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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NUMBER 0-16334
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ALLIANCE IMAGING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0239910
(State of Incorporation) (IRS Employer Identification Number)
1065 NORTH PACIFICENTER DRIVE, SUITE 200, ANAHEIM, CALIFORNIA 92806
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 688-7100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 or Regulation S-K Section 229.405 of Title 17, Code of Federal
Regulations is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 20, 1998 (computed by reference to the last
reported sale price of registrant's common stock on such date): $7,404,444.
Number of shares outstanding of each of the registrant's classes of
common stock as of March 20, 1998: Common Stock, $.01 par value, 4,054,111
shares.
DOCUMENTS INCORPORATED BY REFERENCE
NONE.
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PART I
ITEM 1. BUSINESS.
GENERAL
Alliance Imaging, Inc. (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. Unless the context otherwise
requires, the term "Company" as used in this Form 10-K Annual Report refers
to Alliance Imaging, Inc., and its direct and indirect subsidiaries. The
Company primarily provides magnetic resonance imaging ("MRI") and computed
axial tomography ("CT") 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 MRI
services include the provision of high technology diagnostic imaging systems,
highly-trained technologists to operate the imaging systems, equipment
maintenance and upgrades, the management of day-to-day operations,
educational and marketing support, patient scheduling, billing and collection
services, managed care contracting and professional liability insurance. 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 operated a fleet of 121 MRI systems and serviced 451 customers in 36
states as of December 31, 1997.
Since the beginning of 1995, the Company has substantially increased
revenues by adding new customers and increasing scan volumes at existing
customer sites. During the same period, the growth rate of the Company's
EBITDA (excluding expenses associated with the Recapitalization Merger (as
hereinafter defined)) 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.
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 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
December 31, 1997, the Company provided imaging systems and related
technologists and support services to 451 customers (401 for MRI services, 57
for CT services, and 20 for other modalities; some customers contract for
multiple 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 December 31, 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
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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.
IMAGING SYSTEMS. At December 31, 1997, the Company operated 121 MRI
systems, 15 CT systems and 10 other diagnostic imaging systems. Of the 121
MRI systems, 86 are state-of-the-art, high-field 1.0 or 1.5 Tesla systems and
21 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 121 MRI systems, 109 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. Six MRI systems are operated by
partnerships 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.
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 eight 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; Cleveland, Ohio;
Burlington, Connecticut; and Macon, Georgia. Each region has individuals
responsible for sales and operations management.
LICENSING AND JCAHO ACCREDITATION. 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. The Company has been
awarded accreditation with commendation by the JCAHO for its 18 MRI and CT
systems operating in the Company's Pacific Region, which includes southern
California, Arizona and southern Nevada. All other regions are scheduled to
apply for JCAHO accreditation during 1998.
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 volume and obtaining contract renewals.
SALES AND MARKETING
At December 31, 1997, the Company's sales force consisted of 22
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 also employs 22 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.
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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.
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 of 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, a small portion of 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 7% of the
Company's revenue in 1997.
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. The U.S. Department of Health and Human 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 was originally January 1, 1998. However, as part
of federal budget legislation recently signed into law, implementation of the
practice expense 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
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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 to 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 two partnerships for the provision of MRI services. The Company
believes that the partnerships are 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
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 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
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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 December 31, 1997, the Company had 613 employees, of whom
approximately 461 were trained diagnostic imaging technologists, patient
coordinators, other technical support staff. 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.
COMPANY HISTORY
The Company's predecessors, an English partnership and an
affiliated California corporation, began operation in 1983 by providing
mobile CT services in southern California. Mobile MRI services commenced in
1985. The Company's predecessors were merged into Alliance Imaging plc an
English public limited company, in 1985. The Company was incorporated in
Delaware in May 1987 and in July 1987 acquired all the outstanding stock of
Alliance Imaging plc.
The Company's common stock was publicly traded from August 1987 until
November 1988, when the Company was acquired in a going-private transaction
(the "Acquisition"). The Acquisition was accomplished through stock purchase
agreements with individual stockholders and a cash tender offer by Casper
Acquisition Corp., a wholly-owned subsidiary of CTFG Acquisition Corp., which
was formed and owned by DLJ Capital Corp. and certain of the Company's
current stockholders and members of management, including Richard N. Zehner,
the Company's Chairman, and Chief Executive Officer. In November 1991, the
Company completed its second initial public offering of common stock.
At a Special Meeting of the Stockholders held on December 17, 1997,
the Company's stockholders approved the Recapitalization Merger (as
hereinafter defined) pursuant to which affiliates of Apollo Management, L.P.
acquired control of the Company (see Item 4. below).
RECENT DEVELOPMENTS
On November 21, 1997, the Company acquired Medical Consultants Imaging
Co. ("MCIC"), a Cleveland, Ohio based provider of mobile MRI services, CT
services and other outsourced health care services. The acquisition also
included MCIC's one-half interest in an operating joint venture in Michigan.
The purchase price consisted of $12,323,000 cash plus the assumption of
approximately $5,517,000 in financing arrangements. MCIC operates 14 mobile
MRI systems and several other diagnostic imaging systems, primarily in Ohio,
Michigan, Indiana and Pennsylvania.
On March 12, 1998, the Company acquired Mobile Technology Inc.
("MTI"), a Los Angeles, California based provider of mobile MRI services, CT
services and other outsourced health care services. The MTI acquisition adds
70 MRI systems operating in 31 states, 3 CT systems, 9 lithotripsy systems,
and 4 brachytherapy systems to the Company's equipment fleet.
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The purchase price consisted of $61,800,000 in cash plus the assumption of
approximately $37,400,000 in financing arrangements.
On March 12, 1998, the Company announced it had signed a definitive
agreement to acquire the medical diagnostic imaging assets of American Shared
Hospital Services ("American Shared"), a San Francisco, California based
company, for approximately $13,600,000 in cash and assumption of
approximately $26,100,000 of debt in a transaction that is expected to close
by July 15, 1998. The proposed transaction is subject to certain conditions
including receipt of regulatory approvals and approval by the shareholders of
American Shared.
ITEM 2. PROPERTIES.
The Company leases approximately 24,500 square feet of space in an
office building in Anaheim, California for its executive and principal
administrative offices. The Company also leases a 15,600 square foot
operations warehouse in Orange, California, as well as space for its other
regional offices.
ITEM 3. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A special meeting of the Company's stockholders was held on
December 17, 1997 for the purpose of voting on the Agreement and Plan of
Merger, dated as of July 23, 1997, between the Company and Newport
Investment, LLC (the "Investor"), a Delaware limited liability company formed
and wholly owned by certain affiliates of Apollo Management, L.P.
(collectively, "Apollo"), as amended by Amendment No. 1, dated as of August
13, 1997, Amendment No. 2, dated as of October 13, 1997 and Amendment No. 3,
dated as of November 10, 1997 (the "Recapitalization Merger Agreement"). The
Recapitalization Merger Agreement provided for, among other things, (1) the
merger (the "Recapitalization Merger") of Newport Acquisition Corp.
("Newco"), a corporation to be formed solely for the purpose of this
transaction and wholly owned by the Investor, with and into the Company (the
"Recapitalization"), as a result of which the shares of common stock of
Newport Acquisition Corporation were converted into 3,632,222 shares of
common stock of the Company ("Company Common Stock"), the retention of an
aggregate of 411,358 shares of Company Common Stock by the Company's
then-existing stockholders, and the conversion of the balance of shares of
Company Common Stock (other than shares held by Company stockholders who
dissent from the Recapitalization Merger and comply with all the provisions
of the Delaware General Corporation Law concerning the right of stockholders
to seek appraisal of their shares) into the right to receive $11.00 per share
in cash, (2) the purchase by the Investor of 150,000 shares of the Company's
non-voting redeemable Series F preferred stock, (3) the Board of Directors of
Newco to become the Board of Directors of the Company upon consummation of
the Recapitalization Merger, and (4) the amendment and restatement of the
Company's Restated Certificate of Incorporation.
The stockholders approved the Recapitalization Merger Agreement by a
vote of 8,634,831 for, 9,794 shares against, 9,425 shares abstaining, and no
broker non-votes.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock traded on the Nasdaq SmallCap Market under
the symbol SCAN until the Company's Common Stock was delisted on February 23,
1998. The high and low prices as reported on the Nasdaq SmallCap Market are
set forth below for the period indicated. As of March 11, 1998, there were 23
record holders and approximately 377 beneficial holders of the Company's
Common Stock.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
First Quarter 8 3/8 5 3/4 4 1/8 2 7/8 1 7/16 7/16
Second Quarter 10 5/8 6 5/8 6 1/8 3 13/16 2 1/2 1 1/4
Third Quarter 11 1/8 10 6 3/8 3 7/8 3 1/8 2
Fourth Quarter (1) 11 3/16 10 1/2 5 15/16 4 5/8 3 3/8 2 3/8
</TABLE>
(1) Fourth Quarter 1997 reflects the high and low prices through the date
of the approval of the Recapitalization Merger, December 17, 1997.
The Company has never paid any cash dividends on its Common Stock and has
no current plans to do so; rather, the Company intends to retain available
cash to provide for the operation of its business, including capital
expenditures, and to fund future acquisitions.
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The Company made the following sales of securities in 1997, which were
not registered under the Securities Act:
On December 31, 1996, the Company entered into a bridge loan agreement
with General Electric Company 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 was convertible into 18,000 shares of a new Series D 4%
convertible preferred stock. On March 26, 1997, General Electric Company
exercised its option to convert the senior bridge loan into 18,000 shares of
Series D convertible preferred stock. At that time, other senior notes not to
exceed $9,000,000 held by General Electric Company became convertible into a
new Series E convertible preferred stock on or after January 1, 1998. In
connection with the Recapitalization Merger, both the Series D convertible
preferred stock and the rights to convert the other senior notes into Series
E convertible preferred stock were retired.
In connection with the Recapitalization Merger, on December 18, 1997,
Apollo purchased 150,000 shares of the Company's Series F Preferred stock for
$15,000,000 and received a financing fee of $600,000. Immediately after the
consummation of the Recapitalization Merger, Apollo sold to BT Investment
Partners, Inc. 9,000 shares of the Company's Series F Preferred stock for
$900,000, and paid to BT Investment Partners, Inc. a financing fee of $36,000.
Also in connection with the Recapitalization Merger, Apollo purchased a total
of 3,632,222 shares of the Company Common Stock. Consequently, as a result of
the Recapitalization, the Company had 4,043,580 shares of common stock
outstanding, of which Apollo owned 3,632,222 shares (or approximately 90%)
and the Company's existing stockholders owned 411,358 shares (or
approximately 10%). Immediately after consummation of the transactions,
Apollo sold 242,898 shares of the Company Common Stock owned by Apollo to BT
Investment Partners, Inc., for $11.00 per share (or approximately $2.7
million in the aggregate) in cash, the amount paid to the Company's existing
stockholders for shares of the Company Common Stock.
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial data, except as noted
herein, has been taken or derived from the audited consolidated financial
statements of the Company and should be read in conjunction with the full
consolidated financial statements included herein.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues $ 86,474 $ 68,482 $ 58,065 $ 57,875 $ 60,728
Costs and expenses:
Operating expenses,
Excluding depreciation 38,997 32,344 28,342 31,093 31,768
Depreciation expense 15,993 12,737 12,202 13,424 13,617
Selling, general and
administrative expenses 8,857 8,130 6,294 6,284 6,538
Amortization expense,
primarily goodwill 2,426 1,952 1,345 943 790
Interest expense, net 7,808 5,758 5,053 10,758 10,507
Recapitalization merger costs 16,350 - - - -
Asset impairment and other special charges - - - 13,339 17,500
---------- ---------- ---------- ---------- -----------
Total costs and expenses 90,431 60,921 53,236 75,841 80,720
---------- ---------- ---------- ---------- -----------
Income (loss) before income taxes and
extraordinary gains (3,957) 7,561 4,829 (17,966) (19,992)
Provision (benefit) for income taxes 1,700 1,060 727 1,100 (5,300)
---------- ---------- ---------- ---------- -----------
Income (loss) before extraordinary gains (5,657) 6,501 4,102 (19,066) (14,692)
Extraordinary gains, net of taxes 1,849 6,300 - - -
---------- ---------- ---------- ---------- -----------
Net income (loss) $ (3,808) $ 12,801 $ 4,102 $ (19,066) $(14,692)
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
Earnings per common share:
Income (loss) before extraordinary gains $ (0.41) $ 0.67 $ 0.30 $ (2.68) $ (2.07)
Extraordinary gains, net of taxes $ 0.17 0.58 - - -
---------- ---------- ---------- ---------- -----------
Net income (loss) per common share $ (0.24)(1) $ 1.25 $ 0.30 $ (2.68)(4) $ (2.07)(5)
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
Earnings per common share-assuming dilution:
Income (loss) before extraordinary gains $ (0.41) $ 0.63 $ 0.28 $ (2.68) $ ( 2.07)
Extraordinary gains, net of taxes 0.17 0.55 - - -
---------- ---------- ---------- ---------- -----------
Net income (loss) per common share
- assuming dilution $ (0.24)(1) $ 1.18 $ 0.28 $ (2.68)(4) $ (2.07)(5)
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
BALANCE SHEET DATA:
Total assets $193,655 $ 128,510 $103,327 $ 102,527 $ 117,096
Long-term debt 42,874 68,110 (2) 50,049 52,314 49,320
Senior subordinated debentures
(long-term portion) 185,000 4,592 (3) 15,883 16,633 35,000
Redeemable preferred stock 14,487 4,694 (3) 16,430 15,500 -
</TABLE>
(1) Includes $1.23 net loss per common share for costs associated with the
Recapitalization Merger.
(2) Long-term debt of $12,872 plus $5,128 used to repurchase senior
subordinated debt and redeemable preferred stock on January 2, 1997
was converted to preferred stock in March 1997.
(3) The 1996 balance of senior subordinated debentures and redeemable
preferred stock was repurchased by the Company on January 2, 1997
for $5,128.
(4) Includes $1.94 net loss per common share for special charges.
(5) Includes $1.81 net loss per common share for special charges.
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
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 121 MRI systems and services 451 customers in 36
states as of December 31, 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, the Company has substantially increased
revenues by adding new customers and increasing scan volumes at existing
customer sites. During the same period, the growth rate of the Company's
EBITDA (excluding expenses associated with the Recapitalization Merger) has
exceeded 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.
The Company 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. The Company's ongoing equipment
trade-in and upgrade program has substantially improved the marketability and
productivity of its MRI systems. Because the Company 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. The Company
currently maintains one of the most advanced fleets in the industry.
The Company also provides CT services and imaging services. Revenues
from CT services and other imaging services accounted for approximately 5% of
the Company's revenues for the year ended December 31, 1997.
On July 23, 1997, the Company 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, merged with and into the Company. Immediately following the
Recapitalization, the Company experienced an approximate 90% ownership change
and Apollo owned approximately 84% of the issued and
outstanding common stock of the Company and the Company's existing
shareholders owned approximately 10% (SEE NOTE 1).
On November 21,1997, the Company acquired Medical Consultants
Imaging Co. ("MCIC"), a Cleveland, Ohio based provider of mobile MRI
services, CT services and other outsourced health care services. The
acquisition also included MCIC's one-half interest in an operating joint
venture in Michigan. The purchase price consisted of $12,323,000 cash plus
the assumption of approximately $5,517,000 in financing arrangements. MCIC
operates 14 mobile MRI systems and several other diagnostic imaging systems,
primarily in Ohio, Michigan, Indiana and Pennsylvania.
On March 12, 1998, the Company acquired Mobile Technology Inc.
("MTI"), which management believes is the second largest provider of mobile
MRI services in the United States, in a transaction to be accounted for as a
purchase. The Company will include the operations of MTI in its consolidated
financial statements from the date of acquisition. This acquisition adds 70
MRI systems operating in 31 states, 3 CT systems, 9 lithotripsy systems, and
4 brachytherapy systems to the Company's equipment fleet. The purchase price
consisted of $61,800,000 for all of the equity interests in MTI plus direct
acquisition costs presently estimated at $3,700,000. In connection with the
acquisition, the Company also refinanced $37,400,000 of MTI's outstanding
debt. To finance these expenditures, the Company increased its existing term
loan facility by $20,000,000 to provide total availability of $70,000,000,
established a new $50,000,000 term loan facility and borrowed an aggregate of
$90,000,000 thereunder, for which the Company incurred debt issuance costs
presently estimated at $1,000,000. The Company also borrowed $5,400,000 under
its revolving loan facility and used
10
<PAGE>
$8,500,000 of cash on hand at MTI to complete the financing requirements. The
Company has not completed the allocation of the purchase price and the
determination of any goodwill resulting form the acquisition.
Also on March 12, 1998, the Company announced it had signed a
definitive agreement to acquire the medical diagnostic imaging assets of
American Shared Hospital Services ("American Shared") for approximately
$13,600,000 in cash and assumption of approximately $26,100,000 of debt in a
transaction that is expected to be consummated by July 15, 1998. The proposed
transaction is subject to certain conditions including receipt of regulatory
approvals and approval by the shareholders of American Shared.
TWELVE MONTHS YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER
31, 1996
Revenues for 1997 were $86,474,000, an increase of $17,991,000 or
26.3% ($1,033,000, or 5.7%, as a result of the MCIC acquisition), over 1996.
This increase reflects a scan-based MRI revenue increase of $15,616,000, or
25.9%, resulting from a 30.0% increase in total scan volume partially offset
by a 3.2% decrease in the average revenue realized per MRI scan. The average
daily scan volume per MRI system increased 8.4% to 7.24 from 6.68 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 in incremental scan volume; 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
$1,104,000, or 31.2%, as a result of internal growth and the fourth quarter
1996 acquisition of a small CT business. Other revenues increased $1,271,000
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, and the MCIC acquisition.
The Company operated 121 MRI systems at December 31, 1997 compared to
86 MRI systems at December 31, 1996. The average number of MRI systems
operated by the Company was 95 during 1997, compared to 85 during 1996.
Operating expenses, excluding depreciation, totaled $38,997,000 in
1997, an increase of $6,653,000, or 20.6% from 1996. Payroll and related
employee expenses increased $3,113,000, or 23.3%, primarily as a result of an
increase in operating staffing levels necessary to support new units in
operation and increased scans per unit. Repairs and maintenance expense
increased $624,000, or 38.1%, due to an increased number of systems in
service, as well as costs associated with preparing additional sites. Fuel
and other vehicle expenses collectively increased $557,000, or 34.0%,
primarily due to addition of new MRI and other mobile systems. Preventative
maintenance and cryogen contract expense increased $541,000, or 6.3%, 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, employee and professional services) increased
$1,818,000, or 25.8%, as a result of the increased level of operations.
Depreciation expense during 1997 totaled $15,993,000, an increase of
$3,256,000, or 25.6%, from the 1996 level principally due to a higher amount
of depreciable assets associated with equipment additions and upgrades.
Amortization expense during 1997 increased $474,000, or 24.3%, over 1996 as a
result of goodwill amortization associated with recent business acquisitions.
Selling, general and administrative expenses totaled $8,857,000 in
1997, an increase of $727,000, or 8.9%, from 1996. Employee expenses
increased $447,000, or 96.8%, primarily as a result of the Company's
recapitalization effort. Professional services expenses increased $124,000,
or 20.3%, primarily due to costs associated with increased investor relations
efforts and merger and acquisition activity. Corporate office expenses
increased $70,000 or 10.1% over 1996 as a result of the Company relocating
its administrative office. Other expenses increased by $86,000 primarily as a
result of expanded marketing programs.
Interest expense of $7,808,000 in 1997 was $2,050,000, or 35.6%,
higher than 1996, as a result of higher average outstanding debt balances
during 1997 as compared to 1996. This increase was primarily related to the
debt incurred in connection with the Recapitalization Merger and to the
financing of several new imaging systems during 1997.
An income tax provision of $1,700,000 was recorded in 1997, primarily
as a result of permanently non-deductible costs for tax purposes associated
with the Recapitalization Merger. At December 31, 1997, the Company had
approximately $36,000,000 of net operating losses available for federal tax
purposes to offset future taxable income, subject to certain limitations. The
Company expects its future effective tax rate to increase as net operating
loss carryforwards are fully utilized.
The Company's loss before extraordinary gain was $5,657,000 in 1997,
compared to income before extraordinary gain of $6,501,000 in 1996, a
decrease of $12,158,000, primarily attributable to costs associated with the
Recapitalization Merger. The Company reported extraordinary gains, net of
income taxes, in 1997 of $1,849,000 on early extinguishment of debt.
11
<PAGE>
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, the Company 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 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 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
the Company 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.
The Company 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 the Company was 85 during 1996, compared to 74 during 1995.
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 a higher number of rented MRI systems in operation and
the Company'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 the Company'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 increased $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. the
Company's pre-tax income in 1996 was substantially offset by net operating
loss carry forwards; 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. The Company'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, the Company 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. The Company
expects its future effective tax rate to increase as these net operating loss
carryovers are fully utilized.
The Company'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
12
<PAGE>
increase in operating and selling, general and administrative expenses. The
Company reported extraordinary gains, net of income taxes, in the fourth
quarter of 1996 of approximately $6,300,000 on early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $12,864,000, $21,731,000 and $18,043,000 from
operating activities in 1997, 1996 and 1995, respectively. Capital
expenditures, consisting primarily of new equipment purchases, totaled
$51,821,000, $34,376,000 and $11,383,000 in 1997, 1996 and 1995,
respectively. Since January 1, 1995, The Company has upgraded 24 MRI systems
and purchased 43 new MRI systems, including replacement systems. The Company
expects to purchase additional equipment under binding commitments in 1998
and finance such purchases with the Company's revolving loan facility (SEE
NOTE 4).
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 $3,025,000 in the aggregate, based on the fleet size at
December 31, 1997. In addition to these routine expenditures, the Company
expects capital expenditures to be approximately $28,143,000 in 1998, which
primarily reflects the anticipated purchase of 14 new MRI systems, including
replacement systems. 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.
As a result of the Recapitalization Merger, the Company issued
$185,000,000 of Notes (consisting of $140,000,000 Senior Subordinated Notes
due 2005, bearing interest at the rate of 9 5/8% per annum; and $45,000,000
Floating Interest Rate Subordinated Term Securities due 2005, bearing
interest at a rate per annum equal to LIBOR plus 4.19%) which are payable
semiannually, and require no principal repayments until maturity. The Company
also entered into a $125,000,000 Credit Agreement consisting of a $50,000,000
Term Loan Facility ($30,000,000 of which was funded at December 31, 1997) and
a $75,000,000 Revolving Loan Facility (none of which was funded at December
31, 1997), and carried over approximately $12,700,000 of other obligations.
The Term Loan matures on the sixth anniversary of the initial borrowing and
requires annual principal repayments of $300,000 per year during the first
five years and the outstanding principal amount in the sixth year. The
Revolving Loan Facility matures on the fifth anniversary of the initial
borrowing and has mandatory commitment reductions of $37,500,000 on the
fourth and fifth anniversaries of the initial borrowing. The Credit Agreement
contains restrictive covenants, which, among other things, limit the
incurrence of additional indebtedness, dividends, transactions with
affiliates, asset sales, acquisitions, mergers and consolidations, liens and
encumbrances, and prepayments of other indebtedness. In addition, the Credit
Agreement requires loans to be prepaid with 100% of the net proceeds of
non-ordinary-course asset sales or other dispositions of property, issuance's
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.
Also as part of the Recapitalization Merger, the Company issued
$15,000,000 of Series F Preferred Stock. The Series F Preferred Stock pays
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.
On March 12, 1998, the Company acquired Mobile Technology, Inc.
("MTI"), another nationwide provider of diagnostic imaging services. The
Company funded the MTI acquisition with $20,000,000 of existing Term Loan
availability under tranche A, $5,400,000 of revolver borrowings, a
$20,000,000 increase to the Term Loan Facility under tranche A, and a new
$50,000,000 Term Loan Facility under tranche B. The Credit Agreement was
amended to provide for the increased Term Facilities.
The Company believes that subsequent to the Recapitalization Merger
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.
13
<PAGE>
Certain statements contained in Management's Discussion and Analysis
of Financial Condition and Results of Operations, particularly in the
preceding section entitled "Liquidity and Capital Resources" and elsewhere in
this annual report on Form 10-K, are forward-looking statements. Statements
in this annual report on Form 10-K which address activities, events or
developments that the Company expects or anticipates will or may occur in the
future, including such things as results of operations and financial
condition, the consummation of acquisitions and financing transactions and
the effect of such transactions on the Company's business and the Company's
plans and objectives for future operations and expansion. These forward
looking statements are subject to risks and uncertainties, including those
identified as "Risk Factors" in the Company's Registration Statements on
Forms S-2 (No. 333-33817) and S-4 (No. 333-3378). The foregoing should not be
construed as an exhaustive list of all factors which could cause actual
results to differ materially from those expressed in forward-looking
statements made by the Company. Actual results may materially differ from
anticipated results described in these statements.
YEAR 2000
The Company recently purchased new software for approximately $296,000
which is year 2000 compatible. As a result, the Company does not believe
its systems will be adversely affected. However, there is no guarantee that
the systems of other companies on which the Company's systems rely will be
timely converted and would not have an adverse effect on the Company's
systems.
14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>
<S> <C>
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1997 and 1996 16
Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995 17
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 18-20
Consolidated Statements of Preferred Stock, Common Stock, Additional Paid-In Capital (Deficit)
and Accumulated Deficit for the years ended December 31, 1997, 1996 and 1995 21
Notes to Consolidated Financial Statements 22-31
Report of Independent Auditors 32
Quarterly Financial Data 33
</TABLE>
<PAGE>
ALLIANCE IMAGING, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------
ASSETS 1997 1996
---- ----
<S> <C> <C>
Current assets:
Cash and short-term investments $ 10,798,000 $ 10,867,000
Accounts receivable, net of allowance for doubtful accounts of $750,000
in 1997 and $513,000 in 1996 12,628,000 8,889,000
Deferred income taxes (Note 3) 2,478,000 -
Prepaid expenses 1,285,000 710,000
Other receivables 472,000 345,000
-------------- --------------
Total current assets 27,661,000 20,811,000
Equipment, at cost (NOTE 4) 169,468,000 121,354,000
Less accumulated depreciation (57,255,000) (43,735,000)
-------------- --------------
112,213,000 77,619,000
Goodwill, net of accumulated amortization of
$9,971,000 in 1997 and $7,568,000 in 1996 36,149,000 27,990,000
Deferred financing costs 13,641,000 185,000
Deposits and other assets 3,991,000 1,905,000
-------------- --------------
Total assets $ 193,655,000 $ 128,510,000
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,677,000 $ 1,765,000
Accrued compensation and related expenses 5,982,000 3,465,000
Other accrued liabilities 8,021,000 6,341,000
Current portion of long-term debt (NOTE 4) 6,351,000 16,323,000
-------------- --------------
Total current liabilities 27,031,000 27,894,000
Long-term debt, net of current portion (NOTE 4) 227,874,000 72,702,000
Other liabilities 86,000 2,029,000
Deferred income taxes (NOTE 3) 6,865,000 4,831,000
-------------- --------------
Total liabilities 261,856,000 107,456,000
Commitments (NOTE 6)
Redeemable preferred stock, Series F, $.01 par value; 300,000 shares authorized;
shares issued and outstanding - 150,000 in 1997
(redemption value - $15,084,000) and zero in 1996 (NOTE 5) 14,487,000 -
Redeemable preferred stock, Series A, $.01 par value; 155,000 shares
authorized; shares issued and outstanding (at redemption value)
- zero in 1997 and 44,286 in 1996 (NOTES 2 AND 4) - 4,694,000
Convertible preferred stock, $.01 par value; 22,000 shares authorized; shares
issued and outstanding - zero in 1997 and 3,876 in 1996 (NOTE 5) - 388,000
Common stock, $.01 par value; shares authorized - 10,000,000 in 1997 and
25,000,000 in 1996; shares issued and outstanding - 4,054,111 in
1997 and 10,913,388 in 1996 (NOTE 5) 41,000 109,000
Additional paid-in capital (deficit) (59,738,000) 34,404,000
Accumulated deficit (22,991,000) (18,541,000)
-------------- --------------
Total liabilities and stockholders' equity $193,655,000 $128,510,000
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES.
