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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 26, 1999
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America Service Group Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-23340
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(Commission File Number)
21-0332317
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(IRS Employer Identification Number)
105 Westpark Drive, Suite 300, Brentwood, Tennessee 37027
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(Address of principal executive offices)
Registrant's telephone number, including area code: (615) 373-3100
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Not applicable
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(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index Located on Page: 6
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Total Number of Pages: 331
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Item 2. Acquisition or Disposition of Assets
On January 26, 1999, America Service Group Inc. (the "Company")
purchased all of the outstanding stock of EMSA Government Services, Inc.
("EMSA") from InPhyNet Administrative Services, Inc. ("InPhyNet") for $67.0
million in cash pursuant to a Stock Purchase Agreement, dated as of December 18,
1998 (the "Stock Purchase Agreement"), as amended by the First Amendment to
Stock Purchase Agreement, dated as of January 26, 1999 (the "First Amendment"),
between the Company and InPhyNet. The Company placed $2.0 million of the
purchase price into escrow to secure InPhyNet's performance of certain
post-closing obligations pursuant to the Stock Purchase Agreement, as amended.
EMSA conducts its operations through two wholly-owned subsidiaries,
EMSA Correctional Care, Inc. ("EMSA Correctional") and EMSA Military Services,
Inc. ("EMSA Military"), each of which the Company acquired pursuant to its
acquisition of EMSA. EMSA Correctional provides comprehensive managed health
care solutions to state and local correctional facilities, managing health care
for over 71,000 inmates. Following the Acquisition, the Company, through EMSA
Correctional and Prison Health Services, Inc., the Company's operating
subsidiary, will manage health care for approximately 132,000 inmates in 25
states. EMSA Military contracts with the U.S. Department of Defense (the "DOD")
and the Veterans Administration (the "VA") to provide emergency medicine and
primary health care services to active and retired military personnel and their
dependents at medical facilities operated by the DOD and the VA.
The purchase price paid to InPhyNet is subject to increase or decrease
on a dollar-for-dollar basis by an amount equal to the amount by which EMSA's
working capital, as reflected on its balance sheet as of January 26, 1999 (the
"Closing Date Balance Sheet"), is in excess of or is less than $27.6 million.
EMSA is obligated to deliver the Closing Date Balance Sheet to the Company
within 45 days following the closing of the EMSA acquisition. The Company will
account for the EMSA acquisition using the purchase method of accounting.
In connection with the EMSA acquisition: (i) the Company and all of its
subsidiaries, including EMSA, EMSA Military and EMSA Correctional, entered into
an Amended and Restated Credit Agreement, dated as of January 26, 1999, with
NationsBank, N.A., as Administrative Agent and Issuing Bank ("NationsBank")
which provides for a revolving credit facility of up to $52.0 million (the
"Credit Facility") and (ii) the Company entered into a Securities Purchase
Agreement, dated as of January 26, 1999 (the "Securities Purchase Agreement"),
with Health Care Capital Partners L.P. ("Capital Partners") and Health Care
Executive Partners L.P. ("Executive Partners"), investment funds managed by
Ferrer Freeman Thompson & Co. (collectively, with Capital Partners and Executive
Partners, "FFT"). On January 26, 1999, pursuant to the Securities Purchase
Agreement, the Company issued to FFT (i) $15.0 million aggregate principal
amount of the Company's 12% Subordinated Convertible Bridge Notes due January
26, 2000 (the "Notes") with detachable warrants (the "Warrants") to purchase an
aggregate 135,000 shares of the Company's common stock, par value $0.01 per
share (the "Common Stock"), and (ii) 50,000 shares of the Company's Series A
Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock"),
for an aggregate purchase price of $5.0 million. The Notes, Warrants and
Preferred Stock are referred to collectively as the "Convertible Securities."
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The Company used $47.0 million in borrowings under the Credit Facility
and the aggregate $20 million in proceeds received from its issuance of the
Convertible Securities to FFT to partially finance the EMSA acquisition.
At the option of either the Company or FFT, at any time following the
closing of the Securities Purchase Agreement, subject to certain conditions, the
Notes are convertible into shares of Preferred Stock at a ratio of one share of
Preferred Stock for each $100 of outstanding principal amount of Notes. The
Warrants entitle the holder thereof to purchase 135,000 shares of Common Stock
at the lower of $9.45 and the closing sale price of the Common Stock for the
thirty (30) consecutive trading days prior to the Stockholder Meeting (as
defined), provided that such price shall in no event be less than $5.50 per
share (subject to adjustment) (the "Warrant Exercise Price"). Subject to certain
adjustments, each share of Preferred Stock is convertible, at the option of the
holder thereof, into the number of shares of Common Stock determined by dividing
the face value of such share of Preferred Stock by the lower of $9.45 and the
closing sale price of the Common Stock for the thirty (30) consecutive trading
days prior to the Stockholder Meeting, provided that such price shall in no
event be less than $5.00 per share (subject to adjustment).
The conversion of the Notes into shares of Preferred Stock is
conditioned upon, among other things, the Company's stockholders approving the
issuance of: (i) the shares of Preferred Stock issued to FFT on January 26,
1999, (ii) the shares of Preferred Stock issuable upon conversion of the Notes
and (iii) the shares of Common Stock issuable upon conversion or exercise, as
applicable, of the Convertible Securities, to the extent that the number of
shares of Common Stock to be issued will be in excess of 20% of the number of
shares of Common Stock outstanding, without regard to the shares of Common Stock
issuable upon conversion of the Convertible Securities (the "Stock Issuance").
The Securities Purchase Agreement obligates the Company to convene a meeting of
its stockholders (the "Stockholder Meeting") to consider and vote upon the
approval of the Stock Issuance (the "Stockholder Approval") as soon as
practicable following the closing of the Securities Purchase Agreement and no
later than July 26, 1999.
If the Company fails to file preliminary proxy materials relating to
the Stockholder Meeting (the "Proxy Statement") on or before March 27, 1999 or
fails convene the Stockholders Meeting on or before July 26, 1999, the interest
on the Notes will immediately increase by 0.05% per month and will further
increase by 0.05% per month until the Company files the Proxy Statement or
convenes the Stockholder Meeting, as appropriate. In addition, if the Company
fails to convene the Stockholders Meeting on or before July 26, 1999, fails to
take other actions in connection with obtaining Stockholder Approval or fails to
take certain other actions required by the terms of the Warrants, the Warrant
Exercise Price will be reduced to $.01 per share. The interest on the Notes will
not be increased as described above and the Warrant Exercise Price will not be
reduced as described above until the maturity of the Notes, in each case, if the
sole reason the Company fails to obtain Stockholder Approval is the failure of
the holders of the Common Stock to approve the Stock Issuance at a meeting duly
called and convened in accordance with the Securities Purchase Agreement. The
Warrants and the terms of the Preferred Stock each provide that, prior to the
date of Stockholder Approval, the maximum number of shares of Common Stock that
will be issued or
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be issuable upon exercise of the Warrants together with the shares of Common
Stock that will be issued or be issuable upon conversion of the Preferred Stock,
may not exceed 19.9% of the Company's outstanding Common Stock, notwithstanding
any other provisions of the Warrants or terms of the Preferred Stock. However,
if prior to Stockholder Approval the total number of shares of Common Stock
which are issuable upon exercise of the Warrants and conversion of the Preferred
Stock would exceed 19.9% but for the 19.9% limitation described in the previous
sentence, following Stockholder Approval the number of shares of Common Stock
which are issuable will be recalculated to give effect to the full amount of
shares of Common Stock that would have been issuable but for such limitation.
The following table sets forth the sources and uses of funds for the
EMSA acquisition (in millions):
<TABLE>
<S> <C>
SOURCES:
Cash ................................................... $ 2.1
Borrowings under the Credit Facility.................... 47.0
Proceeds from sale of the Notes......................... 15.0
Proceeds from sale of the Preferred Stock............... 5.0
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Total Sources.................................. $ 69.1
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USES:
Cash Consideration for EMSA ("Purchase Price").......... $ 65.0
Purchase Price Escrow................................... 2.0
Transaction costs ...................................... 2.1
Total Sources.................................. $ 69.1
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</TABLE>
The Company entered into a Registration Rights Agreement, dated as of
January 26, 1999 (the "Registration Rights Agreement"), with FFT pursuant to
which it agreed to register the Common Stock issuable upon conversion of the
Preferred Stock issued or issuable to FFT pursuant to the Securities Purchase
Agreement and exercise of the Warrants for resale by the holders thereof.
The summaries contained herein of certain provisions of the Securities
Purchase Agreement, the Notes, the Warrants, the Certificate of Designation of
the Preferred Stock, the Registration Rights Agreement, the Stock Purchase
Agreement and the First Amendment are qualified in their entirety by reference
to all the provisions of such documents, including the definitions therein of
certain terms which are not otherwise defined herein. Copies of all such
documents except the Stock Purchase Agreement, which was filed as an exhibit to
the Company's Current Report on Form 8-K which was filed on January 5, 1999, are
filed as exhibits to this Current Report on Form 8-K.
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Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits
(a) Financial Statements
The EMSA Financial Statements, together with the independent public
accountants' reports thereon, will be filed by amendment to this Form 8-K not
later than March 11, 1999.
(b) Pro Form Financial Information
The EMSA pro forma financial information will be filed by amendment to
this Form 8-K not later than March 11, 1999.
(c) Exhibits
99.1 Amended and Restated Credit Agreement, dated as of January 26, 1999,
among the Company, as Borrower, the Company's subsidiaries as listed
therein, as Guarantors, the Lenders identified therein and NationsBank,
N.A. as Administrative Agent and as Issuing Bank.
99.2 Securities Purchase Agreement , dated as of January 26, 1999, among the
Company, Health Care Capital Partners L.P. and Health Care Executive
Partners L.P.
99.3 Certificate of Designation of the Series A Convertible Preferred Stock.
99.4 The Company's 12% Subordinated Convertible Bridge Notes due January 26,
2000, issued to Health Care Capital Partners L.P. on January 26, 1999.
99.5 The Company's 12% Subordinated Convertible Bridge Notes due January 26,
2000, issued to Health Care Executive Partners L.P. on January 26,
1999.
99.6 Warrant, dated as of January 26, 1999, issued by the Company to Health
Care Capital Partners L.P. to purchase shares of the Common Stock.
99.7 Warrant, dated as of January 26, 1999, issued by the Company to Health
Care Executive Partners L.P. to purchase shares of the Common Stock,
dated as of January 26, 1999.
99.8 First Amendment to Stock Purchase Agreement, dated as of January 26,
1999, between the Company and InPhyNet Administrative Services, Inc.
99.9 Registration Rights Agreement , dated as of January 26, 1999, among the
Company, Health Care Capital Partners L.P. and Health Care Executive
Partners L.P.
99.10 Text of Press Release of the Company, dated January 26, 1999.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 10, 1999
AMERICA SERVICE GROUP, INC.
By: /s/ Bruce A. Teal
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Bruce A. Teal
Senior Vice President and Chief Financial
Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
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<S> <C>
99.1 Amended and Restated Credit Agreement, dated as of
January 26, 1999, among the Company, as Borrower, the
Company's subsidiaries as listed therein, as
Guarantors, the Lenders identified therein and
NationsBank, N.A. as Administrative Agent and as
Issuing Bank.
99.2 Securities Purchase Agreement , dated as of January
26, 1999, among the Company, Health Care Capital
Partners L.P. and Health Care Executive Partners L.P.
99.3 Certificate of Designation of the Series A
Convertible Preferred Stock.
99.4 The Company's 12% Subordinated Convertible Bridge
Notes due January 26, 2000, issued to Health Care
Capital Partners L.P. on January 26, 1999.
99.5 The Company's 12% Subordinated Convertible Bridge
Notes due January 26, 2000, issued to Health Care
Executive Partners L.P. on January 26, 1999.
99.6 Warrant, dated as of January 26, 1999, issued by the
Company to Health Care Capital Partners L.P. to
purchase shares of the Common Stock.
99.7 Warrant, dated as of January 26, 1999, issued by the
Company to Health Care Executive Partners L.P. to
purchase shares of the Common Stock, dated as of
January 26, 1999.
99.8 First Amendment to Stock Purchase Agreement, dated as
of January 26, 1999, between the Company and InPhyNet
Administrative Services, Inc.
99.9 Registration Rights Agreement , dated as of January
26, 1999, among the Company, Health Care Capital
Partners L.P. and Health Care Executive Partners L.P.
99.10 Text of Press Release of the Company, dated January
26, 1999.
</TABLE>
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AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of January 26, 1999
Among
AMERICA SERVICE GROUP INC.,
as the Borrower,
All of its present and future
Subsidiaries that become parties hereto,
as Guarantors,
the Lenders identified herein,
and
NATIONSBANK, N.A.,
as Administrative Agent
and as Issuing Bank
$ 52,000,000
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AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"), dated as
of January 26, 1999, is made and entered into on the terms and conditions
hereinafter set forth, by and among AMERICA SERVICE GROUP INC., a Delaware
corporation (the "Borrower"), all subsidiaries of the Borrower now or hereafter
becoming parties to this Agreement (collectively, the "Guarantors" and,
individually, a "Guarantor"), those several lenders who are or become parties to
this Agreement (collectively, the "Lenders" and, individually, a "Lender"),
NATIONSBANK, N.A., a national banking association (successor by merger to
NationsBank of Tennessee, N.A., a national banking association, and herein
referred to as "NationsBank"), as administrative agent for the Lenders and the
Issuing Bank (in such capacity, the "Administrative Agent") and as Issuing Bank.
THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE 1
DEFINITIONS, ACCOUNTING TERMS
AND PRINCIPLES OF CONSTRUCTION
1.1. Defined Terms. In addition to terms defined elsewhere herein, the
following terms, as used in this Agreement, shall have the respective meanings
set forth below (terms defined in the singular to have the same meaning when
used in the plural, and vice versa, unless otherwise expressly indicated):
"Adjusted Consolidated Funded Indebtedness" shall mean, for
the Borrower and its Subsidiaries on a consolidated basis, as of any date of
determination, Consolidated Funded Indebtedness, less:
(1) the aggregate face amount of any letters of credit issued
for the account of the Borrower or a Subsidiary thereof within the
forty-five (45) day period prior to the date of determination (provided
that Adjusted Consolidated Funded Indebtedness shall include the
aggregate unreimbursed amount of any drafts drawn under such letters of
credit), and
(2) the amount by which (a) the aggregate amount of
unrestricted cash and Cash Equivalents of the Borrower and
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its Subsidiaries on deposit or maintained with the Administrative
Agent, or an Affiliate thereof, exceeds (b) the consolidated operating
expenses for the Borrower and its Subsidiaries for the Last Four Fiscal
Quarters, determined in conformity with GAAP, divided by twenty-six
(26).
"Adjusted Consolidated Senior Funded Indebtedness" shall mean,
for the Borrower and its Subsidiaries on a consolidated basis, as of any date of
determination, Consolidated Funded Indebtedness, less:
(1) the aggregate face amount of any letters of credit issued
for the account of the Borrower or a Subsidiary thereof (provided that
Adjusted Consolidated Senior Funded Indebtedness shall include the
aggregate unreimbursed amount of any drafts drawn under such letters of
credit), and
(2) Subordinated Indebtedness.
"Administrative Agent" shall mean NationsBank or such
successor Administrative Agent as may be appointed by the Lenders pursuant to
Section 12.10.
"Affiliate" shall mean, as to any Person, any other Person
directly or indirectly controlling (including all directors, officers and
employees of such Person), directly or indirectly controlled by or under direct
or indirect common control with such Person.
"Applicable Bankruptcy Law" shall mean, with respect to any
Guarantor, Title 11 of the United States Code, and any other laws governing
bankruptcy, suspension of payments, reorganization, arrangement, adjustment of
debts, relief of debtors, dissolution or insolvency and any other similar laws
applicable to such Guarantor.
"Applicable Base Rate Margin" shall mean the margin to be
added to the Base Rate for purposes of determining the interest rate(s)
applicable to Base Rate Loans from time to time, which shall be determined as
provided in Section 2.13.
"Applicable Commitment Fee Percentage" shall mean the
percentage to be used to calculate Commitment Fees from time to time, which
shall be determined as provided in Section 2.13.
"Applicable Letter of Credit Fee Percentage" shall mean the
annualized percentage to be used to calculate Letter of Credit Fees from time to
time, which shall be determined as provided in Section 2.13.
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"Applicable LIBOR Margin" shall mean the margin to be added to
LIBOR for purposes of determining the interest rate(s) applicable to LIBOR Loans
from time to time, which shall be determined as provided in Section 2.13.
"Asset Acquisition" shall mean (a) any investment by the
Borrower or any of its Subsidiaries in any other Person pursuant to which such
Person shall become a Subsidiary of the Borrower or any of its Subsidiaries or
shall be merged with the Borrower or any of its Subsidiaries or (b) any
acquisition by the Borrower or any of its Subsidiaries of the assets of any
Person that constitute substantially all of an operating unit or business of
such Person.
"Assignment and Acceptance" shall mean an assignment and
acceptance, substantially in the form of Exhibit 13.2, between a transferor
Lender and a proposed transferee, regarding the sale, assignment, transfer or
other disposition (other than the sale of a participation) of all or any amount
of the Commitments, Revolving Loans and participations in the Letters of Credit
of such Lender.
"Assignment and Security Agreement" shall mean the Amended and
Restated Assignment and Security Agreement, substantially in the form of Exhibit
4.1C, by and among the Borrower, the Guarantors and the Administrative Agent.
"Base LIBOR" shall mean the rate per annum for offered Dollar
deposits in the interbank Eurodollar market appearing on page 3750 of the
TELERATE rate reporting system at about 11:00 a.m., Central time, on the
Interest Rate Determination Date immediately prior to the beginning of the
Interest Period for the corresponding LIBOR Loan, for the number of months
comprised therein and in an amount equal to the amount of such LIBOR Loan to be
outstanding during such Interest Period. Without limiting the provisions of
Section 2.14.3, in the event that prior to the Maturity Date TELERATE quotes for
Base LIBOR are discontinued or become unascertainable, the Administrative Agent
may designate a comparable resource for use in determining Base LIBOR for
purposes hereof.
"Base Rate" shall mean, for any period, the greater of (i) the
fluctuating rate of interest per annum from time to time established by
NationsBank as its "prime rate", regardless of whether published or publicly
announced, or (ii) a fluctuating rate of interest per annum equal to one-half of
one percentage point (0.5%) in excess of the Federal Funds Rate in effect from
time to time. Each change in the Base Rate shall be effective as of the opening
of business on the day such change occurs. The parties hereto acknowledge that
the rate established by NationsBank as its "prime rate" is an index or base rate
and is not necessarily the lowest rate charged to its customers or other
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banks. In the event that prior to the Maturity Date NationsBank discontinues or
abandons the practice of establishing a prime rate, or should the same become
unascertainable, the Administrative Agent shall designate a comparable reference
rate for use in determining the Base Rate for purposes hereof.
"Base Rate Loans" shall mean Revolving Loans bearing interest
at rates determined by reference to the Base Rate.
"Borrowing" shall mean (1) a borrowing consisting of Revolving
Loans made to the Borrower on the same day by the Lenders ratably according to
their respective Commitments pursuant to the provisions of Section 2.2.1, and
(2) a borrowing consisting of a Swing Line Loan made to the Borrower by the
Swing Line Lender pursuant to the provisions of Section 2.2.6.
"Bridge Notes" shall mean the Subordinated Convertible Bridge
Notes due January 26, 2000, in the original aggregate principal amount of
$15,000,000, issued by the Borrower pursuant to the Securities Purchase
Agreement.
"Budgeted Maintenance Capital Expenditures" shall mean, as to
the Borrower and its Subsidiaries on a consolidated basis for any Fiscal Year,
the aggregate of all Maintenance Capital Expenditures included in the budget for
such Fiscal Year delivered to the Administrative Agent and the Lenders pursuant
to Section 8.2.3.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the States of New York and
Tennessee are authorized or required by law or executive order to close.
"Capital Expenditures" shall mean, as to any Person for any
period, the aggregate capital expenditures recorded by such Person and its
Subsidiaries on a consolidated basis in conformity with GAAP, including charges
in respect of Capitalized Lease Obligations exclusive of imputed interest on
such Capitalized Lease Obligations; provided, however, that for purposes of
determining Capital Expenditures for the Borrower and its Subsidiaries on a
consolidated basis, there shall be excluded therefrom any Capital Expenditures
attributable solely to the making of Permitted Acquisitions.
"Capitalization" shall mean, for the Borrower and its
Subsidiaries on a consolidated basis, the sum of Consolidated Funded
Indebtedness, plus shareholders' equity, plus federal and state net operating
loss carryforwards, plus certain deferred liabilities and other items
specifically approved by the Administrative Agent for inclusion in
Capitalization, as more particularly described on Schedule 1.1A.
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"Capitalized Lease" shall mean, as to any Person, any lease of
property by such Person as lessee that would be capitalized on a balance sheet
of such Person prepared in conformity with GAAP.
"Capitalized Lease Obligations" shall mean, as to any Person,
the capitalized amount of the obligations of such Person and its Subsidiaries
under all Capitalized Leases.
"Cash Equivalents" shall mean, at any time,
(a) Government Obligations having a maturity not
exceeding one hundred eighty (180) days;
(b) commercial paper rated at least A-1 by S&P or P-1 by
Moody's, having a maturity not exceeding one hundred eighty (180) days;
(c) certificates of deposit or time deposits of (i) the
Lenders or (ii) other commercial banks having capital and undivided
surplus of at least $500 million and issuing commercial paper rated as
described in the preceding clause (b) and organized and existing under,
or chartered or otherwise qualified to do business under, the laws of
the United States of America or any State thereof or the District of
Columbia, having a maturity not exceeding ninety (90) days;
(d) repurchase agreements or investment contracts having a
maturity not exceeding ninety (90) days with a financial institution
insured by the Federal Deposit Insurance Corporation, or any broker or
dealer (as defined in the Securities Exchange Act of 1934) that is a
dealer in government bonds and that is recognized by trades with and
reports to, a Federal Reserve Bank as a primary dealer in government
securities; provided that in any case (i) collateral is pledged for the
repurchase agreement or investment contract, which collateral consists
of (A) Government Obligations or evidences of ownership of
proportionate interests in future interest and principal payments on
Government Obligations held by a bank or trust company as custodian,
under which the owner of the investment is the real party in interest
and has the right to proceed directly and individually against the
obligor on such obligations, and which underlying obligations are held
in a segregated account and not available to satisfy any claim of the
custodian or any person claiming through the custodian or to whom the
custodian may be obligated or (B) evidences of indebtedness issued by
any of the following: Bank of Cooperatives, Export-Import Bank of the
United States, Farmers Home Administration, Federal Financing Bank,
Federal Home Loan Bank System, Federal Home
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Loan Mortgage Corporation (including participation certificates),
Federal Housing Administration, Federal Farm Credit Banks, Federal
National Mortgage Association, Government National Mortgage
Association, Inter-American Development Bank, International Bank for
Reconstruction and Development, Small Business Administration or any
other agency or instrumentality of the United States of America created
by an act of Congress that is substantially similar to the foregoing in
its legal relationship to the United States of America, (ii) the
current market value of the collateral securing the repurchase
agreement or investment contract is at least equal to the amount of the
repurchase agreement or investment contract and (iii) the current
market value of the collateral is determined not less frequently than
monthly;
(e) investments in money market funds substantially all of
whose assets consist of securities of the types described in the
foregoing clauses (a) through (d);
(f) investments in obligations the return with respect to
which is excludable from gross income under Section 103 of the Code,
having a maturity of not more than six (6) months or providing the
holder the right to put such obligations for purchase at par upon not
more than twenty-eight (28) days' notice, and which are rated at least
A-1 by S&P or P-1 by Moody's;
(g) investments in tax free money market funds all of whose
assets consist of securities of the types described in the foregoing
clause (f); and
(h) investments, redeemable upon not more than seven (7) days'
notice, in money market preferred municipal bond funds that are rated
at least AAA by S&P or Aaa by Moody's.
"Certificate of Designation" shall have the meaning given such
term in the Securities Purchase Agreement.
"Code" shall mean the Internal Revenue Code of 1986.
"Collateral" shall mean all property and interests in
property, presently owned or hereafter acquired or presently existing or
hereafter created by the Borrower or the Guarantors, including any and all
proceeds thereof, in which a security interest has been granted in favor of the
Administrative Agent for the ratable benefit of the Lenders, whether under this
Agreement, the Security Documents or any other Loan Document.
"Collateral Account" shall mean the Collateral Account
described in Section 11.3.1.
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"Commission" shall mean the Securities and Exchange
Commission or any successor entity.
"Commitment Fees" shall have the meaning given such term in
Section 2.11.2.
"Commitment Period" shall mean that period commencing on the
date hereof and continuing to, but not including, the Commitment Period
Expiration Date.
"Commitment Period Expiration Date" shall mean
September 30, 2002.
"Commitments" shall mean the Revolving Credit Commitments and
the Letter of Credit Commitments, which collectively are in the aggregate amount
set forth in Section 2.1 and in the case of each Lender are in the initial
amount set forth with such Lender's signature on this Agreement or the
Assignment and Acceptance pursuant to which such Lender became a party hereto.
"Commonly Controlled Entity" shall mean a Person that is under
common control with the Borrower within the meaning of subsection 414(b), (c),
(m), (n) or (o) of the Code.
"Consolidated Funded Indebtedness" shall mean, for the
Borrower and its Subsidiaries on a consolidated basis, all Indebtedness that
constitutes (a) indebtedness for borrowed money or for notes, debentures or
other debt securities, (b) notes payable and drafts accepted representing
extensions of credit regardless of whether the same represent obligations for
borrowed money, (c) reimbursement obligations in respect of letters of credit
issued for the account of Borrower or a Subsidiary thereof (including any such
obligations in respect of any drafts drawn thereunder), (d) liabilities for all
or any part of the deferred purchase price of property or services, (e)
liabilities secured by any Lien on any property or asset owned or held by the
Borrower or any of its Subsidiaries regardless of whether the Indebtedness
secured thereby shall have been assumed by or is a primary obligation of the
Borrower or such Subsidiary, (f) Capitalized Lease Obligations, and (g) without
duplication, all Contingent Obligations the primary obligation of which is
Indebtedness of the type described in clauses (a) through (f) above; provided,
however, that Consolidated Funded Indebtedness shall not include any unsecured
current liabilities incurred in the ordinary course of business and not
represented by any note, bond, debenture or other instrument.
"Consolidated Healthcare Revenue" shall mean, for the Borrower
and its Subsidiaries on a consolidated basis for any period, the healthcare
revenue of the Borrower and its Subsidiaries on a consolidated basis for such
period taken as a
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single accounting period, determined in conformity with GAAP, subject to
customary exclusions with respect to extraordinary and nonrecurring items.
"Consolidated Net Income" shall mean, for the Borrower and its
Subsidiaries on a consolidated basis for any period, the net income (or loss)
after taxes of the Borrower and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period, determined in conformity with
GAAP, subject to customary exclusions with respect to extraordinary and
nonrecurring items; provided, however, that net income attributable to Permitted
Non-Guarantor Entities in any Fiscal Quarter shall be excluded to the extent
that it exceeds ten percent (10%) of Consolidated Net Income for such Fiscal
Quarter.
"Contingent Obligations" shall mean, as to any Person, any
contingent obligation calculated in conformity with GAAP, and in any event shall
include (without duplication) all indebtedness, obligations or other liabilities
of such Person guaranteeing or in effect guaranteeing the payment or performance
of any indebtedness, obligation or other liability, regardless of whether
contingent (collectively, the "primary obligations"), of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including any
indebtedness, obligation or other liability of such Person, (a) to purchase any
such primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) 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 with respect thereto.
"Continuing Directors" shall mean, as of any date of
determination:
(a) individuals who were directors of the Borrower on the day
that is two (2) years prior to such date,
(b) any individual appointed or elected by a Person or group
of Persons who on the date of this Agreement has (or pursuant to the
terms of securities of the Borrower held by such Person or group on the
date of this Agreement will have) a right, without the joinder or
approval of any other Person, to appoint or elect such individual to
the Borrower's board of directors or to cause such individual to be so
appointed or elected, and
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<PAGE> 10
(c) individuals whose election as directors of the Borrower or
whose nomination for such election by the Borrower's shareholders was
approved by a vote of at least two-thirds (2/3) of the directors of the
Borrower then in office who either are directors described in the
preceding clauses (a) or (b) or whose election or nomination for
election was previously so approved.
"Contractual Obligations" shall mean, as to any Person, any
and all indebtedness, obligations or other liabilities of such Person, now
existing or hereafter arising, whether due or not due, absolute or contingent,
liquidated or unliquidated, direct or indirect, express or implied, individually
or jointly with others, pursuant to the provisions of any document, instrument
or agreement to which such Person is a party or by which such Person or any of
its property is or may be bound or affected or pursuant to the provisions of any
security issued by such Person.
"Convertible Preferred Stock" shall mean the Series A
Convertible Preferred Stock, $0.01 par value, issued by the Borrower pursuant to
the Securities Purchase Agreement, including any such Series A Convertible
Preferred Stock issued upon conversion of the Bridge Notes into same as provided
in the Securities Purchase Agreement.
"Credit Fees" shall mean the credit fees payable as provided
in Section 2.11.
"Current Maturities of Long-Term Debt" shall mean (a) as of
any date of determination occurring on or before December 31, 1999, $5,000,000,
and (b) as of any date of determination subsequent to December 31, 1999, that
portion of Consolidated Funded Indebtedness that is due and payable within the
twelve (12) month period immediately following the date of determination,
calculated in conformity with GAAP.
"Current Ratio" shall mean, for the Borrower and its
Subsidiaries on a consolidated basis, as of any date of determination, the ratio
of (a) current assets plus the Unused Working Capital Sublimit to (b) current
liabilities; provided, however, that for purposes of this definition, "current
liabilities" shall not include the Indebtedness evidenced by the Bridge Notes.
"Default" shall mean any of the events specified in Section
11.1, regardless of whether any requirement for the giving of notice (and, if
applicable, an opportunity to cure), the lapse of time or both has been
satisfied.
"Default Rate" shall mean the rate(s) per annum
otherwise applicable to Loans from time to time plus two
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<PAGE> 11
percentage points (2.00%); provided, however, that in no event shall any Default
Rate exceed the Highest Lawful Rate.
"Dollars" and "$" shall mean lawful money of the United
States of America.
"EBITDA" shall mean, for the Borrower and its Subsidiaries on
a consolidated basis for any period, after giving Pro Forma Effect to any Asset
Acquisition made during such period, the sum of Consolidated Net Income, plus
Interest Expense, plus any provision for taxes based on income or profits that
was deducted in computing Consolidated Net Income, plus depreciation,
amortization of intangible assets and other non-cash charges.
"EMSA" shall mean EMSA Government Services, Inc., a Florida
corporation formerly known as InPhyNet Government Services, Inc.
"EMSA Acquisition" shall mean the acquisition by the Borrower
of all of the outstanding shares of the capital stock of EMSA pursuant to the
terms and conditions of the EMSA Acquisition Agreement, as in effect on the date
of this Agreement, as a result of which EMSA will become a wholly-owned
Subsidiary of the Borrower.
"EMSA Acquisition Agreement" shall mean the Stock Purchase
Agreement dated December 18, 1999, by and between the Borrower and InPhyNet
Administrative Services, Inc., a Florida
corporation.
"Environmental Laws" shall mean all federal, state, regional,
county or local laws, statutes, rules, regulations or ordinances, now or
hereafter in effect, relating to the generation, recycling, use, reuse, sale,
storage, handling, transport, treatment or disposal of Hazardous Materials,
including the Comprehensive Environmental Response Compensation Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. ss.9601 et seq., the Resource Conservation and Recovery Act of 1976, as
amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. ss.6901
et seq., the Toxic Substances Control Act, 15 U.S.C. ss.2601 et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. ss.1801, et seq., the Clean
Air Act, 42 U.S.C. ss.7401 et seq., the Clean Water Act of 1977, 33 U.S.C.
ss.1251 et seq., and any rules, regulations and guidance documents promulgated
or published thereunder, and any state, regional, county or local statute, law,
rule, regulation or ordinance now or hereafter in effect that relates to public
health, safety or the discharge, emission or disposal of Hazardous Materials in
or to air, water, land or groundwater, to the withdrawal or use of groundwater,
to the use, handling or disposal of asbestos, polychlorinated biphenyls,
petroleum,
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<PAGE> 12
petroleum derivatives or by-products, other hydrocarbons or urea formaldehyde,
to the treatment, storage, disposal or management of Hazardous Materials, to
exposure to Hazardous Materials or to the transportation, storage, disposal,
management or release of gaseous or liquid substances, and any regulation,
order, injunction, judgment, declaration, notice or demand issued thereunder.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974.
"Event of Default" shall mean any of the events specified in
Section 11.1, provided that any requirement for the giving of notice (and, if
applicable, an opportunity to cure), the lapse of time or both has been
satisfied.
"Existing Liens" shall mean those certain Liens in existence
on the date hereof that are described on Schedule 9.2.
"Facilities" shall mean the Revolving Credit Facility,
the Swing Line Facility and the Letter of Credit Facility.
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for each
day (or, if such day is not a Business Day, for the immediately preceding
Business Day) by the Federal Reserve Bank of New York.
"Financing Statement" shall mean any Uniform Commercial Code
financing statement, on Form UCC-1 or otherwise, executed pursuant to the
provisions of this Agreement or any other Loan Document.
"Fiscal Quarter" shall mean each of the accounting periods of
approximately three (3) months ending on March 31, June 30, September 30 and
December 31, respectively, of each year.
"Fiscal Year" shall mean the twelve (12) month period ending
on December 31 of each year.
"Fixed Charge Coverage Ratio" shall mean, for the Borrower and
its Subsidiaries on a consolidated basis, calculated for the most recent Fiscal
Quarter after giving Pro Forma Effect to any Asset Acquisition made during the
most recent twelve (12) month period ending on and including the date of
determination, the ratio of (a) Consolidated Net Income, plus Interest Expense,
plus Rent Expense, plus depreciation, amortization of intangible assets and
other non-cash charges, less Restricted Payments (to the extent not previously
deducted in computing Consolidated Net
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<PAGE> 13
Income), less an amount equal to twenty-five percent (25%) of Budgeted
Maintenance Capital Expenditures for the corresponding Fiscal Year (or, if less,
the actual Maintenance Capital Expenditures incurred during such Fiscal
Quarter), to (b) Interest Expense, plus Rent Expense, plus an amount equal to
twenty-five percent (25%) of Current Maturities of Long-Term Debt.
"Funded Indebtedness to Capitalization Ratio" shall mean, for
the Borrower and its Subsidiaries on a consolidated basis, as of any date of
determination, the ratio of Consolidated Funded Indebtedness to Capitalization.
"Funded Indebtedness to EBITDA Ratio" shall mean, for the
Borrower and its Subsidiaries on a consolidated basis, calculated for the most
recent twelve (12) month period after giving Pro Forma Effect to any Asset
Acquisition made during such period, the ratio of Adjusted Consolidated Funded
Indebtedness to EBITDA.
"Funding Date" shall mean each of the respective dates on
which the funding of a Borrowing made under this Agreement occurs.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"Government Obligations" shall mean direct obligations of the
United States of America or obligations for the full and prompt payment of which
the full faith and credit of the United States of America are pledged.
"Governmental Authority" shall mean any nation, province,
state or other political subdivision thereof and any government or any natural
person or entity exercising executive, legislative, regulatory or administrative
functions of or pertaining to government.
"Guaranteed Obligations" shall mean all the obligations of the
Borrower guaranteed by the Guarantors pursuant to Article 5.
"Guarantor" shall mean each Subsidiary of the Borrower that
has become a party to this Agreement as a Guarantor by executing this Agreement
or a Supplement to Amended and Restated Credit Agreement in the form of Exhibit
1.1, has become a party to the Security Agreement by executing the Security
Agreement or a Supplement to Amended and Restated Security Agreement in the form
of Exhibit A thereto, has become a party to the Pledge Agreement by executing
the Pledge Agreement or a Supplement to Amended and Restated Pledge Agreement in
the form of Exhibit A
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thereto, has become a party to the Assignment and Security Agreement by
executing the Assignment and Security Agreement or a Supplement to Amended and
Restated Assignment and Security Agreement in the form of Exhibit A thereto and
has delivered to the Administrative Agent, for the ratable benefit of the
Lenders, (1) all certificates and other instruments or documents evidencing
capital stock or other ownership interests of such Subsidiary in any other
Subsidiaries of the Borrower, accompanied by stock powers endorsed in blank or
the equivalent and (2) all promissory notes and other instruments evidencing
intercompany Indebtedness owed to such Subsidiary by any other Subsidiary of the
Borrower, endorsed to the order of the Administrative Agent.
"Guaranty" shall mean the guaranty of the Obligations
of the Borrower set forth in Article 5.
"Hazardous Material" shall mean any material, substance,
pollutant or waste that is defined or designated as a hazardous material,
hazardous substance, hazardous waste, pollutant, contaminant or toxic substance
under any Environmental Law or otherwise is regulated under any Environmental
Law, including asbestos, polychlorinated biphenyls, petroleum, petroleum
derivatives or by-products, other hydrocarbons, urea formaldehyde and medical
and infectious wastes.
"Highest Lawful Rate" shall mean, with respect to each Lender,
the maximum nonusurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on debts
outstanding hereunder or under the Notes, as the case may be, under the laws
applicable to such Lender that are presently in effect or, to the extent allowed
by law, under such applicable laws that may hereafter be in effect and that
allow a higher maximum nonusurious interest rate than applicable laws now allow.
"Indebtedness" shall mean, as to any Person, all items that in
conformity with GAAP would be shown on the balance sheet of such Person as a
liability and in any event shall include (without duplication) (a) indebtedness
for borrowed money or for notes, debentures or other debt securities, (b) notes
payable and drafts accepted representing extensions of credit regardless of
whether representing obligations for borrowed money, (c) reimbursement
obligations in respect of letters of credit issued for the account of such
Person (including any such obligations in respect of any drafts drawn
thereunder), (d) liabilities for all or any part of the deferred purchase price
of property or services, (e) liabilities secured by any Lien on any property or
asset owned or held by such Person regardless of whether the indebtedness
secured thereby shall have been assumed by or is a primary liability of such
Person, (f) Capitalized Lease Obligations, and (g) Contingent Obligations.
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"Insurance Subsidiary" shall mean any Subsidiary of the
Borrower hereafter organized for the purpose of engaging in the insurance
business.
"Interest Expense" shall mean, as to any Person for any
period, the aggregate interest expense and amortization of deferred loan costs
of such Person and its Subsidiaries on a consolidated basis for such period
(calculated without regard to any limitations on the payment thereof), imputed
interest on Capitalized Lease Obligations, commissions, discounts and other fees
and charges owed with respect to letters of credit and unused commitments and
net costs under interest rate protection agreements, all as determined in
conformity with GAAP.
"Interest Payment Date" shall mean, (a) with respect to any
Base Rate Loan or Swing Line Loan, January 1, April 1, July 1 and October 1 of
each year, commencing on the first such date after the applicable Funding Date,
and (b) with respect to any LIBOR Loan, the last day of the Interest Period
applicable to such Loan; provided, however, that with respect to any Interest
Period of six (6) months "Interest Payment Date" also shall include the day that
is three (3) months after the day on which that Interest Period commenced.
"Interest Period" shall mean any interest period applicable to
a LIBOR Loan as determined pursuant to Section 2.14.1.
"Interest Rate Contracts" shall mean any interest rate swap
agreements, interest rate cap agreements, interest rate collar agreements,
interest rate insurance and other agreements or arrangements designed to provide
protection against fluctuations in interest rates, in each case between the
Borrower and any Lender, and in an aggregate notional amount at any time not to
exceed an amount equal to Consolidated Funded Indebtedness at such time.
"Interest Rate Determination Date" shall mean each date for
calculating LIBOR for purposes of determining the interest rate in respect of an
Interest Period, which in each case shall be the second (2d) Business Day prior
to the first (1st) day of the corresponding Interest Period.
"Investment" shall mean the making of any loan, advance,
extension of credit or capital contribution to, or the acquisition of any stock,
bonds, notes, debentures or other obligations or securities of, or the
acquisition of any other interest in or the making of any other investment in,
any Person.
"Issuing Bank" shall mean NationsBank and any other financial
institution that, subject to approval by the Administrative Agent and the
Borrower, agrees to become a party
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<PAGE> 16
to this Agreement and to issue Letters of Credit pursuant to
Section 2.3.
"Last Four Fiscal Quarters" shall mean, at any time, the
Fiscal Quarter most recently ended plus the immediately preceding three Fiscal
Quarters.
"Lending Office" shall mean with respect to any Lender or the
Administrative Agent, the office of each such Lender at the address specified on
the signature pages hereto or in the Assignment and Acceptance pursuant to which
it became a Lender, or such other office as any such Lender from time to time
may specify to the Borrower and the Administrative Agent.
"Letter of Credit Commitments" shall mean, at any time, (a)
the commitment of the Issuing Bank to issue Letters of Credit pursuant to the
provisions of Section 2.3.1, and (b) the aggregate commitments of all the
Lenders to purchase participations in the Letter of Credit Liabilities pursuant
to the provision of Section 2.4; and the "Letter of Credit Commitment" of any
Lender at any time shall mean an amount equal to such Lender's Percentage
multiplied by the then effective aggregate Letter of Credit Commitments under
clause (b) above. The Letter of Credit Commitments are in the aggregate amount
set forth in Section 2.1.
"Letter of Credit Facility" shall mean the letter of credit
facility provided by the Lenders pursuant to the Letter of Credit Commitments as
more particularly set forth in Section 2.3.
"Letter of Credit Fees" shall have the meaning given such term
in Section 2.11.3.
"Letter of Credit Liabilities" shall mean all liabilities of
the Borrower to the Issuing Bank in respect of Letters of Credit, regardless of
whether any such liability is contingent, and shall consist of the sum, without
duplication, of (a) the amount available to be drawn or that may become
available to be drawn under outstanding Letters of Credit (including all amounts
committed to be paid by the Issuing Bank thereunder), and (b) all amounts that
have been paid or made available by the Issuing Bank thereunder if and to the
extent the Issuing Bank has not received reimbursement from the Borrower
pursuant to the terms hereof.
"Letter of Credit Request" shall mean a request substantially
in the form of Exhibit 2.3.2 annexed hereto with respect to the proposed
issuance of a Letter of Credit hereunder.
