of the
retiring Trustee shall become effective, and the successor Trustee shall have
all the rights, powers and duties of the Trustee under this Indenture. A
successor Trustee shall mail notice of its succession to each Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided that such
--------
corporation shall be otherwise qualified and eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirement of TIA (S)(S) 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee shall
have a combined capital and surplus
<PAGE>
-83-
of at least $100,000,000 as set forth in its most recent published annual report
of condition. In addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of the bank holding company,
shall meet the capital requirements of TIA (S) 310(a)(2). The Trustee shall
comply with TIA (S) 310(b); provided, however, that there shall be excluded from
-------- -------
the operation of TIA (S) 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
the Company are outstanding, if the requirements for such exclusion set forth in
TIA (S) 310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the
Company and any other obligor of the Securities.
SECTION 7.11. Preferential Collection of Claims
Against Company.
----------------
The Trustee, in its capacity as Trustee hereunder shall comply with
TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A
Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to
the extent indicated.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations.
----------------------------------------
The Company may terminate its obligations under the Securities and
this Indenture, except those obligations referred to in the penultimate
paragraph of this Section 8.01, if all Securities previously authenticated and
delivered (other than destroyed, lost or stolen Securities which have been
replaced or paid or Securities for whose payment U.S. Legal Tender has
theretofore been deposited with the Trustee or the Paying Agent in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company, as provided in Section 8.05) have been delivered to the Trustee for
cancellation
<PAGE>
-84-
and the Company has paid all sums payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall have
given notice to the Trustee and mailed a notice of redemption to each
Holder of the redemption of all of the Securities under arrangements
satisfactory to the Trustee for the giving of such notice or (ii) all
Securities have otherwise become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the benefit
of the Holders of that purpose, U.S. Legal Tender in such amount as is
sufficient without consideration of reinvestment of such interest, to pay
principal of, premium, if any, and interest on the outstanding Securities
to maturity or redemption; provided that the Trustee shall have been
--------
irrevocably instructed to apply such U.S. Legal Tender to the payment of
said principal, premium, if any, and interest with respect to the
Securities and provided, further, that from and after the time of deposit,
-------- -------
the money deposited shall not be subject to the rights of holders of Senior
Debt or Guarantor Senior Debt pursuant to the provisions of Article Ten or
Twelve, as the case may be;
(c) no Default or Event of Default with respect to this Indenture
or the Securities shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any
other instrument to which the Company is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each
<PAGE>
-85-
stating that all conditions precedent providing for or relating to the
termination of the Company's obligations under the Securities and this
Indenture have been complied with. Such Opinion of Counsel shall also state
that such satisfaction and discharge does not result in a default under the
Credit Agreement or any other agreement or instrument then known to such
counsel that binds or affects the Company.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall survive
until the Securities are no longer outstanding pursuant to the last paragraph of
Section 2.08. After the Securities are no longer outstanding, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Securities and this Indenture except for those surviving obligations
specified above.
SECTION 8.02. Legal Defeasance and Covenant Defeasance.
----------------------------------------
(a) The Company may, at its option by Board Resolution of the Board
of Directors of the Company, at any time, elect to have either paragraph (b) or
(c) below be applied to all outstanding Securities upon compliance with the
conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03, be deemed to have been
discharged from its obligations with respect to all outstanding Securities on
the date the conditions set forth below are satisfied (hereinafter, "Legal
-----
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
- ----------
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Securities, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.04 hereof and
<PAGE>
-86-
the other Sections of this Indenture referred to in (i) and (ii) below, and to
have satisfied all its other obligations under such Securities and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), and Holders of the
Securities and any amounts deposited under Section 8.03 hereof shall cease to be
subject to any obligations to, or the rights of, any holder of Senior Debt under
Article Ten or otherwise, except for the following provisions, which shall
survive until otherwise terminated or discharged hereunder: (i) the rights of
Holders of outstanding Securities to receive solely from the trust fund
described in Section 8.04 hereof, and as more fully set forth in such Section,
payments in respect of the principal of and interest on such Securities when
such payments are due, (ii) the Company's obligations with respect to such
Securities under Article Two and Section 4.02 hereof, (iii) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (iv) this Article Eight. Subject to
compliance with this Article Eight, the Company may exercise its option under
this paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03 hereof, be released
from its obligations under the covenants contained in Sections 4.03, 4.04 and
Sections 4.12 through 4.18 and Article Five hereof with respect to the
outstanding Securities on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Securities shall
-------------------
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Securities shall not be deemed outstanding for accounting purposes) and Holders
of the Securities and any amounts deposited under Section 8.03 hereof shall
cease to be subject to any obligations to, or the rights
<PAGE>
-87-
of, any holder of Senior Debt under Article Ten or otherwise. For this purpose,
such Covenant Defeasance means that, with respect to the outstanding Securities,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01(c) hereof, but,
except as specified above, the remainder of this Indenture and such Securities
shall be unaffected thereby. In addition, upon the Company's exercise under
paragraph (a) hereof of the option applicable to this paragraph (c), subject to
the satisfaction of the conditions set forth in Section 8.03 hereof, Sections
6.01(c), 6.01(d) and 6.01(e) shall not constitute Events of Default.
SECTION 8.03. Conditions to Legal Defeasance
or Covenant Defeasance.
-----------------------
The following shall be the conditions to the application of either
Section 8.02(b) or 8.02(c) hereof to the outstanding Securities:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, U.S. Legal Tender or U.S. Government
Obligations which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms, will provide, not later
than one day before the due date of any payment on the Securities, U.S.
Legal Tender, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
on the Securities on the stated date for payment thereof or on the
applicable redemption date, as the case may be;
<PAGE>
-88-
(b) in the case of an election under Section 8.02(b) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had
not occurred;
(c) in the case of an election under Section 8.02(c) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the
Holders of the Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of
the proceeds of which will be used to defease the Securities pursuant to
this Article Eight concurrently with such incurrence) or insofar as
Sections 6.01(f) and 6.01(g) hereof are concerned, at any time in the
period ending on the 91st day after the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under this Indenture
or any other material agreement or instrument to which the Company or any
of its
<PAGE>
-89-
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with; and
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (i) the trust funds will not be subject to any
rights of any holders of Senior Debt, including, without limitation, those
arising under this Indenture, and (ii) assuming no intervening bankruptcy
or insolvency of the Company between the date of deposit and the 91st day
following the deposit and that no Holder is an insider of the Company,
after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable Bankruptcy Law.
Notwithstanding the foregoing, the Opinion of Counsel required by
clause (b) above of this Section 8.03 need not be delivered if all Securities
not theretofore delivered to the Trustee for cancellation (i) have become due
and payable, (ii) will become due and payable on the Maturity Date within one
year or (iii) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company.
SECTION 8.04. Application of Trust Money.
--------------------------
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it
<PAGE>
-90-
pursuant to this Article Eight, and shall apply the deposited U.S. Legal Tender
and the money from U.S. Government Obligations in accordance with this Indenture
to the payment of principal of and interest on the Securities. The Trustee shall
be under no obligation to invest said U.S. Legal Tender or U.S. Government
Obligations except as it may agree with the Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.03 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Securities.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any U.S. Legal Tender or U.S. Government Obligations held by it as
provided in Section 8.03 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof that would
then be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
SECTION 8.05. Repayment to the Company.
------------------------
Subject to this Article Eight, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Company upon request any money held by them for the payment of
principal or interest that remains unclaimed for two years; provided that the
--------
Trustee or such Paying Agent, before being required to make any payment, may at
the expense of the Company cause to be published once in a newspaper of general
circulation in the City of New York or mail to each Holder entitled to such
money notice that such money remains unclaimed and that after a date specified
therein which
<PAGE>
-91-
shall be at least 30 days from the date of such publication or mailing any
unclaimed balance of such money then remaining will be repaid to the Company.
After payment to the Company, Holders entitled to such money must look to the
Company for payment as general creditors unless an applicable law designates
another Person.
SECTION 8.06. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with this Article Eight by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Eight until such time as the Trustee or Paying Agent is
permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in
accordance with this Article Eight; provided that if the Company has made any
--------
payment of interest on or principal of any Securities because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the U.S. Legal
Tender or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
--------------------------
The Company, the Guarantors and the Trustee, together, may amend or
supplement this Indenture, the Securities or the Guarantees without notice to or
consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
<PAGE>
-92-
(2) to evidence the succession in accordance with Article Five
hereof of another Person to the Company and the assumption by any such
successor of the covenants of the Company herein and in the Securities;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(4) to make any other change that does not adversely affect the
rights of any Securityholders hereunder in any material respect;
(5) to comply with any requirements of the Commission in connection
with the qualification of this Indenture under the TIA; or
(6) to add or release any Guarantor pursuant to the terms of this
Indenture;
provided that the Company has delivered to the Trustee an Opinion of Counsel and
- --------
an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
-----------------------
Subject to Section 6.07, the Company, the Guarantors and the Trustee,
together, with the written consent of the Holder or Holders of at least a
majority in aggregate principal amount of the outstanding Securities, may amend
or supplement this Indenture, the Securities or the Guarantees, without notice
to any other Securityholders. Subject to Section 6.07, the Holder or Holders of
a majority in aggregate principal amount of the outstanding Securities may waive
compliance by the Company with any provision of this Indenture, the Securities
or the Guarantees without notice to any other Securityholder. Without the
consent of each Securityholder affected, however, no amendment, supplement or
waiver, including a waiver pursuant to Section 6.04, may:
<PAGE>
-93-
(1) reduce the amount of Securities whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the rate of or change or have the effect of changing the
time for payment of interest, including default interest, on any Security;
(3) reduce the principal of or change or have the effect of
changing the fixed maturity of any Security, or change the date on which
any Securities may be subject to redemption or repurchase, or reduce the
redemption or purchase price therefor;
(4) make any Securities payable in money other than that stated in
the Securities;
(5) make any change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Security on or after the due date thereof or to bring suit to enforce
such payment, or permitting Holders of a majority in principal amount of
the Securities to waive Defaults or Events of Default;
(6) make any changes in Section 6.04, 6.07 or this Section 9.02;
(7) modify or change any provision of this Indenture or the related
definitions affecting the subordination or ranking of the Securities or any
Guarantee, in a manner which adversely affects the Holders;
(8) amend, modify or change in any material respect the obligation
of the Company to make and consummate a Change of Control Offer in the
event of a Change of Control or make and consummate a Net Proceeds Offer
with respect to any Asset Sale that has been consummated or, modify any of
the provisions or definitions with respect thereto; or
<PAGE>
-94-
(9) release any Guarantor from any of its obligations under its
Guarantee or this Indenture otherwise than in accordance with the terms of
this Indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Effect on Senior Debt.
---------------------
No amendment of this Indenture shall adversely affect the rights of
any holder of Senior Debt or Guarantor Senior Debt under Article Ten or Article
Twelve, as the case may be, of this Indenture, without the consent of such
holder.
SECTION 9.04. Compliance with TIA.
-------------------
From the date on which this Indenture is qualified under the TIA,
every amendment, waiver or supplement of this Indenture, the Securities or the
Guarantees shall comply with the TIA as then in effect.
SECTION 9.05. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by notice to the Trustee
or the Company received before
<PAGE>
-95-
the date on which the Trustee receives an Officers' Certificate certifying that
the Holders of the requisite principal amount of Securities have consented (and
not theretofore revoked such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (9) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security; provided that any such waiver
--------
shall not impair or affect the right of any Holder to receive payment of
principal of and interest on a Security, on or after the respective due dates
expressed in such Security, or to bring suit for the enforcement of any such
payment on or after such respective dates without the consent of such Holder.
SECTION 9.06. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Company may require the Holder of the Security to deliver it to the Trustee.
The Company may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new
<PAGE>
-96-
Security that reflects the changed terms. Failure to make the appropriate
notation or issue a new Security shall not affect the validity and effect of
such amendment, supplement or waiver.
SECTION 9.07. Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided that the Trustee may, but
--------
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture and constituted the legal, valid and binding obligations of the
Company enforceable in accordance with its terms. Such Opinion of Counsel shall
be at the expense of the Company.
ARTICLE TEN
SUBORDINATION OF SECURITIES
SECTION 10.01. Securities Subordinated to
Senior Debt.
------------
Anything herein to the contrary notwithstanding, the Company, for
itself and its successors, and each Holder, by his or her acceptance of
Securities, agrees that the payment of all Obligations owing to the Holders in
respect of the Securities is subordinated, to the extent and in the manner
provided in this Article Ten, to the prior payment in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Debt, of all Obligations on Senior Debt.
<PAGE>
-97-
This Article Ten shall constitute a continuing offer to all Persons
who become holders of, or continue to hold, Senior Debt, and such provisions are
made for the benefit of the holders of Senior Debt and such holders are made
obligees hereunder and any one or more of them may enforce such provisions.
SECTION 10.02. Suspension of Payment When Senior
Debt Is in Default.
-------------------
(a) Unless Section 10.03 shall be applicable, if any default occurs
and is continuing in the payment when due, whether at maturity, upon any
redemption, by declaration or otherwise, of any principal of, interest on,
unpaid drawings for letters of credit issued in respect of, or regularly
accruing fees with respect to, any Senior Debt (a "Payment Default"), then no
---------------
payment of any kind or character shall be made by or on behalf of the Company or
any other Person on its or their behalf with respect to any Obligations on the
Securities or to acquire any of the Securities for cash or property or otherwise
and until such Payment Default shall have been cured or waived or shall have
ceased to exist or such Senior Debt as to which such Payment Default relates
shall have been discharged or paid in full in cash or Cash Equivalents, after
which the Company shall resume making any and all required payments in respect
of the Securities, including any missed payments.
(b) Unless Section 10.03 shall be applicable, if any other event of
default (other than a Payment Default) occurs and is continuing with respect to
any Designated Senior Debt (as such event of default is defined in the
instrument creating or evidencing such Designated Senior Debt) permitting the
holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof (a "Non-payment Default") and if the Representative for the
-------------------
respective issue of Designated Senior Debt gives notice of the event of default
to the Trustee (a "Default Notice"), then, unless and until all events of
--------------
default have been cured or waived or have ceased to exist or the Trustee
receives notice thereof from the Representative for the respective issue of
Designated Senior Debt terminating the Payment Blockage Period (as defined
below), during the 180 days
<PAGE>
-98-
after the delivery of such Default Notice (the "Payment Blockage Period"),
-----------------------
neither the Company nor any other Person on its behalf shall (x) make any
payment of any kind or character with respect to any Obligations on the
Securities or (y) acquire any of the Securities for cash or property or
otherwise. Notwithstanding anything herein to the contrary, (x) in no event will
a Payment Blockage Period extend beyond 180 days from the date the payment on
the Securities was due and (y) only one such Payment Blockage Period may be
commenced within any 360 consecutive days. For all purposes of this Section
10.02(b), no event of default which existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Debt shall be, or be made, the basis for the commencement of a second
Payment Blockage Period by the Representative of such Designated Senior Debt
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Payment Blockage Period that, in either case, would give
rise to an event of default pursuant to any provisions under which an event of
default previously existed or was continuing shall constitute a new event of
default for this purpose).
(c) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by the foregoing provisions of this Section 10.02, such payment shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Senior Debt (pro rata to such holders on the basis of the respective amount of
Senior Debt held by such holders) or their respective Representatives, as their
respective interests may appear. The Trustee shall be entitled to rely on
information regarding amounts then due and owing on the Senior Debt, if any,
received from the holders of Senior Debt (or their Representatives) or, if such
information is not received from such holders or their Representatives, from the
Company and only amounts included in the information provided to the Trustee
shall be paid to the holders of Senior Debt.
<PAGE>
-99-
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided that all Senior Debt thereafter due or declared to
--------
be due shall first be paid in full in cash or Cash Equivalents before the
Holders are entitled to receive any payment of any kind or character with
respect to Obligations on the Securities.
SECTION 10.03. Securities Subordinated to Prior Payment
of All Senior Debt on Dissolution,
Liquidation or Reorganization of Company.
-----------------------------------------
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors or marshaling of assets of the Company or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
the Company or its property, whether voluntary or involuntary, all Obligations
due or to become due upon all Senior Debt shall first be paid in full in cash or
Cash Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Debt, before any payment or distribution of any kind or
character is made on account of any Obligations on the Securities, or for the
acquisition of any of the Securities for cash or property or otherwise. Upon
any such dissolution, winding-up, liquidation, reorganization, receivership or
similar proceeding, any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to which the Holders
of the Securities or the Trustee under this Indenture would be entitled, except
for the provisions hereof, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the Holders or by the Trustee under this
Indenture if received by them, directly to the holders of Senior Debt (pro rata
to such holders on the basis of the respective amounts of Senior Debt held by
such holders) or their respective Representatives,
<PAGE>
-100-
or to the trustee or trustees under any indenture pursuant to which any of such
Senior Debt may have been issued, as their respective interests may appear, for
application to the payment of Senior Debt remaining unpaid until all such Senior
Debt has been paid in full in cash or Cash Equivalents after giving effect to
any concurrent payment, distribution or provision therefor to or for the holders
of Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on behalf
of the Company, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar Person under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then, if such payment is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar Person, the Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by this Section 10.03(c), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Debt (pro rata to such holders on the
basis of the respective amount of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash or
Cash Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
(d) The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance
<PAGE>
-101-
or transfer of all or substantially all of its assets, to another corporation
upon the terms and conditions provided in Article Five hereof and as long as
permitted under the terms of the Senior Debt shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section if
such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, assume the Company's obligations hereunder in accordance
with Article Five hereof.
SECTION 10.04. Payments May Be Paid Prior
to Dissolution.
---------------
Nothing contained in this Article Ten or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Sections
10.02 and 10.03, from making payments at any time for the purpose of making
payments of principal of and interest on the Securities, or from depositing with
the Trustee any moneys for such payments, or (ii) in the absence of actual
knowledge by the Trustee that a given payment would be prohibited by Section
10.02 or 10.03, the application by the Trustee of any moneys deposited with it
for the purpose of making such payments of principal of, and interest on, the
Securities to the Holders entitled thereto unless at least two Business Days
prior to the date upon which such payment would otherwise become due and payable
a Trust Officer shall have actually received the written notice provided for in
the first sentence of Section 10.02(b) or in Section 10.07 (provided that,
---------
notwithstanding the foregoing, such application shall otherwise be subject to
the provisions of Section 10.02(a) and Section 10.03). The Company shall give
prompt written notice to the Trustee of any dissolution, winding-up, liquidation
or reorganization of the Company.
SECTION 10.05. Holders To Be Subrogated to Rights
of Holders of Senior Debt.
--------------------------
Subject to the payment in full in cash or Cash Equivalents of all
Senior Debt, the Holders of the Securities shall be subrogated to the rights of
the holders of Senior Debt to receive payments or distributions of cash,
property or securities of the Company applicable to the Senior Debt until the
<PAGE>
-102-
Securities shall be paid in full; and, for the purposes of such subrogation, no
such payments or distributions to the holders of the Senior Debt by or on behalf
of the Company, or by or on behalf of the Holders by virtue of this Article Ten,
which otherwise would have been made to the Holders shall, as between the
Company and the Holders, be deemed to be a payment by the Company to or on
account of the Senior Debt, it being understood that the provisions of this
Article Ten are and are intended solely for the purpose of defining the relative
rights of the Holders, on the one hand, and the holders of Senior Debt, on the
other hand.
SECTION 10.06. Obligations of the Company Unconditional.
----------------------------------------
Nothing contained in this Article Ten or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Debt, and the Holders, the obligation
of the Company, which is absolute and unconditional, to pay to the Holders the
principal of and any interest on the Securities as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders and creditors of the Company
other than the holders of the Senior Debt, nor shall anything herein or therein
prevent the Holder of any Security or the Trustee on its behalf from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.
SECTION 10.07. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Debt or of any other facts which would prohibit the making of any
payment to
<PAGE>
-103-
or by the Trustee unless and until the Trustee shall have received notice in
writing from the Company, or from a holder of Senior Debt or a Representative
therefor, together with proof satisfactory to the Trustee of such holding of
Senior Debt or of the authority of such Representative, and, prior to the
receipt of any such written notice, the Trustee shall be entitled to assume (in
the absence of actual knowledge to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Ten, and if such evidence is not furnished the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
SECTION 10.08. Reliance on Judicial Order or
Certificate of Liquidating Agent.
--------------------------------
Upon any payment or distribution of assets of the Company referred to
in this Article Ten, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders of the Securities shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which any
insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation,
reorganization or similar case or proceeding is pending, or upon a certificate
of the receiver, trustee in bankruptcy, liquidating trustee, assignee for the
benefit of creditors, agent or other person making such payment or distribution,
delivered to the Trustee or the Holders of the Securities, for the purpose of
ascertaining the persons entitled to participate in such payment or
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
<PAGE>
-104-
distributed thereon and all other facts pertinent thereto or to this Article
Ten.
SECTION 10.09. Trustee's Relation to Senior Debt.
---------------------------------
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article Ten with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt.
Whenever a distribution is to be made or a notice given to holders or
owners of Senior Debt, the distribution may be made and the notice may be given
to their Representative, if any.
SECTION 10.10. Subordination Rights Not Impaired
by Acts or Omissions of the Company
or Holders of Senior Debt.
--------------------------
No right of any present or future holders of any Senior Debt to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any
<PAGE>
-105-
time and from time to time, without the consent of or notice to the Trustee,
without incurring responsibility to the Trustee or the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
Ten or the obligations hereunder of the Holders of the Securities to the holders
of the Senior Debt, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Debt, or otherwise amend or supplement in any manner Senior Debt, or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person
liable in any manner for the payment or collection of Senior Debt; and (iv)
exercise or refrain from exercising any rights against the Company and any other
Person.
SECTION 10.11. Securityholders Authorize Trustee To
Effectuate Subordination of Securities.
--------------------------------------
Each Holder of Securities by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior Debt
and the Holders of Securities, the subordination provided in this Article Ten,
and appoints the Trustee its attorney-in-fact for such purposes, including, in
the event of any dissolution, winding-up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of credits or
otherwise) tending towards liquidation of the business and assets of the
Company, the filing of a claim for the unpaid balance of its Securities and
accrued interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Debt or their
Representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim
<PAGE>
-106-
for and on behalf of the Holders of said Securities. Nothing herein contained
shall be deemed to authorize the Trustee or the holders of Senior Debt or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee or the holders of Senior Debt or their Representative to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 10.12. This Article Ten Not To
Prevent Events of Default.
-------------------------
The failure to make a payment on account of principal of or interest
on the Securities by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
SECTION 10.13. Trustee's Compensation
Not Prejudiced.
---------------
Nothing in this Article Ten will apply to amounts due to the
Trustee pursuant to other sections of this Indenture.
ARTICLE ELEVEN
GUARANTEE OF SECURITIES
SECTION 11.01. Unconditional Guarantee.
-----------------------
Subject to the provisions of this Article Eleven, each of the
Guarantors hereby, jointly and severally, unconditionally and irrevocably
guarantees, on a senior subordinated basis (such guarantees to be referred to
herein as a "Guarantee") to each Holder of a Security authenticated and
---------
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the
Securities or the obligations of the Company or any other Guarantors to the
Holders or the Trustee hereunder or thereunder, that: (a) the principal of,
premium,
<PAGE>
-107-
if any, and interest on the Securities shall be duly and punctually paid in full
when due, whether at maturity, upon redemption at the option of Holders pursuant
to the provisions of the Securities relating thereto, by acceleration or
otherwise, and interest on the overdue principal and (to the extent permitted by
law) interest, if any, on the Securities and all other obligations of the
Company or the Guarantors to the Holders or the Trustee hereunder or thereunder
(including amounts due the Trustee under Section 7.07 hereof) and all other
obligations shall be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Securities or any of such other obligations, the same
shall be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed, or failing
performance of any other obligation of the Company to the Holders under this
Indenture or under the Securities, for whatever reason, each Guarantor shall be
obligated to pay, or to perform or cause the performance of, the same
immediately. An Event of Default under this Indenture or the Securities shall
constitute an event of default under this Guarantee, and shall entitle the
Holders of Securities to accelerate the obligations of the Guarantors hereunder
in the same manner and to the same extent as the obligations of the Company.
Each of the Guarantors hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Securities with
respect to any provisions hereof or thereof, any release of any other Guarantor,
the recovery of any judgment against the Company, any action to enforce the
same, whether or not a Guarantee is affixed to any particular Security, or any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a Guarantor. Each of the Guarantors hereby waives the
benefit of diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency
<PAGE>
-108-
or bankruptcy of the Company, any right to require a proceeding first against
the Company, protest, notice and all demands whatsoever and covenants that its
Guarantee shall not be discharged except by complete performance of the
obligations contained in the Securities, this Indenture and this Guarantee. This
Guarantee is a guarantee of payment and not of collection. If any Holder or the
Trustee is required by any court or otherwise to return to the Company or to any
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or such Guarantor, any amount paid by the
Company or such Guarantor to the Trustee or such Holder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor further agrees that, as between it, on the one hand, and the
Holders of Securities and the Trustee, on the other hand, (a) subject to this
Article Eleven, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six hereof for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (b) in
the event of any acceleration of such obligations as provided in Article Six
hereof, such obligations (whether or not due and payable) shall forthwith become
due and payable by the Guarantors for the purpose of this Guarantee.
No stockholder, officer, director, employee or incorporator, past,
present or future, or any Guarantor, as such, shall have any personal liability
under this Guarantee by reason of his, her or its status as such stockholder,
officer, director, employee or incorporator.
Each Guarantor that makes a payment or distribution under its
Guarantee shall be entitled to a contribution from each other Guarantor,
determined in accordance with GAAP.
SECTION 11.02. Limitations on Guarantees.
-------------------------
The obligations of each Guarantor under its Guarantee are limited to
the maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from or
payments
<PAGE>
-109-
made by or on behalf of any other Guarantor in respect of the obligations of
such other Guarantor under its Guarantee or pursuant to its contribution
obligations under this Indenture, will result in the obligations of such
Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a contribution
from each other Guarantor in an amount pro rata, based on the net assets of each
--- ----
Guarantor, determined in accordance with GAAP.
SECTION 11.03. Execution and Delivery of Guarantee.
-----------------------------------
To further evidence the Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form of Exhibit B hereto, shall be endorsed on each Security authenticated and
---------
delivered by the Trustee. Such Guarantee shall be executed on behalf of each
Guarantor by either manual or facsimile signature of two Officers of each
Guarantor, each of whom, in each case, shall have been duly authorized to so
execute by all requisite corporate action. The validity and enforceability of
any Guarantee shall not be affected by the fact that it is not affixed to any
particular Security.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 11.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Security a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture or a
Guarantee no longer holds that office at the time the Trustee authenticates the
Security on which such Guarantee is endorsed or at any time thereafter, such
Guarantor's Guarantee of such Security shall nevertheless be valid.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of each Guarantor.
<PAGE>
-110-
SECTION 11.04. Release of a Guarantor.
----------------------
(a) If no Default exists or would exist under this Indenture, upon
the sale or disposition of all of the Capital Stock of a Guarantor by the
Company, in a transaction or series of related transactions that either (i) does
not constitute an Asset Sale or (ii) constitutes an Asset Sale the Net Cash
Proceeds of which are applied in accordance with Section 4.16, or upon the
consolidation or merger of a Guarantor with or into any Person in compliance
with Article Five (in each case, other than to the Company or an Affiliate of
the Company), or if any Guarantor is dissolved or liquidated in accordance with
this Indenture, such Guarantor's Guarantee will be automatically discharged and
released from all obligations under this Article Eleven without any further
action required on the part of the Trustee or any Holder. Any Guarantor not so
released or the entity surviving such Guarantor, as applicable, shall remain or
be liable under its Guarantee as provided in this Article Eleven.
(b) The Trustee shall deliver an appropriate instrument evidencing
the release of a Guarantor upon receipt of a request by the Company or such
Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel
certifying as to the compliance with this Section 11.04; provided, however, that
-------- -------
the legal counsel delivering such Opinion of Counsel may rely as to matters of
fact on one or more Officers Certificates of the Company.
The Trustee shall execute any documents reasonably requested by the
Company or a Guarantor in order to evidence the release of such Guarantor from
its obligations under its Guarantee endorsed on the Securities and under this
Article Eleven.
Except as set forth in Articles Four and Five and this Section 11.04,
nothing contained in this Indenture or in any of the Securities shall prevent
any consolidation or merger of a Guarantor with or into the Company or another
Guarantor or shall prevent any sale or conveyance of the property of a
<PAGE>
-111-
Guarantor as an entirety or substantially as an entirety to the Company or
another Guarantor.
SECTION 11.05. Waiver of Subrogation.
---------------------
Until this Indenture is discharged and all of the Securities are
discharged and paid in full, each Guarantor hereby irrevocably waives and agrees
not to exercise any claim or other rights which it may now or hereafter acquire
against the Company that arise from the existence, payment, performance or
enforcement of the Company's obligations under the Securities or this Indenture
and such Guarantor's obligations under this Guarantee and this Indenture, in any
such instance including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, and any right to
participate in any claim or remedy of the Holders against the Company, 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 Company, 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 or other
rights. If any amount shall be paid to any Guarantor in violation of the
preceding sentence and any amounts owing to the Trustee or the Holders of
Securities under the Securities, this Indenture, or any other document or
instrument delivered under or in connection with such agreements or instruments,
shall not have been paid in full, such amount shall have been deemed to have
been paid to such Guarantor for the benefit of, and held in trust for the
benefit of, the Trustee or the Holders and shall forthwith be paid to the
Trustee for the benefit of itself or such Holders to be credited and applied to
the obligations in favor of the Trustee or the Holders, as the case may be,
whether matured or unmatured, in accordance with the terms of this Indenture.
Each Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Indenture and that the
waiver set forth in this Section 11.05 is knowingly made in contemplation of
such benefits.
<PAGE>
-112-
SECTION 11.06. Immediate Payment.
-----------------
Each Guarantor agrees to make immediate payment to the Trustee on
behalf of the Holders of all Obligations owing or payable to the respective
Holders upon receipt of a demand for payment therefor by the Trustee to such
Guarantor in writing.
SECTION 11.07. No Set-Off.
----------
Each payment to be made by a Guarantor hereunder in respect of the
Obligations shall be payable in the currency or currencies in which such
Obligations are denominated, and shall be made without set-off, counterclaim,
reduction or diminution of any kind or nature.
SECTION 11.08. Obligations Absolute.
--------------------
The obligations of each Guarantor hereunder are and shall be absolute
and unconditional and any monies or amounts expressed to be owing or payable by
each Guarantor hereunder which may not be recoverable from such Guarantor on the
basis of a Guarantee shall be recoverable from such Guarantor as a primary
obligor and principal debtor in respect thereof.
SECTION 11.09. Obligations Continuing.
----------------------
The obligations of each Guarantor hereunder shall be continuing and
shall remain in full force and effect until all the obligations have been paid
and satisfied in full. Each Guarantor agrees with the Trustee that it will from
time to time deliver to the Trustee suitable acknowledgments of this continued
liability hereunder and under any other instrument or instruments in such form
as counsel to the Trustee may advise and as will prevent any action brought
against it in respect of any default hereunder being barred by any statute of
limitations now or hereafter in force and, in the event of the failure of a
Guarantor so to do, it hereby irrevocably appoints the Trustee the attorney and
agent of such Guarantor to make, execute and deliver such written acknowledgment
or acknowledgments or other instruments as may from time to time become
necessary
<PAGE>
-113-
or advisable, in the judgment of the Trustee on the advice of counsel, to fully
maintain and keep in force the liability of such Guarantor hereunder.
SECTION 11.10. Obligations Not Reduced.
-----------------------
The obligations of each Guarantor hereunder shall not be satisfied,
reduced or discharged solely by the payment of such principal, premium, if any,
interest, fees and other monies or amounts as may at any time prior to discharge
of this Indenture pursuant to Article Eight be or become owing or payable under
or by virtue of or otherwise in connection with the Securities or this
Indenture.
SECTION 11.11. Obligations Reinstated.
----------------------
The obligations of each Guarantor hereunder shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
which would otherwise have reduced the obligations of any Guarantor hereunder
(whether such payment shall have been made by or on behalf of the Company or by
or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders
upon the insolvency, bankruptcy, liquidation or reorganization of the Company or
any Guarantor or otherwise, all as though such payment had not been made. If
demand for, or acceleration of the time for, payment by the Company is stayed
upon the insolvency, bankruptcy, liquidation or reorganization of the Company,
all such Indebtedness otherwise subject to demand for payment or acceleration
shall nonetheless be payable by each Guarantor as provided herein.
SECTION 11.12. Obligations Not Affected.
------------------------
The obligations of each Guarantor hereunder shall not be affected,
impaired or diminished in any way by any act, omission, matter or thing
whatsoever, occurring before, upon or after any demand for payment hereunder
(and whether or not known or consented to by any Guarantor or any of the
Holders) which, but for this provision, might constitute a whole or partial
defense to a claim against any Guarantor hereunder or
<PAGE>
-114-
might operate to release or otherwise exonerate any Guarantor from any of its
obligations hereunder or otherwise affect such obligations, whether occasioned
by default of any of the Holders or otherwise, including, without limitation:
(a) any limitation of status or power, disability, incapacity or
other circumstance relating to the Company or any other Person, including
any insolvency, bankruptcy, liquidation, reorganization, readjustment,
composition, dissolution, winding-up or other proceeding involving or
affecting the Company or any other Person;
(b) any irregularity, defect, unenforceability or invalidity in
respect of any indebtedness or other obligation of the Company or any other
Person under this Indenture, the Securities or any other document or
instrument;
(c) any failure of the Company, whether or not without fault on
its part, to perform or comply with any of the provisions of this Indenture
or the Securities, or to give notice thereof to a Guarantor;
(d) the taking or enforcing or exercising or the refusal or
neglect to take or enforce or exercise any right or remedy from or against
the Company or any other Person or their respective assets or the release
or discharge of any such right or remedy;
(e) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the
Company or any other Person;
(f) any change in the time, manner or place of payment of, or in
any other term of, any of the Securities, or any other amendment,
variation, supplement, replacement or waiver of, or any consent to
departure from, any of the Securities or this Indenture, including, without
limitation, any increase or decrease in the principal amount of or premium,
if any, or interest on any of the Securities;
<PAGE>
-115-
(g) any change in the ownership, control, name, objects,
businesses, assets, capital structure or constitution of the Company or a
Guarantor;
(h) any merger or amalgamation of the Company or a Guarantor with
any Person or Persons;
(i) the occurrence of any change in the laws, rules, regulations
or ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, any of
the Obligations or the obligations of a Guarantor under its Guarantee; and
(j) any other circumstance, including release of the Guarantor
pursuant to Section 11.04 (other than by complete, irrevocable payment)
that might otherwise constitute a legal or equitable discharge or defense
of the Company under this Indenture or the Securities or of a Guarantor in
respect of its Guarantee hereunder.
SECTION 11.13. Waiver.
------
Without in any way limiting the provisions of Section 11.01 hereof,
each Guarantor hereby waives notice of acceptance hereof, notice of any
liability of any Guarantor hereunder, notice or proof of reliance by the Holders
upon the obligations of any Guarantor hereunder, and diligence, presentment,
demand for payment on the Company, protest, notice of dishonor or non-payment of
any of the Obligations, or other notice or formalities to the Company or any
Guarantor of any kind whatsoever.
SECTION 11.14. No Obligation To Take Action Against
the Company.
------------
Neither the Trustee nor any other Person shall have any obligation to
enforce or exhaust any rights or remedies or to take any other steps under any
security for the Obligations or against the Company or any other Person or any
property of
<PAGE>
-116-
the Company or any other Person before the Trustee is entitled to demand payment
and performance by any or all Guarantors of their liabilities and obligations
under their Guarantees or under this Indenture.
SECTION 11.15. Dealing with the Company and Others.
-----------------------------------
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of any Guarantor
hereunder and without the consent of or notice to any Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Company or any
other Person;
(b) take or abstain from taking security or collateral from the
Company or from perfecting security or collateral of the Company;
(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security given by
the Company or any third party with respect to the obligations or matters
contemplated by this Indenture or the Securities;
(d) accept compromises or arrangements from the Company;
(e) apply all monies at any time received from the Company or from
any security upon such part of the Obligations as the Holders may see fit
or change any such application in whole or in part from time to time as the
Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal
with, the Company and all other Persons and any security as the Holders or
the Trustee may see fit.
<PAGE>
-117-
SECTION 11.16. Default and Enforcement.
-----------------------
If any Guarantor fails to pay in accordance with Section 11.06 hereof,
the Trustee may proceed in its name as trustee hereunder in the enforcement of
the Guarantee of any such Guarantor and such Guarantor's obligations thereunder
and hereunder by any remedy provided by law, whether by legal proceedings or
otherwise, and to recover from such Guarantor the obligations.
SECTION 11.17. Amendment, Etc.
--------------
No amendment, modification or waiver of any provision of this
Indenture relating to any Guarantor or consent to any departure by any Guarantor
or any other Person from any such provision will in any event be effective
unless it is signed by such Guarantor and the Trustee.
SECTION 11.18. Acknowledgment.
--------------
Each Guarantor hereby acknowledges communication of the terms of this
Indenture and the Securities and consents to and approves of the same.
SECTION 11.19. Costs and Expenses.
------------------
Each Guarantor shall pay on demand by the Trustee any and all costs,
fees and expenses (including, without limitation, legal fees on a solicitor and
client basis) incurred by the Trustee, its agents, advisors and counsel or any
of the Holders in enforcing any of their rights under any Guarantee.
SECTION 11.20. No Merger or Waiver; Cumulative Remedies.
----------------------------------------
No Guarantee shall operate by way of merger of any of the obligations
of a Guarantor under any other agreement, including, without limitation, this
Indenture. No failure to exercise and no delay in exercising, on the part of
the Trustee or the Holders, any right, remedy, power or privilege hereunder or
under this
<PAGE>
-118-
Indenture or the Securities, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder or
under this Indenture or the Securities preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges in the Guarantee and under this
Indenture, the Securities and any other document or instrument between a
Guarantor and/or the Company and the Trustee are cumulative and not exclusive of
any rights, remedies, powers and privilege provided by law.
SECTION 11.21. Survival of Obligations.
-----------------------
Without prejudice to the survival of any of the other obligations of
each Guarantor hereunder, the obligations of each Guarantor under Section 11.01
shall survive the payment in full of the Obligations and shall be enforceable
against such Guarantor without regard to and without giving effect to any
defense, right of offset or counterclaim available to or which may be asserted
by the Company or any Guarantor.
SECTION 11.22. Guarantee in Addition to Other Obligations.
------------------------------------------
The obligations of each Guarantor under its Guarantee and this
Indenture are in addition to and not in substitution for any other obligations
to the Trustee or to any of the Holders in relation to this Indenture or the
Securities and any guarantees or security at any time held by or for the benefit
of any of them.
SECTION 11.23. Severability.
------------
Any provision of this Article Eleven which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction
unless its removal would substantially defeat the basic intent, spirit and
purpose of this Indenture and this Article Eleven.
SECTION 11.24. Successors and Assigns.
----------------------
Each Guarantee shall be binding upon and inure to the benefit of each
Guarantor and the Trustee and the other Holders
<PAGE>
-119-
and their respective successors and permitted assigns, except that no Guarantor
may assign any of its obligations hereunder or thereunder.
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated
to Guarantor Senior Debt.
-------------------------
Anything herein to the contrary notwithstanding, each of the
Guarantors, for itself and its successors, and each Holder, by his or her
acceptance of Guarantees, agrees that the payment of all Obligations owing to
the Holders in respect of its Guarantee (collectively, as to any Guarantor, its
"Guarantee Obligations") is subordinated, to the extent and in the manner
---------------------
provided in this Article Twelve, to the prior payment in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Guarantor Senior Debt, of all Obligations on Guarantor Senior Debt of
such Guarantor.
This Article Twelve shall constitute a continuing offer to all Persons
who become holders of, or continue to hold, Guarantor Senior Debt, and such
provisions are made for the benefit of the holders of Guarantor Senior Debt and
such holders are made obligees hereunder and any one or more of them may enforce
such provisions.
SECTION 12.02. Suspension of Guarantee Obligations
When Guarantor Senior Debt Is in Default.
-----------------------------------------
(a) Unless Section 12.03 shall be applicable, if any Payment Default
occurs and is continuing with respect to any Guarantor Senior Debt, then no
payment of any kind or character shall be made by or on behalf of such Guarantor
or any other Person on its behalf with respect to any Guarantee Obligations or
to acquire any of the Securities for cash or property or
<PAGE>
-120-
otherwise and until such Payment Default shall have been cured or waived or
shall have ceased to exist or such Guarantor Senior Debt shall have been
discharged or paid in full in cash or Cash Equivalents, after which such
Guarantor shall resume making any and all required payments in respect of its
obligations under this Guarantee, including any missed payments.
(b) Unless Section 12.03 shall be applicable, if any Non-payment
Default occurs and is continuing with respect to any Designated Senior Debt
under which a Guarantor is a primary obligor or which is guaranteed by a
Guarantor (which obligation or guarantee constitutes Guarantor Senior Debt of
such Guarantor) (as such event of default is defined in the instrument creating
or evidencing such Designated Senior Debt) and if the Representative for the
respective issue of Designated Senior Debt gives a Default Notice to the
Trustee, then, unless and until all events of default have been cured or waived
or have ceased to exist or the Trustee receives notice thereof from the
Representative for the respective issue of Designated Senior Debt terminating
the Guarantor Payment Blockage Period (as defined below), during the 180 days
after the delivery of such Default Notice (the "Guarantor Payment Blockage
--------------------------
Period"), neither such Guarantor nor any other Person on its behalf shall (x)
- ------
make any payment of any kind or character with respect to any Obligations on its
Guarantee or (y) acquire any of the Securities for cash or otherwise.
Notwithstanding anything herein to the contrary, (x) in no event will a
Guarantor Payment Blockage Period extend beyond 180 days from the date the
payment on a Guarantee was due and (y) only one such Guarantor Payment Blockage
Period may be commenced within any 360 consecutive days. For all purposes of
this Section 12.02(b), no event of default which existed or was continuing on
the date of the commencement of any Guarantor Payment Blockage Period with
respect to the Designated Senior Debt of a Guarantor shall be, or be made, the
basis for the commencement of a second Guarantor Payment Blockage Period by the
Representative of such Designated Senior Debt whether or not within a period of
360 consecutive days, unless such event of default shall have been cured or
waived for a period of not less than 90 consecutive days (it being acknowledged
that any subsequent action, or any
<PAGE>
-121-
breach of any financial covenants for a period commencing after the date of
commencement of such Guarantor Payment Blockage Period that, in either case,
would give rise to an event of default pursuant to any provisions under which an
event of default previously existed or was continuing shall constitute a new
event of default for this purpose).
(c) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by the foregoing provisions of this Section 12.02, such payment shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Guarantor Senior Debt (pro rata to such holders on the basis of the respective
amount of Guarantor Senior Debt held by such holders) or their respective
Representatives, as their respective interests may appear. The Trustee shall be
entitled to rely on information regarding amounts then due and owing on the
Guarantor Senior Debt, if any, received from the holders of Guarantor Senior
Debt (or their Representatives) or, if such information is not received from
such holders or their Representatives, from a Guarantor and only amounts
included in the information provided to the Trustee shall be paid to the holders
of Guarantor Senior Debt.
SECTION 12.03. Guarantee Obligations Subordinated
to Prior Payment of All Guarantor
Senior Debt on Dissolution, Liquidation
or Reorganization of Such Guarantor.
------------------------------------
(a) Upon any payment or distribution of assets of any Guarantor of
any kind or character, whether in cash, property or securities, to creditors
upon any liquidation, dissolution, winding-up, reorganization, assignment for
the benefit of creditors or marshaling of assets of such Guarantor or in a
bankruptcy, reorganization, insolvency, receivership or other similar proceeding
relating to such Guarantor or its property, whether voluntary or involuntary,
all Obligations due or to become due upon all Guarantor Senior Debt shall first
be paid in full in cash or Cash Equivalents, or such payment duly provided for
to the satisfaction of the holders of Guarantor Senior Debt, before any payment
or distribution of any kind or character
<PAGE>
-122-
is made on account of any Guarantee Obligations or for the acquisition of any of
the Securities for cash or property or otherwise. Upon any such dissolution,
winding-up, liquidation, reorganization, receivership or similar proceeding, any
payment or distribution of assets of such Guarantor of any kind or character,
whether in cash, property or securities, to which the Holders or the Trustee
under this Indenture would be entitled, except for the provisions hereof, shall
be paid by such Guarantor or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution, or by the
Holders or by the Trustee under this Indenture if received by them, directly to
the holders of Guarantor Senior Debt (pro rata to such holders on the basis of
the respective amounts of Guarantor Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Guarantor Senior Debt may have been issued, as
their respective interests may appear, for application to the payment of
Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has
been paid in full in cash or Cash Equivalents after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
Guarantor Senior Debt.
(b) To the extent any payment of Guarantor Senior Debt (whether by or
on behalf of a Guarantor, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Guarantor Senior Debt or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding as if
such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of
<PAGE>
-123-
any kind or character, whether in cash, property or securities, shall be
received by any Holder when such payment or distribution is prohibited by this
Section 12.03(c), such payment or distribution shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Guarantor
Senior Debt (pro rata to such holders on the basis of the respective amount of
Guarantor Senior Debt held by such holders) or their respective Representatives,
or to the trustee or trustees under any indenture pursuant to which any of such
Guarantor Senior Debt may have been issued, as their respective interests may
appear, for application to the payment of Guarantor Senior Debt remaining unpaid
until all such Guarantor Senior Debt has been paid in full in cash or Cash
Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Guarantor Senior Debt.
(d) The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another corporation or the liquidation or dissolution of
a Guarantor following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Article Five hereof and as long as permitted under the terms of the Guarantor
Senior Debt shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section if such other corporation shall,
as a part of such consolidation, merger, conveyance or transfer, assumes the
Guarantee of such Guarantor hereunder in accordance with Article Five hereof.
SECTION 12.04. Payments May Be Paid Prior
to Dissolution.
---------------
Nothing contained in this Article Twelve or elsewhere in this
Indenture shall prevent (i) any Guarantor, except under the conditions described
in Sections 12.02 and 12.03, from making payments at any time for the purpose of
making payments on Guarantee Obligations, or from depositing with the Trustee
any moneys for such payments, or (ii) in the absence of actual knowledge by the
Trustee that a given payment would be prohibited by Section 12.02 or 12.03, the
application by the Trustee
<PAGE>
-124-
of any moneys deposited with it for the purpose of making such payments on
Guarantee Obligations to the Holders entitled thereto unless at least two
Business Days prior to the date upon which such payment would otherwise become
due and payable a Trust Officer shall have actually received the written notice
provided for in the first sentence of Section 12.02(b) or in Section 12.07
(provided that, notwithstanding the foregoing, such application shall otherwise
--------
be subject to the provisions of Section 12.02(a) and Section 12.03). Each
Guarantor shall give prompt written notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of such Guarantor.
SECTION 12.05. Holders of Guarantee Obligations
To Be Subrogated to Rights of
Holders of Guarantor Senior Debt.
---------------------------------
Subject to the payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt, the Holders of Guarantee Obligations of any Guarantor
shall be subrogated to the rights of the holders of Guarantor Senior Debt of
such Guarantor to receive payments or distributions of cash, property or
securities of such Guarantor applicable to such Guarantor Senior Debt until all
amounts owing on or in respect of the Guarantee Obligations shall be paid in
full; and, for the purposes of such subrogation, no such payments or
distributions to the holders of such Guarantor Senior Debt by or on behalf of
such Guarantor, or by or on behalf of the Holders by virtue of this Article
Twelve, which otherwise would have been made to the Holders shall, as between
such Guarantor and the Holders, be deemed to be a payment by such Guarantor to
or on account of such Guarantor Senior Debt, it being understood that the
provisions of this Article Twelve are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders of
Guarantor Senior Debt, on the other hand.
SECTION 12.06. Obligations of the Guarantors Unconditional.
-------------------------------------------
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Guarantees is intended to or shall impair, as among the
Guarantors, their creditors other than the
<PAGE>
-125-
holders of Guarantor Senior Debt, and the Holders, the obligation of the
Guarantors, which is absolute and unconditional, to pay to the Holders all
amounts due and payable under the Guarantees as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the Holders and creditors of the Guarantors other
than the holders of the Guarantor Senior Debt, nor shall anything herein or
therein prevent any Holder or the Trustee on its behalf from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, in respect of cash, property or
securities of the Guarantors received upon the exercise of any such remedy.
SECTION 12.07. Notice to Trustee.
-----------------
Each Guarantor shall give prompt written notice to the Trustee of any
fact known to such Guarantor which would prohibit the making of any payment to
or by the Trustee in respect of the Guarantees pursuant to the provisions of
this Article Twelve. Regardless of anything to the contrary contained in this
Article Twelve or elsewhere in this Indenture, the Trustee shall not be charged
with knowledge of the existence of any default or event of default with respect
to any Guarantor Senior Debt or of any other facts which would prohibit the
making of any payment to or by the Trustee unless and until the Trustee shall
have received notice in writing from a Guarantor, or from a holder of Guarantor
Senior Debt or a Representative therefor, together with proof satisfactory to
the Trustee of such holding of Guarantor Senior Debt or of the authority of such
Representative, and, prior to the receipt of any such written notice, the
Trustee shall be entitled to assume (in the absence of actual knowledge to the
contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Debt to participate in any payment or distribution pursuant to
this Article Twelve, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amounts
<PAGE>
-126-
of Guarantor Senior Debt held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article Twelve, and if such
evidence is not furnished the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 12.08. Reliance on Judicial Order or
Certificate of Liquidating Agent.
--------------------------------
Upon any payment or distribution of assets of a Guarantor referred to
in this Article Twelve, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which any insolvency, bankruptcy,
receivership, dissolution, winding-up, liquidation, reorganization or similar
case or proceeding is pending, or upon a certificate of the trustee in
bankruptcy, liquidating trustee, receiver, assignee for the benefit of
creditors, agent or other person making such payment or distribution, delivered
to the Trustee or the Holders, for the purpose of ascertaining the persons
entitled to participate in such payment or distribution, the holders of the
Guarantor Senior Debt and other Indebtedness of such Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article Twelve.
SECTION 12.09. Trustee's Relation to Guarantor Senior Debt.
-------------------------------------------
The Trustee and any agent of a Guarantor or the Trustee shall be
entitled to all the rights set forth in this Article Twelve with respect to any
Guarantor Senior Debt which may at any time be held by it in its individual or
any other capacity to the same extent as any other holder of Guarantor Senior
Debt and nothing in this Indenture shall deprive the Trustee or any such agent
of any of its rights as such holder.
With respect to the holders of Guarantor Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in
<PAGE>
-127-
this Article Twelve, and no implied covenants or obligations with respect to the
holders of Guarantor Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Guarantor Senior Debt.
Whenever a distribution is to be made or a notice given to holders or
owners of Guarantor Senior Debt, the distribution may be made and the notice may
be given to their Representative, if any.
SECTION 12.10. Subordination Rights Not Impaired
by Acts or Omissions of the Guarantors
or Holders of Guarantor Senior Debt.
------------------------------------
No right of any present or future holders of any Guarantor Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Guarantor
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by any Guarantor with the terms of this Indenture, regardless of
any knowledge thereof which any such holder may have or otherwise be charged
with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Guarantor Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Securities and without
impairing or releasing the subordination provided in this Article Twelve or the
obligations hereunder of the Holders of the Securities to the holders of
Guarantor Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Guarantor Senior Debt, or otherwise amend or supplement in any manner
Guarantor Senior Debt, or any instrument evidencing the same or any agreement
under which Guarantor Senior Debt is outstanding; (ii) sell, exchange, release
or otherwise deal with any property pledged, mortgaged or otherwise securing
Guarantor Senior Debt; (iii) release any Person liable in any manner for the
payment or collection of Guarantor Senior Debt; and
<PAGE>
-128-
(iv) exercise or refrain from exercising any rights against the Guarantors and
any other Person.
SECTION 12.11. Holders Authorize Trustee To Effectuate
Subordination of Guarantee Obligations.