16
<PAGE>
ALLIANCE IMAGING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues $ 86,474,000 $68,482,000 $58,065,000
Costs and expenses:
Operating expenses, excluding depreciation 38,997,000 32,344,000 28,342,000
Depreciation expense 15,993,000 12,737,000 12,202,000
Selling, general and administrative expenses 8,857,000 8,130,000 6,294,000
Amortization expense, primarily goodwill 2,426,000 1,952,000 1,345,000
Interest expense, net of interest income of
$592,000 in 1997, $502,000 in 1996 and
$437,000 in 1995 7,808,000 5,758,000 5,053,000
Recapitalization merger costs (NOTE 1) 16,350,000 - -
---------------- ------------ -------------
Total costs and expenses 90,431,000 60,921,000 53,236,000
Income (loss) before income taxes and
extraordinary gains (3,957,000) 7,561,000 4,829,000
Provision for income taxes (NOTE 3) 1,700,000 1,060,000 727,000
---------------- ------------ -------------
Income (loss) before extraordinary gains (5,657,000) 6,501,000 4,102,000
Extraordinary gains, net of taxes 1,849,000 6,300,000 -
---------------- ------------ -------------
Net income (loss) (3,808,000) 12,801,000 4,102,000
Less: Preferred stock dividends 626,000 943,000 930,000
Add: Excess of carrying amount of preferred
stock repurchased over consideration paid 1,906,000 1,764,000 -
---------------- ------------ -------------
Income (loss) applicable to common stock $(2,528,000) $13,622,000 $3,172,000
---------------- ------------ -------------
---------------- ------------ -------------
Earnings per common share:
Income (loss) before extraordinary gains $ (0.41) $ 0.67 $ 0.30
Extraordinary gains, net of taxes 0.17 0.58 -
---------------- ------------ -------------
Net income (loss) per common share $ (0.24) $ 1.25 $ 0.30
---------------- ------------ -------------
---------------- ------------ -------------
Earnings per common share - assuming dilution:
Income (loss) before extraordinary gains $ (0.41) $ 0.63 $ 0.28
Extraordinary gains, net of taxes 0.17 0.55 -
---------------- ------------ -------------
Net income (loss) per common share
- assuming dilution $ (0.24) $ 1.18 $ 0.28
---------------- ------------ -------------
---------------- ------------ -------------
</TABLE>
SEE ACCOMPANYING NOTES.
17
<PAGE>
ALLIANCE IMAGING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (3,808,000) $ 12,801,000 $ 4,102,000
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Extraordinary gains (1,849,000) (6,300,000) -
Depreciation and amortization 18,419,000 14,689,000 13,547,000
Amortization of deferred financing costs 131,000 411,000 85,000
Distributions in excess of equity in (undistributed)
income of investee 271,000 (91,000) (262,000)
Increase (decrease) in deferred income taxes (444,000) 1,041,000 (173,000)
Gain on disposal of equipment - - (335,000)
Gain on sale of investment - (750,000) -
Changes in operating assets and liabilities:
Accounts receivable, net (1,960,000) (2,474,000) 1,261,000
Prepaid expenses (221,000) (306,000) (78,000)
Other receivables 211,000 (49,000) (18,000)
Other assets 18,000 (72,000) (96,000)
Accounts payable, accrued compensation and
other accrued liabilities 4,105,000 2,115,000 (520,000)
Other liabilities (2,009,000) 716,000 530,000
----------- ----------- -----------
Net cash provided by operating activities 12,864,000 21,731,000 18,043,000
INVESTING ACTIVITIES
Equipment purchases (45,122,000) (26,510,000) (10,243,000)
(Increase) decrease in deposits on equipment (1,106,000) 264,000 448,000
Purchase of contracts and related assets of Mobile
M.R. Venture, Ltd. - (455,000) -
Purchase of common stock of Royal Medical
Health Services, Inc., net of cash acquired - (1,844,000) -
Purchase of common stock of Sun MRI Services,
Inc., net of cash acquired - (269,000) -
Purchase of contracts and related assets of West
Coast Mobile Imaging - (90,000) -
Purchase of contracts and related assets of
Advanced Health care Diagnostic Service, Inc. - - (412,000)
Purchase of MRI contracts and related assets of Pacific
Medical Imaging, Inc. (756,000) - -
Purchase of partnership interests of Medical Consultants
Imaging Company, net of cash acquired (11,436,000) - -
Proceeds from sale of investment 968,000
Proceeds from sale of equipment - 2,418,000
----------- ----------- -----------
Net cash used in investing activities (58,420,000) (27,936,000) (7,789,000)
</TABLE>
18
<PAGE>
ALLIANCE IMAGING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
---- ----- -----
<S> <C> <C> <C>
FINANCING ACTIVITIES
Payment of preferred stock dividends (810,000) (1,594,000) -
Repurchase of senior subordinated debentures (2,286,000) (5,714,000) -
Partial prepayment of senior notes - (3,537,000) -
Repurchase of Series A preferred stock (2,523,000) (6,307,000) -
Principal payments on long-term debt (19,777,000) (13,630,000) (12,763,000)
Proceeds from long-term debt 36,027,000 23,889,000 11,116,000
Proceeds from senior bridge loan 5,128,000 12,872,000 -
Proceeds from senior subordinated notes and term loan 215,000,000 - -
Prepayment of senior notes and certain equipment debt (73,341,000) - -
Repurchase of common stock and common stock
warrants (153,339,000) - -
Issuance of common stock 39,954,000 - -
Issuance of Series F preferred stock 14,400,000 - -
Increase in deferred financing costs (13,721,000) (76,000) (54,000)
Proceeds from exercise of employee stock options 775,000 41,000 97,000
------------- ------------- -------------
Net cash provided by (used in) financing activities 45,487,000 5,944,000 (1,604,000)
Net (decrease) increase in cash and short-term
investments (69,000) (261,000) 8,650,000
Cash and short-term investments, beginning of year 10,867,000 11,128,000 2,478,000
------------- ------------- -------------
Cash and short-term investments, end of year $ 10,798,000 $ 10,867,000 $ 11,128,000
------------- ------------- -------------
------------- ------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 7,677,000 $ 5,562,000 $ 5,483,000
Income taxes paid 623,000 378,000 629,000
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Net book value of assets exchanged $ 1,434,000 $ 3,521,000 $ 1,104,000
Preferred stock dividend accrued 97,000 266,000 930,000
Excess of carrying amount of preferred stock
repurchased over consideration paid 1,906,000 1,764,000 -
Conversion of senior bridge loan into Series D 4%
convertible preferred stock 18,000,000 - -
Conversion of Series C 5% convertible preferred stock
into common stock 388,000 - -
Conversion of Series D 4% convertible preferred stock
into common stock 18,000,000 - -
</TABLE>
19
<PAGE>
During the 1997 fourth quarter, the Company purchased the partnership
interests of Medical Consultants Imaging Company for cash consideration of
approximately $12,323,000. In conjunction with the acquisition, liabilities
were assumed as follows:
<TABLE>
<CAPTION>
<S> <C>
Fair value of assets acquired $ 19,916,000
Cash paid for partnership interests (12,323,000)
-------------
Liabilities assumed $ 7,593,000
-------------
-------------
</TABLE>
During the 1996 second quarter, the Company 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, the Company issued
convertible preferred stock in the amount of $388,000 and common stock
warrants valued at $212,000.
During the 1996 third quarter, the Company 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.
20
<PAGE>
ALLIANCE IMAGING, INC.
CONSOLIDATED STATEMENTS OF PREFERRED
STOCK, COMMON STOCK, ADDITIONAL PAID-IN CAPITAL (DEFICIT)
AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
Series A and F Redeemable Series C and D Convertible
Preferred Stock Preferred Stock
--------------- ---------------
Shares Amount Shares Amount
--------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 155,000 $15,500,000 - $ -
Exercise of common stock options - - - -
Preferred stock dividends accrued - 930,000 - -
Net income for year ended December 31, 1995 - - - -
--------- ----------- -------- ----------
Balance at December 31, 1995 155,000 16,430,000 - -
Payment of 1995 preferred stock dividends - (930,000) - -
Exercise of common stock options - - - -
Issuance of common stock warrants in connection with
senior and subordinated debt amendment - - - -
Issuance of common stock warrants in connection with
transfer and amendment of senior notes - - - -
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. - - - -
Preferred stock dividends accrued - 930,000 - -
Payment of 1996 preferred stock dividends - (664,000) - -
Repurchase of Series A preferred stock (110,714) (11,072,000) - -
Net income for year ended December 31, 1996 - - - -
--------- ----------- -------- ----------
Balance at December 31, 1996 44,286 4,694,000 3,876 388,000
Exercise of common stock options - - - -
Repurchase of Series A redeemable preferred stock (44,286) (4,694,000) - -
Transaction costs associated with conversion of senior
bridge loan into Series D preferred stock - - - -
Conversion of senior bridge loan into Series D preferred stock - - 18,000 18,000,000
Series C preferred stock dividend - - - -
Series D preferred stock dividend - - - -
Conversion of Series C preferred stock into common stock - - (3,876) (388,000)
Conversion of Series D preferred stock into common stock - - (18,000) (18,000,000)
Conversion of Newport Acquisition Corp. common stock
into Alliance common stock - - - -
Issuance of Series F redeemable preferred stock 150,000 14,400,000 - -
Series F preferred stock dividend accrued and accretion - 87,000 - -
Repurchase of common stock - - - -
Payment to retire common stock warrants - - - -
Tax benefit of disqualified stock option dispositions
and warrants - - - -
Net loss for the year ended December 31, 1997 - - - -
--------- ----------- -------- ----------
Balance at December 31, 1997 150,000 $14,487,000 - -
--------- ----------- -------- ----------
--------- ----------- -------- ----------
<CAPTION>
Additional
Common Stock Paid-In
------------ Capital Accumulated
Shares Amount (Deficit) Deficit
------ ------ ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 10,614,371 $106,000 $31,813,000 $(33,584,000)
Exercise of common stock options 221,800 2,000 95,000 -
Preferred stock dividends accrued - - - (930,000)
Net income for year ended December 31, 1995 - - - 4,102,000
-- ----------- --------- ------------ ------------
Balance at December 31, 1995 10,836,171 108,000 31,908,000 (30,412,000)
Payment of 1995 preferred stock dividends - - - -
Exercise of common stock options 77,217 1,000 39,000 -
Issuance of common stock warrants in connection with
senior and subordinated 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. - - - -
Issuance of common stock warrants in connection with
acquisition of Royal Medical Health Services, Inc. - - 212,000 -
Preferred stock dividends accrued - - - (930,000)
Payment of 1996 preferred stock dividends - - - -
Repurchase of Series A preferred stock - - 1,764,000 -
Net income for year ended December 31, 1996 - - - 12,801,000
----------- --------- ------------ ------------
Balance at December 31, 1996 10,913,388 109,000 34,404,000 (18,541,000)
Exercise of common stock options 554,539 6,000 768,000 -
Repurchase of Series A redeemable preferred stock - - 1,906,000 -
Transaction costs associated with conversion of senior
bridge loan into Series D preferred stock - - (160,000) -
Conversion of senior bridge loan into Series D preferred stock - - - -
Series C preferred stock dividend - - - (13,000)
Series D preferred stock dividend - - - (528,000)
Conversion of Newport Acquisition Corp. common stock
into Alliance common stock 3,632,222 36,000 39,918,000 -
Conversion of Series C preferred stock into common stock 80,206 1,000 400,000 (14,000)
Conversion of Series D preferred stock into common stock 3,000,000 30,000 17,970,000 -
Issuance of Series F redeemable preferred stock - - - -
Series F preferred stock dividend accrued and accretion - - - (87,000)
Repurchase of common stock (14,126,244) (141,000) (155,247,000) -
Payment to retire common stock warrants - - (2,097,000) -
Tax benefit of disqualified stock option dispositions
and warrants - - 2,400,000 -
Net loss for the year ended December 31, 1997 - - - (3,808,000)
----------- --------- ------------ ------------
Balance at December 31, 1997 4,054,111 $41,000 $(59,738,000) $(22,991,000)
----------- --------- ------------ ------------
----------- --------- ------------ ------------
</TABLE>
See accompanying notes
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. DESCRIPTION OF THE COMPANY AND BASIS OF FINANCIAL STATEMENT PRESENTATION
DESCRIPTION OF THE COMPANY -- Alliance Imaging, Inc. (the Company) 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 health care providers. Diagnostic imaging
services are provided on both a mobile, shared-user basis as well as on a
full-time basis to single customers. The Company 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 the Company 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 Imaging, Inc. and its
consolidated subsidiaries. Significant intercompany transactions have been
eliminated. The Company owns 49% of a partnership as a general and limited
partner and a 50% interest in a joint venture. These entities provide
services similar to the Company's activities and are accounted for under the
equity method.
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.
RECAPITALIZATION MERGER -- On December 18, 1997, after obtaining the approval
of stockholders, the Company completed a series of transactions contemplated
by an Agreement and Plan of Merger between Newport Investment LLC (the
"Investor") and the Company (the "Recapitalization Merger") whereby the
Company: obtained proceeds from debt financing aggregating $215,000,000;
issued 150,000 shares of non-voting redeemable Series F preferred stock to
the Investor for proceeds of $15,000,000; issued 3,632,222 shares of its
common stock in exchange for all of the outstanding stock of Newport
Acquisition Corporation, a subsidiary of the Investor, and received net
proceeds of $39,954,000 from cash placed into Newport Acquisition Corporation
by the Investor; and converted all shares of its common stock held by
existing stockholders in excess of 411,358 shares that were retained by
electing existing stockholders into the right to receive $11 in cash. The
Company used the cash proceeds from these transactions to fund: the purchase
of its common stock from existing stockholders - $162,500,000; repayment of
existing debt, net of $1,100,000 net discount on prepayment of debt -
$73,900,000; transaction costs charged to expense - $16,400,000; deferred
debt financing fees and redeemable preferred stock financing fees of
$14,300,000; and an increase in the Company's cash balance of $2,854,000.
As a result of these transactions, the Company experienced an
approximate 90% ownership change. The Investor, which was formed and is
wholly owned by certain affiliates of Apollo Management, L.P., (Apollo)
obtained ownership of approximately 83.6% of the Company's outstanding common
stock, and the Company became highly leveraged. The Company paid $3,200,000
to Apollo for professional services rendered in connection with the
Recapitalization Merger. The Recapitalization Merger and related transactions
have been treated as a leveraged recapitalization in which the issuance and
retirement of debt have been accounted for as financing transactions, the
sales and purchases of the Company's stock have been accounted for as capital
transactions at amounts received from or paid to stockholders, and no changes
were made to the carrying values of the Company's assets and liabilities that
were not directly impacted by the transactions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND SHORT-TERM INVESTMENTS -- The Company considers short-term
investments with original maturities of three months or less to be cash
equivalents.
ACCOUNTS RECEIVABLE -- The Company provides shared and single-user diagnostic
imaging equipment and technical support services to the health care industry
and directly to patients on an outpatient basis. Substantially all of the
Company's accounts receivable are due from hospitals, other health care
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 payors. Credit
losses are provided for in the consolidated financial statements and losses
experienced have been within management's estimates.
22
<PAGE>
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 the Company 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
and leasehold improvements, substantially all of the property owned by the
Company relates to diagnostic imaging equipment, tractors and trailers used
in the business.
GOODWILL -- The Company amortizes goodwill using the straight-line method
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 of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" (SFAS No. 121), in March 1995. SFAS No. 121 requires long-lived assets
and certain intangibles held and used by the Company 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. The Company adopted SFAS
No. 121 in the first quarter of 1996 with no material effect on the Company's
financial statements.
REVENUE RECOGNITION -- The majority of the Company's revenues are derived
directly from health care providers. To a lesser extent, revenues are
generated from direct billings to patients or their medical payors who 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 7%, 8% and 10% of revenues
in the years ended December 31, 1997, 1996 and 1995, respectively. No single
customer accounted for 3% or more of consolidated revenues in each of the
three years in the period ended December 31, 1997. All revenues are
recognized at the time the service is performed.
INCOME TAXES -- The Company 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 valuation allowance is established for deferred tax assets
unless their realization is considered more likely than not. The Company'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 -- The Company 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 the Company.
The following methods and assumptions were used by the Company 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 the Company's long-term debt are estimated
using discounted cash flow analyses, based on the Company's current
incremental rates for similar types of borrowing arrangements.
23
<PAGE>
The carrying amounts and estimated fair values of the Company's
financial instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Cash and short-term investments $ 10,798,000 $ 10,798,000 $10,867,000 $10,867,000
Long-term debt 234,225,000 233,539,000 89,025,000 84,150,000
Redeemable preferred stock - Series A - - 4,694,000 2,788,000
Redeemable preferred stock - Series F 14,487,000 14,487,000 - -
</TABLE>
As more fully discussed in Note 4, the Company repurchased all of its
Series A redeemable preferred stock and paid approximately $2,788,000 to
retire the December 31, 1996 balance. Consequently, the Company believes
$2,788,000 reasonably approximates the fair value of its Series A redeemable
preferred stock balance at December 31, 1996.
As more fully discussed in Note 5, the Company issued its Series F
redeemable preferred stock in exchange for $15,000,000 cash on December 18,
1997, in connection with the Recapitalization Merger. Although it was not
practicable to reevaluate the estimated fair value of the Series F redeemable
preferred stock as of December 31, 1997 because of a lack of a quoted market
price and the inability to estimate fair value without incurring excessive
costs, the Company believes the $14,487,000 carrying amount at December 31,
1997, which represents the original fair value of the preferred stock (less a
$600,000 financing fee) increased for the 1997 cumulative dividend and
financing fee accretion, reasonably approximates its fair value at that date.
EARNINGS PER COMMON SHARE -- In 1997, the FASB issued Statement No. 128,
"Earnings per Share". Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share are very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where necessary, restated to conform to the Statement 128
requirements. The following table sets forth the computation of basic and
diluted earnings per share:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Numerator:
Income (loss) before extraordinary gains $ (5,657,000) $ 6,501,000 $ 4,102,000
Preferred stock dividends (626,000) (943,000) (930,000)
Excess of carrying amount of preferred stock repurchased
over consideration paid 1,906,000 1,764,000 -
----------- ---------- ------------
Numerator for basic and diluted earnings per share
- income available to common stockholders before
extraordinary gain $ (4,377,000) $7,322,000 $3,172,000
----------- ---------- ------------
----------- ---------- ------------
Denominator:
Denominator for basic earnings per share -
weighted-average shares 10,743,000 10,864,000 10,736,000
Effect of dilutive securities:
Employee stock options and common stock warrants - 630,000 422,000
----------- ---------- ------------
Denominator for diluted earnings per share - adjusted
weighted-average shares 10,743,000 11,494,000 11,158,000
----------- ---------- ------------
----------- ---------- ------------
Basic earnings (loss) per share before extraordinary gain $ (0.41) $ 0.67 $ 0.30
----------- ---------- ------------
----------- ---------- ------------
Diluted earnings (loss) per share before extraordinary gain $ (0.41) $ 0.63 $ 0.28
----------- ---------- ------------
----------- ---------- ------------
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS -- In June 1997, the FASB issued Statement
No. 130, "Reporting Comprehensive Income", which establishes standards for
the reporting and display of comprehensive income and its components in
financial statements. Comprehensive income is comprised of net income plus or
minus specified changes in stockholders' equity. Statement No. 130 is
effective for fiscal years beginning after December 15, 1997 and requires
restatement of earlier periods presented. Also in June 1997, the FASB issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information", which requires publicly-held companies to report financial and
descriptive information about its operating segments in financial statements
issued
24
<PAGE>
to shareholders for interim and annual periods. The statement also requires
additional disclosures with respect to products and services, geographical
areas of operations and major customers. Statement No. 131 is effective for
fiscal years beginning after December 15, 1997 and requires restatement of
earlier periods presented.
3. INCOME TAXES
The provision for income taxes shown in the consolidated statements of
operations consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 3,529,000 $ 2,958,000 $ 960,000
State (105,000) 735,000 970,000
------------- ------------ -----------
3,424,000 3,693,000 1,930,000
Utilization of net operating loss carryovers - (2,649,000) (1,029,000)
------------- ------------ -----------
3,424,000 1,044,000 901,000
Deferred:
Federal (1,460,000) - (181,000)
State 1,016,000 731,000 7,000
------------- ------------ -----------
(444,000) 731,000 (174,000)
------------- ------------ -----------
$ 2,980,000 $ 1,775,000 $ 727,000
------------- ------------ -----------
------------- ------------ -----------
</TABLE>
The provision for income taxes applicable to income before
extraordinary gains and attributed to the extraordinary gains is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Provision for taxes on income before extraordinary gains:
Current $ 2,144,000 $ 329,000 $ 901,000
Deferred (444,000) 731,000 (174,000)
-------------- ----------- -----------
Total provision for taxes on income before extraordinary gains 1,700,000 1,060,000 727,000
Provision for taxes on extraordinary gains (current) 1,280,000 715,000 -
-------------- ----------- -----------
$ 2,980,000 $1,775,000 $ 727,000
-------------- ----------- -----------
-------------- ----------- -----------
</TABLE>
Significant components of the Company's deferred tax assets and
(liabilities) at December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Equipment basis differences $ (17,774,000) $ (12,981,000)
Cancellation of indebtedness (3,000,000) (2,258,000)
-------------- --------------
Total deferred tax liabilities (20,774,000) (15,239,000)
DEFERRED TAX ASSETS:
Net operating losses 13,743,000 9,900,000
Accounts receivable 292,000 266,000
Basis differences associated with other assets 3,458,000 2,105,000
Other 16,000 330,000
-------------- --------------
Total deferred tax assets 17,509,000 12,601,000
Valuation allowance (1,122,000) (2,193,000)
-------------- --------------
Net deferred tax assets 16,387,000 10,408,000
-------------- --------------
Net deferred taxes (4,387,000) (4,831,000)
Current deferred tax asset 2,478,000 -
-------------- --------------
Noncurrent deferred tax liability $ (6,865,000) $ (4,831,000)
-------------- --------------
-------------- --------------
</TABLE>
The net increase (decrease) in the Company's valuation allowance on
deferred tax assets during the year ended December 31, 1997 totaled
$(1,550,000) and $478,000 for federal and state purposes, respectively.
25
<PAGE>
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>
1997 1996 1995
---- ---- ----
<S> <C> <C>
Computed expected provision (benefit) $(1,385,000) $ 2,646,000 $ 1,690,000
State income taxes, net of federal
benefit 407,000 572,000 313,000
Amortization of goodwill 650,000 487,000 458,000
Nondeductible Recapitalization expenses 3,053,000
Warrants (189,000)
Alternative minimum tax - 182,000 34,000
Increase (decrease) in valuation allowance
on federal deferred tax assets (873,000) (2,798,000) (1,710,000)
Other 37,000 (29,000) (58,000)
-------------- ------------ ------------
$ 1,700,000 $ 1,060,000 $ 727,000
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
At December 31, 1997, the Company had approximately $36,000,000 and
$12,400,000 of operating loss carryforwards for federal and state regular
income tax purposes, respectively, expiring through 2006. The Tax Reform Act
of 1986 contains provisions which could substantially limit the availability
of the net operating loss carryforwards if there is a greater than 50% change
in ownership during a three year period. The Company has experienced such a
change in 1991 and 1997, resulting in a limitation on the utilization of its
net operating loss carryforwards. The limitation is based upon the value of
the stock on that date. Management believes that the limitations will not
have a material adverse effect on the Company's ability to fully utilize its
net operating loss carryforwards. The ultimate realization of the loss
carryforwards is dependent upon the future profitability of the Company.
4. INDEBTEDNESS
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Term loan facility, due in quarterly installments through December 2003,
interest payable as defined (SEE BELOW) $ 30,000,000 $ -
Senior subordinated notes, due December 2005, interest at 9.625%,
payable semi-annually (SEE BELOW) 140,000,000 -
Subordinated term securities, due December 2005, interest at LIBOR
(as defined) plus 4.19%, payable semi-annually (SEE BELOW) 45,000,000 -
Obligations to lending institutions, secured by equipment, due in monthly
installments through December 2002 with weighted average interest rates of
9.97% and 9.77% at December 31, 1997
and 1996 respectively 19,225,000 51,695,000
Senior notes, secured by equipment (SEE BELOW) - 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) - 4,592,000
------------ ------------
234,225,000 89,025,000
Less current portion 6,351,000 16,323,000
------------ ------------
$227,874,000 $72,702,000
------------ ------------
------------ ------------
</TABLE>
In connection with the Recapitalization Merger, the Company issued
$140,000,000 of 9.625% senior subordinated notes and $45,000,000 of floating
interest rate subordinated term securities (the "Notes"). The Notes mature on
December 15, 2005 and are unsecured obligations of the Company ranking
subordinate in right of payment to all senior debt. Interest on the Notes is
payable semi-annually in cash on each June 15 and December 15 commencing on
June 15, 1998. The interest rate on the floating interest
26
<PAGE>
rate subordinated term securities was 10.09625% at December 31, 1997.
The Notes are unconditionally guaranteed, on a senior subordinated
basis, jointly and severally, by all significant direct and indirect
consolidated subsidiaries of the Company, 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 the Company's obligations pursuant to the
Notes, and the aggregate net assets, earnings and equity of the Subsidiary
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 and other
disclosures concerning the Subsidiary Guarantors would not provide material
information to users of its financial statements. Combined summarized
financial information for the Subsidiary Guarantors is set forth below (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1997 1996
------------------ -----------------
<S> <C> <C>
Current assets $ 111 $131
Noncurrent assets 19,937 8,163
------------------ -----------------
Total assets $20,048 $8,294
------------------ -----------------
------------------ -----------------
Current liabilities $ 1,102 $1,621
Noncurrent liabilities 14,893 4,238
Equity 4,053 2,435
------------------ -----------------
Total liabilities and equity $20,048 $8,294
------------------ -----------------
------------------ -----------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1997 1996 1995
------------------ ----------------- ----------------
<S> <C> <C> <C>
Revenues $8,465 $7,142 $558
Costs and expenses 6,880 5,676 225
------------------ ----------------- ----------------
Operating margin 1,585 1,466 333
Provision for income taxes 540 205 50
------------------ ----------------- ----------------
Net income $1,045 $1,261 $283
------------------ ----------------- ----------------
------------------ ----------------- ----------------
</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.