"Letter of Credit Supportable Obligations" shall mean (a)
obligations of the Borrower or any of its Subsidiaries incurred in the ordinary
course of business with respect to
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workers' compensation, surety bonds and other similar statutory obligations, (b)
obligations of the Borrower or any of its Subsidiaries in respect of Service
Contracts or performance bonds issued in connection therewith, and (c) such
other obligations of the Borrower or any of its Subsidiaries as are reasonably
acceptable to the Issuing Bank and the Administrative Agent and otherwise
permitted to exist pursuant to the terms of this Agreement.
"Letters of Credit" shall mean the letters of credit issued by
the Issuing Bank pursuant to the provisions of Section 2.3.1.
"LIBOR" shall mean the rate per annum (rounded upwards, if
necessary, to the nearest whole one-eighth of 1%) equal to the product of Base
LIBOR times Statutory Reserves.
"LIBOR Loans" shall mean Revolving Loans bearing interest at
rates determined by reference to LIBOR.
"Lien" shall mean, as to any asset, (a) any lien, charge,
claim, mortgage, security interest, pledge, hypothecation or other encumbrance
of any kind with respect to such asset, (b) any interest of a vendor or lessor
under any conditional sale agreement, Capitalized Lease or other title retention
agreement relating to such asset, (c) any reservation, exception, encroachment,
easement, right-of-way, covenant, condition, restriction, lease or other title
exception affecting such asset, or (d) any assignment, deposit, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"Loan Documents" shall mean this Agreement, the Notes, the
Letters of Credit, the Security Documents, the Interest Rate Contracts and all
other documents, instruments and agreements now or hereafter executed or
delivered pursuant hereto or in connection herewith.
"Loans" shall mean Revolving Loans and Swing Line
Loans.
"Maintenance Capital Expenditures" shall mean, as to the
Borrower and its Subsidiaries on a consolidated basis for any period, the
aggregate of all Capital Expenditures for maintenance purposes.
"Material Adverse Effect" and "Material Adverse Change"
shall mean a material adverse effect on, or a material adverse
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change in, (a) the properties, business, operations or financial condition of
the Borrower and its Subsidiaries, taken as a whole, or (b) the ability of the
Borrower, any Guarantor or any of their respective Subsidiaries to perform any
of their respective obligations under this Agreement, the Notes or the other
Loan Documents to which it is a party.
"Material Contract" shall mean each contract (including each
Service Contract) to which the Borrower or any of its Subsidiaries is a party or
a guarantor (or by which it is bound) that requires payments (either to or for
the benefit of, or by or on behalf of, the Borrower or any of its Subsidiaries)
in excess of $3,000,000 in any twelve-month period (a) the cancellation,
non-performance or non-renewal of which by any party thereto would have a
Material Adverse Effect, or (b) pursuant to which the Borrower or any of its
Subsidiaries may incur Indebtedness for borrowed money or Capitalized Lease
Obligations.
"Maturity Date" shall mean September 30, 2002, or such earlier
date to which the maturity of the Obligations may be accelerated pursuant to the
terms of this Agreement.
"Maximum Guaranty Liability" shall mean the maximum liability
hereunder of the respective Guarantors permitted by Applicable Bankruptcy Law as
provided in Section 5.2.
"Moody's" shall mean Moody's Investors Service, Inc.
and its successors.
"Multi-Employer Plan" shall mean any multiple employer plan,
as defined in Section 4001(a)(3) of ERISA, that is maintained by the Borrower,
any Guarantor, any of their respective Subsidiaries or a Commonly Controlled
Entity.
"Notes" shall mean the Revolving Notes and the Swing
Line Note.
"Notice of Borrowing" shall mean a notice substantially in the
form of Exhibit 2.2.4 with respect to a proposed Borrowing of Revolving Loans.
"Notice of Conversion/Continuation" shall mean a notice
substantially in the form of Exhibit 2.7.2 annexed hereto with respect to a
proposed conversion or continuation, pursuant to Section 2.7, of (a) Revolving
Loans bearing interest at a rate determined by reference to one basis, to (b)
Revolving Loans bearing interest at a rate determined by reference to an
alternative basis.
"Obligations" shall mean, as to any Person, all indebtedness,
obligations and other liabilities of such Person of any kind and description
owing to the Administrative Agent, the
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Issuing Bank or the Lenders pursuant to the provisions of this Agreement, the
Notes and the other Loan Documents, howsoever evidenced or acquired, whether now
existing or hereafter arising, due or not due, absolute or contingent,
liquidated or unliquidated, direct or indirect, express or implied, whether owed
individually or jointly with others.
"Operating Lease" shall mean, as to any Person, any lease of
property (whether real, personal or mixed) by such Person as lessee that is not
a Capitalized Lease.
"Original Credit Agreement" shall mean the Credit Agreement
dated May 30, 1997, by and among the Borrower, certain Subsidiaries of the
Borrower, the Lenders, the Issuing Bank and the Administrative Agent, as
heretofore amended, supplemented or otherwise modified.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to subtitle A of Title IV of ERISA.
"Percentage" shall mean, as to each Lender, the percentage set
forth with such Lender's signature on this Agreement or the Assignment and
Acceptance pursuant to which such Lender became a party hereto.
"Permitted Acquisition" shall mean (1) the EMSA Acquisition,
and (2) any Asset Acquisition by the Borrower or any Guarantor with respect to
which:
(a) the Borrower and the Guarantors shall have
complied with applicable provisions of Section 8.2.4,
(b) the Borrower or such Guarantor is the surviving
entity in the transaction,
(c) all assets acquired in the transaction are held or
acquired by the Borrower or such Guarantor,
(d) at the time of such Asset Acquisition and after giving Pro
Forma Effect thereto and to any other Asset Acquisition made during the
then most recent twelve (12) month period, no Default shall have
occurred or be continuing or would result therefrom, and
(e) the aggregate consideration paid or to be paid in
connection with such Asset Acquisition, including all Indebtedness
incurred or assumed and any "earnout" or similar payments payable
during or with respect to the twelve (12) month period following the
date of such Asset Acquisition, but excluding any equity securities of
the Borrower or such Guarantor issued in compliance with
18
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applicable provisions of this Agreement, will not exceed
$10,000,000;
provided, however, that no more than two (2) Asset Acquisitions in any one
Fiscal Quarter shall constitute Permitted Acquisitions unless otherwise agreed
by Requisite Lenders in their discretion.
"Permitted Insurance Subsidiary Investments" shall mean
Investments held by an Insurance Subsidiary consisting of one or more of the
following:
(a) Government Obligations;
(b) commercial paper and other obligations rated at least A-1
by S&P or P-1 by Moody's;
(c) certificates of deposit or time deposits of (i) the
Lenders or (ii) other commercial banks having capital and undivided
surplus of at least $500 million and issuing commercial paper rated as
described in the preceding clause (b) and organized and existing under,
or chartered or otherwise qualified to do business under, the laws of
the United States of America or any State thereof or the District of
Columbia;
(d) other obligations rated higher than A by both S&P and
Moody's;
(e) other obligations rated at least A by both S&P and
Moody's.
Notwithstanding the foregoing, the Investments described only in the preceding
clause (e), shall constitute Permitted Insurance Subsidiary Investments only to
the extent that the aggregate face amount of same do not at any time exceed
one-third (1/3) of the aggregate face amount of all Permitted Insurance
Subsidiary Investments at such time.
"Permitted Non-Guarantor Entity" shall mean a Person other
than a Subsidiary of the Borrower (a) in which the Borrower or any Subsidiary of
the Borrower maintains an Investment and (b) which is engaged solely in the
business of providing managed healthcare services to correctional facilities and
related businesses that enhance or support that primary business activity.
"Permitted Liens" shall mean Liens permitted pursuant to the
provisions of Section 9.2.
"Person" shall mean an individual, corporation, partnership,
limited partnership, limited liability company, limited liability limited
partnership, trust, business trust,
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association, joint stock company, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization, Governmental Authority or other
form of entity not specifically listed herein.
"PHS" shall mean Prison Health Services, Inc., a Delaware
corporation that is a wholly-owned Subsidiary of the Borrower.
"Plan" shall mean an employee pension benefit plan covered by
Title IV of ERISA that is maintained by the Borrower, any Guarantor, any of
their respective Subsidiaries or a Commonly Controlled Entity, and shall include
any Single Employer Plan or any Multi-Employer Plan.
"Pledge Agreement" shall mean the Amended and Restated Pledge
and Security Agreement, substantially in the form of Exhibit 4.1B, by and among
the Borrower, the Guarantors and the Administrative Agent.
"Pledged Notes" shall have the meaning given such term in the
Pledge Agreement.
"Pledged Stock" shall have the meaning given such term in the
Pledge Agreement.
"Pricing Tier Determination Date" shall mean the fifth (5th)
Business Day following each date on which the Borrower has delivered to the
Administrative Agent financial statements, financial reports, certificates and
other financial information complying with the requirements of Section 8.1.1 or
8.1.2 and containing information sufficient to enable a calculation of the
Senior Funded Indebtedness to EBITDA Ratio for the Fiscal Quarter then most
recently ended for the purpose of determining the Applicable Base Rate Margin,
the Applicable LIBOR Margin, the Applicable Letter of Credit Fee Percentage and
the Applicable Commitment Fee Percentage pursuant to Section 2.13.
"Principal Obligor" shall mean, with respect to a specific
indebtedness or obligation, the Person creating, incurring, assuming or
suffering to exist such indebtedness or obligation without becoming liable for
same as a surety or guarantor.
"Pro Forma Effect" shall mean, in making any calculation
hereunder to which such term is applicable, including any calculation necessary
to determine whether the Borrower is in compliance with Sections 10.1.2, 10.1.3
or 10.1.4 or whether a Default would result from any Asset Acquisition, (a) any
Asset Acquisition made during the most recent twelve (12) month period (the
"Reference Period") ending on and including the date of determination (the
"Calculation Date") shall be assumed to have occurred on the first day of the
Reference Period,
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(b) Consolidated Funded Indebtedness, and the application of proceeds therefrom,
incurred or to be incurred in connection with any Asset Acquisition made or to
be made during the Reference Period shall be assumed to have arisen or occurred
on the first day of the Reference Period, (c) there shall be excluded any
Interest Expense in respect of Consolidated Funded Indebtedness outstanding
during the Reference Period that was or is to be refinanced with proceeds of
Indebtedness incurred or to be incurred in connection with any Asset Acquisition
made or to be made during the Reference Period, (d) Interest Expense in respect
of Consolidated Funded Indebtedness bearing a floating rate of interest and
assumed to have been incurred on the first day of the Reference Period shall be
calculated on the basis of the average rate in effect under this Agreement for
Base Rate Loans throughout the period such Consolidated Funded Indebtedness is
assumed to be outstanding, (e) Rent Expense shall include actual Rent Expense
incurred by any Person, operating unit or business acquired during the Reference
Period, plus Rent Expense projected for the twelve (12) month period following
the date of actual incurrence thereof in respect of any Operating Lease entered
into or to be entered into in connection with any Asset Acquisition made during
the Reference Period, which projected Rent Expense shall be deemed to have been
incurred on the first day of the Reference Period, and (f) with respect to the
EMSA Acquisition, one-twelfth (1/12) of the aggregate transition expenses listed
on Schedule 1.1B shall be assumed to have been incurred during each month of the
Reference Period, regardless of when actually incurred.
"Projections" means the financial projections for the Borrower
and its Subsidiaries dated December 18, 1998, as the same may have been modified
or supplemented in a writing delivered to the Administrative Agent, the Lenders
and the Issuing Bank that is expressly identified as a modification of or
supplement to such financial projections.
"Purchase Money Debt" shall mean (a) Indebtedness of the
Borrower or any of its Subsidiaries that, within thirty (30) days of the
purchase of equipment in which neither the Borrower nor any of its Subsidiaries
at any time prior to such purchase had any interest, is incurred to finance part
or all of (but not more than) the purchase price of such equipment, and that
bears interest at a rate per annum that is commercially reasonable at the time,
and (b) Indebtedness that constitutes a renewal, extension or refunding of, but
not an increase in the principal amount of, Purchase Money Debt that is such by
virtue of clause (a), is binding only upon the obligor or obligors under the
Purchase Money Debt being renewed, extended or refunded and bears interest at a
rate per annum that is commercially reasonable at the time.
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"Qualifying Preferred Stock" shall mean preferred stock that
is not, whether through the passage of time or upon the occurrence of any event
or condition or otherwise, redeemable, payable or subject to being required to
be purchased or otherwise retired or extinguished, in whole or in part, (i) at a
fixed or determinable date, whether by operation of a sinking fund or otherwise,
(ii) at the option of any Person other than the issuer, or (iii) upon the
occurrence of a condition not solely within the control of the issuer, such as a
redemption required to be made out of future earnings.
"Rent Expense" shall mean, as to any Person for any period,
the aggregate rent and lease expenses recorded by such Person and its
Subsidiaries on a consolidated basis in conformity with GAAP pursuant to any
Operating Lease.
"Replacement Lender" shall have the meaning given such term in
Section 2.16.
"Reportable Event" shall mean any of the events set forth
under Section 4043(b) of ERISA or the PBGC regulations thereunder.
"Requirement of Law" shall mean, as to any Person (a) the
partnership agreement, charter, certificate of incorporation, articles of
incorporation, bylaws, articles of organization, operating agreement or other
organizational or governing documents of such Person; (b) any federal, state or
local law, treaty, ordinance, rule or regulation; (c) any order, decree or
determination of a court, arbitrator or other Governmental Authority, in each
case applicable to or binding upon such Person or any of its property or to
which such person or any of its property is subject.
"Requisite Lenders" shall mean at any time Lenders having at
least sixty-seven percent (67%) of the Commitments.
"Responsible Officer" shall mean, as to any Person, either (a)
its president or chief executive officer, or (b) with respect to financial
matters, its president, chief executive officer, chief financial officer or any
vice president designated in writing by the chief executive officer to the
Administrative Agent.
"Restricted Payments" shall mean, as to any Person for
any period:
(a) dividends, other distributions and other payments or
deliveries of property on account of the capital stock of or other
ownership interests in, or any warrants, options or other rights in
respect of any capital stock of or other ownership interests in, such
Person or its Subsidiaries, now
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or hereafter outstanding, that are recorded by such Person and its
Subsidiaries on a consolidated basis (excluding (1) any such dividends,
distributions and other payments made solely to such Person or a
wholly-owned Subsidiary of such Person by a Subsidiary of such Person,
(2) adjustments in the exercise price of the Warrants made in
accordance with the terms of the Warrants, and (3) adjustments in the
conversion price of the Convertible Preferred Stock made in accordance
with the terms of the Certificate of Designation.
(b) amounts paid to purchase, redeem, retire or otherwise
acquire for value any of the capital stock of or other ownership
interests in, or any warrants, options or other rights in respect of
the capital stock of or other ownership interests in, such Person or
its Subsidiaries, now or hereafter outstanding (excluding any such
amounts paid solely to such Person or a wholly-owned Subsidiary of such
Person by a Subsidiary of such Person),
(c) any assets segregated or set apart by such Person or any
of its Subsidiaries (including any money or property deposited with a
trustee or other paying agent) for a sinking or analogous fund for the
purchase, redemption or retirement or other acquisition of any capital
stock of or other ownership interests in, or any warrants, options or
other rights in respect of any capital stock of or other ownership
interests in, such Person or its Subsidiaries, now or hereafter
outstanding (excluding any assets so segregated or set apart with
respect to any stock, warrants, options or other rights held by a
wholly-owned Subsidiary of such Person),
(d) payments made or required to be made by such Person with
respect to any stock appreciation rights plan, equity incentive or
achievement plan or any similar plan and any assets segregated or set
apart for such purposes (including any money or property deposited with
a trustee or other paying agent), and
(e) any payment, purchase, redemption or acquisition of
Subordinated Indebtedness and any assets segregated or set apart for
such purposes (including any money or property deposited with a trustee
or other paying agent), excluding, however, (1) regularly scheduled
payments of interest made according to the stated terms of such
Subordinated Indebtedness (which, with respect to the Bridge Notes,
shall include additional interest payable as provided in subsection
8.3(b) of the Securities Purchase Agreement), and (2) Gross-Up Payments
(as defined in the Securities Purchase Agreement) made to holders of
Bridge Notes pursuant to Section 6.15 of the Securities Purchase
Agreement;
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all as determined in conformity with GAAP.
"Revolving Credit Commitments" shall mean, at any time, the
commitment of all the Lenders, collectively, to make Revolving Loans to the
Borrower during the Commitment Period pursuant to the provisions of Section 2.2,
and the "Revolving Credit Commitment" of any Lender at any time shall mean an
amount equal to such Lender's Percentage multiplied by the then effective
aggregate Revolving Credit Commitments. The Revolving Credit Commitments are in
the aggregate amount set forth in Section 2.1.
"Revolving Credit Facility" shall mean the revolving credit
facility provided by the Lenders pursuant to the Revolving Credit Commitments as
more particularly set forth in Section 2.2.1.
"Revolving Loans" shall mean the loans made by the Lenders to
the Borrower pursuant to the provisions of Section 2.2.1.
"Revolving Notes" shall mean the promissory notes, in
substantially the form of Exhibit 2.8A, executed by the Borrower in favor of the
Lenders, evidencing the indebtedness of the Borrower to the Lenders in
connection with the Revolving Loans.
"S&P" shall mean Standard & Poor's Corporation and its
successors.
"Scheduled Commitment Reduction Date" shall mean each date on
which the aggregate Commitments automatically reduce in accordance with Section
2.1.2.
"Securities Purchase Agreement" shall mean the Securities
Purchase Agreement dated January 26, 1999, by and among the Borrower, Health
Care Capital Partners, L.P., a Delaware limited partnership, and Health Care
Executive Partners, L.P., a Delaware limited partnership.
"Security Agreement" shall mean the Amended and Restated
Security Agreement, substantially in the form of Exhibit 4.1A, by and among the
Borrower, the Guarantors and the Administrative Agent.
"Security Documents" shall mean the Security Agreement, the
Pledge Agreement, the Assignment and Security Agreement and the Financing
Statements, together with all documents, instruments and agreements now or
hereafter executed or delivered pursuant thereto or in connection therewith.
"Senior Funded Indebtedness to EBITDA Ratio" shall
mean, for the Borrower and its Subsidiaries on a consolidated
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basis, calculated for the most recent twelve (12) month period after giving Pro
Forma Effect to any Asset Acquisition made during such period, the ratio of
Adjusted Consolidated Senior Funded Indebtedness to EBITDA.
"Service Contracts" shall mean contracts of the Borrower or a
Subsidiary of the Borrower with a Governmental Authority pursuant to which the
Borrower or such Subsidiary provides health care services to jailed or
imprisoned persons incarcerated pursuant to the authority of such Governmental
Authority or a related Governmental Authority.
"Single Employer Plan" shall mean any Plan that is not
a Multi-Employer Plan.
"Solvent" shall mean, with respect to any Person on any
particular date, that on such date (a) the fair value of the assets of such
Person (both at fair valuation and at present fair saleable value) is, on the
date of determination, greater than the total amount of liabilities, including
contingent and unliquidated liabilities, of such Person, (b) such Person is able
to pay all liabilities of such Person as they mature, and (c) such Person does
not have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that can be
reasonably expected to become an actual or matured liability.
"Statutory Reserves" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves), expressed
as a decimal, established by the Federal Reserve Board and/or any other banking
authority to which any Lender or any member bank of the Federal Reserve System
is subject with respect to LIBOR, for Eurocurrency Liabilities (as defined in
Regulation D of the Federal Reserve Board). Such reserve percentages shall
include those imposed under such Regulation D. LIBOR Loans shall be deemed to
constitute Eurocurrency Liabilities and as such shall be deemed to be subject to
such reserve requirements without benefit of or credit for proration, exceptions
or offsets that may be available from time to time to the Lenders under such
Regulation D. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
"Subordinated Indebtedness" shall mean, for the Borrower and
its Subsidiaries on a consolidated basis, (1) the Indebtedness of the Borrower
evidenced by the Bridge Notes, and (2) all other Indebtedness subordinated in
right of payment to
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the Obligations on terms satisfactory to the Administrative
Agent.
"Subsidiary" shall mean, as to any Person (a) a corporation,
limited liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock having such
power only by reason of the occurrence of a contingency) to elect a majority of
the board of directors or other managers thereof are at the time owned, or the
management of which is otherwise controlled, directly or indirectly, through one
or more intermediaries, or both, by such Person, or (b) a partnership in which
such Person is a general partner or the management of which is otherwise
controlled, directly or indirectly, through one or more intermediaries or both,
by such Person.
"Swing Line Commitment" shall mean the commitment of the Swing
Line Lender to make Swing Line Loans pursuant to Section 2.2.6.
"Swing Line Facility" shall mean the swing line credit
facility provided by the Swing Line Lender pursuant to the Swing Line Commitment
as more particularly set forth in Section 2.2.6.
"Swing Line Lender" shall mean NationsBank and any other
financial institution that, subject to approval by the Administrative Agent and
the Borrower, agrees to become a party to this Agreement and to make Swing Line
Loans pursuant to Section 2.2.6. As used herein and in the other Loan Documents,
"Lender" shall include the Swing Line Lender except to the extent that the
context requires otherwise.
"Swing Line Loans" shall mean the loans made by the Swing Line
Lender pursuant to Section 2.2.6.
"Swing Line Note" shall mean the promissory note, in
substantially the form of Exhibit 2.8B, executed by the Borrower in favor of the
Swing Line Lender, evidencing the indebtedness of the Borrower to the Swing Line
Lender in connection with the Swing Line Loans.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of Tennessee or any other applicable jurisdiction, as the context may
require.
"Unused Working Capital Sublimit" shall mean, at any time, an
amount equal to the difference (if such difference is a positive number) between
the Working Capital Sublimit and the sum of (1) the aggregate principal amount
of Loans outstanding at such time that were made for purposes other than the
financing or refinancing of Asset Acquisitions, and (2) the aggregate Letter of
Credit Liabilities outstanding at such time.
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"Warrants" shall mean the detachable warrants to purchase
shares of the common stock of the Borrower being issued by the Borrower in
conjunction with the issuance by the Borrower of the Bridge Notes, all as more
particularly set forth in the Securities Purchase Agreement.
"Working Capital Sublimit" shall mean $10,000,000.
"Year 2000 Compliant" shall mean a condition or state of
affairs such that computers, computer systems, computer programs and software,
computer applications, imbedded microchips and other systems are and will be
able to perform and process date-sensitive functions and operations (including
input, output, comparisons (branching) and arithmetic calculations) accurately
prior to, on and after December 31, 1999, or, to the extent that the same are
unable or fail to perform and process such functions and operations accurately,
there are in place alternative or back-up systems or procedures such that any
such inability or failure will not have a Material Adverse Effect.
1.2. Accounting and Commercial Terms. As used in this Agreement, all
accounting terms used but not otherwise defined herein shall have the respective
meanings assigned to them in conformity with GAAP. All terms used but not
otherwise defined herein that are defined or used in Article 9 of the UCC shall
have the respective meanings assigned to them in such Article.
1.3. General Construction. As used in this Agreement, the masculine,
feminine and neuter genders and the plural and singular numbers shall be deemed
to include the others in all cases in which they would so apply. "Includes" and
"including" are not limiting, and shall be deemed to be followed by "without
limitation" regardless of whether such words or words of like import in fact
follow same. The word "or" is not intended and shall not be construed to be
exclusive.
1.4. Defined Terms; Headings. The use of defined terms in the Loan
Documents is for convenience of reference and the specific words used as defined
terms shall not be deemed to be limiting or to have any other substantive effect
with respect to the persons or things to which reference is made through the use
of such defined terms. Article and section headings and captions in the Loan
Documents are included in such Loan Documents for convenience of reference and
shall not constitute a part of the applicable Loan Documents for any other
purpose.
1.5. References to this Agreement and Parts Thereof. As used in this
Agreement, unless otherwise specified the words "hereof," "herein" and
"hereunder" and words of similar import shall refer to this Agreement including
all schedules and exhibits hereto, as a whole, and not to any particular
provision of this Agreement, and the words "Article", "Section", "Schedule"
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and "Exhibit" refer to articles, sections, schedules and exhibits
of or to this Agreement.
1.6. Documentary References. Any reference herein to any instrument,
document or agreement, by whatever terminology used, shall be deemed to include
any and all amendments, modifications, supplements, extensions, renewals,
substitutions and/or replacements thereof as the context may require.
Notwithstanding the foregoing, as used herein "Bridge Notes", "Certificate of
Designation", "Convertible Preferred Stock", "Securities Purchase Agreement" and
"Warrants" shall mean and refer only to such instruments as in effect on the
date of this Agreement, together with any amendments thereto or modifications
thereof that have been approved in writing by Requisite Lenders.
1.7. Legal References. Any reference herein to any law shall be a
reference to such law as in effect from time to time and shall include any rules
and regulations promulgated or published thereunder and published
interpretations thereof.
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1. Commitments.
2.1.1. Amounts of Commitments.
(a) The aggregate amount of the Commitments shall be
$52,000,000, subject to reduction as provided in Sections 2.1.2 and
2.1.3.
(b) The aggregate amount of the Revolving Credit Commitments
at any time is equal to the aggregate amount of the Commitments in
effect at such time less the aggregate amount of Letter of Credit
Liabilities outstanding at such time.
(c) The aggregate amount of the Letter of Credit Commitments
at any time is equal to the aggregate amount of the Commitments in
effect at such time less the aggregate amount of Loans outstanding at
such time.
2.1.2. Mandatory Reductions of Commitments. The Commitments
shall be permanently reduced on each Scheduled Commitment Reduction Date set
forth below by the correlative amount shown below:
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<TABLE>
<CAPTION>
Scheduled Commitment Reduction Remaining
Reduction Date Amount Commitments
- -------------------- ----------- -------------
<S> <C> <C>
July 1, 1999 $ 6,000,000 $ 46,000,000
January 1, 2000 6,000,000 40,000,000
January 1, 2001 7,000,000 33,000,000
January 1, 2002 8,000,000 25,000,000
Maturity Date 25,000,000 -0-
</TABLE>
provided, however, that, on the effective date of any voluntary reduction in the
Commitments pursuant to Section 2.1.3, the amount of the scheduled reduction on
the first Scheduled Commitment Reduction Date following the date of such
voluntary reduction shall be reduced by the amount of such voluntary reduction
and to the extent that the amount of such voluntary reduction exceeds the amount
of such scheduled reduction, the excess shall be applied to the reduction of the
amount of the scheduled reduction on the next succeeding Scheduled Commitment
Reduction Date and each Scheduled Commitment Reduction Date thereafter until
applied in full.
2.1.3. Voluntary Reductions of Commitments. The Borrower
shall have the right, at any time and from time to time, to terminate in whole
or permanently reduce in part, without premium or penalty, the Commitments in an
amount up to the amount by which the Commitments exceed the aggregate amount of
the then outstanding Loans and Letter of Credit Liabilities. The Borrower shall
give not less than ten (10) Business Days' prior written notice to the
Administrative Agent designating the date (which shall be a Business Day) of
such termination or reduction and the amount of any reduction. Promptly after
receipt of a notice of such termination or reduction, the Administrative Agent
shall notify each Lender of the proposed termination or reduction. Such
termination or reduction of the Commitments shall be effective on the date
specified in the Borrower's notice and shall reduce the Commitment of each
Lender in proportion to its Percentage of the Commitments. Any such reduction of
the Commitments shall be in a minimum amount of $1,000,000 and in integral
multiples of $1,000,000.
2.2. Loans.
2.2.1. Commitment to Make Revolving Loans. Subject to all of
the terms and conditions of this Agreement (including the conditions set forth
in Sections 6.1 and 6.2) and in reliance upon the representations and warranties
of the Borrower herein set forth, each Lender hereby severally agrees to make
Revolving Loans to the Borrower from time to time during the Commitment Period,
for the purposes identified in Section 2.10; provided, however, that in no event
shall:
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(a) the aggregate principal amount of Revolving Loans made
by any Lender outstanding at any time exceed such Lender's Revolving
Credit Commitment,
(b) the aggregate principal amount of Loans outstanding at
any time exceed the Revolving Credit Commitments, or
(c) the aggregate principal amount of Loans outstanding at
any time that were made for purposes other than the financing or
refinancing of Asset Acquisitions exceed an amount equal to the
difference (if such difference is a positive number) between the
Working Capital Sublimit and the aggregate Letter of Credit Liabilities
outstanding at such time.
Each Lender's Revolving Credit Commitment shall expire on the Commitment Period
Expiration Date, and all Revolving Loans shall be paid in full no later than the
Maturity Date.
2.2.2. Lenders' Obligations Several; Proportionate Loans.
The obligations of the Lenders to make Revolving Loans under Section 2.2.1 shall
be several and not joint and, subject to Section 2.14.4, all Revolving Loans
under this Agreement shall be made by the Lenders simultaneously and
proportionately to their respective Percentages of the Revolving Credit
Commitments. It is understood and agreed that the failure of any Lender to make
its Revolving Loan as part of any Borrowing under Section 2.2.1 shall not
relieve any other Lender of its obligation to make its Revolving Loan as
provided in Section 2.2.1. Neither the Administrative Agent nor any Lender shall
be responsible for the failure of any other Lender to make a Revolving Loan as
provided herein nor shall the Revolving Credit Commitment of any Lender be
increased as a result of the default by any other Lender in such other Lender's
obligation to make Revolving Loans hereunder.
2.2.3. Revolving Credit; Minimum Borrowings. Amounts
borrowed by the Borrower under the Revolving Credit Commitments may be prepaid
and reborrowed from time to time to during the Commitment Period. The aggregate
amount of Revolving Loans made on any Funding Date shall be in integral
multiples of $100,000.
2.2.4. Notice of Borrowing.
(a) Delivery of Notice. Whenever the Borrower desires to
borrow under Section 2.2.1, it shall deliver to the Administrative
Agent a Notice of Borrowing no later than 11:00 a.m. (Central time) at
least one (1) Business Day in advance of the proposed Funding Date (in
the case of Base Rate Loans) or three (3) Business Days in advance of
the proposed Funding Date (in the case of LIBOR Loans). The
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Notice of Borrowing shall specify (i) the proposed Funding Date (which
shall be a Business Day), (ii) the amount of the proposed Borrowing,
(iii) whether the proposed Borrowing shall be in the form of Base Rate
Loans or LIBOR Loans, (iv) in the case of LIBOR Loans, the requested
Interest Period, and (v) the purposes for which the proceeds of the
proposed Borrowing will be used. In lieu of delivering a Notice of
Borrowing, the Borrower may give the Administrative Agent telephonic
notice by the required time of notice of any proposed Borrowing under
this Section 2.2.4; provided, however, that such notice shall be
promptly confirmed in writing by delivery of a Notice of Borrowing to
the Administrative Agent on or prior to the Funding Date of the
requested Revolving Loans. The execution and delivery of each Notice of
Borrowing shall be deemed a representation and warranty by the Borrower
that the requested Revolving Loans may be made in accordance with, and
will not violate the requirements of, this Agreement, including those
set forth in Section 2.2.1.
(b) No Liability for Telephonic Notices. Neither the
Administrative Agent nor any Lender shall incur any liability to the
Borrower in acting upon any telephonic notice given pursuant to this
Section 2.2.4 that the Administrative Agent believes in good faith to
have been given by a duly authorized officer or other person authorized
to borrow on behalf of the Borrower or for otherwise acting in good
faith under this Section 2.2.4 and, upon the funding of Revolving Loans
by the Lenders in accordance with this Agreement pursuant to any
telephonic notice, the Borrower shall have effected a Borrowing of
Revolving Loans hereunder.
(c) Notice Irrevocable. A Notice of Borrowing for LIBOR
Loans (or a telephonic notice in lieu thereof) shall be irrevocable on
and after the related Interest Rate Determination Date, and the
Borrower shall be bound to make a Borrowing in accordance therewith.
2.2.5. Disbursement of Funds. Promptly after receipt of a
Notice of Borrowing (or telephonic notice in lieu thereof), the Administrative
Agent shall notify each Lender of the proposed Borrowing in writing, or by
telephone promptly confirmed in writing. Each Lender shall make the amount of
its Revolving Loan available to the Administrative Agent, in immediately
available funds, at the Lending Office of the Administrative Agent, not later
than 11:00 a.m. (Central time) on the Funding Date. The Administrative Agent
shall make the proceeds of such Revolving Loans available to the Borrower on
such Funding Date by causing an amount of immediately available funds equal to
the proceeds of all such Revolving Loans received by the Administrative Agent to
be credited to the account of the Borrower at such office of the
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<PAGE> 33
Administrative Agent or, if so directed by the Borrower in writing, the
Administrative Agent shall disburse the proceeds of such Revolving Loans
pursuant to such directions on such Funding Date or as soon thereafter as is
reasonably practicable.
2.2.6. Swing Line Loans.
(a) Commitment to Make Swing Line Loans. Subject to all of
the terms and conditions of this Agreement (including the conditions
set forth in Sections 6.1 and 6.2 and the limitations set forth in
Section 2.2.1), and in reliance upon the representations and warranties
of the Borrower herein set forth and the agreements of the other
Lenders set forth in subsections (c) and (d) of this Section 2.2.6, the
Swing Line Lender hereby agrees to make Swing Line Loans to the
Borrower from time to time during the Commitment Period, in an
aggregate principal amount not to exceed $5,000,000 outstanding at any
time, for the purposes identified in Section 2.10. Amounts borrowed by
the Borrower under the Swing Line Commitment may be prepaid and
reborrowed from time to time during the Commitment Period. The Swing
Line Lender's commitment to make Swing Line Loans as provided in this
subsection 2.2.6(a) shall expire on the Commitment Period Expiration
Date, and all Swing Line Loans shall be paid in full no later than the
Maturity Date.
(b) Funding Procedures for Swing Line Loans. Except to the
extent that funding of Swing Line Loans is being administered through
an automated cash management system mutually approved in writing by the
Borrower and the Swing Line Lender, the Borrower shall give to the
Swing Line Lender written notice (or oral notice to be confirmed
promptly in writing) of a proposed Swing Line Loan Borrowing,
specifying the amount of the requested Swing Line Loan, not later than
11:00 a.m., Central time, on the Business Day of the proposed
Borrowing. Each request for a Swing Line Loan shall be deemed a
representation and warranty by the Borrower that the requested Swing
Line Loan may be made in accordance with, and will not violate the
requirements of, this Agreement, including those set forth in
subsection 2.2.6(a). Not later than 2:00 p.m., Central time, on the
Business Day of the proposed Swing Line Loan Borrowing, the Swing Line
Lender shall make the proceeds of the requested Swing Line Loan
available to the Borrower at the office of the Swing Line Lender by
crediting an account of the Borrower maintained at such office.
(c) Repayment of Swing Line Loans With Revolving Loans.
Regardless of whether the conditions set forth in Sections 6.1 and 6.2
have been or are capable of being satisfied, on any Business Day the
Swing Line Lender may, in its sole discretion, give notice to the
Lenders that some
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<PAGE> 34
part or all of the outstanding Swing Line Loans are to be repaid on the
next succeeding Business Day with a Borrowing of Revolving Loans
constituting Base Rate Loans made pursuant to Section 2.2.1 in the same
manner and with the same force and effect as if the Borrower had
submitted a Notice of Borrowing therefor pursuant to Section 2.2.4.
Subject to and in accordance with Sections 2.2.1 and 2.2.2, each Lender
shall make the amount of its Revolving Loan available to the
Administrative Agent, in immediately available funds, at the Lending
Office of the Administrative Agent, not later than 11:00 a.m. (Central
time) on the applicable Funding Date. The Administrative Agent shall
make the proceeds of such Revolving Loans available to the Swing Line
Lender on such Funding Date by causing an amount of immediately
available funds equal to the proceeds of all such Revolving Loans
received by the Administrative Agent to be credited to an account of
the Swing Line Lender at such office of the Administrative Agent, or
shall make such proceeds available to the Swing Line Lender in such
other manner as shall be satisfactory to the Administrative Agent and
the Swing Line Lender.
(d) Participations in Swing Line Loans. If for any reason a
requested Borrowing of Revolving Loans pursuant to subsection 2.2.6(c)
is not or cannot be effected, the Lenders will immediately purchase
from the Swing Line Lender, as of the date such proposed Borrowing
otherwise would have occurred but adjusted for any payments received in
respect of such Swing Line Loan(s) by or for the account of the
Borrower on or after such date but prior to such purchase, such
participations in the outstanding Swing Line Loans as shall be
necessary to cause the Lenders to share in such Swing Line Loan(s)
proportionately in accordance with their respective Percentages of the
Revolving Credit Commitments. Whenever, at any time after any Lender
has purchased a participating interest in a Swing Line Loan, the Swing
Line Lender receives any payment on account thereof, the Swing Line
Lender will distribute to such Lender its proportionate share of such
amount (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Lender's participating
interest was outstanding and funded); provided, however, that in the
event any such payment received by the Swing Line Lender is
subsequently set aside or is required to be refunded, returned or
repaid, such Lender will repay to the Swing Line Lender its
proportionate share thereof.
(e) Failure to Pay by Lenders. If any Lender shall fail to
perform its obligation to make a Revolving Loan pursuant to subsection
2.2.6(c) or to purchase a participation in Swing Line Loans pursuant to
subsection 2.2.6(d), the amount in default shall bear
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<PAGE> 35
interest for each day from the day such amount is payable until fully
paid at a rate per annum equal to the Federal Funds Rate or any other
rate customarily used by banks for the correction of errors among
banks, but in no event to exceed the Highest Lawful Rate, and such
obligation may be satisfied by application by the Administrative Agent
(for the account of the Swing Line Lender) of any payment that such
Lender otherwise is entitled to receive under this Agreement. Pending
repayment, each such advance shall be secured by such Lender's
participation interest, if any, in the Swing Line Loans and any
security therefor, and the Swing Line Lender shall be subrogated to
such Lender's rights hereunder in respect thereof.
(f) Lenders' Obligations Absolute. The obligation of each
Lender to make Revolving Loans pursuant to subsection 2.2.6(c) and to
purchase participations in Swing Line Loans pursuant to subsection
2.2.6(d) shall be unconditional and irrevocable, shall not be subject
to any qualification or exception whatsoever, shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances and shall be binding in accordance with the terms and
conditions of this Agreement under all circumstances, including the
following circumstances:
(1) any lack of validity or enforceability of this
Agreement, any of the other Loan Documents or any other
instrument, document or agreement relating to the
transactions that are the subject thereof;
(2) the existence of any claim, set-off, defense or
other right that the Borrower, any Guarantor or any Lender
may have at any time against the Administrative Agent, the
Swing Line Lender, any other Lender or any other Person,
whether in connection with this Agreement, the transactions
contemplated herein or any related transactions;
(3) the surrender or impairment of any security for
the performance or observance of any of the terms of this
Agreement;
(4) the occurrence or continuance of any Default;
(5) any adverse change in the condition (financial or
other) of the Borrower or any Guarantor; or
(5) any other reason.
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<PAGE> 36
2.3. Letters of Credit.
2.3.1. Issuance of Letters of Credit.
(a) The Borrower may request the Issuing Bank at any time
and from time to time prior to September 30, 2000, and subject to and
upon all of the terms and conditions of this Agreement (including the
conditions set forth in Sections 6.1 and 6.2) and in reliance upon the
representations and warranties of the Borrower herein set forth the
Issuing Bank shall issue, for the account of the Borrower and for the
benefit of the holder(s) (or any trustee, agent or other representative
of such holder(s)) of Letter of Credit Supportable Obligations of the
Borrower and its Subsidiaries, one or more irrevocable standby letters
of credit in the form customarily used by such Issuing Bank, or in such
other form as has been approved by the Issuing Bank and the
Administrative Agent, in support of such Letter of Credit Supportable
Obligations; provided, however, that:
(1) each Letter of Credit shall be in a minimum
stated amount of $50,000,
(2) each Letter of Credit by its terms shall
terminate no later than three hundred sixty-six (366) days
after the date of issuance (or the date of the most recent
extension, as the case may be), nor later than fifteen (15)
days prior to the Maturity Date,
(3) in no event shall any Letter of Credit be issued
if the issuance thereof would cause the aggregate amount of
the then outstanding Letter of Credit Liabilities to exceed
(A) the aggregate amount of the Letter of Credit
Commitments, or (B) an amount equal to the difference
between the Working Capital Sublimit and the aggregate
principal amount of the Loans outstanding at such time that
were made for purposes other than the financing or
refinancing of Asset Acquisitions, and
(4) the Issuing Bank shall not issue any Letter of
Credit relating to a new Service Contract that individually
will represent more than $25 million in annual revenue for
the Borrower and its Subsidiaries unless such Letter of
Credit is specifically approved by Requisite Lenders, in
their discretion.
(b) The Borrower may request the Issuing Bank at any time
and from time to time prior to September 30, 2001 to extend, and
subject to and upon all of the terms and conditions of this Agreement
(including the conditions set forth in Sections 6.1 and 6.2) and in
reliance upon the
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<PAGE> 37
representations and warranties of the Borrower herein set forth the
Issuing Bank shall extend, the expiration date of a Letter of Credit
outstanding on the Commitment Period Expiration Date; provided,
however, that each such extension shall be subject to all applicable
limitations and other provisions set forth in paragraph (a) of this
Section 2.3.1.
2.3.2. Letter of Credit Requests. At least five (5) Business
Days prior to (i) the date on which the Borrower desires that a Letter of Credit
be issued hereunder or (ii) the date on which the Borrower desires that the
expiration date of an outstanding Letter of Credit be extended, as the case may
be, the Borrower shall deliver to the Issuing Bank (with copies to the
Administrative Agent and each Lender) a Letter of Credit Request therefor. The
execution and delivery of each Letter of Credit Request shall be deemed a
representation and warranty by the Borrower that the requested Letter of Credit
issuance or extension may be accomplished in accordance with, and will not
violate the requirements of, this Agreement, including those set forth in
Section 2.3.1. Unless the Issuing Bank has received notice from the
Administrative Agent or Requisite Lenders before it issues or extends the
requested Letter of Credit that a Default exists or that the requested issuance
or extension would violate the requirements of this Agreement, including those
set forth in Section 2.3.1, then the Issuing Bank may issue or extend, as the
case may be, the requested Letter of Credit for the account of the Borrower in
accordance with the Issuing Bank's usual and customary practices. Upon the
issuance or extension of any Letter of Credit, the Issuing Bank shall promptly
notify the Administrative Agent and each Lender of such issuance or extension,
which notice to the Administrative Agent shall be accompanied by a copy of the
Letter of Credit so issued or the instrument(s) evidencing such extension.