---------------------------------------
Each Holder of Guarantee Obligations by its acceptance of them
authorizes and expressly directs the Trustee on its behalf to take such action
as may be necessary or appropriate to effectuate, as between the holders of
Guarantor Senior Debt and the Holders, the subordination provided in this
Article Twelve, and appoints the Trustee its attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of any Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of credits or otherwise) tending towards liquidation of the business
and assets of any Guarantor, the filing of a claim for the unpaid balance under
its Guarantee Obligations and accrued interest in the form required in those
proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Guarantor Senior Debt
or their Representative are or is hereby authorized to have the right to file
and are or is hereby authorized to file an appropriate claim for and on behalf
of the Holders of said Guarantee Obligations. Nothing herein contained shall be
deemed to authorize the Trustee or the holders of Guarantor Senior Debt or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Guarantee Obligations or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Guarantor Senior Debt or their
Representative to vote in respect of the claim of any Holder in any such
proceeding.
<PAGE>
-129-
SECTION 12.12. This Article Twelve Not To
Prevent Events of Default.
--------------------------
The failure to make a payment on account of principal of or interest
on the Guarantees by reason of any provision of this Article Twelve will not be
construed as preventing the occurrence of an Event of Default.
SECTION 12.13. Trustee's Compensation
Not Prejudiced.
---------------
Nothing in this Article Twelve will apply to amounts due to the Trustee
pursuant to other sections of this Indenture.
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
SECTION 13.02. Notices.
-------
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Company or a Guarantor:
Alliance Imaging, Inc.
1065 Pacific Center Drive, Suite 200
Anaheim, California 92806
Attention: Chief Financial Officer
<PAGE>
-130-
Telephone: (714) 688-7100
Facsimile: (714) 688-3377
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Center
New York, New York 10112
Attention: John J. Suydam
Telephone: (216) 408-2400
Facsimile: (212) 408-2420
if to the Trustee:
Telephone:
Facsimile:
Each of the Company and the Trustee by written notice to each other
such Person may designate additional or different addresses for notices to such
Person. Any notice or communication to the Company and the Trustee, shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when answered back, if telexed; when receipt is acknowledged, if
telecopied; and five (5) calendar days after mailing if sent by registered or
certified mail, postage prepaid (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
<PAGE>
-131-
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communications by Holders
with Other Holders.
-------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture, the
Securities or the Guarantees. The Company, the Trustee, the Registrar and any
other Person shall have the protection of TIA (S) 312(c).
SECTION 13.04. Certificate and Opinion as
to Conditions Precedent.
------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee at the
request of the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed or effected by the Company, if any, provided for
in this Indenture relating to the proposed action have been complied with;
and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, any and all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in
Certificate or Opinion.
----------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.08, shall include:
<PAGE>
-132-
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with; provided,
--------
however, that with respect to matters of fact an Opinion of Counsel may
-------
rely on an Officers' Certificate or certificates of public officials.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee, Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 13.07. Legal Holidays.
--------------
If a payment date is not a Business Day, payment may be made
on the next succeeding day that is a Business Day.
SECTION 13.08. Governing Law.
-------------
THIS INDENTURE, THE SECURITIES AND THE GUARANTEES WILL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Indenture, the Securities or the
Guarantees.
<PAGE>
-133-
SECTION 13.09. No Adverse Interpretation
of Other Agreements.
--------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.10. No Recourse Against Others.
--------------------------
A director, officer, employee, stockholder or incorporator, as such,
of the Company shall not have any liability for any obligations of the Company
under the Securities, this Indenture or the Guarantees or for any claim based
on, in respect of or by reason of such obligations or their creation. Each
Securityholder by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 13.11. Successors.
----------
All agreements of the Company and the Guarantors in this Indenture,
the Securities and the Guarantees shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 13.12. Duplicate Originals.
-------------------
All parties may sign any number of copies of this Indenture. Each
signed copy or counterpart shall be an original, but all of them together shall
represent the same agreement.
SECTION 13.13. Severability.
------------
In case any one or more of the provisions in this Indenture, in the
Securities or in the Guarantees shall be held invalid, illegal or unenforceable,
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
<PAGE>
S-1
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the date first written above.
ALLIANCE IMAGING, INC.,
as Issuer
By: ___________________________
Name:
Title:
ALLIANCE IMAGING OF OHIO, INC.,
as Guarantor
By: ___________________________
Name:
Title:
ALLIANCE IMAGING OF MICHIGAN,
INC., as Guarantor
By: ___________________________
Name:
Title:
ROYAL MEDICAL HEALTH SERVICES,
INC., as Guarantor
By: ___________________________
Name:
Title:
<PAGE>
-2-
ALLIANCE IMAGING OF CENTRAL
GEORGIA, INC., as Guarantor
By: ___________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By: ___________________________
Name:
Title:
<PAGE>
EXHIBIT A
---------
[FORM OF FIXED RATE NOTE]
[FACE OF SECURITY]
Unless this Certificate is presented by an authorized representative
of The Depository Trust Company, a New York Corporation ("DTC"), to the Company
or its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), any transfer, pledge, or other use hereof for value or
otherwise by or to any person is wrongful inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
Unless and until this Global Security is exchanged in whole or in part
for the individual securities represented hereby, this Global Security may not
be transferred except as a whole by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or by a
Depository or any such nominee to a successor Depository or a nominee of a
successor Depository.
<PAGE>
-2-
% Senior Subordinated Note
due , 2005
CUSIP No.:
No. [ ] $[ ]
ALLIANCE IMAGING, INC., a Delaware corporation (the "Company", which
term includes any successor corporation), for value received promises to pay to
[ ] or registered assigns, the principal sum of $[ ] Dollars,
on , 2005.
Interest Payment Dates: and , commencing
, 1998.
Record Dates: and .
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated:
ALLIANCE IMAGING, INC.
By: ______________________
Name:
Title:
By: ______________________
Name
Title:
<PAGE>
-3-
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the % Senior Subordinated Notes due 2005
described in the within-mentioned Indenture.
Dated: IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By____________________________
Authorized Signatory
<PAGE>
-4-
(REVERSE OF SECURITY)
ALLIANCE IMAGING, INC.
% Senior Subordinated Note
due , 2005
1. Interest.
--------
ALLIANCE IMAGING, INC., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. The Company will pay interest semi-annually on
and of each year (the "Interest Payment Date"), commencing ,
1998. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from ,
1997. Interest on the Fixed Rate Notes (as defined below) will be computed on
the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time
on demand at the rate borne by the Securities plus 2% and on overdue
installments of interest (without regard to any applicable grace periods) to the
extent lawful.
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by wire transfer of Federal funds, or interest by
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to
<PAGE>
-5-
the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
--------------------------
Initially, IBJ SCHRODER BANK & TRUST COMPANY (the "Trustee") will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act as Registrar or co-
Registrar.
4. Indenture.
---------
The Company issued the Securities under an Indenture, dated as of
, 1997 (the "Indenture"), among the Company, the Guarantors named therein and
the Trustee. This Note is one of a duly authorized issue of Securities of the
Company designated as its [ ]% Senior Subordinated Notes due 2005 (the
"Fixed Rate Notes"). The Securities include the Fixed Rate Notes and the
Floating Rate Notes (as defined in the Indenture). The Fixed Rate Notes and the
Floating Rate Notes are treated as a single class of securities under the
Indenture unless otherwise specified in the Indenture. Capitalized terms herein
are used as defined in the Indenture unless otherwise defined herein. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such
time as the Indenture is qualified under the TIA, and thereafter as in effect on
the date on which the Indenture is qualified under the TIA. Notwithstanding
anything to the contrary herein, the Securities are subject to all such terms,
and Holders of Securities are referred to the Indenture and the TIA for a
statement of them. The Securities are general obligations of the Company
limited in aggregate principal amount to $265,000,000.
5. Subordination.
-------------
<PAGE>
-6-
The Securities are subordinated in right of payment, in the manner and
to the extent set forth in the Indenture, to the prior payment in full in cash
or Cash Equivalents of all Senior Debt of the Company, whether outstanding on
the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by his acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
6. Optional Redemption.
-------------------
The Fixed Rate Notes will be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after , 2001,
upon not less than 30 nor more than 60 days' notice, at the following redemption
prices (expressed as percentages of the principal amount) if redeemed during the
twelve-month period commencing on of the years set forth below, plus,
in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
Year Percentage
- ---- ----------
2001................ %
2002................ %
2003................ %
2004................ 100.000%
7. Optional Redemption upon Equity Offering.
----------------------------------------
At any time, or from time to time, on or prior to , 2000,
the Company may, at its option, use the net cash proceeds of one or more Equity
Offerings to redeem up to 40% aggregate principal amount of Fixed Rate Notes at
a redemption price equal to % of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the date of redemption; provided
--------
that after any such redemption the aggregate principal amount of Fixed Rate
Notes outstanding must equal at least 60% of the aggregate amount of the Fixed
Rate
<PAGE>
-7-
Notes issued pursuant to the Indenture. In order to effect the foregoing
redemption with the net cash proceeds of any Equity Offering, the Company shall
make such redemption not more than 120 days after the consummation of any such
Equity Offering.
As used in the preceding paragraph, "Equity Offering" means a public
or private offering of Qualified Capital Stock (other than public offerings with
respect to the Company's Common Stock on Form S-8) of the Company for aggregate
net cash proceeds to the Company of at least $25.0 million.
8. Notice of Redemption.
--------------------
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption.
9. Change of Control Offer.
-----------------------
Upon the occurrence of a Change of Control, the Company will be
required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of repurchase.
10. Limitation on Asset Sales.
-------------------------
<PAGE>
-8-
The Company is, subject to certain conditions, obligated to make an
offer to purchase Securities at 100% of their principal amount, plus accrued and
unpaid interest, if any, thereon to the date of repurchase with certain net cash
proceeds of certain sales or other dispositions of assets in accordance with the
Indenture.
11. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
12. Persons Deemed Owners.
---------------------
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
13. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agent will repay the funds to the Company
at its request. After that, all liability of the Trustee and such Paying Agent
with respect to such funds shall cease.
14. Discharge Prior to Redemption or Maturity.
-----------------------------------------
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantees,
<PAGE>
in each case upon satisfaction of certain conditions specified in the Indenture.
15. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture, the Securities and the
Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture, the Securities and the Guarantees to, among other things, cure
any ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the Commission in connection with the qualification of the
Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Security.
16. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
of the Company to the Company, to consolidate, merge or sell all or
substantially all of its assets or to engage in transactions with affiliates.
The limitations are subject to a number of important qualifications and
exceptions. The Company must annually report to the Trustee on compliance with
such limitations.
<PAGE>
17. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantees except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
18. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
19. No Recourse Against Others.
--------------------------
No stockholder, director, officer, employee or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
20. Authentication.
--------------
<PAGE>
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
21. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
22. Governing Law.
-------------
This Security shall be governed by, and construed in accordance with,
the laws of the State of New York without giving effect to applicable principles
of conflicts of laws to the extent that the application of the laws of another
jurisdiction would be required thereby.
23. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
<PAGE>
EXHIBIT B
---------
[FORM OF FLOATING RATE NOTE]
[FACE OF SECURITY]
Unless this certificate is presented by an authorized representative
of the Depository Trust Company, a New York Corporation ("DTC"), to the Company
or its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. Or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
Unless and until this Global Security is exchanged in whole or in part
for the individual Securities represented hereby, this Global Security may not
be transferred except as a whole by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or by a
Depository or any such nominee to a successor Depository or a nominee of a
successor Depository.
<PAGE>
-2-
ALLIANCE IMAGING, INC.
Senior Subordinated Floating Rate Note due 2005
CUSIP No.
No. [ ] $[ ]
ALLIANCE IMAGING, INC., a Delaware corporation (the "Company" which
term includes any successor corporation), for value received, promises to pay to
[ ] or registered assigns, the principal sum of $[ ]
Dollars, on , 2005.
Interest Payment Dates: and ,
commencing , 1998.
Record Dates: and
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated: ALLIANCE IMAGING, INC.
By:_______________________________
Name:
Title:
<PAGE>
-3-
By:_______________________________
Name:
Title:
<PAGE>
-4-
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Senior Subordinated Floating Rate Notes due
2005 described in the within-mentioned Indenture.
Dated:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:_______________________________
Authorized Signatory
<PAGE>
-5-
(REVERSE OF SECURITY)
ALLIANCE IMAGING, INC.
Senior Subordinated Floating Rate Note due 2005
1. Interest.
--------
ALLIANCE IMAGING, INC., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum, reset semi-annually equal to LIBOR (as defined below) plus [ ]%,
as determined by the Calculation Agent. Interest on the Floating Rate Notes (as
defined below) will accrue from the most recent date on which interest has been
paid or, if no interest has been paid, from , 1997. The Company will
pay interest semi-annually on each and (each, an
"Interest Payment Date") for the period commencing on and including the
immediately preceding Interest Payment Date and ending on and including the day
next preceding the Interest Payment Date (an "Interest Period"), with the
exception that the first Interest Period shall commence on and include December
, 1997 and end on and include , 1998, and at stated maturity,
commencing on , 1998.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Floating Rate Notes and on overdue installments of interest (without regard to
any applicable grace periods) to the extent lawful.
"LIBOR", with respect to an Interest Period, shall be the rate
(expressed as a percentage per annum) for deposits in United States dollars for
a six-month period beginning on the second London Banking Day (as defined) after
the Determination Date (as defined) that appears on Telerate Page 3750 (as
defined) as of 11:00 a.m., London time, on the Determination Date. If Telerate
Page 3750 does not include such a rate or is
<PAGE>
-6-
unavailable on a Determination Date, LIBOR for the Interest Period shall be the
arithmetic mean of the rates (expressed as a percentage per annum) for deposits
in a Representative Amount (as defined) in United States dollars for a six-month
period beginning on the second London Banking Day after the Determination Date
that appears on Reuters Screen LIBO Page (as defined) as of 11:00 a.m., London
time, on the Determination Date. If Reuters Screen LIBO Page does not include
two or more rates or is unavailable on a Determination Date, the Calculation
Agent will request the principal London office of each of four major banks in
the London interbank market, as selected by the Calculation Agent, to provide
such bank's offered quotation (expressed as a percentage per annum), as of
approximately 11:00 a.m., London time, on such Determination Date, to prime
banks in the London interbank market for deposits in a Representative Amount in
United States dollars for a six-month period beginning on the second London
Banking Day after the Determination Date. If at least two such offered
quotations are so provided, LIBOR for the Interest Period will be the arithmetic
mean of such quotations. If fewer than two such quotations are so provided, the
Calculation Agent will request each of three major banks in New York City, as
selected by the Calculation Agent, to provide such bank's rate (expressed as a
percentage per annum), as of approximately 11:00 a.m., New York City time, on
such Determination Date, for loans in a Representative Amount in United States
dollars to leading European banks for a six-month period beginning on the second
London Banking Day after the Determination Date. If at least two such rates are
so provided, LIBOR for the Interest Period will be the arithmetic mean of such
rates. If fewer than two such rates are so provided, then LIBOR for the Interest
Period will be LIBOR in effect with respect to the immediately preceding
Interest Period.
"Determination Date," with respect to an Interest Period, will be the
second London Banking Day preceding the first day of the Interest Period.
"London Banking Day" is any day in which dealings in United States
dollars are transacted or, with respect to any
<PAGE>
-7-
future date, are expected to be transacted in the London interbank market.
"Representative Amount" means a principal amount of not less than
U.S. $1,000,000 for a single transaction in the relevant market at the relevant
time.
"Telerate Page 3750" means the display designated as "Page 3750" on
the Dow Jones Telerate Service (or such other page as may replace Page 3750 on
that service).
"Reuters Screen LIBO Page" means the display designated as page "LIBO"
on The Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service).
The amount of interest for each day that the Floating Rate Notes are
outstanding (the "Daily Interest Amount") will be calculated by dividing the
interest rate in effect for such day by 360 and multiplying the result by the
principal amount of the Floating Rate Notes. The amount of interest to be paid
on the Floating Rate Notes for each Interest Period will be calculated by adding
the Daily Interest Amounts for each day in the Interest Period.
All percentages resulting from any of the above calculations will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all dollar
amounts used in or resulting from such calculations will be rounded to the
nearest cent (with one-half cent being rounded upwards).
The interest rate on the Floating Rate Notes will in no event be
higher than the maximum rate permitted by New York law as the same may be
modified by United States law of general application. Under current New York
law, the maximum rate of interest is 25% per annum on a simple interest basis.
This limit may not apply to Floating Rate Notes in which $2,500,000 or more has
been invested.
<PAGE>
-8-
The Calculation Agent will, upon the request of the holder of any
Floating Rate Note, provided the interest rate then in effect with respect to
the Floating Rate Notes. All calculations made by the Calculation Agent in the
absence of manifest error shall be conclusive for all purposes and binding on
the Company and the Holders of the Floating Rate Notes.
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by wire transfer of Federal funds, or interest by
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent, Registrar and
Calculation Agent.
----------------------------
Initially, IBJ Schroder Bank & Trust Company (the "Trustee") will act
as Paying Agent, Registrar and Calculation Agent. The Company may change any
Paying Agent, Registrar, co-Registrar or Calculation Agent without notice to the
Holders. The Company or any of its Subsidiaries may, subject to certain
exceptions, act as Registrar or co-Registrar.
4. Indenture.
---------
The Company issued the Securities under an Indenture, dated as of
December , 1997 (the "Indenture"), among the Company, each of the Guarantors
named therein and the Trustee.
<PAGE>
-9-
This Security is one of a duly authorized issue of Securities of the Company
designated as its Senior Floating Rate Notes due 2005 (the "Floating Rate
Notes"). The Securities include the Floating Rate Notes and the Fixed Rate Notes
(as defined in the Indenture). The Floating Rate Notes and the Fixed Rate Notes
are treated as a single class of securities under the Indenture unless otherwise
specified in the Indenture. Capitalized terms used herein shall have the
meanings assigned to them in the Indenture unless otherwise defined herein. The
terms of the Securities include those stated in this Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
(S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of this Indenture
until such time as the Indenture is qualified under the TIA. Notwithstanding
anything to the contrary herein, the Securities are subject to all such terms,
and Holders of Securities are referred to the Indenture and the TIA for a
statement of them. The Securities are general obligations of the Company limited
in aggregate principal amount to $265,000,000.
5. Subordination.
-------------
The Securities are subordinated in right of payment, in the manner and
to the extent set forth in the Indenture, to the prior payment in full in cash
or Cash Equivalents of all Senior Debt of the Company, whether outstanding on
the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by his acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
6. Optional Redemption.
-------------------
The Floating Rate Notes will be redeemable, at the Company's option,
in whole at any time or in part from time to time, upon not less than 30 nor
more than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the twelve-
<PAGE>
-10-
month period commencing on of the year set forth below, plus, in
each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
YEAR PERCENTAGE
---- ----------
1997 %
1998 %
1999 %
2000 %
2001 %
2002 and thereafter 100.000%
7. Notice of Redemption.
--------------------
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations larger than
$1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption.
8. Change of Control Offer.
-----------------------
Upon the occurrence of a Change of Control, the Company will be
required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of repurchase.
<PAGE>
-11-
9. Limitation on Asset Sales.
-------------------------
The Company is, subject to certain conditions, obligated to make an
offer to purchase Securities at 100% of their principal amount, plus accrued and
unpaid interest, if any, thereon to the date of repurchase with certain net cash
proceeds of certain sales or other dispositions of assets in accordance with the
Indenture.
10. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
11. Persons Deemed Owners.
---------------------
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
12. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agent will repay the funds to the Company
at its request. After that, all liability of the Trustee and such Paying Agent
with respect to such funds shall cease.
13. Discharge Prior to Redemption or Maturity.
-----------------------------------------
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants
<PAGE>
-12-
contained in the Indenture, the Securities and the Guarantees, in each case upon
satisfaction of certain conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture, the Securities and the
Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture, the Securities and the Guarantees to, among other things, cure
any ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the Commission in connection with the qualification of the
Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Security.
15. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
of the Company to the Company, to consolidate, merge or sell all or
substantially all of its assets or to engage in transactions with affiliates.
The limitations are subject to a number of important qualifications and
exceptions. The Company must annually report to the Trustee on compliance with
such limitations.
16. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal
<PAGE>
-13-
amount of Securities then outstanding may declare all the Securities to be due
and payable immediately in the manner and with the effect provided in the
Indenture. Holders of Securities may not enforce the Indenture, the Securities
or the Guarantees except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture, the Securities or the Guarantees unless it
has received indemnity satisfactory to it. The Indenture permits, subject to
certain limitations therein provided, Holders of a majority in aggregate
principal amount of the Securities then outstanding to direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of certain continuing Defaults or Events of Default if it
determines that withholding notice is in their interest.
17. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
18. No Recourse Against Others.
--------------------------
No stockholder, director, officer, employee or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
-------------------------------
<PAGE>
-14-
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. Governing Law.
-------------
This Security shall be governed by, and construed in accordance with,
the laws of the State of New York without giving effect to applicable principles
of conflicts of laws to the extent that the application of the laws of another
jurisdiction would be required thereby.
22. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
<PAGE>
EXHIBIT C
---------
GUARANTEE
---------
For value received, the undersigned hereby unconditionally guarantees,
as principal obligor and not only as a surety, to the Holder of this Security
the cash payments in United States dollars of principal of, premium, if any, and
interest on this Security in the amounts and at the times when due and interest
on the overdue principal, premium, if any, and interest, if any, of this
Security, if lawful, and the payment or performance of all other obligations of
the Company under the Indenture (as defined below) or the Securities, to the
Holder of this Security and the Trustee, all in accordance with and subject to
the terms and limitations of this Security, Article Eleven of the Indenture and
this Guarantee. This Guarantee will become effective in accordance with Article
Eleven of the Indenture and its terms shall be evidenced therein. The validity
and enforceability of any Guarantee shall not be affected by the fact that it is
not affixed to any particular Security.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Indenture dated as of , 1997, among Alliance
Imaging, Inc., a Delaware corporation, as issuer (the "Company"), the Guarantors
named therein and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"),
as amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article Eleven of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. The undersigned Guarantor hereby agrees to submit to the
jurisdiction of
<PAGE>
-2-
the courts of the State of New York in any action or proceeding arising out of
or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth
in the Indenture.
<PAGE>
-3-
IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to
be duly executed.
Date:____________________
ALLIANCE IMAGING OF OHIO, INC.
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
ALLIANCE IMAGING OF MICHIGAN, INC.
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
<PAGE>
-4-
ROYAL MEDICAL HEALTH SERVICES, INC.
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
ALLIANCE IMAGING OF CENTRAL
GEORGIA, INC.
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or
transferee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint agent to
---------------------------------------
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated: _________________ Signed: _________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee: _____________________________________
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount: $___________
Dated: _________________ Signed: _________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee: _____________________________________
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
EXHIBIT 5
O'SULLIVAN GRAEV & KARABELL, LLP
30 ROCKEFELLER PLAZA
NEW YORK, NY 10012
---------
212 408-2400
FACSIMILE 212 408-2420
CABLE "APPLELAW NY"
December 9, 1997
Alliance Imaging, Inc.
1065 North PacifiCenter Drive
Suite 200
Anaheim, California 92806
Senior Subordinated Notes Due 2005
Senior Subordinated Floating Rate Notes Due 2005
------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Alliance Imaging, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") of the Registration
Statement of the Company on Form S-2, as amended (File No. 333-33817) (as so
amended, the "Registration Statement"), under the Securities Act of 1933, as
amended (the "Act").
This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Act.
In connection with this opinion, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary for the
purposes of rendering the opinions set forth below including, without
limitation, (i) the Registration Statement, (ii) the form of Indenture (the
"Indenture") to be entered into among the Company, the subsidiary guarantors of
the Company party thereto (the "Guarantors") and IBJ Schroder Bank & Trust
Company, as trustee (the "Trustee"), governing the Company's Senior Subordinated
Notes due 2005 and the Senior Subordinated Floating Rate Notes due 2005
(collectively, the "Notes"), (iii) the form of Underwriting Agreement (the
"Underwriting Agreement") to be entered into among the Company, the Guarantors
and BT Alex. Brown Incorporated and Salomon Brothers Inc (collectively, the
"Underwriters"), (iv) the Amended and Restated Certificate of Incorporation of
the Company, as amended through the date hereof, (v) the By-laws of the Company,
as amended through the date hereof, and (vi) resolutions adopted by the Board of
Directors of the Company by unanimous written consent in lieu of meetings dated
August 8, 1997 and October 10, 1997. As to certain questions of fact material to
the opinions contained herein, we have relied upon certificates or statements of
officers of the Company and certificates of public officials.
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to authentic originals of all documents submitted to us as
certified or photostatic copies. In making our examination of documents executed
by parties other than the Company, we have assumed that such parties had the
power, corporate or other, to enter into and perform all obligations thereunder
and have also assumed the due
<PAGE>
O'SULLIVAN GRAEV & KARABELL, LLP
Alliance Imaging, Inc.
December 9, 1997
Page Two
authorization by all requisite action, corporate or other, and execution and
delivery by such parties of such documents and the validity and binding effect
thereof.
Based upon the foregoing, we are of the opinion as follows:
1. The Company is a validly existing corporation under the laws
of the State of Delaware.
2. The Notes have been duly authorized and, when issued and
sold to the Underwriters and paid for by them in accordance with the terms of
the Underwriting Agreement, will be validly issued and, assuming due
authorization, execution and delivery by the Trustee, will be valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except that enforcement thereof may be subject to (i) bankruptcy,
involvency, fradulent conveyance, reorganization, moratorium and other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
Members of our firm are admitted to the Bar of the State of New
York and we express no opinion as to the laws of any other jurisdiction other
than the Delaware General Corporation Law.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. We also consent to the
reference to our firm under "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are included in the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission.
Very truly yours,
/s/ O'Sullivan Graev & Karabell, LLP
<PAGE>
EXHIBIT 10.20
[W&C Draft: 12/8/97]
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
ALLIANCE IMAGING, INC.,
VARIOUS LENDING INSTITUTIONS,
and
BANKERS TRUST COMPANY,
AS AGENT
________________________________
Dated as of December 18, 1997
________________________________
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C>
SECTION 1. Amount and Terms of Credit............................................ 1
1.01 Commitments......................................................... 1
1.02 Minimum Borrowing Amounts, etc...................................... 5
1.03 Notice of Borrowing................................................. 5
1.04 Disbursement of Funds............................................... 6
1.05 Notes............................................................... 7
1.06 Conversions......................................................... 8
1.07 Pro Rata Borrowings................................................. 9
1.08 Interest............................................................ 9
1.09 Interest Periods.................................................... 10
1.10 Increased Costs; Illegality; etc.................................... 11
1.11 Compensation........................................................ 14
1.12 Change of Lending Office............................................ 14
1.13 Replacement of Banks................................................ 15
SECTION 2. Letters of Credit..................................................... 16
2.01 Letters of Credit................................................... 16
2.02 Letter of Credit Requests........................................... 18
2.03 Letter of Credit Participations..................................... 19
2.04 Agreement to Repay Letter of Credit Drawings........................ 21
2.05 Increased Costs..................................................... 22
SECTION 3. Fees; Commitments..................................................... 23
3.01 Fees................................................................ 23
3.02 Voluntary Termination or Reduction of Total Unutilized Revolving
Loan Commitment................................................... 25
3.03 Mandatory Reduction of Commitments.................................. 26
SECTION 4. Payments.............................................................. 27
4.01 Voluntary Prepayments............................................... 27
4.02 Mandatory Repayments and Commitment Reductions...................... 28
4.03 Method and Place of Payment......................................... 35
4.04 Net Payments........................................................ 35
SECTION 5. Conditions Precedent to Initial Credit Events......................... 38
5.01 Execution of Agreement; Notes....................................... 38
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.02 Officer's Certificate............................................... 38
5.03 Opinions of Counsel................................................. 38
5.04 Corporate Documents; Proceedings.................................... 39
5.05 Adverse Change, etc................................................. 39
5.06 Litigation.......................................................... 40
5.07 Approvals........................................................... 40
5.08 Recapitalization, Financing Transactions, etc............................... 40
5.09 ......................................................................... 41
Refinancing.................................................................... 41
......................................................................... 42
5.10 Security Documents; etc............................................. 42
5.11 Subsidiaries Guaranty............................................... 43
Employee Benefit Plans; Shareholders' Agreements; Management
Agreements; Employment Agreements; Collective Bargaining
Agreements; Existing Indebtedness Agreements; Material
Contracts; Tax Allocation Agreements............................. 44
Consent Letter.......................................................... 45
5.14 Solvency Certificate; Insurance Certificates........................ 45
5.15 Financial Statements; Pro Forma Balance Sheet; Projections.......... 46
Payment of Fees......................................................... 46
SECTION 6. Conditions Precedent to All Credit Events............................. 46
6.01 No Default; Representations and Warranties.......................... 46
6.02 Notice of Borrowing; Letter of Credit Request....................... 46
SECTION 7. Representations and Warranties........................................ 47
7.01 Corporate Status.................................................... 47
7.02 Company Power and Authority......................................... 47
7.03 No Violation........................................................ 48
7.04 Litigation.......................................................... 48
7.05 Use of Proceeds; Margin Regulations................................. 48
7.06 Governmental Approvals.............................................. 49
7.07 Investment Company Act.............................................. 49
7.08 Public Utility Holding Company Act.................................. 49
7.09 True and Complete Disclosure........................................ 49
7.10 Financial Condition; Financial Statements........................... 50
7.11 Security Interests.................................................. 51
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.12 Compliance with ERISA............................................... 51
7.13 Capitalization...................................................... 52
7.14 Subsidiaries........................................................ 53
7.15 Intellectual Property, etc.......................................... 53
7.16 Compliance with Statutes, etc....................................... 53
7.17 Environmental Matters............................................... 53
7.18 Properties.......................................................... 54
7.19 Labor Relations..................................................... 54
7.20 Tax Returns and Payments............................................ 55
7.21 Existing Indebtedness............................................... 55
7.22 Insurance........................................................... 55
7.23 Representations and Warranties in Other Documents................... 55
7.24 Transaction......................................................... 56
7.25 Special Purpose Corporations........................................ 56
7.26 Subordination....................................................... 56
SECTION 8. Affirmative Covenants................................................. 56
8.01 Information Covenants............................................... 57
8.02 Books, Records and Inspections...................................... 60
8.03 Insurance........................................................... 61
8.04 Payment of Taxes.................................................... 62
8.05 Corporate Franchises................................................ 62
8.06 Compliance with Statutes; etc....................................... 62
8.07 Compliance with Environmental Laws.................................. 62
8.08 ERISA............................................................... 63
8.09 Good Repair......................................................... 65
8.10 End of Fiscal Years; Fiscal Quarters................................ 65
8.11 Additional Security; Further Assurances............................. 65
8.12 Foreign Subsidiaries Security....................................... 66
8.13 Ownership of Subsidiaries........................................... 67
8.14 Permitted Acquisitions.............................................. 67
8.15 Maintenance of Company Separateness................................. 69
8.16 Performance of Obligations.......................................... 69
8.17 Use of Proceeds..................................................... 69
SECTION 9. Negative Covenants.................................................... 69
9.01 Changes in Business................................................. 69
9.02 Consolidation; Merger; Sale or Purchase of Assets; etc............ 69
9.03 Liens............................................................. 73
9.04 Indebtedness...................................................... 75
9.05 Advances; Investments; Loans........................................ 77
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.06 Dividends; etc...................................................... 79
9.07 Transactions with Affiliates........................................ 80
9.08 Consolidated Fixed Charge Coverage Ratio............................ 81
9.09 Minimum Consolidated EBITDA......................................... 82
9.10 Consolidated Interest Coverage Ratio................................ 83
9.11 Adjusted Total Leverage Ratio....................................... 84
9.12 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation, By-
Laws and Certain Other Agreements; Issuances of Capital Stock;
etc.............................................................. 85
9.13 Limitation on Issuance of Capital Stock............................. 86
9.14 Limitation on Certain Restrictions on Subsidiaries.................. 87
9.15 Limitation on the Creation of Subsidiaries and Joint Ventures....... 88
SECTION 10. Events of Default.................................................... 89
10.01 Payments........................................................... 89
10.02 Representations, etc............................................... 89
10.03 Covenants.......................................................... 89
10.04 Default Under Other Agreements..................................... 89
10.05 Bankruptcy, etc.................................................... 90
10.06 ERISA.............................................................. 90
10.07 Security Documents................................................. 91
10.08 Subsidiaries Guaranty.............................................. 91
10.09 Judgments.......................................................... 91
10.10 Ownership.......................................................... 91
SECTION 11. Definitions.......................................................... 92
SECTION 12. The Agent............................................................130
12.01 Appointment........................................................130
12.02 Delegation of Duties...............................................131
12.03 Exculpatory Provisions.............................................131
12.04 Reliance by Agent..................................................131
12.05 Notice of Default..................................................132
12.06 Nonreliance on Agent and Other Banks...............................132
12.07 Indemnification....................................................133
12.08 Agent in its Individual Capacity...................................133
12.09 Holders............................................................133
12.10 Resignation of the Agent...........................................134
SECTION 13. Miscellaneous........................................................134
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
13.01 Payment of Expenses, etc...........................................134
13.02 Right of Setoff....................................................135
13.03 Notices............................................................135
13.04 Benefit of Agreement...............................................136
13.05 No Waiver; Remedies Cumulative.....................................138
13.06 Payments Pro Rata..................................................138
13.07 Calculations; Computations.........................................139
13.08 Governing Law; Submission to Jurisdiction; Venue...................139
13.09 Counterparts.......................................................140
13.10 Effectiveness......................................................140
13.11 Headings Descriptive...............................................141
13.12 Amendment or Waiver; etc...........................................141
13.13 Survival...........................................................142
13.14 Domicile of Loans and Commitments..................................142
13.15 Confidentiality....................................................143
13.16 Waiver of Jury Trial...............................................143
13.17 Register...........................................................143
13.18 Limitation on Additional Amounts, etc..............................144
13.19 Post-Closing Actions...............................................144
</TABLE>
(v)
<PAGE>
SCHEDULE I List of Banks and Commitments
SCHEDULE II Bank Addresses
SCHEDULE III Real Properties
SCHEDULE IV Existing Indebtedness
SCHEDULE V Pension Plans
SCHEDULE VI Existing Investments
SCHEDULE VII Subsidiaries
SCHEDULE VIII Insurance
SCHEDULE IX Existing Liens
SCHEDULE X Capitalization
EXHIBIT A -- Form of Notice of Borrowing
EXHIBIT B-1 -- Form of Term Note
EXHIBIT B-2 -- Form of Revolving Note
EXHIBIT B-3 -- Form of Swingline Note
EXHIBIT C -- Form of Letter of Credit Request
EXHIBIT D -- Form of Section 4.04(b)(ii) Certificate
EXHIBIT E-1 -- Form of Opinion of O'Sullivan Graev & Karabell, LLP,
special counsel to the Credit Parties
EXHIBIT E-2 -- Form of Opinion of Irell & Manella LLP
EXHIBIT F -- Form of Officers' Certificate
EXHIBIT G -- Form of Pledge Agreement
EXHIBIT H -- Form of Security Agreement
EXHIBIT I -- Form of Subsidiaries Guaranty
EXHIBIT J -- Form of Consent Letter
EXHIBIT K -- Form of Solvency Certificate
EXHIBIT L -- Form of Assignment and Assumption Agreement
EXHIBIT M -- Form of Intercompany Note
EXHIBIT N -- Form of Shareholder Subordinated Note
(vi)
<PAGE>
CREDIT AGREEMENT, dated as of December 18, 1997, among ALLIANCE
IMAGING, INC., a Delaware corporation (the "Borrower"), the lenders from time to
time party hereto (each, a "Bank" and, collectively, the "Banks"), and BANKERS
TRUST COMPANY, as Agent (in such capacity, the "Agent"). Unless otherwise
defined herein, all capitalized terms used herein and defined in Section 11 are
used herein as so defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available to the Borrower the credit
facilities provided for herein; and
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
--------------------------
1.01 Commitments. (a) Subject to and upon the terms and conditions
-----------
set forth herein, each Bank with a Term Loan Commitment severally agrees to make
a term loan or term loans (each, a "Term Loan" and, collectively, the "Term
Loans"), which Term Loans:
(i) shall be incurred by the Borrower pursuant to a single
drawing on the Initial Borrowing Date for the purposes described in Section
7.05(a);
(ii) shall be denominated in U.S. Dollars;
(iii) except as hereafter provided, shall, at the option of the
Borrower, be incurred and maintained as, and/or converted into, Base Rate
Loans or Eurodollar Loans, provided, that (x) except as otherwise
--------
specifically provided in Section 1.10(b), all Term Loans made as part of
the same Borrowing shall at all times consist of Term Loans of the same
Type and (y) unless the Agent has determined that the Syndication Date has
occurred (at which time this clause (y) shall no longer be applicable), no
more than three Borrowings of Term Loans to be maintained as Eurodollar
Loans may be incurred prior to the 90th day after the Initial Borrowing
Date (or, if later, the last day of the Interest Period applicable to the
third Borrowing of Eurodollar Loans referred to below), each of which
<PAGE>
Borrowings of Eurodollar Loans may only have an Interest Period of one
month, and the first of which Borrowings may only be made on, or within
five Business Days after, the Initial Borrowing Date, the second of which
Borrowings may only be made on the last day of the Interest Period of the
first such Borrowing and the third of which Borrowings may only be made on
the last day of the Interest Period of the second such Borrowing; and
(iv) shall not exceed for any Bank, in initial principal amount
for the Term Loans being made by such Bank on the Initial Borrowing Date,
that amount which equals the Term Loan Commitment of such Bank as in effect
on the Initial Borrowing Date (before giving effect to any reductions
thereto on such date pursuant to Section 3.03(b)(i) but after giving effect
to any reductions thereto on or prior to such date pursuant to Section
3.03(b)(ii)).
Once repaid, Term Loans incurred hereunder may not be reborrowed.
(b) Subject to and upon the terms and conditions herein set forth,
each RL Bank severally agrees, at any time and from time to time on and after
the Initial Borrowing Date and prior to the Revolving Loan Maturity Date, to
make a revolving loan or revolving loans (each, a "Revolving Loan" and,
collectively, the "Revolving Loans") to the Borrower, which Revolving Loans:
(i) shall be denominated in U.S. Dollars;
(ii) shall, at the option of the Borrower, be incurred and
maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans,
provided that (x) except as otherwise specifically provided in Section
--------
1.10(b), all Revolving Loans made as part of the same Borrowing shall at
all times be of the same Type and (y) unless the Agent has determined that
the Syndication Date has occurred, no more than three Borrowings of
Revolving Loans to be maintained as Eurodollar Loans may be incurred prior
to the 90th day after the Initial Borrowing Date (or, if later, the last
day of the Interest Period applicable to the third Borrowing of Eurodollar
Loans referred to below), each of which Borrowings of Eurodollar Loans may
only have an Interest Period of one month, and the first of which
Borrowings may only be made on the same date as the initial Borrowing of
Term Loans that are maintained as Eurodollar Loans, the second of which
Borrowings may only be made on the last day of the Interest Period of the
first such Borrowing and the third of which Borrowings may only be made on
the last day of the Interest Period of the second such Borrowing;
(iii) may be repaid and reborrowed in accordance with the
provisions hereof;
-2-
<PAGE>
(iv) shall not exceed for any Bank at any time outstanding that
aggregate principal amount which, when added to the product of (x) such
Bank's Adjusted RL Percentage and (y) the sum of (I) the amount of all
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are
repaid with the proceeds of, and simultan eously with the incurrence of,
the respective incurrence of Revolving Loans) at such time and (II) the
aggregate principal amount of all Swingline Loans (exclusive of Swingline
Loans which are repaid with the proceeds of, and simultaneously with the
incurrence of, the respective incurrence of Revolving Loans) then
outstanding, equals the Revolving Loan Commitment of such Bank at such
time; and
(v) shall not exceed for all Banks at any time outstanding that
aggregate principal amount which, when added to (x) the amount of all
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are
repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans) at such time and (y) the
aggregate principal amount of all Swingline Loans (exclusive of Swingline
Loans which are repaid with the proceeds of, and simultan eously with the
incurrence of, the respective incurrence of Revolving Loans) then
outstanding, exceeds an amount equal to the Total Revolving Loan Commitment
then in effect.
(c) Subject to and upon the terms and conditions herein set forth,
BTCo in its individual capacity agrees to make at any time and from time to time
on and after the Initial Borrowing Date and prior to the Swingline Expiry Date,
a loan or loans to the Borrower (each, a "Swingline Loan" and, collectively, the
"Swingline Loans"), which Swingline Loans:
(i) shall be denominated in U.S. Dollars;
(ii) shall be made and maintained as Base Rate Loans;
(iii) may be repaid and reborrowed in accordance with the
provisions hereof;
(iv) shall not exceed in aggregate principal amount at any time
outstand ing, when combined with the aggregate principal amount of (x) all
Revolving Loans made by Non-Defaulting Banks then outstanding and (y) the
Letter of Credit Outstandings at such time, an amount equal to the Adjusted
Total Revolving Loan Commitment at such time (after giving effect to any
changes thereto on such date); and
(v) shall not exceed in aggregate principal amount at any time
outstanding the Maximum Swingline Amount.
-3-
<PAGE>
BTCo shall not be obligated to make any Swingline Loans at a time when a Bank
Default exists unless BTCo has entered into arrangements satisfactory to it and
the Borrower to eliminate BTCo's risk with respect to the Defaulting Bank's or
Banks' participation in such Swingline Loans, including by cash collateralizing
such Defaulting Bank's or Banks' RL Percentage of the outstanding Swingline
Loans. BTCo will not make a Swingline Loan after it has received written notice
from the Borrower or the Required Banks stating that a Default or an Event of
Default exists until such time as BTCo shall have received a written notice of
(i) rescission of such notice from the party or parties originally delivering
the same or (ii) a waiver of such Default or Event of Default from the Required
Banks.
(d) On any Business Day, BTCo may, in its sole discretion, give
notice to the RL Banks that its outstanding Swingline Loans shall be funded with
a Borrowing of Revolving Loans (provided that each such notice shall be deemed
--------
to have been automatic ally given upon the occurrence of a Default or an Event
of Default under Section 10.05 or upon the exercise of any of the remedies
provided in the last paragraph of Section 10), in which case a Borrowing of
Revolving Loans constituting Base Rate Loans (each such Bor rowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all RL
Banks pro rata based on each RL Bank's Adjusted RL Percentage, and the proceeds
--- ----
thereof shall be applied directly to repay BTCo for such outstanding Swingline
Loans. Each RL Bank hereby irrevocably agrees to make Base Rate Loans upon one
Business Day's notice pursuant to each Mandatory Borrowing in the amount and in
the manner specified in the preceding sentence and on the date specified in
writing by BTCo notwithstanding (i) that the amount of the Mandatory Borrowing
may not comply with the Minimum Borrowing Amount otherwise required hereunder,
(ii) whether any conditions specified in Section 5 or 6 are then satisfied,
(iii) whether a Default or an Event of Default has occurred and is continuing,
(iv) the date of such Mandatory Borrowing and (v) the amount of the Total
Revolving Loan Commitment or the Adjusted Total Revolving Loan Commitment at
such time. In the event that any Mandatory Borrowing cannot for any reason be
made on the date otherwise required above (including, without limitation, as a
result of the commencement of a proceeding under the Bankruptcy Code in respect
of the Borrower), each RL Bank (other than BTCo) hereby agrees that it shall
forthwith purchase from BTCo (without recourse or warranty) such assignment of
the outstanding Swingline Loans as shall be necessary to cause the RL Banks to
share in such Swingline Loans ratably based upon their respective Adjusted RL
Percentages (determined before giving effect to any termination of the Revolving
Loan Commitments pursuant to the last paragraph of Section 10), provided that
--------
(x) all interest payable on the Swingline Loans shall be for the account of BTCo
until the date the respective assignment is purchased and, to the extent
attributable to the purchased assignment, shall be payable to the RL Bank
purchasing same from and after such date of purchase and (y) at the time any
purchase of assignments pur suant to this sentence is actually made, the
purchasing RL Bank shall be required to pay BTCo interest on the principal
amount of assignment purchased for each day from and including the day upon
which the Mandatory Borrowing would otherwise have occurred to
-4-
<PAGE>
but excluding the date of payment for such assignment, at the rate otherwise
applicable to Revolving Loans maintained as Base Rate Loans hereunder for each
day thereafter.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal amount
-------------------------------
of each Borrowing of Loans shall not be less than the Minimum Borrowing Amount
appli cable to such Loans, provided that Mandatory Borrowings shall be made in
--------
the amounts required by Section 1.01(d). More than one Borrowing may be
incurred on any day, provided, that at no time shall there be outstanding more
--------
than seven Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to make
-------------------
a Borrowing hereunder (excluding Borrowings of Swingline Loans and Mandatory
Borrow ings), it shall give the Agent at its Notice Office, prior to 12:00 Noon
(New York time), at least three Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar
Loans and at least one Business Day's prior written notice (or telephonic notice
promptly confirmed in writing) of each Borrowing of Base Rate Loans to be made
hereunder. Each such notice (each, a "Notice of Borrowing") shall, except as
otherwise expressly provided in Section 1.10, be irrevocable, and, in the case
of each written notice and each confirmation of telephonic notice, shall be in
the form of Exhibit A, appropriately completed to specify: (i) the aggregate
principal amount of the Loans to be made pursuant to such Borrowing, (ii) the
date of such Borrowing (which shall be a Business Day), (iii) whether the
respective Borrowing shall consist of Term Loans or Revolving Loans, (iv)
whether the respective Borrowing shall consist of Base Rate Loans or, to the
extent permitted hereunder, Eurodollar Loans and, if Eurodollar Loans, the
Interest Period to be initially applicable thereto and (v) in the case of a
Borrowing of Revolving Loans the proceeds of which are to be utilized to
finance, in whole or in part, the purchase price of a Permitted Acquisition, (x)
a reference to the officer's certificate, if any, delivered in accordance with
Section 8.14, (y) the aggregate principal amount of such Revolving Loans to be
utilized in connection with such Permitted Acquisition and (z) the Total
Unutilized Revolving Loan Commitment then in effect after giving effect to the
respective Permitted Acquisition (and all payments to be made in connection
therewith). The Agent shall promptly give each Bank which is required to make
Loans of the Tranche specified in the respective Notice of Borrowing, written
notice (or telephonic notice promptly confirmed in writing) of each proposed
Borrowing, of such Bank's proportionate share thereof and of the other matters
required by the immediately preceding sentence to be specified in the Notice of
Borrowing.
(b) (i) Whenever the Borrower desires to incur Swingline Loans
hereunder, it shall give BTCo not later than 12:00 Noon (New York time) on the
day such Swingline Loan is to be made, written notice (or telephonic notice
promptly confirmed in writing) of each Swingline Loan to be made hereunder.
Each such notice shall be irrevocable and shall specify in each case (x) the
date of such Borrowing (which shall be a Business Day) and
-5-
<PAGE>
(y) the aggregate principal amount of the Swingline Loan to be made pursuant to
such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified in
Sec tion 1.01(d), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section 1.01(d).
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Agent or BTCo (in the case of a Borrowing of Swingline Loans) or the Letter of
Credit Issuer (in the case of the issuance of Letters of Credit), as the case
may be, may prior to receipt of written con firmation act without liability upon
the basis of such telephonic notice, believed by the Agent, BTCo or the Letter
of Credit Issuer, as the case may be, in good faith to be from an Authorized
Officer of the Borrower. In each such case, the Agent's, BTCo's or the
respective Letter of Credit Issuer's, as the case may be, record of the terms of
such tele phonic notice shall be conclusive evidence of the contents of such
notice, absent manifest error.
1.04 Disbursement of Funds. (a) Not later than 1:00 P.M. (New York
---------------------
time) on the date specified in each Notice of Borrowing (or (x) in the case of
Swingline Loans, not later than 2:00 P.M. (New York time) on the date specified
in Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than
12:00 Noon (New York time) on the date specified in Section 1.01(d)), each Bank
with a Commitment of the respective Tranche will make available its pro rata
--- ----
share (determined in accordance with Section 1.07), if any, of each Borrowing
requested to be made on such date (or in the case of Swingline Loans, BTCo shall
make available the full amount thereof) in the manner pro vided below. All
amounts shall be made available to the Agent in U.S. Dollars and in immediately
available funds at the Payment Office and the Agent promptly will make avail
able to the Borrower by depositing to its account at the Payment Office the
aggregate of the amounts so made available in the type of funds received.
Unless the Agent shall have been notified by any Bank prior to the date of
Borrowing that such Bank does not intend to make available to the Agent its
portion of the Borrowing or Borrowings to be made on such date, the Agent may
assume that such Bank has made such amount available to the Agent on such date
of Borrowing, and the Agent, in reliance upon such assumption, may (in its sole
dis cretion and without any obligation to do so) make available to the Borrower
a correspond ing amount. If such corresponding amount is not in fact made
available to the Agent by such Bank and the Agent has made available same to the
Borrower, the Agent shall be enti tled to recover such corresponding amount on
demand from such Bank. If such Bank does not pay such corresponding amount
forthwith upon the Agent's demand therefor, the Agent shall promptly notify the
Borrower, and the Borrower shall immediately pay such corre sponding amount to
the Agent. The Agent shall also be entitled to recover on demand from such Bank
or the Borrower, as the case may be, interest on such corresponding amount in
-6-
<PAGE>
respect of each day from the date such corresponding amount was made available
by the Agent to the Borrower to the date such corresponding amount is recovered
by the Agent, at a rate per annum equal to (x) if paid by such Bank, the
overnight Federal Funds Rate or (y) if paid by the Borrower, the then applicable
rate of interest, calculated in accordance with Section 1.08.
(b) Nothing in this Agreement shall be deemed to relieve any Bank from
its obligation to fulfill its commitments hereunder or to prejudice any rights
which the Borrower may have against any Bank as a result of any default by such
Bank hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of,
-----
and interest on, all the Loans made to it by each Bank shall be evidenced (i) if
Term Loans, by a promissory note substantially in the form of Exhibit B-1 with
blanks appropriately completed in conformity herewith (each, a "Term Note" and,
collectively, the "Term Notes"), (ii) if Revolving Loans, by a promissory note
substantially in the form of Exhibit B-2 with blanks appropriately completed in
conformity herewith (each, a "Revolving Note" and, collectively, the "Revolving
Notes") and (iii) if Swingline Loans, by a promissory note substantially in the
form of Exhibit B-3 with blanks appropriately completed in conformity herewith
(the "Swingline Note").
(b) The Term Note issued to each Bank with a Term Loan Commitment
shall (i) be executed by the Borrower, (ii) be payable to such Bank or its
registered assigns and be dated the date of issuance thereof, (iii) be in a
stated principal amount equal to the Term Loans made by such Bank and be payable
in the principal amount of Term Loans evi denced thereby, (iv) mature on the
Final Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary repayment as provided in
Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(c) The Revolving Note issued to each RL Bank shall (i) be executed
by the Borrower, (ii) be payable to such RL Bank or its registered assigns and
be dated the date of issuance thereof, (iii) be in a stated principal amount
equal to the Revolving Loan Commitment of such RL Bank and be payable in the
principal amount of the outstanding Revolving Loans evidenced thereby, (iv)
mature on the Revolving Loan Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment as provided in Section 4.01 and mandatory repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement
and the other Credit Documents.
-7-
<PAGE>
(d) The Swingline Note issued to BTCo shall (i) be executed by the
Borrower, (ii) be payable to BTCo or its registered assigns and be dated the
Initial Borrowing Date, (iii) be in a stated principal amount equal to the
Maximum Swingline Amount and be payable in the principal amount of the
outstanding Swingline Loans evidenced thereby, (iv) mature on the Swingline
Expiry Date, (v) bear interest as provided in Section 1.08 in respect of the
Base Rate Loans evidenced thereby, (vi) be subject to voluntary prepayment as
provided in Section 4.01 and mandatory repayment as provided in Section 4.02 and
(vii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(e) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evi denced thereby. Failure to make any such notation
or any error in such notation shall not affect the Borrower's obligations in
respect of such Loans.