In addition to the Notes, the Company also entered into a Credit
Agreement with a bank consisting of a $50,000,000 term loan facility and a
$75,000,000 revolving loan facility. The term loan facility balance was $30
million at December 31, 1997 with the remaining $20,000,000 available to
finance future acquisitions permitted under the Credit Agreement. Interest
under the term loan facility is variable based on the Company's leverage
ratio and changes in specified published rates and the bank's prime lending
rate. The interest rate on the term loan facility was 8.41% at December 31,
1997. No amounts were outstanding under the revolving loan facility.
In addition to a variable per annum fee in respect of outstanding
letters of credit, the Company also pays a commitment fee equal to 1/2 of 1%
per annum on the undrawn portion available under the Credit Agreement subject
to decreases in certain circumstances. Certain mandatory prepayments are
required from proceeds of various transactions and are allocated first to the
term loan facility. Voluntary prepayments are permitted subject to certain
limitations.
The term loan facility, the revolving loan facility, and the
obligations to lending institutions are collateralized by all of the
Company's equipment at December 31, 1997.
On December 31, 1996, the Company entered into a Bridge Loan Agreement
(enabling the Company 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 was convertible into 18,000 shares of a new
Series D convertible preferred stock (SEE NOTE 5). On December 31, 1996, the
Company 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, the Company 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 was recognized as an
increase in additional
27
<PAGE>
paid-in capital. In connection with this transaction, on January 2, 1997, the
Company 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, the Company 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 became convertible into a new Series E
preferred stock on or after January 1, 1998 (SEE NOTE 5).
The Company's previous $3,000,000 revolving line of credit was
terminated as of December 18, 1997.
The maturities of long-term debt as of December 31, 1997 is due as
follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31:
1998 $ 6,351,000
1999 6,184,000
2000 4,582,000
2001 2,550,000
2002 1,058,000
Thereafter 213,500,000
------------
$234,225,000
------------
------------
</TABLE>
Of the Company's total indebtedness at December 31, 1997, $226,760,000
is an obligation of the Company and $7,465,000 is an obligation of the
Company's consolidated subsidiaries.
5. PREFERRED AND COMMON STOCK
PREFERRED STOCK -- The Company is authorized to issue 500,000 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 the Recapitalization Merger (SEE NOTE 1), the
Company authorized 300,000 shares of a new Series F redeemable preferred
stock on December 18, 1997. The stock was recorded at $14,400,000
(liquidation value of $15,000,000 less a financing fee of $600,000). The
financing fee is being accreted on a straight-line basis over the ten-year
term of the stock. The holders of the Series F redeemable preferred stock are
entitled to receive cumulative dividends at the rate of 13.5% per annum of
the stated liquidation value. Unpaid dividends accumulate and are payable
quarterly by the Company in kind for the first five years after issuance, and
thereafter in cash.
In the event of liquidation, dissolution or winding up of the Company,
the holders of Series F redeemable 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. The Series F redeemable preferred stock is redeemable at the
option of the Company at stated redemption premiums from the date of issuance
through December 31, 2007. The Company is required to redeem all outstanding
shares of Series F redeemable preferred stock at 100% of liquidation value on
December 31, 2007 out of funds legally available. No sinking fund has been or
will be established for the retirement or redemption of the shares of Series
F redeemable preferred stock. Series F preferred stock is not convertible
into shares of any other class or series of capital stock.
In connection with the Company's debt refinancing effective December
31, 1996 (SEE NOTE 4), the Company 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 Company issued 18,000 shares of Series D preferred stock
as a result of the conversion of borrowings of $18,000,000 under the Bridge
Loan Agreement. No shares of Series E convertible preferred stock were ever
issued. All shares of Series C and D convertible preferred stock were
converted into 80,206 shares and 3,000,000 shares of common stock
respectively in connection with the Recapitalization Merger (SEE NOTE 1).
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
28
<PAGE>
series and similar actions.
STOCK OPTIONS AND AWARDS -- The Company 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 the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense
is recognized.
The Company'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 3 to 4 years
of continued employment. In connection with the Recapitalization Merger, the
Company adopted a new employee stock option plan pursuant to which options
with respect to a total of 454,545 shares of the Company's common stock will
be available for grant. Options are granted at their fair value at the date
of grant. All options have 10 year terms. Fifty percent of the options vest
in equal increments over four years and fifty percent vest over seven and
one-half years (subject to acceleration if certain per-share equity targets
are achieved). The weighted-average remaining contractual life of options
outstanding as of December 31, 1997 and 1996, respectively, is 9.74 and 9.6
years. The following table summarizes the Company's stock option activity:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
------ --------------
<S> <C> <C>
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
Granted 625,000 8.5150
Exercised (554,539) 1.3952
Redeemed for cash (684,975) 4.7704
Canceled (2,000) 0.4375
----------------- -------------
Outstanding at December 31, 1997 334,469 $9.7760
$9.7760
----------------- -------------
----------------- -------------
</TABLE>
At December 31, 1997, 48,500 of these options were exercisable at
$3.5625, 10,969 were exercisable at $6.5625 and 275,000 were exercisable at
$11.00.
In addition, the Company had options on 40,000 shares of common stock
outstanding at December 31, 1996 at exercise prices of $1.125 to $8.25 and
granted options on an additional 100,000 shares of common stock in 1997 at
exercise prices of $6.5625 to $7.875 per share. These stock options were
granted to Company directors outside of the 1991 Stock Option Plan and were
all redeemed for cash in connection with the Recapitalization Merger (SEE
NOTE 1).
Pro forma information regarding net income and earnings per share is
required by FASB Statement 123, which also requires that the information be
determined as if the Company 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 1997 and 1996, respectively: risk-free
interest rates of 6.31% and 5.72%; no dividend yield; volatility factors of
the expected market price of the Company's common stock of .41 and .43; and a
weighted-average expected life of the option of 7 years. The weighted-average
fair value of options granted during 1997 and 1996 is $4.60 and $1.93,
respectively.
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 the Company'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.
29
<PAGE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' expected vesting period.
The Company's pro forma information for the years ended December 31, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Pro forma net income (loss) ($641,000) $12,577,000
Pro forma earnings (loss) per share $ 0.06 $ 1.23
Pro forma earnings (loss) per share
-assuming dilution $ 0.06 $ 1.17
</TABLE>
At December 31, 1996 the Company 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. The Company repurchased all warrants in
December 1997 in connection with the Recapitalization Merger (SEE NOTE 1).
6. COMMITMENTS
The Company 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 February 2002, but may be
canceled by the Company under certain circumstances. Contract payments are
approximately $14,800,000 per year. At December 31, 1997, the Company had
binding equipment purchase commitments totaling approximately $70,400,000.
The Company 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>
<CAPTION>
<S> <C>
Year ending December 31:
1998 $ 3,151,000
1999 2,757,000
2000 2,327,000
2001 1,940,000
2002 709,000
-----------
$10,884,000
-----------
-----------
</TABLE>
The Company's total rental expense, which includes short-term
equipment rentals, for the years ended December 31, 1997, 1996 and 1995 was
$3,669,000, $3,380,000 and $1,923,000, respectively.
7. 401(K) SAVINGS PLAN
The Company established a 401(k) Savings Plan in January 1990. All
employees of the Company are eligible to participate after a six month
waiting period. Employees may contribute between 1% and 15% of their annual
compensation. The Company 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. The Company may also make discretionary
contributions depending on profitability. The Company incurred and charged to
expense $207,000, $157,000 and $140,000 during 1997, 1996 and 1995,
respectively, related to the plan.
8. ACQUISITIONS
On November 21, 1997, the Company acquired Medical Consultants Imaging
Co. (MCIC), a Cleveland, Ohio based provider of mobile MRI services, CT
services and other outsourced health care services. The acquisition also
included MCIC's one-half interest in an operating joint venture in Michigan.
The purchase price consisted of approximately $12,300,000 in cash (of which
$2,000,000 has been placed in escrow and is subject to certain reductions)
plus the assumption of approximately $5,000,000 in financing arrangements.
The acquisition has been accounted for as a purchase and, accordingly, the
results of operations of MCIC have been included in the Company's
consolidated financial statements from the date of acquisition. The goodwill
recorded as a result of this acquisition was $10,300,000, which is being
amortized on a straight-line basis over 20 years. The allocation of the
purchase price of MCIC is tentative pending completion of fair value
determinations for the net assets acquired. The allocation may change with
the completion of these determinations.
On April 26, 1996, the Company acquired all of the outstanding shares
of Royal Medical Health Services, Inc. (Royal) of Pittsburgh, Pennsylvania.
Like the Company, Royal is a provider of comprehensive MRI services. The
Company 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
30
<PAGE>
and, accordingly, the results of operations of Royal have been included in
the Company's consolidated financial statements from the date of acquisition.
The unaudited pro forma information below presents combined results
of operations as if the MCIC acquisition had occurred at the beginning of
1997 and 1996 and the Royal acquisition had occurred at the beginning of 1996
and 1995. The unaudited pro forma information is not necessarily indicative
of the results of operations of the combined company had the acquisitions
actually occurred at the beginning of the periods presented, nor is it
necessarily indicative of future results.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues $97,980,000 $87,514,000 $ 63,621,000
Income before extraordinary gains (5,253,000) 6,500,000 4,492,000
Net income (3,404,000) 12,800,000 4,492,000
Earnings per share:
Basic (.20) $1.25 $0.33
Diluted (.20) $1.19 $0.32
</TABLE>
9. SUBSEQUENT EVENTS
On March 12, 1998, the Company acquired Mobile Technology Inc. (MTI),
which management believes is the second largest provider of mobile MRI
services in the United States, in a transaction to be accounted for as a
purchase. The Company will include the operations of MTI in its consolidated
financial statements from the date of acquisition. This acquisition adds 70
MRI systems operating in 31 states, 3 CT systems, 9 lithotripsy systems, and
4 brachytherapy systems to the Company's equipment fleet. The purchase price
consisted of $61,800,000 for all of the equity interests in MTI plus direct
acquisition costs presently estimated at $3,700,000. In connection with the
acquisition, the Company also refinanced $37,400,000 of MTI's outstanding
debt. To finance these expenditures, the Company increased its existing term
loan facility by $20,000,000 to provide total availability of $70,000,000,
established a new $50,000,000 term loan facility and borrowed an aggregate of
$90,000,000 thereunder, for which the Company incurred debt issuance costs
presently estimated at $1,000,000. The Company also borrowed $5,400,000 under
its revolving loan facility and used $8,500,000 of cash on hand at MTI to
complete the financing requirements. The Company has not completed the
allocation of the purchase price and the determination of any goodwill
resulting from the acquisition.
Also on March 12, 1998, the Company announced it had signed a
definitive agreement to acquire the medical diagnostic imaging assets of
American Shared Hospital Services (American Shared) for approximately
$13,600,000 in cash and assumption of approximately $26,100,000 of debt in a
transaction that is expected to be consummated by July 15, 1998. The proposed
transaction is subject to certain conditions including receipt of regulatory
approvals and approval by the shareholders of American Shared.
31
<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, 1997 and 1996 and the related
consolidated statements of operations, cash flows and preferred stock, common
stock, additional paid-in capital (deficit) and accumulated deficit for each
of the three years in the period ended December 31, 1997. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule 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, 1997 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, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, 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 24, 1998,
except for Note 9, as to which the
date is March 12, 1998
32
<PAGE>
ALLIANCE IMAGING, INC.
QUARTERLY FINANCIAL DATA
Summarized quarterly unaudited financial data for the years ended December
31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------------------
March 31, 1997 June 30, 1997 September 30, 1997 December 31, 1997
------------- ------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues $19,106,000 $20,805,000 $22,374,000 $24,189,000
Income (loss) before income taxes
and extraordinary gains 2,539,000 3,701,000 3,991,000 (14,188,000)
Extraordinary gains, net of taxes 1,332,000 - - 517,000
Net income (loss) 3,036,000 2,411,000 2,636,000 (11,891,000)
Earnings (loss) per common share $0.33 $0.20 $0.22 ($1.25)
Earnings (loss) per common share
- assuming dilution $0.30 $0.16 $0.17 ($1.25)
</TABLE>
The earnings (loss) per share amounts for the four quarters do not sum to the
annual earnings (loss) per share amounts as a result of the significant
decline in shares outstanding that occurred late in the fourth quarter in
connection with the Recapitalization Merger.
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------------------------------------
March 31, 1996 June 30, 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
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 $0.10 $0.14 $0.16 $0.27
Earnings per common share
- assuming dilution $0.10 $0.13 $0.15 $0.25
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
33
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below is information regarding the Company's board of
directors and executive officers, including their principal occupations for
the past five years, certain other directorships held by them, and their ages
as of March 15, 1998. There are no family relationships among any of the
directors or executive officers.
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION
- ---- --- ----------------
<S> <C> <C>
Richard N. Zehner 45 Chairman, Chief Executive Officer and Director
Vincent S. Pino 49 President and Director
Kenneth S. Ord 51 Senior Vice President, Chief Financial Officer and Secretary
Jay A. Mericle 43 Senior Vice President
Terry A. Andrues 46 Senior Vice President
Neil M. Cullinan, Ph.D. 56 Senior Vice President
Cheryl A. Ford 42 Senior Vice President
Michael W. Grismer 36 Controller, Assistant Secretary
Russell D. Phillips, Jr. 35 General Counsel
Robert H. Falk 58 Director
Michael S. Gross 35 Director
Joshua J. Harris 33 Director
Anthony R. Ignaczak 33 Director
Robert A. Katz 31 Director
Mark D. Klein 36 Director
Michael D. Weiner 44 Director
</TABLE>
Richard N. Zehner has been the Chairman and Chief Executive Officer of
the Company since November 1998. Mr. Zehner was a founder of the Company, and
also served as President from 1983 through February 1998. He has served as a
director of the Company since 1987.
Vincent S. Pino has been President of the Company since February 1998.
Prior to that time he served as Executive Vice President and Chief Operating
Officer of the Company since December 1991 and August 1993, respectively. He
has been a director of the Company since 1987. From November 1988 to August
1993, he was Chief Financial Officer of the Company.
Kenneth S. Ord joined the Company in January 1998 as Senior Vice
President, Chief Financial Officer and Secretary. From February 1997 to
September 1997 he served as Executive Vice President and Chief Financial
Officer of Talbert Medical Management Corporation and from February 1994 to
February 1997 he served as Senior Vice President and Chief Financial Officer
of FHP International Corporation. From 1982 to 1994 he was employed by Kelly
Services, Inc. most recently as Vice President of Finance, Controller and
Treasurer.
Jay A. Mericle has acted as Senior Vice President of the Company since
1988 and technical marketing manager of the Company since 1986.
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.
Neil M. Cullinan, Ph.D., served since 1987 as the President of
Atlantic/Gulf Imaging, Inc., which was acquired by the Company in March 1992.
He was employed as Senior Vice President of the Company in connection with
the acquisition.
Cheryl A. Ford became Senior Vice President of the Company in February
1995. She joined the Company as Vice President in October 1993. From 1987 to
October 1993, she was employed by Mobile Technology, Inc. in various
capacities, including most recently as Vice President - Eastern Region.
34
<PAGE>
Michael W. Grismer joined the Company as Controller and Assistant
Secretary in July 1995. He served as Controller of Wynn Oil Company from 1993
through 1995, and was employed by Ernst & Young LLP and its predecessor from
1983 through 1993, most recently as Senior Manager since 1991.
Russell D. Phillips, Jr. joined the Company in March 1998 as General
Counsel. From May 1997 to September 1997 he served as Chief Legal Officer of
Talbert Medical Management Corporation and from June 1992 to April 1997 he
served as Corporate Counsel to FHP International Corporation. Prior to 1992,
Mr. Phillips was an associate with the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP.
Robert H. Falk was named as a director of the Company in December 1997
in connection with the Recapitalization Merger. Mr. 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 was named as a director of the Company in December
1997 in connection with the Recapitalization Merger. Mr. 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 Imagyn
Medical Technologies, Inc.
Joshua J. Harris was named as a director of the Company in December
1997 in connection with the Recapitalization Merger. Mr. Harris is a
principal of Apollo and has served as an officer of certain affiliates of
Apollo since 1990. Mr. Harris is also a director of Converse Inc., Breuners
Home Furnishings Corporation, Florsheim Group Inc., and NRT Incorporated.
Anthony R. Ignaczak was named as a director of the Company in February
1998. Mr. Ignaczak has been a partner at Quad-C, Inc. since May 1993. Prior
to 1993, Mr. Ignaczak was an Associate with the Merchant Banking Group at
Merrill Lynch, and a member of the Mergers and Acquisitions department of
Drexel, Burnham, Lambert Incorporated. Mr. Ignaczak is currently a director
of Max Media, TDS Logistics, Huddle House, Capital Tool & Design and
Stimsonite Corporation.
Robert A. Katz was named as a director of the Company in February
1998. Mr. Katz has been a principal of Apollo since 1990. Prior to 1990,
Mr. Katz was a member of the Mergers and Acquisitions department of Drexel,
Burnham, Lambert Incorporated. Mr. Katz is also a director of Salant
Corporation, Aris Industries, Inc. and Vail Resorts, Inc.
Mark D. Klein was named as a director of the Company in February 1998.
Mr. Klein has served as the President of Newbrook Capital Management, Inc.
since 1994. From 1991 to 1994, Mr. Klein was a Senior Portfolio Manager for
Smith Barney Shearson.
Michael D. Weiner was named as a director of the Company in December
1997 in connection with the Recapitalization Merger. Mr. 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., Capital Apartment Properties,
Inc., Continental Graphics Holdings, Inc., Florsheim Group Inc., NRT
Incorporated, and WMC Finance Co.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Company's officers and directors and persons who own
more than 10% of the Company's Common Stock to file reports of ownership and
changes with the Securities and Exchange Commission and to furnish the
Company with copies.
Based upon its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that, during the last fiscal year, all filing requirements applicable to its
officers, directors, and greater than 10% beneficial owners were complied
with on a timely basis.
35
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth for the fiscal years indicated the
annual and long-term compensation 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,
1997 (the "Named Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------
OTHER ANNUAL
PRINCIPAL POSITION YEAR (1) SALARY BONUS COMPENSATION (2)
------------------ -------- ------ ----- ----------------
<S> <C> <C> <C> <C>
Richard N. Zehner 1997 $ 316,211 $ 472,500 -
Chief Executive Officer, Chairman 1996 296,000 419,025 -
Of the Board and Director 1995 278,750 191,544 -
Vincent S. Pino 1997 223,835 222,000 -
President and Director 1996 208,000 192,140 -
1995 195,500 113,666 -
Terrence M. White (6) 1997 160,000 128,000 -
Former Senior Vice President, Chief 1996 150,000 108,150 -
Financial Officer and Secretary 1995 131,250 70,605 -
Jay A. Mericle 1997 135,000 95,537 -
Senior Vice President 1996 126,000 70,691 -
1995 117,300 66,540 -
Cheryl A. Ford 1997 135,000 93,371 -
Senior Vice President 1996 126,000 63,675 -
1995 116,875 62,580 -
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------------------
SECURITIES ALL
UNDERLYING STOCK LTIP OTHER
PRINCIPAL POSITION OPTIONS/SAR'S (3) PAYOUTS (4) COMPENSATION (5)
------------------ ------------------ ----------- ---------------
<S> <C> <C> <C>
Richard N. Zehner 220,000 $ 543,750 $ 221,596
Chief Executive Officer, Chairman 155,000 - 15,596
Of the Board and Director - - 15,495
Vincent S. Pino 190,000 435,000 153,596
President and Director 125,025 - 3,596
- - 3,486
Terrence M. White (6) 60,000 326,250 439,459
Former Senior Vice President, Chief 90,025 - 3,488
Financial Officer and Secretary - - 3,351
Jay A. Mericle 25,000 217,500 3,455
Senior Vice President 33,050 - 3,436
- - 3,323
Cheryl A. Ford 25,000 217,500 3,455
Senior Vice President 33,050 - 3,411
- - 3,320
</TABLE>
- ----------------------
(1) Rows specified "1997," "1996" and "1995" represent fiscal years ended
December 31, 1997, 1996 and 1995, respectively.
(2) With respect to each Named Officer for each fiscal year, excludes
perquisites, which did not exceed the lesser of $50,000 or 10% of Named
Officer's salary and bonus for the fiscal year.
(3) Stock options were granted under the Company's 1991 Stock Option Plan
and the 1997 Stock Option Plan.
(4) Represents amounts paid at the time of the Recapitalization Merger
pursuant to the Company's Amended and Restated Long Term Incentive Plan.
(5) Includes $206,000, $150,000 and $435,950 in change in control payments
which were paid to Messrs. Zehner, Pino and White, respectively, at the
time of the Recapitalization Merger pursuant to their prior employment
agreements, and 401(k) matching contributions (for 1997, 1996 and 1995,
respectively: Mr. Zehner - $3,164, $3,164 and $3,077; Mr. Pino -
$3,164, $3,164 and $3,077; Mr. White - $3,164, $3,164 and $3,077; Mr.
Mericle - $3,164, $3,164, and $3,077; and Ms. Ford - $3,164, $3,164 and
$3,077); the balance for each Named Officer represents life insurance
premiums paid by the Company.
(6) In January 1998, Mr. White ceased to be a full-time employee of the
Company, and at that time Kenneth S. Ord became Senior Vice President,
Chief Financial Officer and Secretary.
36
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options during the 1997
fiscal year to the Named Officers. No stock appreciation rights have ever been
granted to the Named Officers.
<TABLE>
<CAPTION>
PERCENTAGE OF POTENTIAL REALIZABLE VALUE
OPTIONS/SARS AT ASSUMED ANNUAL RATE OF STOCK
NUMBER OF SHARES GRANTED TO EXERCISE OR BASE PRICE APPRECIATION FOR OPTION TERM (3)
UNDERLYING EMPLOYEES IN PRICE PER SHARE EXPIRATION --------------------------------------
NAME OPTIONS/SARS (1) FISCAL YEAR ($/SH) (2) DATE 0% 5% 10%
---- ---------------- ------------ ---------- ---- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Richard N. Zehner 100,000 28.6% $ 6.5625 03/25/07 $ 0 $412,712 $ 1,045,893
120,000 43.6% 11.00 12/18/07 0 830,141 2,103,740
Vincent S. Pino 80,000 22.9% 6.5625 03/25/07 0 330,170 836,715
110,000 40.0% 11.00 12/18/07 0 760,962 1,928,428
Terrence M. White 60,000 17.1% 6.5625 03/25/07 0 247,627 627,536
Jay A. Mericle 25,000 7.1% 6.5625 03/25/07 0 103,178 261,473
Cheryl A. Ford 25,000 7.1% 6.5625 03/25/07 0 103,178 261,473
</TABLE>
(1) Options granted under the 1991 Option Plan (those priced at $6.5625 per
share) vested in 25% increments per year, but were accelerated upon the
consummation of the Recapitalization Merger. Fifty percent of the
options granted under the 1997 Stock Option Plan (those priced at
$11.00 per share) will vest in equal increments over four years. The
other fifty percent will vest after seven and one half years (subject
to acceleration if the Company achieves certain per-share equity
targets).
(2) All options granted under the 1991 Option Plan were granted at market
value (based on the closing price as reported on the NASDAQ Small
Capitalization Market System on the business day prior to the grant
date) at the date of grant. Options granted pursuant to the 1997 Stock
Option Plan were granted at an exercise price equal to the cash amount
paid for shares of the Company Common Stock in the Recapitalization
Merger.
(3) Valuations based upon the assumed rates of stock price appreciation are
based upon appreciation over a ten-year period from the $6.5625 and
$11.00 exercise price of the options. The 5% and 10% assumed annual
rates of appreciation related to the options granted at $6.5625 would
result in the price of the Company's Common Stock increasing to $10.69
and $17.02 per share, respectively. The 5% and 10% assumed annual rates
of appreciation related to the options granted at $11.00 would result
in the price of the Company's Common Stock increasing to $17.92 and
$28.53 per share, respectively.
37
<PAGE>
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 the Named Officers in 1997 or cancelled in exchange for
payment in cash, as well as the unexercised options to purchase the Company's
Common Stock granted under the 1991 Plan and the 1997 Stock Option Plan to the
Named Officers and held by them as of December 31, 1997. The value of
unexercised in-the-money options as of fiscal year end is based upon the cash
amount paid for shares of Company Common Stock which were cancelled in
connection with the Recapitalization Merger.
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS/SAR'S IN-THE MONEY OPTIONS/
ACQUIRED AT YEAR-END SARS AT FISCAL YEAR-END
ON VALUE ---------------------------- ---------------------------
NAME AND PRINCIPAL POSITION EXERCISE (1) REALIZED (2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard N. Zehner 449,140 $3,713,200 10,969 120,000 $ 48,675 $ -
Chief Executive Officer
and Chairman of the Board
Vincent S. Pino 201,525 1,258,842 3,500 110,000 26,031 -
President
Terrence M. White 150,025 935,811 - - - -
Former Senior Vice President,
Chief Financial Officer and
Secretary
Jay A. Mericle 113,050 984,559 15,000 - 111,563 -
Senior Vice President
Cheryl A. Ford 43,050 245,184 15,000 - 111,563 -
Senior Vice President
</TABLE>
(1) Includes shares acquired upon exercise as well as options cancelled in
exchange for cash in connection with the Recapitalization Merger.
(2) Includes value of shares acquired upon exercise as well as cash payment
made in cancellation of options in connection with the Recapitalization
Merger.
38
<PAGE>
LONG -TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
The Company instituted a long-term executive incentive plan ("LTIP")
in 1995 to provide future awards in cash or equivalent amounts of Common
Stock to key executives. The objective of the plan is to advance the
long-term interests of the Company and its stockholders by providing
substantial incentive to meet or exceed certain cash-flow goals necessary to
ensure that the Company 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, the Company 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. All other objectives of the LTIP
(other than the EBDIT objective for 1998) were also met in 1997. All amounts
previously earned under the LTIP were paid in cash at the time of the
Recapitalization Merger.
The following awards under the plan were earned by the Named Officers in 1997:
<TABLE>
<CAPTION>
NUMBER PERFORMANCE OR ESTIMATED FUTURE PAY-OUTS UNDER
SHARES, OTHER PERIOD NON-STOCK PRICE-BASED PLAN (1)
UNITS OR UNTIL MATURATION -------------------------------
NAME OTHER RIGHTS OR PAY-OUT THRESHOLD TARGET MAXIMUM
- ---- ------------ ---------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Richard N. Zehner $ 43,750 Paid at the time of the Recapitalization Merger $0 $ 31,250 $ 31,250
Vincent S. Pino 35,000 Paid at the time of the Recapitalization Merger 0 25,000 25,000
Terrence M. White 26,250 Paid at the time of the Recapitalization Merger 0 18,750 18,750
Jay A. Mericle 17,500 Paid at the time of the Recapitalization Merger 0 12,500 12,500
Cheryl A. Ford 17,500 Paid at the time of the Recapitalization Merger 0 12,500 12,500
</TABLE>
(1) Represents the remaining, unearned portion of the LTIP, which may be
accrued with respect to fiscal year 1998 based upon the extent to which
the Company's actual earnings before depreciation, amortization,
interest, taxes and equipment charges (as more precisely defined in the
long-term incentive plan, "EBDIT") exceeds targeted EBDIT for 1998.