2.4. Participations in Letter of Credit Liabilities.
2.4.1. Purchase of Participations by Lenders. Each
Lender shall be deemed to have irrevocably and unconditionally purchased and
received from the Issuing Bank, without recourse or warranty and without any
further action on the part of any party, an undivided interest and participation
to the extent of such Lender's Percentage in all Letter of Credit Liabilities as
to each Letter of Credit and any security therefor or guarantee relating
thereto.
2.4.2. Notification by Issuing Bank of Drawing. The Issuing
Bank shall notify the Administrative Agent and each Lender promptly after the
presentation of any draft and certificate or equivalent documents to the Issuing
Bank in connection with any drawing under a Letter of Credit not reimbursed by
or on behalf of the Borrower on the date such drawing is made.
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<PAGE> 38
2.4.3. Payments by Lenders Upon a Drawing or Payment Under a
Letter of Credit; Adjustments. Each of the Lenders, shall, on or before 11:00
a.m. (Central time) on the date of any drawing under a Letter of Credit,
unconditionally pay to the Administrative Agent, for distribution by the
Administrative Agent to the Issuing Bank, such Lender's Percentage of such
drawing; provided, however, that, if the Borrower should pay in full or in part
such drawing on the date thereof, the obligation of each Lender to pay to the
Issuing Bank pursuant to this Section 2.4.3 such Lender's Percentage of such
drawing shall be reduced by the amount equal to such Lender's Percentage of such
payment by the Borrower. Amounts paid in excess of the net amount so owed by
each Lender to the Issuing Bank shall promptly be refunded by the Issuing Bank
to the Administrative Agent for distribution by the Administrative Agent to the
respective Lenders.
2.4.4. Failure to Pay by Lenders. If any Lender shall fail
to pay its Percentage of any drawing under a Letter of Credit as provided in
Section 2.4.3 above, the Issuing Bank shall be deemed to have advanced funds on
behalf of such Lender. Any advance made by the Issuing Bank on behalf of a
Lender hereunder and not paid by such Lender to the Issuing Bank shall bear
interest for each day from the day such payment is due until such payment shall
be paid in full at a rate per annum equal to the Federal Funds Rate or any other
rate customarily used by banks for the correction of errors among banks, but in
no event to exceed the Highest Lawful Rate, and shall be repaid by application
by the Administrative Agent (for the account of the Issuing Bank) of any payment
that such Lender otherwise is entitled to receive under this Agreement. Pending
repayment, each such advance shall be secured by such Lender's participation
interest in the Letter of Credit drawn upon, the Letter of Credit Liabilities
arising therefrom and any security therefor, and the Issuing Bank shall be
subrogated to such Lender's rights hereunder in respect thereof.
2.4.5. Lenders' Obligations Absolute. The obligation of each
Lender to pay to the Administrative Agent, for the benefit of the Issuing Bank,
its Percentage of each drawing under a Letter of Credit not indefeasibly repaid
by the Borrower shall be unconditional and irrevocable, shall not be subject to
any qualification or exception whatsoever, shall be made in accordance with the
terms and conditions of this Agreement under all circumstances and shall be
binding in accordance with the terms and conditions of this Agreement under all
circumstances, including the following circumstances:
(a) any lack of validity or enforceability of this
Agreement, any of the other Loan Documents or any other instrument,
document or agreement relating to the transactions that are the subject
thereof;
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<PAGE> 39
(b) the existence of any claim, set-off, defense or other
right that the Borrower, any Guarantor or any Lender may have at any
time against the Administrative Agent, the Issuing Bank, any Lender or
any other Person, whether in connection with this Agreement or the
transactions contemplated herein or any related transactions;
(c) any draft, statement or other document presented under
or in connection with any Letter of Credit, this Agreement or any other
Loan Document proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in
any respect;
(d) the surrender or impairment of any security for
the performance or observance of any of the terms of this
Agreement;
(e) the occurrence or continuance of any Default;
(f) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not comply
with the terms of the Letter of Credit, except for any such payment
resulting from the Issuing Bank's gross negligence or willful
misconduct; or
(g) any other reason.
2.4.6. Information Regarding Letter of Credit Liabilities.
Upon request by the Administrative Agent from time to time, the Issuing Bank
shall advise the Administrative Agent and the Lenders as to the various amounts
of the outstanding Letter of Credit Liabilities as shown on the records of the
Issuing Bank.
2.5. Borrower's Obligations Absolute.
2.5.1. Obligations Absolute. The obligations of the Borrower
under this Agreement in respect of any Letter of Credit and under any other
agreement or instrument relating to any Letter of Credit shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and such other agreement or instrument under all circumstances, to the
extent permitted by law, including the following circumstances:
(a) any lack of validity or enforceability of this
Agreement, any of the other Loan Documents or any other instrument,
document or agreement relating to the transactions that are the subject
thereof;
(b) any change in the time, manner or place of payment of,
or in any other term of, all or any of the
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<PAGE> 40
obligations of the Borrower in respect of the Letters of
Credit or any other amendment or waiver of or any consent to
departure from all or any of the Loan Documents;
(c) any exchange or release of, or the non-perfection of any
Lien on any Collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the Letter of
Credit Obligations;
(d) the existence of any claim, set-off, defense or other
right that the Borrower or any Guarantor may have at any time against
any beneficiary or any transferee of a Letter of Credit (or any Persons
for whom any such beneficiary or transferee may be acting), any of the
Lenders, the Issuing Bank, the Administrative Agent or any other
Person, whether in connection with this Agreement, any of the other
Loan Documents or the transactions contemplated hereby or thereby or
any unrelated transaction;
(e) any draft, statement or other document presented under
or in connection with any Letter of Credit, this Agreement or any other
Loan Document proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in
any respect;
(f) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not comply
with the terms of the Letter of Credit, except for any such payment
resulting from the Issuing Bank's gross negligence or willful
misconduct;
(g) any consequences arising from causes beyond the control
of the Issuing Bank; and
(h) any other circumstances or happening whatsoever,
regardless of whether similar to any of the foregoing, that might
otherwise constitute a defense available to, or a discharge of, the
Borrower or any Guarantor.
2.5.2. No Liability. No action taken or omitted by the
Issuing Bank under or in connection with the Letters of Credit or the related
applications, agreements or certificates, if taken or omitted in good faith,
shall put the Administrative Agent, the Issuing Bank or any Lender under any
resulting liability to the Borrower.
2.6. Interest.
2.6.1. Interest Rate on Loans. Subject to Section 2.6.3, the
unpaid principal balances of the Loans shall bear interest from their respective
Funding Dates through maturity (whether by acceleration or otherwise) (including
post-
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<PAGE> 41
petition interest in any proceeding under applicable bankruptcy laws) at a
rate determined by reference to the Base Rate or LIBOR. The applicable basis for
determining the rate of interest for Revolving Loans shall be selected by the
Borrower at the time a Notice of Borrowing is given pursuant to Section 2.2.4 or
at the time a Notice of Conversion/Continuation is given pursuant to Section
2.7.2. If on any day any Revolving Loan is outstanding with respect to which
notice has not been delivered to the Administrative Agent in accordance with the
terms of this Agreement specifying the basis for determining the rate of
interest, then for that day such Revolving Loan shall bear interest determined
by reference to the Base Rate. The Loans shall bear interest as follows:
(a) if a Swing Line Loan or a Base Rate Loan, then at a
fluctuating rate per annum equal to the sum of the Base Rate, as it
varies from time to time, plus the Applicable Base Rate Margin; or
(b) if a LIBOR Loan, then at a rate per annum equal to the
sum of LIBOR plus the Applicable LIBOR Margin.
2.6.2. Interest Rate on Unreimbursed Draws Under
Letters of Credit. The unpaid principal amount of all draws under Letters of
Credit not immediately repaid pursuant to Section 3.2 shall bear interest from
the date of such drawing until the principal balance thereof is paid in full at
the Default Rate applicable to Base Rate Loans. Interest accruing pursuant to
this Section 2.6.2 shall be payable upon demand.
2.6.3. Default Rate. Upon the occurrence and during the
continuance of an Event of Default, the unpaid principal balances of the Loans
and, to the extent permitted by applicable law, any unpaid interest accrued in
respect of the Loans shall bear interest at the Default Rate; provided, however,
that in the case of LIBOR Loans, upon the expiration of the Interest Period in
effect at the time any such increase in interest rate is effective, such LIBOR
Loans shall thereupon become Base Rate Loans and thereafter bear interest at the
corresponding Default Rate. Interest accruing pursuant to this Section 2.6.3
shall be payable upon demand.
2.6.4. Conclusive Determination. Each determination by the
Administrative Agent of an interest rate under this Agreement shall be
conclusive and binding for all purposes, absent manifest error.
2.7. Conversion or Continuation.
2.7.1. Option to Convert or Continue. Subject to the
provisions of Section 2.14, the Borrower shall have the option
(a) at any time to convert all or any part of any outstanding
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<PAGE> 42
Base Rate Loans in an aggregate minimum amount of $100,000 and integral
multiples of $50,000 in excess of that amount from Base Rate Loans to LIBOR
Loans, and (b) upon the expiration of any Interest Period applicable to a
specific Borrowing of LIBOR Loans, to continue all or any portion of such Loans
in an aggregate minimum amount of $100,000 and integral multiples of $50,000 in
excess of that amount as LIBOR Loans, and the succeeding Interest Period of such
continued LIBOR Loans shall commence on the expiration date of the Interest
Period previously applicable thereto.
2.7.2. Notice of Conversion/Continuation. The Borrower shall
deliver a Notice of Conversion/Continuation to the Administrative Agent no later
than 11:00 a.m. (Central time) at least three (3) Business Days in advance of
the proposed conversion/continuation date. A Notice of Conversion/Continuation
shall specify (a) the proposed conversion/continuation date (which shall be a
Business Day), (b) the aggregate amount of Loans to be converted/continued, (c)
the nature of the proposed conversion/continuation, and (d) the requested
Interest Period. In lieu of delivering a Notice of Conversion/Continuation, the
Borrower may give the Administrative Agent telephonic notice by the required
time of any proposed conversion/continuation under this Section 2.7; provided,
however, that such notice shall be promptly confirmed in writing by a Notice of
Conversion/Continuation delivered to the Administrative Agent on or before the
proposed conversion/continuation date. The execution and delivery of each Notice
of Conversion/Continuation shall be deemed a representation and warranty by the
Borrower that the requested conversion/continuation may be made in accordance
with, and will not violate the requirements of, this Agreement, including those
set forth in Sections 2.7.1 and 2.14.1.
2.7.3. Notice to the Lenders. Promptly after receipt of a
Notice of Conversion/Continuation (or telephonic notice in lieu thereof), the
Administrative Agent shall notify each Lender of the proposed conversion or
continuation. Neither the Administrative Agent nor the Lender shall incur any
liability to the Borrower in acting upon any telephonic notice referred to above
that the Administrative Agent believes in good faith to have been given by a
duly authorized officer or other person authorized to act on behalf of the
Borrower or for otherwise acting in good faith under this Section 2.7 and, upon
conversion/continuation by the Administrative Agent in accordance with this
Agreement pursuant to any telephonic notice, the Borrower shall have effected a
conversion/continuation of Loans hereunder.
2.7.4. Notice Irrevocable. Except as provided in
Section 3.4.5, a Notice of Conversion/Continuation shall be
irrevocable on and after the related Interest Rate Determination
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Date, and the Borrower shall be bound to convert or continue such Loan in
accordance therewith.
2.7.5. Automatic Conversion. In the event any LIBOR Loan is
unpaid upon the expiration of the Interest Period applicable thereto and a
Notice of Conversion/Continuation has not been given in the manner provided in
Section 2.7.2, such LIBOR Loan shall, effective as of the last day of such
Interest Period, become a Base Rate Loan.
2.8. Notes; Records of Payments. Each Revolving Loan made by a Lender
to the Borrower pursuant to this Agreement shall be evidenced by a Revolving
Note payable to the order of such Lender in an amount equal to such Lender's
Percentage of the aggregate amount of the Commitments, and the Swing Line Loans
made by the Swing Line Lender to the Borrower pursuant to this Agreement shall
be evidenced by the Swing Line Note. Each Lender (including the Swing Line
Lender) hereby is authorized to record and endorse the date and principal amount
of each Loan made by it, and the amount of all payments and prepayments of
principal and interest made to such Lender with respect to such Loans, on a
schedule annexed to and constituting a part of the corresponding Note(s) of such
Lender, which recordation and endorsement shall constitute prima facie evidence
of such Loans made by such Lender to the Borrower and payments made by the
Borrower to such Lender, absent manifest error; provided, however, that (a)
failure by any Lender to make any such recordation or endorsement shall not in
any way limit or otherwise affect the obligations of the Borrower or the rights
and remedies of the Lenders under this Agreement or the Notes, and (b) payments
of principal and interest on the Loans to the Lenders shall not be affected by
the failure to make any such recordation or endorsement thereof. In lieu of
making recordation or endorsement, the Lenders hereby are authorized, at their
option, to record the payments or prepayments on their respective books and
records in accordance with their usual and customary practice, which recordation
shall constitute prima facie evidence of the Loans made by the Lenders to the
Borrower and the payments and prepayments made by the Borrower to the Lenders,
absent manifest error.
2.9. Administrative Agent's Right to Assume Funds Available. The
Administrative Agent may assume that each Lender has made the proceeds of its
Revolving Loans available to the Administrative Agent on the corresponding
Funding Date in the event the applicable conditions precedent to funding the
requested Revolving Loans set forth in Article 6 have been satisfied or waived
in accordance with Section 14.3, and the Administrative Agent, in its sole
discretion, may, but shall not be obligated to, advance all or any portion of
the amount of any requested Borrowing on such Funding Date to the Borrower prior
to receiving the proceeds of the corresponding Revolving Loans from the Lenders.
If the Administrative Agent has advanced proceeds
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of any Revolving Loan to the Borrower on behalf of any Lender and such Lender
fails to make available to the Administrative Agent its Percentage share of such
Revolving Loan as required by Section 2.2, the Administrative Agent shall be
entitled to recover such amount on demand from such Lender. If such Lender does
not pay such amount forthwith upon the Administrative Agent's demand therefor,
the Administrative Agent shall notify the Borrower and the Borrower shall pay
such amount to the Administrative Agent. The Administrative Agent also shall be
entitled to recover from such Lender interest at the Federal Funds Rate or any
other rate customarily used by banks for the correction of errors among banks,
but in no event to exceed the Highest Lawful Rate, on such amount so advanced on
behalf of a Lender for each day from the date such amount was made available by
the Administrative Agent to the Borrower to the date such amount is recovered by
the Administrative Agent, with interest at the applicable rate for such
Revolving Loan. Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill such Lender's Commitments or to prejudice any rights that
the Administrative Agent or the Borrower may have against any Lender as a result
of any default by such Lender hereunder.
2.10. Use of Proceeds. The proceeds of the Loans will be used by the
Borrower for working capital purposes and for other general corporate purposes
(including payment of the transaction fees and expenses payable by the Borrower
pursuant to the terms of the EMSA Acquisition Agreement and the Securities
Purchase Agreement), and will not be used by the Borrower for any purpose
prohibited by the terms of this Agreement or by any law.
2.11. Credit Fees. In consideration for the obligations of the
Administrative Agent, the Issuing Bank and the Lenders set forth herein, the
Borrower shall pay the following credit fees:
2.11.1. Administrative Agent's Fees. Pursuant to one or more
separate agreements with the Administrative Agent, the Borrower shall pay to the
Administrative Agent the fees and charges specified therein for the services of
the Administrative Agent in acting as such hereunder.
2.11.2. Commitment Fees. The Borrower agrees to pay to the
Administrative Agent, for distribution to each Lender in proportion to that
Lender's Percentage of the Commitments, annual commitment fees ("Commitment
Fees") for the period commencing on the date hereof to but excluding the
Commitment Period Expiration Date in amounts equal to the product obtained by
multiplying (a) the amount by which the average of the daily unused portion of
the Commitments (i.e., the aggregate amount of the Commitments, less the
aggregate amount of Revolving Loans and Letter of Credit Liabilities
outstanding, but without reduction for outstanding Swing Line Loans) exceeds
$1,000,000, by (b) the Applicable Commitment Fee Percentage. Commitment Fees
shall be
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payable in quarter-annual installments, in arrears, on January 1, April 1, July
1 and October 1 of each year, commencing April 1, 1999, and on the Commitment
Period Expiration Date.
2.11.3. Letter of Credit Fees.
(a) The Borrower agrees to pay to the Administrative Agent,
for distribution to each Lender in proportion to that Lender's
Percentage of the Commitments, letter of credit fees ("Letter of Credit
Fees") in respect of each Letter of Credit as provided in paragraph (b)
below.
(b) Upon the issuance of a Letter of Credit and on the
corresponding day in each third month thereafter while such Letter of
Credit is outstanding, a Letter of Credit Fee in an amount equal to the
amount available to be drawn under such Letter of Credit on the date of
payment, multiplied by twenty-five percent (25%) of the Applicable
Letter of Credit Fee Percentage in effect on the date of payment, shall
be due and payable in respect of such Letter of Credit.
(c) Letter of Credit Fees shall be deemed earned on and as
of the date due and payable, and shall not be subject to refund or
reduction because of any subsequent event, including the cancellation
or expiration of such Letter of Credit or the drawing of a draft
thereunder.
2.11.4. Opening Fees; Amendment or Transfer Fees; Drawing
Fees. Pursuant to one or more separate agreements with the Issuing Bank,
Borrower shall pay to the Issuing Bank its fees for the issuance of Letters of
Credit pursuant to this Agreement, together with the normal and customary fees
charged by the Issuing Bank upon the establishment of any Letter of Credit, upon
any amendment or transfer of a Letter of Credit and upon the payment of any
drawing under any Letter of Credit.
2.12. Computations. To the extent permitted by applicable law, all
computations of fees and interest under this Agreement payable in respect of any
period shall be made by the Administrative Agent on the basis of a 360-day year,
in each case for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such fees or interest
are payable. In computing interest on any Loan, the date of the making of such
Loan or the first day of an Interest Period, as the case may be, shall be
included and the date of payment or the expiration date of an Interest Period,
as the case may be, shall be excluded; provided, however, that if a Loan is
repaid on the same day on which it is made, one day's interest shall be paid on
that Loan.
2.13. Interest and Fees Margins. For purposes of interest
and fee computations hereunder involving the Applicable Base Rate
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Margin, the Applicable LIBOR Margin, the Applicable Letter of Credit Fee
Percentage and the Applicable Commitment Fee Percentage, such margins and
percentages shall be determined as follows:
<TABLE>
<CAPTION>
Applicable Applicable
Applicable Applicable Letter of Commitment
LIBOR Base Rate Credit Fee Fee
Tier Margin Margin Percentage Percentage
- ---- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1 1.20% 0.00% 0.70% 0.20%
2 1.50% 0.15% 1.00% 0.25%
3 1.90% 0.40% 1.40% 0.30%
4 2.40% 0.75% 1.90% 0.35%
5 3.00% 1.20% 2.50% 0.40%
</TABLE>
Except as expressly hereinafter provided, the applicable tier at any
time shall be determined with reference to the Borrower's Senior Funded
Indebtedness to EBITDA Ratio as follows:
Tier Senior Funded Indebtedness to EBITDA Ratio
---- ------------------------------------------
1 Less than or equal to 2.00 to 1.00
2 Greater than 2.00 to 1.00 but less than or
equal to 2.50 to 1.00
3 Greater than 2.50 to 1.00 but less than or
equal to 3.00 to 1.00
4 Greater than 3.00 to 1.00 but less than or
equal to 3.50 to 1.00
5 Greater than 3.50 to 1.00
From the date hereof to but not including the first Pricing Tier
Determination Date after the date hereof, Tier 5 shall be applicable. Any
adjustment in the margins set forth above shall take effect on the first Pricing
Tier Determination Date following the Fiscal Quarter as to which such ratio was
calculated.
2.14. Special Provisions Governing LIBOR Loans. Notwithstanding other
provisions of this Agreement, the following provisions shall govern with respect
to LIBOR Loans as to the matters covered:
2.14.1. Determination of Interest Period. By giving a Notice
of Borrowing pursuant to Section 2.2.4, the Borrower shall have the option,
subject to the other provisions of this Section 2.14.1, to specify whether the
Interest Period commencing
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on the date specified therein shall be a one, two, three or six-month period;
provided that:
(a) in the case of immediately successive Interest Periods,
each successive Interest Period shall commence on the day on which the
next preceding Interest Period expires;
(b) if any Interest Period otherwise would expire on a day
that is not a Business Day, that Interest Period shall be extended to
expire on the next succeeding Business Day; provided, however, that if
any such Interest Period would otherwise expire on a day that is not a
Business Day but is a day of the month after which no further Business
Day occurs in that month, that Interest Period shall expire on the
immediately preceding Business Day;
(c) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to paragraph (d) below, end on the last Business
Day of a calendar month; and
(d) no Interest Period shall extend beyond the Maturity
Date.
2.14.2. Determination of Interest Rate. As soon as is
practicable after 11:00 a.m. (Central time) on the Interest Rate Determination
Date, the Administrative Agent shall determine (which determination shall,
absent manifest error, be final, conclusive and binding upon all parties) the
interest rate that shall apply to the LIBOR Loans for which an interest rate is
then being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to the Borrower
and to each Lender.
2.14.3. Inability to Determine Rate. In the event the
Administrative Agent shall have determined (which determination shall be
conclusive and binding absent manifest error) that by reason of circumstances
affecting the London interbank Eurodollar market, adequate and reasonable means
do not exist for ascertaining Base LIBOR, the Administrative Agent forthwith
shall give telephonic notice of such determination, confirmed in writing, to the
Borrower and to each Lender. If such notice is given, and until such notice has
been withdrawn by the Administrative Agent, no additional LIBOR Loans shall be
made.
2.14.4. Illegality; Termination of Commitment to Make LIBOR
Loans. Notwithstanding any other provisions of this Agreement, if any law,
treaty, rule or regulation or determination of a court or other governmental
authority, or any
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change therein or in the interpretation or application thereof, shall make it
unlawful for any Lender to make or maintain LIBOR Loans, as contemplated by this
Agreement, then, and in any such event, such Lender shall be an "Affected
Lender" and shall promptly give notice (by telephone confirmed in writing) to
the Borrower and the Administrative Agent (which notice the Administrative Agent
shall promptly transmit to each Lender in writing, or by telephone confirmed in
writing) of such determination, and the obligation of the Affected Lender to
make LIBOR Loans shall be terminated, and its obligation to maintain its LIBOR
Loans during such period shall be terminated at the earlier to occur of the
termination of the last Interest Period then in effect or when required by law.
Thereafter, and until such notice has been withdrawn by the Affected Lender, the
Affected Lender shall have no obligation to make LIBOR Loans, and any LIBOR
Loans of the Affected Lender then outstanding shall be converted into Base Rate
Loans as of the end of the corresponding Interest Period for each.
2.14.5. LIBOR Loans After Default. Unless all Lenders shall
otherwise agree, after the occurrence of and during the continuance of a Default
or an Event of Default, the Borrower may not elect to have a Loan be made or
continued as, or converted to, a LIBOR Loan.
2.15. Expenses. The Borrower shall reimburse the Administrative Agent,
on demand, for all reasonable attorneys' and paralegals' fees and expenses of
counsel to the Administrative Agent, all fees and expenses for title, lien and
other public records searches, all filing and recordation fees and taxes, all
duplicating expenses, corporation search fees, appraisal fees and escrow agent
fees and expenses and all other customary fees and expenses incurred in
connection with (a) the negotiation, documentation and closing of the
transactions contemplated hereby, (b) the perfection of or the continued
perfection of the security interests contemplated hereby, and (c) the review and
preparation of any documentation in connection with, and the approval by the
Lenders of any matter for which the Lenders' approval is requested or required
hereunder. The obligations described in this Section 2.15 regarding the payment
of expenses are independent of all other obligations of the Borrower hereunder,
shall survive the expiration or termination of the Commitments and shall be
payable regardless of whether the financing transactions contemplated by this
Agreement shall be consummated.
2.16. Replacement or Removal of a Lender. If the Administrative Agent
receives a notice pursuant to Section 3.4.7 claiming compensation, reimbursement
or indemnity pursuant to Section 3.4 or Section 3.5, and the aggregate amount of
all such compensation, reimbursement or indemnity payments made or required to
be made by the Borrower pursuant to Section 3.4 or
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Section 3.5 to the Lender giving notice is materially greater (as determined by
the Borrower in its reasonable judgment) than the weighted average amount of
payments made or required to be made to the other Lenders pursuant to Section
3.4 or Section 3.5, or if the Administrative Agent receives a notice from an
Affected Lender pursuant to Section 2.14.4, then, so long as no Default shall
have occurred and be continuing, the Borrower may, within sixty (60) days after
receipt of any such notice, elect to terminate such Lender as a party to this
Agreement. If the amount of such Lender's Commitment, together with the amount
of any other Commitments theretofore or concurrently therewith to be reduced in
accordance with this Section 2.16, aggregates twenty-five percent (25%) or less
of the aggregate Commitments, the Borrower may elect either to replace such
Lender with another financial institution reasonably satisfactory to the
Administrative Agent and the Issuing Bank (a "Replacement Lender") or to reduce
the Commitments by the amount of the Commitment of such Lender. If the amount of
such Lender's Commitment, together with the amount of any other Commitments
theretofore or concurrently therewith to be reduced in accordance with this
Section 2.16, aggregates in excess of twenty-five percent (25%) of the aggregate
Commitments, the Borrower may elect to terminate such Lender only if, together
with its notice of termination, it provides to the Administrative Agent a
commitment from a Replacement Lender to replace the Commitment of the terminated
Lender on the terms and conditions set forth herein. The Borrower's election to
terminate a Lender under this Section 2.16 shall be set forth in a written
notice from the Borrower to the Administrative Agent (with a copy to such
Lender), setting forth (a) the basis for termination of such Lender, (b) whether
the Borrower intends to replace such Lender with a Replacement Lender or, if the
Borrower is not required to replace such Lender, to reduce the Commitments by
the amount of the Commitment of such Lender, and (c) the date (not later than
thirty [30] days after the date of such notice) when such termination shall
become effective. On the date on which such termination becomes effective, (i)
the Borrower and/or the Replacement Lender, as applicable, shall pay the
terminated Lender an amount equal to all principal, interest, fees and other
amounts owed to such Lender pursuant to this Agreement (including any amounts
owed under Sections 3.4 and 3.5) through such date, and (ii) there shall have
been received by the Administrative Agent an executed Assignment and Acceptance
and all other documents and supporting materials necessary, in the reasonable
judgment of the Administrative Agent, to evidence the substitution of the
Replacement Lender for such terminated Lender, or if there is no Replacement
Lender, to reflect the adjustment of the Commitments, including any necessary or
appropriate adjustments to the Lenders' Percentages (adjustments to the
Commitments and Percentages of the remaining Lenders to be based upon the
relative proportions of their respective Percentages).
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ARTICLE 3
PAYMENTS, PREPAYMENTS AND COMPUTATIONS
3.1. General Provisions Relating to Repayment of Loans. The Loans shall
be repaid as provided in this Section 3.1.
3.1.1. Interest Payments. The interest accrued on each Loan
shall be payable on each Interest Payment Date applicable to such Loan, upon any
prepayment of any LIBOR Loan (to the extent accrued on the amount being prepaid)
and at maturity.
3.1.2. Principal Payments.
(a) Optional Prepayments.
(1) The Borrower may prepay Swing Line Loans, in
whole or in part, at any time and from time to time. Except
to the extent that repayment of Swing Line Loans is being
administered through an automated cash management system
mutually approved in writing by the Borrower and the Swing
Line Lender, the Borrower shall, prior to or
contemporaneously with making any such prepayment, give the
Swing Line Lender such notice of prepayment as is sufficient
to enable the Swing Line Lender to apply such prepayment
properly to the repayment of Swing Line Loans.
(2) The Borrower may, upon not less than one (1)
Business Day's prior written or telephonic notice confirmed
in writing to the Administrative Agent (in the case of Base
Rate Loans), and upon not less than three (3) Business Days'
prior written or telephonic notice confirmed in writing to
the Administrative Agent (in the case of LIBOR Loans) (each
of which notices the Administrative Agent will promptly
transmit to each Lender in writing, or by telephone
confirmed in writing), at any time and from time to time
prepay any Borrowing of Revolving Loans (as the Borrower may
specify to the Administrative Agent) in whole or in part in
integral multiples of $50,000; provided, however, that LIBOR
Loans may only be prepaid in part if, after such prepayment,
the unpaid portion of such Loans shall have aggregate
minimum balances of $100,000; and provided further that in
connection with any prepayment of LIBOR Loans, the Borrower
shall pay to the Administrative Agent, for distribution to
the Lenders, the accrued interest on such Loan required to
be paid pursuant to Section
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3.1.1 and any amounts required to be paid pursuant to
Section 3.4.5.
(b) Mandatory Prepayments.
(1) If the aggregate average daily outstanding
principal balance of Swing Line Loans during any weekly
period ending on Thursday of any week (or if Thursday is not
a Business Day, then on the next succeeding Business Day)
exceeds $2,000,000, then on the next succeeding Business Day
the Borrower shall prepay Swing Line Loans in an amount
sufficient to reduce the aggregate outstanding principal
balance of Swing Line Loans to an amount not exceeding
$1,000,000. The Borrower shall, prior to or
contemporaneously with making any such prepayment, give the
Swing Line Lender such notice of prepayment as is sufficient
to enable the Swing Line Lender to apply such prepayment
properly to the repayment of Swing Line Loans.
(2) The Borrower shall make prepayments of Loans on
each Scheduled Commitment Reduction Date required by the
mandatory reduction in the Commitments made on that date and
otherwise shall prepay Loans to the extent necessary so that
(A) the aggregate principal amount of Loans and Letter of
Credit Liabilities outstanding at any time does not exceed
the Commitments then in effect, and (B) the aggregate
principal amount of Loans made for purposes other than the
financing or refinancing of Asset Acquisitions plus the
aggregate principal amount of Letter of Credit Liabilities
outstanding at any time does not exceed the Working Capital
Sublimit; provided, however, that in connection with any
prepayment of LIBOR Loans, the Borrower shall pay to the
Administrative Agent, for distribution to the Lenders, the
accrued interest on such Loan required to be paid pursuant
to Section 3.1.1 and any amounts required to be paid
pursuant to Section 3.4.5. Any prepayment pursuant to this
paragraph (2) shall be applied first to Swing Line Loans
until the same have been fully repaid, then to Base Rate
Loans until the same have been fully repaid, and then to
LIBOR Loans.
3.1.3. Final Maturity of Loans. In all events, the entire
aggregate principal balances of, all accrued and unpaid interest on and all fees
and other sums due and payable in respect of the Loans shall be due and payable
in full on the Maturity Date if not sooner paid.
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3.2. Repayment of Amounts Drawn Under Letters of Credit. On each day
the Issuing Bank honors a drawing under a Letter of Credit, the Borrower shall,
after the Issuing Bank has honored such drawing, immediately reimburse the
Issuing Bank for the account of the Lenders, by 11:00 a.m. (Central time) (or as
soon thereafter as the drawing has been honored) in an amount equal to the
amount of such drawing.
3.3. Payments and Computations, Etc.
3.3.1. Time and Manner of Payments. Except as otherwise
expressly set forth herein, all payments of principal, interest and fees
hereunder and under the Notes shall be in lawful currency of the United States
of America, in immediately available (same day) funds, and delivered to the
Administrative Agent at its Lending Office for its account, the account of the
Lenders, the account of the Swing Line Lender or the account of the Issuing
Bank, as the case may be (or in the case of Swing Line Loans and if so directed
by the Swing Line Lender, delivered directly to the Swing Line Lender), not
later than 11:00 a.m. (Central time) on the date due. As soon as is practicable
thereafter, the Administrative Agent shall cause to be distributed like funds
relating to the payment of principal or interest or fees ratably to the Lenders
in accordance with their respective Percentages (other than amounts payable
pursuant to Sections 2.11.1, 3.4 and 3.5, which are to be distributed other than
ratably). Funds received by the Administrative Agent after the time specified in
the first sentence of this paragraph shall be deemed to have been paid by the
Borrower on the next succeeding Business Day.
3.3.2. Payments on Non-Business Days. Whenever any payment
to be made hereunder or under the Notes shall be stated to be due on a day that
is not a Business Day, the payment shall be made on the next succeeding Business
Day and such extension of time shall be included in the computation of the
payment of interest hereunder or under the Notes or of the fees payable
hereunder, as the case may be; provided, however, that in the event that the day
on which payment relating to a LIBOR Loan is due is not a Business Day but is a
day of the month after which no further Business Day occurs in that month, then
the due date thereof shall be the next preceding Business Day.
3.3.3. Apportionment of Payments. Aggregated principal and
interest payments shall be apportioned among all outstanding Revolving Loans to
which such payments relate, and shall be apportioned ratably among the Lenders
in proportion to the Lenders' respective Percentages of the corresponding
Revolving Loans. The Administrative Agent shall promptly distribute to each
Lender at its Lending Office its Percentage of all such payments received by the
Administrative Agent. Notwithstanding the foregoing provisions of this Section
3.3.3,
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if, pursuant to the provisions of Section 2.14.4, any Notice of Borrowing is
withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate
Loans in lieu of its Percentage of LIBOR Loans, the Administrative Agent shall
give effect thereto in apportioning payments received thereafter.
3.3.4. Assumption of Payments Made. Unless the
Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the benefit of
the Lenders hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate, but in no event to exceed the Highest Lawful
Rate.
3.3.5. Application of Proceeds. After the occurrence and
during the continuance of an Event of Default, unless otherwise set forth in
this Agreement or the other Loan Documents, all payments received by the
Administrative Agent from the enforcement of remedies under the Loan Documents
or otherwise with respect to the Obligations shall be applied (a) first, to the
payment of any fees, expenses, reimbursements or indemnities then due from the
Borrower to the Administrative Agent; (b) second, to the payment of any fees,
expenses, reimbursements or indemnities then due from the Borrower to the
Lenders, or any of them; (c) third, to the ratable payment of interest due from
the Borrower with respect to any of the Loans and fees in respect of the Letters
of Credit; (d) fourth, to the ratable payment of principal of any of the Loans
of the Borrower and all obligations of the Borrower to reimburse the Issuing
Bank and the Lenders in respect of drawings under Letters of Credit; (e) fifth,
to be held as cash collateral by the Administrative Agent for the ratable
benefit of the Lenders, as security for outstanding Letter of Credit
Liabilities, and (f) sixth, to pay all other Obligations. Amounts applied to the
interest on or principal of Loans as aforesaid shall be applied to the interest
on or principal of outstanding Swing Line Loans, if any, prior to the
application of same to Revolving Loans.
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3.4. Increased Costs, Capital Requirements and Taxes.
3.4.1. Increased Costs. Except to the extent reimbursed
pursuant to other provisions of this Section 3.4, in the event that either (i)
the introduction of, or any change in, or in the interpretation of, any law or
regulation or (ii) compliance with any guideline or request from any central
bank or other Governmental Authority (regardless of whether having the force of
law):
(a) does or shall subject any Lender to any additional
income, preference, minimum or excise tax or to any additional tax of
any kind whatsoever with respect to this Agreement, the Notes, the
Letters of Credit or any of the Loans or change the basis of taxation
of payments to such Lender of principal, commitment fees, interest or
any other amount payable hereunder (except for changes in the rate of
tax on the overall gross or net income of that Lender or its foreign
branch, agency or subsidiary); or
(b) does or shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in
or for the account of, advances or loans by, or other credit extended
by, or any other acquisition of funds by, any office of such Lender
(except, with respect to LIBOR Loans, to the extent that the reserve
requirements are reflected in the definition of "LIBOR"); or
(c) does or shall impose on that Lender any other condition;
and the result of any of the foregoing is to increase the cost to that Lender of
issuing or participating in the Letters of Credit or of making, renewing or
maintaining the Loans or the Commitments or to reduce any amount receivable
hereunder or thereunder; then, in any such case, the Borrower shall promptly pay
to such Lender, upon demand, such additional amounts as are sufficient to
compensate such Lender for any such additional cost or reduced amount received.
3.4.2. Capital Requirements - General. If either (i) the
introduction of, or any change in, or in the interpretation of, any law or
regulation or (ii) compliance with any guideline or request from any central
bank or other Governmental Authority (regardless of whether having the force of
law), affects or would affect in any way the amount of capital required or
expected to be maintained by any Lender or any corporation controlling such
Lender with the effect of reducing the rate of return on such capital to a level
below the rate that such Lender or such other corporation could have achieved
but for
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such introduction, change or compliance, and such Lender reasonably determines
that such reduction is based on the existence of such Lender's Commitments
hereunder and other commitments of this type, then upon demand by such Lender,
the Borrower shall further pay to such Lender from time to time as specified by
such Lender such additional amounts as are sufficient to compensate such Lender
or other corporation for such reduction.
3.4.3. Capital Requirements - Letters of Credit. If
the Issuing Bank or any Lender determines that either (i) the introduction of,
or any change in, or in the interpretation of, any law or regulation or (ii)
compliance with any guideline or request from any central bank or other
Governmental Authority (regardless of whether having the force of law), affects
or would affect in any way the amount of capital required or expected to be
maintained by the Issuing Bank or such Lender or any corporation controlling the
Issuing Bank or such Lender with the effect of reducing the rate of return on
such capital below the rate that the Issuing Bank or such Lender or such other
corporation could have achieved but for such introduction, change or compliance,
and the Issuing Bank or such Lender reasonably determines that such reduction is
based on the existence of the Letters of Credit issued hereunder and other
commitments of this type, then upon demand by the Issuing Bank or such Lender,
the Borrower shall further pay to the Issuing Bank and such Lender from time to
time as specified by the Issuing Bank and such Lender such additional amounts as
are sufficient to compensate the Issuing Bank and such Lender or other
corporation for such reduction.
3.4.4. Increased Reserves - Letters of Credit. If
either (i) the introduction of, or any change in, or in the interpretation of,
any law or regulation or (ii) compliance with any guideline or request from any
central bank or other Governmental Authority (regardless of whether having the
force of law), shall either (a) impose, modify or deem applicable any reserve,
special deposit or similar requirement against letters of credit or similar
instruments issued by, or assets held by, or deposits in or for the account of,
the Issuing Bank or any Lender, or (b) impose on the Issuing Bank or any Lender
any other condition regarding this Agreement as it pertains to the Letters of
Credit, or any letter of credit, and the result of any event referred to in the
preceding clause (a) or (b) shall be to increase the cost to the Issuing Bank or
any Lender of issuing or maintaining any Letter of Credit or any participation
therein (which increase in cost shall be determined by the Issuing Bank's or
such Lender's, as the case may be, reasonable allocations of the aggregate of
such cost increases resulting from such event), then, upon demand by the Issuing
Bank or such Lender, as the case may be, the Borrower shall forthwith pay to the
Issuing Bank or such Lender, as the case may be, from time to time as specified
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by the Issuing Bank or such Lender, as the case may be, such additional amounts
as are sufficient to compensate the Issuing Bank or such Lender, as the case may
be, for such increased cost.
3.4.5. Breakage Costs - LIBOR Loans. The Borrower shall
indemnify and hold each Lender free and harmless from all losses, liabilities
and reasonable expenses (including any loss sustained by that Lender in
connection with the re-employment of such funds), that such Lender may sustain:
(a) if for any reason (other than a default by such Lender) a Borrowing of LIBOR
Loans does not occur on a date specified therefor in a Notice of Borrowing or a
telephonic request for borrowing or a continuation of or conversion to LIBOR
Loans does not occur on a date specified therefor in a Notice of
Conversion/Continuation or in a telephonic request for conversion/continuation,
(b) if any prepayment of any of its LIBOR Loans occurs on a date that is not the
last day of an Interest Period, (c) if any prepayment of any of its LIBOR Loans
is not made on any date specified in a notice of prepayment given by the
Borrower, or (d) as a consequence of any other default by the Borrower to repay
its LIBOR Loans when required by the terms of this Agreement.
3.4.6. LIBOR Taxes. The Borrower shall indemnify and hold
each Lender free and harmless from, and shall pay, prior to the date on which
penalties attach thereto, all present and future income, stamp and other taxes,
levies or costs and charges whatsoever imposed, assessed, levied or collected on
or in respect of a Loan solely as a result of the interest rate being determined
by reference to LIBOR and/or the provisions of this Agreement related to LIBOR
and/or the recording, registration, notarization or other formalization of any
thereof and/or any payments of principal, interest or other amounts made on or
in respect of a Loan when the interest rate is determined by reference to LIBOR
(all such taxes, levies, costs and charges being herein collectively called
"LIBOR Taxes"); provided, however, that LIBOR Taxes shall not include: taxes
imposed on or measured by the overall gross or net income of such Lender or any
foreign branch, agency or subsidiary of such Lender by the United States of
America or any political subdivision or taxing authority thereof or therein, or
taxes on or measured by the overall gross or net income of that Lender or any
foreign branch, agency or subsidiary of that Lender by any foreign country or
subdivision thereof in which that Lender, branch, agency or subsidiary is doing
business. The Borrower also shall indemnify and hold each Lender free and
harmless from, and shall pay such additional amounts equal to, increases in
taxes payable by that Lender described in the foregoing proviso that are
attributable to payments made by the Borrower described in the immediately
preceding sentence or this sentence. Promptly after the date on which payment of
any such LIBOR Tax is due pursuant to applicable law, the Borrower will, at the
request of such Lender, furnish to such Lender evidence, in form and substance
satisfactory to such
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Lender, that the Borrower has met its obligation under this Section 3.4.6; and
the Borrower will indemnify each Lender against, and reimburse each Lender on
demand for, any LIBOR Taxes payable by that Lender. Such Lender shall provide
the Borrower with appropriate receipts for any payments or reimbursements made
by the Borrower pursuant to this Section 3.4.6.
3.4.7. Notice of Increased Costs; Payment. Each Lender and
the Issuing Bank will promptly notify the Administrative Agent (with a copy to
the Borrower) of any event of which it has knowledge, occurring after the date
hereof, that entitles such Lender or the Issuing Bank to compensation,
reimbursement or indemnity pursuant to this Section 3.4 or Section 3.5, and
shall furnish to the Administrative Agent (with a copy to the Borrower) a
certificate of such Lender or the Issuing Bank claiming compensation,
reimbursement or indemnity under this Section 3.4 or Section 3.5, setting forth
in reasonable detail the additional amount or amounts to be paid to it hereunder
if not theretofore paid by the Borrower as provided in Section 3.5 (which
certificate shall be presumed correct and binding in the absence of manifest
error). In determining such amount, such Lender and the Issuing Bank may use any
reasonable averaging, attribution or allocation methods. Within fifteen (15)
days following receipt of such notice, the Borrower shall pay to the
Administrative Agent, for distribution to such Lender, or to the Issuing Bank,
as the case may be, the amount shown to be due and payable by such certificate.