1.06 Conversions. The Borrower shall have the option to convert on
-----------
any Business Day occurring on or after the Initial Borrowing Date, all or a
portion at least equal to the applicable Minimum Borrowing Amount of the
outstanding principal amount of Loans (other than Swingline Loans which shall at
all times be maintained as Base Rate Loans) made pursuant to one or more
Borrowings of one or more Types of Loans under a single Tranche into a Borrowing
or Borrowings of another Type of Loan under such Tranche; provided, that (i)
--------
except as otherwise provided in Section 1.10(b) or unless the Borrower pays all
breakage costs and other amounts owing to each Bank pursuant to Section 1.11
concurrently with any such conversion, Eurodollar Loans may be converted into
Base Rate Loans only on the last day of an Interest Period applicable to the
Loans being converted, and no partial conversion of a Borrowing of Eurodollar
Loans shall reduce the outstanding principal amount of the Eurodollar Loans made
pursuant to such Borrowing to less than the Minimum Borrowing Amount applicable
thereto, (ii) Base Rate Loans may only be converted into Eurodollar Loans if no
Default or Event of Default is in existence on the date of the conversion, (iii)
unless the Agent has determined that the Syndication Date has occurred (at which
time this clause (iii) shall no longer be applicable), prior to the 90th day
after the Initial Borrowing Date, conversions of Base Rate Loans into Eurodollar
Loans may only be made if any such conversion is effective on the first day of
the first, second or third Interest Period referred to in clause (y) of each of
Sections 1.01(a)(iii) and 1.01(b)(ii) and so long as such conversion does not
result in a greater number of Borrowings of Eurodollar Loans prior to the 90th
day after the Initial Borrowing Date as are permitted under Sections
1.01(a)(iii) and 1.01(b)(ii) and (iv) Borrowings of Eurodollar Loans resulting
from this Section 1.06 shall be limited in number as provided in Section 1.02.
Each such conversion shall be effected by the Borrower by giving the Agent at
its Notice Office, prior to 11:00 A.M. (New York time), at least three Business
Days' (or one Business Day's in the case of a conversion into Base Rate Loans)
prior written notice (or
-8-
<PAGE>
telephonic notice promptly confirmed in writing) (each, a "Notice of
Conversion") specify ing the Loans to be so converted, the Borrowing(s) pursuant
to which the Loans were made and, if to be converted into a Borrowing of
Eurodollar Loans, the Interest Period to be initially applicable thereto. The
Agent shall give each Bank prompt notice of any such proposed conversion
affecting any of its Loans. Upon any such conversion, the proceeds thereof will
be deemed to be applied directly on the day of such conversion to prepay the
outstanding principal amount of the Loans being converted.
1.07 Pro Rata Borrowings. All Borrowings of Term Loans and Revolving
-------------------
Loans under this Agreement shall be incurred by the Borrower from the Banks pro
---
rata on the basis of such Banks' Term Loan Commitments or Revolving Loan
- ----
Commitments, as the case may be; provided that all Borrowings of Revolving Loans
--------
made pursuant to a Mandatory Borrowing shall be incurred from the RL Banks pro
---
rata on the basis on their Adjusted RL Percentages. It is understood that no
- ----
Bank shall be responsible for any default by any other Bank of its obligation to
make Loans hereunder and that each Bank shall be obligated to make the Loans to
be made by it hereunder, regardless of the failure of any other Bank to fulfill
its commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base Rate
--------
Loan shall bear interest from the date of the Borrowing thereof until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such Base
Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06, at a rate per annum which shall at all times be the
relevant Applicable Margin plus the Base Rate in effect from time to time.
----
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until the earlier of (i) the
maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii)
the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section
1.06, 1.09 or 1.10(b), as appli cable, at a rate per annum which shall at all
times be the relevant Applicable Margin plus the Eurodollar Rate for such
----
Interest Period.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan shall bear interest at a rate per annum equal
to the greater of (x) the rate which is 2% in excess of the rate borne by the
respective such Loans immediately prior to the respective payment default and
(y) the rate which is 2% in excess of the rate otherwise applicable to Base Rate
Loans from time to time. Interest which accrues under this Section 1.08(c)
shall be payable on demand.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on each
Quarterly Payment Date, (ii) in respect of
-9-
<PAGE>
each Eurodollar Loan, on (x) the date of any conversion into a Base Rate Loan
pursuant to Section 1.06, 1.09 or 1.10(b), as applicable (on the amount
converted) and (y) the last day of each Interest Period applicable thereto and,
in the case of an Interest Period in excess of three months, on each date
occurring at three month intervals after the first day of such Interest Period
and (iii) in respect of each Loan, on (x) the date of any prepayment or
repayment thereof (on the amount prepaid or repaid), (y) at maturity (whether by
acceleration or otherwise) and (z) after such maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 13.07(b).
(f) Upon each Interest Determination Date, the Agent shall determine
the Eurodollar Rate for the respective Interest Period or Interest Periods and
shall promptly notify the Borrower and the Banks thereof. Each such
determination shall, absent manifest error, be final and conclusive and binding
on all parties hereto.
1.09 Interest Periods. At the time the Borrower gives a Notice of
----------------
Borrow ing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 11:00 A.M. (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans (in the case of any subse quent Interest Period),
the Borrower shall have the right to elect by giving the Agent written notice
(or telephonic notice promptly confirmed in writing) of the Interest Period
applicable to such Borrowing, which Interest Period shall, at the option of the
Borrower (but otherwise subject to clause (y) of the proviso to Sections
1.01(a)(iii) and 1.01(b)(ii) and to clause (iii) of the proviso to Section
1.06), be a one, two, three or six month period. Notwithstanding anything to
the contrary contained above:
(i) all Eurodollar Loans comprising a Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date of
any conver sion from a Borrowing of Base Rate Loans) and each Interest
Period occurring thereafter in respect of such Borrowing shall commence on
the day on which the next preceding Interest Period applicable thereto
expires;
(iii) if any Interest Period for any Borrowing of Eurodollar Loans
begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period, such Interest Period
shall end on the last Business Day of such calendar month;
-10-
<PAGE>
(iv) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided, that if any Interest Period for any
--------
Borrowing of Eurodollar Loans would otherwise expire on a day which is not
a Business Day but is a day of the month after which no further Business
Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(v) no Interest Period for a Borrowing under a Tranche shall be
selected which would extend beyond the respective Maturity Date for such
Tranche;
(vi) no Interest Period may be elected at any time when a Default or
an Event of Default is then in existence;
(vii) no Interest Period in respect of any Borrowing of Revolving
Loans shall be elected which extends beyond any date upon which a Scheduled
Commitment Reduction will be required to be made under Section 3.03(c) if
the aggregate principal amount of such Revolving Loans which have Interest
Periods which will expire after such date, when added to the Stated Amount
of all Letters of Credit which by their terms expire after such date, will
be in excess of the Total Revolving Loan Commitment as the same will be in
effect after giving effect to the respective Scheduled Commitment
Reduction; and
(viii) no Interest Period in respect of any Borrowing of Term Loans
shall be elected which extends beyond any date upon which a Scheduled
Repayment will be required to be made under Section 4.02(b) if, after
giving effect to the election of such Interest Period, the aggregate
principal amount of such Term Loans which have Interest Periods which will
expire after such date will be in excess of the aggregate principal amount
of such Term Loans then outstanding less the aggregate amount of such
required Scheduled Repayment.
If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to the respective
Borrowing of Eurodollar Loans as provided above, the Borrower shall be deemed to
have elected to convert such Borrowing into a Borrowing of Base Rate Loans
effective as of the expiration date of such current Interest Period.
1.10 Increased Costs; Illegality; etc. (a) In the event that (x) in
---------------------------------
the case of clause (i) below, the Agent or (y) in the case of clauses (ii) and
(iii) below, any Bank, shall have determined (which determination shall, absent
manifest error, be final and con clusive and binding upon all parties hereto):
-11-
<PAGE>
(i) on any Interest Determination Date, that, by reason of any
changes arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition of
Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans because of (x) any change since the date of this
Agreement in any applicable law, governmental rule, regulation, guideline,
order or request (whether or not hav ing the force of law), or in the
interpretation or administration thereof and including the introduction of
any new law or governmental rule, regulation, guideline, order or request,
such as, for example, but not limited to, (A) a change in the basis of
taxation of payment to any Bank of the principal of or interest on such
Eurodollar Loans or any other amounts payable hereunder (except for changes
with respect to any tax imposed on, or determined by reference to, the net
income, net profits or capital (including branch profits tax) of such Bank
or any franchise tax based on the net income or net profits of such Bank
pursuant to the laws of the jurisdiction in which such Bank is organized,
or in which such Bank's principal office or applicable lending office is
located or any subdivision thereof or therein), or (B) a change in official
reserve requirements, but, in all events, excluding reserves required under
Regulation D to the extent included in the computation of the Eurodollar
Rate and/or (y) other circumstances affecting such Bank, the interbank
Eurodollar market or the position of such Bank in such market; or
(iii) at any time since the date of this Agreement, that the making
or con tinuance of any Eurodollar Loan has become unlawful by compliance by
such Bank with any law, governmental rule, regulation, guideline or order
(or would conflict with any governmental rule, regulation, guideline,
request or order not having the force of law but with which such Bank
customarily complies even though the failure to comply therewith would not
be unlawful), or has become impracticable as a result of a contingency
occurring after the date of this Agreement which materially and adversely
affects the interbank Eurodollar market;
then, and in any such event, such Bank (or the Agent in the case of clause (i)
above) shall promptly give notice (by telephone confirmed in writing) to the
Borrower and (except in the case of clause (i)) to the Agent of such
determination (which notice the Agent shall promptly transmit to each of the
other Banks). Thereafter, (x) in the case of clause (i) above, Eurodollar Loans
shall no longer be available until such time as the Agent notifies the Borrower
and the Banks that the circumstances giving rise to such notice by the Agent no
longer exist, and any Notice of Borrowing or Notice of Conversion given by the
Bor rower with respect to Eurodollar Loans which have not yet been incurred
(including by way of conversion) shall be deemed rescinded by the Borrower, (y)
in the case of clause (ii)
-12-
<PAGE>
above, the Borrower agrees, subject to the provisions of Section 13.18 (to the
extent applicable), to pay to such Bank, upon written demand therefor, such
additional amounts (in the form of an increased rate of, or a different method
of calculating, interest or otherwise as such Bank in its sole discretion shall
determine) as shall be required to com pensate such Bank for such increased
costs or reductions in amounts received or receivable hereunder but without
duplication of any payments due under Section 4.04 (a written notice as to the
additional amounts owed to such Bank, showing in reasonable detail the basis for
the calculation thereof, submitted to the Borrower by such Bank shall, absent
manifest error, be final and conclusive and binding upon all parties hereto,
although the failure to give any such notice shall not release or diminish any
of the Borrower's obligations to pay additional amounts pursuant to this Section
1.10(a) upon the subsequent receipt of such notice) and (z) in the case of
clause (iii) above, the Borrower shall take one of the actions specified in
Section 1.10(b) as promptly as possible and, in any event, within the time
period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii), the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Agent telephonic
notice (confirmed promptly in writing) thereof on the same date that the
Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii)), or
(ii) if the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to the Agent, require the affected Bank to convert each
such Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the
circumstance described in Section 1.10(a)(iii), shall occur no later than the
last day of the Interest Period then applicable to such Eurodollar Loan or such
earlier day as shall be required by applicable law); provided, that if more than
--------
one Bank is affected at any time, then all affected Banks must be treated the
same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the date hereof, the
adop tion or effectiveness of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Bank or any corporation controlling such Bank with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Bank's or such other corporation's
capital or assets as a consequence of such Bank's Commitment or Commitments
hereunder or its obligations hereunder to a level below that which such Bank or
such other corporation could have achieved but for such adoption, effectiveness,
change or compliance (taking into con sideration such Bank's or such other
corporation's policies with respect to capital ade quacy), then from time to
time, upon written demand by such Bank (with a copy to the
-13-
<PAGE>
Agent), accompanied by the notice referred to in the last sentence of this
clause (c), the Borrower agrees, subject to the provisions of Section 13.18 (to
the extent applicable), to pay to such Bank such additional amount or amounts as
will compensate such Bank or such other corporation for such reduction in the
rate of return to such Bank or such other corporation. Each Bank, upon
determining in good faith that any additional amounts will be payable pursuant
to this Section 1.10(c), will give prompt written notice thereof to the Borrower
(a copy of which shall be sent by such Bank to the Agent), which notice shall
set forth in reasonable detail the basis of the calculation of such additional
amounts, although the failure to give any such notice shall not release or
diminish the Borrower's obligations to pay additional amounts pursuant to this
Section 1.10(c) upon the subsequent receipt of such notice. A Bank's reasonable
good faith determination of compensation owing under this Section 1.10(c) shall,
absent manifest error, be final and conclusive and binding on all the parties
hereto.
1.11 Compensation. The Borrower agrees, subject to the provisions of
------------
Section 13.18 (to the extent applicable), to compensate each Bank, promptly upon
its writ ten request (which request shall set forth in reasonable detail the
basis for requesting such compensation), for all losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Bank to fund its Eurodollar Loans) which such Bank may sustain:
(i) if for any reason (other than a default by such Bank or the Agent) a
Borrowing of, or conversion from or into, Eurodollar Loans does not occur on a
date specified there for in a Notice of Borrowing or Notice of Conversion given
by the Borrower (whether or not withdrawn by the Borrower or deemed withdrawn
pursuant to Section 1.10(a)); (ii) if any repayment (including any repayment
made pursuant to Section 4.01 or 4.02 or as a result of an acceleration of the
Loans pursuant to Section 10 or as a result of the replacement of a Bank
pursuant to Section 1.13 or 13.12(b)) or conversion of any Euro dollar Loans of
the Borrower occurs on a date which is not the last day of an Interest Period
applicable thereto; (iii) if any prepayment of any Eurodollar Loans is not made
on any date specified in a notice of prepayment given by the Borrower; or (iv)
as a con sequence of (x) any other default by the Borrower to repay its
Eurodollar Loans when required by the terms of this Agreement or (y) an election
made by the Borrower pursuant to Section 1.10(b). Each Bank's calculation of
the amount of compensation owing pursuant to this Section 1.11 shall be made in
good faith. A Bank's basis for requesting compensation pursuant to this Section
1.11 and a Bank's calculation of the amount thereof, shall, absent manifest
error, be final and conclusive and binding on all parties hereto.
1.12 Change of Lending Office. Each Bank agrees that, upon the occur
------------------------
rence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii),
1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by the
Borrower, use reasonable efforts (subject to overall policy considerations of
such Bank) to designate another lending office for any Loans or Letters of
Credit affected by such event; provided, that such desig-
--------
-14-
<PAGE>
nation is made on such terms that, in the sole judgment of such Bank, such Bank
and its lending office suffer no economic, legal or regulatory disadvantage,
with the object of avoid ing the consequences of the event giving rise to the
operation of any such Section. Nothing in this Section 1.12 shall affect or
postpone any of the obligations of the Borrower or the right of any Bank
provided in Section 1.10, 2.05 or 4.04.
1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting
--------------------
Bank, (y) upon the occurrence of any event giving rise to the operation of
Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with
respect to any Bank which results in such Bank charging to the Borrower
increased costs in a material amount in excess of those being generally charged
by the other Banks or (z) in the case of a refusal by a Bank to consent to a
proposed change, waiver, discharge or termination with respect to this Agreement
which has been approved by the Required Banks as provided in Section 13.12(b),
the Borrower shall have the right, in accordance with Section 13.04(b), if no
Default or Event of Default then exists or would exist after giving effect to
such replace ment, to replace such Bank (the "Replaced Bank") with one or more
other Eligible Transferee or Transferees, none of whom shall constitute a
Defaulting Bank at the time of such replacement (collectively, the "Replacement
Bank") and each of whom shall be reason ably acceptable to the Agent or, at the
option of the Borrower, to replace only (a) the Revolving Loan Commitment (and
outstandings pursuant thereto) of the Replaced Bank with an identical Revolving
Loan Commitment provided by the Replacement Bank or (b) in the case of a
replacement as provided in Section 13.12(b) where the consent of the respective
Bank is required with respect to less than all Tranches of its Loans or
Commitments, the Commitments and/or outstanding Loans of such Bank in respect of
each Tranche where the consent of such Bank would otherwise be individually
required, with identical Commitments and/or Loans of the respective Tranche
provided by the Replacement Bank; provided that:
--------
(i) at the time of any replacement pursuant to this Section 1.13,
the Replacement Bank shall enter into one or more Assignment and Assumption
Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant
to said Section 13.04(b) to be paid by the Replacement Bank) pursuant to
which the Replacement Bank shall acquire all of the Commitments and
outstanding Loans (or, in the case of the replacement of only (a) the
Revolving Loan Commitment, the Revolving Loan Commitment and outstanding
Revolving Loans and participations in Letter of Credit Outstandings and/or
(b) Term Loans, the outstanding Term Loans) of, and in each case (except
for the replacement of only the outstanding Term Loans of the respective
Bank) participations in Letters of Credit by, the Replaced Bank and, in
connection therewith, shall pay to (x) the Replaced Bank in respect thereof
an amount equal to the sum of (A) an amount equal to the principal of, and
all accrued interest on, all outstanding Loans (or of the Loans of the
respective Tranche or Tranches being replaced) of the Replaced Bank, (B) an
amount equal to all Unpaid Drawings (unless there are no Unpaid Drawings
with
-15-
<PAGE>
respect to the Tranche being replaced) that have been funded by (and not
reimbursed to) such Replaced Bank, together with all then unpaid interest
with respect thereto at such time and (C) an amount equal to all accrued,
but theretofore unpaid, Fees owing to the Replaced Bank (but only with
respect to the relevant Tranche, in the case of the replacement of less
than all Tranches of Loans then held by the respective Replaced Bank)
pursuant to Section 3.01, (y) except in the case of the replacement of only
the outstanding Term Loans of a Replaced Bank, each Letter of Credit Issuer
an amount equal to such Replaced Bank's Adjusted RL Percentage of any
Unpaid Drawing relating to Letters of Credit issued by such Letter of
Credit Issuer (which at such time remains an Unpaid Drawing) to the ex tent
such amount was not theretofore funded by such Replaced Bank and (z) in the
case of any replacement of Revolving Loan Commitments, BTCo an amount equal
to such Replaced Bank's Adjusted RL Percentage of any Mandatory Borrowing
to the extent such amount was not theretofore funded by such Replaced Bank;
and
(ii) all obligations of the Borrower then owing to the Replaced
Bank (other than those (a) specifically described in clause (i) above in
respect of which the assignment purchase price has been, or is concurrently
being, paid, but including all amounts, if any, owing under Section 1.11 or
(b) relating to any Tranche of Loans and/or Commitments of the respective
Replaced Bank which will remain outstanding after giving effect to the
respective replacement) shall be paid in full to such Replaced Bank
concurrently with such replacement.
Upon the execution of the respective Assignment and Assumption Agreements, the
payment of amounts referred to in clauses (i) and (ii) above, recordation of the
assignment on the Register by the Agent pursuant to Section 13.17 and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Note or Notes executed by the Borrower, (x) the Replacement Bank
shall become a Bank hereunder and, unless the respective Replaced Bank continues
to have outstanding Term Loans or a Revolving Loan Commitment hereunder, the
Replaced Bank shall cease to constitute a Bank hereunder, except with respect to
indemnification provisions under this Agreement (including, without limitation,
Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06), which shall survive as to
such Replaced Bank and (y) except in the case of the replacement of only
outstanding Term Loans, the Adjusted RL Percentages of the Banks shall be
automatically adjusted at such time to give effect to such replacement.
SECTION 2. Letters of Credit.
-----------------
2.01 Letters of Credit. (a) Subject to and upon the terms and
-----------------
conditions herein set forth, the Borrower may request a Letter of Credit Issuer
at any time and from time to time on or after the Initial Borrowing Date and
prior to the tenth Business Day (or
-16-
<PAGE>
the 30th day in the case of Trade Letters of Credit) preceding the Revolving
Loan Maturity Date to issue, (x) for the account of the Borrower and for the
benefit of any holder (or any trustee, agent or other similar representative for
any such holders) of L/C Supportable Indebtedness, irrevocable standby letters
of credit in a form customarily used by such Letter of Credit Issuer or in such
other form as has been approved by such Letter of Credit Issuer (each such
standby letter of credit, a "Standby Letter of Credit") in support of such L/C
Supportable Indebtedness and (y) for the account of the Borrower and for the
benefit of sellers of goods to the Borrower or any Subsidiary Guarantor in the
ordinary course of business, irrevocable sight trade letters of credit in a form
customarily used by such Letter of Credit Issuer or in such other form as has
been approved by such Letter of Credit Issuer (each such trade letter of credit,
a "Trade Letter of Credit," and each such Standby Letter of Credit and Trade
Letter of Credit, a "Letter of Credit" and, collectively, the "Letters of
Credit").
(b) Subject to and upon the terms and conditions set forth herein,
each Letter of Credit Issuer hereby agrees that it will, at any time and from
time to time on and after the Initial Borrowing Date and prior to the tenth
Business Day (or the 30th day in the case of Trade Letters of Credit) preceding
the Revolving Loan Maturity Date, following its receipt of the respective Letter
of Credit Request, issue for the account of the Borrower one or more Letters of
Credit, (x) in the case of Trade Letters of Credit, in support of trade
obligations of the Borrower or any Subsidiary Guarantor that arise in the
ordinary course of business or (y) in the case of Standby Letters of Credit, in
support of such L/C Support able Indebtedness as is permitted to remain
outstanding hereunder. Notwithstanding the foregoing, no Letter of Credit
Issuer shall be under any obligation to issue any Letter of Credit if at the
time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbi trator shall purport by its terms to enjoin or restrain such Letter of
Credit Issuer from issuing such Letter of Credit or any requirement of law
applicable to such Letter of Credit Issuer or any request or directive
(whether or not having the force of law) from any governmental authority
with jurisdiction over such Letter of Credit Issuer shall prohibit, or
request that such Letter of Credit Issuer refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon such Letter of Credit Issuer with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which such
Letter of Credit Issuer is not otherwise compensated) not in effect on the
date hereof, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to such Letter of Credit Issuer as of the
date hereof and which such Letter of Credit Issuer in good faith deems
material to it; or
(ii) such Letter of Credit Issuer shall have received written notice
from the Borrower or the Required Banks prior to the issuance of such
Letter of Credit
-17-
<PAGE>
of the type described in clause (vi) of Section 2.01(c) or the last
sentence of Section 2.02(b).
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time, would
exceed either (x) $15,000,000 or (y) when added to the aggregate principal
amount of all Revolving Loans made by the Non-Defaulting Banks and then
outstanding and all Swingline Loans then outstanding, the Adjusted Total
Revolving Loan Commitment at such time; (ii) (x) each Standby Letter of Credit
shall have an expiry date occurring not later than one year after such Standby
Letter of Credit's date of issuance, provided, that any such Standby Letter of
--------
Credit may be extendable for successive periods of up to one year, but not
beyond the tenth Business Day preceding the Revolving Loan Maturity Date, on
terms acceptable to the Letter of Credit Issuer and (y) each Trade Letter of
Credit shall have an expiry date occurring not later than 180 days after such
Trade Letter of Credit's date of issuance; (iii) (x) no Standby Letter of Credit
shall have an expiry date occurring later than the tenth Business Day preceding
the Revolving Loan Maturity Date and (y) no Trade Letter of Credit shall have an
expiry date occurring later than 30 days prior to the Revolving Loan Maturity
Date; (iv) each Letter of Credit shall be denominated in U.S. Dollars; (v) the
Stated Amount of each Letter of Credit shall not be less than $100,000 or such
lesser amount as is acceptable to the respective Letter of Credit Issuer; and
(vi) no Letter of Credit Issuer will issue any Letter of Credit after it has
received written notice from the Borrower or the Required Banks stating that a
Default or an Event of Default exists until such time as such Letter of Credit
Issuer shall have received a written notice of (x) rescission of such notice
from the party or parties originally delivering the same or (y) a waiver of such
Default or Event of Default by the Required Banks.
(d) Notwithstanding the foregoing, in the event a Bank Default
exists, no Letter of Credit Issuer shall be required to issue any Letter of
Credit unless the respective Letter of Credit Issuer has entered into
arrangements satisfactory to it and the Borrower to eliminate such Letter of
Credit Issuer's risk with respect to the participation in Letters of Credit of
the Defaulting Bank or Banks, including by cash collateralizing such Defaulting
Bank's or Banks' Adjusted RL Percentage of the Letter of Credit Outstandings, as
the case may be.
2.02 Letter of Credit Requests. (a) Whenever the Borrower desires
-------------------------
that a Letter of Credit be issued, the Borrower shall give the Agent and the
respective Letter of Credit Issuer written notice thereof prior to 12:00 Noon
(New York time) at least five Business Days (or such shorter period as may be
acceptable to the respective Letter of Credit Issuer) prior to the proposed date
of issuance (which shall be a Business Day) which written notice shall be in the
form of Exhibit C (each, a "Letter of Credit Request"). Each
-18-
<PAGE>
Letter of Credit Request shall include any other documents as such Letter of
Credit Issuer customarily requires in connection therewith.
(b) The making of each Letter of Credit Request shall be deemed to be
a representation and warranty by the Borrower that such Letter of Credit may be
issued in accordance with, and it will not violate the requirements of, Section
2.01(c). Unless the respective Letter of Credit Issuer has received notice from
the Required Banks before it issues a Letter of Credit that one or more of the
applicable conditions specified in Section 5 or 6, as the case may be, are not
then satisfied, or that the issuance of such Letter of Credit would violate
Section 2.01(c), then such Letter of Credit Issuer may issue the requested
Letter of Credit for the account of the Borrower in accordance with such Letter
of Credit Issuer's usual and customary practice.
2.03 Letter of Credit Participations. (a) Immediately upon the
-------------------------------
issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter of
Credit Issuer shall be deemed to have sold and transferred to each other RL
Bank, and each such RL Bank (each, a "Participant") shall be deemed irrevocably
and unconditionally to have purchased and re ceived from such Letter of Credit
Issuer, without recourse or warranty, an undivided inter est and participation,
to the extent of such Participant's Adjusted RL Percentage, in such Letter of
Credit, each substitute Letter of Credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto (although
Letter of Credit Fees shall be payable directly to the Agent for the account of
the RL Banks as provided in Section 3.01(b) and the Participants shall have no
right to receive any portion of any Facing Fees with respect to such Letters of
Credit) and any security therefor or guaranty pertaining thereto. Upon any
change in the Revolving Loan Commitments or the Adjusted RL Percentages of the
RL Banks pursuant to Section 1.13 or 13.04(b) or as a result of a Bank Default,
it is hereby agreed that, with respect to all outstanding Letters of Credit and
Unpaid Drawings with respect thereto, there shall be an automatic adjustment to
the participations pursuant to this Section 2.03 to reflect the new Adjusted RL
Percentages of the assigning and assignee Bank or of all RL Banks, as the case
may be.
(b) In determining whether to pay under any Letter of Credit, no
Letter of Credit Issuer shall have any obligation relative to the Participants
other than to determine that any documents required to be delivered under such
Letter of Credit have been delivered and that they appear to substantially
comply on their face with the requirements of such Letter of Credit. Any action
taken or omitted to be taken by any Letter of Credit Issuer under or in
connection with any Letter of Credit issued by it if taken or omitted in the
absence of gross negligence or willful misconduct, shall not create for such
Letter of Credit Issuer any resulting liability.
(c) In the event that any Letter of Credit Issuer makes any payment
under any Letter of Credit issued by it and the Borrower shall not have
reimbursed such amount
-19-
<PAGE>
in full to the Letter of Credit Issuer pursuant to Section 2.04(a), such Letter
of Credit Issuer shall promptly notify the Agent, and the Agent shall promptly
notify each Participant of such failure, and each such Participant shall
promptly and unconditionally pay to the Agent for the account of such Letter of
Credit Issuer, the amount of such Participant's Adjusted RL Percentage of such
payment in U.S. Dollars and in same day funds. If the Agent so notifies any
Participant required to fund a payment under a Letter of Credit prior to 11:00
A.M. (New York time) on any Business Day, such Participant shall make available
to the Agent at the Payment Office for the account of the respective Letter of
Credit Issuer such Participant's Adjusted RL Percentage of the amount of such
payment on such Business Day in same day funds (and, to the extent such notice
is given after 11:00 A.M. (New York time) on any Business Day, such Participant
shall make such payment on the immediately following Business Day). If and to
the extent such Participant shall not have so made its Adjusted RL Percentage of
the amount of such payment available to the Agent for the account of the
respective Letter of Credit Issuer, such Participant agrees to pay to the Agent
for the account of such Letter of Credit Issuer, forthwith on demand such
amount, together with interest thereon, for each day from such date until the
date such amount is paid to the Agent for the account of the Letter of Credit
Issuer at the overnight Federal Funds Rate. The failure of any Participant to
make available to the Agent for the account of the respective Letter of Credit
Issuer its Adjusted RL Percentage of any payment under any Letter of Credit
issued by it shall not relieve any other Participant of its obligation hereunder
to make available to the Agent for the account of such Letter of Credit Issuer
its applicable Adjusted RL Percentage of any payment under any such Letter of
Credit on the date required, as specified above, but no Participant shall be
responsible for the failure of any other Participant to make available to the
Agent for the account of such Letter of Credit Issuer such other Participant's
Adjusted RL Percentage of any such payment.
(d) Whenever any Letter of Credit Issuer receives a payment of a reim
bursement obligation as to which the Agent has received for the account of such
Letter of Credit Issuer any payments from the Participants pursuant to clause
(c) above, such Letter of Credit Issuer shall pay to the Agent and the Agent
shall promptly pay to each Participant which has paid its Adjusted RL Percentage
thereof, in U.S. Dollars and in same day funds, an amount equal to such
Participant's Adjusted RL Percentage of the principal amount thereof and
interest thereon accruing after the purchase of the respective participations.
(e) Each Letter of Credit Issuer shall, promptly after each issuance
of, or amendment or modification to, a Standby Letter of Credit issued by it,
give the Agent, each Participant and the Borrower written notice of the issuance
of, or amendment or modification to, such Standby Letter of Credit, which notice
shall be accompanied by a copy of the Standby Letter of Credit or Standby
Letters of Credit issued by it and each such amendment or modification thereto.
-20-
<PAGE>
(f) Each Letter of Credit Issuer (other than BTCo) shall deliver to
the Agent, promptly on the first Business Day of each week, by facsimile
transmission, the aggregate daily Stated Amount available to be drawn under the
outstanding Trade Letters of Credit issued by such Letter of Credit Issuer for
the previous week. The Agent shall,
within 10 days after the last Business Day of each calendar month, deliver to
each Participant a report setting forth for such preceding calendar month the
aggregate daily Stated Amount available to be drawn under all outstanding Trade
Letters of Credit during such calendar month.
(g) The obligations of the Participants to make payments to the Agent
for the account of the respective Letter of Credit Issuer with respect to
Letters of Credit issued by it shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of this Agreement or any
of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower or any of its Subsidiaries may have at any time against
a beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Agent, any Letter of Credit Issuer, any Bank, or other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transaction between the Borrower or any of its Subsidiaries and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or other document presented under the
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;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.04 Agreement to Repay Letter of Credit Drawings. (a) The Borrower
--------------------------------------------
hereby agrees to reimburse each Letter of Credit Issuer, by making payment to
the Agent in immediately available funds at the Payment Office, for any payment
or disbursement made by such Letter of Credit Issuer under any Letter of Credit
issued by it (each such amount so paid or disbursed until reimbursed, an "Unpaid
Drawing") immediately after,
-21-
<PAGE>
and in any event on the date of such payment or disbursement, with interest on
the amount so paid or disbursed by such Letter of Credit Issuer, to the extent
not reimbursed prior to 1:00 P.M. (New York time) on the date of such payment or
disbursement, from and including the date paid or disbursed to but not including
the date such Letter of Credit Issuer is reimbursed therefor at a rate per annum
which shall be the Applicable Margin for Revolving Loans maintained as Base Rate
Loans as in effect from time to time (plus an additional 2% per annum if not
reimbursed by the third Business Day after the date of such payment or
disbursement), such interest also to be payable on demand; provided, that it is
--------
understood and agreed, however, that the notices referred to above in this
clause (a) shall not be required to be given if a Default or an Event of Default
under such Section 10.05 shall have occurred and be continuing (in which case
the Unpaid Drawings shall be due and payable immediately without presentment,
demand, protest or notice of any kind (all of which are hereby waived by each
Credit Party) and shall bear interest at a rate per annum which shall be
Applicable Margin for Revolving Loans maintained as Base Rate Loans plus 2% on
and after the third Business Day following the respective Drawing). Each Letter
of Credit Issuer shall provide the Borrower prompt notice of any payment or
disbursement made by it under any Letter of Credit issued by it, although the
failure of, or delay in, giving any such notice shall not release or diminish
the obligations of the Borrower under this Section 2.04(a) or under any other
Section of this Agreement.
(b) The Borrower's obligation under this Section 2.04 to reimburse
the respective Letter of Credit Issuer with respect to drawings on Letters of
Credit (including, in each case, interest thereon) shall be absolute and
unconditional under any and all circum stances and irrespective of any setoff,
counterclaim or defense to payment which the Borrower or any of its Subsidiaries
may have or have had against such Letter of Credit Issuer, the Agent or any
Bank, including, without limitation, any defense based upon the failure of any
drawing under a Letter of Credit issued by it to conform to the terms of the
Letter of Credit or any nonapplication or misapplication by the beneficiary of
the proceeds of such drawing; provided, however, that the Borrower shall not be
-------- -------
obligated to reimburse such Letter of Credit Issuer for any wrongful payment
made by such Letter of Credit Issuer under a Letter of Credit issued by it as a
result of acts or omissions constituting willful mis conduct or gross negligence
on the part of such Letter of Credit Issuer as determined by a court of
competent jurisdiction.
2.05 Increased Costs. If after the Effective Date, any Letter of
---------------
Credit Issuer or any Participant determines that the adoption or effectiveness
of any applicable law, rule or regulation, order, guideline or request or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or com parable agency charged with the
interpretation or administration thereof, or compliance by any Letter of Credit
Issuer or any Participant with any request or directive (whether or not having
the force of law) by any such authority, central bank or comparable agency shall
either (i) impose, modify or make applicable any reserve, deposit, capital
adequacy or sim-
-22-
<PAGE>
ilar requirement against Letters of Credit issued by such Letter of Credit
Issuer or such Participant's participation therein (except as contemplated by
Section 4.04), or (ii) impose on any Letter of Credit Issuer or any Participant
any other conditions directly or indirectly affecting this Agreement, any Letter
of Credit or such Participant's participation therein; and the result of any of
the foregoing is to increase the cost to such Letter of Credit Issuer or such
Participant of issuing, maintaining or participating in any Letter of Credit, or
to reduce the amount of any sum received or receivable by such Letter of Credit
Issuer or such Participant hereunder or reduce the rate of return on its capital
with respect to Letters of Credit, then, upon written demand to the Borrower by
such Letter of Credit Issuer or such Participant (a copy of which notice shall
be sent by such Letter of Credit Issuer or such Participant to the Agent),
accompanied by the certificate described in the last sentence of this Section
2.05, the Borrower agrees, subject to the provisions of Section 13.18 (to the
extent applicable), to pay to such Letter of Credit Issuer or such Participant
such additional amount or amounts as will compensate such Letter of Credit
Issuer or such Participant for such increased cost or reduction. A certificate
submitted to the Borrower by such Letter of Credit Issuer or such Participant,
as the case may be (a copy of which certificate shall be sent by such Letter of
Credit Issuer or such Participant to the Agent), setting forth in reasonable
detail the basis for the determination of such additional amount or amounts
necessary to compensate such Letter of Credit Issuer or such Participant as
aforesaid shall be final and conclusive and binding on the Borrower absent
manifest error, although the failure to deliver any such certificate shall not
release or diminish the Borrower's obliga tions to pay additional amounts
pursuant to this Section 2.05 upon subsequent receipt of such certificate.
SECTION 3. Fees; Commitments.
-----------------
3.01 Fees. (a) The Borrower shall pay to the Agent for
----
distribution to each Non-Defaulting Bank a commitment fee (the "Commitment Fee")
for the period from the Effective Date to but not including the Revolving Loan
Maturity Date (or such earlier date as the Total Revolving Loan Commitment shall
have been terminated), computed at a rate for each day equal to the Applicable
Commitment Fee Percentage on the daily average Unutilized Revolving Loan
Commitment of such Non-Defaulting Bank. Accrued Commitment Fees shall be due
and payable quarterly in arrears on each Quarterly Payment Date and on the
Revolving Loan Maturity Date (or such earlier date upon which the Total
Revolving Loan Commitment is terminated).
(b) The Borrower shall pay to the Agent for pro rata distribution to
--- ----
each Non-Defaulting Bank with a Revolving Loan Commitment (based on their
respective Adj usted RL Percentages), a fee in respect of each Letter of Credit
(the "Letter of Credit Fee") computed at a rate per annum equal to the
Applicable Margin for Revolving Loans maintained as Eurodollar Loans then in
effect on the daily Stated Amount of such Letter
-23-
<PAGE>
of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in
arrears on each Quarterly Payment Date and upon the first day on or after the
termination of the Total Revolving Loan Commitment upon which no Letters of
Credit remain outstanding.
(c) The Borrower shall pay to each Letter of Credit Issuer a fee in
respect of each Letter of Credit issued by such Letter of Credit Issuer (the
"Facing Fee") computed at the rate of 1/4 of 1% per annum on the daily Stated
Amount of such Letter of Credit; provided, that in no event shall the annual
--------
Facing Fee with respect to each Letter of Credit be less than $500; it being
agreed that (x) on the date of issuance of any Letter of Credit and on each
anniversary thereof prior to the termination of such Letter of Credit, if $500
will exceed the amount of Facing Fees that will accrue with respect to such
Letter of Credit for the immediately succeeding 12-month period, the full $500
shall be payable on the date of issuance of such Letter of Credit and on each
such anniversary thereof prior to the termination of such Letter of Credit and
(y) if on the date of the termination of any Letter of Credit, $500 actually
exceeds the amount of Facing Fees paid or payable with respect to such Letter of
Credit for the period beginning on the date of the issuance thereof (or if the
respective Letter of Credit has been outstanding for more than one year, the
date of the last anniversary of the issuance thereof occurring prior to the
termination of such Letter of Credit) and ending on the date of the termination
thereof, an amount equal to such excess shall be paid as additional Facing Fees
with respect to such Letter of Credit on the next date upon which Facing Fees
are payable in accordance with the immediately succeeding sentence. Except as
provided in the immediately preceding sentence, accrued Facing Fees shall be due
and payable quarterly in arrears on each Quarterly Payment Date and upon the
first day on or after the termination of the Total Revolving Loan Commitment
upon which no Letters of Credit remain outstanding.
(d) The Borrower shall pay directly to each Letter of Credit Issuer
upon each issuance of, payment under, and/or amendment of, a Letter of Credit
issued by such Letter of Credit Issuer such amount as shall at the time of such
issuance, payment or amendment be the administrative charge which such Letter of
Credit Issuer is customarily charging for issuances of, payments under or
amendments of, letters of credit issued by it.
(e) The Borrower shall pay to the Agent, for its own account, such
other fees as may be agreed to in writing from time to time between the Borrower
and the Agent, when and as due.
(f) All computations of Fees shall be made in accordance with
Section 13.07(b).
-24-
<PAGE>
3.02 Voluntary Termination or Reduction of Total Unutilized Revolving
----------------------------------------------------------------
Loan Commitment. (a) Upon at least three Business Days' prior notice to the
- ---------------
Agent at its Notice Office (which notice the Agent shall promptly transmit to
each of the Banks), the Borrower shall have the right, without premium or
penalty, to terminate or partially reduce the Total Unutilized Revolving Loan
Commitment, provided that (v) any such termination or partial reduction shall
--------
apply to proportionately and permanently reduce the Revolving Loan Commitment of
each of the RL Banks, (w) any reduction to the Total Unutilized Revolving Loan
Commitment prior to the Initial Borrowing Date may only be made in con nection
with a termination in full of the Total Commitment, (x) any partial reduction
pur suant to this Section 3.02(a) shall be in integral multiples of $1,000,000,
(y) the reduction to the Total Unutilized Revolving Loan Commitment shall in no
case be in an amount which would cause the Revolving Loan Commitment of any RL
Bank to be reduced (as required by the preceding clause (v)) by an amount which
exceeds the remainder of (A) the Unutilized Revolving Loan Commitment of such RL
Bank as in effect immediately before giving effect to such reduction minus (B)
such RL Bank's Adjusted RL Percentage of the aggregate principal amount of
Swingline Loans then outstanding and (z) any partial reduction to the Total
Revolving Loan Commitment pursuant to this Section 3.02(a) shall apply to reduce
the remaining Scheduled Commitment Reductions in direct order of maturity.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
13.12(b), the Borrower shall have the right, subject to obtaining the consents
required by Section 13.12(b), upon five Business Days' prior written notice to
the Agent at its Notice Office (which notice the Agent shall promptly transmit
to each of the Banks), to terminate the entire Revolving Loan Commitment of such
Bank, so long as all Loans, together with accrued and unpaid interest, Fees and
all other amounts, owing to such Bank (including all amounts, if any, owing
pursuant to Section 1.11 but excluding amounts owing in respect of Term Loans
maintained by such Bank, if such Term Loans are not being repaid pursuant to
Section 13.12(b)) are repaid concurrently with the effectiveness of such
termination (at which time Schedule I shall be deemed modified to reflect such
changed amounts) and at such time, unless the respective Bank continues to have
outstanding Term Loans hereunder, such Bank shall no longer constitute a "Bank"
for purposes of this Agreement, except with respect to indemnifications under
this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04,
13.01 and 13.06), which shall survive as to such repaid Bank. Unless otherwise
specifically agreed in writing by the Required Banks, any reduction to the Total
Revolving Loan Commitment pursuant to this Section 3.02(b) shall apply to reduce
the remaining Scheduled Commitment Reductions on a pro rata basis (based upon
--- ----
the then remaining amount of each such Scheduled Commitment Reduction after
giving effect to all prior reductions thereto).
-25-
<PAGE>
3.03 Mandatory Reduction of Commitments. (a) The Total Commitment
----------------------------------
(and the Term Loan Commitment and the Revolving Loan Commitment of each Bank)
shall terminate in its entirety on December 31, 1997 unless the Initial
Borrowing Date has occurred on or before such date.
(b) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Term Loan Commitment (and the Term Loan
Commitment of each Bank) shall (i) terminate in its entirety on the Initial
Borrowing Date (after giving effect to the incurrence of Term Loans on such
date) and (ii) prior to the termination of the Total Term Loan Commitment as
provided in clause (i) above, be reduced from time to time to the extent
required by Section 4.02.
(c) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment shall be permanently
reduced on each date set forth below (each, a "Scheduled Commitment Reduction
Date"), by the amount set forth opposite such Scheduled Commitment Reduction
Date (each such reduction, as the same may be reduced as provided in Sections
3.02 and 3.03(f), a "Scheduled Commitment Reduction"):
Scheduled Commitment
Reduction Date Amount
------------------------ ------
December 18, 2001 $37.5 million
December 18, 2002 $37.5 million
(d) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving
Loan Commit ment of each RL Bank) shall terminate in its entirety on the
Revolving Loan Maturity Date.
(e) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment shall be reduced from
time to time to the extent required by Section 4.02.
(f) Any amount required to be applied to reduce the Total Revolving
Loan Commitment pursuant to this Section 3.03 (or pursuant to Section 4.02)
shall be applied to reduce the then remaining Scheduled Commitment Reductions
pro rata based upon the then remaining amount of such Scheduled Commitment
- --- ----
Reductions after giving effect to all prior reductions thereto.
-26-
<PAGE>
(g) Each reduction to the Total Term Loan Commitment or Total
Revolving Loan Commitment pursuant to this Section 3.03 (or pursuant to Section
4.02) shall be applied proportionately to reduce the Term Loan Commitment or the
Revolving Loan Commitment, as the case may be, of each Bank with such a
Commitment.
SECTION 4. Payments.
--------
4.01 Voluntary Prepayments. (a) The Borrower shall have the right
---------------------
to pre pay the Loans, and the right to allocate such prepayments to Revolving
Loans, Swingline Loans and/or Term Loans as the Borrower elects, in whole or in
part, without premium or penalty except as otherwise provided in this Agreement,
from time to time on the following terms and conditions:
(i) the Borrower shall give the Agent at its Notice Office written
notice (or telephonic notice promptly confirmed in writing) of its intent
to prepay the Loans, whether such Loans are Term Loans, Revolving Loans or
Swingline Loans, the amount of such prepayment, the Types of Loans to be
repaid and (in the case of Eurodollar Loans) the specific Borrowing(s)
pursuant to which made, which notice (I) shall be given by the Borrower
prior to 12:00 Noon (New York time) (x) at least one Business Day prior to
the date of such prepayment in the case of Base Rate Loans, (y) on the date
of such prepayment in the case of Swingline Loans and (z) at least three
Business Days prior to the date of such prepayment in the case of
Eurodollar Loans and (II) shall, except in the case of Swingline Loans,
promptly be transmitted by the Agent to each of the Banks;
(ii) each prepayment (other than prepayments in full of (x) all
outstanding Base Rate Loans or (y) any outstanding Borrowing of Eurodollar
Loans) shall be in an aggregate principal amount of at least (x)
$1,000,000, in the case of Eurodollar Loans, (y) $500,000, in the case of
Revolving Loans and Term Loans maintained as Base Rate Loans and (z)
$100,000, in the case of Swingline Loans and, in each case, if greater, in
integral multiples of $100,000, provided, that no partial prepayment of
--------
Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate
principal amount of the Eurodollar Loans outstanding pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount applicable
thereto;
(iii) at the time of any prepayment of Eurodollar Loans pursuant to
this Section 4.01 on any date other than the last day of the Interest
Period applicable thereto, the Borrower shall pay the amounts required
pursuant to Section 1.11;
-27-
<PAGE>
(iv) each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied pro rata among such Loans, provided, that at the
--- ---- --------
Borrower's election in connection with any prepayment of Revolving Loans
pursuant to this Section 4.01(a), such prepayment shall not be applied to
any Revolving Loans of a Defaulting Bank; and
(v) each prepayment of principal of Term Loans pursuant to this
Section 4.01(a) shall be applied to reduce the then remaining Scheduled
Repayments in direct order of maturity.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
13.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks), to repay all Loans of such Bank
(including all amounts, if any, owing pursuant to Section 1.11), together with
accrued and unpaid interest, Fees and all other amounts then owing to such Bank
(or owing to such Bank with respect to each Tranche which gave rise to the need
to obtain such Bank's individual consent) in accordance with said Section
13.12(b), so long as (A) in the case of the repayment of Revolving Loans of any
Bank pursuant to this clause (b), the Revolving Loan Commitment of such Bank is
terminated concurrently with such repayment (at which time Schedule I shall be
deemed modified to reflect the changed Revolving Loan Commitments), and (B) the
consents required by Section 13.12(b) in connection with the repayment pursuant
to this clause (b) shall have been obtained.
4.02 Mandatory Repayments and Commitment Reductions. (a) (i) If on
----------------------------------------------
any date the sum of (x) the aggregate outstanding principal amount of Revolving
Loans made by Non-Defaulting Banks and Swingline Loans (after giving effect to
all other repayments thereof on such date) and (y) the Letter of Credit
Outstandings on such date exceeds the Adjusted Total Revolving Loan Commitment
as then in effect, the Borrower shall repay on such date the principal of
Swingline Loans, and if no Swingline Loans are or remain outstanding, Revolving
Loans of Non-Defaulting Banks in an aggregate amount equal to such excess. If,
after giving effect to the prepayment of all outstanding Swingline Loans and all
outstanding Revolving Loans of Non-Defaulting Banks, the aggregate amount of
Letter of Credit Outstandings exceeds the Adjusted Total Revolving Loan
Commitment as then in effect, the Borrower shall pay to the Agent at the Payment
Office on such date an amount in cash and/or Cash Equivalents equal to such
excess (up to the aggregate amount of Letter of Credit Outstandings at such
time) and the Agent shall hold such pay ment as security for the obligations of
the Borrower to Non-Defaulting Banks hereunder pursuant to a cash collateral
agreement to be entered into in form and substance reasonably satisfactory to
the Agent.
-28-
<PAGE>
(ii) On any date on which the aggregate outstanding principal amount
of the Revolving Loans made by any Defaulting Bank exceeds the Revolving Loan
Commitment of such Defaulting Bank, the Borrower shall prepay on such date
principal of Revolving Loans of such Defaulting Bank in an amount equal to such
excess.
(b) In addition to any other mandatory repayments or commitment reduc
tions pursuant to this Section 4.02, on each date set forth below, the Borrower
shall be required to repay that principal amount of Term Loans, to the extent
then outstanding, as is set forth opposite such date (each such repayment, as
the same may be reduced as provided in Sections 4.01 and 4.02(h), a "Scheduled
Repayment"):
Scheduled Repayment Date Amount
------------------------ ------
March 31, 1998 $ 125,000
June 30, 1998 $ 125,000
September 30, 1998 $ 125,000
December 31, 1998 $ 125,000
March 31, 1999 $ 125,000
June 30, 1999 $ 125,000
September 30, 1999 $ 125,000
December 31, 1999 $ 125,000
March 31, 2000 $ 125,000
June 30, 2000 $ 125,000
September 30, 2000 $ 125,000
December 31, 2000 $ 125,000
March 31, 2001 $ 125,000
June 30, 2001 $ 125,000
September 30, 2001 $ 125,000
December 31, 2001 $ 125,000
March 31, 2002 $ 125,000
June 30, 2002 $ 125,000
September 30, 2002 $ 125,000
December 31, 2002 $ 125,000
March 31, 2003 $ 125,000
June 30, 2003 $ 125,000
Final Maturity Date $47,250,000
-29-
<PAGE>
(c) In addition to any other mandatory repayments or commitment reduc
tions pursuant to this Section 4.02, on each date on or after the Effective Date
upon which the Borrower or any of its Subsidiaries receives Net Sale Proceeds
from any Asset Sale, an amount equal to the Applicable Prepayment Percentage of
the Net Sale Proceeds from such Asset Sale shall be applied as a mandatory
repayment and/or commitment reduction in accordance with the requirements of
Sections 4.02(h) and (i); provided that (I)(x) with respect to any such Net Sale
--------
Proceeds received by the Borrower or any of its Subsidiaries in connection with
a Healthcare Unit Replacement, such Net Sale Proceeds shall not give rise to a
mandatory repayment (and/or commitment reduction, as the case may be) on such
date to the extent that no Default or Event of Default then exists and the
Borrower delivers a certificate to the Agent on or prior to such date stating
that (i) an amount equal to such Net Sale Proceeds has been used to purchase a
replacement Healthcare Unit within 180 days prior to the date of receipt of such
Net Sale Proceeds or (ii) such Net Sale Proceeds shall be used to purchase a
replacement Healthcare Unit within 180 days following the date of receipt of
such Net Sale Proceeds (which certificate shall set forth the amount of the
proceeds so expended or the estimates of the proceeds to be so expended, as the
case may be) and (y) in the case of any Healthcare Unit Replacement for which no
replacement Healthcare Unit has been purchased prior to the disposition of the
Healthcare Unit to be replaced pursuant to such Healthcare Unit Replacement, if
all or any portion of such Net Sale Proceeds referred to in preceding clause (x)
(ii) are not so used within such 180-day period, such remaining portion shall be
applied on the last day of such period as a mandatory repayment and/or
commitment reduction as provided above and (II)(x) with respect to no more than
$2,500,000 in the aggregate of such Net Sale Proceeds received by the Borrower
or its Subsidiaries in any fiscal year of the Borrower, such Net Sale Proceeds
shall not give rise to a mandatory repayment (and/or commitment reduction, as
the case may be) on such date to the extent that no Default or Event of Default
then exists and the Borrower delivers a certificate to the Agent on or prior to
such date stating that such Net Sale Proceeds shall be used or contractually
committed to be used to purchase assets used or to be used in the businesses
permitted pursuant to Section 9.01 (including, without limitation (but only to
the extent permitted by Section 9.02), the purchase of the capital stock of a
Person engaged in such businesses) within 270 days following the date of receipt
of such Net Sale Proceeds from such Asset Sale (which certificate shall set
forth the estimates of the proceeds to be so expended) and (y)(i) if all or any
portion of such Net Sale Proceeds are not so used (or contractually committed to
be used) within such 270-day period, such remaining portion shall be applied on
the last day of such period as a mandatory repayment and/or commitment reduction
as provided above and (ii) if all or any portion of such Net Sale Proceeds are
not so used within such 270-day period referred to in clause (i) of this clause
(II)(y) because such amount is contractually committed to be used and subsequent
to such date such contract is terminated or expires without such portion being
so used, such remaining portion shall be applied on the date of such termination
or expiration as a mandatory repayment and/or commitment reduction as provided
above.