Amounts under the LTIP are allocated to specified senior officers;
however, because such officers must generally be employed by the
Company as of the first quarter 1999 payment date under the LTIP
(excluding specified circumstances including death, retirement,
termination by the Company without cause, a change of control and the
sale of the Company before the end of the program period, as to which
different rules are applicable), the amounts reflected in these columns
for each of the Named Officers may not actually be paid.
401(k) PLAN
Effective January 1, 1990 the Company adopted a tax deferred savings
plan (the "401(k) Plan") that covers all employees who were hired before that
date or who have subsequently been employed by the Company for at least six
months. Employees may contribute from 1% to 15% of their compensation to the
401(k) Plan on a pre-tax basis, subject to statutory limitations. For up to
7% of an employee's compensation, the Company may contribute up to $0.333 for
each $1.00 of the employee's contribution. The rates of pre-tax and matching
contributions may be reduced with respect to highly compensated employees, as
defined in the Code, so that the 401(k) Plan will comply with Sections 401(k)
and 401(m) of the Code. Pre-tax and matching contributions are allocated to
each employee's individual account, which is invested in selected fixed
income or stock managed accounts according to the directions of the employee.
An employee's pre-tax contributions are fully vested and nonforfeitable at
all times. Matching contributions vest ratably over six years of service. An
employee may forfeit unvested amounts upon termination of employment, unless
the termination is because of death, disability or retirement.
Matching contributions made by the Company pursuant to the 401(k) Plan
to the Named Officers for the 1995, 1996 and 1997 fiscal years are included
under "All Other Compensation" in the Summary Compensation Table.
39
<PAGE>
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company entered into new employment agreements with Messrs. Zehner
and Pino which took effect upon the consummation of the Recapitalization
Merger. Base compensation under these 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 the Company'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). Such bonus plan will be adopted and administered by the compensation
committee of the Board of Directors.
The term of each employment agreement is initially three years. After
the first year, the 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. The Company 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.
The employment agreements for Messrs. Zehner and Pino were amended in
February 1998, to provide for the payment of one-time lump sum bonuses of
$350,000 and $300,000, respectively, upon the closing of the acquisition by
the Company of Mobile Technology, Inc. or another acquisition with an
enterprise valuation of $25,000,000 or more.
The Company is a party with Mr. Mericle and Ms. Ford to written
employment agreements. Each employment agreement remains in effect until
notice of termination is given by either party. Each contract provides that
the Named Officer will continue to receive his or her base salary and be
entitled to earn bonuses and participate in all benefit plans and programs at
levels and pursuant to terms that are substantially consistent with current
levels and terms, subject to periodic review and possible increases by the
Board of Directors or the Compensation Committee. In addition, each contract
provides that if the Named Officer is terminated by the Company other than
for Just Cause (as defined in the agreement) or if the Named Officer
terminates his or her employment as a result of a Constructive Discharge (as
defined in the agreement) (in either event, a "Severance"), then the Named
Officer will be entitled to a cash severance benefit equal to a specified
number of months of salary at his or her then current rate of salary,
acceleration of the vesting of stock options and certain other benefits
identified in the contract. If such Severance were to occur within one year
prior to or following a Change of Control (as defined in the agreement), then
each employment agreement provides for an increased cash severance benefit.
The Recapitalization Merger constituted a "Change in Control" for the
purposes of such agreements.
NON-EMPLOYEE DIRECTOR COMPENSATION
Prior to the consummation of the Recapitalization Merger, each
non-employee director who was not an officer received compensation of $4,500
per quarter plus $1,500 for each Board meeting attended, plus reimbursement
of travel expenses. In addition, on March 25, 1997, each of the non-employee
directors of the Company (i.e., Messrs. Buncher, Waley-Cohen and Wallace)
received stock options covering 30,000 shares of Company Common Stock. On May
15, 1997, Mr. Hayes received a stock option grant covering 10,000 shares of
Company Common Stock. Such stock options accelerated upon consummation of the
Recapitalization Merger and a cash payment was made as consideration for the
cancellation of the options. Subsequent to the Recapitalization Merger,
non-employee directors receive a $1,000 monthly retainer, plus $500 for each
Board meeting attended, plus reimbursement of travel expenses.
40
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of March 11, 1998, for each person
known to the Company to beneficially own more than 5% of such stock, each
director and each of the Named Officers and all executive officers and
directors of the Company as a group. Unless otherwise specified, the address
of each such person is 1065 North PacifiCenter Drive, Suite 200, Anaheim, CA
92806.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------------ ------------------ ----------
<S> <C> <C>
Newport Investment LLC (1) 3,389,324 83.6%
c/o Apollo Advisors II, L.P.
2 Manhattanville Road
Purchase, New York 10577
Richard N. Zehner (2) 21,500 0.5%
Vincent S. Pino (2) 3,500 0.1%
Terrence M. White - 0.0%
Jay A. Mericle (2) 15,000 0.4%
Cheryl A. Ford (2) 15,000 0.4%
Robert H. Falk (3) - 0.0%
Michael S. Gross (3) - 0.0%
Joshua J. Harris (3) - 0.0%
Anthony R. Ignaczak - 0.0%
Robert A. Katz (3) - 0.0%
Mark D. Klein - 0.0%
Michael D. Weiner (3) - 0.0%
All executive officers and directors as a group (16 persons) 70,000 1.7%
</TABLE>
(1) Newport Investment LLC, a Delaware limited liability company (the
"Investor") was formed and is wholly owned by Apollo Investment Fund
III, L.P., a Delaware limited partnership ("AIF III"), Apollo Overseas
III, L.P., a Delaware limited partnership ("Overseas Partners"), and
Apollo (U.K.) Partners III, L.P., a limited partnership organized under
the laws of England ("UK Partners" and collectively with AIF III and
Overseas, the "Apollo Entities"). Each of the Apollo Entities is
principally engaged in the business of investing in securities. Apollo
Advisors II, L.P., a Delaware limited partnership ("Advisors"), is the
general partner of AIF III and the managing general partner of Overseas
Partners and UK Partners. Apollo Capital Management II, Inc., a Delaware
corporation ("Apollo Capital") is the general partner of Advisors.
Apollo Management, L.P. ("Apollo Management"), serves as manager of
Apollo and manages Apollo's day-to-day operations. AIF III Management,
Inc., a Delaware corporation ("AIM"), is the general partner of Apollo
Management. Apollo Management, the shareholders of Apollo Capital and
AIM, and all officers and directors of each Apollo Entity and each of
its affiliates disclaims any beneficial ownership of the common stock
of the Company owned by the Investor.
(2) Includes shares that the following Named Officers and Directors
presently have the right to acquire by exercise of options: Mr. Zehner,
10,969 shares; Mr. Pino, 3,500 shares; Mr. Mericle, 15,000 shares; Ms.
Ford, 15,000 shares.
(3) This individual is associated with Apollo. This individual disclaims
beneficial ownership of all shares of common stock of the Company held
by the Investor.
41
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company paid to Apollo Management, L.P. a fee of $2,600,000
in connection with arranging the transactions associated with the
Recapitalization Merger (including the financings thereof). In addition, 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 Recapitalization Merger, Apollo purchased $15,000,000
of the Company's Series F Preferred Stock and received a financing fee of
$600,000. Immediately after consummation of the Recapitalization Merger,
Apollo sold to BT Investment Partners, Inc. $900,000 stated amount of the
Series F Preferred Stock purchased by it for $900,000 in cash. In
connection with such sale, Apollo paid to BT $36,000 of the $600,000
financing fee. In addition, the Company paid to Apollo Management, L.P. a fee
of $1,000,000 as consideration for services rendered in structuring and
negotiating the acquisition of MTI and the related debt financing, and
also reimbursed Apollo for expenses of approximately $50,000.
42
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Form 10-K:
1. Financial Statements:
A listing of the Consolidated Financial Statements, related notes and
Report of Independent Auditors is set forth in Item 8 of this report
on Form 10-K.
2. Financial Statement Schedules:
The following Financial Statement Schedule for the years ended
December 31, 1997, 1996 and 1995 is set forth on page 47 of this
report on Form 10-K:
Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted because the required information
is not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is
included in the Consolidated Financial Statements and related notes
for the year ended December 31, 1997.
3. Index to Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Note Description
----------- ---- ------------
<S> <C> <C>
2.1 (8) Agreement and Plan of Merger dated as of July 23, 1997 between the Company and Newport
Investment, LLC (the "Recapitalization Merger Agreement").
2.2 (9) Amendment No. 1 dated as of August 13, 1997 to the Recapitalization Merger Agreement.
2.3 (9) Amendment No. 2 dated as of October 13, 1997 to the Recapitalization Merger Agreement.
2.4 (9) Amendment No. 3 dated as of November 10, 1997 to the Recapitalization Merger Agreement.
2.5 (9) Guaranty Letter dated July 22, 1997, from AIF III to Alliance.
3.1 (11) Form of Amended and Restated Certificate of Incorporation of Alliance.
3.2 (11) By Laws of the Company, as amended.
4.1 (11) Form of Indenture for the 9 5/8% 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.
4.2 (11) Form of Guarantee of the Notes.
10.1 (8) Stockholder Agreement dated as of July 23, 1997 among Newport Investment, LLC and the
stockholders of the Company party thereto.
10.2 (5) Amended and Restated 1991 Stock Option Plan of the Company, including forms of agreement used
thereunder.
10.3 (1) Form of Indemnification Agreement between the Company and its directors and/or officers.
10.4 (2) Georgia Magnetic Imaging Center, Ltd., Limited Partnership Agreement dated as of March 22, 1985.
</TABLE>
43
<PAGE>
<TABLE>
<S> <C> <C>
10.5 (2) Amendment to Georgia Magnetic Imaging Center, Ltd., Limited Partnership Agreement dated as of
July 1, 1993.
10.6 (3) Employment Agreement dated as of September 9, 1993 between the Company and Terry A. Andrues.
10.7 (3) Employment Agreement dated as of September 9, 1993 between the Company and Jay A. Mericle.
10.8 (7) Amended and Restated Employment Agreement dated as of May 15, 1997 between the Company and
Terrence M. White.
10.9 (3) Employment Agreement dated as of June 6, 1994 between the Company and Neil M. Cullinan.
10.10 (3) Employment Agreement dated as of June 6, 1994 between the Company and Cheryl A. Ford.
10.11 (4) Employment Agreement dated as of July 7, 1995 between the Company and Michael W.Grismer.
10.12 (11) Employment Agreement dated as of July 23, 1997 between the Company and Richard N. Zehner.
10.13 (11) Employment Agreement dated as of July 23, 1997 between the Company and Vincent S. Pino.
10.14 (11) Agreement Not to Compete dated as of July 23, 1997 among Newport Investment, LLC, the Company,
Richard N. Zehner and Vincent S. Pino.
10.15 (7) Amended and Restated Long-Term Executive Incentive Plan dated as of July 22, 1997.
10.16 (6) Stock Purchase Agreement dated as of March 25, 1997, between the Company and General Electric
Company.
10.17 (14) Form of Amended and Restated Credit Agreement dated March 12, 1998.
10.18 (10) 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.
10.19 (12) Agreement and Plan of Merger dated as of January 13, 1998 relating to the acquisition of Mobile
Technology, Inc.
10.20 (13) Securities Purchase Agreement dated as of March 12, 1998 relating to the acquisition of American
Shared Hospital Services and CuraCare, Inc.
10.21 (14) Amendment to Employment Agreement dated as of July 23, 1997 between the Company and Richard N.
Zehner.
10.22 (14) Amendment to Employment Agreement dated as of July 23, 1997 between the Company and Vincent S.
Pino.
10.23 (14) Agreement to amend the Employment Agreement dated as of July 23, 1997 between the Company and
Richard N. Zehner.
10.24 (14) Agreement to amend the Employment Agreement dated as of July 23, 1997 between the Company and
Vincent S. Pino.
21.0 (14) List of Subsidiaries.
23 (14) Consent of Ernst & Young LLP.
27.1 (14) Financial Data Schedule.
</TABLE>
(1) Incorporated by reference herein to the indicated exhibits filed in
response to Item 16, "Exhibits" of the Company's Registration Statement
on Form S-1, No. 33-40805, initially filed on May 24, 1991.
44
<PAGE>
(2) Incorporated by reference herein to the indicated exhibits filed in
response to Item 6(a), "Exhibits" of the Company'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 the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994.
(4) Incorporated by reference herein to Exhibit 10.36 filed in response to
Item 6(a), "Exhibits" of the Company's Quarterly report on Form 10-Q for
the quarter ended June 30, 1995.
(5) Incorporated by reference herein to Exhibits filed with the Company's
Registration Statement on Form S-1, No. 33-40805, initially filed on
May 24, 1991 and the Company's definitive Proxy Statement with respect
to its Annual Meeting of Shareholders held May 16, 1996.
(6) Incorporated by reference herein to the indicated Exhibit in response
to Item 14(a)(3), "Exhibits" of the Company's Annual report on Form 10-K
for the year ending December 31, 1996.
(7) Incorporated by reference to indicated exhibits filed in response to
Item 6, "Exhibits" of the Company's Quarterly report on Form 10-Q for
the quarter ended June 30, 1997.
(8) Incorporated by reference herein to the indicated exhibits filed in
response to Item 5, "Exhibits" of the Company's Form 8-K Current Report
dated August 1, 1997.
(9) Incorporated by reference to the indicated exhibits filed in response
to Item 21, "Exhibits" of the Company's Registration Statement on Form
S-4, No. 333-33787, initially filed on August 15, 1997.
(10) Incorporated by reference to the indicated exhibits filed in response
to Item 6, "Exhibits" of the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997.
(11) Incorporated by reference to exhibits filed with the Company
Registration Statement on Form S-2, No. 333-33817.
(12) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K dated January 13, 1998.
(13) Incorporated by reference to exhibits filed with the Company's current
Report on Form 8-K dated March 12, 1998.
(14) Filed herewith.
(b) Reports on Form 8K in the fourth quarter of 1997.
None filed for the quarter ended December 31, 1997.
45
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ALLIANCE IMAGING, INC.
March 31, 1998 By: /S/RICHARD N. ZEHNER
---------------------
Richard N. Zehner,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 31, 1998.
<TABLE>
<CAPTION>
Signature Title
- ---------- ------
<S> <C>
/S/RICHARD N. ZEHNER Chairman of the Board of Directors,
- --------------------- Chief Executive Officer (Principal Executive Officer)
Richard N. Zehner
/S/VINCENT S. PINO President
- ---------------------
Vincent S. Pino
/S/KENNETH S. ORD Senior Vice President, Chief Financial Officer
- --------------------- and Secretary (Principal Financial Officer)
Kenneth S. Ord
/S/MICHAEL W. GRISMER Controller (Principal Accounting Officer)
- ---------------------
Michael W. Grismer
Director
- ---------------------
Robert H. Falk
/S/MICHAEL S. GROSS Director
- ---------------------
Michael S. Gross
/S/JOSHUA J. HARRIS Director
- ---------------------
Joshua J. Harris
/S/ANTHONY R. IGNACZAK Director
- ---------------------
Anthony R. Ignaczak
Director
- ---------------------
Robert A. Katz
Director
- ---------------------
Mark D. Klein
Director
- ---------------------
Michael D. Weiner
</TABLE>
46
<PAGE>
ALLIANCE IMAGING, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Additions Deductions Balance
Beginning Charged to (Bad Debt at End
of Period Expense Write-offs) of Period
---------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1997
Allowance for Doubtful Accounts $ 513,000 $ 256,000 $ (19,000) $ 750,000
---------- ------------ ------------ ---------
---------- ------------ ------------ ---------
Year ended December 31, 1996
Allowance for Doubtful Accounts $ 367,000 $ 567,000 $ (421,000) $ 513,000
---------- ------------ ------------ ---------
---------- ------------ ------------ ---------
Year ended December 31, 1995
Allowance for Doubtful Accounts $ 388,000 $ -- $ (21,000) $ 367,000
---------- ------------ ------------ ---------
---------- ------------ ------------ ---------
</TABLE>
47
<PAGE>
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
ALLIANCE IMAGING, INC.,
VARIOUS LENDING INSTITUTIONS,
SALOMON BROTHERS HOLDING COMPANY INC.,
AS SYNDICATION AGENT,
and
BANKERS TRUST COMPANY,
AS ADMINISTRATIVE AGENT
--------------------------------
Dated as of December 18, 1997
and
Amended and Restated as of March 11, 1998
--------------------------------
- --------------------------------------------------------------------------------
<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 . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.08 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.09 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.10 Increased Costs; Illegality; etc. . . . . . . . . . . . . . . . . . . . 13
1.11 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.12 Change of Lending Office. . . . . . . . . . . . . . . . . . . . . . . . 16
1.13 Replacement of Banks. . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.02 Letter of Credit Requests . . . . . . . . . . . . . . . . . . . . . . . 20
2.03 Letter of Credit Participations . . . . . . . . . . . . . . . . . . . . 21
2.04 Agreement to Repay Letter of Credit Drawings. . . . . . . . . . . . . . 23
2.05 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3. Fees; Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.01 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.02 Voluntary Termination or Reduction of Total Unutilized Revolving
Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.03 Mandatory Reduction of Commitments. . . . . . . . . . . . . . . . . . . 27
SECTION 4. Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.02 Mandatory Repayments and Commitment Reductions. . . . . . . . . . . . . 30
4.03 Method and Place of Payment . . . . . . . . . . . . . . . . . . . . . . 38
4.04 Net Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5. Conditions Precedent to Restatement Effective Date. . . . . . . . . . . 41
5.01 Execution of Agreement; Notes . . . . . . . . . . . . . . . . . . . . . 41
5.02 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 42
(i)
<PAGE>
5.03 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.04 Corporate Documents; Proceedings. . . . . . . . . . . . . . . . . . . . 42
5.05 Adverse Change, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.06 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.07 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.08 Consummation of MTI . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.09 MTI Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.10 Subsidiary Credit Parties; etc. . . . . . . . . . . . . . . . . . . . . 46
5.11 Pledge Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.12 Security Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.13 Employee Benefit Plans; Shareholders' Agreements; Management
Agreements; Employment Agreements; Collective Bargaining
Agreements; Existing Indebtedness Agreements; Material Contracts;
Tax Allocation Agreements.. . . . . . . . . . . . . . . . . . . . . . 47
5.14 Consent Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.15 Solvency Certificate; Insurance Certificates. . . . . . . . . . . . . . 49
5.16 Financial Statements; New Pro Forma Balance Sheet; Projections. . . . . 50
5.17 Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.18 Original Credit Agreement; etc. . . . . . . . . . . . . . . . . . . . . 50
SECTION 6. Conditions Precedent to All Credit Events . . . . . . . . . . . . . . . 51
6.01 No Default; Representations and Warranties. . . . . . . . . . . . . . . 51
6.02 Notice of Borrowing; Letter of Credit Request . . . . . . . . . . . . . 51
6.03 Compliance With Senior Subordinated Notes Indenture.. . . . . . . . . . 51
SECTION 7. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . 52
7.01 Company Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.02 Company Power and Authority . . . . . . . . . . . . . . . . . . . . . . 53
7.03 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.04 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.05 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . 54
7.06 Governmental Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 54
7.07 Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . . . 55
7.08 Public Utility Holding Company Act. . . . . . . . . . . . . . . . . . . 55
7.09 True and Complete Disclosure. . . . . . . . . . . . . . . . . . . . . . 55
7.10 Financial Condition; Financial Statements . . . . . . . . . . . . . . . 55
7.11 Security Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.12 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.13 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.14 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.15 Intellectual Property, etc. . . . . . . . . . . . . . . . . . . . . . . 59
7.16 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . . . . . . 59
(ii)
<PAGE>
7.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.18 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.19 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.20 Tax Returns and Payments. . . . . . . . . . . . . . . . . . . . . . . . 61
7.21 Existing Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.23 Representations and Warranties in Other Documents . . . . . . . . . . . 62
7.24 Original Transaction and Transaction. . . . . . . . . . . . . . . . . . 62
7.25 Special Purpose Corporation . . . . . . . . . . . . . . . . . . . . . . 62
7.26 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.27 Updated Security Agreement and Pledge Agreement Schedules . . . . . . . 63
SECTION 8. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.01 Information Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.02 Books, Records and Inspections. . . . . . . . . . . . . . . . . . . . . 67
8.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.04 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.05 Corporate Franchises. . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.06 Compliance with Statutes; etc.. . . . . . . . . . . . . . . . . . . . . 69
8.07 Compliance with Environmental Laws. . . . . . . . . . . . . . . . . . . 69
8.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.09 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.10 End of Fiscal Years; Fiscal Quarters. . . . . . . . . . . . . . . . . . 71
8.11 Additional Security; Further Assurances . . . . . . . . . . . . . . . . 71
8.12 Foreign Subsidiaries Security . . . . . . . . . . . . . . . . . . . . . 72
8.13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
8.14 Permitted Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . 73
8.15 Maintenance of Company Separateness . . . . . . . . . . . . . . . . . . 75
8.16 Performance of Obligations. . . . . . . . . . . . . . . . . . . . . . . 75
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 9. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.01 Changes in Business . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.02 Consolidation; Merger; Sale or Purchase of Assets; etc. . . . . . . . . 76
9.03 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
9.04 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
9.05 Advances; Investments; Loans. . . . . . . . . . . . . . . . . . . . . . 84
9.06 Dividends; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
9.07 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . 87
9.08 Consolidated Fixed Charge Coverage Ratio. . . . . . . . . . . . . . . . 88
9.09 Minimum Consolidated EBITDA . . . . . . . . . . . . . . . . . . . . . . 89
9.10 Consolidated Interest Coverage Ratio. . . . . . . . . . . . . . . . . . 90
(iii)
<PAGE>
9.11 Adjusted Total Leverage Ratio . . . . . . . . . . . . . . . . . . . . . 91
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.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
9.13 Limitation on Issuance of Capital Stock . . . . . . . . . . . . . . . . 93
9.14 Limitation on Certain Restrictions on Subsidiaries. . . . . . . . . . . 94
9.15 Limitation on the Creation of Subsidiaries and Joint Ventures . . . . . 95
SECTION 10. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 96
10.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
10.02 Representations, etc.. . . . . . . . . . . . . . . . . . . . . . . . . 96
10.03 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
10.04 Default Under Other Agreements . . . . . . . . . . . . . . . . . . . . 96
10.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
10.06 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
10.07 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 98
10.08 Subsidiaries Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . 98
10.09 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
10.10 Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 11. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 12. The Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .141
12.01 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .141
12.02 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . .142
12.03 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . .142
12.04 Reliance by Agents . . . . . . . . . . . . . . . . . . . . . . . . . .143
12.05 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . .143
12.06 Nonreliance on Agents and Other Banks. . . . . . . . . . . . . . . . .143
12.07 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . .144
12.08 Agents in their Individual Capacities. . . . . . . . . . . . . . . . .145
12.09 Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145
12.10 Resignation of the Agents. . . . . . . . . . . . . . . . . . . . . . .145
SECTION 13. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . .146
13.01 Payment of Expenses, etc.. . . . . . . . . . . . . . . . . . . . . . .146
13.02 Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . .147
13.03 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .147
13.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . . .148
13.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . .150
13.06 Payments Pro Rata. . . . . . . . . . . . . . . . . . . . . . . . . . .150
(iv)
<PAGE>
13.07 Calculations; Computations . . . . . . . . . . . . . . . . . . . . . .151
13.08 Governing Law; Submission to Jurisdiction; Venue . . . . . . . . . . .151
13.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .152
13.10 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . .152
13.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . .153
13.12 Amendment or Waiver; etc.. . . . . . . . . . . . . . . . . . . . . . .153
13.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .154
13.14 Domicile of Loans and Commitments. . . . . . . . . . . . . . . . . . .155
13.15 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . .155
13.16 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . .155
13.17 Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .156
13.18 Limitation on Additional Amounts, etc. . . . . . . . . . . . . . . . .156
13.19 Post-Closing Actions . . . . . . . . . . . . . . . . . . . . . . . . .157
13.20 Additions of New Banks . . . . . . . . . . . . . . . . . . . . . . . .158
13.21 Acknowledgment and Agreement of Credit Parties . . . . . . . . . . . .159
SCHEDULE I List of Banks and Commitments
SCHEDULE II Bank Addresses
SCHEDULE III Real Properties
SCHEDULE IV Scheduled Existing Indebtedness
SCHEDULE V Pension Plans
SCHEDULE VI Existing Investments
SCHEDULE VII Subsidiaries
SCHEDULE VIII Insurance
SCHEDULE IX Existing Liens
SCHEDULE X Capitalization
SCHEDULE XI Original Letters of Credit
EXHIBIT A - Form of Notice of Borrowing
EXHIBIT B-1 - Form of Tranche A Term Note
EXHIBIT B-2 - Form of Tranche B Term Note
EXHIBIT B-3 - Form of Revolving Note
EXHIBIT B-4 - 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 Consent Letter
(v)
<PAGE>
EXHIBIT H - Form of Solvency Certificate
EXHIBIT I - Form of Assignment and Assumption Agreement
EXHIBIT J - Form of Intercompany Note
EXHIBIT K - Form of Shareholder Subordinated Note
</TABLE>
(vi)
<PAGE>
CREDIT AGREEMENT, dated as of December 18, 1997 and amended and
restated as of March 10, 1998, among ALLIANCE IMAGING, INC., a Delaware
corporation (the "Borrower"), the lenders from time to time party hereto
(each, a "Bank" and, collectively, the "Banks"), SALOMON BROTHERS HOLDING
COMPANY INC., as Syndication Agent (in such capacity, the "Syndication
Agent"), and BANKERS TRUST COMPANY, as Administrative Agent (in such
capacity, the "Administrative Agent", and together with the Syndication
Agent, each an "Agent", and collectively, the "Agents"). 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, the Borrower, the Original Banks and Bankers Trust
Company, as Agent, are parties to a Credit Agreement, dated as of December
18, 1997 (as the same has been amended, modified or supplemented to, but not
including, the Restatement Effective Date, the "Original Credit Agreement");
and
WHEREAS, the parties hereto wish to amend and restate the Original
Credit Agreement in the form of this Agreement to, inter alia, permit the MTI
Merger and the financing therefor on the terms and subject to the conditions
provided herein and make available to the Borrower the respective credit
facilities provided for herein;
NOW, THEREFORE, the parties hereto agree that the Original Credit
Agreement shall be and hereby is amended and restated in its entirety as
follows:
SECTION 1. AMOUNT AND TERMS OF CREDIT.