3.5. Taxes.
3.5.1. Taxes Generally. Any and all payments by the Borrower
or any Guarantor hereunder or under the Notes or the other Loan Documents shall
be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect to such payments (including interest, additions to tax
and penalties thereon), excluding, in the case of each Lender, the
Administrative Agent and the Issuing Bank, (i) taxes imposed on or measured by
its net income or, in the State of Tennessee, net assets, and franchise taxes
imposed on it, by the jurisdiction of such Lender's Lending Office or any
political subdivision or taxing authority thereof, and (ii) withholding taxes
that are the subject of Sections 3.5.2 through 3.5.5. If the Borrower or any
Guarantor shall be required by law to deduct any such taxes from or in respect
of any sum payable hereunder or under any Note or any other Loan Document to any
Lender or the Administrative Agent, (a) the sum payable shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 3.5) such
Lender or the Administrative Agent (as the case may be) shall receive an amount
equal to the sum it would have received had no such deductions been made, and
(b) the
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Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law. If and to the extent that
any Lender subsequently shall be refunded or otherwise recover all or any part
of any such deduction, it shall refund to the Borrower the amount so recovered.
3.5.2. Withholding Tax Exemption. If any Lender is a
"foreign corporation" within the meaning of the Code, such Lender shall deliver
to the Administrative Agent either: (a) if such Lender qualifies for an
exemption from or a reduction of United States withholding tax under a tax
treaty, a properly completed and executed Internal Revenue Service Form 1001
before the payment of any interest is due in the first calendar year and in each
third succeeding calendar year during which interest may be paid under this
Agreement, or (b) if such Lender qualifies for an exemption for interest paid
under this Agreement from United States withholding tax because it effectively
is connected with a United States trade or business of such Lender, two properly
completed and executed copies of Internal Revenue Service Form 4224 before the
payment of any interest is due in the first taxable year of such Lender, and in
each succeeding taxable year of such Lender, during which interest may be paid
under this Agreement, and (c) such other form or forms as may be required or
reasonably requested by the Administrative Agent to establish or substantiate
exemption from, or reduction of, United States withholding tax under the Code or
other laws of the United States. Each such Lender agrees to notify the
Administrative Agent of any change in circumstances that would modify or render
invalid any claimed exemption or reduction.
3.5.3. Withholding Taxes. If any Lender is entitled to a
reduction in the applicable withholding tax, the Administrative Agent may
withhold from any interest payment to such Lender an amount equivalent to the
applicable withholding tax after taking into account such reduction. If the
forms or other documentation required by Section 3.5.2 are not delivered to the
Administrative Agent, then the Administrative Agent may withhold from any
interest payment to any Lender not providing such forms or other documentation,
an amount equivalent to the applicable withholding tax.
3.5.4. Indemnification. If the Internal Revenue Service or
any authority of the United States or other jurisdiction asserts a claim that
the Administrative Agent did not properly withhold tax from amounts paid to or
for the account of any Lender (because the appropriate form was not delivered or
was not properly executed, or because such Lender failed to notify the
Administrative Agent of a change in circumstances that rendered the exemption
from or reduction of withholding tax ineffective, or for any other reason) such
Lender shall indemnify the Administrative Agent fully for all amounts paid,
directly or
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indirectly, by the Administrative Agent as tax or otherwise, including penalties
and interest, together with all expenses incurred, including legal expenses,
allocated staff costs, and any out-of-pocket expenses.
3.5.5. Subsequent Lenders. If any Lender sells, assigns,
grants participations in or otherwise transfers it rights under this Agreement,
the participant shall comply and be bound by the terms of Sections 3.5.2, 3.5.3
and 3.5.4 as though it were such Lender.
3.6. Booking of Loans. Any Lender may make, carry or transfer Loans at,
to or for the account of, any of its branch or agency offices, provided,
however, that in the event that any Lender transfers its Loans to another branch
or agency office in a transaction that does not involve the transfer by such
Lender of any of its other loans to such branch or agency office, such Lender
shall not be entitled to reimbursement for additional costs or taxes with
respect to such Loans pursuant to Section 3.4 or Section 3.5 if the Borrower
would be subject to additional liability under Section 3.4 or Section 3.5 to
which it would not be subject if such Lender's Loans were maintained at the
office at which such Loans were carried prior to such transfer.
The Borrower acknowledges and agrees that (a) each Lender's method of
funding its Loans hereunder shall be in the sole discretion of such Lender, so
long as such funding complies with all applicable requirements of this
Agreement, and (b) for purposes of any determination to be made pursuant to
Sections 2.14.4 or 3.4.5 of this Agreement, each Lender shall be presumed
conclusively to have funded its LIBOR Loans with the proceeds of Dollar deposits
obtained by such Lender in the interbank Eurodollar market.
ARTICLE 4
SECURITY
4.1. Initial Security. The Obligations of the Borrower shall be secured
by:
(a) the Security Agreement;
(b) the Pledge Agreement;
(c) the Assignment and Security Agreement; and
(d) the security interest in the Collateral Account herein
granted in favor of the Administrative Agent for the
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ratable benefit of the Lenders, and the other Liens provided in this
Agreement and the other Security Documents.
4.2. Further Assurances. The Borrower and the Guarantors shall, and
shall cause each of their respective Subsidiaries to, at their sole cost and
expense, execute and deliver to the Administrative Agent, the Lenders and the
Issuing Bank all such further documents, instruments and agreements and perform
all such other acts that reasonably may be required in the opinion of the
Administrative Agent to enable the Administrative Agent, the Lenders and the
Issuing Bank to exercise and enforce their respective rights as the secured
parties under the Security Documents and to carry out the provisions or
effectuate the purposes of this Agreement and the other Loan Documents. To the
extent permitted by applicable law, the Borrower and the Guarantors hereby
authorize the Administrative Agent on behalf of itself, the Lenders and the
Issuing Bank to file Financing Statements and continuation statements with
respect to the security interests granted or assigned under the Security
Documents and to execute such Financing Statements and continuation statements
on behalf of the Borrower, the Guarantors and their respective Subsidiaries. The
Administrative Agent shall furnish to the Borrower and the Guarantors copies of
all such Financing Statements and continuation statements filed by the
Administrative Agent on behalf of the Lenders pursuant to this Section 4.2.
ARTICLE 5
GUARANTY
5.1. Guaranty. Each of the Guarantors hereby unconditionally and
irrevocably, jointly and severally, guarantees to the Administrative Agent, the
Lenders and the Issuing Bank the due and punctual payment and performance of all
of the Obligations (except to the extent such Guarantor is a Principal Obligor
on such Obligations), in each case as and when the same shall become due and
payable, whether at maturity, by acceleration, mandatory prepayment or
otherwise, according to their terms. In case of failure by a Principal Obligor
of any Obligation punctually to pay or perform such Obligation, each of the
Guarantors (other than a Principal Obligor on such Obligation) hereby
unconditionally and irrevocably agrees to cause such payment to be made
punctually as and when the same shall become due and payable, whether at
maturity, by prepayment, declaration or otherwise, and to cause such performance
to be rendered punctually as and when due, in the same manner as if such payment
or performance were made by such Principal Obligor. This guaranty is and shall
be a guaranty of payment and performance and not merely of collection.
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5.2. Maximum Guaranty Liability,
(a) Each Guarantor's respective obligations hereunder and
under the other Loan Documents shall be in an amount equal to, but not
in excess of, the maximum liability permitted under Applicable
Bankruptcy Law (the "Maximum Guaranty Liability"). To that end, but
only to the extent such obligations otherwise would be subject to
avoidance under Applicable Bankruptcy Law if any Guarantor is deemed
not to have received valuable consideration, fair value or reasonably
equivalent value for its obligations hereunder or under the other Loan
Documents, each such Guarantor's respective obligations hereunder and
under the other Loan Documents shall be reduced to that amount which,
after giving effect thereto, would not render such Guarantor insolvent,
or leave such Guarantor with an unreasonably small capital to conduct
its business, or cause such Guarantor to have incurred debts (or to be
deemed to have intended to incur debts), beyond its ability to pay such
debts as they mature, at the time such obligations are deemed to have
been incurred under Applicable Bankruptcy Law. As used herein, the
terms "insolvent" and "unreasonably small capital" shall likewise be
determined in accordance with Applicable Bankruptcy Law. This Section
5.2 is intended solely to preserve the rights of the Lenders, the
Administrative Agent and the Issuing Bank hereunder and under the other
Loan Documents to the maximum extent permitted by Applicable Bankruptcy
Law, and neither the Guarantors nor any other Person shall have any
right or claim under this Section 5.2 that otherwise would not be
available under Applicable Bankruptcy Law.
(b) Each Guarantor agrees that the Guaranteed Obligations at
any time and from time to time may exceed the Maximum Guaranty
Liability of such Guarantor, and may exceed the aggregate Maximum
Guaranty Liability of all Guarantors hereunder, without impairing this
Guaranty or affecting the rights and remedies of the Lenders, the
Administrative Agent or the Issuing Bank hereunder.
5.3. Contribution. In the event any Guarantor (a "Funding Guarantor")
shall make any payment or payments under this Guaranty or shall suffer any loss
as a result of any realization upon any of its property granted as Collateral
under any Loan Document, each other Guarantor (each, a "Contributing Guarantor")
shall contribute to such Funding Guarantor an amount equal to such Contributing
Guarantor's "Pro Rata Share" of such payment or payments made, or losses
suffered, by such Funding Guarantor. For the purposes hereof, each Contributing
Guarantor's Pro Rata Share with respect to any such payment or loss by a Funding
Guarantor shall be determined as of the date on which such payment or loss was
made by reference to the ratio of (a) such
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Contributing Guarantor's Maximum Guaranty Liability as of such date (without
giving effect to any right to receive, or obligation to make, any contribution
hereunder) to (b) the aggregate Maximum Guaranty Liability of all Guarantors
(including such Funding Guarantor) as of such date (without giving effect to any
right to receive, or obligation to make, any contribution hereunder). Nothing in
this Section 5.3 shall affect each Guarantor's several liability for the entire
amount of the Guaranteed Obligations (up to such Guarantor's Maximum Guaranty
Liability). Each Guarantor covenants and agrees that its right to receive any
contribution hereunder from a Contributing Guarantor shall be subordinate and
junior in right of payment to all the Guaranteed Obligations.
5.4. Guaranty Unconditional. The obligations of each Guarantor under
this Article 5 shall be continuing, unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver
or release in respect of any Obligation of the Borrower under this
Agreement or any other Loan Document, by operation of law or otherwise;
(b) any modification or amendment or supplement to this
Agreement or any other Loan Document;
(c) any modification, amendment, waiver, release,
non-perfection or invalidity of any direct or indirect security, or of
any guaranty or other liability of any third party, for any Obligation
of the Borrower under this Agreement or any other Loan Document;
(d) any change in the existence, structure or ownership of
the Borrower or any Guarantor, or any insolvency, bankruptcy,
reorganization or other similar case or proceeding affecting the
Borrower or any Guarantor or any of their respective assets, or any
resulting release or discharge of any Obligation of the Borrower under
this Agreement or any other Loan Document;
(e) the existence of any claim, set-off or other right that
any Guarantor at any time may have against the Borrower, the
Administrative Agent, the Issuing Bank, any Lender or any other Person,
regardless of whether arising in connection with this Agreement or any
other Loan Document;
(f) any invalidity or unenforceability relating to or
against the Borrower for any reason of the whole or any provision of
this Agreement or any other Loan Document, or any provision of
Applicable Bankruptcy Law purporting to
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prohibit the payment or performance by the Borrower of any Obligation
or the payment by the Borrower of any other amount payable by it under
this Agreement or any other Loan Document; or
(g) any other act or omission to act or delay of any kind by
the Borrower, the Administrative Agent, the Issuing Bank, any Lender or
any other Person or any other circumstance whatsoever that might but
for the provisions of this Section 5.4 constitute a legal or equitable
discharge of the obligations of any Guarantor under this Article 5.
5.5. Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances. Each Guarantor's obligations under this Article 5 shall remain in
full force and effect so long as any Obligations are unpaid or outstanding, any
Obligation under the Loan Documents is not performed or any of the Commitments
are in effect. If at any time any payment of the Obligations or any other amount
payable by the Borrower under this Agreement or the other Loan Documents is
rescinded or otherwise must be restored or returned upon the insolvency,
bankruptcy or reorganization of the Borrower or otherwise, each Guarantor's
obligations under this Article 5 with respect to such payment shall be
reinstated at such time as though such payment had become due but not been made
at such time.
5.6. Waiver. Each Guarantor irrevocably waives acceptance hereof,
presentment, demand, protest, notice of any breach or default by the Borrower
and any other notice not specifically provided for herein, as well as any
requirement that at any time any action be taken by any Person against the
Borrower or any other Person or any Collateral granted as security for the
Obligations or the Guaranteed Obligations. Each Guarantor hereby specifically
waives any right to require that an action be brought against the Borrower or
any other Principal Obligor with respect to the Obligations under the provisions
of Title 47, Chapter 12, Tennessee Code Annotated, as the same may be amended
from time to time.
5.7. Waiver of Reimbursement, Subrogation, Etc. Each Guarantor hereby
waives to the fullest extent possible as against the Borrower and its assets any
and all rights, whether at law, in equity, by agreement or otherwise, to
subrogation, indemnity, reimbursement, contribution, exoneration or any other
similar claim, right, cause of action or remedy that otherwise would arise out
of such Guarantor's performance of its obligations to the Administrative Agent,
any Lender or the Issuing Bank under this Article 5. The preceding waiver is
intended by the Guarantors, the Administrative Agent, the Issuing Bank and the
Lenders to be for the benefit of the Borrower or any of its successors and
permitted assigns as an absolute defense to any action by any Guarantor against
the Borrower or its assets that
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arises out of such Guarantor's having made any payment to the Administrative
Agent, the Issuing Bank or any Lender with respect to any of the Guaranteed
Obligations.
5.8. Stay of Acceleration. If acceleration of the time for payment of
any amount payable by the Borrower under this Agreement is stayed upon the
insolvency, bankruptcy or reorganization of the Borrower, all such amounts
otherwise subject to acceleration under the terms of this Agreement shall
nonetheless be payable by the Guarantors hereunder forthwith on demand by the
Administrative Agent as directed by Requisite Lenders.
5.9. Subordination of Indebtedness. Any indebtedness of the Borrower
for borrowed money now or hereafter owed to any Guarantor is hereby subordinated
in right of payment to the payment by the Borrower of the Obligations, and if a
default in the payment of the Obligations shall have occurred and be continuing,
any such indebtedness of the Borrower owed to any Guarantor, if collected or
received by such Guarantor, shall be held in trust by such Guarantor for the
holders of the Obligations and be paid over to the Administrative Agent for
application in accordance with this Agreement and the other Loan Documents.
5.10. Certain Releases. In the event that any asset sale permitted
under Section 9.3(d) consists in whole or in part of the sale of all of the
capital stock of (or other ownership interests in) a Subsidiary that is owned by
the Borrower or any other Subsidiary of the Borrower, upon the request of the
Borrower, the Administrative Agent shall release the Subsidiary whose stock (or
other ownership interests) has (have) been sold from any duties and obligations
to the Lenders pursuant to this Agreement and the other Loan Documents to which
such Subsidiary may be a party; provided that (a) at the times of such request
and release any Indebtedness evidenced by a Pledged Note made by such Subsidiary
has been fully satisfied, and (b) no Default has occurred and is continuing or
would result from such releases.
ARTICLE 6
CONDITIONS PRECEDENT
6.1. Conditions Precedent to Initial Loans and Letters of Credit. The
effectiveness of this Agreement, the obligations of the Issuing Bank to issue
Letters of Credit, the obligations of the Lenders to purchase participations in
Letters of Credit and the obligations of the Lenders to make the Loans are all
subject to the satisfaction by the Borrower and the Guarantors, to the extent
not waived by the Lenders, of the following conditions
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precedent, except to the extent that any of such conditions are to be satisfied
after the date hereof pursuant to Section 8.19:
6.1.1. Deliveries to the Administrative Agent. The
Administrative Agent shall have received, for the ratable benefit of each Lender
(and in such number of original counterparts or copies as the Administrative
Agent reasonably may specify), each of the following, in form and substance
satisfactory to the Administrative Agent, the Lenders, the Issuing Bank and
their respective counsel:
(a) Agreement. Counterpart originals of this Agreement, each
duly and validly executed and delivered by or on behalf of all the
appropriate parties thereto;
(b) Notes. The Notes, each duly and validly executed and
delivered on behalf of the Borrower;
(c) Security Documents. The Security Agreement, the Pledge
Agreement, the Assignment and Security Agreement and all of the other
Security Documents, each duly and validly executed and delivered by or
on behalf of all the appropriate parties thereto, together with (i)
acknowledgment copies of the financing statements duly filed under the
UCC of all jurisdictions necessary or, in the opinion of the
Administrative Agent, desirable to perfect the security interests
created by such Security Documents, and (ii) evidence of the public
recordation or filing of such of the Security Documents as the
Administrative Agent deems it necessary or desirable to record or file
publicly, in such offices as the Administrative Agent shall require;
(d) Pledged Stock. Certificates evidencing the Pledged
Stock, together with an appropriate stock power for each certificate,
duly executed in blank by the Borrower or the appropriate Guarantor, as
the case may be;
(e) Pledged Notes. The Pledged Notes, together with
appropriate instruments of assignment attached thereto, duly
endorsed in blank by the Borrower or the appropriate
Guarantor, as the case may be;
(f) Perfected Security Interest. Evidence of Lien searches,
through a date satisfactory to the Administrative Agent, showing no
Liens affecting the Collateral other than Liens in favor of the
Administrative Agent for the ratable benefit of the Lenders in
connection herewith;
(g) Organizational Documents. Copies of the
charters, articles or certificates of incorporation or other
organizational documents of the Borrower and each of its
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Subsidiaries, certified by the Secretary of State or other appropriate
public official in each jurisdiction of organization, all in form and
substance satisfactory to the Lenders;
(h) Bylaws. Copies of the bylaws, and all amendments
thereto, of the Borrower and each of its Subsidiaries, together with
certificates of the respective Secretaries or Assistant Secretaries of
the Borrower and each of such Subsidiaries, dated the date hereof,
stating that such copy is complete and correct;
(i) Good Standing and Authority. Certificates of the
appropriate governmental officials of each jurisdiction as the
Administrative Agent reasonably may request, dated within ten (10) days
of the date hereof, stating that the Borrower and each of its
Subsidiaries exists, is in good standing with respect to the payment of
franchise and similar taxes and is duly qualified to transact business
therein;
(j) Incumbency. Certificates of the respective Secretaries
or Assistant Secretaries of the Borrower and each of the Guarantors,
dated the date hereof, as to the incumbency and signature of all
officers of the Borrower or such Guarantor authorized to execute or
attest to this Agreement, the Notes and the other Loan Documents to
which the Borrower or each such Guarantor is a party, together with
evidence of the incumbency of each such Secretary or Assistant
Secretary;
(k) Resolutions. With respect to the Borrower and each of
the Guarantors (i) copies of the resolutions authorizing, approving and
ratifying this Agreement, the Notes, the Security Documents and the
other Loan Documents and the transactions contemplated herein and
therein, duly adopted by the respective boards of directors or other
managers of the Borrower and each of the Guarantors, together with (ii)
certificates of the respective Secretaries or Assistant Secretaries of
the Borrower and each of the Guarantors, dated the date hereof, stating
that each such copy is a true and correct copy of resolutions duly
adopted at a meeting, or by action taken on written consent, of the
board of directors or other managers of the Borrower or such Guarantor
and that such resolutions have not been modified, amended, rescinded or
revoked in any respect and are in full force and effect as of the date
hereof;
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(l) Legal Opinions of the Borrower's and Guarantors'
Counsel. The favorable legal opinions of (i) King & Spalding, counsel
to the Borrower and the Guarantors, (ii) Steel, Hector & Davis, special
Florida counsel to the Borrower and the Guarantors, and (iii) Johnson,
Smith, Pence, Densborn, Wright & Heath, LLP, special Indiana counsel to
the Borrower and the Guarantors, each dated the date hereof and
addressed to the Administrative Agent, the Lenders and the Issuing
Bank, substantially in the forms attached hereto as collective Exhibit
6.1.1A;
(m) Evidence of Indebtedness. If requested by the
Administrative Agent, (i) a copy of each indenture, loan agreement,
guaranty, promissory note or other evidence of Indebtedness other than
Contingent Obligations, Indebtedness incurred under the Loan Documents,
trade debt incurred in the ordinary course of business and obligations
under Operating Leases (together with all modifications, amendments,
restatements or supplements thereto) to which the Borrower, the
Guarantors or their respective Subsidiaries are parties constituting a
liability (contingent or otherwise) equal to or in excess of $500,000,
the terms and conditions of which shall be satisfactory to the
Administrative Agent, and (ii) a report certified by the respective
chief executive officers of the Borrower and each of the Guarantors
describing any default or failure of performance or any event that with
the giving of notice of, or the lapse of time, or both, would become a
default by the Borrower, the Guarantors or any of their respective
Subsidiaries under any of such documents, instruments or agreements;
(n) December 31, 1997 Financial Statements. The consolidated
balance sheet of the Borrower and its Subsidiaries as of December 31,
1997 and the related consolidated statements of income, shareholder's
equity and cash flows for the Fiscal Year then ended, audited and
reported upon, without qualification, by Ernst & Young LLP, together
with an unaudited consolidating balance sheet of the Borrower and its
Subsidiaries as of the end of such Fiscal Year and an unaudited
consolidating statement of income for such Fiscal Year, prepared by
such accountants and certified by a Responsible Officer of the
Borrower;
(o) September 30, 1998 Financial Statements. The unaudited
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as of September 30, 1998 and the related consolidated and
consolidating statement of income and the related consolidated
statements of shareholder's equity and cash flows for the period
commencing at the beginning of the current Fiscal Year and
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ending with the end of the Fiscal Quarter ended on such
date, certified by a Responsible Officer of the Borrower;
(p) Projections. The Projections;
(q) Officer's Certificate. A certificate of a Responsible
Officer of the Borrower and each of the Guarantors, dated the date
hereof, stating that (i) each of the representations and warranties
contained in Article 7 is true and correct at and as of the date hereof
with the same force and effect as if made on such date, (ii) all
obligations, covenants, agreements and conditions contained in this
Agreement to be performed or satisfied by the Borrower or such
Guarantor on or prior to the date hereof have been performed or
satisfied in all respects, (iii) since September 30, 1998, there has
been no Material Adverse Change, and (iv) no Default has occurred or is
continuing, and in addition setting forth in such detail as shall be
required by the Lenders calculations showing that as of the date hereof
and after giving effect to the transactions that are the subject hereof
the Borrower and the Guarantors are in compliance with Article 10;
(r) Solvency Certificates. (i) A solvency certificate of a
Responsible Officer of the Borrower, in substantially the form of
Exhibit 6.1.1B hereto, and (ii) a solvency certificate of the
Responsible Officer of each Guarantor, in substantially the form of
Exhibit 6.1.1C (collectively, the "Solvency Certificates");
(s) Consents. Evidence that the Borrower and each Guarantor
have obtained all requisite consents and approvals required to be
obtained from any Person to permit the transactions contemplated by
this Agreement, the Notes and the other Loan Documents to be
consummated in accordance with their respective terms and conditions;
and
(t) Other Matters. All other documents, instruments,
agreements, opinions, certificates, insurance policies, consents and
evidences of other legal matters, in form and substance satisfactory to
the Administrative Agent and its counsel, as the Administrative Agent
reasonably may request.
6.1.2. Compliance with Laws. The Borrower, the Guarantors
and their respective Subsidiaries shall not be in violation of, and shall not
have received notice of any violation of, any applicable Requirement of Law,
including any building, zoning, occupational safety and health, fair employment,
equal opportunity, pension, environmental control, health care, certificate of
need, health care facility licensing or similar federal, state or local law,
ordinance or regulation, relating to the ownership or operation of its business
or assets, if such
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violation or non-compliance could have a Material Adverse Effect, and if
requested by the Administrative Agent the Borrower, the Guarantors or their
respective Subsidiaries shall have furnished to the Administrative Agent and the
Lenders copies of all required approvals (including required operating licenses
and permits) of any Governmental Authority.
6.1.3. No Material Adverse Change. Since
September 30, 1998, no Material Adverse Change, as reasonably
determined by the Administrative Agent, the Lenders and the
Issuing Bank, shall have occurred.
6.1.4. No Material Misrepresentation. No material
misrepresentation or omission shall have been made by or on behalf of the
Borrower or any Guarantor to the Administrative Agent, the Lenders or the
Issuing Bank with respect to the Borrower's or such Guarantor's business
operations or financial or other condition.
6.1.5. Legal Proceedings. No action, suit, proceeding or
investigation shall be pending before or threatened by any court or Governmental
Authority with respect to the transactions contemplated hereby or that may have
a Material Adverse Effect (as reasonably determined by the Administrative Agent,
the Lenders and the Issuing Bank).
6.2. Conditions Precedent to All Loans and Letters of Credit. The
obligations of each of the Lenders to make any Loans (including Loans used to
refinance or repay other Loans or Letter of Credit Liabilities) on any date
(including the date hereof), and the obligations of the Issuing Bank to issue or
extend Letters of Credit on any date (including the date hereof), are subject to
the satisfaction of the conditions set forth below in this Section 6.2. Each
request for Loans or for a Letter of Credit hereunder shall constitute a
representation and warranty by the Borrower to the Administrative Agent, each
Lender and the Issuing Bank, as of the date of the making of such Loans or the
issuance of such Letter(s) of Credit, that the conditions in this Section 6.2
have been satisfied.
6.2.1. Satisfaction of Conditions Precedent to
Initial Loans and Letters of Credit. The conditions precedent
set forth in Section 6.1 shall have been satisfied.
6.2.2. Representations and Warranties. The
representations and warranties of the Borrower and the Guarantors set forth in
this Agreement, the Notes and the other Loan Documents and in any certificate,
opinion or other statement provided at any time by or on behalf of the Borrower
or any Guarantor in connection herewith shall be true and correct on and as of
the date of the making of such Loans or the issuance of such Letter(s) of Credit
as if made on and as of such date,
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except for such changes as are permitted by the terms of this
Agreement.
6.2.3. No Default. No Default shall have occurred and be
continuing on the date of the requested Borrowing or Letter of Credit issuance
or after giving effect to such Borrowing or Letter of Credit issuance.
6.2.4. No Violations. No law or regulation shall prohibit
the making of the requested Loan or the issuance of the requested Letter of
Credit and no order, judgment or decree of any court or Governmental Authority
shall, and no litigation shall be pending that in the judgment of the
Administrative Agent or Requisite Lenders would, enjoin, prohibit or restrain
any Lender from making a requested Loan or the Issuing Bank from issuing a
requested Letter of Credit.
6.2.5. Proceedings Satisfactory. All proceedings in
connection with the making of any Loan, the issuance of any Letter of Credit and
the other transactions contemplated by this Agreement, the Loan Documents and
all documents incidental thereto shall be reasonably satisfactory to the
Administrative Agent, and the Administrative Agent shall have received all such
information and such counterpart originals or certified or other copies of such
documents as the Administrative Agent reasonably may request.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent, the Lenders and the
Issuing Bank to enter into this Agreement, to make the Loans, to issue the
Letters of Credit and to provide the other financial accommodations provided for
herein, the Borrower and each of the Guarantors hereby make the following
representations and warranties to the Administrative Agent, each Lender and the
Issuing Bank:
7.1. Existence and Power. The Borrower, each of the Guarantors and each
of their respective Subsidiaries are corporations duly organized, validly
existing and in good standing under the laws of the jurisdiction indicated next
to the name of such entity on Schedule 7.1. The Borrower, each of the Guarantors
and each of their respective Subsidiaries have the power, authority and legal
right to own and operate their respective properties and assets, to lease the
properties and assets they operate under lease and to carry on their respective
businesses as they are now being conducted and intended to be conducted, and are
duly qualified to transact business in, and in
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good standing under the laws of, each jurisdiction in which their ownership,
lease or operation of property or the conduct of their respective businesses
requires such qualification, except to the extent that failure to qualify to
transact business will not have a Material Adverse Effect.
7.2. Authorization and Enforceability of Obligations. The Borrower,
each of the Guarantors and each of their respective Subsidiaries (a) have the
power, authority and legal right to enter into this Agreement and such of the
Loan Documents to which each is a party and to enter into and perform their
respective obligations hereunder and thereunder, and (b) have taken all
necessary action on the part of each to authorize the execution and delivery of
such documents, instruments and agreements and the performance of their
respective obligations hereunder and thereunder. This Agreement, the Notes and
the other Loan Documents have been duly executed and delivered on behalf of the
Borrower, each of the Guarantors and such of their respective Subsidiaries as
are parties to such Loan Documents, and constitute legal, valid and binding
obligations, enforceable against the Borrower, the Guarantors and their
respective Subsid iaries as are parties hereto or thereto in accordance with
their respective terms.
7.3. No Consents. Except as set forth on Schedule 7.3, all necessary
consents, approvals and authorizations of, filings with and acts by or with
respect to all Governmental Authorities and other Persons required to be
obtained, made or taken in connection with the execution, delivery, performance,
validity or enforceability of this Agreement, the Notes and the other Loan
Documents, or otherwise in connection with the transactions contemplated hereby,
have been obtained, made or taken and remain in effect.
7.4. No Conflict. The execution and delivery of this Agreement, the
Notes and the other Loan Documents, the transactions contemplated hereby, the
use of the proceeds of the Loans and the Letters of Credit and the performance
by the Borrower, the Guarantors and their respective Subsidiaries as are parties
to the Loan Documents of their respective obligations hereunder and thereunder
(a) do not conflict with or violate any Requirement of Law or any Contractual
Obligation of the Borrower, such Guarantor or such Subsidiary, except to the
extent that any such violation or conflict will not have a Material Adverse
Effect, and (b) do not conflict with, constitute a default or require any
consent under, or result in the creation of any Lien upon any property or assets
of the Borrower, such Guarantor or such Subsidiary pursuant to any Contractual
Obligation of the Borrower, such Guarantor or such Subsidiary (other than Liens
in favor of the Administrative Agent, the Lenders and the Issuing Bank), except
to the extent that any such conflict or default or
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the failure to obtain any necessary consent will not have a
Material Adverse Effect.
7.5. Financial Statements; Projections; Solvency.
(a) The consolidated balance sheet of the Borrower and its
Subsidiaries as of December 31, 1997, together with the related
consolidated statements of income, shareholders' equity and cash flows
for the Fiscal Year then ended, together with the opinion of Ernst &
Young LLP with respect thereto, and together with the unaudited
consolidating balance sheet of the Borrower and its Subsidiaries as of
the end of such Fiscal Year and the unaudited consolidating statement
of income for such Fiscal Year, copies of all of which have been
furnished to the Administrative Agent, are complete and correct and
fairly present the assets, liabilities and consolidated financial
position of the Borrower and its Subsidiaries as at such date and the
consolidated results of their operations and their cash flows for the
Fiscal Year then ended.
(b) The unaudited consolidated and consolidating balance
sheet of the Borrower and its Subsidiaries as of September 30, 1998,
together with the related consolidated and consolidating statement of
income and the related consolidated statements of shareholders' equity
and cash flows for the period commencing at the beginning of such
Fiscal Year and ending with the end of the Fiscal Quarter ended on such
date, copies of all of which have been furnished to the Administrative
Agent, are complete and correct and, subject to customary year-end
adjustments that are not anticipated to be material, fairly present the
assets, liabilities and consolidated financial position of the Borrower
and its Subsidiaries as at such date and the consolidated results of
their operations and their cash flows for such period.
(c) In the opinion of the management of the Borrower, the
assumptions used in the preparation of the Projections were reasonable
when made and as of the date of such Projections. The Projections were
prepared in good faith by executive and financial personnel of the
Borrower in light of the historical financial performance and the
financial and operating condition of the Borrower and its Subsidiaries
at the time prepared and, in the opinion of the management of the
Borrower and the Guarantors, represented, as of the date of such
Projections, a reasonable estimate of the future performance and
financial condition of the Borrower and its Subsidiaries for the
periods included therein, subject to the uncertainties and
approximations inherent in the making of any financial projections and
without
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assurance that the projected performance and financial
condition actually will be achieved.
(d) The financial statements described in the preceding
paragraphs (a) and (b), including the related schedules and notes
thereto, have been prepared in conformity with GAAP applied
consistently throughout the periods involved. Neither the Borrower nor
any of its Subsidiaries has any material Indebtedness, obligation or
other unusual forward or long-term commitment that is not fairly
reflected in the foregoing financial statements or in the notes
thereto.
(e) After giving effect to the consummation of the
transactions contemplated by this Agreement, the making of Loans
hereunder, the issuance of Letters of Credit hereunder, the incurrence
by the Borrower of the Obligations and the incurrence by the Guarantors
of the Guaranteed Obligations, each of the Borrower, the Guarantors and
their respective Subsidiaries is Solvent.
7.6. Absence of Litigation. Except as otherwise set forth in Schedule
7.6, there are no actions, suits, proceedings or other litigation (including
proceedings by or before any arbitrator or Governmental Authority) pending or
threatened against or affecting the Borrower, the Guarantors or any of their
respective Subsidiaries, nor to the knowledge of the Borrower and the Guarantors
is there any basis therefor, (a) that challenge the validity or propriety of the
transactions contemplated hereby, or (b) that reasonably can be expected to be
adversely determined and, if adversely determined, to have a Material Adverse
Effect, either individually or in the aggregate.
7.7. No Default. Neither the Borrower nor any Guarantor nor any of
their respective Subsidiaries is in default (nor has any event occurred that
with notice or lapse of time or both would constitute a default) under any
Contractual Obligation of the Borrower, any Guarantor or any of their respective
Subsidiaries, if such default or event could have a Material Adverse Effect. No
Default has occurred and is continuing.
7.8. Security Documents. The Security Documents create in favor of the
Administrative Agent for the benefit of the Issuing Bank and the ratable benefit
of the Lenders valid, perfected security interests in the Collateral subject to
no Liens other than Permitted Liens. The security interests granted in favor of
the Administrative Agent as contemplated by this Agreement and the Security
Documents do not constitute a fraudulent conveyance under the federal Bankruptcy
Code or any applicable state law.
7.9. Capital Stock. The capitalization of the Borrower,
the Guarantors and their respective Subsidiaries consists of such
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number of shares, authorized, issued and outstanding, of such classes and
series, with or without such par value, as are set forth in Schedule 7.1. All
such outstanding shares have been duly authorized and validly issued and are
fully paid and nonassessable. There are no outstanding stock purchase warrants,
subscriptions, options, securities, instruments or other rights of any type or
nature whatsoever that are convertible into, exchangeable for or otherwise
provide for the issuance of capital stock of the Borrower, any Guarantor or any
of their respective Subsidiaries, except as described in Schedule 7.1.
7.10. Taxes. The Borrower, the Guarantors and their respective
Subsidiaries have filed all tax returns that were required to be filed in any
jurisdiction and have paid all taxes shown thereon to be due or otherwise due
upon the Borrower, the Guarantors, their respective Subsidiaries or their
respective properties, income or franchises, including interest, assessments,
fees and penalties, or have provided adequate reserves for the payment thereof.
To the knowledge of the Borrower and the Guarantors, no claims are threatened,
pending or being asserted with respect to, or in connection with, any return
referred to in this Section 7.10 that, if adversely determined, could have a
Material Adverse Effect.
7.11. No Burdensome Restrictions. No Contractual Obligation of the
Borrower, any Guarantor or any of their respective Subsidiaries, and no
Requirement of Law relating to or otherwise affecting the Borrower, the
Guarantors or any of their respective Subsidiaries or any of their respective
properties, businesses or operations, materially and adversely affects, or
insofar as any of them may reasonably foresee could so affect, the properties,
businesses, prospects, results of operations, management or financial or other
condition of the Borrower and its Subsidiaries, taken as a whole, or could
affect the ability of the Borrower, any Guarantor or any of their respective
Subsidiaries to perform its obligations under this Agreement, the Notes and the
other Loan Documents to which it is a party.
7.12. Judgments. There are no outstanding or unpaid
judgments against the Borrower, any of the Guarantors or any of
their respective Subsidiaries.
7.13. Subsidiaries. Each of the Subsidiaries of the Borrower and the
Guarantors as of the date hereof is set forth in Schedule 7.1. Each such
Subsidiary is wholly owned by the Borrower or a Guarantor. Schedule 7.1 also
shows as of the date hereof as to each such Subsidiary the jurisdiction of its
incorporation or formation, the number of shares of each class of capital stock
outstanding, the direct owner of the outstanding shares of each such class
owned, and the jurisdictions in which such Subsidiary is qualified to do
business as a foreign corporation.
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7.14. ERISA. No "prohibited transaction" or "accumulated funding
deficiency" (each as defined in ERISA) or Reportable Event has occurred with
respect to any Single Employer Plan, or to the knowledge of Borrower and the
Guarantors with respect to any Multi-Employer Plan. As of the most recent
actuarial valuation of any such Plan, the actuarial present value of all
benefits under each Plan (based on those assumptions used to fund the Plan) does
not exceed the fair market value of the assets of the Plan allocable to such
benefits. The Borrower, the Guarantors, their respective Subsidiaries and each
Commonly Controlled Entity are in compliance in all material respects with ERISA
and the rules and regulations promulgated thereunder.
7.15. Margin Securities. None of the Borrower, the Guarantors or any of
their respective Subsidiaries is engaged principally in, nor has as one of its
significant activities, the business of extending credit for the purpose of
purchasing or carrying "margin stock" as that term is defined in Regulation U
promulgated by the Board of Governors of the Federal Reserve System, as now in
effect. No part of the Indebtedness evidenced by the Notes, or otherwise created
in connection with this Agreement or the other Loan Documents, has been or will
be used, directly or indirectly, for the purpose of purchasing any such margin
stock. If requested by the Administrative Agent or any of the Lenders, the
Borrower shall furnish or cause to be furnished to the Administrative Agent and
each such Lender a statement, in conformity with the requirements of Federal
Reserve Form U-1 referred to in Regulation U, to the foregoing effect.
7.16. Investment Company Act. None of the Borrower, the Guarantors or
any of their respective Subsidiaries is an "investment company," or company
"controlled" by an investment company within the meaning of the Investment
Company Act of 1940, as now in effect.
7.17. Indebtedness and Contingent Obligations. Set forth on Schedule
7.17A hereto is a complete and correct list of all Indebtedness (other than
Contingent Obligations, Indebtedness incurred under the Loan Documents, trade
debt incurred in the ordinary course of business and obligations under Operating
Leases) of the Borrower, each Guarantor and each of their respective
Subsidiaries and the aggregate principal amount thereof outstanding on the date
hereof. Set forth on Schedule 7.17B is a complete and correct list of all
Contingent Obligations (other than any Contingent Obligations created under the
Loan Documents) of the Borrower, each Guarantor and each of their respective
Subsidiaries and the aggregate amount thereof outstanding on the date hereof.
7.18. Business Locations and Trade Names. Set forth on
Schedule 7.18A is a complete and correct list of the locations
where each of the Borrower, the Guarantors and their respective
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Subsidiaries maintain their respective chief executive offices, their principal
places of business, an office, a place of business or any material financial
records. Set forth on Schedule 7.18B is a complete and correct list of each name
under or by which each of the Borrower, the Guarantors and their respective
Subsidiaries presently conducts its business or has conducted its business
during the past seven years.
7.19. Title to Assets. The Borrower, the Guarantors and their
respective Subsidiaries have good and marketable title (or good and marketable
leasehold interests with respect to leased property) to all their respective
assets (including all assets constituting a part of the Collateral and all
assets reflected in the consolidated balance sheet as of December 31, 1997),
subject to no Liens other than Permitted Liens.
7.20. Labor Matters. There are no disputes or controversies pending
between the Borrower, the Guarantors or their respective Subsidiaries and their
respective employees, the outcome of which reasonably may be expected to have a
Material Adverse Effect.
7.21. Business. There is no pending or threatened claim, action, suit,
proceeding or other litigation against or affecting the Borrower, the Guarantors
or their respective Subsidiaries contesting the right of the Borrower, the
Guarantors or their respective Subsidiaries to conduct their businesses as
presently conducted or as proposed to be conducted, and there are no other facts
or circumstances that have had or reasonably may be expected to have a Material
Adverse Effect.
7.22. Compliance with Laws. The Borrower and its Subsidiaries (a) have
not been, are not and will not be in violation of any applicable Requirement of
Law, including any building, zoning, occupational safety and health, fair
employment, equal opportunity, pension, environmental control, health care,
certificate of need, health care facility licensing or similar federal, state or
local law, ordinance or regulation, relating to the ownership or operation of
their respective businesses or assets, (b) have not failed to obtain any
license, permit, certificate or other governmental authorization necessary for
the conduct of their businesses or the ownership and operation of their assets,
(c) have not received any notice from any Governmental Authority, and to their
knowledge no such notice is pending or threatened, alleging that the Borrower,
any Guarantor or any of their respective Subsidiaries has violated, or has not
complied with, any Requirement of Law, condition or standard applicable with
respect to any of the foregoing, and (d) are not a party to any agreement or
instrument, or subject to any judgment, order, writ, rule, regulation, code or
ordinance, except to the extent that any violation, noncompliance, failure,
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agreement, judgment, etc. as described in this Section 7.22 will
not have a Material Adverse Effect.
7.23. Service Contracts. Schedule 7.23 is a true, correct and complete
listing of all Service Contracts in effect on the date of this Agreement. Other
than as set forth on Schedule 7.23, each such Service Contract is in full force
and effect in accordance with the terms thereof and there are no material
defaults under any Service Contract by the Borrower, the Guarantors or any of
their respective Subsidiaries as are parties thereto. To the knowledge of the
Borrower and the Guarantors, there is no pending or threatened claim, action,
suit, proceeding, litigation or investigation in connection with any Service
Contract involving the Borrower, any Guarantor or any of their respective
Subsidiaries. The Borrower, the Guarantors and their respective Subsidiaries
have timely filed or caused to be timely filed all reports required to be made
with respect to payment under the Service Contracts, and all such reports are,
or when filed will be, complete and accurate. Except as may be disclosed in the
financial statements referred to in Section 7.5, the Borrower, the Guarantors
and each of their respective Subsidiaries have no liability (regardless of
whether disclosed in any report heretofore or hereafter made) under or in
connection with the Service Contracts for any refund, discount or adjustment to
any Person that has not been fully reserved for, and no interest or penalties
are accruing with respect thereto, except to the extent that the aggregate
amount of all such liabilities will not have a Material Adverse Effect.