-30-
<PAGE>
(d) In addition to any other mandatory repayments or commitment reduc
tions pursuant to this Section 4.02, on each date on or after the Effective Date
on which the Borrower or any of its Subsidiaries receives any cash proceeds from
any incurrence of Indebtedness (other than Indebtedness permitted to be incurred
pursuant to Section 9.04 as in effect on the Effective Date) or issuance of
Preferred Stock (other than (x) Disqualified Preferred Stock to the extent the
proceeds therefrom are used to effect Permitted Acquisitions, (y) Qualified
Preferred Stock and (z) PIK Preferred Stock issued on the Initial Borrowing Date
in accordance with the requirements of Section 5.08) by the Borrower or any of
its Subsidiaries, an amount equal to the Applicable Prepayment Percentage of the
Net Cash Proceeds of the respective incurrence of Indebtedness shall be applied
as a mandatory repayment and/or commitment reduction in accordance with the
requirements of Sections 4.02(h) and (i).
(e) In addition to any other mandatory repayments or commitment reduc
tions pursuant to this Section 4.02, on each date on or after the Effective Date
on which the Borrower or any of its Subsidiaries receives any cash proceeds from
any sale or issuance of Qualified Preferred Stock or common equity of (or cash
capital contributions to) the Borrower or any of its Subsidiaries (other than
proceeds received from (v) the Common Equity Issuance, (w) issuances of Borrower
Common Stock to management of the Borrower and its Subsidiaries (including as a
result of the exercise of any options with respect thereto) in an aggregate
amount not to exceed $2,500,000 in any fiscal year of the Borrower, (x) equity
contributions to any Subsidiary of the Borrower made by the Borrower or any
other Subsidiary of the Borrower, (y) any issuance of Qualified Preferred Stock
or Borrower Common Stock to the extent the proceeds therefrom are used to effect
Permitted Acquisitions and (z) additional issuances of Borrower Common Stock and
Qualified Preferred Stock, to the extent that the aggregate proceeds excluded
pursuant to this clause (z) after the Effective Date do not exceed $2,500,000),
an amount equal to the Applicable Prepayment Percentage of the Net Cash Proceeds
of the respective equity issuance or capital contribution shall be applied as a
mandatory repayment and/or commitment reduction in accordance with the
requirements of Sections 4.02(h) and (i); provided that Net Cash Proceeds
--------
received by the Borrower from additional sales or issuances of Borrower Common
Stock or Qualified Preferred Stock shall not be required to be applied as a
mandatory repayment (and/or commitment reduction, as the case may be) on the
date of receipt thereof, to the extent that (x) no Default or Event of Default
then exists and (y) the Borrower delivers a certificate to the Agent on or prior
to such date stating that such Net Cash Proceeds shall be used or contractually
committed to be used to make Capital Expenditures (including, without
limitation, Permitted Acquisitions) within 270 days following the date of
receipt of such Net Cash Proceeds (which certificate shall set forth the
estimates of the proceeds to be so expended), and provided further, that (i) if
----------------
all or any portion of such Net Cash Proceeds are not so used (or contractually
committed to be used) within such 270-day period, such remaining portion shall
be applied on the last day of such period as a mandatory repayment and/or
commitment reduction as provided above and (ii)
-31-
<PAGE>
if all or any portion of such Net Cash Proceeds are not so used within such 270-
day period referred to in clause (i) above because such amount is contractually
committed to be used and subsequent to such date such contract is terminated or
expires without such portion being so used, such remaining portion shall be
applied on the date of such termination or expiration as a mandatory repayment
and/or commitment reduction as provided above.
(f) In addition to any other mandatory repayments or commitment reduc
tions pursuant to this Section 4.02, within 10 days following each date on or
after the Effective Date on which the Borrower or any of its Subsidiaries
receives any proceeds from any Recovery Event (other than proceeds from Recovery
Events in an amount less than $1,000,000 per Recovery Event), an amount equal to
100% of the proceeds of such Recovery Event (net of reasonable costs (including,
without limitation, legal costs and ex penses) and taxes incurred in connection
with such Recovery Event and the amount of such proceeds required to be used to
repay any Indebtedness (other than Indebtedness of the Banks pursuant to this
Agreement) which is secured by the respective assets subject to such Recovery
Event) shall be applied as a mandatory repayment and/or commitment reduction in
accordance with the requirements of Sections 4.02(h) and (i); provided that (x)
--------
so long as no Default or Event of Default then exists and such proceeds do not
exceed $2,500,000, such proceeds shall not be required to be so applied on such
date to the extent that an Authorized Officer of the Borrower has delivered a
certificate to the Agent on or prior to such date stating that such proceeds
shall be used or shall be committed to be used to replace or restore any
properties or assets in respect of which such proceeds were paid within 360 days
following the date of such Recovery Event (which certificate shall set forth the
estimates of the proceeds to be so expended) and (y) so long as no Default or
Event of Default then exists and to the extent that (a) the amount of such
proceeds exceeds $2,500,000, (b) the amount of such proceeds, together with
other cash available to the Borrower and its Subsidiaries and permitted to be
spent by them on Capital Expenditures during the relevant period, equals at
least 100% of the cost of replacement or restoration of the properties or assets
in respect of which such proceeds were paid as determined by the Borrower and as
supported by such estimates or bids from contractors or subcontractors or such
other supporting information as the Agent may reasonably accept, (c) an
Authorized Officer of the Borrower has delivered to the Agent a certificate on
or prior to the date the application would otherwise be required pursuant to
this Section 4.02(f) in the form des cribed in clause (x) above and also
certifying its determination as required by preceding clause (b) and certifying
the sufficiency of business interruption insurance as required by succeeding
clause (d), and (d) an Authorized Officer of the Borrower has delivered to the
Agent such evidence as the Agent may reasonably request in form and substance
reasonably satisfactory to the Agent establishing that the Borrower has
sufficient business interruption insurance and that the Borrower will receive
payment thereunder in such amounts and at such times as are necessary to satisfy
all obligations and expenses of the Borrower (including, without limitation, all
debt service requirements, including pursuant to this Agreement), without any
delay or extension thereof, for the period from the date of the
-32-
<PAGE>
respective casualty, condemnation or other event giving rise to the Recovery
Event and continuing through the completion of the replacement or restoration of
respective properties or assets, then the entire amount of the proceeds of such
Recovery Event and not just the portion in excess of $2,500,000 shall be
deposited with the Agent pursuant to a cash collateral arrangement reasonably
satisfactory to the Agent whereby such proceeds shall be disbursed to the
Borrower from time to time as needed to pay or reimburse the Borrower or such
Subsidiary actual costs incurred by it in connection with the replacement or
restoration of the respective properties or assets (pursuant to such
certification requirements as may be established by the Agent), provided further
----------------
that at any time while an Event of Default has occurred and is continuing, the
Required Banks may direct the Agent (in which case the Agent shall, and is
hereby authorized by the Borrower to, follow said directions) to apply any or
all proceeds then on deposit in such collateral account to the repayment of
Obligations hereunder in the same manner as proceeds would be applied pursuant
to the Security Agreement, and provided further, that if all or any portion of
----------------
such proceeds not required to be applied as a mandatory repayment and/or
commitment reduction pursuant to the second preceding proviso (whether pursuant
to clause (x) or (y) thereof) are either (A) not so used or committed to be so
used within 360 days after the date of the respective Recovery Event or (B) if
committed to be used within 360 days after the date of receipt of such net
proceeds and not so used within 18 months after the date of respective Recovery
Event then, in either such case, such remaining portion not used or committed to
be used in the case of preceding clause (A) and not used in the case of
preceding clause (B) shall be applied on the date occurring 360 days after the
date of the respective Recovery Event in the case of clause (A) above or the
date occurring 18 months after the date of the respec tive Recovery Event in the
case of clause (B) above as a mandatory repayment and/or commitment reduction in
accordance with the requirements of Sections 4.02(h) and (i).
(g) In addition to any other mandatory repayments or commitment reduc
tions pursuant to this Section 4.02, on each Excess Cash Flow Payment Date, an
amount equal to the Applicable Excess Cash Flow Percentage of the Adjusted
Excess Cash Flow for the relevant Excess Cash Flow Payment Period shall be
applied as a mandatory repayment and/or commitment reduction in accordance with
the requirements of Sections 4.02(h) and (i).
(h) Each amount required to be applied pursuant to Sections 4.02(c),
(d), (e), (f) and (g) in accordance with this Section 4.02(h) shall be applied
(i) first, to repay the outstanding principal amount of Term Loans and (ii)
second, to the extent in excess of the amounts required to be applied pursuant
to preceding clause (i), to reduce the Total Revolving Loan Commitment (it being
understood and agreed that (x) the amount of any reduction to the Total
Revolving Loan Commitment shall be deemed to be an application of proceeds for
purposes of this Section 4.02(h) even though cash is not actually applied and
(y) any cash received by the Borrower or such Subsidiary will be retained by
such Person except to the extent that such cash is otherwise required to be
applied as provided
-33-
<PAGE>
in Section 4.02(a) as a result of any reduction to the Total Revolving Loan
Commitment). All repayments or commitment reductions, as the case may be, of
(x) outstanding Term Loans on the one hand and (y) Revolving Loan Commitments,
on the other hand, pursuant to Sections 4.02(c), (d), (e), (f) or (g) shall be
applied to reduce the then remaining Scheduled Repayments (in the case of
preceding clause (x)) or Scheduled Commitment Reductions (in the case of
preceding clause (y)), on a pro rata basis (based upon the then remaining
--- ----
Scheduled Repayments or Scheduled Commitment Reductions, as the case may be,
after giving effect to all prior reductions thereto).
(i) With respect to each repayment of Loans required by this Section
4.02, the Borrower may designate the Types of Loans of the respective Tranche
which are to be repaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings of the respective Tranche pursuant to which made,
provided that: (i) repayments of Eurodollar Loans pursuant to this Section 4.02
- --------
may only be made on the last day of an Interest Period applicable thereto unless
(x) all Eurodollar Loans of the respective Tranche with Interest Periods ending
on such date of required repayment and all Base Rate Loans of the respective
Tranche have been paid in full and/or (y) concurrently with such repayment, the
Borrower pays all breakage costs and other amounts owing to each Bank pursuant
to Section 1.11; (ii) if any repayment of Eurodollar Loans made pursuant to a
single Borrow ing shall reduce the outstanding Eurodollar Loans made pursuant to
such Borrowing to an amount less than the Minimum Borrowing Amount applicable
thereto, such Borrowing shall be converted at the end of the then current
Interest Period into a Borrowing of Base Rate Loans; and (iii) each repayment of
any Tranche of Loans made pursuant to a Borrowing shall be applied pro rata
--- ----
among such Tranche of Loans. In the absence of a designation by the Borrower as
described in the preceding sentence, the Agent shall, subject to the above, make
such designation in its sole discretion with a view, but no obligation, to
minimize breakage costs owing under Section 1.11. Notwithstanding the foregoing
provisions of this Section 4.02, if at any time the mandatory repayment of Loans
pursuant to Section 4.02(c), (d), (e), (f) or (g) would result, after giving
effect to the procedures set forth in this clause (i) above, in the Borrower
incurring breakage costs under Section 1.10 as a result of Eurodollar Loans
being repaid other than on the last day of an Interest Period applicable thereto
(any such Eurodollar Loans, "Affected Loans"), the Borrower may elect, by
written notice to the Agent, to have the provisions of the following sentence be
applicable. At the time any Affected Loans are otherwise required to be prepaid
the Borrower may elect to deposit 100% (or such lesser percentage elected by the
Borrower as not being repaid) of the principal amounts that otherwise would have
been paid in respect of the Affected Loans with the Agent to be held as security
for the obligations of the Borrower hereunder pursuant to a cash collateral
agreement to be entered into in form and substance satisfactory to the Agent,
with such cash collateral to be released from such cash collateral account (and
applied to repay the principal amount of such Eurodollar Loans) upon each
occurrence thereafter of the last day of an Interest Period applicable to
Eurodollar Loans of the respective Facility (or such earlier date or dates as
shall be
-34-
<PAGE>
requested by the Borrower), with the amount to be so released and applied on the
last day of each Interest Period to be the amount of such Eurodollar Loans to
which such Interest Period applies (or, if less, the amount remaining in such
cash collateral account).
(j) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all other then outstanding Loans shall be
repaid in full on the respective Maturity Date for such Loans.
4.03 Method and Place of Payment. Except as otherwise specifically
---------------------------
pro vided herein, all payments under this Agreement or any Note shall be made to
the Agent for the ratable account of the Bank or Banks entitled thereto not
later than 12:00 Noon (New York time) on the date when due and shall be made in
immediately available funds and in U.S. Dollars at the Payment Office. Any
payments under this Agreement or under any Note which are made later than 12:00
Noon (New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made here under or under any Note
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest shall be payable during such extension at the
applicable rate in effect immediately prior to such extension.
4.04 Net Payments. (a) All payments made by the Borrower hereunder
------------
or under any Note will be made without setoff, counterclaim or other defense.
Except as provided in Section 4.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdic tion or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, except as provided in the second succeeding sentence, any tax imposed
on or measured by the net income, net profits or capital (including branch
profits tax) of a Bank pursuant to the laws of the jurisdiction in which it is
organized or the jurisdiction in which the principal office or applicable
lending office of such Bank is located or any subdivision thereof or therein)
and all interest, penalties or similar liabilities with respect to such
nonexcluded taxes, levies, imposts, duties, fees, assessments or other charges
(all such nonexcluded taxes, levies, imposts, duties, fees, assessments or other
charges being referred to collectively as "Taxes"). If any Taxes are so levied
or imposed, the Borrower agrees to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all amounts due
under this Agreement or under any Note, after withholding or deduction for or on
account of any Taxes, will not be less than the amount provided for herein or in
such Note. If any amounts are payable in respect of Taxes pursuant to the
preceding sentence, the Borrower agrees to reimburse each Bank, upon the written
request of such Bank, for taxes imposed on or measured by the net income, net
profits or capital (including branch profits tax) of such Bank pursuant to the
-35-
<PAGE>
laws of the jurisdiction in which such Bank is organized or in which the
principal office or applicable lending office of such Bank is located or under
the laws of any political subdivision or taxing authority of any such
jurisdiction in which such Bank is organized or in which the principal office or
applicable lending office of such Bank is located and for any withholding of
taxes as such Bank shall determine are payable by, or withheld from, such Bank
in respect of such amounts so paid to or on behalf of such Bank pursuant to the
preceding sentence and in respect of any amounts paid to or on behalf of such
Bank pursuant to this sentence. The Borrower will furnish to the Agent within
45 days after the date the payment of any Taxes is due pursuant to applicable
law certified copies of tax receipts evidencing such payment by the Borrower.
The Borrower agrees to indemnify and hold harmless each Bank, and reimburse such
Bank upon its written request, for the amount of any Taxes so levied or imposed
and paid by such Bank.
(b) Each Bank party to this Agreement on the Effective Date hereby
represents that, as of the Effective Date, all payments of principal, interest,
and fees to be made to it by the Borrower pursuant to this Agreement will be
totally exempt from withholding of United States federal tax. Each Bank that is
not a United States person (as such term is defined in Section 7701(a)(30) of
the Code) for U.S. Federal income tax purposes agrees to deliver to the Borrower
and the Agent on or prior to the Effective Date, or in the case of a Bank that
is an assignee or transferee of an interest under this Agreement pursuant to
Section 1.13 or 13.04 (unless the respective Bank was already a Bank hereunder
immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Bank, (i) two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms)
certifying to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit D (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments of interest to be made under this Agreement and
under any Note. In addition, each Bank agrees that from time to time after the
Effective Date, when a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect, and that
upon the Borrower's reasonable request after the occurrence of any other event
requiring the delivery of a Form 1001 and Form 4224 in addition to or in
replacement of the forms previously delivered, it will deliver to the Borrower
and the Agent two new accurate and complete original signed copies of Internal
Revenue Service Form 4224 or 1001, or Form W-8 and a Section 4.04(b)(ii)
Certificate, as the case may be, and such other forms as may be required in
order to confirm or establish the entitlement of such Bank to a continued
exemption from or reduction in United States withholding tax with respect to
payments
-36-
<PAGE>
under this Agreement and any Note, or it shall immediately notify the Borrower
and the Agent of its inability to deliver any such Form or Certificate in which
case such Bank shall not be required to deliver any such Form or Certificate
pursuant to this Section 4.04(b). Notwithstanding anything to the contrary
contained in Section 4.04(a), but subject to Section 13.04(b) and the
immediately succeeding sentence, (x) the Borrower shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder for the account of any Bank which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income
tax purposes to the extent that such Bank has not provided to the Borrower U.S.
Internal Revenue Service Forms that establish a complete exemption from such
deduction or withholding and (y) the Borrower shall not be obligated pursuant to
Section 4.04(a) hereof to gross-up payments to be made to a Bank in respect of
income or similar taxes imposed by the United States if (I) such Bank has not
provided to the Borrower the Internal Revenue Service Forms required to be
provided to the Borrower pursuant to this Section 4.04(b) or (II) in the case of
a payment, other than interest, to a Bank described in clause (ii) above, to the
extent that such Forms do not establish a complete exemption from withholding of
such taxes. Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section 4.04 and except as set forth in Section
13.04(b), the Borrower agrees to pay additional amounts and to indemnify each
Bank in the manner set forth in Section 4.04(a) (without regard to the identity
of the jurisdiction requiring the deduction or withholding) in respect of any
Taxes deducted or withheld by them as described in the immediately preceding
sentence as a result of any changes after the Effective Date in any applicable
law, treaty, governmental rule, regulation, guideline or order, or in the
interpretation thereof, relating to the deducting or withholding of such Taxes
(or, if later, the date such Bank became party to this Agreement). The Borrower
shall not be required to pay any additional amounts or indemnification under
Section 4.04(a) to any Bank to the extent that the obligation to pay such
additional amounts or indemnification would not have arisen but for the
representation set forth in the first sentence of Section 4.04(b) above made by
the Bank not being true.
(c) If the Borrower pays any additional amount under this Section
4.04 to a Bank and such Bank determines in its sole discretion that it has
actually received or realized in connection therewith any refund or any
reduction of, or credit against, its Tax liabilities in or with respect to the
taxable year in which the additional amount is paid, such Bank shall pay to the
Borrower an amount that the Bank shall, in its sole discretion, determine is
equal to the net benefit, after tax, which was obtained by the Bank in such year
as a consequence of such refund, reduction or credit.
(d) Each Bank shall use reasonable efforts (consistent with legal and
regulatory restrictions and subject to overall policy considerations of such
Bank) (i) to file any certificate or document or to furnish any information as
reasonably requested by the
-37-
<PAGE>
Borrower pursuant to any applicable treaty, law or regulation or (ii) to
designate a different applicable lending office of such Bank, if the making of
such filing or the furnishing of such information or the designation of such
other lending office would avoid the need for or reduce the amount of any
additional amounts payable by the Borrower and would not, in the sole discretion
of such Bank, be disadvantageous to such Bank.
(e) The provisions of this Section 4.04 are subject to the provisions
of Section 13.18 (to the extent applicable).
SECTION 5. Conditions Precedent to Initial Credit Events. The
---------------------------------------------
obligation of each Bank to make each Loan hereunder, and the obligation of the
Letter of Credit Issuer to issue each Letter of Credit hereunder, is subject, at
the time of the making of such Loans or the issuance of such Letters of Credit
to the satisfaction of the following conditions:
5.01 Execution of Agreement; Notes. On or prior to the Initial
-----------------------------
Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Agent for the account of each Bank the appropriate
Term Note and/or Revolving Note and to BTCo the Swingline Note, in each case
executed by the Borrower and in the amount, maturity and as otherwise provided
herein.
5.02 Officer's Certificate. On the Initial Borrowing Date, the Agent
---------------------
shall have received a certificate dated such date signed by an appropriate
officer of the Borrower stating that all of the applicable conditions set forth
in Sections 5.05 through 5.10, inclusive, and 6.01 (other than such conditions
that are subject to the satisfaction of the Agent and/or the Required Banks),
have been satisfied on such date.
5.03 Opinions of Counsel. On the Initial Borrowing Date, the Agent
-------------------
shall have received opinions, addressed to the Agent, the Collateral Agent and
each of the Banks and dated the Initial Borrowing Date, from (i) O'Sullivan
Graev & Karabell, LLP, special counsel to the Credit Parties, which opinion
shall cover the matters contained in Exhibit E-1 and such other matters incident
to the transactions contemplated herein as the Agent and the Required Banks may
reasonably request and be in form and substance reasonably satisfactory to the
Agent and the Required Banks, (ii) Irell & Manella LLP, special California
counsel to the Borrower, which opinion shall cover the matters contained in
Exhibit E-2 and such other matters incident to the transactions contemplated
herein as the Agent and the Required Banks may reasonably request and be in form
and substance reasonably satisfactory to the Agent and the Required Banks, (iii)
counsel rendering such opinions, reliance letters addressed to the Agent and
each of the Banks and dated the Initial Borrowing Date with respect to all legal
opinions delivered in connection with the Transaction, which opinions shall
cover such matters as the Agent may reasonably request and be in form and
substance reasonably satisfactory to the Agent and (iv) local counsel to
-38-
<PAGE>
the Credit Parties and/or the Agent reasonably satisfactory to the Agent, which
opinions (x) shall be addressed to the Agent, the Collateral Agent and each of
the Banks and be dated the Initial Borrowing Date, (y) shall cover the
perfection of the security interests granted pursuant to the Security Documents
and such other matters incident to the transactions contemplated herein as the
Agent may reasonably request and (z) shall be in form and substance reasonably
satisfactory to the Agent.
5.04 Corporate Documents; Proceedings. (a) On the Initial Borrowing
--------------------------------
Date, the Agent shall have received from each Credit Party a certificate, dated
the Initial Borrowing Date, signed by the chairman, a vice-chairman, the
president or any vice-president of such Credit Party, and attested to by the
secretary or any assistant secretary of such Credit Party, in the form of
Exhibit F with appropriate insertions, together with copies of the certificate
of incorporation, by-laws or equivalent organizational documents of such Credit
Party and the resolutions of such Credit Party referred to in such certificate
and all of the foregoing (including each such certificate of incorporation, by-
laws or other organizational document) shall be reasonably satisfactory to the
Agent.
(b) On the Initial Borrowing Date, all Company and legal proceedings
and all instruments and agreements in connection with the transactions
contemplated by this Agreement and the other Documents shall be reasonably
satisfactory in form and substance to the Agent, and the Agent shall have
received all information and copies of all certifi cates, documents and papers,
including good standing certificates, bring-down certificates and any other
records of Company proceedings and governmental approvals, if any, which the
Agent reasonably may have requested in connection therewith, such documents and
papers, where appropriate, to be certified by proper Company or governmental
authorities.
(c) On the Initial Borrowing Date and after giving effect to the
Transaction, the capital structure (including, without limitation, the terms of
any capital stock, options, warrants or other securities issued by the Borrower
or any of its Subsidiaries), and management of the Borrower and its Subsidiaries
shall be in form and substance satisfactory to the Agent.
5.05 Adverse Change, etc. (a) On or prior to the Initial Borrowing
--------------------
Date, since December 31, 1996, nothing shall have occurred which (i) the
Required Banks or the Agent shall reasonably determine has had, or could
reasonably be expected to have, a material adverse effect on the rights or
remedies of the Banks or the Agent, or on the abil ity of any Credit Party to
perform its obligations to them hereunder or under any other Credit Document or
(ii) has had a material adverse effect on the Transaction or a Material Adverse
Effect.
(b) On the Initial Borrowing Date, there shall not have occurred and
be con tinuing any material adverse change to the syndication market for credit
facilities similar
-39-
<PAGE>
in nature to this Agreement and there shall not have occurred and be continuing
a material disruption or a material adverse change in financial, banking or
capital markets that would have a material adverse effect on the syndication, in
each case as determined by the Agent in its reasonable discretion.
5.06 Litigation. On the Initial Borrowing Date, there shall be no
----------
actions, suits, proceedings or investigations pending or threatened (a) with
respect to this Agreement or any other Document or the Transaction, (b) with
respect to any Existing Indebtedness or (c) which the Agent or the Required
Banks shall determine could reasonably be expected to have (i) a Material
Adverse Effect or (ii) a material adverse effect on the Transaction, the rights
or remedies of the Banks or the Agent hereunder or under any other Credit
Document or on the ability of any Credit Party to perform its respective
obligations to the Banks or the Agent hereunder or under any other Credit
Document.
5.07 Approvals. On or prior to the Initial Borrowing Date, (i) all
---------
necessary governmental (domestic and foreign), regulatory and third party
approvals in connection with any Existing Indebtedness, the Transaction, the
transactions contemplated by the Docu ments and otherwise referred to herein or
therein shall have been obtained and remain in full force and effect and
evidence thereof shall have been provided to the Agent, and (ii) all applicable
waiting periods shall have expired without any action being taken by any com
petent authority which restrains, prevents or imposes materially adverse
conditions upon the consummation of the Transaction, the making of the Loans and
the transactions contem plated by the Documents or otherwise referred to herein
or therein. Additionally, there shall not exist any judgment, order, injunction
or other restraint issued or filed or a hearing seeking injunctive relief or
other restraint pending or notified prohibiting or imposing materially adverse
conditions upon, or materially delaying, or making economically unfeas ible, the
consummation of the Transaction or the making of the Loans.
5.08 Recapitalization, Financing Transactions, etc. (a) On the
----------------------------------------------
Initial Borrowing Date, Newport, Acquisition Corp. and the Borrower shall have
effected the Recapitalization (i) pursuant to which Acquisition Corp. shall have
merged with and into the Borrower, with the Borrower as the surviving
corporation of such merger (the "Alliance Merger") and (ii) as a result of which
(x) Newport shall own approximately 90.0% of the issued and outstanding shares
of Borrower Common Stock and the Alliance Holdover Shareholders shall own
approximately 10.0% of the issued and outstanding shares of Borrower Common
Stock and (y) the Alliance Holdover Shareholders shall retain shares of Borrower
Common Stock with a value of approximately $4,500,000 (the "Equity Retention")
and cash in an aggregate amount not to exceed $165,600,000 shall have been
distributed to the existing shareholders of the Borrower (other than in respect
of equity being retained pursuant to the Equity Retention) (the "Recap
Distribution").
-40-
<PAGE>
(b) On the Initial Borrowing Date, (i) Acquisition Corp. shall have
received cash proceeds in an amount equal to at least $40,000,000 from the
issuance of common stock of Acquisition Corp. to Newport (the "Common Equity
Issuance"), (ii) the Borrower shall have received gross cash proceeds from the
issuance of Senior Subordinated Notes in an aggregate principal amount of
$165,000,000 and (iii) the Borrower shall have received gross cash proceeds of
approximately $15,000,000 from the issuance of PIK Preferred Stock.
(c) The Borrower shall have utilized the full amount of the cash
proceeds received by it from the Common Equity Issuance, the issuance of the
Senior Subordinated Notes and the issuance of the PIK Preferred Stock to make
payments owing in connection with the Transaction prior to utilizing any
proceeds of Loans for such purpose.
(d) The Agent shall have received true and correct copies of all
Recapitalization Documents, Common Equity Financing Documents, PIK Preferred
Stock Documents and Senior Subordinated Notes Documents and all terms and
conditions of the foregoing Documents (including, without limitation, in the
case of the Senior Subordinated Notes Documents, amortization, maturities,
interest rates, covenants, defaults, remedies and subordination provisions and,
in the case of PIK Preferred Stock, maturity, limitation on cash dividends
payable, dividend rate and redemption provisions) shall be in form and substance
satisfactory to the Agent and the Required Banks. All conditions precedent to
the consummation of the Transaction as set forth in the Recapitalization
Documents, Common Equity Financing Documents, PIK Preferred Stock Documents and
Senior Subordinated Notes Documents shall have been satisfied and not waived
unless consented to by the Agent and the Required Banks. Each of the
Recapitalization, the Common Equity Issuance, the issuance of the Senior
Subordinated Notes and the issuance of the PIK Preferred Stock shall have been
consummated in accordance with the terms and conditions of the applicable
Documents and all applicable law.
5.09 Refinancing. (a) On the Initial Borrowing Date (after having
-----------
given effect to the Recapitalization) and concurrently with the incurrence of
Loans on such date, approximately $75,200,000 of Indebtedness of the Borrower
consisting of existing Capitalized Lease Obligations, purchase money
indebtedness and all outstanding Indebtedness under the Existing Alliance Credit
Agreement shall have been repaid in full, together with all fees and other
amounts owing thereon (the "Refinanced Indebtedness") and the total commitments
under the Existing Alliance Credit Agreement shall have been terminated.
(b) On the Initial Borrowing Date and concurrently with the
incurrence of Loans on such date, all security interests in respect of, and
Liens securing, the Refinanced Indebtedness shall have been terminated and
released, and the Agent shall have received all such releases as may have been
requested by the Agent, which releases shall be in form
-41-
<PAGE>
and substance satisfactory to the Agent and the Required Banks. Without
limiting the foregoing, there shall have been delivered to the Agent (w) proper
termination statements (Form UCC-3 or the appropriate equivalent) for filing
under the UCC of each jurisdiction where a financing statement (Form UCC-1 or
the appropriate equivalent) was filed with respect to the Borrower or any of its
Subsidiaries in connection with the security interests created with respect to
the Refinanced Indebtedness and the documentation related thereto, (x)
terminations or reassignments of any security interest in, or Lien on, any
patents, trademarks, copyrights, or similar interests of the Borrower or any of
its Subsidiaries on which filings have been made, (y) terminations of all
mortgages, leasehold mortgages and deeds of trust created with respect to
property of the Borrower or any of its Subsidiaries, in each case, to secure the
obligations under the Refinanced Indebtedness, all of which shall be in form and
substance satisfactory to the Agent and the Required Banks, and (z) all
collateral owned by the Borrower or any of its Subsidiaries in the possession of
any agent, collateral agent or trustee for the creditors under the Existing
Alliance Credit Agreement or any related security document.
(c) On the Initial Borrowing Date and after giving effect to the
Transaction, the Borrower and its Subsidiaries shall have no Indebtedness or
Preferred Stock outstanding other than (i) the Loans, (ii) the Senior
Subordinated Notes, (iii) the PIK Preferred Stock and (iv) certain other
indebtedness existing on the Initial Borrowing Date as listed on Schedule IV in
an aggregate outstanding principal amount not to exceed $15,000,000 (with the
Indebtedness described in this subclause (iv) being herein called "Existing
Indebtedness"). On and as of the Initial Borrowing Date, all of the Existing
Indebtedness shall remain outstanding after giving effect to the Transaction and
the other transactions contemplated hereby without any default or event of
default existing thereunder or arising as a result of the Transaction and the
other transactions contemplated hereby (except to the extent amended or waived
by the parties thereto on terms and conditions satisfactory to the Agent and the
Required Banks), and there shall not be any amendments or modifications to the
Existing Indebtedness Agreements other than as requested or approved by the
Agent or the Required Banks.
(d) The Agent shall have received evidence in form, scope and
substance satisfactory to the Agent and the Required Banks that the matters set
forth in this Section 5.09 have been satisfied on the Initial Borrowing Date.
5.10 Security Documents; etc. (a) On the Initial Borrowing Date,
------------------------
each of the Credit Parties shall have duly authorized, executed and delivered a
Pledge Agreement in the form of Exhibit G (as amended, modified or supplemented
from time to time in accordance with the terms thereof and hereof, the "Pledge
Agreement") and shall have delivered to the Collateral Agent, as pledgee
thereunder, all of the Pledged Securities referred to therein then owned by such
Credit Parties and required to be pledged pursuant to the terms thereof,
endorsed in blank in the case of promissory notes or accompanied by
-42-
<PAGE>
executed and undated stock powers in the case of capital stock, along with
evidence that all other actions necessary or, in the reasonable opinion of the
Collateral Agent, desirable, to perfect the security interests purported to be
created by the Pledge Agreement have been taken, and the Pledge Agreement shall
be in full force and effect.
(b) On the Initial Borrowing Date, each of the Credit Parties shall
have duly authorized, executed and delivered a Security Agreement in the form of
Exhibit H (as amended, modified or supplemented from time to time in accordance
with the terms thereof and hereof, the "Security Agreement") covering all of the
Security Agreement Collateral, together with:
(A) executed copies of Financing Statements (Form UCC-1) or
appropriate local equivalent in appropriate form for filing under the UCC
or appropriate local equivalent of each jurisdiction as may be necessary
or, in the reasonable opinion of the Collateral Agent, desirable to perfect
the security interests purported to be created by the Security Agreement;
(B) certified copies of Requests for Information or Copies (Form UCC-
11), or equivalent reports, each of a recent date listing all effective
financing statements that name the Borrower or any of its Subsidiaries as
debtor and that are filed in the jurisdictions referred to in clause (A)
above, together with copies of such financing statements (none of which
shall cover the Collateral except (x) those with respect to which
appropriate termination statements executed by the secured lender
thereunder have been delivered to the Agent and (y) to the extent
evidencing Permitted Liens);
(C) evidence of the completion of all other recordings and filings
of, or with respect to, the Security Agreement as may be necessary or, in
the reasonable opinion of the Collateral Agent, desirable, to perfect the
security interests purported to be created by the Security Agreement; and
(D) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable, to perfect the security
interests purported to be created by the Security Agreement have been
taken;
and the Security Agreement shall be in full force and effect.
5.11 Subsidiaries Guaranty. On the Initial Borrowing Date, each
---------------------
Subsidiary Guarantor shall have duly authorized, executed and delivered a
Subsidiaries Guaranty in the form of Exhibit I (as amended, modified or
supplemented from time to time in accordance with the terms thereof and hereof,
the "Subsidiaries Guaranty"), and the Subsidiaries Guaranty shall be in full
force and effect.
-43-
<PAGE>
5.12 Employee Benefit Plans; Shareholders' Agreements; Management
------------------------------------------------------------
Agreements; Employment Agreements; Collective Bargaining Agreements; Existing
- -----------------------------------------------------------------------------
Indebtedness Agreements; Material Contracts; Tax Allocation Agreements. On or
- ----------------------------------------------------------------------
prior to the Initial Borrowing Date, there shall have been delivered to the
Agent true and correct copies, certified as true and complete by an appropriate
officer of the Borrower of:
(i) all Plans (and for each Plan that is required to file an
annual report on Internal Revenue Service Form 5500-series, a copy of the
most recent such report (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information), and for each Plan
that is a "single-employer plan," as defined in Section 4001(a)(15) of
ERISA, the most recently prepared actuarial valuation there for) and any
other "employee benefit plans," as defined in Section 3(3) of ERISA, and
any other material agreements, plans or arrangements, with or for the
benefit of current or former employees of the Borrower or any of its
Subsidiaries or any ERISA Affiliate (provided that the foregoing shall
apply in the case of any multi employer plan, as defined in 4001(a)(3) of
ERISA, only to the extent that any docu ment described therein is in the
possession of the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate or reasonably available thereto from the sponsor or trustee of
any such plan) (collectively, the "Employee Benefit Plans");
(ii) all agreements (including, without limitation, shareholders'
agree ments, subscription agreements and registration rights agreements)
entered into by the Borrower or any of its Subsidiaries governing the terms
and relative rights of its capital stock and any agreements entered into by
shareholders relating to any such entity with respect to its capital stock
(collectively, the "Shareholders' Agree ments");
(iii) all material agreements with members of, or with respect
to, the management of the Borrower or any of its Subsidiaries after giving
effect to the Transaction (collectively, the "Management Agreements");
(iv) any material employment agreements entered into by the
Borrower or any of its Subsidiaries after giving effect to the Transaction
(collectively, the "Employment Agreements");
(v) all collective bargaining agreements applying or relating to
any employee of the Borrower or any of its Subsidiaries after giving effect
to the Transaction (collectively, the "Collective Bargaining Agreements");
-44-
<PAGE>
(vi) all agreements evidencing or relating to Existing
Indebtedness of the Borrower or any of its Subsidiaries after giving effect
to the Refinancing (collectively, the "Existing Indebtedness Agreements");
(vii) all other material contracts and licenses of the Borrower
and any of its Subsidiaries after giving effect to the Transaction
(collectively, the "Material Contracts"); and
(viii) any tax sharing or tax allocation agreements entered into
by the Borrower or any of its Subsidiaries (collectively, the "Tax
Allocation Agreements");
all of which Employee Benefit Plans, Shareholders' Agreements, Management
Agreements, Employment Agreements, Collective Bargaining Agreements, Existing
Indebtedness Agreements, Material Contracts and Tax Allocation Agreements shall
be in form and substance satisfactory to the Agent and the Required Banks and
shall be in full force and effect on the Initial Borrowing Date.
5.13 Consent Letter. On the Initial Borrowing Date, the Agent shall
--------------
have received a letter from CT Corporation System, presently located at 1633
Broadway, New York, New York 10019, substantially in the form of Exhibit J,
indicating its consent to its appointment by each Credit Party as its agent to
receive service of process as specified in Section 13.08 or the Subsidiaries
Guaranty, as the case may be.
5.14 Solvency Certificate; Insurance Certificates. On or before the
--------------------------------------------
Initial Borrowing Date, the Agent shall have received:
(a) a solvency certificate in the form of Exhibit K from the chief
financial officer of the Borrower, dated the Initial Borrowing Date, and
supporting the con clusion that, after giving effect to the Transaction and
the incurrence of all financings contemplated herein, the Borrower (on a
stand-alone basis) and the Borrower and its Subsidiaries (on a consolidated
basis), in each case, are not insolvent and will not be rendered insolvent
by the indebtedness incurred in connection herewith, will not be left with
unreasonably small capital with which to engage in its or their respective
businesses and will not have incurred debts beyond its or their ability to
pay such debts as they mature and become due; and
(b) evidence of insurance complying with the requirements of Section
8.03 for the business and properties of the Borrower and its Subsidiaries,
in scope, form and substance reasonably satisfactory to the Agent and the
Required Banks and naming the Collateral Agent as an additional insured
and/or loss payee, and stating that such insurance shall not be cancelled
or revised without at least 30 days' prior written notice by the insurer to
the Collateral Agent.
-45-
<PAGE>
5.15 Financial Statements; Pro Forma Balance Sheet; Projections. (a)
----------------------------------------------------------
On or prior to the Initial Borrowing Date, there shall have been delivered to
the Agent (i) true and correct copies of the financial statements referred to in
Section 7.10(b) and (ii) an unaudited pro forma consolidated balance sheet of
--- -----
the Borrower and its Subsidiaries as of September 30, 1997 and, after giving
effect to the Transaction and the incurrence of all Indebtedness (including the
Loans and the Senior Subordinated Notes) contemplated herein and prepared in
accordance with GAAP (the "Pro Forma Balance Sheet"), together with a related
--- -----
funds flow statement, which financial statements, Pro Forma Balance Sheet and
--- -----
funds flow statement shall be reasonably satisfactory to the Agent and the
Required Banks.
(b) On or prior to the Initial Borrowing Date, there shall have been
deliv ered to the Agent detailed projected consolidated financial statements of
the Borrower and its Subsidiaries certified by the chief financial officer or
treasurer of the Borrower for the six fiscal years ended after the Initial
Borrowing Date (the "Projections"), which Projections (x) shall reflect the
forecasted consolidated financial conditions and income and expenses of the
Borrower and its Subsidiaries after giving affect to the Transaction and the
related financing thereof and the other transactions contemplated hereby and (y)
shall be reasonably satisfactory in form and substance to the Agent and the
Required Banks.
5.16 Payment of Fees. On the Initial Borrowing Date, all costs, fees
---------------
and expenses, and all other compensation due to the Agent or the Banks
(including, without limitation, legal fees and expenses) shall have been paid to
the extent due.
SECTION 6. Conditions Precedent to All Credit Events. The obligation
-----------------------------------------
of each Bank to make Loans (including Loans made on the Initial Borrowing Date
but excluding Mandatory Borrowings made thereafter, which shall be made as
provided in Sec tion 1.01(d)), and the obligation of a Letter of Credit Issuer
to issue any Letter of Credit, is subject, at the time of each such Credit Event
(except as hereinafter indicated), to the sat isfaction of the following
conditions:
6.01 No Default; Representations and Warranties. At the time of each
------------------------------------------
such Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein or in any other Credit Document shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on the date of such Credit Event (it being understood
and agreed that any representation or warranty which by its terms is made as of
a specified date shall be required to be true and correct in all material
respects only as of such specified date).
6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to
---------------------------------------------
the mak ing of each Loan (excluding Swingline Loans and Mandatory Borrowings),
the Agent shall
-46-
<PAGE>
have received a Notice of Borrowing meeting the requirements of Section 1.03(a).
Prior to the making of any Swingline Loan, BTCo shall have received the notice
required by Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the Agent and the
respective Letter of Credit Issuer shall have received a Letter of Credit
Request meeting the requirements of Section 2.02(a).
The occurrence of the Initial Borrowing Date and the acceptance of the
bene fits or proceeds of each Credit Event shall constitute a representation and
warranty by the Borrower to the Agent and each of the Banks that all the
conditions specified in Section 5 and in this Section 6 and applicable to such
Credit Event (other than such conditions that are subject to the satisfaction of
the Agent and/or the Required Banks) exist as of that time. All of the Notes,
certificates, legal opinions and other documents and papers referred to in
Section 5 and in this Section 6, unless otherwise specified, shall be delivered
to the Agent at the Notice Office for the account of each of the Banks and,
except for the Notes, in sufficient counterparts or copies for each of the Banks
and shall be in form and substance satisfactory to the Banks.
SECTION 7. Representations and Warranties. In order to induce the
------------------------------
Banks to enter into this Agreement and to make the Loans and issue and/or
participate in the Letters of Credit provided for herein, the Borrower makes the
following representations and warranties with the Banks, all of which shall
survive the execution and delivery of this Agreement, the making of the Loans
and the issuance of the Letters of Credit (with the occurrence of each Credit
Event being deemed to constitute a representation and warranty that the matters
specified in this Section 7 are true and correct in all material respects on and
as of the date of each such Credit Event, unless stated to relate to a specific
earlier date in which case such representations and warranties shall be true and
correct in all material respects as of such earlier date):
7.01 Corporate Status. Each of the Borrower and each of its
----------------
Subsidiaries (i) is a duly organized and validly existing Company in good
standing under the laws of the jurisdiction of its organization, (ii) has the
Company power and authority to own its property and assets and to transact the
business in which it is engaged and presently pro poses to engage and (iii) is
duly qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified and where the failure to
be so qualified would have a Material Adverse Effect.
7.02 Company Power and Authority. Each Credit Party has the Company
---------------------------
power and authority to execute, deliver and carry out the terms and provisions
of the Docu ments to which it is a party and has taken all necessary Company
action to authorize the
-47-
<PAGE>
execution, delivery and performance of the Documents to which it is a party.
Each Credit Party has duly executed and delivered each Document to which it is a
party and each such Document constitutes the legal, valid and binding obligation
of such Credit Party enforce able in accordance with its terms, except to the
extent that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law).
7.03 No Violation. Neither the execution, delivery or performance by
------------
any Credit Party of the Documents to which it is a party, nor compliance by any
Credit Party with the terms and provisions thereof, nor the consummation of the
transactions contem plated herein or therein, (i) will contravene any material
provision of any applicable law, statute, rule or regulation, or any order,
writ, injunction or decree of any court or govern mental instrumentality, (ii)
will conflict or be inconsistent with or result in any breach of, any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
(other than pursuant to the Security Documents) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any of the
property or assets of the Borrower or any of its Subsidiaries pursuant to the
terms of any indenture, mortgage, deed of trust, loan agreement, credit
agreement or any other material agreement or instrument to which the Borrower or
any of its Subsidiaries is a party or by which it or any of its property or
assets are bound or to which it may be subject (including, without limitation,
the Existing Indebtedness) or (iii) will violate any provision of the
certificate of incorpor ation, by-laws, certificate of partnership, partnership
agreement, certificate of limited liability company, limited liability company
agreement or equivalent organizational document, as the case may be, of the
Borrower or any of its Subsidiaries.
7.04 Litigation. There are no actions, suits, proceedings or
----------
investigations pending or threatened (i) with respect to any Credit Document,
(ii) with respect to the Transaction or any other Document that could reasonably
be expected to have a Material Adverse Effect, or (iii) with respect to the
Borrower or any of its Subsidiaries (x) that are likely to have a Material
Adverse Effect or (y) that could reasonably be expected to have a material
adverse effect on the rights or remedies of the Agent or the Banks or on the
ability of any Credit Party to perform its respective obligations to the Agent
or the Banks hereunder and under the other Credit Documents to which it is, or
will be, a party. Addi tionally, there does not exist any judgment, order or
injunction prohibiting or imposing material adverse conditions upon the
occurrence of any Credit Event.
7.05 Use of Proceeds; Margin Regulations. (a) The proceeds of all
-----------------------------------
Term Loans incurred on the Initial Borrowing Date shall be utilized by the
Borrower to (i) finance the Recapitalization (including the Recap Distribution)
and the Refinancing and (ii) pay the fees and expenses incurred in connection
with the Transaction.
-48-
<PAGE>
(b) The proceeds of all Revolving Loans and Swingline Loans shall be
utilized for the general corporate and working capital purposes of the Borrower
and its Subsidiaries (including, but not limited to, Permitted Acquisitions and
the prepayment of Existing Indebtedness and the Senior Subordinated Notes in
accordance with the terms of Section 9.12(ii)); provided, however, that,
-------- -------
proceeds of Revolving Loans and Swingline Loans may not be used for the purposes
described in Section 7.05(a) above.
(c) Neither the making of any Loan, nor the use of the proceeds
thereof, nor the occurrence of any other Credit Event, will violate or be
inconsistent with the pro visions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System and no part of any Credit Event (or the
proceeds thereof) will be used to purchase or carry any Margin Stock or to
extend credit for the purpose of purchasing or carrying any Margin Stock.
7.06 Governmental Approvals. Except as may have been obtained or
----------------------
made on or prior to the Initial Borrowing Date (and which remain in full force
and effect on the Initial Borrowing Date), no order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to autho rize or is required in
connection with (i) the execution, delivery and performance of any Document or
(ii) the legality, validity, binding effect or enforceability of any Document.
7.07 Investment Company Act. Neither the Borrower nor any of its Sub
----------------------
sidiaries is an "investment company" or a company "controlled" by an "investment
com pany," within the meaning of the Investment Company Act of 1940, as amended.
7.08 Public Utility Holding Company Act. Neither the Borrower nor
----------------------------------
any of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding com pany," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
7.09 True and Complete Disclosure. All factual information (taken as
----------------------------
a whole) heretofore or contemporaneously furnished by or on behalf of the
Borrower or any of its Subsidiaries in writing to the Agent or any Bank
(including, without limitation, all information contained in the Documents) for
purposes of or in connection with this Agreement or any transaction contemplated
herein or therein is, and all other such factual information (taken as a whole)
hereafter furnished by or on behalf of any such Persons in writing to the Agent
or any Bank will be, true and accurate in all material respects on the date as
of which such information is dated or certified and not incomplete by omitting
to state any material fact necessary to make such information (taken as a whole)
not mislead ing at such time in light of the circumstances under which such
information was provided.
-49-
<PAGE>
7.10 Financial Condition; Financial Statements. (a) On and as of
-----------------------------------------
the Initial Borrowing Date, on a pro forma basis after giving effect to the
--- -----
Transaction and to all Indebtedness (including the Loans and the Senior
Subordinated Notes) incurred, and to be incurred, and Liens created, and to be
created, by each Credit Party in connection there with, with respect to the
Borrower (on a stand-alone basis) and the Borrower and its Subsidiaries (on a
consolidated basis) (x) the sum of the assets, at a fair valuation, of the
Borrower (on a stand-alone basis) and the Borrower and its Subsidiaries (on a
consolidated basis) will exceed its or their debts, (y) it has or they have not
incurred nor intended to, nor believes or believe that it or they will, incur
debts beyond its or their ability to pay such debts as such debts mature and (z)
it or they will have sufficient capital with which to conduct its or their
business. For purposes of this Section 7.10, "debt" means any liability on a
claim, and "claim" means (i) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(b)(i) The consolidated balance sheets of the Borrower at December
31, 1995, December 31, 1996 and September 30, 1997, and the related statements
of income and cash flows and changes in shareholders' equity of the Borrower for
the fiscal years or nine-month period, as the case may be, ended as of said
dates, and (ii) the Pro-Forma Balance Sheet, copies of which have heretofore
been furnished to each Bank, present fairly in all material respects the
respective consolidated financial condition of the Borrower at the dates of said
financial statements and the results for the periods covered thereby (or, in the
case of the Pro Forma Balance Sheet, presents a good faith estimate of the
--- -----
consolidated pro forma financial condition of the Borrower (after giving effect
--- -----
to the Transaction at the date thereof), subject, in the case of unaudited
financial statements, to normal year-end adjustments. All such financial
statements (other than the aforesaid Pro Forma Balance Sheet) have been prepared
--- -----
in accordance with GAAP consistently applied except to the extent provided in
the notes to said financial statements and subject, in the case of the nine-
month statements, to normal year-end audit adjustments (all of which are of a
recurring nature and none of which, individually or in the aggregate, would be
material) and the absence of footnotes.
(c) Since December 31, 1996 (but after giving effect to the
Transaction as if same had occurred prior thereto), nothing has occurred that
has had or could reasonably be expected to have a Material Adverse Effect.
(d) Except as fully reflected in the financial statements described
in Section 7.10(b) and the Indebtedness incurred under this Agreement and the
Senior Subordinated Notes, (i) there were as of the Initial Borrowing Date (and
after giving effect to any Loans
-50-
<PAGE>
made on such date), no liabilities or obligations (excluding current obligations
incurred in the ordinary course of business and commitments to purchase
Healthcare Units) with respect to the Borrower or any of its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in the aggregate, could
reasonably be expected to be material to the Borrower and its Subsidiaries taken
as a whole or the Borrower and (ii) the Borrower does not know of any basis for
the assertion against the Borrower or any of its Subsidiaries of any such
liability or obligation which, either individually or in the aggregate, are or
would be reasonably likely to have, a Material Adverse Effect.
(e) The Projections have been prepared on a basis consistent with the
finan cial statements referred to in Section 7.10(b), and are based on good
faith estimates and assumptions made by the management of the Borrower. On the
Initial Borrowing Date, such management believed that the Projections were
reasonable and attainable. There is no fact known to the Borrower or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect, which has not been disclosed herein or in such other documents,
certificates and statements furnished to the Banks for use in connection with
the transactions contemplated hereby.
7.11 Security Interests. On and after the Initial Borrowing Date,
------------------
each of the Security Documents creates (or after the execution and delivery
thereof will create), as security for the Obligations, a valid and enforceable
perfected security interest in and Lien on all of the Collateral subject
thereto, superior to and prior to the rights of all third Persons, and subject
to no other Liens (except that (i) the Security Agreement Collateral may be
subject to Permitted Liens relating thereto and (ii) the Pledge Agreement
Collateral may be subject to the Liens described in clauses (a) and (e) of
Section 9.03), in favor of the Collateral Agent. No filings or recordings are
required in order to perfect the security interests created under any Security
Document except for filings or recordings required in connection with any such
Security Document which shall have been made on or prior to the Initial
Borrowing Date as contemplated by Section 5.11 or on or prior to the execution
and delivery thereof as contemplated by Sections 8.11, 8.12 and 9.15.