1.01 COMMITMENTS. (a) Subject to and upon the terms and
conditions set forth herein, (A) each Original Term Loan Bank severally
agrees to continue, on the Restatement Effective Date, the Original Term
Loans made by such Original Term Loan Bank to the Borrower pursuant to the
Original Credit Agreement and outstanding on the Restatement Effective Date
(immediately prior to giving effect thereto) as Tranche A Term Loans
hereunder and (B) each Bank with a New Tranche A Term Loan Commitment
severally agrees to make, on the Restatement Effective Date, a term loan or
term loans (each, a "New Tranche A Term Loan" and, collectively, the "New
Tranche A Term Loans" and together with the Original Term Loans continued
pursuant to clause (A) above, the "Tranche A Term Loans") to the Borrower,
which Tranche A Term Loans:
(i) shall be denominated in U.S. Dollars;
(ii) except as hereafter provided, shall, at the option of the
Borrower, be
<PAGE>
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 Tranche A Term Loans made as
part of the same Borrowing shall at all times consist of Tranche A Term
Loans of the same Type and (y) unless the Agents have determined that the
Syndication Date has occurred (at which time this clause (y) shall no
longer be applicable), no more than three Borrowings of Tranche A Term
Loans to be maintained as Eurodollar Loans may be incurred prior to the
90th day after the Restatement Effective 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, or within five Business Days after, the
Restatement Effective 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
(iii) shall not exceed for any Bank, in initial principal amount,
that amount which equals the sum of (i) the aggregate outstanding principal
amount of the Original Term Loans, if any, made by such Bank and
outstanding on the Restatement Effective Date (immediately prior to giving
effect thereto) as set forth on Schedule I and (ii) the New Tranche A Term
Loan Commitment of such Bank (if any) as in effect on the Restatement
Effective Date (before giving effect to any reductions thereto on such date
pursuant to Section 3.03(b)).
Once repaid, Tranche A 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 Original Effective 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 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;
(iii) may be repaid and reborrowed in accordance with the
provisions hereof;
(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
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<PAGE>
(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 (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 simultaneously 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 Restatement Effective 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
outstanding, 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.
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
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<PAGE>
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 automatically 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
Borrowing, 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 pursuant 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 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.
(e) Subject to and upon the terms and conditions set forth herein,
each Bank with a Tranche B Term Loan Commitment severally agrees to make, on
the Restatement Effective Date, a term loan or term loans (each, a "Tranche B
Term Loan" and, collectively, the "Tranche B Term Loans"), which Tranche B
Term Loans:
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<PAGE>
(i) shall be denominated in U.S. Dollars;
(ii) 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 Tranche B Term Loans made as
part of the same Borrowing shall at all times consist of Tranche B Term
Loans of the same Type and (y) unless the Agents have determined that the
Syndication Date has occurred (at which time this clause (y) shall no
longer be applicable), no more than three Borrowings of Tranche B Term
Loans to be maintained as Eurodollar Loans may be incurred prior to the
90th day after the Restatement Effective 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, or within five Business Days after, the
Restatement Effective 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
(iii) shall not exceed for any Bank, in initial principal amount,
that amount which equals the Tranche B Term Loan Commitment of such Bank as
in effect on the Restatement Effective Date (before giving effect to any
reduction thereto on such date pursuant to Section 3.03(c)).
Once repaid, Tranche B Term Loans incurred hereunder may not be
reborrowed.
1.02 MINIMUM BORROWING AMOUNTS, ETC. The aggregate principal
amount of each Borrowing of Loans under a respective Tranche shall not be
less than the Minimum Borrowing Amount applicable to such Tranche, 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 Borrowings), it shall give the Administrative 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
-5-
<PAGE>
shall be a Business Day), (iii) whether the respective Borrowing shall
consist of Tranche A Term Loans, Tranche B 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 ine ffect after giving effect
to the respective Permitted Acquisition (and all payments to be made in
erewith). The Administrative 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 (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 Section 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
Administrative 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 confirmation act
without liability upon the basis of such telephonic notice, believed by the
Administrative 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 Administrative Agent's, BTCo's or the respective Letter of
Credit Issuer's, as the case may be, record of the terms of such telephonic
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),
-6-
<PAGE>
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 provided below. All amounts shall be made available to the
Administrative Agent in U.S. Dollars and in immediately available funds at
the Payment Office and the Administrative Agent promptly will make available
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 Administrative 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
Administrative Agent its portion of the Borrowing or Borrowings to be made on
such date, the Administrative Agent may assume that such Bank has made such
amount available to the Administrative Agent on such date of Borrowing, and
the Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the
Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Administrative Agent by such Bank and the
Administrative Agent has made available same to the Borrower, the
Administrative Agent shall be entitled to recover such corresponding amount
on demand from such Bank. If such Bank does not pay such corresponding
amount forthwith upon the Administrative Agent's demand therefor, the
Administrative Agent shall promptly notify the Borrower, and the Borrower
shall immediately pay such corresponding amount to the Administrative Agent.
The Administrative 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 respect of each day from the date such corresponding amount was
made available by the Administrative Agent to the Borrower to the date such
corresponding amount is recovered by the Administrative 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 Tranche A Term Loans, by a promissory note substantially in the form
of Exhibit B-1 with blanks appropriately completed in conformity herewith
(each, a "Tranche A Term Note" and, collectively, the "Tranche A Term
Notes"), (ii) if Tranche B Term Loans, by a promissory note substantially in
the form of Exhibit B-2 with blanks appropriately completed in conformity
herewith (each, a "Tranche B Term Note" and, collectively, the "Tranche B
Term Notes"), (iii) if Revolving Loans, by a promissory note substantially in
the form of Exhibit B-3 with blanks appropriately completed in conformity
herewith (each, a "Revolving Note" and, collectively, the "Revolving Notes")
and (iv) if Swingline Loans, by a promissory note substantially in the form
of Exhibit B-4 with blanks appropriately completed in conformity herewith
(the "Swingline Note").
(b) The Tranche A Term Note issued to each Bank with a Tranche A
Term Loan Commitment shall (i) be executed by the Borrower, (ii) be payable
to such Bank or its
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<PAGE>
registered assigns and be dated the Restatement Effective Date, (iii) be
in a stated principal amount equal to the principal amount of the Tranche
A Term Loans made and/or continued by such Bank on the Restatement
Effective Date (or, in the case of any Tranche A Term Note issued after
the Restatement Effective Date, in a stated principal amount equal to the
outstanding principal amount of the Tranche A Term Loan of such Bank on
the date of the issuance thereof) and be payable in the principal amount
of Tranche A Term Loans evidenced thereby from time to time, (iv) mature
on the Tranche A Term 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 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 Tranche B Term Note issued to each Bank with a Tranche B
Term Loan Commitment shall (i) be executed by the Borrower, (ii) be
payable to such Bank or its registered assigns and be dated the
Restatement Effective Date, (iii) be in a stated principal amount equal to
the Tranche B Term Loan Commitment of such Bank on the Restatement
Effective Date (or, in the case of any Tranche B Term Note issued after
the Restatement Effective Date, in a stated principal amount equal to the
outstanding principal amount of the Tranche B Term Loan of such Bank on
the date of the issuance thereof) and be payable in the principal amount
of Tranche B Term Loans evidenced thereby from time to time, (iv) mature
on the Tranche B Term 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 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.
(d) 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.
(e) 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 Original Effective 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
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<PAGE>
entitled to the benefits of this Agreement and the other Credit Documents.
(f) 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 evidenced 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 Restatement Effective 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
Agents have 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 Restatement Effective Date, Tranche A Term Loans and Tranche B Term Loans
maintained as Base Rate Loans may not be converted into Eurodollar Loans
unless 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)(ii) and 1.01(e)(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 Restatement Effective Date as are permitted under Sections
1.01(a)(ii) and 1.01(e)(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
Administrative 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 telephonic notice
promptly confirmed in writing) (each, a "Notice of Conversion") specifying
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 Administrative 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 Tranche A Term Loans,
Tranche B Term Loans and Revolving Loans under this Agreement shall be
incurred by the
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Borrower from the Banks PRO RATA on the basis of such Banks' Tranche A Term
Loan Borrowing Amounts, Tranche B 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 applicable, 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 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 Administrative
Agent shall
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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
Borrowing 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 subsequent Interest
Period), the Borrower shall have the right to elect by giving the
Administrative 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)(ii) and 1.01(e)(ii) and
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 conversion 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;
(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
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Commitment Reduction will be required to be made under Section 3.03(d) 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 Tranche A
Term Loans or Tranche B Term Loans shall be elected which extends beyond
any date upon which a Scheduled Repayment of such Tranche of Term Loans
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 Tranche A Term Loans or Tranche B Term Loans, as the case may be,
which have Interest Periods which will expire after such date will be in
excess of the aggregate principal amount of such Tranche A Term Loans or
Tranche B Term Loans, as the case may be, 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 Administrative 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 conclusive and
binding upon all parties hereto):
(i) on any Interest Determination Date, that, by reason of any
changes arising after the Restatement Effective Date 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 Restatement
Effective Date in any applicable law, governmental rule, regulation,
guideline, order or request (whether or not having 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
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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 Restatement Effective Date, that the
making or continuance 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 Restatement Effective Date which
materially and adversely affects the interbank Eurodollar market;
then, and in any such event, such Bank (or the Administrative 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
Administrative Agent of such determination (which notice the Administrative
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 Administrative Agent notifies the Borrower
and the Banks that the circumstances giving rise to such notice by the
Administrative Agent no longer exist, and any Notice of Borrowing or Notice
of Conversion given by the Borrower 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) 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 compensate 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 giv-
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ing the Administrative 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
Administrative 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 Restatement
Effective Date, the adoption 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 consideration such Bank's or such other
corporation's policies with respect to capital adequacy), then from time to
time, upon written demand by such Bank (with a copy to the Administrative
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
Administrative 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 written 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 any Agent) a Borrowing of, or conversion from or into,
Eurodollar Loans does not occur on a date specified therefor in a
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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 Eurodollar 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
consequence 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
occurrence 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
designation 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 avoiding 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.
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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 replacement, 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
reasonably acceptable to the Administrative 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) the outstanding Term Loans of either or both Tranches, the outstanding
Term Loans of the respective Tranche or Tranches) of, and in each case
(except for the replacement of only the outstanding Term Loans of one or
both Tranches 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 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
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of only the outstanding Term Loans of one or both Tranches of 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 extent 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 Administrative 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 and/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.
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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 Restatement
Effective 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
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 sight 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 Restatement Effective 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 Supportable 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
arbitrator 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
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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 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.
(e) Schedule XI hereto contains a description of all letters of
credit issued pursuant to the Original Credit Agreement and outstanding on
the Restatement Effective Date. Each such letter of credit, including any
extension or renewal thereof (each, as amended from time to time in
accordance with the terms hereof and thereof, an "Original Letter of Credit")
shall constitute a "Letter of Credit" for all purposes of this Agreement,
issued, for purposes of Section 2.03(a), on the Restatement Effective Date.
Any Bank here-
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under to the extent it has issued an Original Letter of Credit shall
constitute the "Letter of Credit Issuer" with respect to such Letter of
Credit for all purposes of this Agreement.
2.02 LETTER OF CREDIT REQUESTS. (a) Whenever the Borrower
desires that a Letter of Credit be issued, the Borrower shall give the
Administrative 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 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 received from such
Letter of Credit Issuer, without recourse or warranty, an undivided interest
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 Administrative 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
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<PAGE>
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 in full to the Letter of Credit Issuer pursuant
to Section 2.04(a), such Letter of Credit Issuer shall promptly notify the
Administrative Agent, and the Administrative Agent shall promptly notify each
Participant of such failure, and each such Participant shall promptly and
unconditionally pay to the Administrative 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
Administrative 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 Administrative 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 Administrative Agent for the
account of the respective Letter of Credit Issuer, such Participant agrees to
pay to the Administrative 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
Administrative 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 Administrative 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 Administrative 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 Administrative 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
reimbursement obligation as to which the Administrative 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 Administrative Agent and the Administrative 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 Administra-
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<PAGE>
tive 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.
(f) Each Letter of Credit Issuer (other than BTCo) shall deliver
to the Administrative 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 Administrative 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
Administrative 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), any
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 Administrative Agent in immediately available funds at the
Payment Office, for any payment or dis-
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<PAGE>
bursement 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, 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 circumstances 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, any
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
misconduct 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 Restatement 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
comparable 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 similar
requirement against Letters of Credit issued by such Letter of Credit Issuer
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<PAGE>
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 Administrative 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 Administrative
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
obligations 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 Administrative
Agent for distribution to each Non-Defaulting Bank with a Revolving Loan
Commitment, a commitment fee (the "Commitment Fee") for the period from the
Original 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 Administrative Agent for PRO
RATA distribution to each Non-Defaulting Bank with a Revolving Loan
Commitment (based on their respective Adjusted 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
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.
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<PAGE>
(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 each Agent, for its own account,
such other fees as may be agreed to in writing from time to time between the
Borrower and such Agent, when and as due.
(f) All computations of Fees shall be made in accordance with
Section 13.07(b).
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<PAGE>
3.02 VOLUNTARY TERMINATION OR REDUCTION OF TOTAL UNUTILIZED
REVOLVING LOAN COMMITMENT. (a) Upon at least three Business Days' prior
notice to the Administrative Agent at its Notice Office (which notice the
Administrative 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 (w) any such termination or partial reduction shall apply to
proportionately and permanently reduce the Revolving Loan Commitment of each
RL Bank, (x) any partial reduction pursuant to this Section 3.02(a) shall be
in integral multiples of $1,000,000, (y) no reduction to the Total Unutilized
Revolving Loan Commitment shall be in an amount which would cause the
Revolving Loan Commitment of any RL Bank to be reduced (as required by the
preceding clause (w)) 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 then
remaining Scheduled Commitment Reductions in direct order of maturity (based
upon the then remaining amount of each such Scheduled Commitment Reduction
after giving effect to all prior reductions thereto).
(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 Administrative Agent at its Notice Office (which notice the
Administrative 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 either Tranche 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 of either Tranche 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).
3.03 MANDATORY REDUCTION OF COMMITMENTS. (a) Each of the Total
New Tranche A Term Loan Commitment (and the New Tranche A Term Loan
Commitment of each Bank) and the Total Tranche B Term Loan Commitment (and
the Tranche B Term
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Loan Commitment of each Bank) shall terminate in its entirety on June 30,
1998 and the Original Credit Agreement shall continue in effect unless the
Restatement Effective 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 New Tranche A Term Loan Commitment
(and the New Tranche A Term Loan Commitment of each Bank) shall terminate in
its entirety on the Restatement Effective Date (after giving effect to the
making of New Tranche A Term Loans on such date).
(c) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Tranche B Term Loan Commitment (and
the Tranche B Term Loan Commitment of each Bank) shall terminate in its
entirety on the Restatement Effective Date (after giving effect to the making
of Tranche B Term Loans on such date).
(d) 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(g), a "Scheduled Commitment Reduction"):
<TABLE>
<CAPTION>
Scheduled Commitment
Reduction Date Amount
-------------------- ------
<S> <C>
December 18, 2001 $37.5 million
December 18, 2002 $37.5 million
</TABLE>
(e) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the
Revolving Loan Commitment of each RL Bank) shall terminate in its entirety on
the Revolving Loan Maturity Date.
(f) 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.
(g) 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.
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<PAGE>
(h) Each reduction to the Total New Tranche A Term Loan
Commitment, the Total Tranche B 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 New Tranche A Term Loan Commitment,
the Tranche B 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. The Borrower shall have the right to
prepay the Loans, and the right to allocate such prepayments to Revolving
Loans, Swingline Loans, Tranche A Term Loans and/or Tranche B 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 Administrative 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 Tranche A Term
Loans, Tranche B 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
Administrative 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;
(iv) except as provided in clause (v) below, each prepayment in
respect
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<PAGE>
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, such
prepayment shall not be applied to any Revolving Loans of a Defaulting
Bank;
(v) 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 may, upon five Business Days'
prior written notice to the Administrative Agent at its Notice Office
(which notice the Administrative Agent shall promptly transmit to each of
the Banks), 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;
(vi) each prepayment of Term Loans pursuant to this Section 4.01
(except as provided in preceding clause (v)) shall be applied to the
Tranche A Term Loans and the Tranche B Term Loans on a PRO RATA basis
(based upon the then outstanding principal amount of Tranche A Term Loans
and Tranche B Term Loans); and
(vii) each prepayment of principal of Tranche A Term Loans and
Tranche B Term Loans pursuant to this Section 4.01 shall be applied to
reduce the then remaining Scheduled Repayments of the respective Tranche in
direct order of maturity (based upon the then remaining principal amounts
of the Scheduled Repayments of the respective Tranche after giving effect
to all prior reductions thereto).
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
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<PAGE>
then in effect, the Borrower shall pay to the Administrative 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 Administrative Agent shall hold such payment 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 Administrative Agent.
(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) (i) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the
Borrower shall be required to repay that principal amount of Tranche A 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 "Tranche A Term Loan Scheduled Repayment"):
<TABLE>
<CAPTION>
Tranche A Scheduled Repayment Date Amount
---------------------------------- ------
<S> <C>
March 31, 1998 $175,000
June 30, 1998 $175,000
September 30, 1998 $175,000
December 31, 1998 $175,000
March 31, 1999 $175,000
June 30, 1999 $175,000
September 30, 1999 $175,000
December 31, 1999 $175,000
March 31, 2000 $175,000
June 30, 2000 $175,000
September 30, 2000 $175,000
December 31, 2000 $175,000
March 31, 2001 $175,000
June 30, 2001 $175,000
September 30, 2001 $175,000
December 31, 2001 $175,000
March 31, 2002 $175,000
June 30, 2002 $175,000
September 30, 2002 $175,000
December 31, 2002 $175,000
-30-
<PAGE>
March 31, 2003 $175,000
June 30, 2003 $175,000
Tranche A Term Loan Maturity Date $ 66,150,000
</TABLE>
(ii) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the
Borrower shall be required to repay that principal amount of Tranche B 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 "Tranche B Term Loan Scheduled Repayment"):
<TABLE>
<CAPTION>
Tranche B
Scheduled Repayment Date Amount
- ------------------------ ------
<S> <C>
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
September 30, 2003 $125,000
December 31, 2003 $125,000
March 31, 2004 $125,000
Tranche B Term Loan Maturity Date $ 46,875,000
------------
</TABLE>
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<PAGE>
(c) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date on or after the
Original 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 Administrative 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 Administrative 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.
(d) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date on or after the
Original Effective Date on which the Borrower or any of its Subsidiaries
receives any cash proceeds from any incur-
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<PAGE>
rence of Indebtedness (other than Indebtedness permitted to be incurred
pursuant to Section 9.04 as in effect on the Restatement 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
Original Effective Date in accordance with the requirements of Section 5.08
of the Original Credit Agreement) 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
reductions pursuant to this Section 4.02, on each date on or after the
Original 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) (or clause (z) of Section 4.02(e) of the
Original Credit Agreement) after the Original 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 Administrative 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) 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.
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<PAGE>
(f) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within 10 days following each date
on or after the Original 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 expenses)
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 Administrative 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 Administrative Agent may reasonably accept, (c) an Authorized Officer
of the Borrower has delivered to the Administrative 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 described 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 Administrative Agent such evidence as the Administrative
Agent may reasonably request in form and substance reasonably satisfactory to
the Administrative 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 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 Administrative Agent pursuant to a cash collateral
arrangement reasonably satisfactory to the Administrative 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
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<PAGE>
respective properties or assets (pursuant to such certification requirements
as may be established by the Administrative Agent), PROVIDED FURTHER, that at
any time while an Event of Default has occurred and is continuing, the
Required Banks may direct the Administrative Agent (in which case the
Administrative 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 respective 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
reductions 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, with each such amount required to be applied to repay outstanding Term
Loans to be applied PRO RATA to each Tranche of Term Loans based upon the
then remaining principal amounts of the respective Tranches (with each
Tranche of Term Loans to be allocated that percentage of the amount to be
applied as is equal to a fraction (expressed as a percentage) the numerator
of which is equal to the then outstanding principal amount of such Tranche of
Term Loans and the denominator of which is equal to the then outstanding
principal amount of all 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
as provided in immediately preceding clause (ii) 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 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)
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<PAGE>
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 of the respective Tranche of Term Loans (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 of the respective Tranche 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 Borrowing 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 Administrative 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 Administrative
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 Administrative 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 Administrative 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 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
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<PAGE>
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 provided herein, all payments under this Agreement or any Note
shall be made to the Administrative 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 hereunder 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 jurisdiction 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 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 Administrative Agent within 45 days after the date the
payment
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<PAGE>
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 Restatement Effective
Date hereby represents that, as of the Restatement 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 Administrative Agent
on or prior to the Original Effective Date (or the Restatement Effective Date
in the case of any Bank that first becomes a party hereto on the Restatement
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 Restatement 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 Administrative 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 under this Agreement and any
Note, or it shall immediately notify the Borrower and the Administrative
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.
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<PAGE>
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
Restatement 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 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).
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<PAGE>
SECTION 5. CONDITIONS PRECEDENT TO RESTATEMENT EFFECTIVE DATE.
The occurrence of the Restatement Effective Date pursuant to Section 13.10,
and the obligation of each Bank to continue and/or make Loans hereunder, and
the obligation of the Letter of Credit Issuer to issue Letters of Credit
hereunder, in each case on the Restatement Effective Date, are subject at the
time of the occurrence of the Restatement Effective Date to the satisfaction
of the following conditions:
5.01 EXECUTION OF AGREEMENT; NOTES. On or prior to the
Restatement Effective Date, (i) this Agreement shall have been executed and
delivered as provided in Section 13.10 and (ii) there shall have been
delivered to the Administrative Agent for the account of each Bank the
appropriate Tranche A Term Note and Tranche B Term 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 Restatement Effective Date,
the Administrative 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 5.04 through 5.09, inclusive,
5.18 and 6.01 (other than such conditions that are subject to the
satisfaction of the Agents and/or the Required Banks), have been satisfied on
such date.
5.03 OPINIONS OF COUNSEL. On the Restatement Effective Date, the
Administrative Agent shall have received opinions, addressed to each Agent,
the Collateral Agent and each of the Banks and dated the Restatement
Effective 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 Agents and the Required Banks may reasonably request and be in
form and substance reasonably satisfactory to the Agents 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 Agents and
the Required Banks may reasonably request and be in form and substance
reasonably satisfactory to the Agents and the Required Banks, (iii) counsel
rendering such opinions, reliance letters addressed to each Agent and each of
the Banks and dated the Restatement Effective Date, with respect to all legal
opinions delivered in connection with the Transaction, which opinions shall
cover such matters as the Agents may reasonably request and be in form and
substance reasonably satisfactory to the Agents and (iv) local counsel to the
Credit Parties and/or the Agents reasonably satisfactory to the Agents, which
opinions (x) shall be addressed to each Agent, the Collateral Agent and each
of the Banks and be dated the Restatement Effective 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 Agents may reasonably request and (z) shall be in form and
substance reasonably satisfactory to the Agents.
5.04 CORPORATE DOCUMENTS; PROCEEDINGS. (a) On the Restatement
Effective Date, the Administrative Agent shall have received from the
Borrower and each New Credit Party a certificate, dated the Restatement
Effective Date, signed by the chairman, a vice-chairman, the president or any
vice-president of such New Credit Party and attested to by
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the secretary or any assistant secretary of such New 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 New Credit Party and the resolutions of such New 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 Agents.
(b) On the Restatement Effective Date, the Administrative Agent
shall have received a certificate from each Credit Party (other than the New
Credit Parties) (x) certifying that there were no changes, or providing the
text of any changes, to the certificate of incorporation, by-laws or
equivalent organizational documents of such Credit Party as delivered
pursuant to Section 5.04 of the Original Credit Agreement, (y) to the effect
that such Credit Party is in good standing in its respective state of
organization and in those states where such Credit Party conducts business
and (z) providing the resolutions adopted by such Credit Party with respect
to the actions contemplated by this Agreement (including, without limitation,
with respect to the MTI Merger, the amendment and restatement of this
Agreement, and the obligations of such Credit Party with respect to the
increased extensions of credit pursuant hereto), and all of the foregoing
shall be acceptable to the Agents.
(c) On the Restatement Effective 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 Agents, and the
Administrative Agent shall have received all information and copies of all
certificates, documents and papers, including good standing certificates,
bring-down certificates and any other records of Company proceedings and
governmental approvals, if any, which either Agent reasonably may have
requested in connection therewith, such documents and papers, where
appropriate, to be certified by proper Company or governmental authorities.
(d) On the Restatement Effective 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 Agents.
5.05 ADVERSE CHANGE, ETC. (a) On the Restatement Effective Date,
since September 30, 1997, nothing shall have occurred which (i) the Required
Banks or either 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 Agents or on the ability 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 Restatement Effective Date, there shall not have
occurred and be continuing any material adverse change to the syndication
market for credit facilities similar
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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 Agents in their reasonable
discretion.
5.06 LITIGATION. On the Restatement Effective 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 either 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 Agents 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 Agents hereunder or under any
other Credit Document.
5.07 APPROVALS. On or prior to the Restatement Effective 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 Documents 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
Administrative Agent, and (ii) all applicable waiting periods shall have
expired without any action being taken by any competent authority which
restrains, prevents or imposes materially adverse conditions upon the
consummation of the Transaction, the making of the Loans and the transactions
contemplated 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 unfeasible,
the consummation of the Transaction or the making of the Loans.
5.08 CONSUMMATION OF MTI MERGER. On or prior to the Restatement
Effective Date, (i) there shall have been delivered to the Administrative
Agent a true and correct copy of the MTI Merger Agreement, certified by such
by an appropriate officer of the Borrower, which shall be in the form
previously provided to the Administrative Agent with such amendments,
modifications and waivers as shall be in form and substance satisfactory to
the Agents, (ii) the MTI Merger, including all of the terms and conditions
thereof, shall have been duly approved by the requisite boards of directors
and (if required by applicable law) the requisite shareholders of the
Borrower, MTI Acquisition Corp. and MTI and all MTI Merger Documents shall
have been duly executed and delivered by the parties thereto and be in full
force and effect, (iii) the representations and warranties set forth in the
MTI Merger Documents shall be true and correct in all material respects as if
made on and as of the Restatement Effective Date, (iv) each of the conditions
precedent to the consummation of the MTI Merger as set forth in the MTI
Merger Documents shall have been satisfied, and not waived except with the
consent of each Agent and the Required Banks, to the satisfaction of each
Agent and the Required Banks, (v) all Liens or Indebtedness to be incurred or
assumed in connection with the MTI Merger shall otherwise be permitted under
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this Agreement (including, without limitation, Sections 9.01 and 9.04), and
(vi) the MTI Merger shall have been consummated in accordance with the MTI
Merger Documents and all applicable law.
5.09 MTI REFINANCING. (a) On the Restatement Effective Date and
concurrently with the incurrence of Loans on such date, approximately
$37,388,641 of Indebtedness of MTI and its Subsidiaries consisting of
existing Capitalized Lease Obligations, purchase money indebtedness and
certain other Indebtedness shall have been repaid in full, together with all
fees and other amounts owing thereon (the "MTI Refinanced Indebtedness").