7.24. Governmental Authorizations; Permits, Licenses and Accreditation;
Other Rights. The Borrower and its Subsidiaries have all licenses, permits,
approvals, registrations, contracts, consents, franchises, qualifications,
certificates of need, accreditations and other authorizations necessary for the
lawful conduct of their respective businesses or operations wherever now
conducted and as planned to be conducted, pursuant to all applicable statutes,
laws, ordinances, rules and regulations of all Governmental Authorities having,
asserting or claiming jurisdiction over the Borrower and its Subsidiaries or
over any part of their respective operations. Copies of all such licenses,
permits, approvals, registrations, contracts, consents, franchises,
qualifications, certificates of need, accreditations and other authorizations
shall be provided to the Administrative Agent upon request. The Borrower and its
Subsidiaries are not in default under any of such licenses, permits, approvals,
registrations, contracts, consents, franchises, qualifications, certificates of
need, accreditations and other authorizations, and no event has occurred, and no
condition exists, that with the giving of notice, the passage of time or both
would constitute a default thereunder or would result in the suspension,
revocation, impairment, forfeiture or non-renewal of any thereof, except to the
extent that the cumulative effect of all such defaults,
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events, conditions, suspensions, revocations, impairments, forfeitures and
non-renewals will not have a Material Adverse Effect. The continuation, validity
and effectiveness of all such licenses, permits, approvals, registrations,
contracts, consents, franchises, qualifications, certificates of need,
accreditations and other authorizations will not be adversely affected by the
transactions contemplated by this Agreement. The Borrower and its Subsidiaries
know of no reason why they will not be able to maintain after the date hereof
all licenses, permits, approvals, registrations, contracts, consents,
franchises, qualifications, certificates of need, accreditations and other
authorizations necessary or appropriate to conduct the businesses of the
Borrower and its Subsidiaries as now conducted and presently planned to be
conducted.
7.25. No Material Adverse Change. Since September 30, 1998
there has been no Material Adverse Change.
7.26. Employment and Investment Agreements. Set forth on Schedule 7.26
is a complete and accurate list, as of the date hereof, of (a) all employment
agreements and executive compensation arrangements to which the Borrower, the
Guarantors or any of their respective Subsidiaries is a party and which provide
for aggregate compensation (including bonuses) to any Person (assuming
compliance with or satisfaction of all contingencies or conditions) of $200,000
or more per year, and (b) all agreements relating to the voting or disposition
of any outstanding shares of capital stock of the Borrower's Subsidiaries and,
to the Borrower's knowledge, of the Borrower.
7.27. Environmental Matters. Except as disclosed in Schedule 7.27, (a)
none of the Borrower, the Guarantors or any of their respective Subsidiaries,
nor any of the properties owned or leased thereby or operations thereof, nor, to
the knowledge of the Borrower and the Guarantors, any current or prior owner,
lessor or operator (other than the Borrower or any Guarantor or any of their
respective Subsidiaries) of any properties owned or leased by Borrower or any
Guarantor or any of their respective Subsidiaries, is in violation of any
applicable Environmental Law or any restrictive covenant or deed restriction
relating to environmental matters (recorded or otherwise) or subject to any
existing, pending or threatened investigation, inquiry or proceeding by any
Governmental Authority or subject to any remedial obligations under any
Environmental Law, except to the extent that the cumulative effect of all such
violations, investigations, inquiries, proceedings and remedial obligations will
not have a Material Adverse Effect; (b) all permits, licenses and approvals
required of the Borrowers, the Guarantors or any of their respective
Subsidiaries with respect to Hazardous Materials, including past or present
treatment, storage, disposal or release of any Hazardous Materials or solid
waste into the environment, have been obtained or filed; (c) all Hazardous
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Materials or solid waste generated by the Borrower, any Guarantor or any of
their respective Subsidiaries have in the past been, and will continue to be,
transported, treated and disposed of only by carriers maintaining valid permits
under all applicable Environmental Laws and only at treatment, storage and
disposal facilities maintaining valid permits under applicable Environmental
Laws, which carriers and facilities have been and are, to the knowledge of the
Borrower and the Guarantors, operating in compliance with such permits; (d) the
Borrower, the Guarantors and their respective Subsidiaries have taken all
reasonable steps necessary to determine, and have determined, that no Hazardous
Materials or solid wastes have been disposed of or otherwise released by them
except in compliance with Environmental Laws; and (e) neither the Borrower nor
any Guarantor nor any of their respective Subsidiaries has a material contingent
liability in connection with any release of any Hazardous Materials or solid
waste into the environment, and in connection herewith the Borrower hereby
agrees to pursue diligently the resolution of any environmental issues disclosed
in Schedule 7.27 by all necessary and appropriate actions and shall report to
the Administrative Agent not less frequently than quarter-annually as to the
status of the resolution of such issues.
7.28. Material Contracts. Set forth on Schedule 7.28 hereto is a
complete and accurate list of all Material Contracts of the Borrower, each of
the Guarantors and each of their respective Subsidiaries. Other than as set
forth on Schedule 7.28, each such Material Contract is in full force and effect
in accordance with the terms thereof and there are no material defaults by the
Borrower, the Guarantors or any of their respective Subsidiaries as are parties
thereto or, to the knowledge of the Borrower and the Guarantors, by any other
party, under any such Material Contract. The Borrower has delivered to the
Administrative Agent a true and complete copy of each Material Contract required
to be listed on Schedule 7.28.
7.29. No Misstatements. Neither this Agreement nor any of the other
Loan Documents, nor any agreement, instrument or other document executed
pursuant hereto or thereto or in connection herewith or therewith, nor any
certificate, statement or other information referred to herein or therein or
furnished to the Administrative Agent, any Lender or the Issuing Bank pursuant
hereto or thereto or in connection herewith or therewith, contains any
misstatement of a material fact or omits to state any material fact necessary to
make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading on the date hereof or
on the date furnished, as the case may be, except as otherwise disclosed to the
Administrative Agent, the Lenders and the Issuing Bank in writing on or prior to
the date hereof. Neither the Borrower nor any Guarantor is aware of any fact
that it has not disclosed in
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writing to the Administrative Agent that materially and adversely affects, or
insofar as the Borrower or such Guarantor can now reasonably foresee, could
materially and adversely affect, the properties, businesses, results of
operations or financial or other condition of the Borrower and its Subsidiaries,
taken as a whole, the Administrative Agent's, the Lenders' or the Issuing Bank's
rights or the ability of the Borrower, any Guarantor or any of their respective
Subsidiaries to perform its obligations under this Agreement and the other Loan
Documents to which it is a party.
7.30. Operating Leases. Schedule 7.30 sets forth each Operating Lease
existing on the date hereof providing for annual lease payments in excess of
$100,000.
7.31. Year 2000 Compliance. The Borrower, the Guarantors and their
respective Subsidiaries have analyzed and are continuing to analyze the
operations thereof that could be affected adversely by a failure to be Year 2000
Compliant in a timely manner and have developed plans and procedures for
assuring that they are or will be Year 2000 Compliant in a timely manner, the
implementation of which is on schedule in all material respects. The Borrower
and the Guarantors reasonably believe that they, their respective Subsidiaries
and the operations thereof, and all suppliers, vendors and other Persons whose
performance is material to such operations, will be Year 2000 Compliant in a
timely manner, except to the extent that a failure to be Year 2000 Compliant
will not have a Material Adverse Effect.
ARTICLE 8
AFFIRMATIVE COVENANTS
So long as any Obligations are unpaid or outstanding, any Obligation
under the Loan Documents is unperformed or any of the Commitments are in effect,
the Borrower and Guarantors shall:
8.1. Financial Statements.
8.1.1. Annual Financial Statements and Reports. Furnish to
the Administrative Agent and each Lender, as soon as available and in any event
within ninety (90) days after the end of each Fiscal Year of the Borrower, a
consolidated balance sheet of the Borrower and its Subsidiaries as of the end of
such Fiscal Year and the related consolidated statements of income,
shareholders' equity and cash flows of the Borrower and its Subsidiaries for
such Fiscal Year, audited and reported upon, without qualification, by Ernst &
Young LLP or other independent public accountants acceptable to Requisite
Lenders, accompanied
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by an unaudited consolidating balance sheet of the Borrower and its Subsidiaries
as of the end of such Fiscal Year and an unaudited consolidating statement of
income for such Fiscal Year, prepared by such accountants and certified by a
Responsible Officer of the Borrower, together with (a) a certificate of a
Responsible Officer of the Borrower stating that no Default has occurred and is
continuing or, if in the opinion of such officer, a Default has occurred and is
continuing, a statement as to the nature thereof and the action that the
Borrower proposes to take with respect thereto, (b) a certificate of a
Responsible Officer of the Borrower, in form satisfactory to the Administrative
Agent and the Lenders, setting forth computations demonstrating compliance with
all financial covenants contained herein as of the end of such Fiscal Year, and
(c) a written discussion and analysis by the management of the Borrower of the
financial statements furnished in respect of such annual fiscal period.
8.1.2. Quarterly Financial Statements and Reports. Furnish
to the Administrative Agent and each Lender, as soon as available and in any
event within forty-five (45) days after the end of each Fiscal Quarter of the
Borrower (other than the last Fiscal Quarter in any Fiscal Year) an unaudited
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as of the end of such Fiscal Quarter, the related consolidated and
consolidating statement of income of the Borrower and its Subsidiaries for the
period commencing at the beginning of the current Fiscal Year and ending with
the end of such Fiscal Quarter and the related consolidated statements of
shareholders' equity and cash flows of the Borrower and its Subsidiaries for
such period, certified by a Responsible Officer of the Borrower, together with
(a) a certificate of said Responsible Officer stating that no Default has
occurred and is continuing or, if in the opinion of such officer, a Default has
occurred and is continuing, a statement as to the nature thereof and the action
that the Borrower proposes to take with respect thereto, (b) a certificate of a
Responsible Officer of the Borrower, in form satisfactory to the Administrative
Agent and the Lenders, setting forth computations demonstrating compliance with
all financial covenants contained herein as of the end of such period, and (c) a
written discussion and analysis by the management of the Borrower of the
financial statements furnished in respect of such period.
8.1.3. Monthly Financial Statements and Reports. Furnish to
the Administrative Agent and each Lender, as soon as available and in any event
within thirty (30) days after the end of each month, an unaudited consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of such month,
the related consolidated statement of income of the Borrower and its
Subsidiaries for such month and a schedule of Service Contract operating margins
for such month, certified by a Responsible Officer of the Borrower, together
with a certificate of said
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Responsible Officer stating that no Default has occurred and is continuing or,
if in the opinion of such officer, a Default has occurred and is continuing, a
statement as to the nature thereof and the action that the Borrower proposes to
take with respect thereto.
8.1.4. GAAP. Take all actions necessary to cause all such
financial statements to be complete and correct in all material respects and to
be prepared in reasonable detail and in conformity with GAAP applied
consistently throughout the periods reflected therein (except as may be approved
by such accountants or Responsible Officer, as the case may be, and disclosed
therein).
8.2. Certificates and Other Information. Furnish to the Administrative
Agent and each Lender, each in form and substance acceptable to Requisite
Lenders:
8.2.1. Management Letters. Promptly after the same are
received by the Borrower, copies of management letters provided to the Borrower
by its independent certified public accountants that describe or refer to any
inadequacy, defect, problem, qualification or other lack of satisfactory
accounting controls utilized by the Borrower or any of its Subsidiaries.
8.2.2. Shareholder Materials. (a) Within two (2) Business
Days after the delivery of same to the shareholders of the Borrower, copies of
all financial statements and reports that the Borrower, any Guarantor or any of
their respective Subsidiaries sends to the shareholders of the Borrower, and (b)
concurrently with the filing thereof, copies of all reports and statements of
the Borrower, the Guarantors and their respective Subsidiaries (including proxy
and information statements, quarterly, annual and current reports and
registration statements, but excluding those pertaining only to employee benefit
plans) that it may make to, or file with, the Commission.
8.2.3. Budgets. As soon as available, and in any event not
later than sixty (60) days after the end of each Fiscal Year of the Borrower,
twelve (12) month budgeted financial statements (including balance sheets and
statements of income, shareholders' equity and cash flows and a statement of
budgeted Capital Expenditures (including a separate item for Maintenance Capital
Expenditures), and including a reasonably detailed description of all underlying
assumptions) of the Borrower and its Subsidiaries on a consolidated basis for
the following Fiscal Year, and twelve (12) month consolidating budgeted
statements of income of the Borrower and each of its Subsidiaries for the
following Fiscal Year, all in a format reasonably acceptable to Requisite
Lenders and certified by a Responsible Officer of the Borrower as being fairly
stated in good faith. Any updates
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thereto shall be provided upon request of the Administrative
Agent.
8.2.4. Asset Acquisitions. Not later than thirty (30) days
prior to the consummation of any Asset Acquisition, notice of the pendency of
such Asset Acquisition (or if such notice is not reasonably practicable, such
prior notice not less than fifteen (15) Business Days prior to such consummation
as is reasonably practicable), and not later than fifteen (15) Business Days
prior to the consummation of such Asset Acquisition, the following:
(a) a reasonably detailed description of the operating
profile for the assets to be acquired in such Asset Acquisition, and
(b) a reasonably detailed description of the terms and
conditions of such Asset Acquisition, including the purchase price and
the manner and structure of payment(s), accompanied by copies of the
then-current drafts of the proposed acquisition agreement(s), and
(c) with respect to any Permitted Acquisition, a certificate
duly executed by a Responsible Officer of the Borrower, in form
satisfactory to the Administrative Agent, certifying that no Default
has occurred or is continuing or will result from such Asset
Acquisition, certifying that after giving Pro Forma Effect to such
Asset Acquisition such Responsible Officer reasonably believes that
such Asset Acquisition will not result in a violation of any of the
financial covenants contained herein during the twelve (12) month
period following such Asset Acquisition, and setting forth computations
demonstrating compliance with all financial covenants contained herein
as of the end of the Fiscal Quarter then most recently completed, after
giving Pro Forma Effect to such Asset Acquisition, and
(d) with respect to any Asset Acquisition that does not
constitute a Permitted Acquisition:
(1) copies of financial statements for the assets to
be acquired for the two (2) most recent fiscal years and for
any subsequent interim accounting periods, and
(2) a certificate duly executed by a Responsible
Officer of the Borrower, in form satisfactory to the
Administrative Agent, certifying that no Default has
occurred or is continuing or will result from such Asset
Acquisition (assuming Requisite Lenders consent to or waive
any violation of subsection 9.7(c)), certifying that after
giving Pro Forma Effect to such
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Asset Acquisition such Responsible Officer reasonably
believes that such Asset Acquisition will not result in a
violation of any of the financial covenants contained herein
during the twelve (12) month period following such Asset
Acquisition, and setting forth computations demonstrating
compliance with all financial covenants contained herein as
of the end of the Fiscal Quarter then most recently
completed, after giving Pro Forma Effect to such Asset
Acquisition.
8.2.5. Acquisition Documents. Not later than fifteen (15)
days after the consummation of any Asset Acquisition, copies of the executed
documents evidencing the transaction.
8.2.6. Communications Regarding Service Contracts. Within
fifteen (15) days following the receipt thereof, a copy of any audit, statement,
notice of deficiency or default, or other report or communication from any
Governmental Authority or other Person relating to performance by the Borrower
or any of its Subsidiaries under any Service Contract.
8.2.7. Lag Studies. Promptly after any time that the
aggregate liability of the Borrower and its Subsidiaries for medical claims
payable under Service Contracts is less than an amount equal to forty-five (45)
days' health care expense under Service Contracts, updated lag studies prepared
by Txen, Inc. or another independent medical claims processing consultant
acceptable to the Administrative Agent, in form satisfactory to the
Administrative Agent, regarding the Service Contracts.
8.2.8. Reports to Other Persons. Promptly after the
furnishing thereof, copies of any statement or report furnished to any other
holder of any Indebtedness of the Borrower, any of the Guarantors or any of
their respective Subsidiaries pursuant to the terms of any indenture, loan or
credit or similar agreement and not otherwise required to be furnished to the
Administrative Agent or Lenders pursuant to any other clause of this Section
8.2.
8.2.9. Funded Indebtedness. Promptly upon request by the
Administrative Agent, copies of all agreements, instruments and/or documents
evidencing or otherwise related to Consolidated Funded Indebtedness.
8.2.10. Employment and Investment Agreements. Promptly upon
request by the Administrative Agent, a true and complete copy of each of the
agreements required to be listed on Schedule 7.26.
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8.2.11. Additional Information. Promptly, such additional
financial and other information as the Administrative Agent or any Lender from
time to time reasonably may request.
8.3. Provision of Notices. Notify the Administrative Agent and each
Lender of the occurrence of any of the following events not later than five (5)
days after the Borrower or any Guarantor knows or has reason to know of such
event:
8.3.1. Default. Any Default.
8.3.2. Other Default or Litigation. (a) Any default or event
of default under any Contractual Obligation of the Borrower, any Guarantor or
any of their respective Subsidiaries that reasonably could be expected to have a
Material Adverse Effect, (b) any litigation, investigation or proceeding that
may exist at any time between the Borrower, any Guarantor or any of their
respective Subsidiaries and any Governmental Authority (excluding, however,
audits and inquiries made in the ordinary course of business), or (c) any other
litigation that if adversely determined reasonably could be expected to have a
Material Adverse Effect.
8.3.3. Reportable Events. (a) Any Reportable Event with
respect to any Plan, (b) the institution of proceedings or the taking or
expected taking of any other action by the PBGC, the Borrower, any Guarantor,
any of their respective Subsidiaries or any Commonly Controlled Entity to
terminate, withdraw or partially withdraw from any Plan, and (c) with respect to
any Multi-Employer Plan, the reorganization or insolvency of such Plan. In
addition to such notice, the Borrower and the Guarantors shall deliver or cause
to be delivered to the Administrative Agent and each Lender whichever of the
following may be applicable: (i) a certificate of a Responsible Officer of the
Borrower or such Guarantor setting forth details as to such Reportable Event and
the action that it, such Subsidiary or the Commonly Controlled Entity proposes
to take with respect thereto, together with the copy of any notice of such
Reportable Event that may be required to be filed with the PBGC, or (ii) any
notice delivered by the PBGC evidencing its intent to institute such proceedings
or any notice to the PBGC that such Plan is to be terminated, as the case may
be.
8.3.4. Environmental Matters. (a) Any event that makes any
of the representations set forth in Section 7.27 inaccurate in any respect or
(b) the receipt by the Borrower, any of the Guarantors or any of their
respective Subsidiaries of any notice, order, directive or other communication
from a Governmental Authority alleging a violation of or noncompliance with any
Environmental Laws.
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8.3.5. Loss of License, Permit, Approval, Etc.
(a) The loss or, if known by the Borrower, any Guarantor or
any of their respective Subsidiaries, threatened loss, by the Borrower,
any Guarantor or any of their respective Subsidiaries, of any license,
permit, approval, registration, contract, consent, franchise,
qualification, certificate of need, accreditation or other
authorization issued by any Governmental Authority referenced in
Section 7.24, if such loss reasonably could be expected to have a
Material Adverse Effect; or
(b) The decertification or, if known by the Borrower, any
Guarantor or any of their respective Subsidiaries, potential
decertification, of the Borrower, any Guarantor or any of their
respective Subsidiaries, under any program relating to Service
Contracts, if such decertification reasonably could be expected to have
a Material Adverse Effect.
8.3.6. Material Contracts. (a) Any proposed material
amendment, change or modification to, or waiver of any material provision of, or
any termination of, any Material Contract and (b) any default or event of
default under any Material Contract.
8.3.7. Casualty Losses. Any casualty loss or event not
insured against in an amount in excess of $100,000.
8.3.8. Year 2000 Compliance. Any determination by the
Borrower, any Guarantor or any of their respective Subsidiaries that the
Borrower or any such Guarantor or Subsidiary or any of the operations thereof,
or any supplier, vendor or other Person whose performance is material to such
operations, will not be Year 2000 Compliant in a timely manner, if the failure
to do so reasonably may be expected to have a Material Adverse Effect.
8.4. Payment of Obligations and Performance of Covenants.
(a) Make full and timely payment of the Obligations,
including the Loans and Letter of Credit Liabilities, whether now
existing or hereafter arising;
(b) Duly comply with all terms, covenants and conditions
contained in each of the Loan Documents, at the times and places and in
the manner set forth therein; and
(c) Take all action necessary to maintain the security
interests provided for under this Agreement and the Security Documents
as valid and perfected Liens on the property intended to be covered
thereby, subject to no other Liens except Permitted Liens, and supply
all information to the
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Administrative Agent or the Lenders necessary to accomplish same.
8.5. Payment of Taxes. Pay, and cause their respective Subsidiaries to
pay, or cause to be paid before the same shall become delinquent and before
penalties have accrued thereon, all taxes, assessments and governmental charges
or levies imposed on the income, profits, franchises, property or businesses of
the Borrower, the Guarantors or their respective Subsidiaries, except to the
extent and so long as (a) the same are being contested in good faith by
appropriate proceedings and (b) adequate reserves with respect thereto in
conformity with GAAP have been provided on the books of the Borrower or any such
Guarantor or Subsidiary, as appropriate.
8.6. Conduct of Business and Maintenance of Existence. Continue, and
cause their respective Subsidiaries to continue, (a) to engage solely in the
business of providing managed healthcare services to correctional facilities and
related businesses that enhance or support that primary business activity, and
(b) except as permitted by Sections 9.3 and 9.7, to preserve, renew and keep in
full force and effect their existence and present corporate, partnership or
other organizational structure, as the case may be.
8.7. Compliance with Law. Observe and comply with, and cause their
respective Subsidiaries to observe and comply with, all present and future
Requirements of Law relating to the conduct of their businesses or to their
properties or assets, except to the extent and so long as the nonobservance
thereof or noncompliance therewith will not have a Material Adverse Effect.
8.8. Maintenance of Properties and Franchises. Maintain, preserve and
keep and cause their respective Subsidiaries to maintain, preserve and keep (a)
all of their buildings, tangible properties, equipment and other property and
assets used and necessary in their businesses, whether owned or leased, in good
repair, working order and condition, from time to time making all necessary and
proper repairs and replacements so that at all times the utility, efficiency and
value thereof shall not be impaired, and (b) all rights, privileges and
franchises necessary or desirable in the normal conduct of their businesses.
8.9. Insurance.
(a) Maintain and cause their respective Subsidiaries to
maintain:
(i) insurance (in addition to any insurance required
under the Security Documents) on all insurable operations of
and insurable property and assets owned or leased by the
Borrower, the Guarantors
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or any of their respective Subsidiaries in the manner, to
the extent and against at least such risks (in any event
including professional and comprehensive general liability,
workers' compensation, employer's liability, automobile
liability and physical damage, fiduciary liability,
commercial fidelity, employee benefits liability and
all-risk property) usually maintained by owners of similar
businesses and properties in similar geographic areas;
provided that the amounts of property insurance coverages
shall not be less than the full replacement cost of all such
insurable property and assets, except for coverage
limitations with respect to flood, earthquake and windstorm
perils that are acceptable to the Administrative Agent and
Requisite Lenders; and
(ii) self-insurance reserves covering those risks for
which the Borrower, the Guarantors and each of their
respective Subsidiaries presently self-insure in appropriate
amounts as determined from time to time by independent
insurance claims auditors acceptable to the Administrative
Agent and Requisite Lenders.
All such insurance shall be in such amounts, in such form and with such
insurance companies as are reasonably satisfactory to the
Administrative Agent and Requisite Lenders.
(b) Furnish to the Administrative Agent not less frequently
than annually and at any time upon written request, (i) full
information as to such insurance carried, including the amounts of all
self-insurance reserves of the Borrower, the Guarantors and their
respective Subsidiaries, and (ii) certificates of insurance from the
insurance companies and certified copies of such insurance policies.
All policies of insurance (or certificates of insurance in favor of the
Administrative Agent with respect thereto) shall provide for not less
than fifteen (15) days' prior written notice to the Administrative
Agent of the cancellation or any material alteration of the policy.
8.10. Use of Proceeds. Use, and cause their respective Subsidiaries to
use, the proceeds of the Facilities for the purposes specified in Section 2.10
and for no other purpose.
8.11. Books and Records. Keep and maintain, and cause their respective
Subsidiaries to keep and maintain, full and accurate books of record and
accounts of their operations, dealings and transactions in relation to their
business and activities, in conformity with GAAP and all Requirements of Law.
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8.12. Inspection. Permit, and cause their respective Subsidiaries to
permit, any employees, agents or other representatives of the Administrative
Agent or the Lenders and any attorneys, accountants or other agents or
representatives designated by the Administrative Agent or the Lenders to (a)
have access to and visit and inspect any of the books of account, financial
records and properties, real, personal or mixed, of the Borrower, the Guarantors
and their respective Subsidiaries (b) examine and make abstracts from any such
books and records, and (c) discuss the affairs, finances and accounts of the
Borrower, the Guarantors and their respective Subsidiaries with their officers,
employees or agents, all at such reasonable business times as the Administrative
Agent or the Lenders deem necessary or advisable to protect their respective
interests.
8.13. Compliance With Terms of Material Contracts. Comply, and cause
their respective Subsidiaries to comply, with all agreements, covenants, terms,
conditions and provisions of all Material Contracts, except to the extent and so
long as noncompliance therewith will not have a Material Adverse Effect .
8.14. Compliance With Environmental Laws, Etc..
(a) Employ, and cause their respective Subsidiaries to
employ, in connection with the use of any real property, appropriate
technology (including appropriate secondary containment measures) to
maintain compliance with any applicable Environmental Laws;
(b) take, and cause their respective Subsidiaries to take,
all actions necessary to comply with all Environmental Laws, including
any actions identified as necessary in any environmental compliance
reports delivered to the Administrative Agent pursuant to the
provisions of this Agreement;
(c) obtain and maintain, and cause their respective
Subsidiaries to obtain and maintain, any and all permits required by
applicable Environmental Laws in connection with the operations of the
Borrower, the Guarantors or any of their respective Subsidiaries or any
Affiliate thereof;
(d) dispose of, and cause their respective Subsidiaries to
dispose of, any and all Hazardous Materials only at facilities and with
carriers maintaining valid permits under any applicable federal, state
and local Environmental Laws; and
(e) use best efforts to obtain, and cause their respective
Subsidiaries to use their best efforts to obtain, certificates of
disposal from all contractors employed by the Borrower, the Guarantors
or any of their respective
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Subsidiaries in connection with the transportation or disposal of any
Hazardous Materials.
8.15. Environmental Monitoring. Establish and maintain, and cause their
respective Subsidiaries to establish and maintain, a system to assure and
monitor continued compliance with all applicable Environmental Laws,
noncompliance with which would have a Material Adverse Effect, which system
shall include annual reviews of such compliance by employees or agents of the
Borrower, the Guarantors and their respective Subsidiaries who are familiar with
the requirements of applicable Environmental Laws.
8.16. Maintenance of Licenses, Permits, Approvals, Etc. Preserve and
maintain, and cause their respective Subsidiaries to preserve and maintain, all
licenses, permits, approvals, registrations, contracts, consents, franchises,
qualifications, certificates of need, accreditations and other authorizations
required under applicable state or local laws and regulations in connection with
the ownership or operation of their businesses, except to the extent that a
failure to preserve and maintain any of same will not have a Material Adverse
Effect.
8.17. Intercompany Indebtedness; Pledged Notes.
(a) Maintain, and cause their respective Subsidiaries to
maintain, accounting systems, practices and procedures that enable the
Borrower, the Guarantors and their respective Subsidiaries to report to
the Administrative Agent at any time upon its request the aggregate
unpaid balance of any unsecured advances or loans owing to the Borrower
or a Guarantor by any such Subsidiary; and
(b) Cause all such advances or loans to be evidenced by
Pledged Notes delivered to the Administrative Agent pursuant to the
Pledge Agreement and, contemporaneously with the delivery to the
Administrative Agent of any Pledged Note, assign and deliver to the
Administrative Agent any loan agreement or other instrument, document
or agreement further evidencing, securing or otherwise relating to the
indebtedness evidenced by such Pledged Note.
8.18. Further Assurances. Perform, make, execute and deliver, and cause
their respective Subsidiaries to perform, make, execute and deliver, all such
additional and further acts, deeds, occurrences and instruments as the
Administrative Agent, the Lenders or the Issuing Bank reasonably may require to
document and consummate the transactions contemplated hereby and to vest
completely in and to ensure the Administrative Agent, the Lenders and the
Issuing Bank their respective rights under this Agreement, the Notes and the
other Loan Documents.
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8.19. Post-Closing Matters. Deliver to the Administrative Agent each
item listed on Schedule 8.19 prior to the deadline therefor as set forth on said
schedule.
8.20. Management. Cause substantially all of the principal executive
management functions of the Borrower and its Subsidiaries to be vested in and
the responsibility of not less than two of Scott L. Mercy, Michael Catalano,
Gerard F. Boyle, Bruce A. Teal and any replacement of any of the foregoing who
has been approved in writing by the Administrative Agent for purposes of this
Section 8.20.
ARTICLE 9
NEGATIVE COVENANTS
So long as any Obligations are unpaid or outstanding, any Obligation
under the Loan Documents is unperformed or any of the Commitments are in effect,
the Borrower and the Guarantors shall not:
9.1. Indebtedness. Create, incur, assume or suffer to exist, or permit
any of their respective Subsidiaries to create, incur, assume or suffer to
exist, any Indebtedness, except:
(a) Indebtedness of the Borrower or any of the Guarantors
under or pursuant to this Agreement and the other Loan Documents;
(b) Indebtedness existing, or arising pursuant to
commitments existing, on the date hereof, all as set forth in Schedules
7.17A and 7.17B, and any extensions, refundings or renewals thereof on
the same terms or other terms satisfactory to Requisite Lenders;
provided, however, that neither the principal amount thereof nor the
interest rate thereon shall be increased, nor shall the amortization
schedule thereof be shortened;
(c) Purchase Money Debt in an aggregate amount not to exceed
$500,000 outstanding at any one time, and Capitalized Lease
Obligations;
(d) Subordinated Indebtedness;
(e) Indebtedness constituting current liabilities incurred
in the ordinary course of business and not represented by any note,
bond, debenture or other instrument, and which is not past due for a
period in excess of that which is customary for similar businesses, or
if overdue for a greater period of time, which are being
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contested in good faith and by appropriate actions and for which
adequate reserves in conformity with GAAP have been established on the
books of the primary obligor with respect thereto;
(f) Contingent Obligations under guarantees executed by the
Borrower, any Guarantor or any of their respective Subsidiaries with
respect to Indebtedness of the Borrower and its Subsidiaries otherwise
permitted by this Agreement;
(g) Contingent Obligations consisting of the indemnification
by the Borrower or any of its Subsidiaries of (i) the officers,
directors, employees and agents of the Borrower or such Subsidiary, to
the extent permissible under the corporation law of the jurisdiction in
which the Borrower or such Subsidiary is organized, (ii) commercial
banks, investment bankers and other independent consultants or
professional advisors pursuant to agreements relating to the
underwriting of the Borrower's or such Subsidiary's securities or the
rendering of banking or professional services to the Borrower or such
Subsidiary, (iii) landlords, licensors, licensees and other parties
pursuant to agreements entered into in the ordinary course of business
by the Borrower or such Subsidiary, and (iv) sellers in Permitted
Acquisitions pursuant to indemnification provisions customary for such
transactions;
(h) Indebtedness with respect to financed insurance premiums
not past due;
(i) Indebtedness of the Borrower or a Subsidiary of the
Borrower that is owed to the Borrower or a Subsidiary of the Borrower
and that is described in clauses (d), (e) or (h) of Section 9.4;
(j) unsecured Indebtedness of the Borrower and its
Subsidiaries, not otherwise described in this Section 9.1, in an
aggregate amount not to exceed $500,000 outstanding at any one time;
and
(k) Indebtedness of an Insurance Subsidiary under insurance
policies issued by such Insurance Subsidiary in the ordinary course of
business.
9.2. Liens. Create, incur, assume or suffer to exist, or permit any of
their respective Subsidiaries to create, incur, assume or suffer to exist, any
Lien upon any real or personal property, fixtures, revenues or other assets
whatsoever (including the Collateral), whether now owned or hereafter acquired,
of the Borrower, the Guarantors or any of their respective Subsidiaries, except:
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(a) Liens securing the Obligations;
(b) Existing Liens;
(c) Liens for taxes not yet due or that are being contested
in good faith and by appropriate actions and for which adequate
reserves in conformity with GAAP have been established on the books of
the Borrower or such Guarantor or Subsidiary;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business that are not overdue for a period of more than thirty (30)
days, or if overdue for more than thirty (30) days, (i) which are being
contested in good faith and by appropriate proceedings, (ii) for which
adequate reserves in conformity with GAAP have been established on the
books of the Borrower or such Guarantor or Subsidiary; and (iii) with
respect to which the obligations secured thereby are not material;
(e) pledges or deposits in connection with workers'
compensation insurance, unemployment insurance and like matters;
(f) Liens securing Purchase Money Debt or Capitalized Lease
Obligations; provided, however, that any such Lien attaches only to the
item or items of property or asset financed with such Purchase Money
Debt or Capitalized Lease;
(g) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(h) easements, reservations, exceptions, rights-of-way,
covenants, conditions, restrictions and other similar encumbrances
incurred in the ordinary course of business that, in the aggregate, are
not substantial in amount, and that do not in any case materially
detract from the value of the property subject thereto or interfere
with the ordinary conduct of business by the Borrower or such Guarantor
or Subsidiary;
(i) Liens in respect of any writ of execution, attachment,
garnishment, judgment or award in an amount less than $100,000, if (i)
the time for appeal or petition for rehearing has not expired, an
appeal or appropriate proceeding for review is being prosecuted in good
faith and a stay of execution pending such appeal or proceeding for
review has been secured, or (ii) the underlying claim is
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fully covered by insurance, the insurer has acknowledged in writing its
responsibility to pay such claim and no action has been taken to
enforce such execution, attachment, garnishment, judgment or award;
(j) Liens of lessors under or in connection with Operating
Leases;
(k) Liens securing Indebtedness permitted under clause (b)
of Section 9.1, but only to the extent that such Indebtedness is
presently secured as set forth on Schedule 7.17A; and
(l) Other non-consensual Liens not securing Indebtedness,
the existence of which in the aggregate will not have a Material
Adverse Effect; provided that any Lien permitted by this clause (l) is
permitted only for so long as is reasonably necessary for the Borrower
or the affected Subsidiary, using its best efforts, to remove or
eliminate such Lien.
9.3. Sale or Transfer of Assets. Sell, lease, assign, transfer or
otherwise dispose of, or permit any of their respective Subsidiaries to sell,
lease, assign, transfer or otherwise dispose of, any of their assets (including
the stock of Subsidiaries) except:
(a) sales of personal property assets in the ordinary
course of business of the Borrower and its Subsidiaries;
(b) the disposition of obsolete or worn-out equipment or
other property no longer required by or useful to the Borrower or any
of its Subsidiaries in connection with the operation of their
businesses;
(c) the sale or transfer to the Borrower or any Guarantor of
any asset owned by the Borrower or any of its Subsidiaries; and
(d) sale(s) of assets not otherwise permitted by this
Section 9.3 in an aggregate amount not to exceed, in any Fiscal Year,
an amount equal to five percent (5%) of the consolidated assets of the
Borrower and its Subsidiaries, determined in conformity with GAAP, as
of the end of the most recently completed Fiscal Year of the Borrower.
9.4. Investments. Make, commit to make or suffer to exist, or permit
any of their respective Subsidiaries to make, commit to make or suffer to exist,
any Investment except:
(a) Cash Equivalents;
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(b) Investments existing on the date hereof and set forth in
Schedule 9.4;
(c) accounts receivable representing trade credit extended
in the ordinary course of business;
(d) unsecured loans or advances by the Borrower or any
Guarantor to any Guarantor or the Borrower;
(e) unsecured loans or advances by any Subsidiary of the
Borrower to the Borrower or any Guarantor;
(f) Investments consisting of Permitted Acquisitions;
(g) Investments in Guarantors that otherwise are permitted
by the terms of this Agreement;
(h) Investments in Permitted Non-Guarantor Entities in an
aggregate amount not to exceed, at any time, five percent (5%) of the
consolidated assets of the Borrower and its Subsidiaries, determined in
conformity with GAAP, as of the end of the most recently completed
Fiscal Year of the Borrower;
(i) Permitted Insurance Subsidiary Investments; and
(j) Redemptions of Bridge Notes and Convertible Preferred
Stock that are not prohibited by Section 9.5.
9.5. Restricted Payments. Declare, pay or make, or permit
any of their respective Subsidiaries to declare, pay or make any
Restricted Payments except:
(a) the Borrower may declare and deliver dividends and make
distributions that are payable solely in common stock of the Borrower,
and may distribute cash in lieu of fractional shares otherwise
distributable pursuant to this clause (a);
(b) to the extent provided in the Certificate of
Designation, the Borrower may declare and deliver dividends and make
distributions in respect of the Convertible Preferred Stock that are
payable solely in Convertible Preferred Stock, and may distribute cash
in lieu of fractional shares otherwise distributable pursuant to this
clause (b);
(c) after the Bridge Notes all have been converted into
Convertible Preferred Stock and are no longer outstanding, the Borrower
may declare and deliver cash dividends and make cash distributions in
respect of the Convertible Preferred Stock as provided in the
Certificate
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of Designation in an aggregate amount not to exceed $500,000
in any one Fiscal Year, provided that:
(1) no Default shall have occurred and be continuing
at the time of declaration or, after giving effect to such
dividend or distribution, at the time of payment; and
(2) no such dividend or distribution may be declared
or paid pursuant to this clause (c) prior to January 1,
2000.
(d) after such time as the Commitments have been permanently
reduced to an aggregate amount not exceeding $33,000,000, the Borrower
may declare and deliver cash dividends and make cash distributions in
respect of the Convertible Preferred Stock as provided in the
Certificate of Designation, may redeem Convertible Preferred Stock as
provided in the Certificate of Designation and may redeem Bridge Notes
or make principal payments in respect of the indebtedness evidenced
thereby, provided that in each case:
(1) no Default shall have occurred and be continuing
at the time of declaration or, after giving effect to such
dividend, distribution or other payment, at the time of
payment; and
(2) the aggregate amount expended pursuant to the
foregoing clause (c) and this clause (d) in any Fiscal
Quarter shall not exceed an amount that, if such amount had
been so expended in the immediately preceding Fiscal
Quarter, would not have resulted in a violation of Section
10.1.2 or otherwise have resulted in the occurrence of a
Default;
(e) Bridge Notes may be converted into Convertible Preferred
Stock as provided in the Securities Purchase Agreement and Convertible
Preferred Stock may be converted into common stock of the Borrower as
provided in the Certificate of Designation;
(f) the Borrower may purchase or otherwise acquire shares of
its capital stock or the Warrants by exchange for or out of the
proceeds received from a substantially concurrent issue of shares of
its capital stock;
(g) the Borrower may purchase or otherwise acquire
fractional shares of its capital stock; and
(h) the Borrower may repay Subordinated Indebtedness using
proceeds received from (i) a substantially concurrent incurrence of new
Subordinated Indebtedness, or (ii) a
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substantially concurrent issue of shares of its capital
stock.
This Section 9.5 shall not be deemed to preclude the accrual of dividends in
respect of outstanding Convertible Preferred Stock in accordance with the terms
of the Certificate of Designation; provided, however, that such dividends may
not be declared or paid except to the extent otherwise permitted hereunder.
9.6. Issuance of Stock. Issue any capital stock or permit
any Subsidiary to issue any capital stock; provided, however,
that
(a) the Borrower may issue common stock and warrants,
options or other rights to acquire the Borrower's common stock
(including the Warrants);
(b) the Borrower may issue Convertible Preferred Stock to
the extent provided in the Securities Purchase Agreement and the
Certificate of Designation;
(c) the Borrower and its Subsidiaries may issue Qualifying
Preferred Stock to the extent that the aggregate of all outstanding
Qualifying Preferred Stock does not require the payment of dividends in
excess of the amounts, if any, permitted under Section 9.5; and
(d) any Subsidiary of the Borrower may issue capital stock
to the Borrower or any wholly-owned Subsidiary of the Borrower.
9.7. Fundamental Changes. Directly or indirectly (whether in one
transaction or a series of transactions), or permit any of their respective
Subsidiaries directly or indirectly (whether in one transaction or a series of
transactions) to:
(a) enter into any transaction of merger, consolidation or
amalgamation;
(b) liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution);
(c) make any Asset Acquisition other than a Permitted
Acquisition; or
(d) enter into any agreement or transaction to do or permit
any of the foregoing;
provided, however, that:
(1) notwithstanding clause (a) of this Section 9.7, the
merger, consolidation or amalgamation of any Person with
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the Borrower or any Guarantor as the method by which a Permitted
Acquisition is accomplished shall be permitted, provided that the
Borrower or such Guarantor is the surviving entity in the transaction;
(2) notwithstanding clause (a) of this Section 9.7, the
merger, consolidation or amalgamation of any Subsidiary of the Borrower
with any Guarantor shall be permitted, provided that such Guarantor is
the surviving entity in the transaction;
(3) notwithstanding clause (a) of this Section 9.7, the
merger, consolidation or amalgamation of any Subsidiary of the Borrower
with the Borrower shall be permitted, provided that the Borrower is the
surviving entity in the transaction; and
(4) notwithstanding clause (b) of this Section 9.7, the
Borrower may permit the dissolution of any of its Subsidiaries (and any
such Subsidiary may suffer such dissolution) if at the time of such
dissolution such Subsidiary has no assets, engages in no business and
otherwise has no activities other than activities related to the
maintenance of its corporate existence and good standing.
9.8. Transactions With Affiliates. Enter into, or permit any of their
respective Subsidiaries to enter into, any transaction, including any purchase,
sale, lease or exchange of property or the rendering of any service, with any
Affiliate or employee of the Borrower or any of its Subsidiaries, except (a)
transactions that are in the ordinary course of business of the Borrower or such
Guarantor or Subsidiary and that are upon fair and reasonable terms no less
favorable to the Borrower or such Guarantor or Subsidiary than would be obtained
in a comparable arm's length transaction with a Person not an Affiliate, and (b)
the transactions that are the subject of the Securities Purchase Agreement and
the instruments, documents and agreements contemplated by the Securities
Purchase Agreement.