7.12 Compliance with ERISA. Schedule V sets forth each Plan; each
---------------------
Plan (and each related trust, insurance contract or fund) is in substantial
compliance with its terms and with all applicable laws, including without
limitation ERISA and the Code; each Plan (and each related trust, if any) which
is intended to be qualified under Section 401(a) of the Code has received a
determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable
Event has occurred; no Plan which is a multiemployer plan (as defined in Sec
tion 4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has an
Unfunded Current Liability; no Plan which is subject to Section 412 of the Code
or Section 302 of ERISA has an accumulated funding deficiency, within the
meaning of such sections of the
-51-
<PAGE>
Code or ERISA, or has applied for or received a waiver of an accumulated funding
defici ency or an extension of any amortization period, within the meaning of
Section 412 of the Code or Section 303 or 304 of ERISA; all contributions
required to be made with respect to a Plan have been timely made; neither the
Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred
any material liability (including any indirect, contin gent or secondary
liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(l),
515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29),
4971 or 4975 of the Code or expects to incur any such liability under any of the
foregoing sections with respect to any Plan; no condition exists which presents
a material risk to the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate of incurring a liability to or on account of a Plan pursuant to the
foregoing provisions of ERISA and the Code; no proceedings have been instituted
to terminate or appoint a trustee to administer any Plan which is subject to
Title IV of ERISA; no action, suit, proceeding, hearing, audit or investi gation
with respect to the administration, operation or the investment of assets of any
Plan (other than routine claims for benefits) is pending, expected or
threatened; using actuarial assumptions and computation methods consistent with
Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the
Borrower and its Subsidiaries and its ERISA Affiliates to all Plans which are
multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of
a complete withdrawal therefrom, as of the close of the most recent fiscal year
of each such Plan ended prior to the date of the most recent Credit Event, would
not exceed $50,000; each group health plan (as defined in Section 607(1) of
ERISA or Sec tion 4980B(g)(2) of the Code) which covers or has covered employees
or former employees of the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate has at all times been operated in compliance with the provisions of
Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no lien
imposed under the Code or ERISA on the assets of the Borrower or any Subsidiary
of the Borrower or any ERISA Affiliate exists or is likely to arise on account
of any Plan; and the Borrower and its Subsidiaries may cease contributions to or
terminate any employee benefit plan maintained by any of them without incurring
any material liability.
7.13 Capitalization. On the Initial Borrowing Date and after giving
--------------
effect to the Transaction, the authorized capital stock of the Borrower shall
consist of (i) 10,000,000 shares of common stock, $.01 par value per share (such
authorized shares of common stock, together with any subsequently authorized
shares of common stock of the Borrower, the "Borrower Common Stock"), 4,043,250
of which shares shall be issued and outstanding and (ii) 500,000 shares of PIK
Preferred Stock, 300,000 of which shares shall be designated the "Series F
Preferred Stock", of which 150,000 shares shall be issued and outstanding. All
such outstanding shares have been duly and validly issued, are fully paid and
nonassessable and have been issued free of preemptive rights. Except as set
forth on Schedule X hereto, the Borrower does not have outstanding any
securities convertible into or exchangeable for its capital stock or outstanding
any rights to subscribe for or to purchase, or any options for the purchase of,
or any agreements providing for the issuance
-52-
<PAGE>
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock.
7.14 Subsidiaries. (a) Prior to the consummation of the
------------
Transaction, Acquisition Corp. has no Subsidiaries.
(b) On and as of the Initial Borrowing Date and after giving effect
to the Transaction, (i) the Borrower has no Subsidiaries other than those
Subsidiaries listed on Schedule VII. Schedule VII correctly sets forth, as of
the Initial Borrowing Date and after giving effect to the Transaction, the
percentage ownership (direct and indirect) of the Borrower in each class of
capital stock of each of its Subsidiaries and also identifies the direct owner
thereof. All outstanding shares of capital stock of each Subsidiary of the
Borrower have been duly and validly issued, are fully paid and non-assessable
and have been issued free of preemptive rights. Except as set forth on Schedule
X hereto, no Subsidiary of the Borrower has outstanding any securities
convertible into or exchangeable for its capital stock or outstanding any right
to subscribe for or to purchase, or any options or warrants for the purchase of,
or any agreement providing for the issuance (contingent or otherwise) of or any
calls, commitments or claims of any character relating to, its capital stock or
any stock appreciation or similar rights.
7.15 Intellectual Property, etc. Each of the Borrower and each of
---------------------------
its Subsidiaries owns all patents, trademarks, permits, service marks, trade
names, technology copyrights, licenses, franchises and formulas, or other rights
with respect to the foregoing, and has obtained assignments of all leases and
other rights of whatever nature, and has in full force and effect all
accreditations and certifications, reasonably necessary for the conduct of its
business, without any known conflict with the rights of others which, or the
failure to obtain which, as the case may be, would result in a Material Adverse
Effect.
7.16 Compliance with Statutes, etc. Each of the Borrower and each of
------------------------------
its Subsidiaries is in compliance with all applicable statutes, regulations,
rules and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, except such non-compliance as is not
likely to, individually or in the aggregate, have a Material Adverse Effect.
7.17 Environmental Matters. (a) Each of the Borrower and each of
---------------------
its Subsidiaries has complied with, and on the date of each Credit Event is in
compliance with, all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws and neither the Borrower nor any of
its Subsidiaries is liable for any material penalties, fines or forfeitures for
failure to comply with any of the foregoing. There are no pending or past or,
to the best knowledge of the Borrower after due inquiry, threatened
Environmental Claims against the Borrower or any of its Subsidiaries or any
-53-
<PAGE>
Real Property owned or operated by the Borrower or any of its Subsidiaries.
There are no facts, circumstances, conditions or occurrences on any Real
Property owned or operated by the Borrower or any of its Subsidiaries or on any
property adjoining or in the vicinity of any such Real Property that would
reasonably be expected (i) to form the basis of an Environmental Claim against
the Borrower or any of its Subsidiaries or any such Real Property or (ii) to
cause any such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property by the Borrower or any
of its Subsidiaries under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Real Property owned or
operated by the Borrower or any of its Subsidiaries except in compliance with
all applicable Environmental Laws and reasonably required in connection with the
operation, use and maintenance of such Real Property by the Borrower's or such
Subsidiary's business. Hazardous Materials have not at any time been Released
on or from any Real Property owned or operated by the Borrower or any of its
Subsidiaries. There are not now any underground storage tanks located on any
Real Property owned or operated by the Borrower or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section 7.17,
the representations made in this Section 7.17 shall only be untrue if the
aggregate effect of all conditions, failures, noncompliances, Environmental
Claims, Releases and presence of underground storage tanks, in each case of the
types described above, would reasonably be expected to have a Material Adverse
Effect.
7.18 Properties. All Real Property owned by the Borrower or any of
----------
its Subsidiaries and all material Leaseholds leased by the Borrower or any of
its Subsidiaries, in each case as of the Initial Borrowing Date and after giving
effect to the Transaction, and the nature of the interest therein, is correctly
set forth in Schedule III. Each of the Borrower and each of its Subsidiaries
has good and marketable title to, or a validly subsisting leasehold interest in,
all material properties owned or leased by it, including all Real Property
reflected in Schedule III and in the financial statements (including the Pro
---
Forma Balance Sheet) referred to in Section 7.10(b) (except such properties sold
- -----
in the ordinary course of business since the dates of the respective financial
statements referred to therein), free and clear of all Liens, other than
Permitted Liens.
7.19 Labor Relations. Neither the Borrower nor any of its
---------------
Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Effect. There is (i) no unfair labor
practice complaint pending against the Borrower or any of its Subsidiaries or
threatened against any of them, before the National Labor Relations Board, and
no grievance or arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Borrower or any of its
Subsidiaries or threatened against any of them, (ii) no strike, labor dispute,
slowdown or
-54-
<PAGE>
stoppage pending against the Borrower or any of its Subsidiaries or threatened
against the Borrower or any of its Subsidiaries and (iii) no union
representation question existing with respect to the employees of the Borrower
or any of its Subsidiaries and no union organizing activities are taking place,
except (with respect to any matter specified in clause (i), (ii) or (iii) above,
either individually or in the aggregate) such as is not reasonably likely to
have a Material Adverse Effect.
7.20 Tax Returns and Payments. Each of the Borrower and each of its
------------------------
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, except for
those contested in good faith and adequately disclosed and fully provided for on
the financial statements of the Borrower and its Subsidiaries in accordance with
generally accepted accounting principles. Each of the Borrower and each of its
Subsidiaries has at all times paid, or have provided adequate reserves (in the
good faith judgment of the management of the Borrower) for the payment of, all
federal, state and foreign income taxes applicable for all prior fiscal years
and for the current fiscal year to date. There is no material action, suit,
proceeding, investigation, audit, or claim now pending or, to the knowledge of
the Borrower or any of its Subsidiaries, threatened by any authority regarding
any taxes relating to the Borrower or any of its Subsidiaries. Neither the
Borrower nor any of its Subsidiaries has entered into an agreement or waiver or
been requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of the Borrower or
any of its Subsidiaries, or is aware of any circumstances that would cause the
taxable years or other taxable periods of the Borrower or any of its
Subsidiaries not to be subject to the normally applicable statute of
limitations.
7.21 Existing Indebtedness. Schedule IV sets forth a true and
---------------------
complete list of all Existing Indebtedness of the Borrower and its Subsidiaries
as of the Initial Borrowing Date after giving effect to the Transaction, in each
case showing the aggregate principal amount thereof and the name of the
respective borrower and any other entity which directly or indirectly guaranteed
such debt.
7.22 Insurance. Set forth on Schedule VIII hereto is a true, correct
---------
and complete summary of all insurance carried by each Credit Party on and as of
the Initial Borrowing Date, with the amounts insured set forth therein.
7.23 Representations and Warranties in Other Documents. All
-------------------------------------------------
representa tions and warranties set forth in the other Documents were true and
correct in all material respects at the time as of which such representations
and warranties were made (or deemed made) and shall be true and correct in all
material respects as of the Initial Borrowing Date as if such representations or
warranties were made on and as of such date, unless stated to
-55-
<PAGE>
relate to a specific earlier date, in which case such representations or
warranties shall be true and correct in all material respects as of such earlier
date.
7.24 Transaction. At the time of consummation thereof, the
-----------
Transaction shall have been consummated in accordance with the terms of the
Documents and all applicable laws. At the time of consummation thereof, all
consents and approvals of, and filings and registrations with, and all other
actions in respect of, all governmental agencies, authorities or
instrumentalities required in order to make or consummate the Transaction in
accordance with the terms of the Documents and all applicable laws have been
obtained, given, filed or taken and are or will be in full force and effect (or
effective judicial relief with respect thereto has been obtained). All
applicable waiting periods with respect thereto have or, prior to the time when
required, will have, expired without, in all such cases, any action being taken
by any competent authority which restrains, prevents, or imposes material
adverse conditions upon the Transaction. Additionally, there does not exist any
judgment, order or injunction prohibiting or imposing material adverse
conditions upon any element of the Transaction, the occurrence of any Credit
Event, or the performance by the Borrower and its Subsidiaries of their
respective obligations under the Documents and all applicable laws.
7.25 Special Purpose Corporations. Acquisition Corp. was formed to
----------------------------
effect the Transaction. Prior to the consummation of the Transaction,
Acquisition Corp. had no significant assets or liabilities (other than those
liabilities under the Recapitalization Documents and such other liabilities
arising in connection with the Transaction).
7.26 Subordination. The subordination provisions contained in the
-------------
Senior Subordinated Note Documents are enforceable against the Borrower and the
holder thereof, and all Obligations shall be within the definition of "Senior
Debt" included in such subordination provisions.
SECTION 8. Affirmative Covenants. The Borrower hereby covenants and
---------------------
agrees that as of the Effective Date and thereafter for so long as this
Agreement is in effect and until the Total Commitment has terminated, no Letters
of Credit or Notes are outstanding and the Loans and Unpaid Drawings, together
with interest, Fees and all other Obligations (other than any indemnities
described in Section 13.13 which are not then due and payable) incurred
hereunder, are paid in full:
-56-
<PAGE>
8.01 Information Covenants. The Borrower will furnish to each Bank:
---------------------
(a) Monthly Reports. Within 30 days after the end of each fiscal
---------------
month of the Borrower, the consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such fiscal month and the related
consolidated statements of income for such fiscal month and for the elapsed
portion of the fiscal year ended with the last day of such fiscal month, in
each case setting forth comparative figures for the corresponding fiscal
month in the prior fiscal year and comparable budgeted figures for such
fiscal month as set forth in the respective budget delivered pursuant to
Section 8.01(d), all of which shall be certified by the chief financial
officer or other Authorized Officer of the Borrower, subject to normal
year-end audit adjustments and the absence of footnotes.
(b) Quarterly Financial Statements. Within 45 days after the close
------------------------------
of the first three quarterly accounting periods in each fiscal year of the
Borrower, (i) the consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarterly accounting period and the
related consolidated statements of income and retained earnings and of cash
flows for such quarterly accounting period and for the elapsed portion of
the fiscal year ended with the last day of such quarterly account ing
period and the budgeted figures for such quarterly period as set forth in
the respective budget delivered pursuant to Section 8.01(d) and (ii)
management's dis cussion and analysis of the most important operational and
financial developments during such quarterly period, all of which shall be
in reasonable detail and certified by the chief financial officer or other
Authorized Officer of the Borrower that they fairly present in all material
respects the financial condition of the Borrower and its Subsidiaries as of
the dates indicated and the results of their operations and changes in
their cash flows for the periods indicated, subject to normal year-end
audit adjust ments and the absence of footnotes.
(c) Annual Financial Statements. Within 90 days after the close of
---------------------------
each fis cal year of the Borrower, the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income and retained earnings and of cash
flows for such fiscal year and setting forth comparative consolidated
figures for the preceding fiscal year and comparable budgeted figures for
such fiscal year as set forth in the respective budget delivered pursuant
to Section 8.01(d) and (except for such comparable budgeted figures) cert
ified by Ernst & Young, LLP or such other independent certified public
accountants of recognized national standing as shall be reasonably
acceptable to the Agent, in each case to the effect that such statements
fairly present in all material respects the financial condition of the
Borrower and its Subsidiaries as of the dates indicated and the results of
their operations and changes in financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years,
-57-
<PAGE>
together with a certificate of such accounting firm stating that in the
course of its regular audit of the business of the Borrower and its
Subsidiaries, which audit was conducted in accordance with generally
accepted auditing standards, no Default or Event of Default which has
occurred and is continuing has come to their attention or, if such a
Default or an Event of Default has come to their attention, a statement as
to the nature thereof.
(d) Budgets, etc. Not more than 60 days after the commencement of
-------------
each fiscal year of the Borrower, consolidated budgets of the Borrower and
its Subsidiaries (x) in reasonable detail for each of the twelve months of
such fiscal year and (y) in summary form for each of the five fiscal years
immediately following such fiscal year, in each case as customarily
prepared by management for its internal use setting forth, with appropriate
discussion, the principal assumptions upon which such budgets are based.
Together with each delivery of financial statements pursuant to Sections
8.01(a), (b) and (c), a comparison of the current year to date financial
results against the budgets required to be submitted pursuant to this
clause (d) shall be presented.
(e) Officer's Certificates. At the time of the delivery of the
----------------------
financial state ments provided for in Sections 8.01(a), (b) and (c), a
certificate of the chief financial officer or other Authorized Officer of
the Borrower to the effect that no Default or Event of Default exists or,
if any Default or Event of Default does exist, specifying the nature and
extent thereof, which certificate shall, if delivered in connection with
the financial statements in respect of a period ending on the last day of a
fiscal quarter or fiscal year of the Borrower, set forth (x) the
calculations required to establish whether the Borrower and its
Subsidiaries were in compliance with the provisions of Sections 3.03, 9.02,
9.04(d), (g) and (j), 9.05(a), (g), (l) and (m) and 9.08 through and
including 9.11 as at the end of such fiscal quarter or year, as the case
may be, and (y) the calculation of the Total Leverage Ratio, the Adjusted
Total Leverage Ratio and the Adjusted Senior Leverage Ratio as at the last
day of the respective fiscal quarter or fiscal year of the Borrower, as the
case may be. In addition, at the time of the delivery of the financial
statements provided for in Section 8.01(c), a certificate of the chief
financial officer or other Authorized Officer of the Borrower setting forth
(in reasonable detail) (i) the amount of, and calculations required to
establish the amount of, Adjusted Excess Cash Flow for the Excess Cash Flow
Period ending on the last day of the respective fiscal year and (ii) the
calculations required to establish whether the Borrower was in compliance
with Section 4.02(c) for the respective fiscal year.
(f) Notice of Default or Litigation. Promptly, and in any event
-------------------------------
within three Business Days after an officer of the Borrower or any of its
Subsidiaries obtains actual knowledge thereof, notice of (i) the occurrence
of any event which constitutes
-58-
<PAGE>
a Default or an Event of Default, which notice shall specify the nature and
period of existence thereof and what action the Borrower proposes to take
with respect thereto, (ii) any litigation or proceeding pending or
threatened (x) against the Borrower or any of its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect, (y) with respect
to any material Indebtedness of the Borrower or any of its Subsidiaries or
(z) with respect to any Document (other than such Documents referred to in
clause (viii) of the definition thereof), (iii) any governmental
investigation pending or threatened against the Borrower or any of its
Subsidiaries and (iv) any other event which could reasonably be expected to
have a Material Adverse Effect.
(g) Auditors' Reports. Promptly upon receipt thereof, a copy of each
-----------------
report or "management letter" submitted to the Borrower or any of its
Subsidiaries by its independent accountants in connection with any annual,
interim or special audit made by them of the books of the Borrower or any
of its Subsidiaries and the management's non-privileged responses thereto.
(h) Environmental Matters. Promptly after an officer of the Borrower
---------------------
or any of its Subsidiaries obtains actual knowledge of any of the following
(but only to the extent that any of the following, either individually or
in the aggregate, could reasonably be expected to (x) have a Material
Adverse Effect or (y) result in a remedial cost to the Borrower or any of
its Subsidiaries in excess of $300,000), written notice of:
(i) any pending or threatened Environmental Claim against the
Borrower or any of its Subsidiaries or any Real Property owned or
operated by the Borrower or any of its Subsidiaries;
(ii) any condition or occurrence on any Real Property owned or
operated by the Borrower or any of its Subsidiaries that (x) results
in noncompliance by the Borrower or any of its Subsidiaries with any
applic able Environmental Law or (y) could reasonably be anticipated
to form the basis of an Environmental Claim against the Borrower or
any of its Subsidiaries or any such Real Property;
(iii) any condition or occurrence on any Real Property owned
or operated by the Borrower or any of its Subsidiaries that could
reasonably be anticipated to cause such Real Property to be subject to
any restrictions on the ownership, occupancy, use or transferability
by the Borrower or such Subsidiary, as the case may be, of its
interest in such Real Property under any Environmental Law; and
-59-
<PAGE>
(iv) the taking of any removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any
Real Property owned or operated by the Borrower or any of its
Subsidiaries.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action
and the Borrower's response or proposed response thereto. In addition, the
Borrower agrees to provide the Banks with copies of all material
communications by the Borrower or any of its Subsidiaries with any Person,
government or governmental agency relating to Environmental Laws or to any
of the matters set forth in clauses (i)-(iv) above, and such detailed
reports relating to any of the matters set forth in clauses (i)-(iv) above
as may reasonably be requested by the Agent or the Required Banks.
(i) Annual Meetings with Banks. At the request of the Agent, the
--------------------------
Borrower shall within 120 days after the close of each of its fiscal years,
hold a meeting (at a mutually agreeable location and time) open to all of
the Banks at which meeting shall be reviewed the financial results of the
previous fiscal year and the financial condition of the Borrower and its
Subsidiaries and the budgets presented for the current fiscal year of the
Borrower and its Subsidiaries.
(j) Notice of Commitment Reductions and Mandatory Repayments. On or
--------------------------------------------------------
prior to the date of any reduction to the Total Commitment or any mandatory
repayment of outstanding Term Loans pursuant to any of Sections 4.02(c)
through (g), inclusive, the Borrower shall provide written notice of the
amount of the respective reduction or repayment, as the case may be, to
each of the Total Term Loan Commitment, the Total Revolving Loan Commitment
or the outstanding Term Loans, as applicable, and the calculation thereof
(in reasonable detail).
(k) Other Information. Promptly upon transmission thereof, copies of
-----------------
any filings and registrations with, and reports to, the SEC by the Borrower
or any of its Subsidiaries and copies of all financial statements, proxy
statements, notices and reports as the Borrower or any of its Subsidiaries
shall send generally to analysts and the holders of their capital stock
(including, in the case of the Borrower, PIK Preferred Stock) or of the
Senior Subordinated Notes or any Permitted Debt in their capacity as such
holders (to the extent not theretofore delivered to the Banks pursuant to
this Agreement) and, with reasonable promptness, such other infor mation or
documents (financial or otherwise) as the Agent on its own behalf or on
behalf of the Required Banks may reasonably request from time to time.
8.02 Books, Records and Inspections. The Borrower will, and will
------------------------------
cause each of its Subsidiaries to, keep proper books of record and account in
which full, true and
-60-
<PAGE>
correct entries in conformity with GAAP and all requirements of law shall be
made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of its Subsidiaries to,
permit, upon notice to the chief financial officer or other Authorized Officer
of the Borrower, officers and designated representatives of the Agent or the
Required Banks to visit and inspect any of the properties or assets of the
Borrower and any of its Subsidiaries in whomsoever's possession, and to examine
the books of account of the Borrower and any of its Subsidiaries and discuss the
affairs, finances and accounts of the Borrower and of any of its Subsidiaries
with, and be advised as to the same by, their officers and independent
accountants, all at such reasonable times and intervals and to such reasonable
extent as the Agent or the Required Banks may desire.
8.03 Insurance. (a) The Borrower will, and will cause each of its
---------
Subsidi aries to (i) maintain, with financially sound and reputable insurance
companies, insurance on all its property in at least such amounts and against at
least such risks as is consistent and in accordance with industry practice and
(ii) furnish to the Agent and each of the Banks, upon request, full information
as to the insurance carried. In addition to the requirements of the immediately
preceding sentence, the Borrower will at all times cause insurance of the types
described in Schedule VIII to be maintained (with the same scope of coverage as
that described in Schedule VIII) at levels which are consistent with its
practices immediately before the Initial Borrowing Date, taking into account the
age and fair market value of equipment. Such insurance shall include physical
damage insurance on all real and personal property (whether now owned or
hereafter acquired) on an all risk basis and business interruption insurance.
The provisions of this Section 8.03 shall be deemed supplemental to, but not
duplicative of, the provisions of any Security Documents that require the
maintenance of insurance.
(b) The Borrower will, and will cause each of its Subsidiaries to, at
all times keep the respective property of the Borrower and its Subsidiaries
(except real or personal property leased or financed through third parties in
accordance with this Agreement) insured in favor of the Collateral Agent, and
all policies or certificates with re spect to such insurance (and any other
insurance maintained by, or on behalf of, the Borrower or any Subsidiary of the
Borrower) (i) shall be endorsed to the Collateral Agent's satisfaction for the
benefit of the Collateral Agent (including, without limitation, by naming the
Collateral Agent as certificate holder, mortgagee and loss payee with respect to
real property, certificate holder and loss payee with respect to personal
property, additional insured with respect to general liability and umbrella
liability coverage and certificate holder with respect to workers' compensation
insurance), (ii) shall state that such insurance poli cies shall not be
cancelled or materially changed without at least 30 days' prior written notice
thereof by the respective insurer to the Collateral Agent and (iii) shall be
deposited with the Collateral Agent.
-61-
<PAGE>
(c) If the Borrower or any of its Subsidiaries shall fail to maintain
all insur ance in accordance with this Section 8.03, or if the Borrower or any
of its Subsidiaries shall fail to so name the Collateral Agent as an additional
insured, mortgagee or loss payee, as the case may be, or so deposit all
certificates with respect thereto, the Agent and/or the Collateral Agent shall
have the right (but shall be under no obligation) to procure such insurance, and
the Credit Parties agree to jointly and severally reimburse the Agent or the
Collateral Agent, as the case may be, for all costs and expenses of procuring
such insurance.
8.04 Payment of Taxes. The Borrower will pay and discharge, and will
----------------
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims for sums that have become due and payable which,
if unpaid, might become a Lien not otherwise permitted under Section 9.03(a);
provided, that neither the Borrower nor any of its Subsidiaries shall be
- --------
required to pay any such tax, assessment, charge, levy or claim which is being
contested in good faith and by proper proceedings if it has maintained adequate
reserves with respect thereto in accordance with GAAP.
8.05 Corporate Franchises. The Borrower will do, and will cause each
--------------------
of its Subsidiaries to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its existence and its material rights,
franchises, authority to do business, licenses, certifications, accreditations
and patents, except for rights, franchises, authority to do business, licenses,
certifications, accreditations and patents the loss of which (individually and
in the aggregate) could not reasonably be expected to have a Material Adverse
Effect; provided, however, that any transaction permitted by Section 9.02 will
-------- -------
not constitute a breach of this Section 8.05.
8.06 Compliance with Statutes; etc. The Borrower will, and will
------------------------------
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, except for such noncompliance as
would not have a Material Adverse Effect or a material adverse effect on the
ability of any Credit Party to perform its obligations under any Credit Document
to which it is a party.
8.07 Compliance with Environmental Laws. (a) (i) The Borrower will
----------------------------------
comply, and will cause each of its Subsidiaries to comply, in all material
respects with all Environmental Laws applicable to the ownership or use of its
Real Property now or here after owned or operated by the Borrower or any of its
Subsidiaries, will promptly pay or cause to be paid all costs and expenses
incurred in connection with such compliance, and will keep or cause to be kept
all such Real Property free and clear of any Liens imposed
-62-
<PAGE>
pursuant to such Environmental Laws and (ii) neither the Borrower nor any of its
Sub sidiaries will generate, use, treat, store, Release or dispose of, or permit
the generation, use, treatment, storage, release or disposal of, Hazardous
Materials on any Real Property owned or operated by the Borrower or any of its
Subsidiaries, or transport or permit the transportation of Hazardous Materials
to or from any such Real Property, unless the failure to comply with the
requirements specified in clause (i) or (ii) above, either individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. If the Borrower or any of its Subsidiaries, or any tenant or occupant
of any Real Property owned or operated by the Borrower or any of its
Subsidiaries, cause or permit any intentional or unintentional act or omission
resulting in the presence or Release of any Hazardous Material (except in
compliance with applicable Environmental Laws), the Borrower agrees to
undertake, and/or to cause any of its Subsidiaries, tenants or occupants to
undertake, at their sole expense, any clean up, removal, remedial or other
action required pursuant to Environmental Laws to remove and clean up any
Hazardous Materials from any Real Property except where the failure to do so
would not reasonably be expected to have a Material Adverse Effect; provided
--------
that neither the Borrower nor any of its Subsidiaries shall be required to
comply with any such order or directive which is being contested in good faith
and by proper proceedings so long as it has maintained adequate reserves with
respect to such compliance to the extent required in accordance with GAAP.
(b) At the written request of the Agent or the Required Banks, which
request shall specify in reasonable detail the basis therefor, at any time and
from time to time, the Borrower will provide, at its sole cost and expense, an
environmental site assessment report concerning any Real Property now or
hereafter owned or operated by the Borrower or any of its Subsidiaries, prepared
by an environmental consulting firm approved by the Agent, addressing the
matters in clause (i), (ii) or (iii) below which gives rise to such request (or,
in the case of a request pursuant to following clause (i), addressing such
matter as may be requested by the Agent or the Required Banks) and estimating
the range of the potential costs of any removal, remedial or other corrective
action in connection with any such matter, provided that in no event shall such
request be made unless (i) an Event of Default has occurred and is continuing,
(ii) the Banks receive notice under Section 8.01(h) for any event for which
notice is required to be delivered for any such Real Property or (iii) the Agent
or the Required Banks reasonably believe that there was a breach of any
representation, warranty or covenant contained in Section 7.17 or 8.07(a). If
the Borrower fails to provide the same within 60 days after such request was
made, the Agent may order the same, and the Borrower shall grant and hereby
grants, to the Agent and the Banks and their agents access to such Real Property
and specifically grants, the Agent and the Banks and their agents an irrevocable
non-exclusive license, subject to the rights of ten ants, to undertake such an
assessment, all at the Borrower's expense.
8.08 ERISA. As soon as possible and, in any event, within ten days
-----
after the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate knows
or has reason
-63-
<PAGE>
to know of the occurrence of any of the following, the Borrower will deliver to
each of the Banks a certificate of the chief financial officer of the Borrower
setting forth the full details as to such occurrence and the action, if any,
that the Borrower, such Subsidiary or such ERISA Affiliate is required or
proposes to take, together with any notices required or proposed to be given to
or filed with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC,
a Plan participant or the Plan administrator with respect thereto: that a
Reportable Event has occurred (except to the extent that the Borrower has
previously delivered to the Banks a certificate and notices (if any) concerning
such event pursuant to the next clause hereof); that a contributing sponsor (as
defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA
is subject to the advance reporting requirement of PBGC Regulation Section
4043.61 (without regard to subparagraph (b)(1) thereof), and an event described
in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section
4043 is reasonably expected to occur within the following 30 days; that an
accumulated funding deficiency, within the meaning of Section 412 of the Code or
Section 302 of ERISA, has been incurred or an application may be or has been
made for a waiver or modification of the minimum funding standard (including any
required installment payments) or an extension of any amortization period under
Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Plan;
that any contribution required to be made with respect to a Plan has not been
timely made; that a Plan has been or may be terminated, reorganized, partitioned
or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded
Current Liability; that proceedings may be or have been instituted to terminate
or appoint a trustee to administer a Plan which is subject to Title IV of ERISA;
that a proceeding has been instituted pursuant to Section 515 of ERISA to
collect a delinquent contribution to a Plan; that the Borrower, any Subsidiary
of the Borrower or any ERISA Affiliate will or may incur any liability
(including any indirect, contingent, or secondary liability) to or on account of
the termination of or withdrawal from a Plan under Section 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section
401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of
ERISA or with respect to a group health plan (as defined in Section 607(1) of
ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code; or
that the Borrower or any Subsidiary of the Borrower may incur any material
liability pursuant to any employee welfare benefit plan (as defined in Section
3(1) of ERISA) that provides benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or any Plan. The
Borrower will deliver to each of the Banks (i) a complete copy of the annual
report (on Internal Revenue Service Form 5500-series) of each Plan (including,
to the extent required, the related financial and actuarial statements and
opinions and other supporting statements, certifications, schedules and
information) required to be filed with the Internal Revenue Service and (ii)
copies of any records, documents or other information that must be furnished to
the PBGC with respect to any Plan pursuant to Section 4010 of ERISA. In
addition to any certificates or notices delivered to the Banks pursuant to the
first sentence hereof, copies of annual reports and any records, documents or
other information required to be furnished to the PBGC, and any material notices
-64-
<PAGE>
received by the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
with respect to any Plan shall be delivered to the Banks no later than ten days
after the date such report has been filed with the Internal Revenue Service or
such records, documents and/or information has been furnished to the PBGC or
such notice has been received by the Borrower, such Subsidiary or such ERISA
Affiliate, as applicable.
8.09 Good Repair. The Borrower will, and will cause each of its
-----------
Subsidi aries to, ensure that its material properties and equipment used in its
business are kept in good repair, working order and condition, ordinary wear and
tear excepted, and that from time to time there are made in such properties and
equipment all needful and proper repairs, renewals, replacements, extensions,
additions, betterments and improvements thereto, to the extent and in the manner
useful or customary for companies in similar businesses.
8.10 End of Fiscal Years; Fiscal Quarters. The Borrower will, for
------------------------------------
financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years to end on December 31 of each year and (ii) each of
its, and each of its Subsidiaries', fiscal quarters to end on March 31, June 30,
September 30 and December 31 of each year.
8.11 Additional Security; Further Assurances. (a) The Borrower
---------------------------------------
will, and will cause each of its Domestic Subsidiaries (and to the extent
Section 8.12 is operative, each of its Foreign Subsidiaries) to, grant to the
Collateral Agent security interests and mortgages in such assets and real
property of the Borrower and its Subsidiaries as are not covered by the original
Security Documents, and as may be requested from time to time by the Agent or
the Required Banks (collectively, the "Additional Security Documents"). All
such security interests and mortgages shall be granted pursuant to documentation
rea sonably satisfactory in form and substance to the Agent and shall constitute
valid and enforceable perfected security interests and mortgages superior to and
prior to the rights of all third Persons and subject to no other Liens except
for Permitted Liens. The Additional Security Documents or instruments related
thereto shall have been duly recorded or filed in such manner and in such places
as are required by law to establish, perfect, preserve and protect the Liens in
favor of the Collateral Agent required to be granted pursuant to the Additional
Security Documents and all taxes, fees and other charges payable in connection
therewith shall have been paid in full.
(b) The Borrower will, and will cause each of its Subsidiaries to, at
the expense of the Borrower, make, execute, endorse, acknowledge, file and/or
deliver to the Collateral Agent from time to time such vouchers, invoices,
schedules, confirmatory assign ments, conveyances, financing statements,
transfer endorsements, powers of attorney, certi ficates, real property surveys,
reports and other assurances or instruments and take such further steps relating
to the Collateral covered by any of the Security Documents as the Collateral
Agent may reasonably require (including, without limitation, reregistering the
-65-
<PAGE>
certificate of title of any mobile Healthcare Unit in any state in which such
Healthcare Unit primarily operates, to the extent the Collateral Agent
determines, in its reasonable discretion, that such action is required to ensure
the perfection of its security interest in such Collateral). Furthermore, the
Borrower shall cause to be delivered to the Collateral Agent such opinions of
counsel, title insurance and other related documents as may be reasonably
requested by the Agent to assure themselves that this Section 8.11 has been
complied with.
(c) Each of the Credit Parties agrees that each action required above
by this Section 8.11 shall be completed as soon as possible, but in no event
later than 90 days after such action is either requested to be taken by the
Agent or the Required Banks or required to be taken by the Borrower and its
Subsidiaries pursuant to the terms of this Section 8.11.
8.12 Foreign Subsidiaries Security. If following a change in the
-----------------------------
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronounce ments issued or promulgated thereunder, counsel for the
Borrower reasonably acceptable to the Agent does not within 30 days after a
request from the Agent or the Required Banks deliver evidence, in form and
substance mutually satisfactory to the Agent and the Borrower, with respect to
any Foreign Subsidiary of the Borrower which has not already had all of its
stock pledged pursuant to the Pledge Agreement that (i) a pledge of 66-2/3% or
more of the total combined voting power of all classes of capital stock of such
Foreign Subsidiary entitled to vote, (ii) the entering into by such Foreign
Subsidiary of a security agreement in substantially the form of the Security
Agreement and (iii) the entering into by such Foreign Subsidiary of a guaranty
in substantially the form of the Subsidiaries Guar anty, in any such case could
reasonably be expected to cause (I) the undistributed earnings of such Foreign
Subsidiary as determined for Federal income tax purposes to be treated as a
deemed dividend to such Foreign Subsidiary's United States parent for Federal
income tax purposes or (II) other material adverse Federal income tax
consequences to the Credit Parties, then in the case of a failure to deliver the
evidence described in clause (i) above, that portion of such Foreign
Subsidiary's outstanding capital stock so issued by such Foreign Subsidiary, in
each case not theretofore pledged pursuant to the Pledge Agreement shall be
pledged to the Collateral Agent for the benefit of the Secured Creditors
pursuant to the Pledge Agreement (or another pledge agreement in substantially
similar form, if needed), and in the case of a failure to deliver the evidence
described in clause (ii) above, such Foreign Subsidiary shall execute and
deliver the Security Agreement (or another security agreement in substantially
similar form, if needed), granting the Secured Creditors a security interest in
all of such Foreign Subsidiary's assets and securing the Obligations of the
Borrower under the Credit Documents and under any Interest Rate Protection Agree
ment or Other Hedging Agreement and, in the event the Subsidiaries Guaranty
shall have been executed by such Foreign Subsidiary, the obligations of such
Foreign Subsidiary there under, and in the case of a failure to deliver the
evidence described in clause (iii) above, such Foreign Subsidiary shall execute
and deliver the Subsidiaries Guaranty (or another
-66-
<PAGE>
guaranty in substantially similar form, if needed), guaranteeing the Obligations
of the Borrower under the Credit Documents and under any Interest Rate
Protection Agreement or Other Hedging Agreement, in each case to the extent that
the entering into of such Security Agreement or Subsidiaries Guaranty is
permitted by the laws of the respective foreign jurisdiction and with all
documents delivered pursuant to this Section 8.12 to be in form and substance
reasonably satisfactory to the Agent.
8.13 Ownership of Subsidiaries. Except to the extent expressly
-------------------------
permitted herein or as otherwise expressly consented in writing by the Required
Banks, each Credit Party shall directly or indirectly own 100% of the capital
stock or other equity interests of each of their respective Subsidiaries.
8.14 Permitted Acquisitions. (a) Subject to the provisions of this
----------------------
Section 8.14 and the requirements contained in the definition of Permitted
Acquisition, the Borrower and any of its Wholly-Owned Subsidiaries may from time
to time effect Permitted Acquisitions, so long as (in each case except to the
extent the Required Banks otherwise specifically agree in writing in the case of
a specific Permitted Acquisition): (i) no Default or Event of Default shall be
in existence at the time of the consummation of the proposed Permitted
Acquisition or immediately after giving effect thereto; (ii) the Borrower shall
have given the Agent and the Banks at least 5 Business Days' prior written
notice of any Permitted Acquisition; (iii) calculations are made by the Borrower
of compliance with the covenants contained in Sections 9.08, 9.09, 9.10 and 9.11
(in the case of Section 9.11, giving effect to the last sentence appearing
therein) for the period of four (except in the case of any determination of
Consolidated EBITDA for purposes of such Sections, which shall be measured on a
two-quarter annualized basis as provided in the definition thereof) consecutive
fiscal quarters (taken as one accounting period) most recently ended prior to
the date of such Permitted Acquisition (each, a "Calculation Period"), on a Pro
---
Forma Basis as if the respective Permitted Acquisition (as well as all other
- -----
Permitted Acquisitions theretofore consummated after the first day of such
Calculation Period) had occurred on the first day of such Calculation Period,
and such recalculations shall show that such financial covenants would have been
complied with if the Permitted Acquisition had occurred on the first day of such
Calculation Period (for this purpose, if the first day of the respective
Calculation Period occurs prior to the Initial Borrowing Date, calculated as if
the covenants contained in said Sections 9.08, 9.09, 9.10 and 9.11 (in the case
of Section 9.11, giving effect to the last sentence appearing therein) had been
applicable from the first day of the Calculation Period); (iv) based on good
faith projections prepared by the Borrower for the period from the date of the
consummation of the Permitted Acquisition to the date which is one year
thereafter, the level of financial performance measured by the covenants set
forth in Sections 9.08, 9.09, 9.10 and 9.11 (in the case of Section 9.11, giving
effect to the last sentence appearing therein) shall be better than or equal to
such level as would be required to provide that no Default or Event of Default
would exist under the financial covenants contained in Sections 9.08, 9.09, 9.10
and 9.11 (in the case of Section 9.11,
-67-
<PAGE>
giving effect to the last sentence appearing therein) of this Agreement as
compliance with such covenants would be required through the date which is one
year from the date of the consummation of the respective Permitted Acquisition;
(v) calculations are made by the Borrower demonstrating compliance with an
Adjusted Senior Leverage Ratio not to exceed 3.0:1.0 on the last day of the
relevant Calculation Period, on a Pro Forma Basis as if the respective Permitted
--- -----
Acquisition (as well as all other Permitted Acquisitions theretofore consummated
after the first day of such Calculation Period) had occurred on the first day of
such Calculation Period; (vi) all representations and warranties contained
herein and in the other Credit Documents shall be true and correct in all
material respects with the same effect as though such representations and
warranties had been made on and as of the date of such Permitted Acquisition
(both before and after giving effect thereto), unless stated to relate to a
specific earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date; (vii) the
Borrower provides to the Agent and the Banks as soon as available but not later
than 5 Business Days after the execution thereof, a copy of any executed
purchase agreement or similar agreement with respect to such Permitted
Acquisition; (viii) after giving effect to each Permitted Acquisition (and the
payment of all post-closing purchase price adjustments required (in the good
faith determination of the Borrower) in connection therewith and all capital
expenditures (and the financing thereof) reasonably anticipated by the Borrower
to be made in the business acquired pursuant to such Permitted Acquisition
within 90 days following such Permitted Acquisition), the Total Unutilized
Revolving Loan Commitment shall equal or exceed $10,000,000; and (ix) the
Borrower shall have delivered to the Agent an officer's certificate executed by
an Authorized Officer of the Borrower, certifying to the best of his knowledge,
compliance with the requirements of preceding clauses (i) through (vi),
inclusive, and (viii) and containing the calculations required by the preceding
clauses (iii), (iv), (v) and (viii).
(b) At the time of each Permitted Acquisition involving the creation
or acquisition of a Subsidiary, or the acquisition of capital stock or other
equity interest of any Person, all capital stock or other equity interests
thereof created or acquired in connection with such Permitted Acquisition shall
be pledged for the benefit of the Secured Creditors pursuant to the Pledge
Agreement in accordance with the requirements of Section 9.15.
(c) The Borrower shall cause each Subsidiary which is formed to
effect, or is acquired pursuant to, a Permitted Acquisition to comply with, and
to execute and deliver, all of the documentation required by, Sections 8.11 and
9.15, to the satisfaction of the Agent.
(d) The consummation of each Permitted Acquisition shall be deemed to
be a representation and warranty by the Borrower that the certifications by the
Borrower (or by one or more of its Authorized Officers) pursuant to Section
8.14(a) are true and correct and that all conditions thereto have been satisfied
and that same is permitted in accordance with the terms of this Agreement, which
representation and warranty shall be deemed to
-68-
<PAGE>
be a representation and warranty for all purposes hereunder, including, without
limitation, Sections 6 and 10.
8.15 Maintenance of Company Separateness. The Borrower will, and
-----------------------------------
will cause each of its Subsidiaries to, satisfy customary Company formalities,
including, as applicable, the holding of regular board of directors' and
shareholders' meetings or action by directors or shareholders without a meeting
and the maintenance of Company offices and records. Neither the Borrower nor
any of its Subsidiaries shall take any action, or conduct its affairs in a
manner, which is likely to result in the Company existence of the Borrower or
any of its Subsidiaries being ignored, or in the assets and liabilities of the
Borrower or any of its Subsidiaries being substantively consolidated with those
of any other such Person in a bankruptcy, reorganization or other insolvency
proceeding.
8.16 Performance of Obligations. The Borrower will, and will cause
--------------------------
each of its Subsidiaries to, perform all of its obligations under the terms of
each mortgage, deed of trust, indenture, loan agreement or credit agreement and
each other material agreement, contract or instrument by which it is bound,
except such non-performances as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
8.17 Use of Proceeds. All proceeds of the Loans shall be used as
---------------
provided in Section 7.05.
SECTION 9. Negative Covenants. The Borrower hereby covenants and
------------------
agrees that as of the Effective Date and thereafter for so long as this
Agreement is in effect and until the Total Commitment has terminated, no Letters
of Credit or Notes are outstanding and the Loans, together with interest, Fees
and all other Obligations (other than any indemnities described in Section 13.13
which are not then due and payable) incurred hereunder, are paid in full:
9.01 Changes in Business. The Borrower and its Subsidiaries will not
-------------------
engage in any business other than a Permitted Business.
9.02 Consolidation; Merger; Sale or Purchase of Assets; etc. The
-------------------------------------------------------
Borrower will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dis solve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of all or any part of
its property or assets (other than inventory in the ordinary course of
business), or enter into any sale-leaseback transactions, or pur chase or
otherwise acquire (in one or a series of related transactions) any part of the
prop erty or assets (other than purchases or other acquisitions of inventory,
materials, general intangibles and equipment in the ordinary course of business)
of any Person or agree to do any of the foregoing at any future time, except
that the following shall be permitted:
-69-
<PAGE>
(a) the Borrower and its Subsidiaries may, as lessee, enter into
operating leases in the ordinary course of business with respect to real or
personal property;
(b) Capital Expenditures (including payments in respect of
Capitalized Lease Obligations entered into after the Initial Borrowing
Date, but excluding Capital Expenditures which may arise as a result of the
purchase of any capital stock or equity interests in any other Person or by
means of a purchase of assets constituting a business, division or product
line of any Person, which expenditures may only be made pursuant to
Permitted Acquisitions effected in accordance with the relevant provisions
of this Agreement) by the Borrower and its Subsidiaries shall be permitted
so long as same do not cause a violation of any of the other provisions of
this Agreement;
(c) Investments permitted pursuant to Section 9.05 and the
liquidation of Cash Equivalents in the ordinary course of business;
(d) the Borrower and any of its Subsidiaries may sell or otherwise
dispose of assets (excluding capital stock of, or other equity interests
in, Subsidiaries and Healthcare Units) which, in the reasonable opinion of
such Person, are obsolete, uneconomic or no longer useful in the conduct of
such Person's business, provided that except with respect to asset
--------
dispositions or transfers arising out of, or in connection with, the events
described in clauses (i) and (ii) of the definition of Recovery Event, (w)
each such sale or disposition shall be for an amount at least equal to the
fair market value thereof (as determined in good faith by senior management
of the Borrower), (x) each such sale or disposition (I) results in
consideration at least 80% of which (taking the amount of cash, the
principal amount of any promissory notes and the fair market value, as
determined by the Borrower in good faith, of any other consideration) shall
be in the form of cash or (II) results in the assumption of all of the
Capitalized Lease Obligations of the Borrower or such Subsidiary in respect
of such asset by the purchaser thereof, (y) the aggregate Net Sale Proceeds
from all assets sold or otherwise disposed of pursuant to this clause (d),
when added to the aggregate amount of all Capitalized Lease Obligations
assigned in connection with all assets sold or otherwise disposed of
pursuant to this clause (d), shall not exceed $2,500,000 in the aggregate
in any fiscal year of the Borrower and (z) the Net Sale Proceeds therefrom
are either applied to repay Term Loans (or reduce the Total Revolving Loan
Commitment) as provided in Section 4.02(c) or reinvested in replacement
assets or retained to the extent permitted by Section 4.02(c) and/or the
other relevant provisions of this Agreement;
(e) any Subsidiary of the Borrower may transfer assets to the
Borrower or to any other Wholly-Owned Subsidiary of the Borrower, so long
as any security
-70-
<PAGE>
interests granted to the Collateral Agent for the benefit of the Secured
Creditors pursuant to the Security Documents in the assets so transferred
shall remain in full force and effect and perfected (to at least the same
extent as in effect immediately prior to such transfer);
(f) any Subsidiary of the Borrower may merge with and into, or be
dissolved or liquidated into, the Borrower, so long as (i) the Borrower is
the surviving corporation of any such merger, dissolution or liquidation
and (ii) any security interests granted to the Collateral Agent for the
benefit of the Secured Creditors pursuant to the Security Documents in the
assets of such Subsidiary shall remain in full force and effect and
perfected (to at least the same extent as in effect immediately prior to
such merger, dissolution or liquidation);
(g) any Subsidiary of the Borrower may merge with and into, or be
dissolved or liquidated into, any Wholly-Owned Domestic Subsidiary of the
Borrower, so long as (i) such Wholly-Owned Domestic Subsidiary is the
surviving corporation of any such merger, dissolution or liquidation and
(ii) any security interests granted to the Collateral Agent for the benefit
of the Secured Creditors pursuant to the Security Documents in the assets
of such Subsidiary shall remain in full force and effect and perfected (to
at least the same extent as in effect immedi ately prior to such merger,
dissolution or liquidation);
(h) the Borrower shall be permitted to make Permitted Acquisitions,
so long as such Permitted Acquisitions are effected in accordance with the
requirements of Section 8.14;
(i) the Recapitalization shall be permitted in accordance with the
requirements of this Agreement;
(j) the Borrower and its Subsidiaries may, in the ordinary course of
business, license patents, trademarks, copyrights and know-how to or from
third Persons or one another, so long as each such license is permitted to
be assigned pursuant to the Security Agreement (to the extent that a
security interest in such patents, trademarks, copyrights and know-how is
granted thereunder) and does not otherwise prohibit the granting of a Lien
by the Borrower or any of its Subsidiaries pursuant to the Security
Agreement in the intellectual property covered by such license;
(k) the Borrower or any of its Subsidiaries may effect Permitted
Sale-Leaseback Transactions in accordance with the definition thereof;
provided that the aggregate amount of all proceeds received by the Borrower
--------
and its Subsidiaries
-71-
<PAGE>
from all Permitted Sale-Leaseback Transactions consummated on and after the
Effective Date shall not exceed $15,000,000;
(l) the Borrower and any of its Subsidiaries may sell Healthcare
Units which, in the reasonable opinion of such Person, are obsolete,
uneconomic or no longer useful in the conduct of such Person's business or
otherwise require upgrading, provided that (i) any such sale shall be for
--------
an amount at least equal to the fair market value thereof (as determined in
good faith by senior management of the Borrower), (ii) such sale (x)
results in consideration at least 80% of which (taking the amount of cash,
the principal amount of any promissory notes and the fair market value, as
determined by the Borrower in good faith, of any other consideration) shall
be in the form of cash or (y) results in the assumption of all of the
Capitalized Lease Obligations of the Borrower or such Subsidiary in respect
of such Healthcare Unit by the purchaser thereof, (iii) the Net Sale
Proceeds from, or the amount of Capitalized Lease Obligations assigned in
connection with, any such sale, when added to the aggregate Net Sale
Proceeds received from, and the aggregate amount of all Capitalized Lease
Obligations assigned in connection with, all other Healthcare Units sold
pursuant to this clause (l) after the Effective Date, shall not exceed
$25,000,000 and (iv) any Net Sale Proceeds from any such sale are applied
to repay Term Loans (or reduce the Total Revolving Loan Commitment) as
provided in Section 4.02(c) or reinvested in replacement assets or retained
to the extent permitted by Section 4.02(c) and/or the other relevant
provisions of this Agreement;
(m) the Borrower and any of its Subsidiaries may effect Healthcare
Unit Replacements, provided that (i) any disposition of a Healthcare Unit
--------
pursuant to a Healthcare Unit Replacement shall be for an amount (including
any credits towards the purchase of a replacement mobile Healthcare Unit)
at least equal to the fair market value thereof (as determined in good
faith by senior management of the Borrower) and (ii) the Net Sale Proceeds
from any such disposition are applied to repay Term Loans (or reduce the
Total Revolving Loan Commitment) as provided in Section 4.02(c) or
reinvested in replacement Healthcare Units or retained to the extent
permitted by Section 4.02(c); and
(n) the Borrower and any of its Subsidiaries may sell or otherwise
dispose of the capital stock of, or other equity interests in, any of their
respective Subsidiaries and Joint Ventures which, in the reasonable opinion
of such Person, are uneconomic or no longer useful in the conduct of such
Person's business, provided that (w) each such sale or disposition shall be
--------
for an amount at least equal to the fair market value thereof (as
determined in good faith by senior management of the Borrower), (x) each
such sale results in consideration at least 80% of which (taking the amount
of cash, the principal amount of any promissory notes and the
-72-
<PAGE>
fair market value, as determined by the Borrower in good faith, of any
other consideration) shall be in the form of cash, (y) the aggregate Net
Sale Proceeds of all assets sold or otherwise disposed of pursuant to this
clause (n) after the Effective Date shall not exceed $15,000,000 in the
aggregate and (z) the Net Sale Proceeds therefrom are either applied to
repay Term Loans (or reduce the Total Revolving Loan Commitment) as
provided in Section 4.02(c) or reinvested in replacement assets or retained
to the extent permitted by Section 4.02(c) and/or the other relevant
provisions of this Agreement.
To the extent the Required Banks waive the provisions of this Section 9.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold or otherwise dis posed of as permitted by this Section 9.02, such
Collateral (unless transferred to the Borrower or a Subsidiary thereof) shall be
sold or otherwise disposed of free and clear of the Liens created by the
Security Documents and the Agent shall take such actions (including, without
limitation, directing the Collateral Agent to take such actions) as are
appropriate in connection therewith.