(b) On the Restatement Effective Date and concurrently with the
incurrence of Loans on such date, all security interests in respect of, and
Liens securing, the MTI Refinanced Indebtedness shall have been terminated
and released, and the Administrative Agent shall have received all such
releases as may have been requested by the Administrative Agent, which
releases shall be in form and substance satisfactory to the Agents and the
Required Banks. Without limiting the foregoing, there shall have been
delivered to the Administrative Agent (x) 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 MTI or any of its Subsidiaries in
connection with the security interests created with respect to the MTI
Refinanced Indebtedness and the documentation related thereto, (y)
terminations or reassignments of any security interest in, or Lien on, any
patents, trademarks, copyrights, or similar interests of MTI or any of its
Subsidiaries on which filings have been made and (z) terminations of all
mortgages, leasehold mortgages and deeds of trust created with respect to
property of MTI or any of its Subsidiaries, in each case, to secure the
obligations under the MTI Refinanced Indebtedness, all of which shall be in
form and substance satisfactory to the Agents and the Required Banks.
(c) On the Restatement Effective 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 Restatement Effective Date as listed on Schedule
IV in an aggregate outstanding principal amount not to exceed $__________
(with the Indebtedness described in this sub-clause (iv) being herein called
the "Scheduled Existing Indebtedness" and the Scheduled Existing
Indebtedness, together with the Senior Subordinated Notes, being herein
called the "Existing Indebtedness"). On and as of the Restatement Effective
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 Agents 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 Agents or the Required
Banks.
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(d) The Administrative Agent shall have received evidence in form,
scope and substance satisfactory to the Agents and the Required Banks that
the matters set forth in this Section 5.09 have been satisfied on the
Restatement Effective Date.
5.10 SUBSIDIARY CREDIT PARTIES; ETC. (a) Each Subsidiary
Guarantor shall have executed and delivered a counterpart of this Agreement,
pursuant to which it makes the acknowledgements and agreements in the form
appearing before the signature pages of the Subsidiary Guarantors at the end
of this Agreement.
(b) In addition to the actions required pursuant to preceding
clause (a), MTI and each of its Wholly-Owned Subsidiaries shall have duly
authorized, executed and delivered counterparts of the Subsidiaries Guaranty,
the Security Agreement and the Pledge Agreement, thereby becoming parties
thereto.
5.11 PLEDGE AGREEMENT. On the Restatement Effective Date, the
Credit Parties shall furnish to the Administrative Agent updates, as
necessary, to the schedules to the Pledge Agreement (as prepared as of the
Restatement Effective Date and after giving effect thereto) and each Credit
Party shall deliver to the Collateral Agent, as pledgee thereunder, all of
the Pledged Securities, if any, referred to therein then owned by such Credit
Party (to the extent not already delivered pursuant to the Pledge Agreement),
endorsed in blank in the case of promissory notes or accompanied by 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.
5.12 SECURITY AGREEMENT. On the Restatement Effective Date, the
Credit Parties shall cause to be delivered to the Administrative Agent
updated schedules to the Security Agreement, prepared as of the Restatement
Effective Date (and after giving effect thereto). In addition, MTI and each
of its Wholly-Owned Subsidiaries shall, in addition to executing counterparts
of the Security Agreement as required by Section 5.10(b) above, deliver the
following:
(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, of a recent date listing all
effective financing statements that name MTI 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 Administrative Agent and (y) to the
extent evidencing
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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 and
protect (or maintain the perfection of) the security interests purported to
be created by the Security Agreement; and
(D) evidence that all other actions necessary (including the amending
of any existing financing statements) or, in the reasonable opinion of the
Collateral Agent, desirable, to perfect and protect (or maintain the
perfection of) the security interests purported to be created (or
maintained) by the Security Agreement have been taken.
5.13 EMPLOYEE BENEFIT PLANS; SHAREHOLDERS' AGREEMENTS; MANAGEMENT
AGREEMENTS; EMPLOYMENT AGREEMENTS; COLLECTIVE BARGAINING AGREEMENTS; EXISTING
INDEBTEDNESS AGREEMENTS; MATERIAL CONTRACTS; TAX ALLOCATION AGREEMENTS. (a)
On the Restatement Effective Date, there shall have been delivered to the
Administrative Agent true and correct copies, certified as true and complete
by an appropriate officer of the Borrower of the following documents (in each
case except to the extent already delivered or made available for review by
the Administrative Agent on or prior to the Original Effective Date), in each
case as same will be in effect on the Restatement Effective Date after the
consummation of the Transaction:
(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 therefor) 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 multiemployer plan, as defined in 4001(a)(3) of
ERISA, only to the extent that any document 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, together with any agreements, plans or
arrangements referred to in Section 5.12(i) of the Original Credit
Agreement and any amendments thereto referred to in Section 5.13(b), the
"Employee Benefit Plans");
(ii) all agreements (including, without limitation, shareholders'
agreements, 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, together with any agreements referred to in Section 5.12(ii)
of the Original Credit Agreement and any amendments
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thereto referred to in Section 5.13(b), the "Shareholders' Agreements");
(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, together with any agreements
referred to in Section 5.12(iii) of the Original Credit Agreement and any
amendments thereto referred to in Section 5.13(b), 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, together with any agreements referred to in Section 5.12(iv)
of the Original Credit Agreement and any amendments thereto referred to in
Section 5.13(b), 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, together with any agreements referred to
in Section 5.12(v) of the Original Credit Agreement and any amendments
thereto referred to in Section 5.13(b), the "Collective Bargaining
Agreements");
(vi) all agreements evidencing or relating to Existing Indebtedness
of the Borrower or any of its Subsidiaries after giving effect to the MTI
Refinancing (collectively, together with any agreements referred to in
Section 5.12(vi) of the Original Credit Agreement and any amendments
thereto referred to in Section 5.13(b), the "Existing Indebtedness
Agreements");
(vii) all other material contracts and licenses (other than
certificates of need) of the Borrower and any of its Subsidiaries after
giving effect to the Transaction (collectively, together with any
agreements referred to in Section 5.12(vii) of the Original Credit
Agreement and any amendments thereto referred to in Section 5.13(b), the
"Material Contracts"); and
(viii) any tax sharing or tax allocation agreements entered into by
the Borrower or any of its Subsidiaries (collectively, together with any
agreements referred to in Section 5.12(viii) of the Original Credit
Agreement and any amendments thereto referred to in Section 5.12(b), 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 Agents and the Required
Banks.
(b) On or prior to the Restatement Effective Date, the
Administrative Agent shall have received (i) a certification from the
appropriate officer of the Borrower that all agreements and plans referenced
in Section 5.12 of the Original Credit Agreement, previ-
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ously delivered (or made available) to the Administrative Agent by each
Credit Party, remain in full force and effect (or specifying which of such
agreements and plans do not remain in full force and effect) and (ii) any
amendments to the agreements and plans referred to in Section 5.12 of the
Original Credit Agreement.
5.14 CONSENT LETTER. On the Restatement Effective Date, the
Administrative 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 G, indicating its consent to its appointment by each
New Credit Party as its agent to receive service of process as specified in
the Subsidiaries Guaranty.
5.15 SOLVENCY CERTIFICATE; INSURANCE CERTIFICATES. On or before
the Restatement Effective Date, the Administrative Agent shall have received:
(a) a solvency certificate in the form of Exhibit H from the chief
financial officer of the Borrower, dated the Restatement Effective Date,
and supporting the conclusion 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
(including, without limitation, the Acquired Business), in scope, form and
substance reasonably satisfactory to the Agents 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.
5.16 FINANCIAL STATEMENTS; NEW PRO FORMA BALANCE SHEET;
PROJECTIONS. (a) On or prior to the Restatement Effective Date, there shall
have been delivered to the Administrative 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 December 31, 1997 and, after giving effect to the Original
Transaction, the Transaction and the incurrence of all Indebtedness
(including the Loans and the Senior Subordinated Notes) contemplated herein
(the "New PRO FORMA Balance Sheet"), together with a related funds flow
statement, which financial statements, New PRO FORMA Balance Sheet and funds
flow statement shall be reasonably satisfactory to the Agents and the
Required Banks.
(b) On or prior to the Restatement Effective Date, there shall
have been delivered to the Administrative Agent detailed projected
consolidated financial statements of
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the Borrower and its Subsidiaries certified by the chief operating officer or
treasurer of the Borrower for the six fiscal years ended after the
Restatement Effective 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 effect to the
Original Transaction, 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 Agents and the Required Banks.
5.17 PAYMENT OF FEES. On the Restatement Effective Date, all costs,
fees and expenses, and all other compensation due to the Agents or the Banks
(including, without limitation, legal fees and expenses) shall have been paid to
the extent due.
5.18 ORIGINAL CREDIT AGREEMENT; ETC. On the Restatement Effective
Date, (i) all Original Term Loans being continued as described in Section
1.01(a)(A) which were outstanding as Eurodollar Loans shall be converted into
Base Rate Loans or borrowed as Eurodollar Loans in accordance with the
requirements of Section 1.01(a), it being understood and agreed that the
Borrower shall (x) take all such actions as may be necessary to ensure that
the Banks participate in each Borrowing of outstanding Tranche A Term Loans
PRO RATA on the basis of their respective Tranche A Term Loan Borrowing
Amounts and (y) pay breakage or similar costs in accordance with the
provisions of Section 1.11 of the Original Credit Agreement in connection
therewith, (ii) all outstanding Swingline Loans shall be repaid in full on
the Restatement Effective Date, (iii) BTCo shall have received payment in
full of all amounts (including any accrued and unpaid interest and fees) then
due and owing to it under the Original Credit Agreement in respect of the
Swingline Loans being repaid, (iv) all accrued interest on all outstanding
extensions of credit pursuant to the Original Credit Agreement, and all
regularly accruing fees pursuant to the Original Credit Agreement, shall be
repaid in full on, and through, the Restatement Effective Date (whether or
not same would otherwise be then due and payable pursuant to the Original
Credit Agreement) and (v) the Administrative Agent shall have received
evidence in form, scope and substance satisfactory to it that the matters set
forth in this Section 5.18 have been satisfied on such date.
SECTION 6. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The
obligation of each Bank to make Loans (including Loans made on the
Restatement Effective Date but excluding Mandatory Borrowings made
thereafter, which shall be made as provided in Section 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 satisfaction 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
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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 making of each Loan (excluding Swingline Loans and Mandatory Borrowings),
the Administrative Agent shall 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
Administrative Agent and the respective Letter of Credit Issuer shall have
received a Letter of Credit Request meeting the requirements of Section
2.02(a).
6.03 COMPLIANCE WITH SENIOR SUBORDINATED NOTES INDENTURE. At the
time of each such Credit Event (so long as any Senior Subordinated Note
remains outstanding), (i) each Credit Event shall comply with the
requirements Section 4.4 of the Senior Subordinated Notes Indenture and all
other applicable covenants contained therein, (ii) the Borrower shall have
delivered to the Administrative Agent an officer's certificate signed by an
appropriate officer of the Borrower (which certificate may be incorporated
into the applicable Notice of Borrowing), in form and substance satisfactory
to the Agents, (i) establishing that such Credit Event does not violate the
terms of the Senior Subordinated Notes Indenture and (ii) containing a
representation and warranty that the Indebtedness incurred pursuant to such
Credit Event constitutes "Senior Debt" and "Designated Senior Debt" under the
Senior Subordinated Notes Indenture, which officer's certificate shall be
accompanied by financial calculations (in form and substance reasonably
satisfactory to the Agents) establishing compliance with a Consolidated Fixed
Charge Coverage Ratio (as defined in the Senior Subordinated Notes Indenture)
of greater than 1.75:1.0 (after giving effect to the respective Credit Event)
as required by the proviso to Section 4.4 of the Senior Subordinated Notes
Indenture and (iii) if requested by any Agent or the Required Banks (which
request may only be made by such Agent or the Required Banks if such Agent or
the Required Banks, as the case may be, has or have reasonable doubts as to
the compliance by the Borrower with the applicable requirements of the Senior
Subordinated Notes Indenture after giving effect to the respective such
Credit Event), the Banks shall have received an opinion of counsel (which
opinion shall be reasonably satisfactory to the respective Agent or Required
Banks requesting same) as may be reasonably requested to assure the Banks
that the requirements of this Section 6.03 and Section 4.4 of the Senior
Subordinated Notes Indenture are satisfied and that the Indebtedness incurred
pursuant to such Credit Event constitutes "Senior Debt" and "Designated Senior
Debt" thereunder.
The occurrence of the Restatement Effective Date and the acceptance of
the benefits or proceeds of each Credit Event shall constitute a representation
and warranty by the Borrower to each of the Agents 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 Agents and/or the Required Banks) exist
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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 Administrative 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, in each case
after giving effect to the Transaction, 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 the Restatement
Effective Date and each Credit Event on or after the Restatement Effective
Date 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 the Restatement Effective Date and on 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 COMPANY 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 proposes 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 Documents to which it is a party and has taken all
necessary Company action to authorize the 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
enforceable 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 contemplated 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
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of,
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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 incorporation, 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 Original Transaction, 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
Agents or the Banks or on the ability of any Credit Party to perform its
respective obligations to the Agents or the Banks hereunder and under the
other Credit Documents to which it is, or will be, a party. Additionally,
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 Original Term Loans have been utilized by the Borrower to finance the
Recapitalization and the Original Refinancing, pay up to $160,000 of accrued
and unpaid dividends on Series D Preferred Stock of the Borrower and pay the
fees and expenses incurred in connection with the Original Transaction.
(b) The proceeds of all New Tranche A Term Loans and all Tranche B
Term Loans shall be utilized by the Borrower to finance the MTI Merger and
the MTI Refinancing and to pay the fees and expenses incurred in connection
with the Transaction.
(c) 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 Scheduled 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 in an
aggregate principal amount not to exceed $[_____](1) may be used for the
purposes described in Section 7.05(b) above.
(d) Neither the making of any Loan, nor the use of the proceeds
thereof,
- ------------------
(1) To be inserted immediately prior to closing. Amount estimated to be
$______.
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nor the occurrence of any other Credit Event, will violate or be inconsistent
with the provisions 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 Restatement Effective Date (and which remain in full
force and effect on the Restatement Effective 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
authorize 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
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company", 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 company", 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 any 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 any 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 misleading at such time in light of the
circumstances under which such information was provided.
7.10 FINANCIAL CONDITION; FINANCIAL STATEMENTS. (a) On and as of
the Original Effective Date and the Restatement Effective Date, on a PRO
FORMA basis after giving effect to the Original Transaction or the Original
Transaction and the Transaction, as the case may be, 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 therewith, 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
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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) (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 Original PRO FORMA Balance Sheet, in each
case furnished to each Original Bank prior to the Original Effective Date
pursuant to Section 5.15 of the Original Credit Agreement, present fairly in
all material respects the 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 Original PRO FORMA Balance Sheet,
presents a good faith estimate of the consolidated PRO FORMA financial
condition of the Borrower (after giving effect to the Original 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 Original 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.
(II) The consolidated balance sheets of MTI and its Subsidiaries
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 MTI for the fiscal years or nine-month period, as the case may be,
ended as of said dates, in each case furnished to the Banks prior to the
Restatement Effective Date, present fairly in all material respects the
consolidated financial condition of MTI and its Subsidiaries at the dates of
said financial statements and the results for the periods covered thereby,
subject, in the case of unaudited financial statements, to normal year-end
adjustments. All of such financial statements 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.
(III) The New PRO FORMA Balance Sheet furnished to each Bank prior
to the Restatement Effective Date pursuant to Section 5.16 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).
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(c) Since December 31, 1996 (but after giving effect to the
Original Transaction and 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
Original Effective Date and as of the Restatement Effective Date (and after
giving effect to any Loans 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 (or in the event this representation is made as of
the Restatement Effective Date, the Acquired Business) 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 (or, in the event this representation is made as of the
Restatement Effective Date, the Acquired Business) 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) On and as of the Restatement Effective Date, the Projections,
which reflect the forecasted consolidated financial conditions and income and
expenses of the Borrower and its Subsidiaries after giving effect to the
Original Transaction and the Transaction (including the projected results of
the Acquired Business) have been prepared on a basis consistent with the
financial 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 Restatement Effective 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 Restatement Effective
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 Restatement Effective Date as contemplated by Section 5.12 or on
or prior to the execution and delivery thereof as contemplated by Sections
8.11, 8.12 and 9.15.
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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 Section 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 Code or
ERISA, or has applied for or received a waiver of an accumulated funding
deficiency 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, contingent 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 investigation 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 Section 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 Restatement Effective Date and after
giving effect to the Original Transaction and 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"), 4,043,580 of which
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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 (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, MTI Acquisition Corp. has no Subsidiaries.
(b) On and as of the Restatement Effective Date and after giving
effect to the Original Transaction and the Transaction, the Borrower has no
Subsidiaries other than those Subsidiaries listed on Schedule VII. Schedule
VII correctly sets forth, as of the Restatement Effective Date and after
giving effect to the Original Transaction and the Transaction, the percentage
ownership (direct and indirect) of the Borrower in each class of capital
stock or other equity interests 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,
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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
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 Restatement Effective Date and
after giving effect to the Original Transaction and 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 Original PRO FORMA Balance
Sheet and the New 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
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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 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 Scheduled Existing Indebtedness of the Borrower and its
Subsidiaries as of the Restatement Effective Date after giving effect to the
Original Transaction and 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 Restatement Effective Date, with the amounts insured set forth
therein.
7.23 REPRESENTATIONS AND WARRANTIES IN OTHER DOCUMENTS. All
representations 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 Restatement Effective Date as if such
representations or warranties were made on and as of such date, unless stated
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to 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 ORIGINAL TRANSACTION AND TRANSACTION. At the time of
consummation thereof, each of the Original Transaction and the Transaction
shall have been consummated in accordance with the terms of the relevant
Documents therefor 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 Original
Transaction and the Transaction in accordance with the terms of the relevant
Documents therefor 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 Original Transaction or the Transaction. Additionally,
there does not exist any judgment, order or injunction prohibiting or
imposing material adverse conditions upon any element of the Original
Transaction, 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 CORPORATION. MTI Acquisition Corp. was
formed to effect the Transaction. Prior to the consummation of the
Transaction, MTI Acquisition Corp. had no significant assets or liabilities
(other than those liabilities under the MTI Merger 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 hereunder and under the other Credit
Documents (including without limitation, pursuant to the Subsidiaries
Guaranty) are within the definitions of "Senior Debt" and "Designated Senior
Debt" included in such subordination provisions.
7.27 UPDATED SECURITY AGREEMENT AND PLEDGE AGREEMENT SCHEDULES.
The updated schedules to the Pledge Agreement and Security Agreement
furnished pursuant to Sections 5.11 and 5.12 are true and correct in all
material respects as of the Restatement Effective Date, and accurately
present in all material respects all information which was originally
required to be scheduled pursuant to the Pledge Agreement and Security
Agreement on the Original Effective Date, but modified to reflect the
addition of Credit Parties on the Restatement Effective Date and any changes
which occurred between the Original Effective Date and the Restatement
Effective Date.
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SECTION 8. AFFIRMATIVE COVENANTS. The Borrower hereby covenants
and agrees that as of the Restatement 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:
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 accounting 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 discussion 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
adjustments and the absence of footnotes.
(c) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the close
of each fiscal 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) certified by Ernst & Young, LLP or such
other independent certified public accountants of recognized national
standing as shall be reasonably acceptable to the
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Administrative 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, 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 statements 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
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actual knowledge thereof, notice of (i) the occurrence of any event
which constitutes 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 (v) 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 applicable 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
(iv) the taking of any removal or remedial action in
response to the actual or alleged presence of any Hazardous
Material on any Real
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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
Administrative Agent or the Required Banks.
(i) ANNUAL MEETINGS WITH BANKS. At the request of the
Administrative 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 Revolving Loan
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 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 information or documents (financial or otherwise)
as any 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 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 Agents or the Required Banks to visit and inspect any
of the properties or assets of the
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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 any Agent or the Required Banks may desire.
8.03 INSURANCE. (a) The Borrower will, and will cause each of
its Subsidiaries 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 each 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 Restatement Effective 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 respect 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 policies 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.
(c) If the Borrower or any of its Subsidiaries shall fail to
maintain all insurance 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 Administrative 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 Administrative 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
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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 hereafter 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
pursuant to such Environmental Laws and (ii) neither the Borrower nor any of
its Subsidiaries 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
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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 Administrative 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 Administrative 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
Administrative 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
Administrative 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 Administrative Agent may order the same,
and the Borrower shall grant and hereby grants, to the Administrative Agent
and the Banks and their agents access to such Real Property and specifically
grants, the Administrative Agent and the Banks and their agents an
irrevocable non-exclusive license, subject to the rights of tenants, 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 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
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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 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
Subsidiaries 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.
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8.11 ADDITIONAL SECURITY; FURTHER ASSURANCES. (a) The Borrower
will, and will cause each of its Wholly-Owned 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 Wholly-Owned Subsidiaries as are not covered by
the original Security Documents, and as may be requested from time to time by
the Administrative Agent or the Required Banks (collectively, the "Additional
Security Documents"). All such security interests and mortgages shall be
granted pursuant to documentation reasonably satisfactory in form and substance
to the Collateral 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 Wholly-Owned
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 assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, 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 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 Collateral Agent to assure itself 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
Administrative Agent, the Collateral 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 pronouncements issued or promulgated thereunder, counsel for the
Borrower reasonably acceptable to the Administrative Agent does not within 30
days after a request from the Administrative Agent or the Required Banks deliver
evidence, in form and substance mutually satisfactory to the Administrative
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
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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 Guaranty, 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 Agreement 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 thereunder, 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 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 Administrative Agent and/or the Collateral Agent.
8.13 USE OF PROCEEDS. All proceeds of the Loans shall be used as
provided in Section 7.05.
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 Domestic 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 Administrative 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
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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 Original Effective
Date or the Restatement Effective 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, 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
Administrative 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 Administrative 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
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acquisition of a Subsidiary, or the acquisition of capital stock or other
equity interest of any Person, the 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 Administrative 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 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.
SECTION 9. NEGATIVE COVENANTS. The Borrower hereby covenants and
agrees that as of the Restatement 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:
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9.01 CHANGES IN BUSINESS. (a) The Borrower and its Subsidiaries
will not engage in any business other than a Permitted Business.
(b) Notwithstanding the foregoing or anything to the contrary
contained in this Agreement, the Borrower will not permit any Excluded
Subsidiary to engage in any significant business or to own assets with an
aggregate value in excess of $50,000 (or an account receivable not to exceed
$400,000 in the case of Epic/Alliance of Texas, Inc.).
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 dissolve 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 purchase or
otherwise acquire (in one or a series of related transactions) any part of the
property 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:
(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 Original
Effective 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 promis-
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sory 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) (and clause (d) of Section 9.02 of the Original
Credit Agreement), 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) (and clause
(d) of Section 9.02 of the Original Credit Agreement), 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 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 immediately prior to such merger, dissolution or
liquidation);
(h) the Borrower and its Wholly-Owned Domestic Subsidiaries
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 MTI Merger shall be permitted in accordance with the
requirements of this Agreement;
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(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 from all
Permitted Sale-Leaseback Transactions consummated on and after the
Original 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 clause (l) of Section 9.02 of the Original Credit
Agreement after the Original Effective Date and this clause (l)
after the Restatement 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
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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 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 clause (n) of Section 9.02 of the
Original Credit Agreement after the Original Effective Date and
this clause (n) after the Restatement 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 disposed 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 Administrative 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
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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;
(c) Liens created by or pursuant to this Agreement and the
Security Documents;
(d) Liens in existence on the Restatement Effective 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;
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(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 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 Original
Effective Date, PROVIDED that (i) any such Liens attach only to the
assets so purchased, 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 Acquisition, 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) Scheduled Existing Indebtedness outstanding on the
Restatement Effective Date and listed on Schedule IV (as reduced by
any repayments thereof after the Restatement Effective Date),
without giving effect to any subsequent extension, renewal or
refinancing thereof;
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(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 $15,000,000), 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 amount of Capitalized Lease
Obligations incurred on and after the Original Effective Date and
outstanding at any time (including Indebtedness evidenced by
Capitalized Lease Obligations arising from Permitted Sale-Leaseback
Transactions) PLUS (III) the aggregate principal amount of all such
purchase money Indebtedness incurred on and after the Original
Effective Date and outstanding at any time, 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 $185,000,000 LESS the amount of any repayments
of principal thereof after the Original 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, purchase price adjustments and
similar obligations in connection with acquisitions or sales of
assets and/or businesses effected in accordance with the
requirements of this Agreement (so long as any such obligations are
those of the Person making the respective acquisition or sale and,
except as permitted by Section 9.04(i)(z), are not
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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,
(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 (z) the Borrower as a guarantor of Indebtedness of any
of its Subsidiaries which may be deemed to exist pursuant to
acquisition agreements entered into in connection with Permitted
Acquisitions (including any obligation to pay the purchase price
therefor and any indemnification, purchase price adjustment and
similar obligations); 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 Original Effective Date pursuant to this Section 9.13(c)
(and Section 9.13(c) of the Original Credit Agreement), 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 (exclusive of amounts on deposit
reserved for payments to stockholders in connection with the
Original Transaction and the MTI Merger) 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;
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(c) the Borrower and its Subsidiaries may acquire and own
investments (including debt obligations and equity securities)
received in connection with the 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
Original Effective 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 MTI Merger shall be permitted;
(j) the Borrower and any of its Wholly-Owned Domestic
Subsidiaries 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;
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(l) so long as no Default or Event of Default exists or would
exist immediately 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) (or clause (l) of Section 9.05 of the Original
Credit Agreement) (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 Administrative 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)
(or clause (l) of Section 9.05 of the Original Credit Agreement);
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, advances 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,
sale proceeds in the case of Investments in the form of debt
instruments 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 common stock of the Borrower or any such Subsidiary, as the
case may be) or return any capital 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 purposes, 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:
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(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, in each case after the Original
Effective Date, 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 (excluding in any
event PIK 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; and
(iv) the Borrower may pay regularly accruing Dividends with
respect to the PIK Preferred Stock through the issuance of
additional shares of 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 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
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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
Restatement Effective Date of one-time consulting and advisory fees to Apollo
in an aggregate amount not to exceed $1,000,000, (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) the payment on the Restatement
Effective Date of bonuses to senior management of the Borrower in an
aggregate amount not to exceed $300,000; (ix) 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 (x) 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:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED RATIO
-------------------- -----
<S> <C>
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
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
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March 31, 2003 1.10:1.00
June 30, 2003 1.10:1.00
September 30, 2003 1.10:1.00
December 31, 2003 1.10:1.00
March 31, 2004 1.10:1.00
</TABLE>
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:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED AMOUNT
------------------- -------
<S> <C>
March 31, 1998
$60,000,000
June 30, 1998
$60,000,000
September 30, 1998 $62,500,000
December 31, 1998 $65,000,000
March 31, 1999
$67,500,000
June 30, 1999
$70,000,000
September 30, 1999 $70,000,000
December 31, 1999 $72,500,000
March 31, 2000
$75,000,000
June 30, 2000
$77,500,000
September 30, 2000 $77,500,000
December 31, 2000 $80,000,000
March 31, 2001 $80,000,000
June 30, 2001 $82,500,000
September 30, 2001 $82,500,000
December 31, 2001 $85,000,000
March 31, 2002 $85,000,000
June 30, 2002 $87,500,000
September 30, 2002 $87,500,000
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December 31, 2002 $90,000,000
March 31, 2003 $90,000,000
June 30, 2003 $90,000,000
September 30, 2003 $90,000,000
December 31, 2003 $90,000,000
March 31, 2004 $90,000,000
</TABLE>
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:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED RATIO
-------------------- -----
<S> <C>
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
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June 30, 2003 2.65:1.00
September 30, 2003 2.65:1.00
December 31, 2003 2.65:1.00
March 31, 2004 2.65:1.00
</TABLE>
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:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED RATIO
------------------- ------
<S> <C>
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
December 31, 2003 3.75:1.00
March 31, 2004 3.75:1.00
</TABLE>
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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 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 Subsidiaries 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 Scheduled 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 Scheduled Existing Indebtedness,
any Permitted Subordinated Refinancing Indebtedness, any Permitted
Subordinated Indebtedness or any PIK Preferred Stock; 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 an aggregate principal amount for all purchases made
after the Original Effective Date pursuant to this clause (y) (and
clause (y) of Section 9.12 of the Original Credit Agreement) 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
Scheduled Existing Indebtedness;
(iii) make (or give any notice in respect of) any principal or
interest payment on, or any redemption or acquisition for value of,
any Shareholder
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<PAGE>
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 Original Transaction
Document (excluding the Original Credit Agreement), any MTI Merger
Document, its certificate of incorporation (including, without
limitation, by the filing or modification of any certificate of
designation other than any certificates of 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) the issuance of shares of PIK Preferred Stock in payment
of regularly accruing dividends on theretofore outstanding shares of PIK
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 purchase, 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
Restatement 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 Original
Effective Date pursuant to this Section 9.13(c) (and Section
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9.13(c) of the Original Credit Agreement) shall not 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 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 Administrative
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 Scheduled 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 restricting
assignment of any contract entered into by the Borrower or any Subsidiary of
the Borrower in the ordinary course of business, (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 and (viii) restrictions applicable to any Joint Venture
that is a Subsidiary existing at the time of the acquisition thereof as a
result of an Investment pursuant to Section 9.05 or a Permitted Acquisition
effected in accordance with Section 8.14; provided that the restrictions
applicable to the respective such Joint Venture are not made worse, or more
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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.