9.9. Agreements Restricting the Borrower and Its Subsidiaries. Enter
into or become a party to, or permit any of their respective Subsidiaries to
enter into or become a party to, any agreement with any Person (other than this
Agreement and the Loan Documents) that in any way prohibits, restricts or limits
the ability of the Borrower, any Guarantor or any such Subsidiary to:
(a) transfer cash or other assets to the Borrower or
any of its Subsidiaries, or
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(b) create, incur, assume or suffer to exist any Lien with
respect to any real or personal property, fixtures, revenues or other
assets whatsoever, whether now owned or hereafter acquired, of the
Borrower, any Guarantor or any such Subsidiary, as security for the
Obligations (as the same may be increased from time to time).
9.10. ERISA.
(a) Terminate or permit any of their respective Subsidiaries
to terminate any Plan so as to result in any material liability to the
PBGC;
(b) Engage or permit any of their respective Subsidiaries to
engage in any "prohibited transaction" (as defined in Section 4975 of
the Code) involving any Plan that would result in a material liability
for an excise tax or civil penalty in connection therewith;
(c) Incur or suffer to exist, or permit any of their
respective Subsidiaries to incur or suffer to exist, any ma terial
"accumulated funding deficiency" (as defined in Section 302 of ERISA),
regardless of whether waived, involving any Plan; or
(d) Allow or suffer to exist, or permit any of their
respective Subsidiaries to allow or suffer to exist, any event or
condition that presents a material risk of incurring a material
liability to the PBGC by reason of the termination of any Plan.
9.11. Maintenance of Material Contracts. Without the prior written
consent of Requisite Lenders, enter into an agreement to cancel, terminate or
surrender, or enter into any material amendment of, any Material Contract,
unless the cumulative effect of all such cancellations, terminations,
surrenders, and amendments will not have a Material Adverse Effect.
9.12. Adverse Transactions. Enter into or become a party to, or permit
any of their respective Subsidiaries to enter into or become a party to, any
transactions the performance of which in the future would be inconsistent with
or would result in a breach of any covenant contained herein or any other Loan
Document or giving rise to any Default.
9.13. Additional Restriction on Investments in Permitted Non-Guarantor
Entities. Make new or additional Investments in Permitted Non-Guarantor Entities
during any Fiscal Quarter following a Fiscal Quarter in which any net income of
the Borrower and its Subsidiaries attributable to Permitted Non-Guarantor
Entities was excluded from Consolidated Net Income pursuant to the proviso
included in the definition of that term.
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9.14. Subordinated Indebtedness. Modify, amend or in any way change the
terms of any Subordinated Indebtedness or any instrument, document or agreement
evidencing same or related thereto, if the effect of any such modification,
amendment or change would be to (a) increase the interest rate applicable to
such Subordinated Indebtedness (provided that this clause (a) shall not be
deemed to preclude adjustments in the interest rate applicable to the
indebtedness evidenced by the Bridge Notes as provided in the Securities
Purchase Agreement), (b) accelerate the date for the making of any required
payment of principal or increase the amount due on any such date, (c) modify the
terms of subordination, as they apply to the Obligations, in a manner that would
affect adversely the rights of the Administrative Agent, the Lenders or the
Issuing Bank vis-a-vis the holder(s) of such Subordinated Indebtedness, or (d)
otherwise materially affect the rights of the Administrative Agent, the Lenders
or the Issuing Bank vis-a-vis the holder(s) of such Subordinated Indebtedness.
ARTICLE 10
FINANCIAL COVENANTS
10.1. Borrower Ratios. So long as any Obligations are unpaid or
outstanding, any Obligation under the Loan Documents is unperformed or any of
the Commitments are in effect, the Borrower and the Guarantors shall not:
10.1.1. Funded Indebtedness to Capitalization Ratio. Permit
the Funded Indebtedness to Capitalization Ratio (a) as of the end of any Fiscal
Quarter ending on or after June 30, 1999 but on or before December 31, 1999 to
be greater than 0.80 to 1.00, or (b) as of the end of any Fiscal Quarter ending
on or after March 31, 2000 but on or before December 31, 2000 to be greater than
0.65 to 1.00, or (c) as of the end of any Fiscal Quarter ending on or after
March 31, 2001 to be greater than 0.55 to 1.00.
10.1.2. Fixed Charge Coverage Ratio. Permit the Fixed Charge
Coverage Ratio as of the end of any Fiscal Quarter to be less than 1.25 to 1.00.
10.1.3. Funded Indebtedness to EBITDA Ratio. Permit the
Funded Indebtedness to EBITDA Ratio as of the end of any Fiscal Quarter to be
greater than 5.25 to 1.00.
10.1.4. Senior Funded Indebtedness to EBITDA Ratio. Permit
the Senior Funded Indebtedness to EBITDA Ratio (a) as of the end of any Fiscal
Quarter ending on or before June 30, 1999 to be greater than 4.25 to 1.00, or
(b) as of the end of any Fiscal Quarter ending on or after September 30, 1999
but on or
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before December 31, 1999 to be greater than 3.45 to 1.00, (c) as of the end of
any Fiscal Quarter ending on or after March 31, 2000 but on or before December
31, 2000 to be greater than 2.75 to 1.00, or (d) as of the end of any Fiscal
Quarter ending on or after March 31, 2001 to be greater than 2.25 to 1.00.
10.1.5. Current Ratio. Permit (a) the Current Ratio as of
the end of any Fiscal Quarter to be less than 1.00 to 1.00, or (b) permit
advance billings of the Borrower and its Subsidiaries on a consolidated basis to
exceed deferred revenue of the Borrower and its Subsidiaries on a consolidated
basis, all determined in conformity with GAAP.
10.1.6. Rent Expense. Permit Rent Expense of the Borrower
and its Subsidiaries during any Fiscal Quarter to exceed two percent (2%) of
Consolidated Healthcare Revenue for such Fiscal Quarter.
10.2. Guarantor Solvency. So long as any Obligations or any Guaranteed
Obligations are unpaid or outstanding, any Obliga tions under the Loan Documents
are unperformed or any of the Com mitments are in effect, each of the Guarantors
at all times shall be Solvent.
ARTICLE 11
EVENTS OF DEFAULT AND LENDERS' REMEDIES
11.1. Events of Default. Any one or more of the following described
events shall constitute an Event of Default hereunder, whether such occurrence
shall be voluntary or involuntary, or come about or be effected by operation of
law or otherwise:
11.1.1. Failure to Pay Loans, Etc. The Borrower shall fail
to pay, within five (5) days of the date due, any interest payable on or in
respect of the Loans or the Letter of Credit Liabilities, or shall fail to pay,
when due, any amount of principal of or any other interest payable on or in
respect of the Loans, the Letter of Credit Liabilities, the Credit Fees or any
of the other Obligations or any other amount payable under this Agreement, the
Notes or the other Loan Documents.
11.1.2. Failure to Perform Certain Covenants. (a) The
Borrower or any Guarantor shall fail to perform or observe any of its covenants
and agreements set forth in Article 9, and such failure shall continue for more
than fifteen (15) days after the earlier of (i) written notice from the
Administrative Agent to the Borrower or such Guarantor, as applicable, of the
existence of such Default, or (ii) the date any Responsible Officer of the
Borrower or such Guarantor, as
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applicable, first obtains knowledge of such failure, or (b) the Borrower or any
Guarantor shall fail to perform or observe any of its covenants and agreements
set forth in Sections 8.6, 8.10 or 8.12 or in Article 10.
11.1.3. Failure to Perform Agreements Generally. The
Borrower or any Guarantor shall fail to perform or observe any of its other
covenants and agreements set forth in this Agreement (other than those described
in Sections 11.1.1 and 11.1.2) or the other Loan Documents, and such failure
shall continue for more than thirty (30) days after the earlier of (a) written
notice from the Administrative Agent to the Borrower or such Guarantor, as
applicable, of the existence of such Default, or (b) the date any Responsible
Officer of the Borrower or such Guarantor, as applicable, first obtains
knowledge of such failure.
11.1.4. Defaults Under Other Loan Documents. Any default or
event of default shall occur under any other Loan Document, and, if subject to a
cure right, shall fail to be cured or corrected within the applicable cure
period.
11.1.5. False Statements. Any representation or warranty of
the Borrower or any Guarantor set forth in this Agreement, the Notes or the
other Loan Documents or in any other certificate, opinion or other statement at
any time provided by or on behalf of the Borrower or any Guarantor in connection
herewith or therewith shall prove to be false or misleading in any material
respect at the time made or given.
11.1.6. Voluntary Insolvency Proceedings. The Borrower, any
Guarantor or any of their respective Subsidiaries (a) shall commence a voluntary
case or other proceeding seeking dissolution, liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a receiver, trustee, liquidator, custodian or other similar
official with respect to it or any substantial part of its property, (b) shall
consent to any such relief or to the appointment of, or the taking of possession
of any of its property by, any such official in any involuntary case or other
proceeding commenced against it, (c) shall make a general assignment for the
benefit of creditors, (d) shall take any action to authorize any of the
foregoing, or (e) shall become insolvent or fail generally to pay its debts as
they become due.
11.1.7. Involuntary Insolvency Proceedings. Any involuntary
case or other proceeding shall be commenced against the Borrower, any Guarantor
or any of their respective Subsidiaries seeking dissolution, liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a receiver, trustee,
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liquidator, custodian or other similar official with respect to it or any
substantial part of its property, an (a) an order for relief (or the equivalent)
shall be entered in such involuntary case or other proceeding or (b) such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of sixty (60) days after the commencement thereof.
11.1.8. Failure to Perform Other Obligations. The
Borrower, any Guarantor or any of their respective Subsidiaries shall (a) fail
to pay any amount of any Indebtedness or interest thereon, or (b) fail to
observe or perform any term, covenant or agreement contained in any Contractual
Obligation (including Contractual Obligations evidencing, securing or relating
to any Indebtedness) executed by it, which failure (i) would cause or permit the
holder or holders or beneficiary or beneficiaries of such Indebtedness (or any
agent or trustee on their behalf) to cause such Indebtedness to become due or
otherwise payable prior to its stated maturity, so long as the aggregate
principal amount of all such Indebtedness that would then become due or payable
would equal or exceed $500,000, or (ii) would impair the Administrative Agent's,
the Lenders' or the Issuing Bank's rights or the performance of the obligations
of the Borrower, any Guarantor or any of their respective Subsidiaries under
this Agreement, the Notes or the other Loan Documents or the business or
operations of the Borrower, any Guarantor or any of their respective
Subsidiaries; unless in the case of a Contractual Obligation that is not for
borrowed money, such failure of performance is being contested by the Borrower,
such Guarantor or such Subsidiary in good faith and adequate reserves with
respect thereto have been established on the books of the Borrower, such
Guarantor or such Subsidiary in conformity with GAAP.
11.1.9. Execution or Attachment. Any judgment lien shall be
filed, or any writ of execution, attachment, garnishment or other legal process
shall be issued, against any of the property of the Borrower, any Guarantor or
any of their respective Subsidiaries, which by itself or together with all other
such legal processes is for an amount in excess of $100,000, and which shall
remain unvacated, unbonded or unstayed for a period of thirty (30) days, or in
any event later than five (5) days prior to the date of any proposed sale
thereunder.
11.1.10. Condemnation of Property. All or substantially all
of the property of the Borrower, any Guarantor or any of their respective
Subsidiaries shall be condemned, seized or otherwise appropriated, and the
condemnation award (together with any net proceeds of insurance then payable in
respect thereof, if any) is materially less than the book value of such property
at the date hereof (if such property was owned by the Borrower or any of its
Subsidiaries on the date hereof) or at the time such property was acquired by
the Borrower or such
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Subsidiary (if such property was acquired by the Borrower or such Subsidiary
after the date hereof).
11.1.11. Suspension of Business. The Borrower, any Guarantor
or any of their respective Subsidiaries shall voluntarily suspend the
transaction of its business for more than five (5) Business Days in any Fiscal
Year after the date hereof without the prior express written consent of
Requisite Lenders.
11.1.12. ERISA. (a) The Borrower or any Commonly Controlled
Entity shall engage in any "prohibited transaction" (as defined in ERISA or
Section 4975 of the Code) involving any Plan, (b) any "accumulated funding
deficiency" (as defined in ERISA), regardless of whether waived, shall exist
with respect to any Plan, (c) a Reportable Event shall occur with respect to, or
a proceeding shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or proceeding presents a material risk of termination of such
Plan for purposes of Title IV of ERISA, and, in the case of a Reportable Event,
shall continue unremedied for ten (10) days after notice of such Reportable
Event is given pursuant to Section 4043(a), (c) or (d) of ERISA and, in the case
of such proceeding, shall continue for ten (10) days after commencement thereof,
(d) any Single Employer Plan shall terminate for purposes of Title IV of ERISA,
(e) the withdrawal or partial withdrawal by the Borrower or any Commonly
Controlled Entity from any Multi-Employer Plan, or (f) the reorganization or
insolvency of a Plan or any other event or condition shall occur or exist with
respect to a Plan and in each case in clauses (a) through (f) above, such event
or condition together with all other such events or conditions, if any, could
subject the Borrower, any Guarantor or any of their respective Subsidiaries to
any tax, penalty or other liability in excess of $100,000 or otherwise would
have a Material Adverse Effect.
11.1.13. Validity of Loan Documents. Any of the Loan
Documents or any provision thereof, for any reason whatsoever, ceases to be
binding on the Borrower, any Guarantor or any of their respective Subsidiaries
as is a party thereto, or the Borrower or any Guarantor shall so assert.
11.1.14. Guaranty Obligations. Any Guarantor shall default
in the performance or observance of its guarantee hereunder, or such guarantee
for any reason whatsoever shall cease to be a valid and binding obligation of
any such Guarantor, or any such Guarantor shall so assert.
11.1.15. Failure of Lien. Any Security Document, after
delivery thereof pursuant to this Agreement, for any reason ceases to create a
valid Lien on any of the Collateral purported to be covered thereby or, after
recordation of such Security Document as provided in this Agreement, ceases to
be a perfected
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and first priority Lien on such Collateral, subject only to Permitted Liens.
11.1.16. Defaults under Material Contracts. Any default or
event of default shall occur under any Material Contract, and, if subject to a
cure right, shall fail to be cured or corrected within the applicable cure
period.
11.1.17. Material Adverse Change. Any Material
Adverse Change shall occur.
11.1.18. Change in Control. An event or series of
events shall occur by which:
(a) any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934) shall become
the "beneficial owner" (within the meaning of Rule 13d-3 and/or Rule
13d-5 under the Securities Exchange Act of 1934, except that a Person
shall be deemed to have "beneficial ownership" of all shares that such
Person has the right to acquire without condition, other than the
passage of time, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of thirty percent
(30%) or more of the combined voting power of all securities of the
Borrower entitled to vote in the election of directors, other than
securities having such power only by reason of the happening of a
contingency (other than the passage of time), excluding, however, any
such person or group that is a record or "beneficial owner" of any such
securities in any amount on the date of this Agreement; or
(b) Continuing Directors shall cease to constitute a
majority of the members of the board of directors of the Borrower.
11.2. Lenders' Remedies. Upon the occurrence of an Event of Default or
at any time thereafter, and in each and every case, unless such Event of Default
shall have been remedied or waived in writing by Requisite Lenders, any one or
all of the following actions may be taken:
(a) upon the request of Requisite Lenders, the
Administrative Agent shall, by notice to the Borrower terminate any or
all of the Commitments, whereupon such Commitments of the Lenders
thereunder immediately shall terminate; provided, however, that upon
the occurrence of any event specified in either Section 11.1.6 or
Section 11.1.7 the Commitments shall terminate automatically without
further action by the Administrative Agent, the Lenders or the Issuing
Bank;
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(b) upon request of Requisite Lenders, the Administrative
Agent shall declare all outstanding Obligations and other amounts owing
under this Agreement, the Notes and the other Loan Documents to be due
and payable immediately, and all such Obligations and other amounts
immediately shall be due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived
to the extent permitted by ap plicable law; provided, however, that
upon the occurrence of any event specified in either Section 11.1.6 or
Section 11.1.7 all such Obligations and other amounts immediately shall
be due and payable in full without declaration or other notice;
(c) the Administrative Agent immediately, and without
expiration of any period of grace, may enforce payment of all
Obligations of the Borrower and the Guarantors to the Administrative
Agent and the Lenders under this Agreement, the Notes and the other
Loan Documents, and the Administrative Agent shall be entitled to all
remedies available hereunder or thereunder; and
(d) the Administrative Agent shall be entitled to exercise,
for the ratable benefit of the Lenders, all other rights, powers,
privileges, options and remedies available under or by virtue of the
Loan Documents or otherwise available at law or in equity.
11.3. Actions in Respect of Letters of Credit.
11.3.1. Collateral Account. If an Event of Default shall
have occurred and be continuing, the Administrative Agent may, and upon the
request of Requisite Lenders shall, whether in addition to the taking by the
Administrative Agent of any of the actions described in Section 11.2 or
otherwise, make demand upon the Borrower or any of the Guarantors to, and
forthwith upon such demand such Person(s) will, pay to the Administrative Agent
at its Lending Office, for its benefit and the ratable benefit of the Lenders
and the Issuing Bank, in immediately available (same day) funds for deposit in a
Collateral Account to be maintained for the benefit of the Administrative Agent
and the ratable benefit of the Lenders and the Issuing Bank at such place as
shall be designated by the Administrative Agent, an amount equal to the amount
of the Letter of Credit Liabilities.
11.3.2. Security Interest. The Borrower and the Guarantors
hereby pledge and assign to the Administrative Agent, for its benefit and the
ratable benefit of the Lenders and the Issuing Bank, and grant to the
Administrative Agent for its benefit and the ratable benefit of the Lenders and
the Issuing Bank, a lien on and a security interest in the Collateral Account,
all cash deposited therein, all notes, certificates and
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instruments, if any, from time to time representing or evidencing the Collateral
Account and all interest and other earnings thereon, additions thereto,
substitutions therefor and proceeds thereof. The lien and security interest
granted hereby secures the payment of all of the Obligations.
11.3.3. Application of Proceeds. The Borrower and the
Guarantors hereby authorize the Administrative Agent to apply, from time to time
after funds are deposited in the Collateral Account, funds then held in the
Collateral Account to the payment of any amounts, in such order as the
Administrative Agent may elect, as shall have become or shall become due and
payable by the Borrower to the Lenders in respect of the Letter of Credit
Liabilities and thereafter to the satisfaction of the other Obligations.
11.3.4. Investments. Neither the Borrowers, nor the
Guarantors, nor any Person claiming or acting on behalf of or through the
Borrowers or the Guarantors shall have any right to withdraw any of the funds
held in the Collateral Account, except as provided in Section 11.3.8; provided,
however, that with the consent of the Administrative Agent, and to the extent
that there is an amount in excess of $100,000 in the Collateral Account at the
end of any Business Day after taking into account applications of funds, if any,
from the Collateral Account made pursuant to Section 11.3.8, the Administrative
Agent may, at the written request of the Borrower, from time to time invest
amounts on deposit in the Collateral Account in Cash Equivalents; provided,
further that in order to provide the Administrative Agent with a perfected
security interest therein, each investment in Cash Equivalents shall be
evidenced by negotiable certificates or instruments of which the Administrative
Agent shall take physical possession. If the Borrower or any Guarantor shall
have the right to have any amounts on deposit in the Collateral Account invested
by the Administrative Agent, but shall have failed to request the Administrative
Agent to invest such amounts, the Administrative Agent will endeavor to invest
such amounts in such Cash Equivalents as the Administrative Agent shall select;
provided, however, that in order to provide the Administrative Agent with a
perfected security interest therein, each such investment in Cash Equivalents
shall be evidenced by negotiable certificates or instruments of which the
Administrative Agent shall take physical possession. Any interest or other
proceeds received by the Administrative Agent in respect of Cash Equivalents
that are not invested or rein vested in Cash Equivalents as provided above shall
be deposited and held in cash in the Collateral Account under the sole dominion
and control of the Administrative Agent and shall be applied as provided in
Section 11.3.3.
11.3.5. Further Liens. The Borrower and the Guarantors
agree that they will not sell or otherwise dispose of
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any interest in the Collateral Account or the funds on deposit therein or create
or permit to exist any Lien on or with respect to the Collateral Account or the
funds on deposit therein except for the security interest created by this
Section 11.3.
11.3.6. Remedies.
(a) Requisite Lenders may, without notice to the Borrower or
any Guarantor except as required by law and at any time and from time
to time, direct any Lender to charge, set-off and otherwise apply all
or any part of first, the Letter of Credit Liabilities and second, the
other Obligations, against the Collateral Account, or any part thereof,
in such order as the Administrative Agent shall elect. The
Administrative Agent agrees to notify promptly the Borrower or such
Guarantor after any such set-off and application made by any Lender, at
the direction of Requisite Lenders, provided that the failure to give
such notice shall not affect the validity of such set-off and
application. The rights of the Lenders under this Section 11.3.6 are in
addition to other rights and remedies (including other rights of
set-off) which any Lender may have.
(b) The Administrative Agent may exercise, in respect of the
Collateral Account, in addition to the other rights and remedies
provided for herein or otherwise available to it, all the rights and
remedies of a secured party upon default under the UCC, and the
Administrative Agent may, without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any office of the Administrative Agent or
elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Administrative Agent may deem commercially
reasonable. The Borrower and the Guarantors agree that to the extent
notice of sale shall be required by law, at least ten (10) days' notice
of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notice. The
Administrative Agent shall not be obligated to make any sale of the
Collateral or any part thereof, regardless of notice of sale having
been given. The Administrative Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
(c) Any cash or other property held in the Collateral
Account, and all proceeds received by the Administrative Agent in
respect of any sale of, collection from or other realization upon all
or any part of the Collateral Account may, in the discretion of the
Administrative Agent, then or
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at any time thereafter be applied (after payment of any amounts payable
pursuant to this Section 11.3) in whole or in part by the
Administrative Agent for the ratable benefit of the Lenders against all
or any part of the Obligations in such order as the Administrative
Agent may elect.
11.3.7. Preservation of the Collateral. The Administrative
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral Account if the Collateral Account is accorded
treatment substantially equal to that which the Administrative Agent accords its
own property, it being understood that the Administrative Agent shall not have
any responsibility or liability (a) for ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Cash Equivalents, regardless of whether the Administrative Agent
has or is deemed to have knowledge of such matters, (b) for taking any necessary
steps to preserve rights against any parties with respect to the Collateral
Account, (c) for the collection of any proceeds from Cash Equivalents, (d) by
reason of any invalidity, lack of value or uncollectability of any of the
payments received by the Administrative Agent from obligors with respect to Cash
Equivalents, (e) for any loss resulting from investments made in compliance with
Section 11.3.4, except to the extent such loss was attributable to the
Administrative Agent's gross negligence or willful misconduct in complying with
Section 11.3.4, as determined by a final judgment of a court of competent
jurisdiction, or (f) in connection with any investments made in compliance with
Section 11.3.4 without a written request from the Borrower or any Guarantor, or
any failure by the Administrative Agent to make any such investment.
11.3.8. Surplus Funds. Any surplus funds held in the
Collateral Account and remaining after the Obligations are fully satisfied shall
be paid to the Borrower or such other Person(s) as may be lawfully entitled to
receive such surplus.
ARTICLE 12
THE ADMINISTRATIVE AGENT
12.1. Appointment. Each Lender hereby (a) irrevocably appoints
NationsBank as the Administrative Agent for such Lender and the other Lenders
under this Agreement, the Notes and the other Loan Documents, and (b)
irrevocably authorizes the Administrative Agent to take such action on its
behalf under the provisions of this Agreement, the Notes and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement, the Notes
and the other Loan Documents,
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together with such other powers as are reasonably incidental thereto. The
Administrative Agent shall, among other things, take such actions as the
Administrative Agent is authorized to take pursuant to this Agreement, the Notes
and the other Loan Documents. As to any matters not expressly provided for in
this Agreement, the Administrative Agent may, but shall not be required to,
exercise any discretion or take any action; however, the Administrative Agent
shall be required to act or to refrain from acting upon the written instructions
of Requisite Lenders if the Administrative Agent shall be indemnified to its
satisfaction by the Lenders against any and all liability and expense that may
be incurred by it by reason of so acting or refraining from acting.
Notwithstanding anything to the contrary herein, the Administrative Agent shall
have no duties, responsibilities or fiduciary relationships with any Lender
except those expressly set forth in this Agreement, the Notes and the other Loan
Documents, and no implied covenants, responsibilities, duties, obligations or
liabilities shall be read into this Agreement, the Notes or the other Loan
Documents or otherwise exist against the Administrative Agent.
12.2. Delegation of Duties. The Administrative Agent may exercise any
of its powers or execute any of its duties under this Agreement, the Notes and
the other Loan Documents by or through one or more agents or attorneys-in-fact
and shall be entitled to obtain, and to rely on, advice of counsel concerning
all matters pertaining to such rights and duties. The Administrative Agent may
utilize the services of such agents and attorneys-in-fact as the Administrative
Agent reasonably determines, and all reasonable fees and expenses of such agents
and attorneys-in-fact shall be paid by the Borrower on demand. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by the Administrative Agent in good
faith.
12.3. Limitation of Liability. Neither the Administrative Agent nor its
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (a) liable for any waiver, consent or approval given or any
action taken or omitted to be taken by it or by such Person under or in
connection with this Agreement, the Notes or the other Loan Documents, if
authorized or permitted hereunder, except for its or such Person's own gross
negligence or willful misconduct, or (b) responsible for the consequences of any
oversight or error in judgment by it or such Person whatsoever, except for its
or such Person's own gross negligence or willful misconduct. The Administrative
Agent shall not be responsible for (i) the execution, validity, genuineness,
effectiveness, sufficiency, enforceability, perfection or priority of this
Agreement, the Notes or the other Loan Documents, (ii) the collectability of any
amounts owing under this Agreement, the Notes or the other Loan Documents, (iii)
the value, sufficiency, enforceability,
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perfection or collectability of any Collateral, (iv) the failure by the
Borrower, any Guarantor or any of their respective Subsidiaries to perform its
obligations under this Agreement, the Notes or the other Loan Documents or to
observe any conditions hereof or thereof, (v) the truth, accuracy and
completeness of the recitals, statements, representations or warranties made by
the Borrower, any Guarantor or any of their respective Subsidiaries or any
officer or agent thereof contained in this Agreement, the Notes or the other
Loan Documents, or in any certificate, report, statement, document or other
writing referred to or provided for in, or received by the Administrative Agent
in connection with, this Agreement, the Notes or the other Loan Documents
believed by the Administrative Agent to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons.
12.4. Reliance by the Administrative Agent. The Administrative Agent
shall not have any obligation (a) to ascertain or to inquire as to the
observance or performance of any of the conditions, covenants or agreements in
this Agreement, the Notes or the other Loan Documents or in any document,
instrument or agreement at any time constituting, or intended to constitute,
Collateral, (b) to ascertain or inquire as to whether any notice, consent,
waiver or request delivered to it shall have been duly authorized or is genuine,
accurate and complete or (c) to inspect the properties, books or records of the
Borrower, any Guarantor or any of their respective Subsidiaries. The
Administrative Agent shall be entitled to rely, and shall be fully protected in
relying (i) upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document, instrument or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and (ii) upon advice and statements of legal counsel
(including counsel to the Borrower or the Guarantors), independent accountants
and other experts selected by the Administrative Agent. The Administrative Agent
may deem and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of the assignment, negotiation or transfer thereof, in
accordance with the provisions of this Agreement, shall have been delivered to
the Administrative Agent identifying the name of the subsequent payee or holder
thereof. The Administrative Agent shall be entitled to fail or refuse, and shall
be fully protected in failing or refusing, to take any action required or
permitted by it under this Agreement, the Notes or the other Loan Documents
unless (A) it first shall receive such advice or concurrence of Requisite
Lenders as it deems appropriate, or (B) it first shall be indemnified to its
satisfaction by the Lenders against any and all liability and expense that may
be incurred by it by reason of taking or continuing to take any such action. In
all cases the Administrative Agent shall be fully protected in acting, or in
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refraining from acting, under this Agreement, the Notes or the other Loan
Documents in accordance with a request of Requisite Lenders, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Notes.
12.5. Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default unless the
Administrative Agent has received notice from a Lender, the Borrower or any
Guarantor referring to this Agreement, describing such Default and stating that
such notice is a "Notice of Default." If the Administrative Agent receives such
a notice, the Administrative Agent shall give telephonic and written notice
thereof to the Lenders as soon as is practicable. The Administrative Agent shall
take such action with respect to such Default as shall be reasonably directed by
Requisite Lenders; provided, however, that unless and until the Administrative
Agent shall have received such directions, the Administrative Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default as it deems advisable in the best interests of the
Lenders.
12.6. Non-Reliance on the Administrative Agent by the Other Lenders.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates
has made any representations or warranties to such Lender. The Administrative
Agent shall have no obligation, responsibility or liability to any of the
Lenders regarding the creditworthiness or financial condition of the Borrower,
any of the Guarantors or any of their respective Subsidiaries or for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
perfection, collectability, priority or sufficiency of this Agreement or any
other Loan Document. No act by the Administrative Agent hereinafter taken,
including any review of the Borrower, the Guarantors and their respective
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, it has made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower, the Guarantors and their
respective Subsidiaries and has made its own decision to enter into this
Agreement and to make its Loans and otherwise participate in the transactions
hereunder. Each Lender also represents that, independently and without reliance
upon the Administrative Agent or any other Lender, and based on such
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documents and information as it deems appropriate at the time, it shall continue
to make its own credit analysis, appraisals and decisions in taking or not
taking action under this Agreement, the Notes and the other Loan Documents and
to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower, the Guarantors and their respective
Subsidiaries. The Administrative Agent shall not be required to make any inquiry
concerning the performance or observance of any of the terms, provisions or
conditions of this Agreement or any other Loan Document, or the financial
condition of the Borrower or the Guarantors or the existence or possible
existence of any Default. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, the Administrative Agent shall have no obligation or liability to
provide any Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of the
Borrower, the Guarantors or their respective Subsidiaries that may come into the
possession of the Administrative Agent or any of its respective officers,
directors, employees, agents, attorneys-in-fact or affiliates.
12.7. Indemnification. Each of the Lenders shall indemnify, defend and
hold harmless the Administrative Agent in its capacity as such (to the extent
not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so), ratably according to their respective Percentages, from and
against any and all claims, demands, lawsuits, costs, expenses, fees,
liabilities, obligations, losses, damages, actions, recoveries, judgments,
suits, costs, expenses or disbursements of any kind whatsoever, including
interest, penalties and reasonable attorneys' and paralegals' fees and costs and
amounts paid in settlement of any of the foregoing, whether direct, indirect,
consequential or incidental, that at any time (including at any time following
the satisfaction of the Obligations) may be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to, resulting from or
arising out of this Agreement, the Notes or the other Loan Documents, the
transactions contemplated hereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided,
however, that no Lender shall be liable for the payment of any portion of such
claims, demands, lawsuits, costs, expenses, fees, liabilities, obligations,
losses, damages, actions, remedies, judgments, suits, costs, expenses or
disbursements to the extent such result arose solely from the Administrative
Agent's gross negligence or willful misconduct. The agreements in this Section
12.7 shall survive the repayment of the Loans and the satisfaction of the other
Obligations and shall be in addition to and not in lieu of any other
indemnification agreements set forth in the Loan Documents.
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12.8. Payments. If in the opinion of the Administrative Agent, the
distribution of any amount received by the Administrative Agent in such capacity
under this Agreement, the Notes or the other Loan Documents might involve it in
liability, the Administrative Agent may refrain from making the distribution
thereof until the Administrative Agent's right to make such distribution shall
have been adjudicated by a court of competent jurisdiction. If a court of
competent jurisdiction shall adjudge that any amount received from and
distributed by the Administrative Agent in such capacity as Administrative Agent
is to be repaid, each Person to whom any such distribution shall have been made
either (a) shall repay to the Administrative Agent its proportionate share of
the amount so adjudged to be repaid, or (b) shall repay the same in such manner
and to such Persons as shall be determined by such court.
12.9. Administrative Agent in Its Individual Capacity. The
Administrative Agent in its individual capacity, and its Affiliates, may make
loans and other financial accommodations to, accept deposits from and generally
engage in any kind of business with the Borrower or any of the Guarantors and
their respective Subsidiaries as though the Administrative Agent were not the
Administrative Agent hereunder. With respect to Loans made or renewed by it, any
Notes issued to it and its participation in the Letter of Credit Liabilities,
the Administrative Agent in its individual capacity shall have the same
benefits, rights, powers and privileges under this Agreement, the Notes and the
other Loan Documents as any other Lender and may exercise the same as though it
were not the Administrative Agent, and the terms "Lender", "Lenders" and
"Requisite Lenders" shall include the Administrative Agent in its individual
capacity.
12.10. Successor Administrative Agent. The Administrative Agent may
resign as such upon thirty (30) days' prior written notice to the Lenders. If
the Administrative Agent shall resign as such under this Agreement, then
Requisite Lenders shall appoint from among the Lenders a successor agent for the
Lenders, which successor agent shall be reasonably acceptable to the Borrower;
provided, however, that acceptability to the Borrower shall not be required if a
Default has occurred and is continuing. Upon acceptance of its appointment as
successor agent, (a) such successor agent shall succeed to the rights, powers,
privileges and duties of the Administrative Agent, (b) the retiring
Administrative Agent shall be discharged of all its obligations and liabilities
in such capacity under this Agreement, the Notes and the other Loan Documents,
(c) the term "Administrative Agent" shall mean such successor agent effective
upon its appointment and (d) the retiring Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such retiring Administrative Agent or any of
the parties to this Agreement or any holders of the Notes. After any retiring
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Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Article 12 shall continue to inure to its benefit as to any
actions taken or omitted to be taken by it while it was Administrative Agent
under this Agreement.
ARTICLE 13
ASSIGNMENTS AND PARTICIPATIONS
13.1. Successors and Assigns. This Agreement, the Notes and the other
Loan Documents shall be binding on and shall inure to the benefit of the
Borrower, the Guarantors, the Administrative Agent, the Lenders, the Issuing
Bank and their respective successors and assigns, except as otherwise provided
herein or therein. Neither the Borrower nor the Guarantors may assign, transfer,
hypothecate or otherwise convey their respective rights, benefits, obligations
or duties hereunder or thereunder without the prior express written consent of
the Lenders. Any purported assignment, transfer, hypothecation or other
conveyance by the Borrower or the Guarantors without the prior express written
consent of all the Lenders shall be void. Neither the Administrative Agent nor
any of the Lenders may sell, assign, transfer, grant a participation in or
otherwise dispose of all or any portion of its interest in this Agreement, the
Notes or the other Loan Documents except as expressly provided herein.
13.2. Assignments.
13.2.1. Assignments. With prior notice to the Borrower, each
Lender may assign (other than the sale of a participation) up to one hundred
percent (100%) of its right, title and interest under this Agreement, the Notes,
the Letters of Credit and the other Loan Documents (including all or a portion
of its Commitments and the same portion of the Loans at the time owing to it) to
one or more banks or other financial institutions reasonably satisfactory to the
Administrative Agent and the Issuing Bank; provided, however, that (a) each such
assignment shall be of a constant, and not a varying, percentage of all such
Lender's right, title and interest hereunder and thereunder, (b) such share
equals no less than $5,000,000 in the case of any one assignee, (c) any assignee
shall execute and deliver to the Administrative Agent an Assignment and
Acceptance, and (d) a Lender may not assign any interest without the prior
approval of the Administrative Agent, the Issuing Bank and the Borrower, which
approval shall not be unreasonably withheld. Notwithstanding the foregoing, any
Lender may assign, as collateral or otherwise, any of its rights (including such
Lender's rights to payments of principal and/or interest on the Notes) under
this Agreement to any Federal Reserve Bank without
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notice to or consent of the Administrative Agent, the Issuing Bank or the
Borrower.
13.2.2. Effect of Assignments. Upon the sale, assignment,
transfer or other disposition (other than the sale of a participation) of any of
a Lender's right, title and interest under this Agreement, the Notes, the
Letters of Credit and the other Loan Documents to any assignee in accordance
with this Section 13.2, then upon the execution, delivery and acceptance of the
Assignment and Acceptance, from and after the effective date specified therein,
(a) the transferor Lender no longer shall have the rights, benefits and
obligations under this Agreement, the Notes, the Letters of Credit or the other
Loan Documents to the extent of the interest transferred (except for such
rights, benefits and obligations that such Lender would retain under or with
respect to this Agreement, the Notes, the Letters of Credit or the other Loan
Documents upon payment in full of the Obligations), and (b) the assignee shall
become a Lender, shall succeed to the rights and benefits and assume the
obligations of such transferor Lender hereunder and thereunder to the extent of
the interest transferred.
13.2.3. Actions by the Borrower. The Borrower hereby agrees
that it shall execute and deliver, at the request of the Administrative Agent
(a) one or more substitute Notes to the order of such Lenders to evidence the
portions of the Loans retained and sold and (b) any amendment to any Loan
Document to effectuate the provisions of this Section 13.2.
13.3. Participations. Subject to the provisions of this Section 13.3,
each Lender shall have the right at any time to sell undivided participating
interests in all or any part of its Commitments, the Loans and the Letters of
Credit to one or more banks or other financial institutions; provided, however,
that (a) such sale or transfer shall not relieve such Lender of any obligation
or liability hereunder, (b) such Lender shall make and receive all payments for
the account of its participants and shall retain exclusively, and shall continue
to exercise exclusively, all rights of approval and administration available
hereunder with respect to such Lender's Commitments, the Loans and the Letters
of Credit, even after giving effect to the sale of any such participation
(although such Lender may at its option agree with its participants that it will
not consent to any matter described in clauses (a) through (f) of Section 14.3.4
without their concurrence), and (c) such Lender shall make such arrangements
with its participants as may be necessary to accomplish the foregoing. No such
participant shall be a Lender for any purpose of this Agreement, other than for
purposes of Section 14.13, without the consent of the Administrative Agent and
the Issuing Bank.
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13.4. Disclosure. In connection with any assignments, participations or
offers therefor pursuant to this Article 13, each Lender may disclose to any
assignee or participant or prospective assignee or participant such information
pertaining to the Borrower, the Guarantors or any of their respective
Subsidiaries as such Lender may deem appropriate or such assignee or participant
or prospective assignee or participant may request; provided, however, that
prior to any such disclosure such assignee or participant or prospective
assignee or participant shall agree to preserve the confidentiality of any
confidential information relating to the Borrower or its Subsidiaries received
by it on the same basis as provided in this Section 13.4.
13.5. Assignments and Participations as Units. No Lender shall assign
or sell any participation in its Commitments, the Loans or the Letters of
Credit, except in the form of units consisting of pro rata interests in its
Commitments, the Loans and the Letters of Credit.
ARTICLE 14
GENERAL PROVISIONS
14.1. Notices. Any notice, request, demand or other communication
required or permitted under this Agreement, the Notes or the other Loan
Documents shall be in writing and shall be deemed to be properly given (a) when
received, if personally delivered or sent by overnight courier with appropriate
confirmation of delivery, (b) two (2) Business Days after deposit in the mail,
if mailed by United States first class, certified or registered mail, postage
prepaid, (c) one (1) Business Day after deposit with a public telegraph company
for transmittal, charges prepaid, or (d) when received, if given by telecopy,
with appropriate confirmation, each to the appropriate address set forth below
or to such other address that any such party or the Administrative Agent may
designate by written notice to other parties.
If to the Borrower:
America Service Group Inc.
Suite 300
105 Westpark Drive
Brentwood, Tennessee 37027
Attn: Treasurer
Telecopy No. 615/376-9862
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with a copy to:
America Service Group Inc.
Suite 300
105 Westpark Drive
Brentwood, Tennessee 37027
Attn: General Counsel
Telecopy No. 615/376-9862
If to any of the Guarantors:
c/o America Service Group Inc.
Suite 300
105 Westpark Drive
Brentwood, Tennessee 37027
Attn: Treasurer
Telecopy No. 615/376-9862
with a copy to:
America Service Group Inc.
Suite 300
105 Westpark Drive
Brentwood, Tennessee 37027
Attn: General Counsel
Telecopy No. 615/376-9862
If to any of the Lenders:
Their respective addresses as set forth with their
signatures on this Agreement.
If to NationsBank as Administrative Agent:
NationsBank, N.A.
One NationsBank Plaza
Nashville, Tennessee 37239-1697
Attn: S. Walker Choppin
Telecopy No. 615/749-4951
If to NationsBank as Issuing Bank:
NationsBank, N.A.
One NationsBank Plaza
Nashville, Tennessee 37239-1697
Attn: S. Walker Choppin
Telecopy No. 615/749-4951
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14.2. Entire Agreement. The execution and delivery of this Agreement
and the other Loan Documents supersede all the negotiations or stipulations
concerning the matters that preceded or accompanied the execution and delivery
hereof and thereof (other than with respect to fees payable pursuant to separate
agreements among the Borrower, the Administrative Agent and the Issuing Bank).
This Agreement, the Notes and the other Loan Documents also are intended, by the
parties hereto and thereto, as a complete and exclusive statement of the terms
and conditions hereof and thereof.
14.3. Amendments, Waivers and Consents.
14.3.1. Amendments. Except as otherwise set forth in this
Agreement, the provisions of (a) this Agreement may not be modified, amended,
restated or supplemented, except by a written instrument duly executed and
delivered on behalf of the Borrower, the Guarantors and Requisite Lenders, and
(b) the Notes and all Loan Documents other than this Agreement may not be
modified, amended, restated or supplemented, except by a written instrument duly
executed and delivered on behalf of the Borrower and any of the Guarantors, to
the extent that the Borrower or any such Guarantor is a signatory party to such
Note or such Loan Document, and on behalf of the Administrative Agent, with the
written consent of Requisite Lenders. Notwithstanding anything to the contrary
herein, the Administrative Agent and Requisite Lenders may modify, amend,
restate, supplement or waive any provision of Article 12 without the consent of
the Borrower or any Guarantor; provided, however, that the requirement of
Section 12.10 that a successor agent be reasonably acceptable to the Borrower
may not be modified without the written consent of the Borrower.