9.03 Liens. The Borrower will not, and will not permit any of its
-----
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of the Borrower or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to the
Borrower or any of its Subsidiaries) or assign any right to receive income,
except for the following (collectively, the "Permitted Liens"):
(a) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due and payable or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been established
in accordance with GAAP;
(b) Liens in respect of property or assets of the Borrower or any of
its Subsidiaries imposed by law which were incurred in the ordinary course
of business and which have not arisen to secure Indebtedness for borrowed
money, such as carriers', warehousemen's and mechanics' Liens, statutory
landlord's Liens, and other similar Liens arising in the ordinary course of
business, and which either (x) do not in the aggregate materially detract
from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Borrower or any of its
Subsidiaries or (y) are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture
or sale of the property or asset subject to such Lien;
-73-
<PAGE>
(c) Liens created by or pursuant to this Agreement and the Security
Documents;
(d) Liens in existence on the Initial Borrowing Date which are
listed, and the property subject thereto described, in Schedule IX, without
giving effect to any extensions or renewals thereof;
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 10.09,
provided that the amount of cash and property (determined on a fair market
--------
value basis) deposited or delivered to secure the respective judgment or
decree or subject to attachment shall not exceed $2,500,000 at any time;
(f) Liens (other than any Lien imposed by ERISA) (x) incurred or
deposits made in the ordinary course of business of the Borrower and its
Subsidiaries in connection with workers' compensation, unemployment
insurance and other types of social security, (y) to secure the performance
by the Borrower and its Subsidiaries of tenders, statutory obligations
(other than excise taxes), surety, stay, customs and appeal bonds,
statutory bonds, bids, leases, government contracts, trade contracts,
performance and return of money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money) or (z) to
secure the performance by the Borrower and its Subsidiaries of leases of
Real Property, to the extent incurred or made in the ordinary course of
business consistent with past practices, provided that the aggregate amount
--------
of deposits at any time pursuant to sub-clause (y) and sub-clause (z) shall
not exceed $4,000,000 in the aggregate;
(g) licenses, sublicenses, leases or subleases granted to third
Persons in the ordinary course of business not interfering in any material
respect with the business of the Borrower or any of its Subsidiaries;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances, in each
case not securing Indebtedness and not interfering in any material respect
with the ordinary conduct of the business of the Borrower or any of its
Subsidiaries;
(i) Liens arising from precautionary UCC financing statements
regarding operating leases;
(j) Liens created pursuant to Capital Leases permitted pursuant to
Section 9.04(d), provided that (x) such Liens only serve to secure the
--------
payment of Indebtedness arising under such Capitalized Lease Obligation
(and other
-74-
<PAGE>
Indebtedness permitted by Section 9.04(d) and incurred from the same Person
as such Indebtedness) and (y) the Lien encumbering the asset giving rise to
the Capitalized Lease Obligation does not encumber any other asset of the
Borrower or any of its Subsidiaries (other than other assets subject to
Capitalized Lease Obligations and/or Indebtedness incurred pursuant to
Section 9.04(d), in each case owing to the same Person as such Capitalized
Lease Obligation);
(k) Permitted Encumbrances;
(l) Liens arising pursuant to purchase money mortgages or security
interests securing Indebtedness representing the purchase price (or
financing of the purchase price within 90 days after the respective
purchase) of assets acquired after the Initial Borrowing Date, provided
--------
that (i) any such Liens attach only to the assets so pur chased, upgrades
thereon and, if the asset so purchased is an upgrade, the original asset
itself (and such other assets financed by the same financing source), (ii)
the Indebtedness (other than Indebtedness incurred from the same financing
source to purchase other assets and excluding Indebtedness representing
obligations to pay installation and delivery charges for the property so
purchased) secured by any such Lien does not exceed 100%, nor is less than
80%, of the lesser of the fair market value or the purchase price of the
property being purchased at the time of the incurrence of such Indebtedness
and (iii) the Indebtedness secured thereby is permitted to be incurred
pursuant to Section 9.04(d); and
(m) Liens on property or assets acquired pursuant to a Permitted
Acquisi tion, or on property or assets of a Subsidiary of the Borrower in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition, provided that (i) any Indebtedness that is secured by such
--------
Liens is permitted to exist under Section 9.04(d), and (ii) such Liens are
not incurred in connection with, or in contemplation or anticipation of,
such Permitted Acquisition and do not attach to any other asset of the
Borrower or any of its Subsidiaries.
9.04 Indebtedness. The Borrower will not, and will not permit any of
------------
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Existing Indebtedness outstanding on the Initial Borrowing Date
and listed on Schedule IV (as reduced by any repayments thereof after the
Initial Borrowing Date), without giving effect to any subsequent extension,
renewal or refinancing thereof;
-75-
<PAGE>
(c) Indebtedness under Interest Rate Protection Agreements entered
into to protect the Borrower against fluctuations in interest rates in
respect of the Obligations otherwise permitted under this Agreement;
(d) (x) Indebtedness of a Subsidiary acquired pursuant to a Permitted
Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition
of an asset securing such Indebtedness) (the "Permitted Acquired Debt"), so
long as (i) such Indebtedness was not incurred in connection with, or in
anticipation or contemplation of, such Permitted Acquisition and (ii) such
Indebtedness does not constitute debt for borrowed money (except to the
extent such Indebtedness cannot be repaid in accordance with its terms at
the time of its assumption pursuant to such Permitted Acquisition and the
aggregate principal amount of all such Indebtedness for borrowed money
permitted pursuant to this parenthetical does not exceed $[_________]), it
being understood and agreed that Capitalized Lease Obligations and purchase
money Indebtedness shall not constitute debt for borrowed money for
purposes of this clause (ii) and (y) Capitalized Lease Obligations and
Indebtedness of the Borrower and its Subsidiaries representing purchase
money Indebtedness secured by Liens permitted pursuant to Section 9.03(l),
provided, that the sum of (I) the aggregate principal amount of all
--------
Permitted Acquired Debt at any time outstanding plus (II) the aggregate
----
outstanding amount of Capitalized Lease Obligations incurred on and after
the Effective Date (including Indebtedness evidenced by Capitalized Lease
Obligations arising from Permitted Sale-Leaseback Transactions) plus (III)
----
the aggregate outstanding principal amount of all such purchase money
Indebtedness incurred on and after the Effective Date, shall not exceed
$30,000,000;
(e) Indebtedness constituting Intercompany Loans to the extent
permitted by Section 9.05(f);
(f) Permitted Subordinated Refinancing Indebtedness, so long as no
Default or Event of Default is in existence at the time of any incurrence
thereof and immediately after giving effect thereto;
(g) unsecured Indebtedness of the Borrower and the Subsidiary
Guarantors incurred under the Senior Subordinated Notes and the other
Senior Subordinated Note Documents in an aggregate principal amount not to
exceed $165,000,000 less the amount of any repayments of principal thereof
after the Effective Date;
(h) Indebtedness of the Borrower or any of its Subsidiaries which may
be deemed to exist in connection with agreements providing for
indemnification, pur chase price adjustments and similar obligations in
connection with acquisitions or sales of assets and/or businesses effected
in accordance with the requirements of this
-76-
<PAGE>
Agreement (so long as any such obligations are those of the Person making
the respective acquisition or sale, and are not guaranteed by any other
Person);
(i) Contingent Obligations of (x) the Borrower or any of its
Subsidiaries as a guarantor of the lessee under any lease pursuant to which
the Borrower or any of its Wholly-Owned Subsidiaries is the lessee so long
as such lease is otherwise permitted hereunder and (y) the Borrower or any
of its Subsidiaries as a guarantor of any Capitalized Lease Obligation to
which a Joint Venture is a party or any contract entered into by such Joint
Venture in the ordinary course of business; provided that the maximum
liability of the Borrower or any of its Subsidiaries in respect of any
obligations as described pursuant to preceding clause (y) is permitted as
an Investment on such date pursuant to the requirements of Section 9.05(l);
and
(j) Permitted Subordinated Indebtedness incurred in accordance with
the requirements of the definition thereof and additional unsecured
Indebtedness of the Borrower and its Subsidiaries not otherwise permitted
pursuant to this Section 9.04, so long as the aggregate principal amount of
all Indebtedness permitted by this clause (j), when added to the aggregate
liquidation preference for all Disqualified Preferred Stock issued after
the Effective Date pursuant to Section 9.13(c), does not exceed $15,000,000
at any time outstanding.
9.05 Advances; Investments; Loans. The Borrower will not, and will
----------------------------
not permit any of its Subsidiaries to, lend money or extend credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person, or purchase or own a futures contract or otherwise become liable for
the purchase or sale of currency or other commodities at a future date in the
nature of a futures contract, or hold any cash or Cash Equivalents (any of the
foregoing, an "Investment"), except:
(a) the Borrower and its Subsidiaries may invest in cash and Cash
Equivalents, provided that during any time that Revolving Loans or
--------
Swingline Loans are outstanding the aggregate amount of cash and Cash
Equivalents held by the Borrower and its Subsidiaries shall not exceed
$5,000,000 for any period of three consecutive Business Days;
(b) the Borrower and its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms (including the dating of receivables) of the Borrower or such
Subsidiary;
(c) the Borrower and its Subsidiaries may acquire and own investments
(including debt obligations and equity securities) received in connection
with the
-77-
<PAGE>
bankruptcy or reorganization of suppliers and customers and in settlement
of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(d) Interest Rate Protection Agreements entered into in compliance
with Section 9.04(c) shall be permitted;
(e) advances, loans and investments in existence on the Initial
Borrowing Date and listed on Schedule VI shall be permitted, without giving
effect to any additions thereto or replacements thereof;
(f) the Borrower may make intercompany loans and advances to any
Subsidiary Guarantor, and any Subsidiary Guarantor may make intercompany
loans and advances to the Borrower or any other Subsidiary Guarantor
(collectively, "Intercompany Loans"), provided, that (x) each Intercompany
--------
Loan shall be evidenced by an Intercompany Note and (y) each such
Intercompany Note shall be pledged to the Collateral Agent pursuant to the
Pledge Agreement;
(g) loans and advances by the Borrower and its Subsidiaries to
employees of the Borrower and its Subsidiaries in connection with
relocations, purchases by such employees of Borrower Common Stock or
options or similar rights to purchase Borrower Common Stock and other
ordinary course of business purposes shall be permitted, so long as the
aggregate principal amount thereof at any time outstanding (determined
without regard to any write-downs or write-offs of such loans and advances)
shall not exceed $2,500,000;
(h) the Borrower may acquire and hold obligations of one or more
officers or other employees of the Borrower or its Subsidiaries in
connection with such officers' or employees' acquisition of shares of
Borrower Common Stock, so long as no cash is actually advanced by the
Borrower or any of its Subsidiaries to such officers or employees in
connection with the acquisition of any such obligations;
(i) the Recapitalization shall be permitted;
(j) the Borrower may make Permitted Acquisitions in accordance with
the relevant requirements of Section 8.14 and the component definitions as
used therein;
(k) the Borrower and its Subsidiaries may own the capital stock of
their respective Subsidiaries created or acquired in accordance with the
terms of this Agreement;
-78-
<PAGE>
(l) so long as no Default or Event of Default exists or would exist
immedi ately after giving effect to the respective Investment, the Borrower
shall be permitted to make Investments in any Joint Venture on any date in
an amount not to exceed the Available JV Basket Amount on such date (after
giving effect to all prior and contemporaneous adjustments thereto, except
as a result of such Investment), it being understood and agreed that (i)
any such Investment may be in the form of a contribution of a Healthcare
Unit or Units to such Joint Venture and (ii) to the extent the Borrower or
one or more other Credit Parties (after the respective Investment has been
made) receives a cash return from the respective Joint Venture of amounts
previously invested pursuant to this clause (l) (which cash return may be
made by way of repayment of principal in the case of loans and cash equity
returns (whether as a distribution, dividend or redemption) in the case of
equity investments), then the amount of such return of investment shall,
upon the Agent's receipt of a certification of the amount of the return of
investment from an Authorized Officer, apply to increase the Available JV
Basket Amount, provided that the aggregate amount of increases to the
--------
Available JV Basket Amount described above shall not exceed the amount of
returned investment and, in no event, shall the amount of the increases
made to the Available JV Basket Amount in respect of any Investment exceed
the amount previously invested pursuant to this clause (l); and
(m) in addition to investments permitted by clauses (a) through (l)
of this Section 9.05, the Borrower and its Subsidiaries may make additional
loans, advan ces and investments to or in a Person not an Affiliate in an
aggregate amount for all loans, advances and investments made pursuant to
this clause (m) (determined without regard to any write-downs or write-offs
thereof), net of cash repayments of principal in the case of loans and cash
equity returns (whether as a distribution, dividend, redemption or sale) in
the case of equity investments, not to exceed $10,000,000.
9.06 Dividends; etc. The Borrower will not, and will not permit any
---------------
of its Subsidiaries to, declare or pay any dividends (other than dividends
payable solely in com mon stock of the Borrower or any such Subsidiary, as the
case may be) or return any capi tal to, its stockholders or authorize or make
any other distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise acquire, directly
or indirectly, for a consideration, any shares of any class of its capital
stock, now or hereafter outstanding (or any warrants for or options or stock
appreciation rights in respect of any of such shares), or set aside any funds
for any of the foregoing pur poses, and the Borrower will not permit any of its
Subsidiaries to purchase or otherwise acquire for consideration any shares of
any class of the capital stock of the Borrower or any other Subsidiary, as the
case may be, now or hereafter outstanding (or any options or warrants or stock
appreciation rights issued by such Person with respect to its capital stock)
(all of the foregoing "Dividends"), except that:
-79-
<PAGE>
(i) any Subsidiary of the Borrower may pay Dividends to the
Borrower or any Wholly-Owned Subsidiary of the Borrower;
(ii) the Borrower may redeem or purchase shares of Borrower
Common Stock or options to purchase Borrower Common Stock, as the case may
be, held by former employees of the Borrower or any of its Subsidiaries
following the termination of their employment, provided that (w) the only
consideration paid by the Borrower in respect of such redemptions and/or
purchases shall be cash, forgiveness of liabilities and/or Shareholder
Subordinated Notes, (x) the sum of (A) the aggregate amount paid by the
Borrower in cash in respect of all such redemptions and/or purchases plus
(B) the aggregate amount of liabilities so forgiven and (C) the aggregate
amount of all cash principal and interest payments made on Shareholder
Subordinated Notes shall not exceed $5,000,000, and (y) at the time of any
cash payment or forgiveness of liabilities permitted to be made pursuant to
this Section 9.06(ii), including any cash payment under a Shareholder
Subordinated Note, no Default or Event of Default shall then exist or
result therefrom;
(iii) so long as no Default or Event of Default exists or would
result therefrom, the Borrower may pay regularly accruing cash Dividends on
Disqualified Preferred Stock issued pursuant to Section 9.13(c), with such
Dividends to be paid in accordance with the terms of the respective
certificate of designation therefor;
(iv) on the Initial Borrowing Date and concurrently with the
consummation of the Recapitalization, the Borrower may redeem options for
its common stock, with the aggregate amount expended in connection with
such redemptions not to exceed $[____________]; and
(v) the Borrower may pay regularly accruing Dividends with
respect to the Holdings PIK Preferred Stock through the issuance of
additional shares of Holdings PIK Preferred Stock in accordance with the
terms thereof.
9.07 Transactions with Affiliates. The Borrower will not, and will
----------------------------
not permit any of its Subsidiaries to, enter into any transaction or series of
transactions with any Affiliate other than on terms and conditions substantially
as favorable to the Borrower or such Subsidiary as would be reasonably expected
to be obtainable by the Borrower or such Subsidiary at the time in a comparable
arm's-length transaction with a Person other than an Affiliate; provided, that
--------
the following shall in any event be permitted: (i) the Transaction; (ii)
intercompany transactions among the Borrower and its Subsidiaries to the extent
expressly permitted by Sections 9.02, 9.04, 9.05 and 9.06 shall be permitted;
(iii) so long as no Default or Event of Default is then in existence or would
result therefrom, the payment, on a quarterly basis, of management fees to
Apollo Group in an aggregate
-80-
<PAGE>
amount not to exceed $125,000 in any fiscal quarter of the Borrower pursuant to,
and in accordance with the terms of, the Apollo Management Agreement, provided
--------
that if during any fiscal quarter of the Borrower, a Default or Event of Default
is in existence and such management fees cannot be paid as provided above, such
fees shall continue to accrue and may be paid at such time as all Defaults and
Events of Default have been cured or waived and so long as no Default or Event
of Default will exist immediately after giving effect to the payment thereof;
(iv) customary fees to non-officer directors of the Borrower and its
Subsidiaries; (v) the Borrower and its Subsidiaries may enter into employment
arrangements with respect to the procurement of services with their respective
officers and employees in the ordinary course of business; (vi) the payment on
the Initial Borrowing Date of one time consulting fees to Apollo in an aggregate
amount not to exceed $2,500,000; (vii) the reimbursement of Apollo for its
reasonable out-of-pocket expenses incurred in connection with performing
management services to the Borrower and its Subsidiaries or in connection with
the Transaction; (viii) so long as no Default or Event of Default is then in
existence or would result therefrom, the payment to Apollo of merger advisory
fees for each Permitted Acquisition in an amount not to exceed 1% of the fair
market value of the business or assets acquired pursuant to such Permitted
Acquisition (determined in good faith by senior management of the Borrower) and
(ix) the payment of consulting or other fees to the Borrower by any of its
Subsidiaries in the ordinary course of business. In no event shall any
management, consulting or similar fee be paid or payable by the Borrower or any
of its Subsidiaries to any Person except as specifically provided in this
Section 9.07.
9.08 Consolidated Fixed Charge Coverage Ratio. The Borrower will not
----------------------------------------
permit the Consolidated Fixed Charge Coverage Ratio for any Test Period ending
on the last day of a fiscal quarter of the Borrower specified below to be less
than the ratio set forth opposite such fiscal quarter below:
Fiscal Quarter Ended Ratio
-------------------- -----
December 31, 1998 0.85:1.00
March 31, 1999 0.90:1.00
June 30, 1999 0.95:1.00
September 30, 1999 0.95:1.00
December 31, 1999 0.95:1.00
March 31, 2000 1.00:1.00
June 30, 2000 1.05:1.00
September 30, 2000 1.05:1.00
December 31, 2000 1.10:1.00
March 31, 2001 1.10:1.00
-81-
<PAGE>
June 30, 2001 1.10:1.00
September 30, 2001 1.10:1.00
December 31, 2001 1.10:1.00
March 31, 2002 1.10:1.00
June 30, 2002 1.10:1.00
September 30, 2002 1.10:1.00
December 31, 2002 1.10:1.00
March 31, 2003 1.10:1.00
June 30, 2003 1.10:1.00
September 30, 2003 1.10:1.00
9.09 Minimum Consolidated EBITDA. The Borrower will not permit
---------------------------
Consolidated EBITDA (determined after giving effect to the proviso to the
definition thereof) for any Test Period ending on the last day of any fiscal
quarter of the Borrower specified below to be less than the respective amount
set forth opposite such fiscal quarter below:
Fiscal Quarter Ended Amount
-------------------- -----------
March 31, 1998 $40,000,000
June 30, 1998 $40,000,000
September 30, 1998 $42,500,000
December 31, 1998 $45,000,000
March 31, 1999 $45,000,000
June 30, 1999 $47,500,000
September 30, 1999 $47,500,000
December 31, 1999 $50,000,000
March 31, 2000 $50,000,000
June 30, 2000 $52,500,000
September 30, 2000 $52,500,000
December 31, 2000 $55,000,000
March 31, 2001 $55,000,000
June 30, 2001 $57,500,000
September 30, 2001 $57,500,000
December 31, 2001 $60,000,000
March 31, 2002 $60,000,000
-82-
<PAGE>
June 30, 2002 $62,500,000
September 30, 2002 $62,500,000
December 31, 2002 $65,000,000
March 31, 2003 $65,000,000
June 30, 2003 $65,000,000
September 30, 2003 $65,000,000
9.10 Consolidated Interest Coverage Ratio. The Borrower will not permit
------------------------------------
the Consolidated Interest Coverage Ratio for any Test Period ending on the last
day of any fiscal quarter of the Borrower specified below to be less than the
ratio set forth opposite such fiscal quarter below:
Fiscal Quarter Ended Ratio
-------------------- ---------
March 31, 1998 1.70:1.00
June 30, 1998 1.70:1.00
September 30, 1998 1.80:1.00
December 31, 1998 1.90:1.00
March 31, 1999 1.90:1.00
June 30, 1999 1.95:1.00
September 30, 1999 1.95:1.00
December 31, 1999 2.00:1.00
March 31, 2000 2.10:1.00
June 30, 2000 2.15:1.00
September 30, 2000 2.20:1.00
December 31, 2000 2.25:1.00
March 31, 2001 2.30:1.00
June 30, 2001 2.35:1.00
September 30, 2001 2.40:1.00
December 31, 2001 2.45:1.00
March 31, 2002 2.50:1.00
June 30, 2002 2.55:1.00
September 30, 2002 2.60:1.00
December 31, 2002 2.65:1.00
March 31, 2003 2.65:1.00
June 30, 2003 2.65:1.00
-83-
<PAGE>
September 30, 2003 2.65:1.00
9.11 Adjusted Total Leverage Ratio. The Borrower will not permit the
-----------------------------
Adjusted Total Leverage Ratio on the last day of any fiscal quarter specified
below to exceed the respective ratio set forth opposite such fiscal quarter
below:
Fiscal Quarter Ended Ratio
-------------------- -----
March 31, 1998 5.75:1.00
June 30, 1998 5.75:1.00
September 30, 1998 5.50:1.00
December 31, 1998 5.25:1.00
March 31, 1999 5.25:1.00
June 30, 1999 5.00:1.00
September 30, 1999 5.00:1.00
December 31, 1999 4.75:1.00
March 31, 2000 4.75:1.00
June 30, 2000 4.50:1.00
September 30, 2000 4.50:1.00
December 31, 2000 4.25:1.00
March 31, 2001 4.25:1.00
June 30, 2001 4.00:1.00
September 30, 2001 4.00:1.00
December 31, 2001 4.00:1.00
March 31, 2002 4.00:1.00
June 30, 2002 3.75:1.00
September 30, 2002 3.75:1.00
December 31, 2002 3.75:1.00
March 31, 2003 3.75:1.00
June 30, 2003 3.75:1.00
September 30, 2003 3.75:1.00
Notwithstanding anything contrary contained above or elsewhere in this
Agreement, (i) all calculations of compliance with this Section 9.11 shall be
made on a Pro Forma Basis and (ii) in no event shall the Adjusted Total Leverage
--- -----
Ratio be greater than the Maximum
-84-
<PAGE>
Permitted Acquisition Leverage Ratio upon the consummation of, and after giving
effect on a Pro Forma Basis to, any Permitted Acquisition.
--- -----
9.12 Limitation on Voluntary Payments and Modifications of Indebtedness;
-------------------------------------------------------------------
Modifications of Certificate of Incorporation, By-Laws and Certain Other
- ------------------------------------------------------------------------
Agreements; Issuances of Capital Stock; etc. The Borrower will not, and will
- --------------------------------------------
not permit any of its Sub sidiaries to:
(i) amend or modify, or permit the amendment or modification of,
any provision of any Shareholder Subordinated Note, any Senior Subordinated
Note Document, any Existing Indebtedness, any PIK Preferred Stock Document
or, after the incurrence or issuance thereof, any Qualified Preferred Stock
or Permitted Debt or of any agreement (including, without limitation, any
purchase agreement, indenture, loan agreement, security agreement or
certificate of designation) relating thereto in a manner that could
reasonably be expected to in any way be adverse to the interests of the
Banks;
(ii) make (or give any notice in respect of) any voluntary or
optional payment or prepayment on or redemption, repurchase or acquisition
for value of, or any prepayment or redemption as a result of any asset
sale, change of control or similar event of, any Senior Subordinated Notes,
any Existing Indebtedness, any Permitted Subordinated Refinancing
Indebtedness or any Permitted Subordinated Indebtedness; provided that, so
--------
long as no Default or Event of Default then exists or would result
therefrom, (x) Senior Subordinated Notes may be refinanced with Permitted
Subordinated Refinancing Indebtedness, (y) the Borrower may repurchase
Senior Subordinated Notes on the open-market in aggregate principal amount
not to exceed $25,000,000, so long as the Adjusted Total Leverage Ratio is
less than 4.00:1.00 on the last day of the Test Period most recently ended
prior to the consummation of the respective repurchase (as set forth in the
officer's certificate most recently delivered pursuant to Section 8.01(e))
and (z) the Borrower and its Subsidiaries may make payments and prepayments
in connection with Existing Indebtedness;
(iii) make (or give any notice in respect of) any principal or
interest pay ment on, or any redemption or acquisition for value of, any
Shareholder Subordinated Note, except to the extent permitted by Section
9.06(ii); and
(iv) amend, modify or change in any way adverse to the interests
of the Banks in any material respect any Tax Allocation Agreement, any
Management Agreement, any Common Equity Financing Document, any
Recapitalization Document, its certificate of incorporation (including,
without limitation, by the filing or modification of any certificate of
designation other than any certificates of
-85-
<PAGE>
designation relating to Qualified Preferred Stock or Disqualified Preferred
Stock issued as permitted herein), by-laws, certificate of partnership,
partnership agreement, certificate of limited liability company, limited
liability company agreement or any agreement entered into by it, with
respect to its capital stock or other equity interest (including any
Shareholders' Agreement), or enter into any new Tax Allocation Agreement,
Management Agreement or agreement with respect to its capital stock or
other equity interest which could reasonably be expected to in any way be
adverse to the interests of the Banks; provided that the foregoing clause
shall not restrict the ability of the Borrower and its Subsidiaries to
amend their respective certificates of incorporation to authorize the
issuance of capital stock otherwise permitted to be issued pursuant to the
terms of this Agreement.
9.13 Limitation on Issuance of Capital Stock. (a) The Borrower will
---------------------------------------
not, and will not permit any of its Subsidiaries to, issue (i) any Preferred
Stock (other than (x) PIK Preferred Stock issued in accordance with the
requirements of Section 5.08, and the issuance of additional shares of PIK
Preferred Stock in payment of regularly accruing dividends on theretofore
outstanding shares of Holdings Preferred Stock and (y) Preferred Stock issued
pursuant to clauses (c) and (d) below, respectively) or any options, warrants or
rights to purchase Preferred Stock or (ii) any redeemable common stock unless,
in either case, the issuance thereof is, and all terms thereof are, satisfactory
to the Required Banks in their sole discretion.
(b) The Borrower shall not permit any of its Subsidiaries to issue
any capital stock (including by way of sales of treasury stock) or any options
or warrants to pur chase, or securities convertible into, capital stock, except
(i) for transfers and replacements of then outstanding shares of capital stock,
(ii) for stock splits, stock dividends and additional issuances which do not
decrease the percentage ownership of the Borrower or any of its Subsidiaries in
any class of the capital stock of such Subsidiaries, (iii) to qualify directors
to the extent required by applicable law and (iv) Subsidiaries formed after the
Effective Date pursuant to Section 9.15 may issue capital stock in accordance
with the requirements of Section 9.15. All capital stock issued in accordance
with this Section 9.13(b) shall, to the extent required by the Pledge Agreement,
be delivered to the Collateral Agent for pledge pursuant to the Pledge
Agreement.
(c) The Borrower may issue Disqualified Preferred Stock so long as
(i) no Default or Event of Default then exists or would exist immediately after
giving effect to the respective issuance, (ii) the aggregate liquidation
preference for all Disqualified Preferred Stock issued after the Effective Date
pursuant to this Section 9.13(c) shall not to exceed, when combined with the
aggregate principal amount of all then outstanding Indebtedness permitted by
Section 9.04(j), $15,000,000, (iii) with respect to each issue of Disqualified
Preferred Stock, the gross cash proceeds therefrom (or in the case of
Disqualified Preferred Stock directly issued as consideration for a Permitted
Acquisition, the fair market value
-86-
<PAGE>
thereof (as determined in good faith by the Borrower) of the assets received
therefor) shall not exceed the liquidation preference thereof at the time of
issuance, (iv) calculations are made by the Borrower of compliance with the
covenants contained in Sections 9.08 through 9.11 for the Calculation Period
most recently ended prior to the date of the respective issuance of Disqualified
Preferred Stock, on a Pro Forma Basis after giving effect to the respective
--- -----
issuance of Disqualified Preferred Stock, and such calculations shall show that
such financial covenants would have been complied with if such issuance of
Disqualified Preferred Stock had been consummated on the first day of the
respective Calculation Period, and (v) the Borrower shall furnish to the Agent a
certificate by an Authorized Officer of the Borrower certifying to the best of
his or her knowledge as to compliance with the requirements of this Section
9.13(c) and containing the pro forma calculations required by the preceding
--- -----
clause (iv).
(d) The Borrower may issue Qualified Preferred Stock so long as, with
respect to each issue of Qualified Preferred Stock, the Borrower receives
reasonably equivalent consideration (as determined in good faith by the
Borrower).
9.14 Limitation on Certain Restrictions on Subsidiaries. (a) The
--------------------------------------------------
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective,
any encumbrance or restriction on the ability of any such Subsidiary to (x) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of
the Borrower, (y) make loans or advances to the Borrower or any Subsidiary of
the Borrower or (z) transfer any of its properties or assets to the Borrower or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (i) applicable law, (ii) this Agreement and the other
Credit Documents, (iii) the provisions contained in the Existing Indebtedness,
(iv) the Senior Subordinated Note Documents, (v) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of the Borrower or a Subsidiary of the Borrower, (vi) customary provisions
restrict ing assignment of any contract entered into by the Borrower or any
Subsidiary of the Borrower in the ordinary course of business and (vii) any
agreement or instrument governing Permitted Acquired Debt, which encumbrance or
restriction is not applicable to any Person or the properties or assets of any
Person, other than the Person or the properties or assets of the Person acquired
pursuant to the respective Permitted Acquisition and so long as the respective
encumbrances or restrictions were not created (or made more restrictive) in
connection with or in anticipation of the respective Permitted Acquisition.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly agree to any consensual encumbrance or
restriction on the ability of any Non-Subsidiary Joint Venture to (x) pay
dividends or make other distributions on its capital stock or other interests or
participations in its profits owned by the Borrower or any
-87-
<PAGE>
Subsidiary of the Borrower or (y) make loans or advances to the Borrower or any
Subsidiary of the Borrower, except for such encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) this Agreement and the
other Credit Documents, (iii) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of such Non-Subsidiary
Joint Venture, (iv) the Senior Subordinated Note Documents, (v) customary
provisions restricting assignment of any contract entered into by such Joint
Venture in the ordinary course of business, (vi) normal restrictions (as
determined in good faith by the Borrower) applicable to any Non-Subsidiary Joint
Venture at the time of the establishment thereof (so long as not in connection
with a Permitted Acquisition) and (vii) restrictions applicable to any Non-
Subsidiary Joint Venture existing at the time of the acquisition thereof as a
result of an Investment pursuant to Section 9.05 or Permitted Acquisition
effected in accordance with Section 8.14; provided that the restrictions
--------
applicable to the respective Non-Subsidiary Joint Venture are not made worse, or
more burdensome, from the perspective of the Borrower and its Subsidiaries, than
those as in effect immediately before giving effect to the consummation of the
respective Investment or Permitted Acquisition.
9.15 Limitation on the Creation of Subsidiaries and Joint Ventures.
-------------------------------------------------------------
(a) Notwithstanding anything to the contrary contained in this Agreement, the
Borrower will not, and will not permit any of its Subsidiaries to, establish,
create or acquire after the Effective Date any Subsidiary (other than Joint
Ventures permitted to be established in accordance with the requirements of
Section 9.05(l)); provided that the (A) Borrower and its Wholly-Owned
--------
Subsidiaries shall be permitted to establish or create Wholly-Owned Subsidiaries
so long as, in each case, (i) at least 15 days' prior written notice thereof is
given to the Agent (or such shorter period of time as is acceptable to the
Agent), (ii) the capital stock of such new Subsidiary is promptly pledged
pursuant to, and to the extent required by, this Agreement and the Pledge
Agreement and the certificates, if any, representing such stock, together with
stock powers duly executed in blank, are delivered to the Collateral Agent,
(iii) such new Subsidiary (other than a Foreign Subsidiary except to the extent
otherwise required pursuant to Section 8.12) promptly executes a counterpart of
the Subsidiaries Guaranty, the Pledge Agreement and the Security Agreement, and
(iv) to the extent requested by the Agent or the Required Banks, such new
Subsidiary takes all actions required pursuant to Section 8.11 and (B)
Subsidiaries may be acquired pursuant to Permitted Acquisitions so long as, in
each such case (i) with respect to each Wholly-Owned Subsidiary acquired
pursuant to a Permitted Acquisition, the actions specified in preceding clause
(A) shall be taken and (ii) with respect to each Subsidiary which is not a
Wholly-Owned Subsidiary and is acquired pursuant to a Permitted Acquisition, all
capital stock thereof owned by any Credit Party shall be pledged pursuant to the
Pledge Agreement. In addition, each new Subsidiary that is required to execute
any Credit Document shall execute and deliver, or cause to be executed and
delivered, all other rele vant documentation of the type described in Section 5
as such new Subsidiary would have had to deliver if such new Subsidiary were a
Credit Party on the Initial Borrowing Date.
-88-
<PAGE>
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, enter into any Joint Ventures, except to the extent permitted
by Section 9.05(l).
SECTION 10. Events of Default. Upon the occurrence of any of the
-----------------
following specified events (each, an "Event of Default"):
10.01 Payments. The Borrower shall (i) default in the payment when
--------
due of any principal of the Loans or (ii) default, and such default shall
continue for three or more Business Days, in the payment when due of any Unpaid
Drawing, any interest on the Loans or any Fees or any other amounts owing
hereunder or under any other Credit Document; or
10.02 Representations, etc. Any representation, warranty or
---------------------
statement made by any Credit Party herein or in any other Credit Document or in
any statement or certificate delivered pursuant hereto or thereto shall prove to
be untrue in any material respect on the date as of which made or deemed made;
or
10.03 Covenants. Any Credit Party shall (a) default in the due
---------
performance or observance by it of any term, covenant or agreement contained in
Sections 8.01(f)(i), 8.10, 8.13, 8.14 or 9, or (b) default in the due
performance or observance by it of any term, covenant or agreement (other than
those referred to in Section 10.01, 10.02 or clause (a) of this Section 10.03)
contained in this Agreement and such default shall continue unremedied for a
period of at least 30 days after notice to the defaulting party by the Agent or
the Required Banks; or
10.04 Default Under Other Agreements. (a) The Borrower or any of
------------------------------
its Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the Obligations) beyond the period of grace, if any,
provided in the instrument or agree ment under which Indebtedness was created or
(ii) default in the observance or performance of any agreement or condition
relating to any such Indebtedness or contained in any instru ment or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause (determined without regard
to whether any notice is required), any such Indebtedness to become due prior to
its stated maturity; or (b) any Indebtedness (other than the Obligations) of the
Borrower or any of its Subsidiaries shall be declared to be due and payable, or
shall be required to be prepaid other than by a regularly scheduled required
prepayment or as a mandatory prepayment (unless such required prepayment or
mandatory prepayment results from a default thereunder or an event of the type
that consti tutes an Event of Default), prior to the stated maturity thereof;
provided, that it shall not constitute an Event of Default pursuant to clause
- --------
(a) or (b) of this Section 10.04 unless the
-89-
<PAGE>
principal amount of any one issue of such Indebtedness, or the aggregate amount
of all such Indebtedness referred to in clauses (a) and (b) above, exceeds
$4,500,000 at any one time; or
10.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries shall
----------------
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bank ruptcy Code"); or an involuntary case is commenced against
the Borrower or any of its Subsidiaries and the petition is not controverted
within 20 days, or is not dismissed within 60 days, after commencement of the
case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or substantially all of the property of the Borrower or any
of its Subsidiaries; or the Borrower or any of its Subsidiaries commences any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or any
of its Subsidiaries; or there is commenced against the Borrower or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60
days; or the Borrower or any of its Subsidiaries is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower or any of its Subsidiaries suffers any
appointment of any custodian or the like for it or any substantial part of its
property to con tinue undischarged or unstayed for a period of 60 days; or the
Borrower or any of its Subsidiaries makes a general assignment for the benefit
of creditors; or any corporate action is taken by the Borrower or any of its
Subsidiaries for the purpose of effecting any of the foregoing; or
10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
-----
standard required for any plan year or part thereof under Section 412 of the
Code or Section 302 of ERISA or a waiver of such standard or extension of any
amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of the Plan
subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66,
.67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur
within the following 30 days, any Plan which is subject to Title IV of ERISA
shall have had or is likely to have a trustee appointed to administer such Plan,
any Plan which is subject to Title IV of ERISA is, shall have been or is likely
to be terminated or to be the subject of termination proceedings under ERISA,
any Plan shall have an Unfunded Current Liability, a contribution required to be
made with respect to a Plan has not been timely made, the Borrower or any
Subsidiary of the Borrower or any ERISA Affiliate has incurred or is likely to
incur any liability to or on account of a Plan under Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section
401(a)(29), 4971
-90-
<PAGE>
or 4975 of the Code or on account of a group health plan (as defined in Section
607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the
Code, or the Borrower or any Subsidiary of the Borrower has incurred or is
likely to incur liabilities pursuant to one or more employee welfare benefit
plans (as defined in Section 3(1) of ERISA) that provide benefits to retired
employees or other former employees (other than as required by Section 601 of
ERISA) or Plans; (b) there shall result from any such event or events the
imposition of a lien, the granting of a security interest, or a liability or a
material risk of incurring a liability; and (c) such lien, security interest or
liability, individually, and/or in the aggregate, in the opinion of the Required
Banks, has had, or could reasonably be expected to have, a Material Adverse
Effect; or
10.07 Security Documents. (a) Any Security Document shall cease to
------------------
be in full force and effect, or shall cease to give the Collateral Agent the
Liens, rights, powers and privileges purported to be created thereby in favor of
the Collateral Agent, superior to and prior to the rights of all third Persons
(except as permitted by Section 9.03), and subject to no other Liens (except as
permitted by Section 9.03), or (b) any Credit Party shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any such Security Document and such default
shall continue beyond any cure or grace period specifically applicable thereto
pursuant to the terms of any such Security Document; or
10.08 Subsidiaries Guaranty. The Subsidiaries Guaranty or any
---------------------
provision thereof shall cease to be in full force and effect, or any Subsidiary
Guarantor or any Person acting by or on behalf of such Subsidiary Guarantor
shall deny or disaffirm such Subsidiary Guarantor's obligations under the
Subsidiaries Guaranty or any Subsidiary Guarantor shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to the Subsidiaries Guaranty; or
10.09 Judgments. One or more judgments or decrees shall be entered
---------
against the Borrower or any of its Subsidiaries involving a liability (to the
extent not paid or not fully covered by insurance) in excess of $4,500,000 for
all such judgments and decrees and all such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within 60 days from
the entry thereof; or
10.10 Ownership. A Change of Control Event shall have occurred;
---------
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent shall, upon the written request of the
Required Banks, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent or any Bank to
enforce its claims against any Subsidiary Guarantor or the Borrower, except as
otherwise specifically provided for in this Agreement (provided, that if an
--------
Event of Default specified in Section 10.05 shall occur with respect to the
-91-
<PAGE>
Borrower, the result which would occur upon the giving of written notice by the
Agent as specified in clauses (i) and (ii) below shall occur automatically
without the giving of any such notice): (i) declare the Total Commitment
terminated, whereupon the Commitment of each Bank shall forthwith terminate
immediately and any Commitment Fees shall forthwith become due and payable
without any other notice of any kind; (ii) declare the principal of and any
accrued interest in respect of all Loans and all Obligations owing hereunder
(including Unpaid Drawings) to be, whereupon the same shall become, forthwith
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower; (iii) enforce, as
Collateral Agent (or direct the Collateral Agent to enforce), any or all of the
Liens and security interests created pursuant to the Security Documents; (iv)
terminate any Letter of Credit which may be terminated in accordance with its
terms; (v) direct the Borrower to pay (and the Borrower hereby agrees upon
receipt of such notice, or upon the occurrence of any Event of Default specified
in Section 10.05, to pay) to the Collateral Agent at the Payment Office such
additional amounts of cash, to be held as security for the Borrower's
reimbursement obligations in respect of Letters of Credit then outstanding,
equal to the aggregate Stated Amount of all Letters of Credit then outstanding;
and (vi) apply any cash collateral as provided in Section 4.02.
SECTION 11. Definitions. As used herein, the following terms shall
-----------
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Acquired Person" shall have the meaning provided in the definition of
Permitted Acquisition.
"Acquisition Corp." shall mean Newport Acquisition Corp., a Delaware
corporation and prior to the Alliance Merger, a Wholly-Owned Subsidiary of
Newport.
"Additional Security Documents" shall have the meaning provided in
Section 8.11.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum
(rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x)
the most recent weekly average dealer offering rate for negotiable certificates
of deposit with a three-month maturity in the secondary market as published in
the most recent Federal Reserve System publication entitled "Select Interest
Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate informa tion shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Agent on the basis of quotations for such
certifi cates received by it from three certificate of deposit dealers in New
York of recognized
-92-
<PAGE>
standing or, if such quotations are unavailable, then on the basis of other
sources reasonably selected by the Agent, by (y) a percentage equal to 100%
minus the stated maximum rate of all reserve requirements as specified in
Regulation D applicable on such day to a three-month certificate of deposit of a
member bank of the Federal Reserve System in excess of $100,000 (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves), plus (2) the then daily net annual assessment rate as estimated by
the Agent for determining the current annual assessment payable by BTCo to the
Federal Deposit Insurance Corporation for insuring three month certificates of
deposit.
"Adjusted Consolidated Net Income" for any period shall mean
Consolidated Net Income for such period plus, without duplication, the sum of
the amount of all net non-cash charges (including, without limitation,
depreciation, amortization, deferred tax expense, non-cash interest expense) and
net non-cash losses which were included in arriving at Consolidated Net Income
for such period less all net non-cash gains included in arriving at Consolidated
Net Income for such period; provided that gains or losses from sales of assets
--------
(other than sales of inventory in the ordinary course of business) shall be
excluded to the extent same would otherwise be included in Adjusted Consolidated
Net Income for the respective period.
"Adjusted Consolidated Working Capital" at any time shall mean
Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities.
"Adjusted Excess Cash Flow" shall mean, for any period, the remainder
of (i) Excess Cash Flow minus (ii) the product of (I) the aggregate amount of
principal repayments of Loans to the extent (and only to the extent) that such
repayments were (x) required as a result of a Scheduled Commitment Reduction
under Section 3.03 or a Scheduled Repayment under Section 4.02 or (y) made as a
voluntary prepayment pursuant to Section 4.01 with internally generated funds
(but in a case of a voluntary prepayment of Revolving Loans, only to the extent
accompanied by a voluntary reduction to the Total Revolving Loan Commitment)
during such period multiplied by (II) 2.
"Adjusted RL Percentage" shall mean (x) at a time when no Bank Default
exists, for each Bank, such Bank's RL Percentage and (y) at a time when a Bank
Default exists, (i) for each Bank that is a Defaulting Bank, zero and (ii) for
each Bank that is a Non-Defaulting Bank, the percentage determined by dividing
such Bank's Revolving Loan Commitment at such time by the Adjusted Total
Revolving Loan Commitment at such time, it being understood that all references
herein to Revolving Loan Commitments and the Adjusted Total Revolving Loan
Commitment at a time when the Total Revolving Loan Commitment or Adjusted Total
Revolving Loan Commitment, as the case may be, has been terminated shall be
references to the Revolving Loan Commitments or Adjusted Total Revolving Loan
Commitment, as the case may be, in effect immediately prior to such ter-
-93-
<PAGE>
mination, provided that (A) no Bank's Adjusted RL Percentage shall change upon
--------
the occurrence of a Bank Default from that in effect immediately prior to such
Bank Default if after giving effect to such Bank Default, and any repayment of
Revolving Loans and Swingline Loans at such time pursuant to Section 4.02(a) or
otherwise, the sum of (i) the aggregate outstanding principal amount of
Revolving Loans of all Non-Defaulting Banks, plus (ii) the aggregate outstanding
principal amount of Swingline Loans, plus (iii) the Letter of Credit
Outstandings, exceed the Adjusted Total Revolving Loan Commitment; (B) the
changes to the Adjusted RL Percentage that would have become effective upon the
occur rence of a Bank Default but that did not become effective as a result of
the preceding clause (A) shall become effective on the first date after the
occurrence of the relevant Bank Default on which the sum of (i) the aggregate
outstanding principal amount of the Revolving Loans of all Non-Defaulting Banks,
plus (ii) the aggregate outstanding principal amount of Swingline Loans, plus
(iii) the Letter of Credit Outstandings, is equal to or less than the Adjusted
Total Revolving Loan Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted
RL Percentage is changed pursuant to the preceding clause (B) and (ii) any repay
ment of such Bank's Revolving Loans or of Unpaid Drawings or of Swingline Loans
that were made during the period commencing after the date of the relevant Bank
Default and ending on the date of such change to its Adjusted RL Percentage must
be returned to the Borrower as a preferential or similar payment in any
bankruptcy or similar proceeding of the Borrower, then the change to such Non-
Defaulting Bank's Adjusted RL Percentage effected pursuant to said clause (B)
shall be reduced to that positive change, if any, as would have been made to its
Adjusted RL Percentage if (x) such repayments had not been made and (y) the
maximum change to its Adjusted RL Percentage would have resulted in the sum of
the outstanding principal of Revolving Loans made by such Bank plus such Bank's
new Adjusted RL Percentage of the outstanding principal amount of Swingline
Loans and of Letter of Credit Outstandings equalling such Bank's Revolving Loan
Commitment at such time.
"Adjusted Senior Leverage Ratio" shall mean the Adjusted Total
Leverage Ratio, except that references to "Consolidated Debt" and "Adjusted
Total Leverage Ratio" therein shall instead be references to "Consolidated
Senior Debt" and "Adjusted Senior Leverage Ratio," respectively.
"Adjusted Total Leverage Ratio" shall mean, on any date, the ratio of
(i) Consolidated Debt on such date to (ii) Consolidated EBITDA for the Test
Period most recently ended on or prior to such date (determined after giving
effect to the proviso to the definition of Consolidated EBITDA contained
herein). All calculations of the Adjusted Total Leverage Ratio shall be made on
a Pro Forma Basis, with determinations of Adjusted Total Leverage Ratio to give
--- -----
effect to all adjustments (including, without limitation, those specified in
clause (v)) contained in the definition of "Pro Forma Basis" contained herein.
--- -----
-94-
<PAGE>
"Adjusted Total Revolving Loan Commitment" shall mean at any time the
Total Revolving Loan Commitment less the aggregate Revolving Loan Commitments of
----
all Defaulting Banks.
"Affected Loans" shall have the meaning provided in Section 4.02(i).
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person; provided, however, that for purposes of Section 9.07,
-------- -------
an Affiliate of the Borrower shall include any Person that directly or
indirectly owns more than 5% of any class of the capital stock of the Borrower
and any officer or director of the Borrower or any such Person.
"Agent" shall have the meaning provided in the first paragraph of this
Agreement and shall include any successor to the Agent appointed pursuant to
Section 12.10.
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time modified, amended and/or supplemented.
"Alliance Holdover Shareholders" shall mean certain existing
shareholders of the Borrower (prior to giving effect to the Recapitalization).
"Alliance Merger" shall have the meaning provided in Section 5.08(a).
"Apollo Group" shall mean Apollo Advisors, L.P., Apollo Investment
Fund, L.P., Apollo Investment Fund III, L.P., Apollo Overseas Partners III,
L.P., Apollo (U.K.) Partners III, L.P., AIF II, L.P., and Apollo Advisors II,
L.P., all Delaware limited partnerships (except that Apollo (U.K.) Partners III,
L.P. is a limited partnership organized under the laws of England).
"Apollo Management Agreement" shall mean the consulting agreement,
dated ___________, 1997, between Apollo Advisors, L.P. and __________________.
"Applicable Commitment Fee Percentage" shall mean, at any time, a
percentage per annum equal to 1/2 of 1%; provided, that if at any time the
--------
Interest Reduction Discount then in effect with respect to Revolving Loans is
(i) greater than or equal to 3/8 of 1% but less than 1%, then the Applicable
Commitment Fee Percentage shall instead be 3/8 of 1% and (ii) 1% or greater,
then the Applicable Commitment Fee Percentage shall instead be 1/4 of 1%.
-95-
<PAGE>
"Applicable Excess Cash Flow Percentage" shall mean, with respect to
any Excess Cash Flow Payment Date, 75%; provided that so long as no Default or
--------
Event of Default is then in existence, if on the last day of the relevant Excess
Cash Flow Payment Period, the Adjusted Total Leverage Ratio for the Test Period
then most recently ended is less than 4.00:1.00, then the Applicable Excess Cash
Flow Percentage shall instead be 50%.
"Applicable Margin" shall mean a percentage per annum equal to (i) in
the case of Revolving Loans (x) maintained as Base Rate Loans, 1.25% less the
then applicable Interest Reduction Discount and (y) maintained as Eurodollar
Loans, 2.25% less the then applicable Interest Reduction Discount and (ii) in
the case of Term Loans (x) maintained as Base Rate Loans, 1.50% less the then
applicable Interest Reduction Discount and (y) maintained as Eurodollar Loans,
2.50% less the then applicable Interest Reduction Discount.
"Applicable Prepayment Percentage" shall mean, at any time, (i) for
purposes of Sections 4.02(c) and 4.02(d), 100%, provided that if at any time the
--------
Adjusted Total Leverage Ratio is less than 4.00 to 1.00, the Applicable
Prepayment Percentage shall instead be 75% and (ii) for purposes of Section
4.02(e), 50%, provided that if at any time the Adjusted Total Leverage Ratio is
less than 4.00 to 1.00, the Applicable Prepayment Percentage shall instead be
0%. Notwithstanding anything to the contrary in this definition, at any time a
Default or Event of Default is then in existence, the Applicable Prepayment
Percentage for purposes of (x) Section 4.02(c) and (d) shall be 100% and (y)
Section 4.02(e) shall be 50%.
"Asset Sale" shall mean any sale, transfer or other disposition by the
Borrower or any of its Subsidiaries to any Person other than the Borrower or any
Wholly-Owned Subsidiary of the Borrower of any asset (including, without
limitation, any capital stock or other securities of another Person, but
excluding the sale by such Person of its own capital stock) of the Borrower or
such Subsidiary other than (i) sales, transfers or other dispositions of
inventory made in the ordinary course of business, (ii) dispositions or
transfers arising out of, or in connection with, the events described in clauses
(i) and (ii) of the definition of Recovery Event, (iii) any sale or other
disposition of assets pursuant to a Permitted Sale-Leaseback Transaction
effected in accordance with the definition thereof and the requirements of
Section 9.02(k), and (iv) other sales and dispositions that generate Net Sale
Proceeds of less than $500,000 in the aggregate in any fiscal year of the
Borrower.
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit L (appropriately
completed).
-96-
<PAGE>
"Authorized Officer" shall mean, with respect to (i) delivering
Notices of Borrowing, Notices of Conversion, Letter of Credit Requests and
similar notices, and delivering financial information and officer's certificates
pursuant to this Agreement, any treasurer or other financial officer of the
Borrower and (ii) any other matter in connection with this Agreement or any
other Credit Document, any officer (or a person or persons so designated by any
two officers) of the Borrower, in each case to the extent reasonably acceptable
to the Agent.
"Available JV Basket Amount" shall mean, on any date of determination,
an amount equal to the sum of (i) $15,000,000 minus (ii) the aggregate amount of
-----
Investments made (including for such purpose the fair market value of any
Healthcare Unit contributed to any Joint Venture (as determined in good faith by
senior management of the Borrower), net of Indebtedness and, without
duplication, Capitalized Lease Obligations assigned to, and assumed by, the
respective Joint Venture in connection therewith) pursuant to Section 9.05(l)
after the Effective Date, minus (iii) the aggregate amount of Indebtedness or
-----
other obligations (whether absolute, accrued, contingent or otherwise and
whether or not due) of any Joint Venture for which the Borrower or any of its
Subsidiaries (other than the respective Joint Venture) is liable, minus (iv) all
-----
payments made by the Borrower or any of its Subsidiaries (other than the
respective Joint Venture) in respect of Indebtedness or other obligations of the
respective Joint Venture (including, without limitation, payments in respect of
obligations described in preceding clause (iii)), plus (v) the amount of any
----
increase to the Available JV Basket Amount made after the Effective Date in
accordance with the provisions of Section 9.05(l). In connection with the
foregoing, it is understood that the acquisition of an Acquired Person which has
ownership interests in one or more Joint Ventures, pursuant to a Permitted
Acquisition effected in accordance with the relevant requirements of this
Agreement shall not be deemed to constitute an Investment pursuant to Section
9.05(l) and the Available JV Basket Amount shall not be reduced as a result of
the payment of consideration owing to effect the Permitted Acquisition (although
the Available JV Basket Amount would be affected to the extent preceding clauses
(iii) or (iv) apply with respect to the Joint Venture so acquired or to the
extent additional Investments are made in the respective Joint Venture pursuant
to Section 9.05(l)).
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing (including
any Mandatory Borrowing) or to fund its portion of any unreimbursed payment
under Section 2.03 or (ii) a Bank having notified the Agent and/or the Borrower
that it does not intend to comply with the obligations under Section 1.01(b),
1.01(d) or 2.03, in the case of either clause (i) or (ii) above as a result of
the appointment of a receiver or conservator with respect to such Bank at the
direction or request of any regulatory agency or authority.