(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 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
Non-Subsidiary 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 a 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 Restatement 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 10
days' prior written notice thereof is given to the Administrative Agent (or
such shorter period of time as is acceptable to the Administrative 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 Administrative 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
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pursuant to a Permitted Acquisition, all capital stock or other equity
interests 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 relevant documentation of the type
described in Section 5 as such new Subsidiary would have had to deliver if
such new Subsidiary were a New Credit Party on the Restatement Effective Date.
(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
Administrative 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 agreement 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 instrument 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 pre-
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payment results from a default thereunder or an event of the type that
constitutes 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 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 "Bankruptcy 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 continue
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 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
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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
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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 Administrative 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 any 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 Borrower, the result which would occur upon the giving of written notice by
the Administrative 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 Business" shall mean the assets, liabilities and businesses
of MTI and its Subsidiaries acquired by the Borrower pursuant to the MTI Merger.
"Acquired Person" shall have the meaning provided in the definition of
Permitted Acquisition.
"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
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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 information shall not be published by the
Federal Reserve System for any week, the weekly average offering rate
determined by the Administrative Agent on the basis of quotations for such
certificates received by it from three certificate of deposit dealers in New
York of recognized standing or, if such quotations are unavailable, then on
the basis of other sources reasonably selected by the Administrative 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 Administrative 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
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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 termination, 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 occurrence 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 repayment 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.
"Adjusted Total Revolving Loan Commitment" shall mean at any time the
Total Revolving Loan Commitment LESS the aggregate Revolving Loan Commitments
of all
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Defaulting Banks.
"Administrative Agent" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 12.10.
"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.
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time modified, amended and/or supplemented.
"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 December 18, 1997, between Apollo Advisors, L.P. and the Borrower.
"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%.
"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
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Interest Reduction Discount and (y) maintained as Eurodollar Loans, 2.25%
less the then applicable Interest Reduction Discount, (ii) in the case of
Tranche A 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 and (iii)
in the case of Tranche B Term Loans (x) maintained as Base Rate Loans, 1.75%
less the then applicable Interest Reduction Discount and (y) maintained as
Eurodollar Loans, 2.75% 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 I (appropriately
completed).
"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, the chief operating officer, 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
Administrative Agent.
"Available JV Basket Amount" shall mean, on any date of determination,
an amount equal to the sum of (i) $25,000,000 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
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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 Restatement Effective
Date (and Section 9.05(l) of the Original Credit Agreement after the
Original 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)) after the Original Effective Date, PLUS (v) the amount of
any increase to the Available JV Basket Amount made after the Original
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
Administrative 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.
"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.
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"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 determinations 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.
"Capital Lease", as applied to any Person, shall mean any lease of any
property (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 instrumentality 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
commercial bank having, or which is the principal banking subsidiary of a
bank holding company
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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 and any Qualified Preferred Stock
and any Disqualified Preferred Stock, in each case to the extent same is not
Voting 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 Original Effective 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 Original 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
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
Notes Indenture or in any Scheduled 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 Scheduled 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
Original 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 the Senior Subordinated Notes
Indenture or in any Scheduled Existing Indebtedness, Permitted Debt, PIK
Preferred Stock, Disqualified Preferred Stock or Qualified Preferred Stock,
to the extent the outstanding
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principal amount or liquidation preference, as the case may be, of such
Scheduled 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 references to the Code are to the Code, as in effect at the date
of this Agreement and any subsequent 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 Administrative Agent acting as
collateral agent for the Secured Creditors.
"Collective Bargaining Agreements" shall have the meaning provided in
Section 5.13.
"Commitment" shall mean any of the commitments of any Bank, I.E.,
whether a New Tranche A Term Loan Commitment, Tranche B Term Loan Commitment or
Revolving Loan Commitment.
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Common Equity Issuance" shall have the meaning provided in the
Original Credit Agreement.
"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 consolidated basis.
"Consolidated Current Liabilities" shall mean, at any time, the
current liabilities 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
duplication) (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
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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
(I.E., Persons other than the Borrower or any of its Subsidiaries) 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 mandatory 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.
"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), (vi), (vii) and (viii) of Section 9.07 and clause (vi)
and (vii) of Section 9.07 of the Original Credit Agreement 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
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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 amortization
payments on all Indebtedness (excluding payments pursuant to the Original
Refinancing and the MTI 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 Original
Effective 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).
Notwithstanding anything to the contrary contained above, to the extent
Consolidated Fixed Charges are to be determined for any Test Period which
ends prior to the first anniversary of the Restatement Effective Date,
Consolidated Fixed Charges for all portions of such period occurring prior to
the Restatement Effective Date shall be calculated in accordance with the
definition of Test Period contained herein.
"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 consolidated 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 (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 Restatement Effective Date, Consolidated Interest Expense
for all portions of such period occurring prior to the Restatement Effective
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
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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 continuing operations of the Borrower
and its Subsidiaries, any other non-cash expenses incurred or payments made
in connection with the Original Transaction and 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 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 manner, 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 property
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
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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 Original 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.
"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 Original Transaction Documents, (iii) the MTI Refinancing Documents, (iv)
the MTI Merger Documents and (v) 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 mean the Original Effective Date.
"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 5.13.
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"Employment Agreements" shall have the meaning set forth in
Section 5.13.
"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 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.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. 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
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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.
"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 Subsidiaries 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 Original Refinancing and the MTI 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, (iii) the increase, if any, in Adjusted Consolidated Working
Capital from the first day to the last day of such period and (iv) without
duplication of amounts deducted in the preceding clauses (b)(i), (ii) and
(iii), the amount of cash expended in respect of Permitted Acquisitions
during such period, except to the extent financed with Indebtedness.
"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.
"Excluded Subsidiary" shall mean and include Epic/Alliance of Texas
Inc., Alliance Resonancia Magnetica S.A. de C.V., MTHS Corporation and Mobile
Technology-Canada, Inc.
"Existing Indebtedness" shall have the meaning provided in
Section 5.09(c).
"Existing Indebtedness Agreements" shall have the meaning provided
in Section 5.13.
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"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
quotations for such day on such transactions received by the Administrative
Agent from three Federal Funds brokers of recognized standing selected by the
Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 3.01.
"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 determinations 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
capital-intensive 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
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disposition, or will result within 180 days following such exchange, sale or
disposition, in the acquisition of) a replacement Healthcare Unit.
"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
duplication, 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 delivered 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.
"Intercompany Loan" shall have the meaning provided in
Section 9.05(f).
"Intercompany Notes" shall mean promissory notes, in the form of
Exhibit J, 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 Original Effective 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 to such Start Date (the "Test
Date") the conditions in clause (A), (B), (C), (D), (E) or (F) below are met:
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(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 Tranche A
Term Loans and Tranche B 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 below, from the date on which such officer's
certificate is delivered to the Administrative Agent to the earlier of (x)
the date on which the next certificate is delivered to the Administrative
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 Administrative Agent. Notwithstanding anything to the
contrary contained above, the
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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 Administrative Agent and the Letter of Credit
Issuer and otherwise permitted to exist pursuant to the terms of this
Agreement.
"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).
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"Letter of Credit Issuer" shall mean BTCo and any other Bank which,
at the request of the Borrower and with the consent of the Administrative
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 Restatement Effective 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 Tranche A Term Loan, each Tranche B Term
Loan, each Revolving Loan and each Swingline Loan.
"Management Agreements" shall have the meaning provided in
Section 5.13.
"Management Participants" shall mean certain members of management
of the Borrower previously identified and satisfactory to the Administrative
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 8.01(c)
for the fiscal year 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
Restatement Effective Date.
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"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, the Borrower and its Subsidiaries taken as a whole or
the Acquired Business.
"Material Contracts" shall have the meaning provided in Section 5.13.
"Maturity Date", with respect to any Tranche of Loans, shall mean the
Tranche A Term Loan Maturity Date, the Tranche B Term Loan 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.
"MTI" shall mean Mobile Technology Inc., a Delaware corporation.
"MTI Acquisition Corp." shall mean MTI Acquisition Corp., a Delaware
corporation, and immediately prior to the MTI Merger, a Wholly-Owned
Subsidiary of the Borrower.
"MTI Merger" shall mean the merger of MTI Acquisition Corp. with and
into MTI, with MTI being the surviving corporation of such merger, and as a
result of which, MTI shall become a Wholly-Owned Subsidiary of the Borrower.
"MTI Merger Agreement" shall mean the Agreement and Plan of Merger,
dated as of January 13, 1998, between MTI and MTI Acquisition Corp., as in
effect on the Restatement Effective Date and as the same may be amended,
modified or supplemented from time to time pursuant to the terms hereof and
thereof.
"MTI Merger Documents" shall mean the MTI Merger Agreement and all
other agreements, instruments and documents entered into or delivered in
connection with the MTI Merger.
"MTI Refinanced Indebtedness" shall have the meaning provided in
Section 5.09(a).
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"MTI Refinancing" shall mean the refinancing of the MTI Refinanced
Indebtedness in accordance with the provisions of Section 5.09.
"MTI Refinancing Documents" shall mean each of the agreements,
documents and instruments entered into in connection with the MTI Refinancing.
"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.
"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, brokerage 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.
"New Bank" shall mean each Person listed on Schedule I that is not an
Original Bank.
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"New Credit Party" shall mean each Credit Party that was not a Credit
Party (as defined in the Original Credit Agreement) on the Original Effective
Date.
"New PRO FORMA Balance Sheet" shall have the meaning provided in
Section 5.16(a).
"New Tranche 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 "New Tranche A Term Loan Commitment", as the same
may be reduced or terminated pursuant to Sections 3.03 and/or 10.
"New Tranche A Term Loans" shall have the meaning provided in Section
1.01(a).
"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 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 Original Effective 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.
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"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 Tranche A Term Note, each Tranche B 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 Administrative Agent
located at One Bankers Trust Plaza, New York, New York 10006 or such other
office as the Administrative 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
either Agent, the Collateral Agent or any Bank pursuant to the terms of this
Agreement or any other Credit Document.
"Original Bank" shall mean each Person which was a Bank under, and as
defined in, the Original Credit Agreement.
"Original Credit Agreement" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
"Original Effective Date" shall mean the Effective Date under, and as
defined in, the Original Credit Agreement.
"Original Letter of Credit" shall have the meaning provided in
Section 2.01(e).
"Original Loans" shall mean, collectively, the Original Term Loans
and the Original Revolving Loans.
"Original PRO FORMA Balance Sheet" shall have the meaning provided
in Section 7.10(b).
"Original Refinancing" shall mean the "Refinancing", as defined in
the Original Credit Agreement.
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"Original Revolving Loans" shall mean the "Revolving Loans" under,
and as defined in, the Original Credit Agreement.
"Original Term Loan Bank" shall mean each Bank under, and as
defined in, the Original Credit Agreement with outstanding Original Term
Loans on the Restatement Effective Date (immediately prior to giving effect
thereto).
"Original Term Loans" shall mean the "Term Loans" under, and as
defined in, the Original Credit Agreement.
"Original Transaction" shall mean the "Transaction", as defined in
the Original Credit Agreement.
"Original Transaction Documents" shall mean the Documents under,
and as defined in, the Original Credit Agreement.
"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 Administrative Agent
located at One Bankers Trust Plaza, New York, New York 10006 or such other
office as the Administrative 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 Domestic 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 Sec-
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tion 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 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 either Agent, be verified by a nationally
recognized accounting firm or as otherwise agreed to by such Agent.
"Permitted Business" shall mean the magnetic resonance imaging
business conducted by the Borrower and its Subsidiaries on the Restatement
Effective Date, any imaging or other healthcare services business, the
provision of equipment and 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 Administrative 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
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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
Administrative 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 Subsidiary after the Original Effective 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 Administrative 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
representation 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)
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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, corporation, limited liability company, association, trust or other
enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"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 on the Original
Effective Date.
"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 mean the Pledge Agreement, dated as of
December 18, 1997, executed and delivered pursuant to Section 5.10 of the
Original Credit Agreement, as same may from time to time be amended, modified
or supplemented (including by the addition of certain additional Credit
Parties as parties thereto as required by Section 5.10 hereof) in accordance
with the terms hereof and thereof.
"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 com-
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mercial loans or other loans at rates of interest at, above or below the
Prime Lending Rate.
"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 (v) if the relevant
period to be tested includes any period prior to the Original Effective Date,
the consummation of the Original Transaction as if the same had occurred on
the first day of such period, (w) if the relevant period to be tested
includes any period prior to the Restatement Effective Date, the consummation
of the Transaction as if the same had occurred on the first day of such
period, (x) the incurrence of any Indebtedness (other than revolving
Indebtedness, except to the extent same is incurred to finance the Original
Transaction or 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 Original Transaction
or 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 determination (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
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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 (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
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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 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 5.16(b).
"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
percentage equal to the percentage determined pursuant to clause (I) above 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 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-
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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 Tranche B Term Loan 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.
"Recapitalization" shall have the meaning provided in the Original
Credit Agreement.
"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.
"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.
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"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 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).
"Restatement Effective Date" shall have the meaning provided in
Section 13.10.
"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 entitled "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)(iii).
"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
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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(d).
"Scheduled Commitment Reduction Date" shall have the meaning provided
in Section 3.03(d).
"Scheduled Existing Indebtedness" shall have the meaning provided in
Section 5.09(c).
"Scheduled Repayment" shall mean any Tranche A Term Loan Scheduled
Repayment and/or any Tranche B Term Loan Scheduled Repayment.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"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 mean the Security Agreement, dated as of
December 18, 1997, executed and delivered pursuant to Section 5.10 of the
Original Credit Agreement, as same may be amended, modified or supplemented from
time to time (including by the addition of certain additional Credit Parties as
parties thereto as required by Section 5.10 hereof) in accordance with the terms
hereof and thereof.
"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 9-5/8% Senior
Subordinated Notes due 2005 and the Borrower's Floating Interest Rate
Subordinated Term
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Securities, in each case issued pursuant to the Senior Subordinated Notes
Indenture, as in effect on the Original 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 Original 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 18, 1997, among the Borrower, the Subsidiary Guarantors and the
Senior Subordinated Notes Indenture Trustee, as in effect on the Original
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 IBJ Schroder
Bank & Trust Company.
"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 K.
"Shareholders' Agreements" shall have the meaning provided in Section
5.13.
"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 mean the Subsidiaries Guaranty, dated as
of December 18, 1997, executed and delivered pursuant to Section 5.10 of the
Original Credit Agreement, as same may be amended, modified or supplemented from
time to time (including by the addition of certain additional Credit Parties as
parties thereto as required by Section 5.10 hereof) in accordance with the terms
hereof and thereof.
"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
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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 Wholly-Owned 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)(iv).
"Syndication Agent" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the Syndication
Agent appointed pursuant to Section 12.10.
"Syndication Date" shall mean that date upon which the Agents
determine (and notify the Borrower and the Banks) that the primary syndication
(and resultant addition of Persons as Banks pursuant to Section 13.04(b)) of the
New Tranche A Term Loans and the Tranche B Term Loans has been completed.
"Tax Allocation Agreements" shall have the meaning provided in Section
5.13.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Loan Commitment" shall mean the New Tranche A Term Loan
Commitment and/or the Tranche B Term Loan Commitment.
"Term Loan Commitment Termination Date" shall mean the Restatement
Effective Date (after giving effect to the reduction to the Total New Tranche A
Term Loan Commitment and the Total Tranche B Term Loan Commitment on such date
pursuant to Section 3.03(b) or (c), as the case may be).
"Term Loans" shall mean and include Tranche A Term Loans and Tranche B
Term Loans.
"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 Restatement Effective Date, such period shall be
a one-year period ending on the last day of the fiscal quarter last ended,
with any calculations of (x) Consolidated Interest Expense (but not for
purposes of determining Consolidated EBITDA) required in determining
compliance with Section 9.10 to be made on
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a PRO FORMA basis in accordance with, and to the extent provided in, the
immediately succeeding sentence and (y) Consolidated Fixed Charges (but not
for purposes of determining Consolidated EBITDA) required in determining
compliance with Section 9.08 to be made on a PRO FORMA basis in accordance
with, and to the extent provided in, the second 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 $7,443,887, (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 $7,443,887, (iii) includes the fourth fiscal quarter of the fiscal year
ended December 31, 1997, Consolidated Interest Expense for such fiscal
quarter shall be deemed to be $7,443,887 and (iv) includes the first
fiscal quarter of the fiscal year ended December 31, 1998, 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 Restatement Effective Date
and (y) for each day of such fiscal quarter occurring prior to the
Restatement Effective Date, using a per-day Consolidated Interest Expense
of $82,710. To the extent the respective Test Period includes the first
fiscal quarter of the fiscal year ended December 31, 1998, Consolidated Fixed
Charges shall be determined by taking actual Consolidated Fixed Charges
determined in accordance with the definition thereof for the relevant Test
Period, except that Consolidated Interest Expense as used in the
determination of Consolidated Fixed Charges for any portion of such Test
Period occurring prior to the Restatement Effective Date shall be
calculated on the basis provided in clause (iv) of the immediately
preceding sentence.
"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 New Tranche A Term Loan Commitment" shall mean the sum of the
New Tranche A Term Loan Commitments of each of the Banks.
"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.
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"Total Revolving Loan Commitment" shall mean the sum of the Revolving
Loan Commitments of each of the Banks.
"Total Term Loan Commitment" shall mean the sum of the Total New
Tranche A Term Loan Commitment and the Total Tranche B Term Loan Commitment.
"Total Tranche B Term Loan Commitment" shall mean the sum of the
Tranche B 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.
"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 four separate Tranches, I.E.,
Tranche A Term Loans, Tranche B Term Loans, Revolving Loans and Swingline Loans.
"Tranche A Term Loan Borrowing Amount" shall mean, with respect to
each Bank, the sum of (i) the New Tranche A Term Loan Commitment of such Bank as
in effect on the Restatement Effective Date (before giving effect to any
reduction thereto on such date pursuant to Section 3.03(b)) PLUS (ii) the amount
set forth opposite such Bank's name in Schedule I directly below the column
entitled "Original Term Loans".
"Tranche A Term Loan Scheduled Repayment" shall have the meaning
provided in Section 4.02(b)(i).
"Tranche A Term Loans" shall have the meaning provided in Section
1.01(a).
"Tranche A Term Loan Maturity Date" shall mean December 18, 2003.
"Tranche A Term Note" shall have the meaning provided in Section
1.05(a)(i).
"Tranche B Term Loan Scheduled Repayment" shall have the meaning
provided in Section 4.02(b)(ii).
"Tranche B Term Loan" shall have the meaning provided in Section
1.01(e).
"Tranche B 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 "Tranche B Term Loan Commitment", as the same may be
reduced or
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terminated pursuant to Sections 3.03 and/or 10.
"Tranche B Term Loan Maturity Date" shall mean June 18, 2004.
"Tranche B Term Note" shall have the meaning provided in Section
1.05(a)(ii).
"Transaction" shall mean, collectively, (i) the MTI Merger, (ii) the
amendment and restatement of the Original Credit Agreement in the form of this
Agreement as provided herein, (iii) the consummation of the MTI Refinancing,
(iv) the incurrence of all Loans hereunder on the Restatement Effective Date and
(v) 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.
"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
corpora-
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tion 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 AGENTS.
12.01 APPOINTMENT. Each Bank hereby irrevocably designates and
appoints BTCo as Administrative Agent of such Bank (for purposes of this
Section 12, the term "Administrative Agent" shall mean BTCo in its capacity
as Administrative Agent hereunder and Collateral Agent pursuant to the
Security Documents) and Salomon Brothers Holding Company Inc. as Syndication
Agent to act as specified herein and in the other Credit Documents, and each
such Bank hereby irrevocably authorizes the Administrative Agent and the
Syndication 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 Administrative Agent or
the Syndication Agent by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental
thereto. Each of the Administrative Agent and the Syndication Agent agrees to
act as such upon the express conditions contained in this Section 12.
Notwithstanding any provision to the contrary elsewhere in this Agreement or
in any other Credit Document, the Administrative Agent and the Syndication
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 Administrative Agent or the
Syndication Agent. The provisions of this Section 12 are solely for the
benefit of the Administrative Agent, the Syndication 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 performing its
functions and duties under this Agreement, each of the Administrative Agent
and the Syndication Agent shall act solely as agent of the Banks and 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. Each of the Administrative Agent and
the Syndication 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. Neither the Administrative Agent nor the Syndication Agent shall be
responsible for the negligence or misconduct of any agents or
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attorneys-in-fact selected by it with reasonable care.
12.03 EXCULPATORY PROVISIONS. None of the Administrative Agent,
the Syndication Agent or any of their respective officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for
any action taken or omitted to be taken by it or such Person in its capacity
as Administrative Agent or Syndication Agent, as the case may be, 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 Agreement or the other
Credit Documents, any other Document or in any certificate, report, statement
or other document referred to or provided for in, or received by the
Administrative Agent or the Syndication 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. Neither the Administrative Agent nor the
Syndication Agent shall be under any obligation to any Bank to ascertain or
to inquire as to the observance or performance of any of the agreements
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. Neither the Administrative Agent nor the Syndication Agent
shall be responsible to any Bank for the effectiveness, genuineness,
validity, enforceability, 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, certificates or
any other documents in connection herewith or therewith furnished or made by
the Administrative Agent or the Syndication Agent, as the case may be, to the
Banks or by or on behalf of the Borrower or any of its Subsidiaries to the
Administrative Agent or the Syndication Agent, as the case may be, or any
Bank or be required to ascertain or inquire as to the performance or
observance 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 existence of any Default or Event
of Default.
12.04 RELIANCE BY AGENTS. The Administrative Agent and the
Syndication 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 statements of legal counsel (including,
without limitation, counsel to the Borrower or any of its Subsidiaries),
independent accountants and other experts selected by the Administrative
Agent or the Syndication Agent, as the case may be. The Administrative Agent
and the Syndication 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
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any such action. The Administrative Agent and the Syndication Agent shall in
all cases be fully protected 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. Neither the Administrative Agent nor the
Syndication Agent shall be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default unless the Administrative Agent
or the Syndication Agent, as the case may be, 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 Administrative Agent or the Syndication
Agent receives such a notice, the Administrative Agent or the Syndication
Agent, as the case may be, shall give prompt notice thereof to the Banks.
The Administrative Agent or the Syndication Agent, as the case may be, 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 Administrative Agent or the Syndication Agent, as the case may be, shall
have received such directions, the Administrative Agent or the Syndication
Agent, as the case may be, 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 AGENTS AND OTHER BANKS. Each Bank expressly
acknowledges that none of the Administrative Agent, the Syndication Agent or
any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates has made any representations or warranties to
it and that no act by the Administrative Agent or the Syndication 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 Administrative Agent or the Syndication Agent to any Bank.
Each Bank represents to the Administrative Agent and the Syndication Agent
that it has, independently and without reliance upon the Administrative
Agent, the Syndication Agent or any other Bank, and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, assets, operations, property, financial and
other condition, prospects and creditworthiness 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, independently
and without reliance upon the Administrative Agent, the Syndication Agent or
any other Bank, and based on such documents 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. Neither
the Administrative Agent nor the Syndication Agent shall 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 the Borrower or its Subsidiaries
which may come into the possession of the Administrative Agent, the
Syndication Agent or any of their respective officers, directors,
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employees, agents, attorneys-in-fact or affiliates.
12.07 INDEMNIFICATION. The Banks agree to indemnify each of the
Administrative Agent and the Syndication Agent in their respective capacities
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 Administrative Agent or the Syndication Agent in their respective
capacities 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 Administrative Agent or the Syndication 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 Administrative Agent or the Syndication
Agent for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting primarily from the gross negligence or willful
misconduct of the Administrative Agent or the Syndication Agent. If any
indemnity furnished to the Administrative Agent or the Syndication Agent for
any purpose shall, in the opinion of the Administrative Agent or the
Syndication Agent, be insufficient or become impaired, the Administrative
Agent or the Syndication Agent, as the case may be, may call for additional
indemnity and cease, or not commence, to do the acts indemnified against
until such additional indemnity is furnished. The agreements in this Section
12.07 shall survive the payment of all Obligations.
12.08 AGENTS IN THEIR INDIVIDUAL CAPACITIES. Each of the
Administrative Agent and the Syndication Agent and their respective
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
Administrative Agent or the Syndication Agent, as the case may be, were not
the Administrative Agent or the Syndication Agent, as the case may be,
hereunder. With respect to the Loans made by it and all Obligations owing to
it, each of the Administrative Agent and the Syndication 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 Administrative Agent or the Syndication Agent,
as the case may be, and the terms "Bank" and "Banks" shall include the
Administrative Agent and the Syndication Agent in their individual capacities.
12.09 HOLDERS. The Administrative 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 Administrative 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
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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.