14.3.2. Waivers and Consents. Except as otherwise set forth
in this Agreement, any waiver of the terms and conditions of this Agreement, the
Notes or the other Loan Documents, or any waiver of any Default or Event of
Default and its consequences hereunder or thereunder, and any consent or
approval required or permitted by this Agreement, the Notes or the other Loan
Documents to be given by the Lenders, may be made or given with, but only with,
the written consent of Requisite Lenders on such terms and conditions as
specified in the written instrument granting such waiver, consent or approval. A
waiver, to be effective, must be in writing and signed by the party making the
waiver.
14.3.3. Effect of Waivers. In the case of any waiver, the
Borrower, the Guarantors, the Lenders and the Administrative Agent shall be
restored to their former positions and rights under this Agreement, the Notes
and the other Loan Documents to the extent of such waiver, and any Default or
Event of Default waived shall be deemed to be cured and not continued;
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provided, however, that no waiver shall constitute the waiver of any subsequent
or other Default or Event of Default or impair any right consequent thereon. No
failure or delay on the part of the Administrative Agent or any Lender to
exercise or enforce any right or remedy under or in connection with this
Agreement, the Notes or the other Loan Documents, whether by their respective
terms, at law, in equity or otherwise, shall operate as a waiver thereof. No
single or partial exercise of any such right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy.
14.3.4. Consent of All the Lenders. Without in each instance
the prior express written consent of the Administrative Agent and all the
Lenders, no such modification, amendment, restatement, supplement, waiver or
consent shall:
(a) increase the aggregate Commitments, or increase the
Commitment of any Lender without such Lender's approval;
(b) extend any Scheduled Commitment Reduction Date or reduce
the amount of the scheduled reduction of the aggregate Commitments on
any Scheduled Commitment Reduction
Date;
(c) reduce the amounts or extend the dates for the payment
of any Credit Fees that are payable ratably to all of the Lenders in
accordance with their respective Percentages of the Commitments;
(d) extend the maturity of the Notes or the date of any
scheduled principal payments or mandatory prepayments hereunder or
thereunder;
(e) reduce the rate or extend the time of payment of
interest hereunder or under the Notes;
(f) waive the payment of any principal, interest or Credit
Fees payable hereunder or under the Notes;
(g) extend the termination dates of any of the Commitments
or the Maturity Date except as expressly provided for in this
Agreement;
(h) consent to the assignment or transfer by the Borrower of
any of its Obligations under this Agreement, the Notes or the other
Loan Documents;
(i) release a material portion of the Collateral or release
any of the guarantees hereunder, except as expressly provided herein;
or
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(j) amend or modify the definitions of "Percentages" or
"Requisite Lenders" contained in this Agreement.
14.3.5. Binding Effect. Any such modification, amendment,
restatement, supplement, waiver or consent shall apply equally to each of the
Lenders and shall be binding upon the Borrower, the Guarantors, the Lenders, the
Administrative Agent
and all future holders of the Notes.
14.4. Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or otherwise would be within the limitations of, another covenant shall not
avoid the occurrence of a Default or an Event of Default if such action is taken
or condition exists.
14.5. Interpretation. Neither this Agreement, the Notes or the other
Loan Documents, nor any uncertainty or ambiguity herein or therein, shall be
construed or resolved against the Administrative Agent, the Lenders, the Issuing
Bank, the Borrower or the Guarantors whether under any rule of construction or
otherwise. This Agreement, the Notes and the other Loan Documents have been
reviewed by all the parties hereto and thereto and shall be construed and
interpreted according to the ordinary meaning of the words used as to accomplish
fairly the purposes and intentions of all such parties.
14.6. Inconsistencies With Other Documents. In the event there is a
conflict or inconsistency between this Agreement, the Notes or the other Loan
Documents, the terms of this Agreement shall control; provided, however, that
any provision of the Security Documents that imposes additional burdens on the
Borrower or any Guarantor or further restricts the rights of the Borrower or any
Guarantor or gives the Lenders additional rights shall not be deemed to be in
conflict or inconsistent with this Agreement and shall be given full force and
effect.
14.7. Severability. If any portion of this Agreement, the Notes or any
of the other Loan Documents shall be judged by a court of competent jurisdiction
to be unenforceable, the remaining portions shall be valid and enforceable to
the extent that the remaining terms thereof provide for the creation of the
Obligations and the consummation of the issuance of the Notes, the grant of
collateral security therefor, the guarantee thereof and the payment of principal
and interest in respect of the Obligations substantially on the same terms and
subject to the same conditions as set forth herein and therein.
14.8. Governing Law. This Agreement, the Notes and the
other Loan Documents, unless otherwise expressly set forth
therein, shall be governed by, construed and enforced in
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accordance with the laws of the State of Tennessee, without reference to the
conflicts or choice of law principles thereof, except to the extent that the
laws of a particular jurisdiction govern the creation, perfection, priority and
enforcement of liens on and security interests in the Collateral.
Notwithstanding the foregoing, if at any time the laws of the United States of
America permit any Lender to contract for, take, reserve, charge or receive
interest or loan charges in amounts greater than are allowed by the laws of such
state (whether such federal laws directly so provide or refer to the law of the
state where such Lender is located), then such federal laws shall to such extent
govern as to the interest and loan charges that such Lender is allowed to
contract for, take, reserve, charge or receive under this Agreement, the Notes
and the other Loan Documents. References to laws in this section are to such
laws as are now in effect, and, with respect to usury laws, if any, applicable
to any Lender and to the extent allowed thereby, to such laws as hereafter may
be in effect that allow a higher maximum nonusurious interest rate than such
laws now allow.
14.9. CONSENT TO JURISDICTION. THE BORROWER AND EACH GUARANTOR HEREBY
IRREVOCABLY CONSENT TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS
LOCATED IN DAVIDSON COUNTY, TENNESSEE IN ANY ACTION, CLAIM OR OTHER PROCEEDING
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES AND THE
OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THE BORROWER AND EACH GUARANTOR
HEREBY IRREVOCABLY CONSENT TO THE SERVICE OF A SUMMONS AND COMPLAINT AND OTHER
PROCESS IN ANY ACTION, CLAIM OR PROCEEDING BROUGHT BY THE ADMINISTRATIVE AGENT,
ANY LENDER OR THE ISSUING BANK IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR
THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS, ON BEHALF OF ITSELF OR ITS
PROPERTY, IN THE MANNER SPECIFIED IN SECTION 14.1. NOTHING IN THIS SECTION 14.9
SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT, ANY LENDER OR THE ISSUING
BANK TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE
RIGHT OF THE ADMINISTRATIVE AGENT, ANY LENDER OR THE ISSUING BANK TO BRING ANY
ACTION OR PROCEEDING AGAINST THE BORROWER, ANY OF THE GUARANTORS OR THEIR
RESPECTIVE PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTIONS.
14.10. WAIVER OF JURY TRIAL. THE ADMINISTRATIVE AGENT, EACH LENDER, THE
ISSUING BANK, THE BORROWER AND EACH GUARANTOR HEREBY IRREVOCABLY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM,
COUNTERCLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS
HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. The
scope of this waiver is intended to be all-encompassing with respect to any and
all disputes that may be filed in any court and that relate to the subject
matter of
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this transaction, including without limitation contract claims, tort claims,
breach of duty claims and all other common law and statutory claims. Each of the
parties hereto (a) acknowledges that this waiver is a material inducement for
the parties to the Loan Documents to enter into a business relationship, that
the parties to the Loan Documents have already relied on this waiver in entering
into same and the transactions that are the subject thereof, and that they will
continue to rely on this waiver in their related future dealings, and (b)
further warrants and represents that each has reviewed this waiver with its
legal counsel and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. This waiver is irrevocable,
meaning that it may not be modified either orally or in writing, and this waiver
shall apply to any subsequent amendments, modifications, supplements,
extensions, renewals and/or replacements of this Agreement. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
14.11. Cumulative Remedies. All rights and remedies provided in or
contemplated by this Agreement, the Notes and the other Loan Documents are
cumulative and not exclusive of any right or remedy otherwise provide herein,
therein, at law or in equity.
14.12. Expenses of Administration and Enforcement. The Borrower shall
pay on demand all reasonable expenses of the Administrative Agent in connection
with this Agreement, the Notes and the other Loan Documents, and the preparation
of any modifications, amendments, restatements, supplements or waivers,
including all attorneys' and paralegals' fees and expenses, all fees and
expenses for title, lien and other public records searches, filing and
recordation fees and taxes, duplicating expenses, corporation search fees,
appraisal fees, escrow agent fees and expenses, and all other customary
expenses. If there shall occur a Default or Event of Default, all reasonable
out-of-pocket expenses incurred by the Lenders and the Administrative Agent
(including administrative expenses of the Administrative Agent and the Lenders
and fees and disbursements of in-house and outside counsel) in connection with
such Default or Event of Default and collection and other enforcement
proceedings (including bankruptcy proceedings) resulting therefrom shall be paid
by the Borrower, regardless of whether suit is actually commenced to obtain any
relief provided hereunder. The Borrower shall indemnify, defend and hold
harmless the Administrative Agent, each of the Lenders and the Issuing Bank from
and against any and all documentary or filing taxes, assessments or charges by
any Governmental Authority by reason of the execution and delivery of this
Agreement, the Notes and the other Loan Documents and the consummation of the
transactions that are the subject thereof.
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14.13. Indemnification. The Borrower and each of the Guarantors,
jointly and severally, shall indemnify, defend and hold harmless the
Administrative Agent, the Lenders and the Issuing Bank (to the fullest extent
permitted by law) from and against any and all claims, demands, lawsuits, costs,
expenses, fees, obligations, liabilities, losses, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorneys' and
paralegals' fees and costs and amounts paid in settlement of any of the
foregoing, whether direct, indirect, consequential or incidental, that the
Administrative Agent, the Lenders or the Issuing Bank may incur or suffer or
that may arise out of, result from or relate to (a) this Agreement, the Notes,
the Letters of Credit or the other Loan Documents or the transactions
contemplated hereby or thereby (excluding actions arising out of the
Administrative Agent's, the Lenders' or the Issuing Bank's own gross negligence
or willful misconduct and actions arising out of claims made by the
Administrative Agent, any Lender or the Issuing Bank against any of the others),
or (b) any action under this Agreement, the Notes, the Letters of Credit or the
other Loan Documents or the transactions contemplated hereby or thereby
(excluding actions arising out of the Administrative Agent's, the Lenders' or
the Issuing Bank's own gross negligence or willful misconduct and actions
arising out of claims made by the Administrative Agent, any Lender or the
Issuing Bank against any of the others). In no event shall the Administrative
Agent, any Lender or the Issuing Bank be liable to the Borrower or any of the
Guarantors for any matter or thing in connection with this Agreement, the Notes,
the Letters of Credit or the other Loan Documents other than to account for
monies actually received by them in accordance with the terms hereof. This
Section 14.13 shall survive termination of this Agreement.
14.14. Adjustment. If any Lender (a "benefitted Lender") at any time
shall receive any payment of all or part of its Revolving Loans or its
participation in the Letter of Credit Liabilities or the interest thereon or
receive any collateral therefor, whether voluntarily or involuntarily, by
set-off or otherwise, in a greater portion of any such payment to and collateral
received by any other Lender, if any, in respect of such other Lender's
Revolving Loans or its participation in the Letter of Credit Liabilities or the
interest thereon, such benefitted Lender shall purchase for cash from the other
Lenders such portion of each Lender's Revolving Loan and participation in the
Letter of Credit Obligations, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, however, that
if all or any portion of such excess payment or benefits thereafter is recovered
from such benefitted Lender or set aside, such purchase shall be rescinded and
the purchase price and benefit returned to the extent of such recovery, but
without
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interest. Each Lender so purchasing a portion of another Lenders' Revolving Loan
and participation in the Letter of Credit Obligations may exercise all rights of
payment (including rights of setoff) with respect to such portion as fully as if
such Lender were the direct holder of such portion.
14.15. Setoff. In addition to any rights and remedies of the Lenders
provided by law, the Lenders each shall have a security interest in any and all
deposits of the Borrower and the Guarantors (general or special, time or demand,
provisional or final) at any time held by any Lender or any Affiliate thereof,
which security interest shall secure the Obligations. Upon the occurrence and
during the continuance of any Event of Default, with the consent of the
Administrative Agent without prior notice to the Borrower or the Guarantors, any
notice being specifically waived by the Borrower and the Guarantors to the
fullest extent permitted by applicable law, each Lender may set off and apply
against any indebtedness, whether matured or unmatured, of the Borrower or any
Guarantor to the Lenders, any amount owing from any Lender or any Affiliate
thereof to the Borrower or any Guarantor at, or at any time after, the
occurrence of an Event of Default (and each Affiliate of any Lender is
irrevocably authorized to permit such setoff and application), and the aforesaid
right of setoff may be exercised by any Lender against the Borrower or the
Guarantors or against any trustee in bankruptcy, debtor in possession, assignee
for the benefit of creditors, receiver or execution, judgment, or attachment
creditor of the Borrower or any Guarantor, or against anyone else claiming
through or against the Borrower or any such Guarantor or such trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver or execution, judgment or other attachment creditor, notwithstanding
the fact that such right of setoff shall not have been exercised by any Lender
prior to the making, filing or issuance, or service upon any Lender of, or of
notice of, any such petition, assignment for the benefit of creditors,
appointment or application for the appointment of a receiver, or issuance of
execution, subpoena, order or warrant. Each Lender promptly shall notify the
Borrower or the Guarantors and the Administrative Agent after any such setoff
and application made by any Lender; provided, however, that failure to give such
notice shall not affect the validity of such setoff and application.
14.16. Other Accommodations to the Borrower and the Guarantors; No
Rights By Virtue of Cross-Collateralization.
(a) Each Lender (including the Administrative Agent) may,
without notice to or consent by any other Lender, make or participate
in loans, extensions of credit or other financial accommodations to or
for the benefit of the Borrower and/or any of its Subsidiaries on any
terms that it deems desirable, and engage in other business
transactions,
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in the same manner as if this Agreement were not in existence, all
without limiting, waiving or otherwise impairing any rights of such
Lender or any other Lender under this Agreement. Without limiting the
generality of the foregoing, the Lenders acknowledge and agree that so
long as a Lender acts in good faith and the other Lenders' interests in
the Obligations and the Collateral are not impaired thereby, (i) such
Lender may be preferred or secured in any manner that it deems
advisable with respect to such other loans, extensions of credit,
financial accommodations and transactions, (ii) such Lender shall be
under no obligation to collect or attempt to collect any payments in
respect of the Obligations in preference to the collection or
enforcement of any other borrowings or obligations of the Borrower
and/or its Subsidiaries to such Lender, and (iii) any amounts collected
by such Lender from the Borrower and/or its Subsidiaries that are not
expressly designated (or reasonably determinable to be intended) as
being in payment of the Obligations may be applied to any of the
obligations of such Person to such Lender in any manner deemed
appropriate by such Lender.
(b) The Lenders acknowledge and agree that the Collateral
constitutes all of the collateral security for the Obligations and
that, as among themselves, no Lender shall have any interest in (i) any
property or interests of the Borrower or any of its Subsidiaries, other
than the Collateral, that now or hereafter secures loans, extensions of
credit, other financial accommodations and other transactions
(excluding the Obligations), of the Borrower or any of its Subsidiaries
with any other Lender, whether entered into directly or acquired by
such Lender, (ii) any property of the Borrower or any of its
Subsidiaries, other than the Collateral, now or hereafter in the
possession or control of any other Lender, (iii) any deposit, not
constituting Collateral, now or hereafter held by any other Lender, or
(iv) any other indebtedness now or hereafter owing to any other Lender;
any of which may be or become security for or otherwise available for
payment or performance of the Obligations by reason of any
cross-collateralization or any general description of secured
indebtedness(es) and/or obligation(s) contained in any mortgage,
security agreement or other security instrument or agreement held by
any Lender, or by reason of the right of setoff, counterclaim or
otherwise. Notwithstanding the foregoing, if any such property, deposit
or indebtedness, or any proceeds thereof, in the discretion of the
Lender holding same, is applied to the reduction of the Obligations,
then all of the Lenders shall be entitled to their respective
Percentages of such application in the manner provided in Sections 3.3
and 14.14.
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14.17. Survival of Representations and Warranties. All representations
and warranties of the Borrower and the Guarantors set forth in this Agreement,
the Notes and the other Loan Documents and in any other certificate, opinion or
other statement provided at any time by or on behalf of the Borrower and the
Guarantors in connection herewith shall survive the execution of the delivery of
this Agreement, the Notes and the other Loan Documents, the purchase and sale of
the Notes hereunder and the payment or other satisfaction of the Obligations.
14.18. Relationship of the Parties. None of the Administrative Agent,
the Lenders or the Issuing Bank shall be deemed partners or joint venturers with
the Borrower or the Guarantors or any Affiliate thereof in making this Agreement
or by any action taken hereunder. The Borrower and the Guarantors, jointly and
severally, shall indemnify, defend and hold harmless the Lenders and the
Administrative Agent from and against any and all claims, demands, lawsuits,
costs, expenses, fees, obligations, liabilities, losses, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorneys' fees and
costs, whether direct, indirect, consequential or incidental, that the Lenders
or the Administrative Agent may incur or suffer or that may arise out of, result
from or relate to such a construction of the parties and their relationship.
This Section 14.18 shall survive termination of this Agreement.
14.19. Destruction of Records. Any documents, schedules, invoices or
other papers delivered to the Administrative Agent, the Lenders or the Issuing
Bank at their option may be destroyed or otherwise disposed of by them six (6)
months after they are delivered to or received by them, unless the Borrower or
any Guarantor requests, in writing, the return of such documents, schedules,
invoices or other papers and makes reasonably acceptable arrangements, at the
Borrower's or such Guarantor's expense, for their return.
14.20. Execution in Counterparts; Effectiveness.
(a) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original hereof for all purposes, but
all of which together shall constitute one and the same document. One
or more counterparts of this Agreement may be executed by one or more
of the parties hereto, and some different counterparts or copies
executed by other parties. Each counterpart hereof executed by any
party hereto shall be binding upon the party executing same even though
other parties may execute one or more different counterparts, and all
counterparts hereof so executed shall constitute but one and the same
agreement. Each party hereto, by execution of a
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counterpart hereof, expressly authorizes and directs any other party
hereto to detach the signature pages (and any corresponding
acknowledgment pages) thereof from the counterpart hereof executed by
the authorizing party and affix same to another identical counterpart
hereof such that upon execution of multiple counterparts hereof by all
parties hereto, there shall be one counterpart hereof to which is
attached the signature pages (and any corresponding acknowledgment
pages) containing signatures (and acknowledgments) of all parties
hereto.
(b) This Agreement shall become effective when (i) the
Administrative Agent shall have received counterparts or signature
pages executed by the Borrower, the Guarantors, the Administrative
Agent, the Lenders and the Issuing Bank, or (ii) in the case of any
Lender, the Administrative Agent shall have received telecopied notice
from such Lender that it has executed a counterpart hereof or signature
page hereto and forwarded the same to the Administrative Agent by first
class, registered or certified mail as set forth in Section 14.1. A set
of the copies of this Agreement or counterparts signed by all of the
parties shall be lodged with the Borrower, on behalf of itself and the
Guarantors, and the Administrative Agent.
14.21. Interest and Loan Charges Not to Exceed Maximum Amounts Allowed
by Law. It is the intention of the Borrower and the Lenders to conform strictly
to all laws applicable to the Lenders that govern or limit the interest and loan
charges that may be charged in respect of the Obligations. Anything in this
Agreement, the Notes or any of the other Loan Documents to the contrary
notwithstanding, in no event whatsoever, whether by reason of advancement of
proceeds of the Loans or the Letters of Credit, acceleration of the maturity of
the unpaid balance of any of the Obligations or otherwise, shall the interest
and loan charges agreed to be paid to any of the Lenders for the use of the
money advanced or to be advanced hereunder exceed the maximum amounts
collectible by such Lender pursuant to applicable law. If for any reason
whatsoever the interest or loan charges paid or contracted to be paid by the
Borrower to any of the Lenders in respect of the Obligations shall exceed the
maximum amounts collectible under the law applicable to such Lender, then, in
that event, and notwithstanding anything to the contrary in this Agreement, the
Notes or any other Loan Document: (a) the aggregate of all consideration that
constitutes interest or loan charges under the law applicable to such Lender
that is contracted for, taken, reserved, charged or received under this
Agreement, the Notes or any other Loan Document or otherwise in connection with
the Obligations under no circumstances shall exceed the maximum amounts allowed
by such applicable law, and any excess shall be credited by such Lender on the
principal amount of the Obligations (or, to the extent the principal amount
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outstanding under this Agreement, the Notes and the other Loan Documents has
been or thereby would be paid in full, refunded to the Borrower); and (b) in the
event that the maturity of any or all of the Obligations is accelerated by
reason of an election of the Lenders resulting from any Default under this
Agreement or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest or loan charges under the law
applicable to any Lender may never include more than the maximum amounts allowed
by the law applicable to such Lender, and any excess interest or loan charges
provided for in this Agreement or otherwise shall be canceled automatically as
of the date of such acceleration or prepayment and, if theretofore paid, shall
be credited by such Lender on the principal amount of the Obligations (or, to
the extent the principal amount of the Obligations has been or thereby would be
paid in full, refunded by such Lender to the Borrower). All sums paid or agreed
to be paid to the Lenders for the use, forbearance or detention of sums due
hereunder shall, to the extent permitted by applicable law, be prorated,
allocated and spread throughout the full term of the Obligations until payment
in full so that the rate or amount of interest and loan charges on account of
the Obligations will not exceed any applicable legal limitation. The right to
accelerate the maturity of the Obligations does not include the right to
accelerate the maturity of any interest or loan charges not otherwise accrued on
the date of such acceleration, and the Lenders do not intend to charge or
collect any unearned interest or loan charges in the event of any such
acceleration.
14.22. Amended and Restated Agreement. This Agreement
amends, restates, supersedes and replaces the Original Credit
Agreement.
14.23. Final Agreement. This written agreement represents the final
agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties. There are no
unwritten oral agreements between the parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first written above.
BORROWER:
AMERICA SERVICE GROUP INC.
a Delaware corporation
By: /s/
--------------------------------
Name:
---------------------
Title:
--------------------
GUARANTORS:
PRISON HEALTH SERVICES, INC.
a Delaware corporation
By: /s/
--------------------------------
Name:
---------------------
Title:
--------------------
UNISOURCE, INC.
a Delaware corporation
By: /s/
--------------------------------
Name:
---------------------
Title:
--------------------
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PRISON HEALTH SERVICES OF INDIANA,
L.L.C.
an Indiana limited liability company
BY: PRISON HEALTH SERVICES, INC.
a Delaware corporation
By: /s/
------------------------
Name:
------------------
Title:
-----------------
Being the duly authorized General
Manager thereof.
EMSA GOVERNMENT SERVICES, INC.
a Florida corporation
By: /s/
--------------------------------
Name:
---------------------
Title:
--------------------
EMSA CORRECTIONAL CARE, INC.
a Florida corporation
By: /s/
--------------------------------
Name:
---------------------
Title:
--------------------
EMSA MILITARY SERVICES, INC.
a Florida corporation
By: /s/
--------------------------------
Name:
---------------------
Title:
--------------------
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EMSA LIMITED PARTNERSHIP
a Florida limited partnership
BY: EMSA CORRECTIONAL CARE, INC.
a Florida corporation
By: /s/
--------------------------------
Name:
---------------------------
Title:
---------------------------
Being the duly authorized General
Partner thereof.
[LENDERS' SIGNATURE PAGES FOLLOW]
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[Lender's Signature Page to $52,000,000
America Service Group Inc. Amended and Restated
Credit Agreement dated January 26, 1999]
NATIONSBANK, N.A., as a Lender and as
Administrative Agent and Issuing Bank
By: /s/
----------------------------------
Title: SVP
-----------------------
Address: Second Floor
One NationsBank Plaza
Nashville, TN 37239-1697
Attn: Healthcare Group
Telecopy No. 615/749-4951
Initial Commitment: $ 52,000,000
Percentage: 100.0%
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SCHEDULES AND EXHIBITS
SCHEDULES
<TABLE>
<S> <C>
Schedule 1.1A Certain Deferred Liabilities Included in
Capitalization
Schedule 1.1B EMSA Acquisition Transition Expenses
Schedule 7.1 Borrower, Guarantors and Subsidiaries -
Capitalization and Jurisdictions of
Incorporation and Foreign Qualification
Schedule 7.3 Post-Closing Consents
Schedule 7.6 Pending Litigation
Schedule 7.17A Indebtedness
Schedule 7.17B Contingent Obligations
Schedule 7.18A Business Locations
Schedule 7.18B Trade Names
Schedule 7.23 Service Contracts
Schedule 7.26 Employment Agreements and Executive
Compensation Arrangements
Schedule 7.27 Environmental Matters
Schedule 7.28 Material Contracts
Schedule 7.30 Operating Leases
Schedule 8.19 Post-Closing Matters
Schedule 9.2 Existing Liens
Schedule 9.4 Existing Investments
</TABLE>
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EXHIBITS
<TABLE>
<S> <C>
Exhibit 1.1 Form of Supplement to Amended and Restated
Credit Agreement
Exhibit 2.2.4 Form of Notice of Borrowing
Exhibit 2.3.2 Form of Letter of Credit Request
Exhibit 2.7.2 Form of Notice of Conversion/Continuation
Exhibit 2.8A Form of Revolving Note
Exhibit 2.8B Form of Swing Line Note
Exhibit 4.1A Form of Security Agreement
Exhibit 4.1B Form of Pledge Agreement
Exhibit 4.1C Form of Assignment and Security Agreement
Exhibit 6.1.1A Forms of Opinions of Counsel to the Borrower
and the Guarantors
Exhibit 6.1.1B Form of Solvency Certificate of Borrower
Exhibit 6.1.1C Form of Solvency Certificate of Guarantors
Exhibit 13.2 Form of Assignment and Acceptance
</TABLE>
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EXHIBIT 99.2
SECURITIES PURCHASE AGREEMENT
AMONG
AMERICA SERVICE GROUP INC.,
HEALTH CARE CAPITAL PARTNERS L.P.
AND
HEALTH CARE EXECUTIVE PARTNERS L.P.
Dated as of January 26, 1999
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TABLE OF CONTENTS
<TABLE>
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Page
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1. Issuance and Sale of Notes, Warrants and Preferred Stock.........................................1
1.1. Issuance, Purchase and Sale of Notes, Warrants and Preferred Stock......................1
1.2. Closing.................................................................................2
1.3. Conditions to Closing...................................................................2
1.4. Deliveries at Closing...................................................................4
1.5. Mergers and Acquisition Advisory Fee....................................................5
2. Representations and Warranties of the Company....................................................5
2.1. Organization and Qualification..........................................................5
2.2. Due Authorization.......................................................................5
2.3. Subsidiaries............................................................................6
2.4. SEC Reports.............................................................................6
2.5. Financial Statements....................................................................6
2.6. Actions Pending; Compliance with Laws...................................................7
2.7. Title to Properties; Insurance..........................................................8
2.8. Governmental Consents, etc..............................................................8
2.9. Holding Company Act and Investment Company Act..........................................8
2.10. Acquisition Agreement...................................................................9
2.11. Conflicting Agreements and Charter Provisions...........................................9
2.12. Capitalization..........................................................................9
2.13. Disclosure.............................................................................10
2.14. Status of Securities...................................................................11
2.15. Registration Under Exchange Act........................................................11
2.16. ERISA..................................................................................11
2.17. Possession of Franchises, Licenses, etc................................................12
2.18. Environmental Matters..................................................................12
2.19. Certain Agreements.....................................................................13
2.20. Offering of Notes, Preferred Stock and Warrants........................................14
2.21. Use of Proceeds........................................................................15
2.22. Unlawful Use of Proceeds...............................................................15
2.23. Intellectual Property Rights...........................................................15
2.24. Related Transactions...................................................................16
2.25. No Brokerage or Finder's Fees..........................................................16
2.26. "Year 2000"............................................................................16
2.27. Taxes..................................................................................17
2.28. Vote Required..........................................................................17
2.29. Medicare and Medicaid..................................................................17
2.30. Property...............................................................................17
</TABLE>
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<TABLE>
<S> <C> <C>
3. Representations and Warranties of the Purchasers................................................17
3.1. Organization and Qualification.........................................................17
3.2. Due Authorization......................................................................18
3.3. Conflicting Agreements and Other Matters...............................................18
3.4. Acquisition for Investment.............................................................18
3.5. Brokers or Finders.....................................................................19
3.6. Accredited Investor....................................................................19
3.7. HSR Notification.......................................................................19
4. Registration, Exchange and Transfer of Notes....................................................19
4.1. Authorized Denominations of Notes......................................................19
4.2. The Note Register; Persons Deemed Owners...............................................19
4.3. Issuance of New Notes Upon Exchange or Transfer........................................19
4.4. Lost, Stolen, Damaged and Destroyed Notes..............................................20
5. Payment of Notes................................................................................20
5.1. Home Office Payment....................................................................20
5.2. Limitation on Interest.................................................................20
5.3. Interest...............................................................................21
5.4. Business Day...........................................................................21
6. Covenants of the Company........................................................................21
6.1. Financial Covenants....................................................................21
6.2. Limitation on Convertible Securities and Equity Securities.............................21
6.3. Merger; Purchase and Sale of Assets....................................................22
6.4. Dividends and Distributions............................................................22
6.5. Compliance with Laws...................................................................22
6.6. Limitation on Agreements...............................................................23
6.7. Preservation of Franchises and Existence...............................................23
6.8. Insurance..............................................................................23
6.9. Payment of Taxes and Other Charges.....................................................24
6.10. Financial Statements and Other Reports.................................................24
6.11. Inspection of Property.................................................................25
6.12. Board Membership.......................................................................25
6.13. Lost, Stolen, Damaged and Destroyed Stock Certificates.................................27
6.14. HSR....................................................................................27
6.15. Certain Tax Matters....................................................................28
6.16. [Intentionally Omitted]................................................................29
6.17. Notice of Breach.......................................................................29
6.18. Limitation on Transactions with Affiliates.............................................29
6.19. Stockholders Meeting...................................................................29
6.20. Proxy Statement........................................................................30
6.21. Financial Covenants....................................................................30
6.22. Limitation on Indebtedness.............................................................30
6.23. Limitation on Other Senior Subordinated Indebtedness...................................30
</TABLE>
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<TABLE>
<S> <C> <C>
6.24. Limitation on Guarantees of Indebtedness by Subsidiaries...............................30
6.25. Limitation on Issuances and Sales of Subsidiary Stock..................................30
6.26. Limitation on Liens Securing Pari Passu Indebtedness or Subordinated Indebtedness......31
6.27. Limitation on Dividends and other Payment Restrictions Affecting Subsidiaries..........31
6.28. Limitation on Investments..............................................................32
6.29. Mergers, Consolidations and Certain Sales of Assets....................................32
6.30. NASDAQ Approval........................................................................32
6.31. Redemption of Redeemable Common Stock..................................................32
7. Nondisclosure of Confidential Information.......................................................33
8. Events of Default and Remedies..................................................................34
8.1. Events of Default......................................................................34
8.2. Acceleration of Maturity...............................................................36
8.3. Other Remedies.........................................................................37
8.4. Conduct No Waiver; Collection Expenses.................................................38
8.5. Annulment of Acceleration..............................................................39
8.6. Remedies Cumulative....................................................................39
8.7. Limitations............................................................................39
9. Redemption......................................................................................39
9.1. Optional Redemption....................................................................39
9.2. Change of Control......................................................................40
10. Conversion......................................................................................41
10.1. Holder's Option to Convert into Preferred Stock........................................41
10.2. Company's Option to Convert............................................................41
10.3. Exercise of Conversion Privilege.......................................................41
10.4. Fractions of Shares; Interest..........................................................42
10.5. Reservation of Stock...................................................................43
11. Subordination of Notes..........................................................................43
11.1. Subordination of Notes to Senior Indebtedness..........................................43
11.2. Proofs of Claim of Holders of Senior Indebtedness; Voting..............................46
11.3. Rights of Holders of Senior Indebtedness Unimpaired....................................46
11.4. Effects of Event of Default............................................................47
11.5. Company's Obligations Unimpaired.......................................................47
11.6. Subrogation............................................................................47
11.7. Avoided Payments in Respect of Senior Indebtedness of the Company......................48
11.8. Independence of Provisions.............................................................48
11.9. Reliance by Certain Holders of Senior Indebtedness of the Company; Amendments and
Modifications..........................................................................48
12. Interpretation..................................................................................48
12.1. Definitions............................................................................48
</TABLE>
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<TABLE>
<S> <C> <C>
12.2. Accounting Principles..................................................................66
13. Miscellaneous...................................................................................66
13.1. Payments...............................................................................66
13.2. Severability...........................................................................66
13.3. Specific Enforcement...................................................................67
13.4. Entire Agreement.......................................................................67
13.5. Counterparts...........................................................................67
13.6. Notices and Other Communications.......................................................67
13.7. Amendments.............................................................................68
13.8. Cooperation............................................................................68
13.9. Successors and Assigns.................................................................68
13.10. Expenses and Remedies..................................................................69
13.11. Survival of Representations and Warranties.............................................70
13.12. Transfer of Securities.................................................................70
13.13. Governing Law..........................................................................71
13.14. Publicity..............................................................................71
13.15. Signatures.............................................................................71
</TABLE>
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<PAGE> 6
SCHEDULES
<TABLE>
<S> <C>
Schedule 2.3 Subsidiaries of the Company
Schedule 2.7 Insurance Policies
Schedule 2.12(a) Options Outstanding
Schedule 2.12(b) Capitalization of the Company
Schedule 2.18 Environmental Matters
Schedule 2.19(a) Certain Agreements
Schedule 2.19(b) Related Agreements
Schedule 2.23 Intellectual Property Rights Matters
Schedule 2.24 Related Transactions
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A-1 Form of Notes issuable by the Company to HCCP
Exhibit A-2 Form of Notes issuable by the Company to HCEP
Exhibit B-1 Form of Warrants issuable by the Company to HCCP
Exhibit B-2 Form of Warrants issuable by the Company to HCEP
Exhibit C Opinion Matters of King & Spalding
Exhibit D Certificate of Designation of Preferred Stock
Exhibit E Registration Rights Agreement among the Company,
HCCP and HCEP
Exhibit F Letter Agreement
</TABLE>
- v -
<PAGE> 7
THIS SECURITIES PURCHASE AGREEMENT, dated as of January 26,
1999 (this "Agreement"), among America Service Group Inc., a Delaware
corporation (the "Company"), Health Care Capital Partners L.P., a Delaware
limited partnership ("HCCP"), and Health Care Executive Partners L.P., a
Delaware limited partnership ("HCEP," and together with HCCP, the "Purchasers").
WHEREAS, the Company has agreed to acquire (the "Acquisition")
all of the outstanding shares of capital stock of EMSA Government Services, Inc.
("EMSA") from InPhyNet Administrative Services, Inc. (the "Seller") pursuant to
a Stock Purchase Agreement, dated as of December 18, 1998 (the "Acquisition
Agreement"), between the Company and the Seller.
WHEREAS, in connection with the financing of the Acquisition
the Purchasers wish to purchase from the Company, and the Company wishes to sell
to the Purchasers, Subordinated Convertible Bridge Notes due January 26, 2000
(the "Notes") in the aggregate principal amount set forth herein with detachable
warrants (the "Warrants") to purchase shares of the Company's Common Stock, par
value $0.01 per share (the "Common Stock"), upon the terms set forth herein, and
Series A Convertible Preferred Stock, par value $0.01 per share (the "Preferred
Stock"), in the amount and upon the terms set forth herein;
WHEREAS, the Notes shall be convertible (under the
circumstances described herein) into shares of the Preferred Stock and the
Preferred Stock shall be convertible into shares of Common Stock; the Notes, the
Warrants and the Preferred Stock are referred to collectively as the "Purchased
Securities" or "Convertible Securities"; and the Convertible Securities and the
Common Stock are referred to collectively as the "Securities" (for the
definition of certain other capitalized terms, please refer to Section 12
hereof); and
WHEREAS, the Purchasers and the Company desire to provide for
such purchase and sale and to establish various rights and obligations in
connection therewith.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein set forth, the parties hereto agree as
follows:
1. Issuance and Sale of Notes, Warrants and Preferred Stock
1.1. Issuance, Purchase and Sale of Notes, Warrants and
Preferred Stock. Upon the terms set forth herein, the Company will sell to the
Purchasers, and the Purchasers will purchase from the Company, Notes in the
aggregate principal amount of $15,000,000 (the "Initial Principal Balance") with
the associated Warrants to purchase 135,000 shares of Common Stock and 50,000
shares of Preferred Stock at an aggregate price of $5,000,000 (the "Preferred
Stock Consideration," together with the Initial Principal Balance, the "Purchase
Price"). Each Note shall be in the form of Exhibits A-1
<PAGE> 8
and A-2 hereto and the Warrants shall be in the form set forth in Exhibits B-1
and B-2 hereto.
1.2. Closing. The closing of the transactions contemplated
hereby (the "Closing") will take place at the offices of King & Spalding,
Atlanta, Georgia, at 9:00 a.m. on January 26, 1999 or on such other date as
shall be mutually agreed by the Company and the Purchasers (the "Closing Date").
1.3. Conditions to Closing. (a) The obligations of the Company
and the Purchasers to consummate the transactions contemplated hereby at the
Closing are subject to the satisfaction of the following conditions: no
temporary restraining order, preliminary or permanent injunction or other order
or decree which prevents the consummation of the transactions contemplated
hereby shall have been issued and remain in effect, and no statutes, rules or
regulations shall have been enacted by any governmental authority (of the United
States or otherwise) which prevents the consummation of the transactions
contemplated hereby.
(b) The obligations of the Purchasers to
consummate the transactions contemplated hereby at the Closing are subject to
the satisfaction or waiver of the following conditions:
(i) the representations and warranties of
the Company set forth in Section 2 of this Agreement shall be true and
correct in all material respects as of the date when made and (unless
made as of a specified date) as of the Closing Date; and the Company
shall have performed in all material respects its covenants set forth
in this Agreement to be performed prior to the Closing Date and shall
not have taken any action which (if any shares of Preferred Stock or
the Notes were outstanding) would violate any provision of the
Certificate of Designation or this Agreement, as the case may be;
(ii) King & Spalding, counsel to the
Company, shall have delivered to the Purchasers an opinion (the
"Opinion of Counsel") dated the Closing Date with respect to the
matters set forth in Exhibit C hereto;
(iii) the Company shall have received and
delivered to the Purchasers a copy of the opinion from SunTrust
Equitable Securities Corporation ("SESC"), in form and substance
satisfactory to the Purchasers dated as of December 18, 1998, to the
effect that the terms of the Acquisition Agreement, this Agreement,
each document contemplated by this Agreement (the "Transaction
Documents") and the Revolving Credit Agreement (the "Revolving Credit
Facility") to be entered among the Company, the lenders identified
therein (the "Lenders") and NationsBank, N.A. ("NationsBank"), as
administrative agent and as issuing bank (the "Revolving Credit
Agreement"), taken as a whole, are fair, from a financial point of
view, to the Company (the "Fairness Opinion");
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<PAGE> 9
(iv) the Company and the Purchasers shall
have entered into a warrant agreement in the form of Exhibit B hereto
(the "Warrant Agreement");
(v) simultaneously with the Closing, the
Company shall have duly authorized and executed a certificate of
designation substantially in the form of Exhibit D hereto, setting
forth the rights and preferences of the Preferred Stock (the
"Certificate of Designation"), and the Certificate of Designation shall
have been filed with the Secretary of State of the State of Delaware in
accordance with the General Corporation Law of the State of Delaware
(the "DGCL"), which Certificate of Designation shall amend and
supplement the Amended and Restated Certificate of Incorporation, as
amended, of the Company (the Amended and Restated Certificate of
Incorporation, as amended, including such Certificate of Designation,
the "Certificate of Incorporation");
(vi) the Company shall have paid (X) to
FFT the Advisory Fee and (Y) to the Purchasers the expenses, both as
provided in Section 1.5;
(vii) the Common Stock to be issued upon
conversion of the 50,000 shares of Preferred Stock to be issued on the
Closing Date or upon exercise of the Warrants shall have been approved
for quotation on the National Association of Securities Dealers, Inc.
Automated Quotation System ("Nasdaq") National Market, subject to
official notice of issuance;
(viii) the Purchasers shall have received
true, complete and correct copies of such agreements, schedules,
exhibits, certificates, documents, financial information and filings as
it may reasonably request in connection with the Transaction Documents,
all in form and substance reasonably satisfactory to the Purchasers;
(ix) the Purchasers shall have received
true copies of all consents, licenses and approvals required in
connection with the execution, delivery, performance, validity and
enforceability of this Agreement and the Transaction Documents, and
such consents, licenses and approvals shall be in full force and effect
and shall be reasonably satisfactory in form and substance to the
Purchasers;
(x) there shall not have occurred prior
to the Closing Date (x) any Material Adverse Change as determined by
Ferrer Freeman Thompson & Co. ("FFT"), the general partner of the
Purchasers, in its reasonable judgment or (y) the legal inability of
the Company to issue and deliver to the Purchasers the Purchased
Securities;
(xi) all proceedings taken in connection
with the issuance and sale of the Securities and the transactions
contemplated hereby and all documents and papers relating thereto shall
be reasonably satisfactory in form and
-3-
<PAGE> 10
substance to FFT. The Purchasers shall have received copies of such
documents and papers as FFT may reasonably request in connection with
this Agreement;
(xii) at Closing, the Company shall have
executed a registration rights agreement in the form of Exhibit E
hereto (the "Registration Rights Agreement");
(xiii) (a) the Purchasers shall have
received executed or conformed copies of any amendments to the
Acquisition Agreement on or prior to the Closing Date, the terms and
conditions of which shall be in all respects reasonably satisfactory to
FFT, (b) the Acquisition Agreement and the Revolving Credit Facility
shall be in full force and effect and no material term or condition
thereof shall have been amended, modified or waived after the execution
thereof without the prior written approval of FFT, (c) none of the
applicable parties shall have failed in any respect to perform any
material obligation or covenant required by the Acquisition Agreement
or the Revolving Credit Agreement to be performed or complied with by
it on or before the Closing Date, in each case as materiality shall be
determined by FFT in its sole judgment and (d) all material conditions
to the transactions contemplated by the Acquisition Agreement and the
Revolving Credit Agreement set forth therein shall have been satisfied
or the fulfillment of such conditions shall have been waived, in each
case as materiality shall be determined by FFT in its sole judgment;
(xiv) the Company shall have delivered an
Officer's Certificate detailing the sources and uses of all funds for
the transactions occurring on the Closing Date, with proper wire
instructions for the Purchasers for the application of the proceeds
from the issuances of the Purchased Securities on the Closing Date, all
in form and substance satisfactory to FFT;
(xv) the Company shall have delivered a
letter agreement in the form of Exhibit F hereto executed by Scott L.