-97-
<PAGE>
"Bankruptcy Code" shall have the meaning provided in Section 10.05.
"Base Rate" at any time shall mean the highest of (x) the rate which
is 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate, (y) the rate
which is 1/2 of 1% in excess of the Federal Funds Rate and (z) the Prime Lending
Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrower Common Stock" shall have the meaning provided in Section
7.13(a).
"Borrowing" shall mean and include (i) the borrowing of Swingline
Loans from BTCo on a given date and (ii) the borrowing of one Type of Loan
pursuant to a single Tranche by the Borrower from all of the Banks having
Commitments with respect to such Tranche on a pro rata basis on a given date (or
--- ----
resulting from conversions on a given date), having in the case of Eurodollar
Loans the same Interest Period; provided, that Base Rate Loans incurred pursuant
--------
to Section 1.10(b) shall be considered part of any related Borrowing of
Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company, in its individual capacity,
and any successor corporation thereto by merger, consolidation or otherwise.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determina tions in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Calculation Period" shall have the meaning provided in Section 8.14.
"Capital Expenditures" shall mean, with respect to any Person, for any
period, all expenditures by such Person which should be capitalized in
accordance with GAAP during such period, including all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with GAAP)
and the amount of all Capitalized Lease Obligations incurred by such Person
during such period.
-98-
<PAGE>
"Capital Lease," as applied to any Person, shall mean any lease of any
prop erty (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries, in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean, as to any Person, (i) securities issued
or directly and fully guaranteed or insured by the United States or any agency
or instrumental ity thereof (provided that the full faith and credit of the
--------
United States is pledged in support thereof) having maturities of not more than
six months from the date of acquisition, (ii) time deposits, certificates of
deposit and bankers' acceptances of any Bank or any commer cial bank having, or
which is the principal banking subsidiary of a bank holding company organized
under the laws of the United States, any State thereof, the District of Columbia
or any foreign jurisdiction having capital, surplus and undivided profits
aggregating in excess of $200,000,000 and having a long-term unsecured debt
rating of at least "A" or the equivalent thereof from S&P's or "A2" or the
equivalent thereof from Moody's, with maturities of not more than six months
from the date of acquisition by such Person, (iii) repurchase agreements with a
term of not more than 30 days, involving securities of the types described in
preceding clause (i), and entered into with commercial banks meeting the
requirements of preceding clause (ii), (iv) commercial paper issued by any
Person incorporated in the United States rated at least A-1 or the equivalent
thereof by S&P's or at least P-1 or the equivalent thereof by Moody's and in
each case maturing not more than six months after the date of acquisition by
such Person, (v) investments in money market funds substantially all of whose
assets are comprised of securities of the types described in clauses (i) through
(iv) above and (vi) demand deposit accounts maintained in the ordinary course of
business.
"Change of Control Event" shall mean, (I) at any time prior to the
consummation of a Qualified IPO, (a) Apollo Group and its Affiliates shall cease
to own on a fully diluted basis in the aggregate at least 30% of the economic
and voting interest in the Borrower's capital stock (for such purposes,
excluding the PIK Preferred Stock) or (b) Apollo Group and its Affiliates,
together with the Management Participants and other investors which own shares
of Borrower Common Stock on the Initial Borrowing Date, shall cease to own on a
fully diluted basis in the aggregate at least a majority of the outstanding
Voting Stock of the Borrower or (c) any Person or "group" (within the meaning of
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on
the Effective Date, other than the Permitted Holders, shall (A) have acquired
beneficial ownership of 30% or more on a fully diluted basis of the voting
and/or economic interest in the Borrower's capital stock or (B) obtained the
power (whether or not exercised) to elect a majority of the Borrower's directors
or (d) the Board of Directors of the Borrower shall
-99-
<PAGE>
cease to consist of a majority of Continuing Directors or (e) a "change of
control" or similar event shall occur as provided in the Senior Subordinated
Note Indenture or in any Existing Indebtedness, Permitted Debt, PIK Preferred
Stock, Disqualified Preferred Stock or Qualified Preferred Stock, to the extent
the outstanding principal amount or liquidation preference, as the case may be,
of such Existing Indebtedness, Permitted Debt, PIK Preferred Stock, Disqualified
Preferred Stock or Qualified Preferred Stock exceeds $10,000,000 or (II) at any
time after a Qualified IPO, (a) any Person or "group" (within the meaning of
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on
the Effective Date), other than the Permitted Holders, shall have acquired
beneficial ownership of 25% or more on a fully diluted basis of the voting
and/or economic interest in the Borrower's capital stock and Apollo Group and
its Affiliates shall own less than such Person or "group" on a fully diluted
basis of the economic and voting interest in the Borrower's capital stock or (b)
the Board of Directors of the Borrower shall cease to consist of a majority of
Continuing Directors or (c) a "change of control" or similar event shall occur
as provided in Senior Subordinated Note Indenture or in any Existing
Indebtedness, Permitted Debt, PIK Preferred Stock, Disqualified Preferred Stock
or Qualified Preferred Stock, to the extent the outstanding principal amount or
liquidation preference, as the case may be, of such Existing Indebtedness,
Permitted Debt, PIK Preferred Stock, Disqualified Preferred Stock or Qualified
Preferred Stock exceeds $10,000,000.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section refer ences to the Code are to the Code, as in effect at the date of
this Agreement and any subse quent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in each of
the Security Documents.
"Collateral Agent" shall mean the Agent acting as collateral agent for
the Secured Creditors.
"Collective Bargaining Agreements" shall have the meaning provided in
Section 5.12.
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Common Equity Financing Documents" shall mean all of the agreements
and documents governing, or relating to, the Common Equity Issuance.
-100-
<PAGE>
"Common Equity Issuance" shall have the meaning provided in Section
5.08(b)
"Company" shall mean any corporation, limited liability company,
partnership or other business entity (or the adjectival form thereof, where
appropriate).
"Consolidated Current Assets" shall mean, at any time, the current
assets (other than cash, Cash Equivalents and deferred income taxes to the
extent included in current assets) of the Borrower and its Subsidiaries at such
time determined on a consol idated basis.
"Consolidated Current Liabilities" shall mean, at any time, the
current liabil ities of the Borrower and its Subsidiaries determined on a
consolidated basis, but excluding deferred income taxes, restructuring costs or
reserves, litigation costs or reserves and the current portion of and accrued
but unpaid interest on any Indebtedness under this Agreement and any other long-
term Indebtedness which would otherwise be included therein.
"Consolidated Debt" shall mean, at any time, the sum of (without
duplica tion) (i) all Indebtedness of the Borrower and its Subsidiaries as would
be required to be reflected on the liability side of a balance sheet of such
Person in accordance with GAAP as determined on a consolidated basis, (ii) all
Indebtedness of the Borrower and its Subsidiaries of the type described in
clauses (iii) and (vii) of the definition of Indebtedness and (iii) all
Contingent Obligations of the Borrower and its Subsidiaries in respect of
Indebtedness of other Persons of the type referred to in preceding clauses (i)
and (ii) of this definition; provided, that for purposes of this definition, (i)
--------
the amount of Indebtedness in respect of Interest Rate Protection Agreements
shall be at any time the unrealized net loss position, if any, of the Borrower
and/or its Subsidiaries thereunder on a marked-to-market basis determined no
more than one month prior to such time, (ii) any Disqualified Preferred Stock of
the Borrower and any Preferred Stock of any of its Subsidiaries shall be treated
as Indebtedness, with an amount equal to the greater of the liquidation
preference or the maximum fixed repurchase price of any such outstanding
Preferred Stock deemed to be a component of Consolidated Debt and (iii) without
duplication of amounts already included in Consolidated Debt, Consolidated Debt
at any time shall be adjusted by adding thereto the amount of Total Non-
Consolidated Joint Venture Debt at such time.
"Consolidated EBIT" shall mean, for any period, the Consolidated Net
Income of the Borrower and its Subsidiaries, determined on a consolidated basis,
before Consolidated Interest Expense (to the extent deducted in arriving at
Consolidated Net Income) and provision for taxes based on income or gains or
losses from sales of assets other than inventory sold in the ordinary course of
business, in each case that were included in arriving at Consolidated Net
Income.
-101-
<PAGE>
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto the amount of (i) all amortization and depreciation
and other non-cash items and (ii) any management fees and consulting fees paid
pursuant to, and in accordance with the requirements of, clauses (iii) and (vi)
of Section 9.07 during such period, in each case that were deducted in arriving
at Consolidated EBIT for such period; provided that (x) without duplication of
--------
amounts already included in Consolidated EBITDA, Consolidated EBITDA for any
period shall be adjusted by adding thereto the amount of Total Non-Consolidated
Joint Venture EBITDA for the respective period and (y) for purposes of any
determination of compliance with the financial covenants contained in Sections
9.08 through 9.11, inclusive, or any determination of the Adjusted Total
Leverage Ratio, the Adjusted Senior Leverage Ratio or the Total Leverage Ratio
elsewhere in this Agreement, Consolidated EBITDA for any Test Period shall mean
the product of (x) Consolidated EBITDA for the two most recent fiscal quarters
ended during such Test Period multiplied by (y) 2.
"Consolidated Fixed Charge Coverage Ratio" for any period shall mean
the ratio of (x) Consolidated EBITDA (determined after giving effect to the
proviso to the definition thereof) for such period to (y) Consolidated Fixed
Charges for such period.
"Consolidated Fixed Charges" for any period shall mean the sum,
without duplication, of (i) Consolidated Interest Expense for such period, (ii)
the amount of all Capital Expenditures made by the Borrower and its Subsidiaries
during such period (other than Capital Expenditures made with the proceeds or
credits from equipment exchanges, asset sales or insurance proceeds from any
Recovery Event to the extent such proceeds are not required to be applied by the
Borrower as a mandatory repayment pursuant to Section 4.02(c) or (f), as the
case may be) and (iii) the scheduled principal amount of all amorti zation
payments on all Indebtedness (excluding payments pursuant to the Refinancing and
the principal component of any Capitalized Lease Obligation to the extent the
Capital Expenditures financed pursuant to such Capitalized Lease Obligation were
made after the Initial Borrowing Date and were included in the determination of
Consolidated Fixed Charges in a prior period) of the Borrower and its
Subsidiaries for such period (as determined on the first day of the respective
period).
"Consolidated Interest Coverage Ratio" for any period shall mean the
ratio of Consolidated EBITDA (determined after giving effect to the proviso to
the definition thereof) to Consolidated Interest Expense for such period.
"Consolidated Interest Expense" shall mean, for any period, the total
consol idated interest expense of the Borrower and its Subsidiaries for such
period (calculated without regard to any limitations on the payment thereof)
plus, without duplication, (i) that portion of Capitalized Lease Obligations of
the Borrower and its Subsidiaries representing the interest factor for such
period, and capitalized interest expense, plus (ii) the product of
-102-
<PAGE>
(x) the amount of all cash Dividend requirements (whether or not declared or
paid) on Disqualified Preferred Stock of the Borrower and on any Preferred Stock
of any of its Subsidiaries paid, accrued or scheduled to paid or accrued during
such period multiplied by (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective consolidated
Federal, state, local and foreign tax rate (expressed as a decimal number
between one and zero) of the Borrower as reflected in the audited consolidated
financial statements of the Borrower for its most recently completed fiscal
year, which amounts described in preceding clause (ii) shall be treated as
interest expense of the Borrower and its Subsidiaries for purposes of this
definition regardless of the treatment of such amounts under GAAP, in each case
net of the total consolidated cash interest income of the Borrower and its
Subsidiaries for such period, but excluding the amortization of any deferred
financing costs or of any costs in respect of any Interest Rate Protection
Agreement. Notwithstanding anything to the contrary contained above, to the
extent Consolidated Interest Expense is to be determined for any Test Period
which ends prior to the first anniversary of the Initial Borrowing Date,
Consolidated Interest Expense for all portions of such period occurring prior to
the Initial Borrowing Date shall be calculated in accordance with the definition
of Test Period contained herein.
"Consolidated Net Income" shall mean, for any period, the net after
tax income of the Borrower and its Subsidiaries determined on a consolidated
basis, without giving effect to any extraordinary or non-recurring gains or
losses to the extent not related to the operations of the Borrower and its
Subsidiaries, any other non-cash expenses incurred or payments made in
connection with the Transaction, and without giving effect to gains and losses
from the sale or disposition of assets (other than sales or dispositions of
inventory, equipment, raw materials and supplies) by the Borrower and its
Subsidiaries; provided that the following items shall be excluded in computing
--------
Consolidated Net Income (without duplication): (i) the net income or net losses
of any Person in which any Person or Persons other than the Borrower and its
Wholly-Owned Subsidiaries has an equity interest or interests, to the extent of
such equity interests held by Persons other than the Borrower and its Wholly-
Owned Subsidiaries in such Person, (ii) except for determinations expressly
required to be made on a Pro Forma Basis, the net income (or loss) of any Person
--- -----
accrued prior to the date it becomes a Wholly-Owned Subsidiary or all or
substantially all of the property or assets of such Person are acquired by a
Wholly-Owned Subsidiary and (iii) the net income of any Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by such
Subsidiary of such net income is not at the time permitted by the operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Subsidiary.
"Consolidated Senior Debt" shall mean at any time (x) Consolidated
Debt less (y) the sum of (i) the aggregate outstanding principal amount of the
Senior Subordinated Notes at such time and (ii) the aggregate principal amount
of all other
-103-
<PAGE>
subordinated debt incurred pursuant to Sections 9.04(f) and (j) and outstanding
at such time and otherwise included in Consolidated Debt.
"Consolidated Subsidiary" shall mean each Subsidiary of the Borrower
the financial results of which are consolidated with those of the Borrower, in
accordance with GAAP, for financial reporting purposes.
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any man ner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any prop erty constituting direct
or indirect security therefor, (b) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof; provided, however, that
-------- -------
the term Contingent Obligation shall not include endorsements of instruments for
deposit or collection or standard contractual indemnities entered into, in each
case in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"Continuing Directors" shall mean the directors of the Borrower on the
Effective Date and each other director if such director's nomination for the
election to the Board of Directors of the Borrower is recommended by a majority
of the then Continuing Directors.
"Credit Documents" shall mean this Agreement, the Notes, the
Subsidiaries Guaranty and each Security Document.
"Credit Event" shall mean the making of a Loan (other than a Revolving
Loan made pursuant to a Mandatory Borrowing) or the issuance of a Letter of
Credit.
"Credit Party" shall mean the Borrower and each Subsidiary Guarantor.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
-104-
<PAGE>
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Disqualified Preferred Stock" shall mean any Preferred Stock of the
Borrower other than Qualified Preferred Stock.
"Dividend" shall have the meaning provided in Section 9.06.
"Documents" shall mean and include (i) the Credit Documents, (ii) the
Common Equity Financing Documents, (iii) the Senior Subordinated Notes
Documents, (iv) the Recapitalization Documents, (v) the PIK Preferred Stock
Documents, (vi) the Refinancing Documents and (vii) all other documents,
agreements and instruments executed in connection with the Transaction.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower
incorporated or organized in the United States or any State or territory
thereof.
"Effective Date" shall have the meaning provided in Section 13.10.
"Eligible Transferee" shall mean and include a commercial bank, mutual
fund, financial institution, a "qualified institutional buyer" (as defined in
Rule 144A of the Securities Act), any fund that invests in bank loans or any
other "accredited investor" (as defined in Regulation D of the Securities Act)
(other than an individual).
"Employee Benefit Plans" shall have the meaning set forth in Section
5.12.
"Employment Agreements" shall have the meaning set forth in Section
5.12.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any violation (or alleged violation) by the Borrower or any of its
Subsidiaries under any Environmental Law (hereafter "Claims") or any permit
issued to the Borrower or any of its Subsidiaries under any such law, including,
without limitation, (a) any and all Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (b) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
"Environmental Law" shall mean any federal, state or local policy,
statute, law, rule, regulation, ordinance, code or rule of common law now or
hereafter in effect and
-105-
<PAGE>
in each case as amended, and any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent, decree or
judgment (for purposes of this definition (collectively, "Laws")), relating to
the environment, or Hazardous Materials or health and safety to the extent such
health and safety issues arise under the Occupational Safety and Health Act of
1970, as amended, or any such similar Laws.
"Equity Investors" shall mean and include (i) the Apollo Group and
(ii) the Management Participants.
"Equity Retention" shall have the meaning provided in Section 5.08(a).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued there under. Section references to ERISA are to ERISA, as in effect at
the date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with the Borrower or a Subsidiary of the Borrower would
be deemed to be a "single employer" (i) within the meaning of Section 414(b),
(c), (m) or (o) of the Code or (ii) as a result of the Borrower or a Subsidiary
of the Borrower being or having been a general partner of such person.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.08(b).
"Eurodollar Rate" shall mean with respect to each Interest Period for
a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/100 of
1%) of the offered quotation to first-class banks in the interbank Eurodollar
market by BTCo for U.S. dollar deposits of amounts in same day funds comparable
to the outstanding principal amount of the Eurodollar Loan of BTCo for which an
interest rate is then being determined with maturities comparable to the
Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00
A.M. (New York time) on the date which is two Business Days prior to the
commencement of such Interest Period divided (and rounded upward to the next
whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D (or any successor category of liabilities
under Regulation D).
"Event of Default" shall have the meaning provided in Section 10.
-106-
<PAGE>
"Excess Cash Flow" shall mean, for any period, the remainder of (a)
the sum of (i) Adjusted Consolidated Net Income for such period, (ii) without
duplication of amounts already included in Adjusted Consolidated Net Income, the
Total Non-Consolidated Joint Venture EBITDA for such period and (iii) the
decrease, if any, in Adjusted Consolidated Working Capital from the first day to
the last day of such period, minus (b) the sum of (i) the amount of Capital
Expenditures made by the Borrower and its Subsid iaries on a consolidated basis
during such period, except to the extent financed with the proceeds of
Indebtedness (other than the proceeds of Revolving Loans) or pursuant to
Capitalized Lease Obligations or with proceeds of asset sales, asset trade-ins
or insurance, (ii) the aggregate amount of permanent principal payments of
Indebtedness for borrowed money of the Borrower and its Subsidiaries and the
permanent repayment of the principal component of Capitalized Lease Obligations
of the Borrower and its Subsidiaries (excluding (1) payments pursuant to the
Refinancing, (2) payments with proceeds of asset sales, (3) payments with the
proceeds of Indebtedness or equity and (4) payments of Loans or other
Obligations) during such period and (iii) the increase, if any, in Adjusted
Consolidated Working Capital from the first day to the last day of such period.
"Excess Cash Flow Payment Date" shall mean the date occurring 120 days
after the last day of a fiscal year of the Borrower (commencing with the fiscal
year ending on December 31, 1998).
"Excess Cash Flow Payment Period" shall mean, with respect to the
repayment required on each Excess Cash Flow Payment Date, the immediately
preceding fiscal year of the Borrower.
"Existing Alliance Credit Agreement" shall mean the Credit Agreement,
dated as of __________, among the Borrower, _________________ and __________, as
in effect on the Initial Borrowing Date.
"Existing Indebtedness" shall have the meaning provided in Section
5.09(c).
"Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.12.
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate 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 which is a Business Day, the average of the
-107-
<PAGE>
quotations for such day on such transactions received by the Agent from three
Federal Funds brokers of recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 3.01.
"Final Maturity Date" shall mean December 18, 2003.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower other
than a Domestic Subsidiary.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; it being understood and
agreed that deter minations in accordance with GAAP for purposes of Section 9,
including defined terms as used therein, are subject (to the extent provided
therein) to Section 13.07(a).
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; and (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely hazardous wastes,"
"restrictive hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar meaning and regulatory
effect.
"Healthcare Unit" shall mean any of the following: (i) a magnetic
resonance imaging machine, (ii) a computer assisted tomography machine (CAT
Scanner), (iii) a SPECT machine, (iv) a lithotripsy machine and (v) any other
similar healthcare or diagnostic device used in connection with a Permitted
Business, together with any computer and all attachments, software and related
equipment (including any related vehicles, buildings or leasehold improvements)
required in connection with the operation, transport, housing or storage of any
of the foregoing.
"Healthcare Unit Replacement" shall mean the exchange, sale or other
disposition of a Healthcare Unit, which, in the reasonable opinion of the
Borrower, is obsolete, uneconomic, or no longer useful in the conduct of the
Borrower's or any of its Subsidiaries' business or otherwise requires upgrading,
the purpose of which exchange, sale or other disposition is to acquire (and has
resulted within 180 days prior to such exchange, sale or disposition, or will
result within 180 days following such exchange, sale or disposition, in the
acquisition of) a replacement Healthcare Unit.
-108-
<PAGE>
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services payable to the sellers thereof or any of such seller's
assignees which in accordance with GAAP would be shown on the liability side of
the balance sheet of such Person but excluding deferred rent as determined in
accordance with GAAP, (iii) the face amount of all letters of credit issued for
the account of such Person and, without duplica tion, all drafts drawn
thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all
obligations of such Person to pay a specified purchase price for goods or
services whether or not deliv ered or accepted, i.e., take-or-pay and similar
----
obligations, (vii) all obligations under Interest Rate Protection Agreements and
Other Hedging Agreements and (viii) all Contingent Obligations of such Person,
provided, that Indebtedness shall not include trade payables and accrued
- --------
expenses, in each case arising in the ordinary course of business.
"Initial Borrowing Date" shall mean the date upon which the initial
Borrowing of Loans occurs.
"Intercompany Loan" shall have the meaning provided in Section
9.05(f).
"Intercompany Notes" shall mean promissory notes, in the form of
Exhibit M, evidencing Intercompany Loans.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period," with respect to any Eurodollar Loan, shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement or other similar agreement or arrangement.
"Interest Reduction Discount" shall mean initially zero; provided,
--------
that from and after the first day of any Margin Reduction Period (the "Start
Date") occurring after the last day of the first fiscal quarter of the Borrower
ended after the Initial Borrowing Date to and including the last day of such
Margin Reduction Period (the "End Date"), the Interest Reduction Discount shall
be (1) for all purposes of determining interest with respect to Revolving Loans
and Swingline Loans, the respective percentage per annum set forth in clause
(A), (B), (C), (D), (E) or (F) below if, but only if, as of the last day of the
most recent fiscal quarter or year, as the case may be, of the Borrower ended
immediately prior
-109-
<PAGE>
to such Start Date (the "Test Date") the conditions in clause (A), (B), (C),
(D), (E) or (F) below are met:
(A) 1/4 of 1% if, but only if, as of the Test Date for such Start Date
the Total Leverage Ratio for the Test Period ended on such Test Date shall
be less than 4.50:1.00 and the conditions set forth in none of clauses (B),
(C), (D), (E) and (F) below are satisfied;
(B) 3/8 of 1% if, but only if, as of the Test Date for such Start Date
the Total Leverage Ratio for the Test Period ended on such Test Date shall
be less than 4.25:1.00 and the conditions set forth in none of clauses (C),
(D), (E) and (F) below are satisfied;
(C) 1/2 of 1% if, but only if, as of the Test Date for such Start Date
the Total Leverage Ratio for the Test Period ended on such Test Date shall
be less than 4.00:1.00 and the conditions set forth in none of clauses (D),
(E) and (F) below are satisfied;
(D) 3/4 of 1% if, but only if, as of the Test Date for such Start Date
the Total Leverage Ratio for the Test Period ended on such Test Date shall
be less than 3.50:1.00 and the conditions set forth in neither clause (E)
nor (F) below are satisfied;
(E) 1% if, but only if, as of the Test Date for such Start Date the
Total Leverage Ratio for the Test Period ended on such Test Date shall be
less than 3.00:1.00 and the conditions set forth in clause (F) below are
not satisfied; or
(F) 1-1/4% if, but only if, as of the Test Date for such Start Date the
Total Leverage Ratio for the Test Period ended on such Test Date shall be
less than or equal to 2.50:1.00,
or (2) for all purposes of determining interest with respect to Term Loans, 1/4%
of 1% if, but only if, as of the Test Date most recently ended prior to such
Start Date, the Total Leverage Ratio for the Test Period ended on such Test Date
shall be less than 4.00:1.00.
The Total Leverage Ratio shall be determined for the relevant Test Period, in
each case taken as one accounting period, by delivery of an officer's
certificate of the Borrower to the Banks pursuant to Section 8.01(e) (or in the
case of the Test Period ended December 31, 1997, the IRD Eligibility
Certificate), which certificate shall set forth the calculation of the Total
Leverage Ratio and the Interest Reduction Discount which shall thereafter be
applicable (until the same is changed or ceases to apply in accordance with the
following sentences). The Interest Reduction Discount so determined shall
apply, except as set forth
-110-
<PAGE>
below, from the date on which such officer's certificate is delivered to the
Agent to the earlier of (x) the date on which the next certificate is delivered
to the Agent pursuant to Section 8.01(e) and (y) the 45th day following the
first day of the fiscal quarter immediately following the delivery of such
certificate to the Agent. Notwithstanding anything to the contrary contained
above, the Interest Reduction Discount shall be zero if no such officer's
certificate has been delivered to the Banks which sets forth the Total Leverage
Ratio for the relevant Test Period or the financial statements upon which any
such calculations are based have not been delivered, until such a certificate
and/or financial statements are delivered. Notwithstanding anything to the
contrary above in this definition, the Interest Reduction Discount shall be zero
at all times when there shall exist a Default or Event of Default. It is
understood and agreed that the Interest Reduction Discount as provided above
shall in no event be cumulative and only the Interest Reduction Discount
available pursuant to (x) in the case of Revolving Loans and Swingline Loans,
clause (1)(A), (B), (C), (D), (E), or (F) if any, contained in this definition
shall be applicable or (y) in the case of Term Loans, clause (2) contained in
this definition shall be applicable.
"Investment" shall have the meaning provided in the preamble to Section
9.05.
"IRD Eligibility Certificate" shall mean a certificate of the chief
financial officer or other Authorized Officer of the Borrower to the effect that
no Default or Event of Default exists, which certificate shall (i) be delivered
solely in respect of the fiscal year of the Borrower ended December 31, 1997,
(ii) set forth the calculations required to establish compliance with the
provisions of Sections 3.03, 9.02, 9.04(d), (g) and (j) and 9.05 (a), (g), (l)
and (m) and 9.08 through and including 9.11 as at the end of such fiscal year
and (iii) the calculation of the Total Leverage Ratio, the Adjusted Total
Leverage Ratio and the Adjusted Senior Leverage Ratio as at the last day of the
Test Period most recently ended.
"Joint Venture" shall mean any Person, other than an individual or a
Wholly-Owned Subsidiary of the Borrower, (i) in which the Borrower or a
Subsidiary of the Borrower holds or acquires an ownership interest (whether by
way of capital stock, partnership or limited liability company interest, or
other evidence of ownership) and (ii) which is engaged in a Permitted Business.
"L/C Supportable Indebtedness" shall mean (i) obligations of the
Borrower or its Wholly-Owned Subsidiaries incurred in the ordinary course of
business with respect to insurance obligations and workers' compensation, surety
bonds and other similar statutory obligations and (ii) such other obligations of
the Borrower or any of its Wholly-Owned Subsidiaries as are reasonably
acceptable to the Agent and the Letter of Credit Issuer and otherwise permitted
to exist pursuant to the terms of this Agreement.
-111-
<PAGE>
"Leasehold" of any Person shall mean all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section 2.01(a).
"Letter of Credit Fees" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Issuer" shall mean BTCo and any other Bank which, at
the request of the Borrower and with the consent of the Agent, agrees in such
Bank's sole discretion to become a Letter of Credit Issuer for purposes of
issuing Letters of Credit pursuant to Section 2. The sole Letter of Credit
Issuer on the Initial Borrowing Date is BTCo.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in Section
2.02(a).
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any similar
recording or notice statute, and any lease having substantially the same effect
as the foregoing).
"Loan" shall mean each Term Loan, each Revolving Loan and each Swingline
Loan.
"Management Agreements" shall have the meaning provided in Section 5.12.
"Management Participants" shall mean certain members of management of
the Borrower previously identified and satisfactory to the Agent.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(d).
"Margin Reduction Period" shall mean each period which shall commence on
a date on which the financial statements are delivered pursuant to Section
8.01(b) or (c) (or the date of the delivery of the IRD Eligibility Certificate,
if applicable), as the case may be, and which shall end on the earlier of (i)
the date of actual delivery of the next financial statements pursuant to Section
8.01(b) or (c), as the case may be, (but excluding the delivery of the financial
statements delivered pursuant to Section 9.01(c) for the fiscal year
-112-
<PAGE>
ended December 31, 1997, in the event the IRD Eligibility Certificate has been
delivered to the Banks) and (ii) the latest date on which the next financial
statements are required to be delivered pursuant to Section 8.01(b) or (c), as
the case may be, (or the date occurring 45 days after the close of the first
quarterly accounting period in the fiscal year of the Borrower ended December
31, 1998) it being understood that the first Margin Reduction Period shall
commence on the earlier of (x) the date of the delivery of the IRD Eligibility
Certificate and (y) the date of delivery of the first set of financial
statements pursuant to Section 8.01(b) after the Initial Borrowing Date.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole.
"Material Contracts" shall have the meaning provided in Section 5.12.
"Maturity Date", with respect to any Tranche of Loans, shall mean the
Final Maturity Date or the Revolving Loan Maturity Date, as the case may be.
"Maximum Permitted Acquisition Leverage Ratio" shall mean, at any time,
the maximum Adjusted Leverage Ratio which may exist pursuant to Section 9.11
without giving rise to a Default or Event of Default at such time, adjusted by
reducing the ratio appearing in such maximum Adjusted Leverage Ratio by 0.25.
"Maximum Swingline Amount" shall mean $2,500,000.
"Minimum Borrowing Amount" shall mean (i) for Revolving Loans,
$1,000,000, (ii) for Term Loans, $5,000,000, and (iii) for Swingline Loans,
$500,000.
"Moody's" shall mean Moody's Investors Service, Inc.
"Net Cash Proceeds" shall mean for any event requiring a reduction of
the Total Revolving Loan Commitment and/or repayment of Term Loans pursuant to
Section 3.03 or 4.02, as the case may be, the gross cash proceeds (including any
cash received by way of deferred payment pursuant to a promissory note,
receivable or otherwise, but only as and when received) received from such
event, net of reasonable transaction costs (including, as applicable, any
underwriting, brokerage or other customary commissions and reasonable legal,
advisory and other fees and expenses associated therewith) received from any
such event.
-113-
<PAGE>
"Net Sale Proceeds" shall mean for any sale of assets, the gross cash
proceeds (including any cash received by way of deferred payment pursuant to a
promissory note, receivable or otherwise, but only as and when received)
received from any sale of assets, net of (i) reasonable transaction costs
(including, without limitation, any underwriting, brok erage or other customary
selling commissions and reasonable legal, advisory and other fees and expenses,
including title and recording expenses, associated therewith) and payments of
unassumed liabilities relating to the assets sold at the time of, or within 30
days after, the date of such sale, (ii) the amount of such gross cash proceeds
required to be used to repay any Indebtedness (other than Indebtedness of the
Banks pursuant to this Agreement) which is secured by the respective assets
which were sold, and (iii) the estimated marginal increase in income taxes which
will be payable by the Borrower's consolidated group with respect to the fiscal
year in which the sale occurs as a result of such sale; provided, however, that
-------- -------
such gross proceeds shall not include any portion of such gross cash proceeds
which the Borrower determines in good faith should be reserved for post-closing
adjustments (including indemnification payments) (to the extent the Borrower
delivers to the Banks a certificate signed by its chief financial officer or
treasurer, controller or chief accounting officer as to such determination), it
being understood and agreed that on the day that all such post-closing
adjustments have been determined (which shall not be later than six months
following the date of the respective asset sale), the amount (if any) by which
the reserved amount in respect of such sale or disposition exceeds the actual
post-closing adjustments payable by the Borrower or any of its Subsidiaries
shall constitute Net Sale Proceeds on such date received by the Borrower and/or
any of its Subsidiaries from such sale, lease, transfer or other disposition.
The parties hereto acknowledge and agree that Net Sale Proceeds shall not
include any trade-in-credits or purchase price reductions received by the
Borrower or any of its Subsidiaries in connection with an exchange of equipment
for replacement equipment that is the functional equivalent of such exchanged
equipment.
"Newport" shall mean Newport Investment LLC, a Delaware limited
liability company.
"Non-Consolidated Joint Venture" shall mean any Joint Venture which is
not a Consolidated Subsidiary of the Borrower.
"Non-Consolidated Joint Venture Debt" shall mean, for each Non-
Consolidated Joint Venture at any time, the Proportionate Share of the increase
(or decrease) to Consolidated Debt at such time which would have resulted if the
respective Joint Venture had instead been a Wholly-Owned Subsidiary of the
Borrower at such time.
"Non-Consolidated Joint Venture EBITDA" shall mean, for each Non-
Consolidated Joint Venture for any period, the Proportionate Share of the
increase (or decrease) to Consolidated EBITDA for such period which would have
occurred if the
-114-
<PAGE>
respective Joint Venture had instead been a Wholly-Owned Subsidiary of the
Borrower during such period (or, if shorter, that portion of such period during
which the respective Non-Consolidated Joint Venture was a Non-Consolidated Joint
Venture). Notwithstanding anything to the contrary contained above, for
purposes of any determination of Non-Consolidated Joint Venture EBITDA used in a
computation of Total Non-Consolidated Joint Venture EBITDA for purposes of the
definition of Excess Cash Flow, (A) if Non-Consolidated Joint Venture EBITDA for
the respective period, as determined pursuant to the immediately preceding
sentence, is positive, the amount thereof for such purposes shall be limited to
the lesser of (x) the amount determined pursuant to the immediately preceding
sentence and (y) the amount of cash actually distributed during the respective
period by such Non-Consolidated Joint Venture to the Borrower or its Wholly-
Owned Subsidiaries and (B) if Non-Consolidated Joint Venture EBITDA for the
respective period is negative, such negative amount shall be included for such
purposes, but only to the extent the aggregate of all negative amounts so
included (for the respective period and all prior periods occurring after the
Initial Borrowing Date) does not exceed the aggregate amount theretofore
invested by the Borrower and its Subsidiaries in the respective Non-Consolidated
Joint Venture; provided that preceding clause (B) shall not be applicable to any
Non-Consolidated Joint Venture acquired pursuant to a Permitted Acquisition.
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting Bank.
"Non-Subsidiary Joint Venture" shall mean each Joint Venture which is
not a Subsidiary of the Borrower.
"Non-Wholly Owned Entity" shall have the meaning provided in the
definition of Permitted Acquisition.
"Note" shall mean each Term Note, each Revolving Note and the Swingline
Note.
"Notice of Borrowing" shall have the meaning provided in Section
1.03(a).
"Notice of Conversion" shall have the meaning provided in Section 1.06.
"Notice Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to the Borrower and the Banks from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to the
Agent, the Collateral Agent or any Bank pursuant to the terms of this Agreement
or any other Credit Document.
-115-
<PAGE>
"Other Hedging Agreements" shall mean any foreign exchange contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against fluctuations in currency values.
"Participant" shall have the meaning provided in Section 2.03(a).
"Payment Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to the Borrower and the Banks from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquired Debt" shall have the meaning set forth in Section
9.04(d).
"Permitted Acquisition" shall mean the acquisition by the Borrower or
any of its Wholly-Owned Subsidiaries of assets constituting a business, division
or product line of any Person not already a Subsidiary of the Borrower or any of
its Wholly-Owned Subsidiaries or of 100% of the capital stock or other equity
interests of any such Person, which Person shall, as a result of such
acquisition, become a Domestic Subsidiary of the Borrower or such Wholly-Owned
Subsidiary, provided that (A) the consideration paid by the Borrower or such
--------
Wholly-Owned Subsidiary consists solely of cash (including proceeds of Revolving
Loans), the issuance of the Borrower Common Stock, the issuance of any Qualified
Preferred Stock or Disqualified Preferred Stock otherwise permitted in Section
9.13, the issuance of Indebtedness otherwise permitted in Section 9.04
(including Permitted Subordinated Indebtedness) and the assumption/acquisition
of any Permitted Acquired Debt (calculated in accordance with GAAP) relating to
such business, division, product line or Person which is permitted to remain
outstanding in accordance with the requirements of Section 9.04, (B) in the case
of the acquisition of 100% of the capital stock or other equity interests of any
Person, such Person (the "Acquired Person") shall own no capital stock or other
equity interests of any other Person unless either (x) the Acquired Person owns
100% of the capital stock or other equity interests of such other Person or (y)
if the Acquired Person owns capital stock or equity interests in any other
Person which is not a Wholly-Owned Subsidiary of the Acquired Person (a "Non-
Wholly Owned Entity"), both (1) the Acquired Person shall not have been created
or established in contemplation of, or for purposes of, the respective Permitted
Acquisition and (2) any Non-Wholly Owned Entity of the Acquired Person shall
have been non-wholly-owned prior to the date of the respective Permitted
Acquisition and not created or established in contemplation thereof, (C)
substantially all of the business, division or product line acquired pursuant to
the respective Permitted Acquisition, or the business of the Person acquired
pursuant to the respective Permitted Acquisition and its Subsidiaries taken as a
whole, is in the United States, (D) the assets acquired, or the business of the
Person whose stock is acquired, shall be in a
-116-
<PAGE>
Permitted Business and (E) all applicable requirements of Sections 8.14 and 9.02
applicable to Permitted Acquisitions are satisfied. Notwithstanding anything to
the contrary contained in the immediately preceding sentence, an acquisition
which does not otherwise meet the requirements set forth above in the definition
of "Permitted Acquisition" shall constitute a Permitted Acquisition if, and to
the extent, the Required Banks agree in writing that such acquisition shall
constitute a Permitted Acquisition for purposes of this Agreement.
"Permitted Acquisition Additional Cost-Savings" shall mean, in
connection with each Permitted Acquisition, those demonstrable cost-savings
adjustments (in each case not included pursuant to clause (iii) or (iv) of the
definition of Pro Forma Basis contained herein) reasonably anticipated by the
--- -----
Borrower to be achieved in connection with such Permitted Acquisition for the 12
month period following the consummation of such Permitted Acquisition, which
cost-savings adjustments shall be estimated on a good faith basis by the
Borrower and, if requested by the Agent, be verified by a nationally recognized
accounting firm or as otherwise agreed to by the Agent.
"Permitted Business" shall mean the mobile magnetic resonance imaging
business conducted by the Borrower and its Subsidiaries on the Effective Date,
any imaging or other healthcare services business, the provision of services to
hospitals and other healthcare providers and reasonable extensions of the
foregoing.
"Permitted Debt" shall mean and include Permitted Acquired Debt,
Permitted Subordinated Refinancing Indebtedness and Permitted Subordinated
Indebtedness.
"Permitted Encumbrances" shall mean (i) those liens, encumbrances and
other matters affecting title to any Real Property and found reasonably
acceptable by the Agent, (ii) as to any particular Real Property at any time,
such easements, encroachments, covenants, rights of way, minor defects,
irregularities or encumbrances on title which could reasonably be expected to
materially impair such Real Property for the purpose for which it is held by the
mortgagor thereof, or the lien held by the Collateral Agent, (iii) zoning and
other municipal ordinances which are not violated in any material respect by the
existing improvements and the present use made by the mortgagor thereof of the
premises, (iv) general real estate taxes and assessments not yet delinquent, and
(v) such other similar items as the Agent may consent to (such consent not to be
unreasonably withheld).
"Permitted Holders" shall mean Apollo Group and its Affiliates and the
Management Participants.
"Permitted Liens" shall have the meaning provided in Section 9.03.
"Permitted Sale-Leaseback Transaction" shall mean any sale by the
Borrower or any of its Subsidiaries of any Healthcare Unit first acquired by the
Borrower or such
-117-
<PAGE>
Subsidiary after the Initial Borrowing Date which Healthcare Unit is then leased
back to the Borrower or such Subsidiary, provided that (i) the proceeds of the
--------
respective sale shall be entirely cash and in an amount at least equal to 85% of
the aggregate amount expended by the Borrower or such Subsidiary in so acquiring
such Healthcare Unit, (ii) such sale and leaseback are effected within 90 days
of the acquisition by the Borrower or such Subsidiary of such Healthcare Unit,
and (iii) the respective transaction is otherwise effected in accordance with
the applicable requirements of Section 9.02(k).
"Permitted Subordinated Indebtedness" shall mean subordinated
Indebtedness of the Borrower incurred in connection with a Permitted Acquisition
and in accordance with Section 8.14, which Permitted Subordinated Indebtedness
and all terms and conditions thereof (including, without limitation, the
maturity thereof, the interest rate applicable thereto, amortization, defaults,
remedies, voting rights, subordination provisions, etc.), and the documentation
therefor, shall be reasonably satisfactory to the Agent, provided, that in any
--------
event, unless the Required Banks otherwise expressly consent in writing prior to
the incurrence thereof, (i) no such Indebtedness shall be guaranteed by the
Borrower or any of its Subsidiaries and (ii) no such Indebtedness shall be
secured by any asset of the Borrower or any of its Subsidiaries. The incurrence
of Permitted Subordinated Indebtedness shall be deemed to be a representation
and warranty by the Borrower that all conditions thereto have been satisfied in
all material respects and that same is permitted in accordance with the terms of
this Agreement, which representation and warranty shall be deemed to be a repre
sentation and warranty for all purposes hereunder, including, without
limitation, Sections 6 and 10.
"Permitted Subordinated Refinancing Indebtedness" shall mean
Indebtedness of the Borrower issued or given in exchange for, or the proceeds of
which are used to refinance, the Senior Subordinated Notes, so long as (a) such
Indebtedness has a weighted average life to maturity greater than or equal to
the weighted average life to maturity of the Senior Subordinated Notes, (b) such
refinancing does not (i) increase the amount of such Indebtedness outstanding
immediately prior to such refinancing or (ii) add guarantors, obligors or
security from that which applied to the Senior Subordinated Notes, (c) such
Indebtedness has substantially the same (or, from the perspective of the Banks,
more favorable) subordination provisions, if any, as applied to the Senior
Subordinated Notes, and (d) all other terms of such refinancing (including,
without limitation, with respect to the amortization schedules, redemption
provisions, maturities, covenants, defaults and remedies), are not, taken as a
whole, materially less favorable to the Borrower than those previously existing
with respect to the Senior Subordinated Notes.
"Person" shall mean any individual, partnership, joint venture, firm,
corpora tion, limited liability company, association, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
-118-
<PAGE>
"PIK Preferred Stock" shall mean the pay-in-kind preferred stock of the
Borrower, $.01 par value per share, issued pursuant to the PIK Preferred Stock
Documents.
"PIK Preferred Stock Documents" shall mean the documents executed and
delivered with respect to the PIK Preferred Stock.
"Plan" shall mean any pension plan as defined in Section 3(2) of ERISA,
which is maintained or contributed to by (or to which there is an obligation to
contribute of) the Borrower or a Subsidiary of the Borrower or an ERISA
Affiliate, and each such plan for the five year period immediately following the
latest date on which the Borrower, or a Subsidiary of the Borrower or an ERISA
Affiliate maintained, contributed to or had an obligation to contribute to such
plan.
"Pledge Agreement" shall have the meaning provided in Section 5.10(a).
"Pledge Agreement Collateral" shall mean all "Collateral" as defined in
the Pledge Agreement.
"Pledged Securities" shall mean all the Pledged Securities as defined in
the Pledge Agreement.
"Preferred Stock," as applied to the capital stock of any Person, means
capital stock of such Person (other than common stock of such Person) of any
class or classes (however designed) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of capital
stock of any other class of such Person, and shall include any Qualified
Preferred Stock and Disqualified Preferred Stock.
"Prime Lending Rate" shall mean the rate which BTCo announces from time
to time as its prime lending rate, the Prime Lending Rate to change when and as
such prime lending rate changes. The Prime Lending Rate is a reference rate and
does not necessarily represent the lowest or best rate actually charged to any
customer. BTCo may make commercial loans or other loans at rates of interest
at, above or below the Prime Lending Rate.
"Pro Forma Balance Sheet" shall have the meaning provided in Section
--- -----
5.15.
"Pro Forma Basis" shall mean, in connection with any calculation of
--- -----
compliance with any financial covenant or financial term, the calculation
thereof after giving effect on a pro forma basis to (w) if the relevant period
to be tested includes any period occurring prior to the Initial Borrowing Date,
the consummation of the Transaction as if same had occurred on the first day of
such period, (x) the incurrence of any
-119-
<PAGE>
Indebtedness (other than revolving Indebtedness, except to the extent same is
incurred to finance the Transaction, to refinance other outstanding Indebtedness
or to finance Permitted Acquisitions) or Preferred Stock (other than Qualified
Preferred Stock of the Borrower) after the first day of the relevant Calculation
Period as if such Indebtedness or Preferred Stock had been incurred or issued
(and the proceeds thereof applied) on the first day of the relevant Calculation
Period, (y) the permanent repayment of any Indebtedness (other than revolving
Indebtedness except to the extent paid with Permitted Debt or Disqualified
Preferred Stock) or Preferred Stock (other than Qualified Preferred Stock of the
Borrower) after the first day of the relevant Calculation Period as if such
Indebtedness or Preferred Stock had been retired or redeemed on the first day of
the relevant Calculation Period and (z) the Permitted Acquisition, if any, then
being consummated as well as any other Permitted Acquisition consummated after
the first day of the relevant Calculation Period and on or prior to the date of
the respective Permitted Acquisition then being effected, with the following
rules to apply in connection therewith:
(i) all Indebtedness and Preferred Stock (other than Qualified
Preferred Stock of the Borrower) (x) (other than revolving Indebtedness,
except to the extent same is incurred to finance the Transaction, to
refinance other outstanding Indebtedness, or to finance Permitted
Acquisitions) incurred or issued after the first day of the relevant
Calculation Period (whether incurred to finance a Permitted Acquisition, to
refinance Indebtedness or otherwise) shall be deemed to have been incurred
or issued (and the proceeds thereof applied) on the first day of the
respective Calculation Period and remain outstanding through the date of
determina tion (and thereafter in the case of projections pursuant to
Section 8.14(a)(iv)) and (y) (other than revolving Indebtedness except to
the extent paid with Permitted Debt or Disqualified Preferred Stock)
permanently retired or redeemed after the first day of the relevant
Calculation Period shall be deemed to have been retired or redeemed on the
first day of the respective Calculation Period and remain retired through
the date of determination (and thereafter in the case of projections
pursuant to Section 8.14(a)(iv));
(ii) all Indebtedness or Preferred Stock (other than Qualified
Preferred Stock of the Borrower) assumed to be outstanding pursuant to
preceding clause (i) shall be deemed to have borne interest or accrued
dividends, as the case may be, at (x) the rate applicable thereto, in the
case of fixed rate indebtedness or Preferred Stock or (y) the rates which
would have been applicable thereto during the respective period when same
was deemed outstanding, in the case of floating rate Indebtedness or
Preferred Stock (although interest expense with respect to any Indebtedness
or Preferred Stock for periods while same was actually outstanding during
the respective period shall be calculated using the actual rates applicable
thereto while same was actually outstanding); provided that for purposes of
--------
calculations pursuant to Section 8.14(a)(iv), all Indebtedness or Preferred
Stock
-120-
<PAGE>
(whether actually outstanding or deemed outstanding) bearing interest at a
floating rate of interest shall be tested on the basis of the rates
applicable at the time the determination is made pursuant to said
provisions;
(iii) in making any determination of Consolidated EBITDA, pro
---
forma effect shall be given to any Permitted Acquisition consummated after
-----
the first day of the respective period being tested, taking into account,
for any portion of the relevant period being tested occurring prior to the
consummation of such Permitted Acquisition, demonstrable cost savings
actually achieved simultaneously with the closing of the respective
Permitted Acquisition, which cost savings would be permitted to be
recognized in pro forma statements prepared in accordance with Regulation
--- -----
S-X under the Securities Act, as if such cost-savings were realized on the
first day of the relevant period;
(iv) without duplication of adjustments provided above, in case
of any Permitted Acquisition consummated after the first day of the
relevant period being tested, pro forma effect shall be given to the
--- -----
termination or replacement of operating leases with Capitalized Lease
Obligations or other Indebtedness, and to any replacement of Capitalized
Lease Obligations or other Indebtedness with operating leases, in each case
effected at the time of the consummation of such Permitted Acquisition or
thereafter, in each case if effected after the first day of the period
being tested and prior to the date the respective determination is being
made, as if such termination or replacement had occurred on the first day
of the relevant period; and
(v) in making any determination of Consolidated EBITDA for
purposes of any calculation of the Adjusted Total Leverage Ratio or the
Adjusted Senior Leverage Ratio only, (x) for any Permitted Acquisition
which occurred during the last two fiscal quarters comprising the
respective Test Period (and, in the case of Section 8.14, thereafter and on
or prior to the relevant date of determination), there shall be added to
Consolidated EBITDA the amount of Permitted Acquisition Additional Cost
Savings, determined in accordance with the definition thereof contained
herein, expected to be realized with respect to such Permitted Acquisition,
(y) for any Permitted Acquisition effected in the second fiscal quarter of
the respective Test Period (it being understood and agreed that such fiscal
quarter shall not be directly included in the determination of Consolidated
EBITDA, by virtue of the proviso to the definition thereof), the
Consolidated EBITDA shall be increased by 50% of the Permitted Acquisition
Additional Cost Savings estimated to arise in connection with the
respective Permitted Acquisition and (z) for any Permitted Acquisition
effected in the first fiscal quarter of the respective Test Period (it
being understood and agreed that such fiscal quarter will not be directly
included in the determination of Consolidated EBITDA by virtue of the
proviso to the
-121-
<PAGE>
definition thereof), the Consolidated EBITDA shall be increased by 25% of
the Permitted Acquisition Additional Cost Savings estimated to arise in
connection with the respective Permitted Acquisition; provided that the
aggregate additions to Consolidated EBITDA, for any period being tested,
pursuant to this clause (v) shall not exceed 15% of the amount which would
have been Consolidated EBITDA in the absence of the adjustment pursuant to
this clause (v).
Notwithstanding anything to the contrary contained above, (x) for purposes of
Sections 9.08, 9.10 and 9.11, and for purposes of all determinations of the
Interest Reduction Discount, pro forma effect (as otherwise provided above)
--- -----
shall only be given for events or occurrences which occurred during the
respective Test Period but not thereafter and (y) for purposes of Section 8.14,
pro forma effect (as otherwise provided above) shall be given for events or
- --- -----
occurrences which occurred during the respective Test Period and thereafter but
on or prior to the respective date of determination.
"Projections" shall have the meaning provided in Section 5.15.
"Proportionate Share" shall mean (I) in the case of any determination of
Non-Consolidated Joint Venture EBITDA, with respect to each Non-Consolidated
Joint Venture for any period, the proportion (expressed as a percentage) of the
share of the Borrower and its Wholly-Owned Subsidiaries (whether directly or
indirectly) in the Non-Consolidated Joint Venture EBITDA (for this purpose,
calculated in accordance with the first sentence of the definition thereof as if
the phrase "the Proportionate Share of" appearing therein and the second
sentence of such definition were deleted) of such Non-Consolidated Joint Venture
for such period, which percentage shall be determined giving effect to any
priorities (including, without limitation, repayments of loans to owners of
equity interest in the respective Joint Venture, preferred distribution
priorities, etc.) established by such Non-Consolidated Joint Venture (or the
owners of the equity interests therein) for the allocation of such Non-
Consolidated Joint Venture EBITDA and (II) in the case of any determination of
Non-Consolidated Joint Venture Debt, with respect to each Non-Consolidated Joint
Venture at any time, the proportion (expressed as a percentage) of the share of
the Borrower and its Wholly-Owned Subsidiaries (whether directly or indirectly)
in the Non-Consolidated Joint Venture Debt (for this purpose, calculated in
accordance with the first sentence of the definition thereof as if the phrase
"the Proportionate Share of" appearing therein and the second sentence of such
definition were deleted) of such Non-Consolidated Joint Venture at such time.
"Qualified IPO" shall mean an underwritten public offering of Borrower
Common Stock which generates cash proceeds of at least $30,000,000.