12.10 RESIGNATION OF THE AGENTS. (a) The Administrative 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 Administrative 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 Administrative Agent hereunder or thereunder who shall be
a commercial bank or trust company reasonably acceptable to the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 30 Business Day period, the Administrative Agent, with
the consent of the Borrower (which consent shall not be unreasonably withheld
or delayed), shall then appoint a successor Administrative Agent who shall
serve as Administrative Agent hereunder or thereunder until such time, if
any, as the Required Banks appoint a successor Administrative Agent as
provided above.
(d) If no successor Administrative 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 Administrative Agent, the
Administrative Agent's resignation shall become effective and the Required
Banks shall thereafter perform all the duties of the Administrative Agent
hereunder and/or under any other Credit Document until such time, if any, as
the Banks appoint a successor Administrative Agent as provided above.
(e) The Syndication 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 five Business Days' prior written notice to the Banks.
Such resignation shall take effect at the end of such five Business Day
period. Upon the effectiveness of the resignation of the Syndication Agent,
the Administrative Agent shall assume all of the functions and duties of the
Syndication Agent hereunder and/or under the other Credit Documents.
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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 Agents (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 instruments referred
to therein and any amendment, waiver or consent relating thereto and in
connection with the Agents' syndication efforts with respect to this
Agreement; (ii) pay all reasonable out-of-pocket costs and expenses of each
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 each 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
each 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 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 each Agent, the Collateral Agent, each Letter of Credit Issuer
and each Bank, their respective officers, directors, employees,
representatives, trustees 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 any 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 any 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 Original Transaction 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, without
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, each 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
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and all deposits (general or special) and any other Indebtedness at any time
held or owing by such Agent, such Letter of Credit Issuer or such Bank
(including, without limitation, by branches and agencies of such 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 such
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 such Agent, such Letter of
Credit Issuer or such Bank shall have made any demand hereunder 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, 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
designated 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 or Loans 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 or of a mandatory repayment of Loans 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 participation is not increased as a result thereof and that any
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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 participant 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.
(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 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 Commitments and/or outstanding Term Loans, as the case may be,
(iii) the consent of the Administrative 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 assignment of 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 Administrative
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 Administrative 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
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obligations hereunder with respect to its assigned Commitments 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 Administrative 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 Commitment and outstanding Obligations
pursuant to Section 1.13 or this Section 13.04(b) would, due to circumstances
existing at 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 Administrative 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 any 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 any 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 any 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 Agents or the Banks to any other or further action in any
circumstances without notice or demand.
13.06 PAYMENTS PRO RATA. (a) The Administrative Agent agrees that
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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.
(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 principal 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 calculations 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 Original Effective Date or the
Restatement Effective Date, such calculation shall be adjusted on a PRO FORMA
Basis to give effect to the Original Transaction or the Transaction, as the case
may be, 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 and
Consolidated Fixed Charges for any portion of any Test Period which ends prior
to the Original Effective Date or the Restatement Effective Date, all
computations determining compliance with Sections 9.08 and 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
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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 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 Corporation
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 Administrative 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 any 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 Administrative Agent.
13.10 EFFECTIVENESS. This Agreement shall become effective on the
date
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(the "Restatement Effective Date") on which (i) each of the Borrower, each
New Bank, the Required Banks (determined immediately before the occurrence of
the Restatement Effective Date and without giving effect thereto), the
Administrative Agent and the Syndication Agent shall have signed a counterpart
hereof (whether the same or different counterparts) and shall have delivered the
same (including by way of facsimile transmission) to the Administrative Agent
and (ii) the conditions contained in Sections 5 and 6 are met to the
satisfaction of the Agents and the Required Banks (determined immediately after
the occurrence of the Restatement Effective Date). Unless the Administrative
Agent has received actual notice from any Bank that the conditions contained in
Sections 5 and 6 have not been met to its satisfaction, upon the satisfaction of
the condition described in clause (i) of the immediately preceding sentence and
upon the Administrative Agent's good faith determination that the conditions
described in clause (ii) of the immediately preceding sentence have been met,
then the Restatement Effective Date shall have been deemed to have occurred,
regardless of any subsequent determination that one or more of the conditions
thereto had not been met (although the occurrence of the Restatement Effective
Date shall not release the Borrower from any liability for failure to satisfy
one or more of the applicable conditions contained in Section 5 or 6). The
Administrative Agent will give the Borrower and each Bank prompt written notice
of the occurrence of the Restatement Effective Date.
13.11 HEADINGS DESCRIPTIVE. The headings of the several sections and
subsections 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
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<PAGE>
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.
(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), Term Loan Commitment (if prior to the Term Loan
Commitment Termination Date and if such Bank's consent is required as a result
of its Term 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 Commitments which are 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 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 Term 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
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<PAGE>
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.
13.15 CONFIDENTIALITY. (a) Each of the Banks agrees that it will
use its reasonable 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 Administrative
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
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<PAGE>
error in such recordation shall not affect the Borrower's obligations in
respect of such Loans. With respect to any Bank, the transfer of any
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 Administrative Agent with respect to ownership of
such Commitment and Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitment and Loans shall remain owing
to the transferor. The registration of assignment or transfer of all or part
of any Commitment and Loans shall be recorded by the Administrative Agent on
the Register only upon the acceptance by the Administrative 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 Administrative Agent for acceptance and
registration of assignment or transfer of all or part of a Commitment and/or
Loan, or as soon thereafter as practicable, the assigning or transferor Bank
shall surrender the Note evidencing such Commitment and/or 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 Administrative 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 Administrative 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 Restatement
Effective Date shall be filed in the appropriate governmental office within
10 days following the Restatement Effective Date.
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<PAGE>
(b) CERTIFICATES OF TITLE. (i) 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 Original
Effective Date (other than Healthcare Units securing Scheduled Existing
Indebtedness not refinanced on the Original Effective Date) shall be
registered in the appropriate governmental office within 90 days following
the Original Effective Date and (ii) 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
Restatement Effective Date (other than Healthcare Units securing Scheduled
Existing Indebtedness not being refinanced on the Restatement Effective
Date) shall be registered in the appropriate governmental office within 90
days following the Restatement Effective Date.
(c) INSURANCE POLICIES. Within 30 days following the Restatement
Effective 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
Restatement Effective Date (or such later date as shall have been
determined by the Administrative Agent in its sole discretion), the
Administrative 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 Restatement Effective Date (or such later date as shall have
been determined by the Administrative Agent in its sole discretion).
Within 90 days following the Original Effective Date (or such later date as
shall have been determined by the Administrative Agent in its sole
discretion), the Administrative Agent shall have received Form UCC-3
termination statements in respect of the Liens listed on Part C-1 of
Schedule IX hereto and the same shall have been filed in the appropriate
governmental office within 105 days following the Original Effective Date
(or such later date as shall have been determined by the Administrative
Agent in its sole discretion). Within 90 days following the Restatement
Effective Date (or such later date as shall have been determined by the
Administrative Agent in its sole discretion), the Administrative Agent
shall have received Form UCC-3 termination statements in respect of the
Liens listed on Part C-2 of Schedule IX hereto and same shall be filed in
the appropriate governmental office within 105 days following the
Restatement Effective Date (or such later date as shall have been
determined by the Administrative Agent in its sole discretion).
(e) OPINIONS OF LOCAL COUNSEL. Within 45 days following the
Restatement Effective Date, the Collateral Agent shall have received
additional opinions, addressed to each Agent, the Collateral Agent and each
of the Banks from local counsel to Credit Parties and/or the Agents
reasonably satisfactory to the Collateral Agent, which opinions (x) shall
cover the perfection of the security interests granted pursuant to the
Security Documents and such other matters relating to the
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<PAGE>
transactions contemplated herein as the Collateral Agent may reasonably
request and (y) shall be in form and substance reasonably satisfactory to
the Collateral Agent.
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
Restatement Effective 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 relevant 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.
13.20 ADDITIONS OF NEW BANKS. On and as of the occurrence of the
Restatement Effective Date in accordance with Section 13.10 hereof, each New
Bank shall become a "Bank" under, and for all purposes of, this Agreement and
the other Credit Documents.
13.21 ACKNOWLEDGMENT AND AGREEMENT OF CREDIT PARTIES. Each of the
Credit Parties, by executing and delivering a counterpart of this Agreement,
hereby consents to the increased extensions of credit pursuant to this Agreement
which will be made available as a result of the amendment and restatement hereof
on the Restatement Effective Date. All such extensions of credit, as well as
the extensions of credit pursuant to the Original Credit Agreement, shall be
entitled to all benefits of (and shall be fully guaranteed pursuant to) the
Subsidiaries Guaranty and shall be fully secured pursuant to, and in accordance
with the terms of, the various Security Documents.
* * * *
-149-
<PAGE>
ACKNOWLEDGMENT AND AGREEMENT
Each of the undersigned, each being a Subsidiary Guarantor on the
Restatement Effective Date (including each Subsidiary of the Borrower which
was a Subsidiary Guarantor immediately before the Restatement Effective Date
and each Subsidiary of the Borrower which becomes a Subsidiary Guarantor on
the Restatement Effective Date) hereby acknowledges and agrees to the
provisions of the foregoing Amended and Restated Credit Agreement (including,
without limitation, Section 13.21 thereof), and hereby agrees for the benefit
of the Banks that all extensions of credit pursuant thereto (including the
increased extensions of credit made as a result of the occurrence of the
Restatement Effective Date and all other obligations pursuant to the Amended
and Restated Credit Agreement), shall be fully entitled to the benefits of
(and shall be fully guaranteed and secured pursuant to the provisions of) all
Guaranties and Security Documents.
ALLIANCE IMAGING CENTERS, INC.
By
-----------------------------------
Title:
ALLIANCE IMAGING OF CENTRAL
GEORGIA, INC.
By
-----------------------------------
Title:
ALLIANCE IMAGING MANAGEMENT, INC.
By
-----------------------------------
Title:
ROYAL MEDICAL HEALTH SERVICES, INC.
By
-----------------------------------
Title:
ALLIANCE IMAGING OF OHIO, INC.
<PAGE>
By
-----------------------------------
Title:
ALLIANCE IMAGING OF MICHIGAN, INC.
By
-----------------------------------
Title:
MEDICAL CONSULTANTS IMAGING CO.
By Alliance Imaging of Ohio, Inc.,
its General Partner
By
-----------------------------------
Title:
By Alliance Imaging of Michigan, Inc.,
its General Partner
By
-----------------------------------
Title:
MEDICAL CONSULTANTS IMAGING CO., LTD.
<PAGE>
By Medical Consultants Imaging Co.,
its Managing Member
By Alliance Imaging of Ohio, Inc.,
its General Partner
By
-----------------------------------
Title:
By Alliance Imaging of Michigan, Inc.,
its General Partner
By
-----------------------------------
Title:
MOBILE TECHNOLOGY, INC.
By
-----------------------------------
SOURCE2SITE
By
-----------------------------------
MTI ACQUISITION CORP.
By
-----------------------------------
EMBARCADERO HOLDING CORP. I
By
-----------------------------------
<PAGE>
EMBARCARDERO HOLDING CORP. II
By
-----------------------------------
<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.
1065 North PacifiCenter Drive
Suite 200
Anaheim, California
Telephone No.: (714) 688-7100
Facsimile No.: (714) 688-3333 By
Attention: Terrence M. White -----------------------------
Title:
<PAGE>
BANKERS TRUST COMPANY,
Individually and as
Administrative Agent
By -----------------------------
Title:
<PAGE>
SALOMON BROTHERS HOLDING COMPANY, INC,
Individually and as
Syndication Agent
By -----------------------------
Title:
<PAGE>
BANQUE PARIBAS
By -----------------------------
Title:
By -----------------------------
Title:
<PAGE>
CITY NATIONAL BANK
By -----------------------------
Title:
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By -----------------------------
Title:
<PAGE>
PRIME INCOME TRUST
By -----------------------------
Title:
<PAGE>
DRESDNER BANK AG,
NEW YORK BRANCH AND
GRAND CAYMAN BRANCH
By
-------------------------------
Title:
By
-------------------------------
Title:
<PAGE>
EATON VANCE
By
-------------------------------
Title:
<PAGE>
GENERAL ELECTRIC CAPITAL
CORPORATION
By
-------------------------------
Title:
<PAGE>
HELLER FINANCIAL, INC.
By
-------------------------------
Title:
<PAGE>
IMPERIAL BANK
By
-------------------------------
Title:
<PAGE>
ING BANK
By
-------------------------------
Title:
<PAGE>
PILGRIM
By
-------------------------------
Title:
<PAGE>
ROYAL BANK OF CANADA
By
-------------------------------
Title:
<PAGE>
SALOMON BROTHERS HOLDING
COMPANY INC
By
-------------------------------
Title:
<PAGE>
UNION BANK OF CALIFORNIA,
N.A.
By
-------------------------------
Title:
<PAGE>
VAN KAMPEN AMERICAN
CAPITAL
PRIME RATE INCOME TRUST
By
-------------------------------
Title:
<PAGE>
SCHEDULE I
LIST OF BANKS AND COMMITMENTS
<TABLE>
<CAPTION>
Bank Original New Tranche Tranche B Revolving
---- Term A Term Loan Loan
Loans Term Loan Commitment Commitment
----- Commitment ---------- ----------
----------
<S> <C> <C> <C> <C>
Bankers Trust Company 3,360,000 8,240,000 16,000,000 $6,900,000
Salomon Brothers Holding 3,360,000 2,240,000 0 $6,900,000
Company Inc.
Heller Financial, Inc. 3,360,000 4,240,000 5,000,000 $6,900,000
Banque Paribas 3,360,000 2,240,000 0 $6,900,000
Credit Lyonnais New York 2,640,000 2,760,000 3,000,000 $6,600,000
Branch
Dresdner Bank AG, New 2,640,000 5,760,000 0 $6,600,000
York Branch and Grand Cayman Branch
General Electric Capital 2,640,000 1,760,000 0 $6,600,000
Company
Imperial Bank 2,640,000 1,760,000 0 $6,600,000
Union Bank of California, 2,640,000 1,760,000 0 $6,600,000
N.A.
City National Bank 0 0 0 $7,500,000
Royal Bank of Canada 0 1,000,000 2,000,000 0
ING Bank NV 0 2,000,000 9,500,000 0
Prime Rate Income Trust 0 2,000,000 5,000,000 0
Pilgrim America Prime 0 2,000,000 9,500,000 0
Rate Trust
Van Kampen American 3,360,000 2,240,000 0 6,900,000
Capital Prime Income
Trust
Total $30,000,000 $40,000,000 $50,000,000 $75,000,000
</TABLE>
<PAGE>
SCHEDULE II
Page 2
SCHEDULE II
BANK ADDRESSES
<TABLE>
<CAPTION>
Bank Address
- ---- -------
<S> <C>
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
Banque Paribas 2029 Century Park East
Suite 3900
Los Angeles, California 90067
Attention: Sean Conlon
Telephone No.: (310) 551-7334
Facsimile No.: (310) 556-8759
City National Bank 400 North Roxbury Drive
3rd Floor
Beverly Hills, California 90210
Attention: Kim Bingham
Telephone No.: (310) 888-6132
Facsimile No.: (310) 888-6152
Credit Lyonnais 1301 Avenue of the Americas
New York, New York 10019
Attention: Attila Koe
Telephone No.: (212) 261-7358
Facsimile No.: (212) 459-3176
Dean Witter Two World Trade Center
New York, New York 10048
Attention: April Chrisostomas
Telephone No.: (212) 392-5709
Facsimile No.: (212) 392-5345
<PAGE>
SCHEDULE II
Page 3
Dresdner Bank 75 Wall Street
New York, New York 10005
Attention: Andrew Nesi
Telephone No.: (212) 429-2000
Facsimile No.: (212) 429-2129
Eaton Vance 24 Federal Street
Boston, Massachusetts 02110
Attention Juliana Riley
Telephone No.: (617) 348-0115
Facsimile No.: (617) 695-9594
General Electric Capital 201 High Ridge Road
Corporation Stamford, Connecticut 06927
Attention: Anne Leith
Telephone No.: (203) 316-7489
Facsimile No.: (203) 316-7978
Heller Financial 500 West Monroe Street
Chicago, Illinois 60661
Attention: Linda Wolf
Telephone No.: (312) 441-7894
Facsimile No.: (312) 441-7357
Imperial Bank 9920 South La Cienega Boulevard
Inglewood, California 90301
Attention: John Farrace
Telephone No.: (310) 417-5676
Facsimile No.: (310) 338-2612
<PAGE>
SCHEDULE II
Page 4
ING Bank 333 South Grand Avenue
Los Angeles, California 90071
Attention: Kathleen Lenarcic
Telephone No.: (213) 346-3971
Facsimile No.: (213) 346-3995
Pilgrim Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, Arizona 85004-3444
Attention: Jeff Bakalar
Telephone No.: (602) 417-8252
Facsimile No.: (602) 417-8327
Royal Bank of Canada 800 Wilshire Boulevard
Suite 800
Los Angeles, California 90017-3220
Attention: Athar Khan
Telephone No.: (213) 955-5309
Facsimile No.: (213) 955-5350
Salomon Brothers Seven World Trade Center
New York, New York 10048
Attention: Chad Leat
Telephone No.: (212) 783-1725
Facsimile No.: (212) 783-2823
Union Bank of California 550 South Hope Street
3rd Floor
Los Angeles, California 90071
Attention: Jennifer Banks
Telephone No.: (213) 243-3558
Facsimile No.: (213) 243-3503
VKM One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Jeffery Maillet
Telephone No.: (630) 684-6438
<PAGE>
SCHEDULE II
Page 5
Facsimile No.: (630) 684-6740
</TABLE>
<PAGE>
SCHEDULE III
REAL PROPERTIES
<PAGE>
SCHEDULE IV
SCHEDULED 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
<TABLE>
<CAPTION>
Filing File Original Description
Location Debtor Secured Party Number File Date of Collateral
- -------- ------ ------------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
SCHEDULE VII
Page 2
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made this
15th day of February, 1998, between ALLIANCE IMAGING, INC., a Delaware
corporation ("Alliance" or the "Corporation") and RICHARD N. ZEHNER
("Executive"), with reference to the following:
RECITALS
A. Alliance and Executive are parties to an Employment Agreement dated
as of July 23, 1997 (as previously amended to the date hereof, the
"Agreement"), pursuant to which, among other things, Executive was previously
granted stock options pursuant to a stock option agreement dated as of
December 18, 1997 (the "Option Agreement").
B. The parties desire to amend the stock option provisions of, and to
add a new special bonus provision to, the Agreement as hereinafter described.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements of the parties set forth herein, the parties do hereby agree as
follows:
1. STOCK OPTIONS. The second sentence of Section 5 of the Agreement is
hereby amended and restated to read in full as follows:
"Executive shall be granted options to acquire
120,000 shares of common stock of the Corporation
under such plan as of the Effective Time."
Likewise, the Option Agreement is hereby amended to specify the number of
shares of common stock subject thereto as 120,000.
2. SPECIAL BONUS. In consideration of Executive's services pursuant to
the Agreement and, in particular, extraordinary efforts in connection with
merger and acquisition activity on behalf of Alliance following the Effective
Time, the title of Section 4 of the Agreement is amended to read "Bonuses"
and there is hereby added to said Section 4 a new paragraph (c), reading in
full as follows:
"(c) Executive shall be entitled to receive a
special bonus in the amount of $350,000 (the
"Special Bonus") in connection with the closing
of the acquisition by the Corporation of Mobile
Technology, Inc. or the closing by the Corporation
of any other acquisitive
<PAGE>
transaction involving an enterprise valuation of
$25 million or more. The Special Bonus shall be payable
no later than the next regular payroll of the Corporation
following the closing of such first applicable acquisitive
transaction. A Special Bonus shall be payable in
connection with only the first such transaction; once
having paid a single Special Bonus, the Corporation's
obligations pursuant to this paragraph (c) shall be deemed
to have been fully satisfied."
The effectiveness of the amendment to the Agreement described in this Section
2 shall be contingent upon the Corporation obtaining the consent of its
senior bank lender as required.
3. NO OTHER CHANGES. Except as expressly set forth in this Amendment,
the Agreement and the Option Agreement shall remain in full force and effect
in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first set forth above.
ALLIANCE IMAGING, INC.
By
-----------------------------------
Its
--------------------------------
-------------------------------------
Richard N. Zehner
-2-
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made this
5th day of February, 1998, between ALLIANCE IMAGING, INC., a Delaware
corporation ("Alliance" or the "Corporation") and VINCENT S. PINO
("Executive"), with reference to the following:
RECITALS
A. Alliance and Executive are parties to an Employment Agreement dated
as of July 23, 1997 (as previously amended to the date hereof, the
"Agreement"), pursuant to which, among other things, Executive was previously
granted stock options pursuant to a stock agreement dated as of December 18,
1997 (the "Option Agreement").
B. The parties desire to amend the stock option provisions of, and to add
a new special bonus provision to, the Agreement as hereinafter described, and
the parties further desire to change Executive's position and title as
hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements of the parties set forth herein, the parties do hereby agree as
follows:
1. STOCK OPTIONS. The second sentence of Section 5 of the Agreement is
hereby amended and restated to read in full as follows:
"Executive shall be granted options to acquire
110,000 shares of common stock of the Corporation
under such plan as of the Effective Time."
Likewise, the Option Agreement is hereby amended to specify the number of
shares of common stock subject thereto as 110,000.
2. SPECIAL BONUS. In consideration of Executive's services pursuant to
the Agreement and, in particular, extraordinary efforts in connection with
merger and acquisition activity on behalf of Alliance following the Effective
Time, the title of Section 4 of the Agreement is amended to read "Bonuses"
and there is hereby added to said Section 4 a new paragraph (c), reading in
full as follows:
"(c) Executive shall be entitled to receive a
special bonus in the amount of $300,000 (the
"Special Bonus") in connection with the closing
of the acquisition by the Corporation of Mobile
<PAGE>
Technology, Inc. or the closing by the Corporation
of any other acquisitive transaction involving an
enterprise valuation of $25 million or more. The
Special Bonus shall be payable no later than the
next regular payroll of the Corporation following
the closing of such first applicable acquisitive
transaction. A Special Bonus shall be payable in
connection with only the first such transaction;
once having paid a single Special Bonus, the
Corporation's obligations pursuant to this paragraph
(c) shall be deemed to have been fully satisfied."
The effectiveness of the amendment to the Agreement described in this Section
2 shall be contingent upon the Corporation obtaining the consent of its
senior bank lender as required.
3. TITLE. Section 1(a) of the Agreement is hereby amended to change
Executive's position and title from "COO" to "President". Likewise, all other
references in the Agreement to "COO" shall be deemed references to
"President."
4. NO OTHER CHANGES. Except as expressly set forth in this Amendment,
the Agreement and the Option Agreement shall remain in full force and effect
in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first set forth above.
ALLIANCE IMAGING, INC.
By
-------------------------------------
Its
----------------------------------
---------------------------------------
Vincent S. Pino
-2-
<PAGE>
ALLIANCE IMAGING INC.
1065 North PacifiCenter Drive, Suite 200
Anaheim, California 92806
As of December 31, 1997
Richard N. Zehner
9881 Orchard Lane
Villa Park, California 92861
Re: EMPLOYMENT AGREEMENT
Dear Rick:
This letter confirms our agreement to amend the Employment Agreement
dated as of July 23, 1997 (the "AGREEMENT"), between you and Alliance
Imaging, Inc., a Delaware corporation (the "Company") in the following
respects: Section 6(b) of the Agreement is amended to increase the "$644,000"
amount referred to therein to "$736,525" and to change the "January 2, 1998"
date referred to therein to "March 20, 1998."
Notwithstanding anything to the contrary contained herein, the Company's
obligations hereunder shall be conditioned upon the Company obtaining the
requisite consents under the Credit Agreement dated as of December 18, 1997
among the Company, Bankers Trust Company, as Agent, and the various lending
institutions party thereto.
Except as expressly provided herein, the Agreement shall remain in full
force and effect, enforceable in accordance with its terms.
If this letter correctly sets forth our agreement, please so indicate by
executing in the space provided below.
ALLIANCE IMAGING, INC.
By: /s/ Vincent S. Pino
_______________________________
Name: Vincent S. Pino
Title: Executive Vice President
AGREED AS OF THE DATE FIRST ABOVE WRITTEN:
/s/ Richard N. Zehner
_________________________________
Richard N. Zehner
<PAGE>
ALLIANCE IMAGING INC.
1065 North PacifiCenter Drive, Suite 200
Anaheim, California 92806
As of December 31, 1997
Vincent S. Pino
31441 Island Drive
Evergreen, Colorado 80439
Re: EMPLOYMENT AGREEMENT
Dear Vince:
This letter confirms our agreement to amend the Employment Agreement
dated as of July 23, 1997 (the "AGREEMENT"), between you and Alliance
Imaging, Inc., a Delaware corporation (the "Company") in the following
respects: Section 6(b) of the Agreement is amended to decrease the "$165,000"
amount referred to therein to "$150,000," to increase the "$335,000" amount
referred to therein to "$426,900" and to change the "January 2, 1998" date
referred to therein to "March 20, 1998."
Notwithstanding anything to the contrary contained herein, the Company's
obligations hereunder shall be conditioned upon the Company obtaining the
requisite consents under the Credit Agreement dated as of December 18, 1997
among the Company, Bankers Trust Company, as Agent, and the various lending
institutions party thereto.
Except as expressly provided herein, the Agreement shall remain in full
force and effect, enforceable in accordance with its terms.
If this letter correctly sets forth our agreement, please so indicate by
executing in the space provided below.
ALLIANCE IMAGING, INC.
By: /s/ Richard N. Zehne
_______________________________
Name: Richard N. Zehne
Title: C.E.O.
AGREED AS OF THE DATE FIRST ABOVE WRITTEN:
/s/ Vincent S. Pino
_________________________________
Vincent S. Pino
<PAGE>
EXHIBIT 21.0
SUBSIDIARIES OF THE REGISTRANT
There is no parent of the Registrant. The following is a listing of the
active subsidiaries of the Registrant, or if indented, subsidiaries of the
subsidiary under which they are listed:
INCORPORATION
-------------
Alliance Imaging Centers, Inc. California
Alliance Imaging of Central Georgia, Inc. Georgia
Epic/Alliance of Texas, Inc. Texas
Alliance Imaging Management, Inc. California
Alliance Resonancia Magnetica S.A. de C.V. Mexico, D.F.
Royal Medical Health Services, Inc. Pennsylvania
Alliance Imaging of Ohio, Inc. Delaware
Alliance Imaging of Michigan, Inc. Delaware
Mobile Technology, Inc. Delaware
Source2Site California
MTHS Corporation Delaware
Mobile Technology - Canada, Inc. New Brunswick
Embarcardero Holding Corp. I Delaware
Embarcadero Holding Corp. II Delaware
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-22333) pertaining to the 1991 Amended and Restated Stock
Option Plan and the Long Term Executive Incentive Plan of our report dated
February 24, 1998, except for Note 9, as to which the date is March 12, 1998,
with respect to the consolidated financial statements and schedule of
Alliance Imaging, Inc. included in the Annual Report (Form 10-K) for the year
ended December 31, 1997.
/s/ ERNST & YOUNG LLP
Orange County, California
March 30, 1998
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