"Qualified Preferred Stock" shall mean any Preferred Stock of the
Borrower, the express terms of which shall provide that dividends thereon shall
not be required to be
-122-
<PAGE>
paid at any time (and to the extent) that such payment would be prohibited by
the terms of this Agreement or any other agreement of the Borrower relating to
outstanding indebtedness and which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event (including any Change of Control Event), cannot
mature (excluding any maturity as the result of an optional redemp tion by the
issuer thereof) and is not mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, and is not redeemable, or required to be repurchased,
at the sole option of the holder thereof (including, without limitation, upon
the occurrence of a Change of Control Event), in whole or in part, on or prior
to the date occurring two years after the Final Maturity Date.
"Quarterly Payment Date" shall mean the last Business Day of each March,
June, September and December.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recap Distribution" shall have the meaning provided in Section 5.08(a).
"Recapitalization" shall mean and include the Alliance Merger, the
Equity Retention, the Recap Distribution and such other transactions
contemplated by the Recapitalization Documents.
"Recapitalization Documents" shall mean and include (i) the Agreement
and Plan of Merger, dated as of July 23, 1997, among Newport, Acquisition Corp.
and the Borrower, as the same may be amended, modified or supplemented from time
to time pursuant to the terms hereof and thereof and (ii) all other agreements
and documents governing, or relating to, the Recapitalization.
"Recovery Event" shall mean the receipt by the Borrower or any of its
Subsidiaries of any insurance or condemnation proceeds payable (i) by reason of
theft, physical destruction or damage or any other similar event with respect to
any properties or assets of the Borrower or any of its Subsidiaries, (ii) by
reason of any condemnation, taking, seizing or similar event with respect to any
properties or assets of the Borrower or any of its Subsidiaries and (iii) under
any policy of insurance required to be maintained under Section 8.03.
"Refinanced Indebtedness" shall have the meaning provided in Section
5.09(a).
"Refinancing" shall mean the refinancing transactions described in
Section 5.09.
-123-
<PAGE>
"Refinancing Documents" shall mean each of the agreements, documents and
instruments entered into in connection with the Refinancing.
"Register" shall have the meaning provided in Section 13.17.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or any portion thereof.
"Regulation T" shall mean Regulation T of the Board of Governors of the
Federal Reserve System as from to time in effect and any successor to all or any
portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or any portion thereof.
"Release" means disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing,
pouring and the like, into or upon any land or water or air, or otherwise
entering into the environment.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
.22, .23, .25, .27, or .28 of PBGC Regulation Section 4043.
"Required Banks" shall mean Non-Defaulting Banks, the sum of whose
outstanding Term Loans and Revolving Loan Commitments (or after the termination
thereof, outstanding Revolving Loans and Adjusted RL Percentage of Swingline
Loans and Letter of Credit Outstandings) represent an amount greater than 50% of
the sum of all
-124-
<PAGE>
outstanding Term Loans of Non-Defaulting Banks and the Adjusted Total Revolving
Loan Commitment (or after the termination thereof, the sum of the then total
outstanding Revolving Loans of Non-Defaulting Banks and the aggregate Adjusted
RL Percentages of all Non-Defaulting Banks of the total outstanding Swingline
Loans and Letter of Credit Outstandings at such time).
"Returns" shall have the meaning provided in Section 7.21.
"Revolving Loan" shall have the meaning provided in Section 1.01(b).
"Revolving Loan Commitment" shall mean, with respect to each RL Bank,
the amount set forth opposite such Bank's name in Schedule I directly below the
column enti tled "Revolving Loan Commitment," as the same may be reduced from
time to time pursuant to Sections 3.02, 3.03, 4.02 and/or Section 10.
"Revolving Loan Maturity Date" shall mean December 18, 2002.
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"RL Bank" shall mean at any time each Bank with a Revolving Loan
Commitment or with outstanding Revolving Loans.
"RL Percentage" of any Bank at any time shall mean a fraction (expressed
as a percentage) the numerator of which is the Revolving Loan Commitment of such
Bank at such time and the denominator of which is the Total Revolving Loan
Commitment at such time, provided that if the RL Percentage of any Bank is to be
--------
determined after the Total Revolving Loan Commitment has been terminated, then
the RL Percentages of the Banks shall be determined immediately prior (and
without giving effect) to such termination.
"S&P" shall mean Standard & Poor's Ratings Services, a division of
McGraw Hill, Inc.
"Scheduled Commitment Reduction" shall have the meaning provided in
Section 3.03(c).
"Scheduled Commitment Reduction Date" shall have the meaning provided in
Section 3.03(c).
"Scheduled Repayment" shall have the meaning provided in Section
4.02(b).
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
-125-
<PAGE>
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning provided in the Security
Documents.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Security Agreement" shall have the meaning provided in Section 5.10(b).
"Security Agreement Collateral" shall mean all "Collateral" as defined
in the Security Agreement.
"Security Documents" shall mean and include the Security Agreement, the
Pledge Agreement and each Additional Security Document, if any.
"Senior Subordinated Notes" shall mean the Borrower's [__]% Senior
Subordinated Notes due 2005 issued pursuant to the Senior Subordinated Note
Indenture, as in effect on the Effective Date and as the same may be amended,
modified or supplemented from time to time in accordance with the terms hereof
and thereof.
"Senior Subordinated Notes Documents" shall mean the Senior Subordinated
Notes, the Senior Subordinated Notes Indenture and all other documents executed
and delivered with respect to the Senior Subordinated Notes or Senior
Subordinated Notes Indenture, as in effect on the Effective Date and as the same
may be amended, modified or supplemented from time to time in accordance with
the terms hereof and thereof.
"Senior Subordinated Notes Indenture" shall mean the Indenture, dated as
of December ___, 1997, between the Borrower and the Senior Subordinated Note
Indenture Trustee, as in effect on the Effective Date and as thereafter amended
from time to time in accordance with the requirements hereof and thereof.
"Senior Subordinated Notes Indenture Trustee" shall mean
[________________].
"Shareholder Subordinated Note" shall mean an unsecured junior
subordinated note issued by the Borrower (and not guaranteed or supported in any
way by the Borrower or any of its Subsidiaries) in the form of Exhibit N.
"Shareholders' Agreements" shall have the meaning provided in Section
5.12.
-126-
<PAGE>
"Standby Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Stated Amount" of each Letter of Credit shall mean the maximum amount
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Subsidiaries Guaranty" shall have the meaning provided in Section 5.11.
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity (other than a corporation) in which such Person directly
or indirectly through Subsidiaries, has more than a 50% equity interest at the
time.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower that
is or becomes a party to the Subsidiaries Guaranty.
"Swingline Expiry Date" shall mean the date which is five Business Days
prior to the Revolving Loan Maturity Date.
"Swingline Loan" shall have the meaning provided in Section 1.01(c).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Syndication Date" shall mean that date upon which the Agent determines
(and notifies the Borrower and the Banks) that the primary syndication (and
resultant addition of Persons as Banks pursuant to Section 13.04(b)) has been
completed.
"Tax Allocation Agreements" shall have the meaning provided in Section
5.12.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Loan" shall have the meaning provided in Section 1.01(a).
"Term Loan Commitment" shall mean, with respect to each Bank, the amount
set forth opposite such Bank's name in Schedule I directly below the column
entitled "Term Loan Commitment," as the same may be terminated pursuant to
Sections 3.03, 4.02 and/or Section 10.
-127-
<PAGE>
"Term Note" shall have the meaning provided in Section 1.05(a).
"Test Period" shall mean each period of four consecutive fiscal quarters
then last ended, in each case taken as one accounting period. Notwithstanding
anything to the contrary contained above or in Section 13.07 or otherwise
required by GAAP, in the case of any Test Period ending prior to the first
anniversary of the Initial Borrowing Date, such period shall be a one-year
period ending on the last day of the fiscal quarter last ended, with any
calculations of Consolidated Interest Expense (but not for purposes of
determining Consolidated EBITDA) required in determining compliance with Section
9.10 to be made on a pro forma basis in accordance with, and to the extent
--- -----
provided in, the immediately succeeding sentence. To the extent the respective
Test Period (i) includes the second fiscal quarter of the fiscal year ended
December 31, 1997, Consolidated Interest Expense for such fiscal quarter shall
be deemed to be $_____ million, (ii) includes the third fiscal quarter of the
fiscal year ended December 31, 1997, Consolidated Interest Expense for such
fiscal quarter shall be deemed to be $____ million and (iii) includes the fourth
fiscal quarter of the fiscal year ended December 31, 1997, Consolidated Interest
Expense shall be determined by (x) taking actual Consolidated Interest Expense
determined in accordance with the definition thereof for any period beginning
on, and ending after, the Initial Borrowing Date and (y) for each day of such
fiscal quarter occurring prior to the Initial Borrowing Date, using a per-day
Consolidated Interest Expense of $[__].
"Total Commitment" shall mean the sum of the Total Term Loan Commitment
and the Total Revolving Loan Commitment.
"Total Leverage Ratio" shall mean on any date the ratio of (i)
Consolidated Debt on such date to (ii) Consolidated EBITDA for the Test Period
most recently ended on or prior to such date (determined after giving effect to
the proviso to the definition of Consolidated EBITDA contained herein). All
calculations of the Total Leverage Ratio shall be made on a Pro Forma Basis, it
--- -----
being understood and agreed that, as provided in the definition of Pro Forma
--- -----
Basis, the adjustments contained in clause (v) thereof shall not be taken into
account in determining the Total Leverage Ratio.
"Total Non-Consolidated Joint Venture Debt" shall mean, at any time, the
sum of the Non-Consolidated Joint Venture Debt for all Non-Consolidated Joint
Ventures at such time.
"Total Non-Consolidated Joint Venture EBITDA" shall mean, for any
period, the sum of the Non-Consolidated Joint Venture EBITDA for all Non-
Consolidated Joint Ventures for such period.
"Total Revolving Loan Commitment" shall mean the sum of the Revolving
Loan Commitments of each of the Banks.
-128-
<PAGE>
"Total Term Loan Commitment" shall mean the sum of the Term Loan
Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
(i) the Total Revolving Loan Commitment at such time less (ii) the sum of the
----
aggregate principal amount of all Revolving Loans and Swingline Loans
outstanding at such time plus the Letter of Credit Outstandings at such time
less (iii) the Blocked Commitment as then in effect.
- ----
"Trade Letter of Credit" shall have the meaning set forth in Section
2.01(a).
"Tranche" shall mean the respective facility and commitments utilized in
making Loans hereunder, with there being two separate Tranches, i.e., Term Loans
----
and Revolving Loans.
"Transaction" shall mean, collectively, (i) the Common Equity Issuance,
(ii) the issuance of the Senior Subordinated Notes, (iii) the consummation of
the Recapitalization, (iv) the issuance of the PIK Preferred Stock, (v) the
consummation of the Refinancing, (vi) the entering into of the Credit Documents
and the incurrence of all Loans on the Initial Borrowing Date and (vii) the
payment of fees and expenses in connection with the foregoing.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan.
----
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if any,
by which the actuarial present value of the accumulated plan benefits under the
Plan as of the close of its most recent plan year exceeds the fair market value
of the assets allocable thereto, each determined in accordance with Statement of
Financial Accounting Standards No. 87, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan.
"Unpaid Drawing" shall have the meaning provided in Section 2.04(a).
"Unutilized Revolving Loan Commitment" with respect to any RL Bank at
any time shall mean such RL Bank's Revolving Loan Commitment at such time less
----
the sum of (i) the aggregate outstanding principal amount of all Revolving Loans
made by such RL Bank and (ii) such RL Bank's Percentage of the Letter of Credit
Outstandings at such time.
-129-
<PAGE>
"U.S. Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States of America.
"Voting Stock" shall mean, as to any Person, any class or classes of
capital stock of such Person pursuant to which the holders thereof have the
general voting power under ordinary circumstances to elect at least a majority
of the Board of Directors of such Person.
"Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying shares
and/or other nominal amounts of shares required to be held other than by such
Person under applicable law) is at the time owned by such Person and/or one or
more Wholly-Owned Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person and/or one or
more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such
time.
"Written" (whether lower or upper case) or "in writing" shall mean any
form of written communication or a communication by means of telex, facsimile
device, telegraph or cable.
SECTION 12. The Agent.
---------
12.01 Appointment. Each Bank hereby irrevocably designates and
-----------
appoints BTCo as Agent of such Bank (such term to include for purposes of this
Section 12, BTCo acting as Collateral Agent) to act as specified herein and in
the other Credit Documents, and each such Bank hereby irrevocably authorizes
BTCo as the Agent to take such action on its behalf under the provisions of this
Agreement and the other Credit Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Credit Documents, together with such other powers as are
reasonably incidental thereto. The Agent agrees to act as such upon the express
conditions contained in this Section 12. Notwithstanding any provision to the
con trary elsewhere in this Agreement or in any other Credit Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein or in the other Credit Documents, or any fiduciary relationship with any
Bank, and no implied covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into this Agreement or otherwise exist against the
Agent. The provisions of this Section 12 are solely for the benefit of the
Agent and the Banks, and neither the Borrower nor any of its Subsidiaries shall
have any rights as a third party beneficiary of any of the provisions hereof.
In
-130-
<PAGE>
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and the Agent does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for the Borrower or any of its Subsidiaries.
12.02 Delegation of Duties. The Agent may execute any of its duties
--------------------
under this Agreement or any other Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
12.03 Exculpatory Provisions. Neither the Agent nor any of its
----------------------
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person in its capacity as Agent under or in connection with this Agreement or
the other Credit Documents (except for its or such Person's own gross negligence
or willful misconduct) or (ii) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties made by the Borrower,
any of its Subsidiaries or any of their respective officers contained in this
Agree ment or the other Credit Documents, any other Document or in any
certificate, report, state ment or other document referred to or provided for
in, or received by the Agent under or in connection with, this Agreement or any
other Document or for any failure of the Borrower or any of its Subsidiaries or
any of their respective officers to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the agree
ments contained in, or conditions of, this Agreement or the other Documents, or
to inspect the properties, books or records of the Borrower or any of its
Subsidiaries. The Agent shall not be responsible to any Bank for the
effectiveness, genuineness, validity, enforce ability, collectability or
sufficiency of this Agreement or any other Document or for any representations,
warranties, recitals or statements made herein or therein or made in any written
or oral statement or in any financial or other statements, instruments, reports,
cert ificates or any other documents in connection herewith or therewith
furnished or made by the Agent to the Banks or by or on behalf of the Borrower
or any of its Subsidiaries to the Agent or any Bank or be required to ascertain
or inquire as to the performance or obser vance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the use
of the proceeds of the Loans or of the existence or possible exist ence of any
Default or Event of Default.
12.04 Reliance by Agent. The Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, facsimile, telex
or teletype message, statement, order or other document or conversation
reasonably believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and
-131-
<PAGE>
statements of legal counsel (including, without limitation, counsel to the
Borrower or any of its Subsidiaries), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Credit Document
unless it shall first receive such advice or concurrence of the Required Banks
as it deems appropriate or it shall first be indemnified to its satisfaction by
the Banks against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Agent shall in
all cases be fully pro tected in acting, or in refraining from acting, under
this Agreement and the other Credit Documents in accordance with a request of
the Required Banks, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Banks.
12.05 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has actually received notice from a Bank or the Borrower referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Banks. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Banks; provided, that, unless and until
--------
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Banks.
12.06 Nonreliance on Agent and Other Banks. Each Bank expressly
------------------------------------
acknowl edges that neither the Agent nor any of its respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrower or any of its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Bank. Each Bank represents to the Agent that it has,
independently and with out reliance upon the Agent or any other Bank, and based
on such documents and informa tion as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other condition, prospects and credit worthiness of the Borrower
or its Subsidiaries and made its own decision to make its Loans hereunder and
enter into this Agreement. Each Bank also represents that it will, indepen
dently and without reliance upon the Agent or any other Bank, and based on such
docu ments and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement, and to make such investigation as it deems
necessary to inform itself as to the business, assets, operations, property,
financial and other condition, prospects and creditworthiness of the Borrower or
its Subsidiaries. The Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
operations, assets, property, financial and other condition, prospects or
creditworthiness of
-132-
<PAGE>
the Borrower or its Subsidiaries which may come into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
12.07 Indemnification. The Banks agree to indemnify the Agent in its
---------------
capacity as such ratably according to their respective "percentages" as used in
determining the Required Banks at such time or, if the Commitments have
terminated and all Loans have been repaid in full, as determined immediately
prior to such termination and repayment (with such "percentages" to be
determined as if there are no Defaulting Banks), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, reasonable expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment of
the Obligations) be imposed on, incurred by or asserted against the Agent in its
capacity as such in any way relating to or arising out of this Agreement or any
other Credit Document, or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted to be taken
by the Agent under or in connection with any of the foregoing, but only to the
extent that any of the foregoing is not paid by the Borrower or any of its
Subsidiaries; provided, that no Bank shall be liable to the Agent for the
--------
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from the gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indem nified against until
such additional indemnity is furnished. The agreements in this Section 12.07
shall survive the payment of all Obligations.
12.08 Agent in its Individual Capacity. The Agent and its affiliates
--------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower and its Subsidiaries as though the Agent were not the
Agent hereunder. With respect to the Loans made by it and all Obligations owing
to it, the Agent shall have the same rights and powers under this Agreement as
any Bank and may exercise the same as though it were not the Agent and the terms
"Bank" and "Banks" shall include the Agent in its individual capacity.
12.09 Holders. The Agent may deem and treat the payee of any Note as
-------
the owner thereof for all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the case may be, shall have
been filed with the Agent. Any request, authority or consent of any Person or
entity who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or indorsee, as the case may be, of such
Note or of any Note or Notes issued in exchange therefor.
-133-
<PAGE>
12.10 Resignation of the Agent. (a) The Agent may resign from the
------------------------
performance of all its functions and duties hereunder and/or under the other
Credit Documents at any time by giving 30 Business Days' prior written notice to
the Borrower and the Banks. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Required Banks shall
appoint a successor Agent hereunder or thereunder who shall be a commercial bank
or trust company reasonably acceptable to the Borrower.
(c) If a successor Agent shall not have been so appointed within such
30 Business Day period, the Agent, with the consent of the Borrower (which
consent shall not be unreasonably withheld or delayed), shall then appoint a
successor Agent who shall serve as Agent hereunder or thereunder until such
time, if any, as the Required Banks appoint a successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to clause (b) or
(c) above by the 30th Business Day after the date such notice of resignation was
given by the Agent, the Agent's resignation shall become effective and the
Required Banks shall thereafter perform all the duties of the Agent hereunder
and/or under any other Credit Document until such time, if any, as the Banks
appoint a successor Agent as provided above.
SECTION 13. Miscellaneous.
-------------
13.01 Payment of Expenses, etc. The Borrower agrees to: (i) whether
-------------------------
or not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Agent (including, without limitation,
the reasonable fees and disbursements of White & Case and local counsel) in
connection with the negotiation, preparation, execution and delivery of the
Credit Documents and the documents and instru ments referred to therein and any
amendment, waiver or consent relating thereto and in connection with the Agent's
syndication efforts with respect to this Agreement; (ii) pay all reasonable out-
of-pocket costs and expenses of the Agent, each Letter of Credit Issuer and each
of the Banks in connection with the enforcement of the Credit Documents and the
documents and instruments referred to therein and, after an Event of Default
shall have occurred and be continuing, the protection of the rights of the
Agent, each Letter of Credit Issuer and each of the Banks thereunder (including,
without limitation, the reasonable fees and disbursements of counsel (including
in-house counsel) for the Agent, for each Letter of Credit Issuer and for each
of the Banks); (iii) pay and hold each of the Banks harmless from and against
any and all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all
-134-
<PAGE>
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to such Bank) to pay such taxes; and (iv) indemnify
the Agent, the Collateral Agent, each Letter of Credit Issuer and each Bank,
their respective officers, directors, em ployees, representatives and agents
from and hold each of them harmless against any and all losses, liabilities,
claims, damages or expenses incurred by any of them as a result of, or arising
out of, or in any way related to, or by reason of, (a) any investigation,
litigation or other proceeding (whether or not the Agent, the Collateral Agent,
any Letter of Credit Issuer or any Bank is a party thereto and whether or not
any such investigation, litigation or other proceeding is between or among the
Agent, the Collateral Agent, any Letter of Credit Issuer, any Bank, any Credit
Party or any third Person or otherwise) related to the entering into and/or
performance of this Agreement or any other Document or the use of the proceeds
of any Loans hereunder or the Transaction or the consummation of any other
transactions contemplated in any Document (but excluding any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified), or (b)
the actual or alleged presence of Hazardous Materials in the air, surface water
or groundwater or on the surface or subsurface of any Real Property or any
Environmental Claim, in each case, including, with out limitation, the
reasonable fees and disbursements of counsel and independent consultants
incurred in connection with any such investigation, litigation or other
proceeding.
13.02 Right of Setoff. In addition to any rights now or hereafter
---------------
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, the Agent, each Letter
of Credit Issuer and each Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to the
Borrower or any of its Subsidiaries or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and apply any and
all deposits (general or special) and any other Indebtedness at any time held or
owing by the Agent, such Letter of Credit Issuer or such Bank (including,
without limitation, by branches and agencies of the Agent, such Letter of Credit
Issuer and such Bank wherever located) to or for the credit or the account of
the Borrower or any of its Subsidiaries against and on account of the
Obligations of the Borrower or any of its Subsidiaries to the Agent, such Letter
of Credit Issuer or such Bank under this Agreement or under any of the other
Credit Documents, including, without limitation, all interests in Obligations of
the Borrower or any of its Subsidiaries purchased by such Bank pursuant to
Section 13.06(b), and all other claims of any nature or description arising out
of or connected with this Agreement or any other Credit Document, irrespective
of whether or not the Agent, such Letter of Credit Issuer or such Bank shall
have made any demand here under and although said Obligations shall be
contingent or unmatured.
13.03 Notices. Except as otherwise expressly provided herein, all
-------
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied,
-135-
<PAGE>
cabled or delivered, if to any Credit Party, at the address specified opposite
its signature below or in the other relevant Credit Documents, as the case may
be; if to any Bank, at its address specified for such Bank on Schedule II; or,
at such other address as shall be desig nated by any party in a written notice
to the other parties hereto. All such notices and communications shall be
mailed, telegraphed, telexed, telecopied or cabled or sent by overnight courier,
and shall be effective when received.
13.04 Benefit of Agreement. (a) This Agreement shall be binding upon
--------------------
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, the Borrower may not assign or
-------- -------
transfer any of its rights, obligations or interest hereunder or under any other
Credit Document without the prior written consent of the Banks and, provided
--------
further, that, although any Bank may transfer, assign or grant participations in
- -------
its rights hereunder, such Bank shall remain a "Bank" for all purposes hereunder
(and may not transfer or assign all or any portion of its Commitments hereunder
except as provided in Section 13.04(b)) and the transferee, assignee or
participant, as the case may be, shall not constitute a "Bank" hereunder and,
provided further, that no Bank shall transfer or grant any participation under
- ----------------
which the participant shall have rights to approve any amendment to or waiver of
this Agreement or any other Credit Document except to the extent such amendment
or waiver would (i) extend the final scheduled maturity of any Loan, Note or
Letter of Credit (unless such Letter of Credit is not extended beyond the
Revolving Loan Maturity Date) in which such participant is participating, or
reduce the rate or extend the time of payment of interest or Fees thereon
(except in connection with a waiver of applicability of any post-default
increase in interest rates) or reduce the principal amount thereof, or increase
the amount of the participant's participation over the amount thereof then in
effect (it being understood that a waiver of any Default or Event of Default or
of a mandatory reduction in the Total Commitment shall not constitute a change
in the terms of such participation, that an increase in any Commitment or Loan
shall be permitted without the consent of any participant if the participant's
parti cipation is not increased as a result thereof and that any amendment or
modification to the financial definitions in this Agreement shall not constitute
a reduction in any rate of interest or fees for purposes of this clause (i)),
(ii) consent to the assignment or transfer by the Borrower of any of its rights
and obligations under this Agreement or (iii) release all or substantially all
of the Collateral under all of the Security Documents (except as expressly
provided in the Security Documents) supporting the Loans hereunder in which such
parti cipant is participating. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against such Bank in respect of such
participation to be those set forth in the agreement executed by such Bank in
favor of the participant relating thereto) and all amounts payable by the
Borrower hereunder shall be determined as if such Bank had not sold such
participation.
-136-
<PAGE>
(b) Notwithstanding the foregoing, any Bank (or any Bank together with
one or more other Banks) may (x) assign all or a portion of its Revolving Loan
Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Term Loans to (i) its parent company and/or any affiliate of such
Bank which is at least 50% owned by such Bank or its parent company or to one or
more Banks or (ii) in the case of any Bank that is a fund that invests in bank
loans, any other fund that invests in bank loans and is managed by the same
investment advisor of such Bank or by an Affiliate of such investment advisor or
(y) assign all, or if less than all, a portion equal to at least $5,000,000 in
the aggregate for the assigning Bank or assigning Banks, of such Revolving Loan
Commitments (and related outstanding Obligations hereunder) and outstanding
principal amount of Term Loans to one or more Eligible Transferees (treating (x)
any fund that invests in bank loans and (y) any other fund that invests in bank
loans and is managed by the same investment advisor as such fund or by an
Affiliate of such investment advisor, as a single Eligible Transferee), each of
which assignees shall become a party to this Agreement as a Bank by execution of
an Assignment and Assumption Agreement, provided that (i) at such time Schedule
--------
I shall be deemed modified to reflect the Revolving Loan Commitments and/or
outstanding Term Loans, as the case may be, of such new Bank and of the existing
Banks, (ii) upon surrender of the old Notes (or the furnishing of a standard
indemnity letter from the respective assigning Bank in respect of any lost
Notes), new Notes will be issued, at the Borrower's expense, to such new Bank
and to the assigning Bank, such new Notes to be in conformity with the
requirements of Section 1.05 (with appropriate modifications) to the extent
needed to reflect the revised Revolving Loan Commitments and/or outstanding Term
Loans, as the case may be, (iii) the consent of the Agent and, so long as no
Default or Event of Default is then in existence, the Borrower shall be required
in connection with any assignment to an Eligible Transferee pursuant to clause
(y) of this Section 13.04(b) (which consent, in each case, shall not be
unreasonably withheld or delayed), (iv) the consent of each Letter of Credit
Issuer shall be required in connection with any Revolving Loan Commitments
pursuant to clause (y) of this Section 13.04(b) (which consent shall not be
unreasonably withheld or delayed) and (v) the Agent shall receive at the time of
each assignment, from the assigning or assignee Bank, the payment of a non-
refundable assignment fee of $3,500 and, provided further, that such transfer or
-------- -------
assignment will not be effective until recorded by the Agent on the Register
pursuant to Section 13.17. To the extent of any assignment pursuant to this
Section 13.04(b), the assigning Bank shall be relieved of its obligations
hereunder with respect to its assigned Revolving Loan Commitment and/or
outstanding Term Loans. At the time of each assignment pursuant to this Section
13.04(b) to a Person which is not already a Bank hereunder and which is not a
United States person (as such term is defined in Section 7701(a)(30) of the
Code) for Federal income tax purposes, the respective assignee Bank shall
provide to the Borrower and the Agent the appropriate Internal Revenue Service
Forms (and, if applicable a Section 4.04(b)(ii) Certificate) described in
Section 4.04(b). To the extent that an assignment of all or any portion of a
Bank's Revolving Loan Commitment and outstanding Obligations pursuant to Section
1.13 or this Section 13.04(b) would, due to circumstances existing at
-137-
<PAGE>
the time of such assignment, result in increased costs under Section 1.10, 1.11,
2.05 or 4.04 from those being charged by the respective assigning Bank prior to
such assignment, then the Borrower shall not be obligated to pay such increased
costs (although the Borrower shall be obligated to pay any other increased costs
of the type described above resulting from changes after the date of the
respective assignment). Notwithstanding anything to the contrary contained
above, at any time after the termination of the Total Revolving Loan Commitment,
if any Revolving Loans or Letters of Credit remain outstanding, assignments may
be made as provided above, except that the respective assignment shall be of a
portion of the outstanding Revolving Loans of the respective RL Bank and its
participation in Letters of Credit and its obligation to make Mandatory
Borrowings, although any such assignment effected after the termination of the
Total Revolving Loan Commitment shall not release the assigning RL Bank from its
obligations as a Participant with respect to outstanding Letters of Credit or to
fund its share of any Mandatory Borrowing (although the respective assignee may
agree, as between itself and the respective assigning RL Bank, that it shall be
responsible for such amounts).
(c) Nothing in this Agreement shall prevent or prohibit any Bank or
BTCo from pledging its Loans and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Bank from such Federal Reserve Bank and, with
the consent of the Agent, any Bank which is a fund may pledge all or any portion
of its Notes or Loans to its trustee in support of its obligations to its
trustee. No pledge pursuant to this clause (c) shall release the transferor
Bank from any of its obligations hereunder.
13.05 No Waiver; Remedies Cumulative. No failure or delay on the part
------------------------------
of the Agent or any Bank in exercising any right, power or privilege hereunder
or under any other Credit Document and no course of dealing between any Credit
Party and the Agent or any Bank shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies which the Agent or any Bank would otherwise have. No
notice to or demand on any Credit Party in any case shall entitle any Credit
Party to any other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of the Agent or the Banks to any other or
further action in any circum stances without notice or demand.
13.06 Payments Pro Rata. (a) The Agent agrees that promptly after its
-----------------
receipt of each payment from or on behalf of any Credit Party in respect of any
Obligations of such Credit Party, it shall, except as otherwise provided in this
Agreement, distribute such payment to the Banks (other than any Bank that has
consented in writing to waive its pro rata share of such payment) pro rata based
--- ---- --- ----
upon their respective shares, if any, of the Obligations with respect to which
such payment was received.
-138-
<PAGE>
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the princi pal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total of such Obligation then owed and due to such Bank bears to the total of
such Obligation then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the Obligations
of the respective Credit Party to such Banks in such amount as shall result in a
proportional participation by all of the Banks in such amount; provided, that if
--------
all or any portion of such excess amount is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.
13.07 Calculations; Computations. (a) The financial statements to be
--------------------------
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with GAAP consistently applied throughout the periods involved (except as set
forth in the notes thereto or as otherwise disclosed in writing by the Borrower
to the Banks); provided, that except as otherwise specifically provided herein,
--------
all computations determining compliance with Sections 4.02, 8.14 and 9,
including definitions used therein shall, in each case, utilize accounting
principles and policies in effect at the time of the preparation of, and in
conformity with those used to prepare, the December 31, 1996 financial
statements of the Borrower delivered to the Banks pursuant to Section 7.10(b);
provided further, that (i) to the extent expressly required pursuant to the
- ----------------
provisions of this Agreement, certain calcu lations shall be made on a Pro Forma
--- -----
Basis, (ii) to the extent compliance with any of Sections 9.08, 9.09, 9.10 or
9.11 would include periods occurring prior to the Initial Borrowing Date, such
calculation shall be adjusted on a Pro Forma Basis to give effect to the
--- -----
Transaction as if same had occurred on the first day of the respective period
and (iii) in the case of any determinations of Consolidated Interest Expense for
any portion of any Test Period which ends prior to the Initial Borrowing Date,
all computations determining compliance with Section 9.10 shall be calculated in
accordance with the definition of Test Period contained herein.
(b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.
13.08 Governing Law; Submission to Jurisdiction; Venue. (a) THIS
------------------------------------------------
AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this
-139-
<PAGE>
Agreement or any other Credit Document may be brought in the courts of the State
of New York or of the United States for the Southern District of New York, and,
by execution and delivery of this Agreement, the Borrower hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Borrower hereby
irrevocably designates, appoints and empowers CT Corpor ation System, with
offices on the date hereof at 1633 Broadway, New York, New York 10019 as its
designee, appointee and agent to receive, accept and acknowledge for and on its
behalf, and in respect of its property, service of any and all legal process,
summons, notices and documents which may be served in any such action or
proceeding. If for any reason such designee, appointee and agent shall cease to
be available to act as such, the Borrower agrees to designate a new designee,
appointee and agent in New York City on the terms and for the purposes of this
provision satisfactory to the Agent under this Agreement. The Borrower hereby
further irrevocably waives any claim that any such courts lack jurisdiction over
the Borrower, and agrees not to plead or claim, in any legal action or
proceeding with respect to this Agreement or any other Credit Document brought
in any of the aforesaid courts, that any such court lacks jurisdiction over the
Borrower. The Borrower further irrevocably consents to the service of process
in any such action or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, to the Borrower, at its address for notices
pursuant to Section 13.03, such service to become effective 30 days after such
mailing. The Borrower hereby irrevocably waives any objection to such service
of process and further irrevocably waives and agrees not to plead or claim in
any action or proceeding commenced hereunder or under any other Credit Document
that service of process was in any way invalid or ineffective. Nothing herein
shall affect the right of the Agent, any Bank or the holder of any Note to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against any Credit Party in any other jurisdiction.
(b) The Borrower hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.
13.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.
13.10 Effectiveness. This Agreement shall become effective on the date
-------------
(the "Effective Date") on which the Borrower, the Agent and each of the Banks
shall have
-140-
<PAGE>
signed a counterpart hereof (whether the same or different counterparts) and
shall have delivered the same to the Agent at the Notice Office or at the office
of Agent's counsel. The Agent will give the Borrower and each Bank prompt
written notice of the occurrence of the Effective Date.
13.11 Headings Descriptive. The headings of the several sections and
--------------------
subsec tions of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement.
13.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any
-------------------------
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks, provided that no such change, waiver, discharge or termination
--------
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected thereby in the case of the following clause
(i)), (i) extend the final scheduled maturity of any Loan or Note or extend the
stated maturity of any Letter of Credit beyond the Revolving Loan Maturity Date,
or reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the principal amount thereof (it being understood that any amendment or
modification to the financial definitions in this Agreement shall not constitute
a reduction in any rate of interest or fees for purposes of this clause (i)),
(ii) release all or substantially all of the Collateral (except as expressly
provided in the Security Documents) under all the Security Documents, (iii)
amend, modify or waive any provision of this Section 13.12, (iv) reduce the
percentage specified in the definition of Required Banks (it being understood
that, with the consent of the Required Banks, additional extensions of credit
pursuant to this Agreement may be included in the determination of the Required
Banks on substantially the same basis as the extensions of Term Loans and
Revolving Loan Commitments are included on the Effective Date) or (v) consent to
the assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement; provided further, that no such change, waiver, discharge
----------------
or termination shall (v) increase the Commitments of any Bank over the amount
thereof then in effect without the consent of such Bank (it being understood
that waivers or modifications of conditions precedent, covenants, Defaults or
Events of Default or of a mandatory reduction in the Total Commitment shall not
constitute an increase of the Commitment of any Bank, and that an increase in
the available portion of any Commitment of any Bank shall not constitute an
increase in the Commitment of such Bank), (w) without the consent of each Letter
of Issuer, amend, modify or waive any provision of Section 2 or alter its rights
or obligations with respect to Letters of Credit, (x) without the consent of
BTCo, alter its rights or obligations with respect to Swingline Loans, (y)
without the consent of the Agent, amend, modify or waive any provision of
Section 12 as same applies to the Agent or any other provision as same relates
to the rights or obligations of the Agent and (z) without the consent of the
Collateral Agent, amend, modify or waive any provision relating to the rights or
obligations of the Collateral Agent.
-141-
<PAGE>
(b) If, in connection with any proposed change, waiver, discharge or
termination of or to any of the provisions of this Agreement as contemplated by
clauses (i) through (v), inclusive, of the first proviso to Section 13.12(a),
the consent of the Required Banks is obtained but the consent of one or more of
such other Banks whose consent is required is not obtained, then the Borrower
shall have the right, so long as all non-consenting Banks whose individual
consent is required are treated as described in either clause (A) or (B) below,
to either (A) replace each such non-consenting Bank or Banks (or, at the option
of the Borrower if the respective Bank's consent is required with respect to
less than all Tranches of Loans (or related Commitments), to replace only the
Revolving Loan Commitments and/or Loans of the respective non-consenting Bank
which gave rise to the need to obtain such Bank's individual consent) with one
or more Replacement Banks pursuant to Section 1.13 so long as at the time of
such replacement, each such Replacement Bank consents to the proposed change,
waiver, discharge or termination or (B) terminate such non-consenting Bank's
Revolving Loan Commitment (if such Bank's consent is required as a result of its
Revolving Loan Commitment) and/or repay each Tranche of outstanding Loans of
such Bank which gave rise to the need to obtain such Bank's consent and/or cash
collateralize its applicable Adjusted RL Percentage of the Letter of Credit of
Outstandings, in accordance with Sections 3.02(b) and/or 4.01(b), provided that,
--------
unless the Revolving Loan Commitment which is terminated and Loans which are
repaid pursuant to preceding clause (B) are immediately replaced in full at such
time through the addition of new Banks or the increase of the Revolving Loan
Commitments and/or outstanding Loans of existing Banks (who in each case must
specifically consent thereto), then in the case of any action pursuant to
preceding clause (B), the Required Banks (determined after giving effect to the
proposed action) shall specifically consent thereto, provided further, that the
----------------
Borrower shall not have the right to replace a Bank, terminate its Revolving
Loan Commitment or repay its Loans solely as a result of the exercise of such
Bank's rights (and the withholding of any required consent by such Bank)
pursuant to the second proviso to Section 13.12(a).
13.13 Survival. All indemnities set forth herein including, without
--------
limitation, in Sections 1.10, 1.11, 2.05, 4.04, 12.07 and 13.01, shall, subject
to the provisions of Section 13.18 (to the extent applicable), survive the
execution and delivery of this Agreement and the making and repayment of the
Loans.
13.14 Domicile of Loans and Commitments. Each Bank may transfer and
---------------------------------
carry its Loans and/or Commitments at, to or for the account of any branch
office, subsidiary or affiliate of such Bank; provided, that the Borrower shall
--------
not be responsible for costs arising under Section 1.10, 1.11, 2.05 or 4.04
resulting from any such transfer (other than a transfer pursuant to Section
1.12) to the extent such costs would not otherwise be applicable to such Bank in
the absence of such transfer.
-142-
<PAGE>
13.15 Confidentiality. (a) Each of the Banks agrees that it will use
---------------
its rea sonable efforts not to disclose without the prior consent of the
Borrower (other than to its directors, employees, auditors, counsel or other
professional advisors, to affiliates or to another Bank if the Bank or such
Bank's holding or parent company in its sole discretion determines that any such
party should have access to such information) any information with respect to
the Borrower or any of its Subsidiaries which is furnished pursuant to this
Agreement; provided, that any Bank may disclose any such information (a) as has
--------
become generally available to the public, (b) as may be required or appropriate
(x) in any report, statement or testimony submitted to any municipal, state or
Federal regulatory body having or claiming to have jurisdiction over such Bank
or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or
similar organizations (whether in the United States or elsewhere) or their
successors or (y) in connection with any request or requirement of any such
regulatory body, (c) as may be required or appropriate in response to any
summons or subpoena or in connection with any litigation, (d) to comply with any
law, order, regulation or ruling applicable to such Bank, and (e) to any
prospective transferee in connection with any contemplated transfer of any of
the Notes or any interest therein by such Bank; provided, that such prospective
--------
transferee agrees to be bound by this Section 13.15 to the same extent as such
Bank.
(b) The Borrower hereby acknowledges and agrees that each Bank may
share with any of its affiliates any information related to the Borrower or any
of its Subsidiaries (including, without limitation, any nonpublic customer
information regarding the creditworthiness of the Borrower and its
Subsidiaries), provided that such Persons shall be subject to the provisions of
--------
this Section 13.15 to the same extent as such Bank.
13.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT
--------------------
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
13.17 Register. The Borrower hereby designates the Agent to serve as
--------
the Borrower's agent, solely for purposes of this Section 13.17, to maintain a
register (the "Register") on which it will record the Commitments from time to
time of each of the Banks, the Loans made by each of the Banks and each
repayment in respect of the principal amount of the Loans of each Bank. Failure
to make any such recordation, or any error in such recordation shall not affect
the Borrower's obligations in respect of such Loans. With respect to any Bank,
the transfer of the Revolving Loan Commitment of such Bank and the rights to the
principal of, and interest on, any Loan shall not be effective until such
transfer is recorded on the Register maintained by the Agent with respect to
ownership of such Revolving Loan Commitment and Loans and prior to such
recordation all amounts owing to the transferor with respect to such Revolving
Loan Commitment and Loans shall remain
-143-
<PAGE>
owing to the transferor. The registration of assignment or transfer of all or
part of any Revolving Loan Commitment and Loans shall be recorded by the Agent
on the Register only upon the acceptance by the Agent of a properly executed and
delivered Assignment and Assumption Agreement pursuant to Section 13.04(b).
Coincident with the delivery of such an Assignment and Assumption Agreement to
the Agent for acceptance and registration of assignment or transfer of all or
part of a Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Note evidencing such Loan, and thereupon one
or more new Notes in the same aggregate principal amount shall be issued to the
assigning or transferor Bank and/or the new Bank. The Borrower agrees to
indemnify the Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Agent in performing its duties under this Section 13.17.
13.18 Limitation on Additional Amounts, etc. Notwithstanding anything
--------------------------------------
to the contrary contained in Section 1.10, 1.11, 2.05 or 4.04 of this Agreement,
unless a Bank gives notice to the Borrower that it is obligated to pay an amount
under such Section within six months after the later of (x) the date the Bank
incurs the respective increased costs, Taxes, loss, expense or liability,
reduction in amounts received or receivable or reduction in return on capital or
(y) the date such Bank has actual knowledge of its incurrence of the respective
increased costs, Taxes, loss, expense or liability, reductions in amounts
received or receivable or reduction in return on capital, then such Bank shall
only be entitled to be compensated for such amount by the Borrower pursuant to
said Section 1.10, 1.11, 2.05 or 4.04, as the case may be, to the extent of the
costs, Taxes, loss, expense or liability, reduction in amounts received or
receivable or reduction in return on capital that are incurred or suffered on or
after the date which occurs six months prior to such Bank giving notice to the
Borrower that it is obligated to pay the respective amounts pursuant to said
Section 1.10, 1.11, 2.05 or 4.04, as the case may be. This Section 13.18 shall
have no applicability to any Section of this Agreement other than said Sections
1.10, 1.11, 2.05 and 4.04.
13.19 Post-Closing Actions. Notwithstanding anything to the contrary
--------------------
contained in this Agreement or the other Credit Documents, the parties hereto
acknowledge and agree that:
(a) Security Document Filings. Form UCC-1 financing statements
-------------------------
delivered by the Borrower to the Collateral Agent on the Initial Borrowing Date
shall be filed in the appropriate governmental office within 10 days following
the Initial Borrowing Date.
(b) Certificates of Title. The Collateral Agent's security interest
---------------------
with respect to the certificates of title in respect of all Healthcare Units
owned by the Borrower and its Subsidiaries on the Initial Borrowing Date (other
than Healthcare Units securing Existing
-144-
<PAGE>
Indebtedness not being refinanced on the Initial Borrowing Date) shall be
registered in the appropriate governmental office within 90 days following the
Initial Borrowing Date.
(c) Insurance Policies. Within 30 days following the Initial Borrowing
------------------
Date, the Borrower shall have deposited with the Collateral Agent all policies
with respect to the insurance required to be maintained in favor of the
Collateral Agent pursuant to Section 8.03.
(d) UCC-3 Termination Statements. Within 60 days following the Initial
----------------------------
Borrowing Date (or such later date as shall have been determined by the Agent in
its sole discretion), the Agent shall have received Form UCC-3 termination
statements in respect of the Liens listed on Part B of Schedule IX hereto and
same shall be filed in the appropriate governmental office within 75 days
following the Initial Borrowing Date (or such later date as shall have been
determined by the Agent in its sole discretion). Within 90 days following the
Initial Borrowing Date (or such later date as shall have been determined by the
Agent in its sole discretion), the Agent shall have received Form UCC-3
termination statements in respect of the Liens listed on Part C of Schedule IX
hereto and same shall be filed in the appropriate governmental office within 105
days following the Initial Borrowing Date (or such later date as shall have been
determined by the Agent in its sole discretion).
All provisions of this Credit Agreement and the other Credit Documents
(including, without limitation, all conditions precedent, representations,
warranties, covenants, events of default and other agreements herein and
therein) shall be deemed modified to the extent necessary to effect the
foregoing (and to permit the taking of the actions described above within the
time periods, required above, rather than as otherwise provided in the Credit
Documents); provided, that (x) to the extent any representation and warranty
--------
would not be true because the foregoing actions were not taken on the Initial
Borrowing Date, the respective representation and warranty shall be required to
be true and correct in all material respects at the time the respective action
is taken (or was required to be taken) in accordance with the foregoing
provisions of this Section 13.19 and (y) all representations and warranties
relating to the Collateral Documents shall be required to be true immediately
after the actions required to be taken by Section 13.19 have been taken (or were
required to be taken). The acceptance of the benefits of the Loans shall
constitute a representation, warranty and covenant by the Borrower to each of
the Banks that the actions required pursuant to this Section 13.19 will be, or
have been, taken within the rele vant time periods referred to in this Section
13.19 and that, at such time, all representations and warranties contained in
this Credit Agreement and the other Credit Documents shall then be true and
correct without any modification pursuant to this Section 13.19. The parties
hereto acknowledge and agree that the failure to take any of the actions
required above, within the relevant time periods required above, shall give rise
to an immediate Event of Default pursuant to this Agreement.
-145-
<PAGE>
* * * *
-146-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.
Address:
- -------
ALLIANCE IMAGING, INC.
_________________________
_________________________
Telephone No.:
Facsimile No.: By ________________________________
Attention: Title:
BANKERS TRUST COMPANY,
Individually and as Agent
By________________________________
Title:
[ADDITIONAL BANKS]
By_________________________________
Title:
<PAGE>
Schedule I
----------
LIST OF BANKS AND COMMITMENTS
-----------------------------
Bank Term Loan Revolving Loan
Commitment Commitment
---------- ----------
Bankers Trust Company $ $
[Additional Banks] $ $
Total $50,000,000 $150,000,000
<PAGE>
Schedule II
-----------
BANK ADDRESSES
--------------
Bank Address
- ---- -------
Bankers Trust Company One Bankers Trust Plaza
New York, New York 10006
Attention: GREGORY SHEFRIN
Telephone No.: (212) 250-2500
Facsimile No.: (212) 250-7218
[Additional Banks]
<PAGE>
Schedule III
------------
REAL PROPERTIES
---------------
<PAGE>
Schedule IV
-----------
EXISTING INDEBTEDNESS
---------------------
<PAGE>
Schedule V
----------
PENSION PLANS
-------------
<PAGE>
Schedule VI
-----------
EXISTING INVESTMENTS
--------------------
<PAGE>
Schedule VII
------------
SUBSIDIARIES
------------
<PAGE>
Schedule VIII
-------------
INSURANCE
---------
<PAGE>
Schedule IX
-----------
EXISTING LIENS
--------------
Filing File Original Description
Location Debtor Secured Party Number File Date of Collateral
- --------- ------ ------------- ------ --------- -------------
<PAGE>
EXHIBIT 25
----------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)_
-------------------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. employer
or organization if not a U.S. national bank) identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
---------------------------------------------
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
----------------------------------------
Alliance Imaging, Inc.
(Exact names of obligor as specified in its charter)
Delaware 33-0239910
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1065 North PacifiCenter Drive, Suite 200
Anaheim, CA 92806
(Address of principal executive offices) (Zip code)
Royal Medical Health Services, Inc.
(Exact names of guarantor as specified in its charter)
Pennsylvania 25-1738355
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1065 North PacifiCenter Drive, Suite 200
Anaheim, CA 92806
(Address of principal executive offices) (Zip code)
<PAGE>
Alliance Imaging of Ohio, Inc.
(Exact names of guarantor as specified in its charter)
Delware 33-0768045
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1065 North PacifiCenter Drive, Suite 200
Anaheim, CA 92806
(Address of principal executive offices) (Zip code)
Alliance Imaging of Michigan, Inc.
(Exact names of guarantor as specified in its charter)
Delware 33-0779723
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1065 North PacifiCenter Drive, Suite 200
Anaheim, CA 92806
(Address of principal executive offices) (Zip code)
Alliance Imaging of Central Georgia, Inc.
(Exact names of guarantor as specified in its charter)
Georgia
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1065 North PacifiCenter Drive, Suite 200
Anaheim, CA 92806
(Address of principal executive offices) (Zip code)
----------------------------------------
Alliance Imaging, Inc.
% Senior Subordinated Notes due 2005
% Senior Subordinated Floating Rate Notes due 2005
(Title of indenture securities)
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, Two Rector Street, New
York, New York
Federal Deposit Insurance Corporation, Washington, D.C.
Federal Reserve Bank of New York Second District,
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate
trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
The obligor is not an affiliate of the trustee.
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of any such
default.
None
3
<PAGE>
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligors are outstanding, or is trustee for
more than one outstanding series of securities under the indenture,
state whether there has been a default under any such indenture or
series, identify the indenture or series affected, and explain the
nature of any such default.
None
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company
as amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to
Commence Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise
corporate trust powers, as amended to date (See Exhibit 4 to
Form T-1, Securities and Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to
date (See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
* The Exhibits thus designated are incorporated herein by reference as exhibits
hereto. Following the description of such Exhibits is a reference to the copy
of the Exhibit heretofore filed with the Securities and Exchange Commission,
to which there have been no amendments or changes.
4
<PAGE>
NOTE
----
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligor and its directors or officers,
the trustee has relied upon information furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of
all facts on which to base responsive answers to Item 2, the answer to said Item
is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment to
this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2 and
16 of this form since to the best knowledge of the trustee as indicated in Item
13, the obligor is not in default under any indenture under which the applicant
is trustee.
5
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 8th day
of December, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Terence Rawlins
_____________________________________________
Terence Rawlins
Assistant Vice President
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the issuance by Alliance Imaging,
Inc. of its % Senior Subordinated Notes due 2005 and % Senior Subordinated
Floating Rate Notes due 2005,we hereby consent that reports of examinations by
Federal, State, Territorial, or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Terence Rawlins
-----------------------------
Terence Rawlins
Assistant Vice President
Dated: December 8, 1997
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
--------------
ASSETS
------
<S> <C>
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin.............. $ 41,319
Interest-bearing balances....................................... $ 314,579
Securities: Held-to-maturity securities............................ $ 180,111
Available-for-sale securities.......................... $ 47,600
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold and Securities purchased under agreements
to resell................................................... $ 694,859
Loans and lease financing receivables:
Loans and leases, net of unearned income............. $1,955,686
LESS: Allowance for loan and lease losses............ $ 62,876
LESS: Allocated transfer risk reserve................ $ -0-
Loans and leases, net of unearned income, allowance, and reserve $1,892,810
Trading assets held in trading accounts............................. $ 603
Premises and fixed assets (including capitalized leases)............ $ 3,709
Other real estate owned............................................. $ 202
Investments in unconsolidated subsidiaries and associated companies. $ -0-
Customers' liability to this bank on acceptances outstanding........ $ 81
Intangible assets................................................... $ -0-
Other assets........................................................ $ 67,092
TOTAL ASSETS........................................................ $3,242,965
</TABLE>
<PAGE>
<TABLE>
<S> <C>
LIABILITIES
-----------
In domestic offices......................................................... $1,694,675
Noninterest-bearing.......................................... $ 263,641
Interest-bearing............................................. $1,431,034
In foreign offices, Edge and Agreement subsidiaries, and IBFs............... $1,121,075
Noninterest-bearing.......................................... $ 17,535
Interest-bearing............................................. $1,103,540
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under agreements to repurchase.. $ 25,000
Demand notes issued to the U.S. Treasury........................................ $ 60,000
Trading Liabilities............................................................. $ 140
Other borrowed money:
a) With a remaining maturity of one year or less............................ $ 38,369
b) With a remaining maturity of more than one year.......................... $ 1,763
c) With a remaining maturity of more than three years....................... $ 2,242
Bank's liability on acceptances executed and outstanding........................ $ 81
Subordinated notes and debentures............................................... $ -0-
Other liabilities............................................................... $ 69,908
TOTAL LIABILITIES............................................................... $3,013,253
Limited-life preferred stock and related surplus................................ $ -0-
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................... $ -0-
Common stock.................................................................... $ 29,649
Surplus (exclude all surplus related to preferred stock)........................ $ 217,008
Undivided profits and capital reserves.......................................... $ (17,000)
Net unrealized gains (losses) on available-for-sale securities.................. $ 55
Cumulative foreign currency translation adjustments............................. $ -0-
TOTAL EQUITY CAPITAL............................................................ $ 229,712
TOTAL LIABILITIES AND EQUITY CAPITAL............................................ $3,242,965
</TABLE>