Mercy; and
(xvi) the Purchasers shall have received an
Officer's Certificate in form and substance satisfactory to the
Purchasers from the Company confirming the foregoing matters and any
other evidence requested by the Purchasers in support thereof.
1.4. Deliveries at Closing. At the Closing, the Company shall
deliver to the Purchasers, against payment in full of the Purchase Price, (a)
Notes in the form of Exhibit A in such denominations as the Purchasers have
requested, dated the Closing Date hereof and registered in the names requested
by the Purchasers, in an aggregate principal amount corresponding to the Initial
Principal Balance, (b) Warrants in the form of Exhibit B and (c) stock
certificates registered in the names requested by the Purchasers representing
50,000 shares of Preferred Stock.
-4-
<PAGE> 11
The Closing of the purchase and sale of the Purchased
Securities shall be deemed to have taken place in the State of New York.
1.5. Mergers and Acquisition Advisory Fee. The Company shall
pay FFT on the date hereof a fee related to mergers and acquisition advice
provided to the Company by FFT ("Advisory Fee") of $1,000,000 and shall, subject
to the limitations set forth in Section 13.10(a), reimburse all of the
Purchasers' reasonable out-of-pocket expenses (including, without limitation,
reasonable fees, charges, disbursements of counsel and travel expenses) incurred
in connection with (i) the negotiation, execution and delivery of this Agreement
and the Transaction Documents and the Purchasers' due diligence investigation
and (ii) the transactions contemplated by this Agreement and the other
Transaction Documents, which payments shall be made by wire transfer to an
account specified by the Purchasers.
2. Representations and Warranties of the Company
The Company represents and warrants as of the date hereof as
follows:
2.1. Organization and Qualification. Each of the Company and
its Subsidiaries is a corporation or other entity duly organized and existing in
good standing under the laws of its jurisdiction of organization and has the
power to own its respective property and to carry on its respective business as
now being conducted. Each of the Company and its Subsidiaries is duly qualified
to do business and in good standing in every jurisdiction in which the nature of
the respective business conducted or property owned by it makes such
qualification necessary and where the failure so to qualify would have a
Material Adverse Effect.
2.2. Due Authorization. The execution and delivery of this
Agreement, the Registration Rights Agreement, the Warrant Agreement and the
Notes and the issuance, sale and delivery of the Purchased Securities and the
Common Stock issuable upon conversion of the Preferred Stock, upon conversion of
the Preferred Stock issuable upon conversion of the Notes and upon exercise of
the Warrants and compliance by the Company with all the provisions of this
Agreement, the Registration Rights Agreement, the Warrant Agreement, the
Certificate of Designation and the Convertible Securities (i) are within the
corporate power and authority of the Company; (ii) except for the Stockholder
Approval (as defined below), do not or will not require the approval or consent
of the stockholders of the Company; and (iii) have been authorized by all
requisite corporate proceedings on the part of the Company. This Agreement, the
Notes, the Registration Rights Agreement and the Warrant Agreement have been
duly executed and delivered by the Company and constitute valid and binding
agreements of the Company, enforceable in accordance with their respective
terms, except that (x) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights, and (y) the remedy of specific performance
and injunctive and other forms of equitable relief may be
-5-
<PAGE> 12
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. The Company has furnished to the
Purchasers true and correct copies of the Company's Amended and Restated
Certificate of Incorporation and its Amended and Restated By-Laws ("By-Laws") as
in effect on the date of this Agreement.
2.3. Subsidiaries. The Subsidiaries of the Company, all of
which are (or upon closing of the Acquisition will be) wholly owned by the
Company, directly or indirectly, together with their jurisdiction of
incorporation or formation, are as set forth on Schedule 2.3 hereto.
2.4. SEC Reports. The Company has filed all registration
statements, proxy statements, reports and other documents required to be filed
by it under the Securities Act and the Exchange Act since December 31, 1995; and
the Company has furnished the Purchasers copies of its Annual Report on Form
10-K for the fiscal year ended December 31, 1997 (the "1997 Form 10-K"),
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, June 30
and September 30, 1998 and all proxy statements, registration statements and
reports under the Securities Act and the Exchange Act filed by the Company after
such date, each as filed with the Commission (collectively, the "SEC Reports").
Each SEC Report was in substantial compliance with the requirements of its
respective report form and did not on the date of filing contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and as of the date
hereof there is no fact not disclosed in the SEC Reports which is peculiar to
the Company and which would have a Material Adverse Effect.
2.5. Financial Statements. The audited consolidated balance
sheet and statements of operations, stockholders' equity and cash flows of the
Company for the year ended December 31, 1997 (including the related notes
thereto), together with the unqualified report of Ernst & Young LLP ("E&Y") (the
"1997 Financial Statements") and the financial statements included in the SEC
Reports (including any related schedules and/or notes) have been prepared in
accordance with generally accepted accounting principles consistently followed
(except as indicated in the notes thereto) throughout the periods involved and
fairly present the consolidated financial condition, results of operations and
changes in stockholders' equity of the Company and its Subsidiaries as of the
dates thereof and for the periods ended on such dates (in each case subject, as
to interim statements, to changes resulting from year-end adjustments, none of
which will be material in amount or effect), and the Company has no material
liabilities or obligations, contingent or otherwise, not reserved against or
otherwise disclosed in the latest quarterly financial statements included in the
SEC Reports, other than any such liabilities contemplated hereby or which were
incurred in the ordinary course of business since September 30, 1998. Since
September 30, 1998, the Company and its Subsidiaries have operated their
respective businesses only in the ordinary course and no event has occurred
-6-
<PAGE> 13
which has or is reasonably likely to have a Material Adverse Effect, other than
changes disclosed or referred to in the SEC Reports or the 1997 Financial
Statements. The projections and other financial analyses of the Company provided
to the Purchasers were prepared on the basis set forth therein, and there are no
statements or conclusions in any such projections or financial analyses which
are based upon or include information known to the Company to be misleading or
which fail to take into account information regarding the matters reported
therein. The Company believes that the projections are reasonable, although it
is recognized that actual results may differ therefrom. Such projections and
other financial analyses constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. The projections and financial analyses are not guarantees of future
performance and involve risks and uncertainties, and actual results may differ
materially from those contemplated by such forward-looking statements. Important
factors currently known to the Company that could cause actual results to differ
materially from those in such forward-looking statements are set forth in the
1997 Form 10-K under the caption "Cautionary Statements."
2.6. Actions Pending; Compliance with Laws. There is no
action, suit, investigation or proceeding pending or, to the knowledge of the
Company, threatened by any public official or governmental authority, against
the Company or any of its Subsidiaries or any of their respective properties or
assets by or before any court, arbitrator or governmental body, department,
commission, board, bureau, agency or instrumentality (collectively,
"Litigation"), which questions the validity or enforceability of, or seeks to
enjoin or invalidate this Agreement, the Registration Rights Agreement, the
Warrant Agreement, the Certificate of Designation or the Convertible Securities
or any action taken or to be taken pursuant hereto or thereto, which, if
adversely determined, would result in any Material Adverse Effect, except for
any Litigation set forth in the SEC Reports or the 1997 Financial Statements,
and neither the Company nor any of its Subsidiaries is in default in any
material respect with respect to any judgment, order, writ, injunction, decree
or award. The Company and each Subsidiary is in compliance with all applicable
federal, state, local and foreign laws, statutes, orders, rules, regulations,
policies or guidelines promulgated, or judgments, decisions or orders entered by
any governmental authority (collectively, "Applicable Laws") relating to the
Company or any Subsidiary or their respective business or properties, including,
without limitation, social security laws, workers' protection laws, laws
regarding the provision of insurance, health maintenance organization, corporate
practice of medicine, third party administration and primary health care
services, the Occupational Safety and Health Act and the regulations promulgated
thereunder ("OSHA"), and all rules of professional conduct applicable to the
Company or any Subsidiary by which any of its properties are bound or subject,
except where the failure to be in compliance therewith would not have a Material
Adverse Effect.
2.7. Title to Properties; Insurance. Except for Permitted
Liens (as defined in the Revolving Credit Agreement as in effect on the date
hereof), the Company
-7-
<PAGE> 14
and its Subsidiaries have good and valid title to, or, in the case of property
leased by any of them as lessee, a valid and subsisting leasehold interest in,
their respective properties and assets, free of all liens and encumbrances other
than those referred to in the 1997 Financial Statements, except in each case for
such defects in title and such other liens and encumbrances which are disclosed
in the SEC Reports or the 1997 Financial Statements or which do not in the
aggregate materially detract from the value to the Company of the properties and
assets of the Company and its Subsidiaries taken as a whole. The Company and its
Subsidiaries maintain insurance in such amounts, including self-insurance,
retainage and deductible arrangements, and of such a character as is reasonable
for companies engaged in the same or similar business, including directors' and
officers' liability and medical professional liability insurance. Schedule 2.7
sets forth a complete and correct list of all such policies, including the
amount of all policy limits and deductibles.
2.8. Governmental Consents, etc. The Company is not required
to obtain any consent, approval or authorization of, or to make any declaration
or filing with, any governmental authority as a condition to or in connection
with the valid execution, delivery and performance of this Agreement, the
Warrant Agreement, the Registration Rights Agreement and the Notes and the valid
offer, issue, sale or delivery of the Securities, or the performance by the
Company of its obligations in respect thereof, except for (a) the filing with
the Secretary of State of the State of Delaware of the Certificate of
Designation which will be made simultaneously with the Closing; (b) any filings
required to effect any registration of the Common Stock pursuant to the
Registration Rights Agreement; (c) approval by the Company's stockholders
representing a majority of the shares of Common Stock (excluding shares
Beneficially Owned by the Purchasers) present and voting at a meeting duly
called and convened by the Company (the "Stockholder Approval") of the issuance
of the shares of Preferred Stock, the shares of Preferred Stock issuable upon
conversion of the Notes and the shares of Common Stock issuable upon conversion
or exercise of the Convertible Securities contemplated by this Agreement (the
"Stock Issuance"), of which the number of shares of Common Stock to be issued
will be in excess of 20% of the number of shares of Common Stock outstanding
without regard to the shares of Common Stock issuable upon conversion of the
Convertible Securities, as required by Rule 4310 of the NASD Manual; (d) the
receipt of notice of early termination, or the expiration of, the applicable
waiting period pursuant to the HSR Act (the "HSR Approval"); and (e) any filings
required pursuant to state and federal securities laws which will be timely made
after the Closing hereunder.
2.9. Holding Company Act and Investment Company Act. Neither
the Company nor any Subsidiary is: (i) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a "holding company," or
an "affiliate" of such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or (ii) a "public
utility," as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person"
-8-
<PAGE> 15
thereof or an "affiliated person" of any such "affiliated person," as such terms
are defined in the Investment Company Act of 1940, as amended.
2.10. Acquisition Agreement. The copy of the Acquisition
Agreement provided by the Company to the Purchasers (a) is a true and correct
copy thereof, (b) has not been amended or modified and (c) is in full force and
effect and will be in full force and effect as of the Closing Date. On the
Closing Date, each of the representations and warranties made by the Company
and, to the knowledge of the Company, the Seller in the Acquisition Agreement
will be true and correct in all material respects, (without regard to any waiver
thereof). All consents, approvals and authorizations of, and filings,
registrations and qualifications (collectively, "Consents") with, any
governmental authority on the part of the Company and, to the knowledge of the
Company, EMSA and the Seller required in connection with the consummation of the
Acquisition will have been obtained or made and remain in full force and effect
as of the Closing Date, except for Consents the failure to obtain which will not
(i) have a Material Adverse Effect, (2) impair the ability of the Company to
perform its obligations under the Transaction Documents or (3) delay or prevent
the consummation of the Acquisition or the transactions contemplated hereunder.
2.11. Conflicting Agreements and Charter Provisions. None of
(i) the execution and delivery of this Agreement, the Warrant Agreement, the
Registration Rights Agreement and the Notes and the issuance of the Securities;
(ii) the fulfillment of and compliance with the terms and provisions hereof and
thereof and of the Securities; (iii) the payment of dividends on shares of
Preferred Stock and the redemption of the Notes and Preferred Stock as
contemplated by the Governing Instruments out of funds legally available
therefor; and (iv) except with respect to the Stockholder Approval and the HSR
Approval, the conversion or exercise, as the case may be, of the Convertible
Securities as contemplated by the Governing Instruments will conflict with or
result in a breach of the terms, conditions or provisions of, or give rise to a
right of termination under, or constitute a default under, or result in any
violation of, the Certificate of Incorporation or By-laws of the Company or any
mortgage, agreement, instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company or any of its Subsidiaries or any of their
respective property is subject, except that the payment of cash dividends on
shares of Preferred Stock and the redemption of the Notes may conflict with
certain covenants in the Revolving Credit Agreement. Neither the Company nor any
of its Subsidiaries is in default under any outstanding indenture or other debt
instrument or with respect to the payment of principal of or interest on any
outstanding obligation for borrowed money, is in default under any of their
respective contracts or agreements, or under any instrument by which the Company
or any of its Subsidiaries is bound, in each case which default would have a
Material Adverse Effect.
2.12. Capitalization. (a) Immediately prior to the Closing and
the consummation of the Acquisition, the Company has no outstanding Senior or
Subordinated Indebtedness and the authorized capital stock of the Company
consists
-9-
<PAGE> 16
solely of (i) 10,000,000 shares of the Common Stock of which (x) 3,574,077
shares are issued and outstanding as of December 31, 1998 and (y) 1,474,408
shares were reserved for issuance upon the exercise of options granted or
issuable by the Company or pursuant to the Company's Employee Incentive Stock
Plan or pursuant to the Company's Employee Stock Purchase Plan; and (ii)
2,000,000 shares of preferred stock, par value $.01 per share, of which none are
outstanding. All of the outstanding shares of Common Stock have been validly
issued and are fully paid and nonassessable. No class of capital stock of the
Company is entitled to preemptive or similar rights. Except for the securities
referred to in the first sentence of this Section 2.12 and the options listed on
Schedule 2.12(a) hereto, there are no outstanding subscriptions, options,
warrants, puts, calls, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into,
shares of any class of capital stock of the Company, or contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of its capital stock or options, warrants or rights to
purchase or acquire any shares of its capital stock. Since September 30, 1998,
the Company has not issued any additional shares of capital stock, other than
pursuant to the exercise of outstanding stock options pursuant to the Company's
Employee Incentive Stock Plan or pursuant to the Company's Employee Stock
Purchase Plan or as contemplated by Schedule 2.12(a), nor has the Company
changed the amount of its authorized capital stock or subdivided or otherwise
changed any shares of any class of its capital stock, whether by way of
reclassification, recapitalization, stock split or otherwise, or issued or
reissued, or agreed to issue or reissue, any of its capital stock. Except as
contemplated by this Agreement, the Company has not agreed to register any
securities under the Securities Act or under any state securities law or granted
registration rights to any person or entity. There are no voting trusts,
stockholders agreements, proxies or other similar agreements or understandings
in effect to which the Company is a party or of which it has knowledge with
respect to the voting or transfer of any of the shares of Common Stock. To the
extent that any rights, options or warrants to acquire any securities of the
Company are outstanding, none of (i) the issuance and sale of the Purchased
Securities pursuant to this Agreement, (ii) the conversion of the Notes into
Preferred Stock or (iii) the issuance of the Common Stock upon conversion of the
Preferred Stock, upon conversion of the Preferred Stock issuable upon conversion
of the Notes or upon exercise of the Warrants will result in an adjustment of
the exercise price or number of shares issuable upon the exercise in respect of
any such rights, options or warrants.
(b) After the Closing and the consummation of
the Acquisition, the capitalization of the Company will be as set forth in
Schedule 2.12(b) hereto.
2.13. Disclosure. Neither this Agreement nor any certificate,
instrument or written statement furnished or made to the Purchasers by or on
behalf of the Company in connection with this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein misleading. There is
no fact which the Company has not disclosed to the
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<PAGE> 17
Purchasers or their counsel in writing and of which the Company is aware which
materially and adversely affects or which could reasonably be expected to have a
Material Adverse Effect or materially and adversely affect the ability of the
Company to perform its obligations under this Agreement.
2.14. Status of Securities. The Securities have been duly
authorized by all necessary corporate action on the part of the Company (other
than the Stockholder Approval and HSR Approval, no consent or approval of
stockholders being required by law, the Certificate of Incorporation or the
By-Laws of the Company or otherwise), and, assuming receipt of Stockholder
Approval, the Preferred Stock issuable upon conversion of the Notes, and the
Common Stock issuable upon conversion of the Preferred Stock, upon conversion of
the Preferred Stock issuable upon conversion of the Notes or upon the exercise
of the Warrants, as the case may be, will be validly issued and outstanding,
fully paid and nonassessable, and the issuance of such Preferred Stock or Common
Stock is not and will not be subject to preemptive rights of any other
stockholder of the Company. Such shares of Preferred Stock and such shares of
Common Stock have been validly reserved for issuance.
2.15. Registration Under Exchange Act. The Company has not
registered the Notes, the Warrants or the Preferred Stock as a class pursuant to
Section 12 of the Exchange Act. Neither the Notes, the Warrants nor the
Preferred Stock will be registered as such class and such registration is not
required except as otherwise required by the provisions of the Registration
Rights Agreement.
2.16. ERISA. No accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any Pension Plan and each Pension Plan has been maintained in
compliance with minimum funding standards of ERISA and the Code (other than a
Multiemployer Plan). No liability to the PBGC or any other entity has been, or
is reasonably likely to be, incurred with respect to any Pension Plan or
Employee Benefit Plan (other than a Multiemployer Plan) by the Company, any of
its Subsidiaries or any ERISA Affiliate which would have a Material Adverse
Effect on the Company, its Subsidiaries and any ERISA Affiliate. Neither the
Company nor any of its Subsidiaries and any ERISA Affiliate has incurred, or is
reasonably likely to incur, any withdrawal liability (including contingent
withdrawal liability) under Title IV of ERISA with respect to any Multiemployer
Plan which would have a Material Adverse Effect on the Company, its Subsidiaries
or its ERISA Affiliates and if the Company, its Subsidiaries and ERISA
Affiliates were to completely withdraw as of the date hereof from each
Multiemployer Plan in which they participate, the Company, its Subsidiaries and
its ERISA Affiliates would not incur any material withdrawal liability under
Title IV of ERISA. Neither the Company nor any of its Subsidiaries has any
obligation to provide post-retirement health benefits to any employee or former
employee. No fiduciary of any Employee Benefit Plan maintained or contributed to
by the Company or any of its Subsidiaries, for the benefit of their respective
employees has engaged or caused any Employee Benefit Plan
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<PAGE> 18
to engage in any transaction prohibited by Section 4975 of the Code or Section
406 of ERISA which is reasonably likely to subject the Company or any Subsidiary
or any entity the Company or any Subsidiary has an obligation to indemnify to
any tax or penalty imposed under Section 4975 of the Code or Section 406 of
ERISA. Each Employee Benefit Plan has been maintained and administered in
compliance with all applicable law including ERISA and the Code in all material
respects. Each Employee Benefit Plan and Pension Plan (and each related trust,
if any) which is intended to be qualified under Section 401(a) of the Code is so
qualified and has received a determination letter from the Internal Revenue
Service to such effect, and no circumstances exist which could reasonably be
expected to affect such qualification.
2.17. Possession of Franchises, Licenses, etc. The Company and
its Subsidiaries possess all franchises, certificates, licenses, permits and
other authorizations from governmental or political subdivisions or regulatory
authorities and all patents, trademarks, service marks, trade names, copyrights,
licenses and other rights that are necessary in any material respect to the
Company and its Subsidiaries taken as a whole for the ownership, maintenance and
operation of their respective properties and assets, and neither the Company nor
any of its Subsidiaries is in violation of any thereof in any material respect.
2.18. Environmental Matters. Except as listed in Schedule
2.18:
(a) There are, with respect to the Company and each
Subsidiary, or any predecessor of the foregoing, no past or present material
violations of Environmental Law, nor any actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise to
any liability pursuant to any Environmental Law and neither the Company nor any
of its Subsidiaries has received any notice with respect to any of the
foregoing, nor is any Litigation pending or threatened in connection with any of
the foregoing.
(b) No Hazardous Materials are present on or about
any real property currently leased or used by the Company or any of its
Subsidiaries and no Hazardous Materials were present on or about any real
property previously owned, leased or used by the Company or any its Subsidiaries
during the period the property was owned, leased or used by the Company or any
of its Subsidiaries, except in the normal course of the Company's or any such
Subsidiary's business; provided, however, that no representation or warranty is
made regarding the presence or absence of Hazardous Materials at prison
facilities used by the Company or its Subsidiaries if (i) (A) the Company has no
knowledge of such Hazardous Materials, and (B) such Hazardous Materials were not
produced by or used in the business of the Company or any of its Subsidiaries,
or (ii) the presence of such Hazardous Materials would not, individually or in
the aggregate, have a Material Adverse Effect.
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<PAGE> 19
(c) No Hazardous Materials have been released on or
about, or where they may pose a threat of migration to, any real property
currently leased or used by the Company or any of its Subsidiaries and no
Hazardous Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries during the
period the property was owned, leased or used by the Company or any of its
Subsidiaries, except as may be required in the normal course of business and in
material compliance with applicable Environmental Law; provided, however, that
no representation or warranty is made regarding the presence or absence of a
release of Hazardous Materials at prison facilities used by the Company or its
Subsidiaries if (i) (A) the Company has no knowledge of such Hazardous Material
release, and (B) such Hazardous Materials were not released by the Company or
any of its Subsidiaries, or (ii) where such release would not, individually or
in the aggregate, have a Material Adverse Effect.
(d) No asbestos-containing materials or PCBs are
present on or about any property currently leased or used by the Company or any
of its Subsidiaries; provided, however, that no representation or warranty is
made regarding the presence or absence of such materials at prison facilities
used by the Company or its Subsidiaries if (i) (A) the Company has no knowledge
of such materials, and (B) such materials were not produced by or used in the
business of the Company or any of its Subsidiaries, or (ii) the presence of such
materials would not, individually or in the aggregate, have a Material Adverse
Effect.
(e) There are not now, nor have there ever been,
any underground storage tanks or similar facilities ("Storage Facilities") of
any kind on or under any real property currently or previously owned, leased or
used by the Company or any of its Subsidiaries; provided, however, that no
representation or warranty is made regarding the presence or absence of Storage
Facilities at prison facilities used by the Company or its Subsidiaries if (i)
(A) the Company has no knowledge of such Storage Facilities, and (B) such
Storage Facilities were not used in the Company's business or (ii) where the
presence of such Storage Facilities would not, individually or in the aggregate,
have Material Adverse Effect.
2.19. Certain Agreements. (a) Except as described in the SEC
Reports or as set forth in Schedule 2.19(a) hereto, neither the Company nor any
Subsidiary is a party to any written or oral contract, agreement, Guarantee,
lease or executory commitment (each a "Contract") falling within any of the
following categories: (i) Contracts which are service contracts or equipment
leases involving payments by the Company or any Subsidiary of more than $50,000
per year, (ii) Contracts containing covenants purporting to limit the freedom of
the Company or any Subsidiary to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (iii)
Contracts relating to any outstanding commitment for capital expenditures in
excess of $100,000, (iv) Contracts relating to the lease or sublease of or sale
or purchase of real or personal property involving any annual expense or price
in excess of $50,000 and not cancelable
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<PAGE> 20
by the Company or any Subsidiary (without premium or penalty) within one month,
(v) indentures, mortgages, promissory notes, loan agreements, Guarantees of
amounts in excess of $100,000, letters of credit or other agreements or
instruments of the Company or any Subsidiary or commitments for the borrowing or
the lending of amounts in excess of $100,000 or by the Company or any Subsidiary
or providing for any right of first refusal or the creation of any charge,
security interest, encumbrance or lien upon any of the assets of the Company or
any Subsidiary, and (vi) Contracts involving annual revenues or expenditures to
the business of the Company or any Subsidiary, in excess of 5.0% of the
Company's annual revenues. All such contracts are valid and binding obligations
of the Company and each Subsidiary, as the case may be, and, to the knowledge of
the Company and each Subsidiary, are the valid and binding obligation of each
other party thereto except such Contracts which if not so valid and binding
would not, individually or in the aggregate, have a Material Adverse Effect.
Neither the Company or any Subsidiary nor, to the knowledge of the Company or
any Subsidiary, any other party thereto is in violation of or in default in
respect of, nor has there occurred an event or condition which with the passage
of time or giving of notice (or both) would constitute a default under any such
Contract which in the judgment of the management of the Company would adversely
affect the Company's ability to retain, renew or otherwise continue the
Company's contractual relationship with the parties thereto, except for the loss
of contractual relationships which would not have a Material Adverse Effect.
(b) Except for Non-Disclosable Contracts and as
described in the SEC Reports, Schedule 2.19(b) lists all Contracts to which the
Company or any Subsidiary is a party with or for the benefit of any officer,
director or Affiliate of the Company or any Subsidiary or Associate thereof, and
the Company has provided to the Purchasers true and correct copies of each such
Contract as currently in effect.
2.20. Offering of Notes, Preferred Stock and Warrants. Neither
the Company nor any Person acting on its behalf has offered the Notes, the
Preferred Stock or the Warrants or any similar securities of the Company for
sale to, solicited any offers to buy the Notes, the Preferred Stock or the
Warrants or any similar securities of the Company from or otherwise approached
or negotiated with respect to the Company with any Person other than the
Purchasers. Neither the Company nor any Person acting on its behalf has taken or
will take any action (including, without limitation, any offering of any
securities of the Company under circumstances which would require the
integration of such offering with the offering of the Notes, Preferred Stock and
Warrants under the Securities Act and the rules and regulations of the
Commission thereunder) which could reasonably be expected to subject the
offering, issuance or sale of the Notes, Preferred Stock and Warrants to the
registration requirements of Section 5 of the Securities Act.
2.21. Use of Proceeds. The proceeds of the sale of the
Purchased Securities will be used by the Company only (i) for the payment of
fees and expenses in connection with the transactions contemplated hereunder and
in the other Transaction
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<PAGE> 21
Documents and (ii) to fund the payment of the purchase price of the Acquisition
pursuant to the Acquisition Agreement.
2.22. Unlawful Use of Proceeds. (a) The Company does not own,
directly or indirectly, any "margin security", as defined in Regulation G issued
by the Board of Governors of the Federal Reserve System (12 CFR Part 207); and
the Company will not use any proceeds from the sale of the Purchased Securities
for any purpose which would result in any transaction contemplated by this
Agreement constituting a "purpose credit" within the meaning of said Regulation
G, or which would involve a violation of Section 7 of the Exchange Act or
Regulation T, U or X of said Board of Governors (12 CFR Parts 220, 221 and 224,
respectively).
(b) The Company does not intend to apply and will not
apply any part of the proceeds of the sale of the Purchased Securities in any
manner which is unlawful or which would involve a violation of Executive Orders
12775 and 12779 (56 Fed. Reg. 50645 and 55976) Prohibiting Certain Transactions
with respect to Haiti or any of the following regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended): the Foreign
Assets Control Regulations, the Transactions Control Regulations, the Cuban
Assets Control Regulations, the Foreign Funds Control Regulations, the Iranian
Assets Control Regulations, the Iraqi Transactions Regulations, the Nicaraguan
Trade Control Regulations, the South African Transactions Regulations and the
Libyan Sanctions Regulations.
2.23. Intellectual Property Rights. To the Company's
knowledge, except as described in the SEC Reports or as set forth in Schedule
2.23:
(a) Each of the Company or its Subsidiaries owns or
has a license to use all patents and patent applications, trademark
registrations and applications and copyright registrations and applications, and
all other material intangible property and technology ("Intellectual Property")
which are used by the Company or any Subsidiary free and clear of all Liens,
other than Permitted Liens (as defined in the Revolving Credit Agreement as in
effect on the date hereof) and Liens which arise in the ordinary course of
business and do not materially impair such ownership or use of such Intellectual
Property or materially detract from the value thereof. With respect to such
Intellectual Property licensed by the Company or any Subsidiary, such licenses
are in full force and effect, the Company or such Subsidiary is in compliance
with the terms and provisions thereof, and no event has occurred which, with
notice or lapse of time or both, would constitute a breach or violation thereof
which could have a Material Adverse Effect, and the Company or such Subsidiary
holds a valid license to use such Intellectual Property, free of any liens,
claims or encumbrances except those liens, claims or encumbrances which do not
and will not, individually or in the aggregate, have a Material Adverse Effect.
(b) The Company and the Subsidiaries (i) have the
right and authority to use such Intellectual Property in connection with the
conduct of the business
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<PAGE> 22
of the Company and the Subsidiaries in the manner and to the extent such
business is presently conducted, and (ii) have not been notified of any claim
that such use conflicts with, infringes upon or violates any rights of any other
person or entity, except in each case, as such would not, individually or in the
aggregate, have a Material Adverse Effect.
2.24. Related Transactions. Except as disclosed in the SEC
Reports or on Schedule 2.24, no current stockholder, director, officer or
employee of the Company, or any "Affiliate" or "associate" (as such term is
defined in Rule 12b-2 under the Exchange Act) of any of the foregoing persons or
the Company or any Subsidiary is presently, or during the past three years has
been, directly or indirectly, a party to any agreement, transaction or series of
similar transactions with the Company or any Subsidiary which are or will be
required to be disclosed under the provisions of the 1934 Act, other than in
connection with any such person's duties as a director, officer or employee of
the Company.
2.25. No Brokerage or Finder's Fees. Except for the Company's
obligations to SESC under an engagement letter dated September 28, 1998 and to
FFT under a commitment letter dated November 13, 1998, neither the Company, any
Subsidiary of the Company, nor any stockholder, director, officer or employee of
the Company or any Subsidiary has incurred or will incur any brokerage, finder's
or similar fee in connection with the transactions contemplated by this
Agreement or the Acquisition Agreement (other than fees related to Senior
Indebtedness).
2.26. "Year 2000". The Company and each of its Subsidiaries
have analyzed and are continuing to analyze the operations thereof that could be
affected adversely by a failure to be Year 2000 Compliant in a timely manner and
have developed plans and procedures for assuring that they are or will be Year
2000 Compliant in a timely manner, the implementation of which is on schedule in
all material respects. The Company reasonably believes that it, and its
Subsidiaries and the operations thereof, and all suppliers, vendors and other
Persons whose performance is material to such operations, will be Year 2000
Compliant in a timely manner, except to the extent that a failure to be
compliant will not have a Material Adverse Effect. "Year 2000 Compliant" means a
condition or state of affairs such that computers, computer systems, computer
programs and software, computer applications, imbedded microchips and other
systems are and will be able to perform and process date-sensitive functions and
operations (including input, output, comparisons and arithmetic calculations)
accurately prior to, on and after December 31, 1999, or, to the extent that the
same are unable or fail to perform and process such functions and operations
accurately, there are in place alternative or back-up systems or procedures such
that any such inability or failure will not have a Material Adverse Effect.
2.27. Taxes. The Company and its Subsidiaries have filed or
caused to be filed all income tax returns which are required to be filed and
have paid or caused to be paid all taxes as shown on said returns and on all
assessments for income taxes received
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<PAGE> 23
by them to the extent that such taxes have become due, except taxes the validity
or amount of which is being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside, and except for
such returns for which the failure to file would not have a Material Adverse
Effect. With respect to prior fiscal years, for which the federal income tax
returns of the Company and its Subsidiaries have been examined and reported on
by the Internal Revenue Service, all tax liabilities including additional
assessments have been satisfied for all such fiscal years prior to and including
the fiscal year ended December 31, 1994. The Company and its Subsidiaries have
paid or caused to be paid, or have established reserves that the Company
reasonably believes to be adequate in all material respects, for all federal
income tax liabilities and state income tax liabilities applicable to the
Company and its Subsidiaries for all fiscal years which have not been examined
and reported on by the taxing authorities (or closed by applicable statutes).
2.28. Vote Required. The Stockholder Approval is the only vote
of the holders of any class or series of the Company's capital stock necessary
for the Company to approve the Stock Issuance.
2.29. Medicare and Medicaid. Neither the Company nor any of
its Affiliates participates in either the Medicare or Medicaid programs as those
programs are defined in the Medicare Act and the Medicaid Act, respectively, and
do not receive any payments or funds therefrom.
2.30. Property. Neither the Company nor any of its
Subsidiaries owns any real property.
3. Representations and Warranties of the Purchasers. The Purchasers
represent and warrant as of the date hereof as follows:
3.1. Organization and Qualification. Each of the Purchasers is
a limited partnership duly organized and existing in good standing under the
laws of the jurisdiction of its formation and has the power to own its
respective property and to carry on its respective business as now being
conducted. Each of the Purchasers is duly qualified to do business and in good
standing in every jurisdiction in which the nature of the respective business
conducted or property owned by it makes such qualification necessary, except
where the failure to so qualify would not prevent consummation of the
transactions contemplated hereby or have a material adverse effect on the
Purchasers' ability to perform their obligations hereunder.
3.2. Due Authorization. Each of the Purchasers has all right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by each of the Purchasers and the consummation by the Purchasers of the
transactions contemplated hereby have been duly authorized by all necessary
action on behalf of each of the Purchasers. This Agreement has been duly
executed and delivered by the Purchasers and constitutes a valid and
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<PAGE> 24
binding agreement of the Purchasers enforceable in accordance with its terms,
except that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
3.3. Conflicting Agreements and Other Matters. Neither the
execution and delivery of this Agreement nor the performance by the Purchasers
of their obligations hereunder will conflict with, result in a breach of the
terms, conditions or provisions of, constitute a default under, or require any
consent, approval or other action by or any notice to or filing with any court
or administrative or governmental body pursuant to, the organizational documents
or agreements of each of the Purchasers or any mortgage, agreement, instrument,
order, judgment, decree, statute, law, rule or regulation to which either
Purchaser or any of their respective properties are subject, except for filings
after the Closing under Section 13(d) of the Exchange Act and compliance with
the HSR Act.
3.4. Acquisition for Investment. Each of the Purchasers is
acquiring the Purchased Securities being purchased by it for its own account for
the purpose of investment and not with a view to or for sale in connection with
any distribution thereof, and none of the Purchasers have any present intention
or plan to effect any distribution thereof. Each of the Purchasers acknowledges
that the Securities, including the Securities issuable upon conversion or
exercise, as the case may be, of the Convertible Securities, have not been
registered under the Securities Act, and may be sold or disposed of in the
absence of such registration only pursuant to an exemption from such
registration and in accordance with this Agreement. At the date hereof none of
the Purchasers beneficially own, directly or, to the knowledge of such
Purchasers, indirectly (or have any option or right to acquire), any securities
of the Company other than the Securities being purchased by it hereunder.
3.5. Brokers or Finders. Except as set forth in Section 1.5,
no agent, broker, investment banker or other firm or Person, including any of
the foregoing that is an Affiliate of the Purchasers, is or will be entitled to
any broker's fee or any other commission or similar fee from the Purchasers in
connection with any of the transactions contemplated by this Agreement that the
Company will be responsible for pursuant to Section 13.10.
3.6. Accredited Investor. Each of the Purchasers is an
"accredited investor" within the meaning of Rule 501 promulgated under the
Securities Act.
3.7. HSR Notification. The Purchasers will file their
notification ("HSR Notification") of the transaction contemplated by this
Agreement pursuant to the HSR Act at the same time as the Company files its HSR
Notification pursuant to Section 6.14.
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<PAGE> 25
4. Registration, Exchange and Transfer of Notes
4.1. Authorized Denominations of Notes. The Notes are issuable
only as fully registered Notes in denominations of at least $100,000.
4.2. The Note Register; Persons Deemed Owners. The Company
shall maintain, at its office designated for notices in accordance with Section
13.6, a register for the Notes (the "Note Register"), in which the Company shall
record the name and address of the person in whose name each Note has been
issued and the name and address of each transferee and prior owner of each Note.
The Company may deem and treat the person in whose name a Note is so registered
as the holder and owner thereof for all purposes and shall not be affected by
any notice to the contrary, until due presentment of such Note for registration
of transfer as provided in this Article 4.
4.3. Issuance of New Notes Upon Exchange or Transfer. Upon
surrender for exchange or registration of transfer of any Note at the office of
the Company designated for notices in accordance with Section 13.6, the Company
shall execute and deliver, at its expense, one or more new Notes of any
authorized denominations requested by the holder of the surrendered Note, each
dated the date to which interest, if any, has been paid on the Note so
surrendered (or, if no interest has been paid, the date of such surrendered
Note), but in the same aggregate unpaid principal amount as such surrendered
Note, and registered in the name of such person or persons as shall be
designated in writing by such holder. Every Note surrendered for registration of
transfer shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the holder of such Note or by his attorney duly
authorized in writing. The Company may also condition the issuance of any new
Note or Notes in connection with a transfer by any person on the payment of a
sum sufficient to cover any stamp tax or other governmental charge imposed in
respect of such transfer.
4.4. Lost, Stolen, Damaged and Destroyed Notes. Upon receipt
by the Company of evidence reasonably satisfactory to it of the ownership of and
the loss, theft, destruction or mutilation of any Note (which evidence shall be,
in the case of any of the Purchasers or any Affiliate of the Purchasers or FFT,
an affidavit from FFT of such ownership and such loss, theft, destruction or
mutilation), and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it; provided that if the holder of
such Note is, or is a nominee for, any of the Purchasers, an Affiliate
of the Purchasers or FFT or another holder of a Note with a minimum net
worth of at least $5,000,000, such Person's own unsecured agreement of
indemnity shall be deemed to be satisfactory, or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
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the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
5. Payment of Notes
5.1. Home Office Payment. The Company will pay to the
Purchasers or any transferee thereof all sums becoming due on the Notes
(including all sums which become due on the Notes at the maturity thereof) at
the address specified in Section 13.6 or at the address specified by such
transferee, by wire transfer of immediately available funds, or at such other
address or by such other method as the Purchasers or transferee shall have
designated by notice to the Company, without presentment for notation of payment
and without surrender. Before selling or otherwise transferring any Note, the
Purchasers or transferee will make a notation thereon of the aggregate amount of
all payments of principal, if any, therefore made, and of the date to which
interest has been paid.
5.2. Limitation on Interest. No provision of this Agreement or
of any Note shall require the payment or permit the collection of interest, if
payable, in excess of the maximum rate which is permitted by law. If any such
excess interest is provided for herein or in any Note, or shall be adjudicated
to be so provided for, then the Company shall not be obligated to pay such
interest in excess of the maximum rate permitted by law, and the right to demand
payment of any such excess interest is hereby waived, any other provisions in
this Agreement or in any Note to the contrary notwithstanding.
5.3. Interest. (a) Subject to Section 8.3, interest on the
unpaid principal balance of each Note shall be payable at a rate per annum
(computed on the basis of a 360-day year of twelve 30-day months) of 12.0%, due
and payable monthly in arrears at the rate of 1.0% per month on the last day of
each month (each, a "Payment Date") after the issuance of the Notes, until such
Notes have been paid in full.
(b) Accrued interest on each Note is required to
be paid in cash (in accordance with Section 5.1 herein) on each Payment Date.
5.4. Business Day. Any payments in respect of any Note which
are required under this Agreement to be made on a day that is not a Business Day
shall be made on the next succeeding Business Day.
6. Covenants of the Company
A. The Company covenants that so long as any
principal amount of the Notes or one-third (unless a greater percentage is
required below) of the shares of the Preferred Stock issued or issuable
hereunder shall remain outstanding:
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<PAGE> 27
6.1. Financial Covenants. (a) The Company will not permit its
Consolidated Net Worth on the last day of each quarter to be less than the
Required Net Worth Amount (it being understood that, for the purposes of this
paragraph (a), the Notes and any other Subordinated Indebtedness of the Company
shall be treated as debt and any other equity interests of the Company (other
than Disqualified Stock) shall be treated as equity).
(b) The Company will not permit its ratio of Consolidated
Funded Debt to Consolidated Total Capital (i) as of the end of any fiscal
quarter ending on or after June 30, 1999 but on or before December 31, 1999 to
be greater than 0.85 to 1.00, or (ii) as of the end of any fiscal quarter ending
on or after March 31, 2000 but on or before December 31, 2000 to be greater than
0.70 to 1.00, or (iii) as of the end of any fiscal quarter ending on or after
March 31, 2001 to be greater than 0.60 to 1.00.
6.2. Limitation on Convertible Securities and Equity
Securities. (a) The Company will not issue, and will not permit any Subsidiary
to issue, (i) any convertible debt securities or debt securities exchangeable at
the option of the holder for Common Stock of the Company, or (ii) any equity
securities ranking senior to or on a parity with the Preferred Stock with
respect to dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Company.
(b) For purposes of this Section 6.2, the issuance of
units comprising debt (including financial leases) or preferred stock and
warrants shall be deemed to be an issuance of convertible securities.
6.3. Merger; Purchase and Sale of Assets. So long as the
Purchasers hold Issuable Preferred Stock, without the Purchasers' consent:
(a) The Company will not merge with or into or
consolidate with any other Person unless (i) the Company is the continuing or
surviving entity and the shares of Common Stock then outstanding remain
unchanged and outstanding and represent at least a majority of the Voting
Securities of the surviving entity, (ii) the surviving entity expressly assumes
the then outstanding principal amount of the Notes and the Face Value of the
Preferred Stock and (iii) immediately after the consummation of such merger or
consolidation the surviving entity would not be in violation of any covenant set
forth in Section 6.1.
(b) The Company will not, and will not permit any
Subsidiary to, in any transaction or series of transactions, sell, lease or
exchange all or substantially all of the assets of the Company or any of its
Subsidiaries except sale(s) of assets not otherwise permitted by this Section
6.3 in an aggregate amount not to exceed, in any fiscal year, an amount equal to
five percent (5%) of the consolidated assets of the Company and its
Subsidiaries, determined in conformity with generally accepted accounting
principles, as of the end of the most recently completed fiscal year of the
Company.
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(c) The Company will not, and will not permit any
Subsidiary to, in any transaction or series of transactions, acquire (including
pursuant to a merger or consolidation) all or any substantial portion of the
business or assets of any Person unless (i) such transaction or series of
transactions has been approved by the Board of Directors of the Company and (ii)
after giving effect to such transactions or series of transactions, the Company
would be in compliance with the covenants set forth in Section 6.1 hereof.
6.4. Dividends and Distributions. The Company will not, and
will not permit any Subsidiary to, declare or pay any dividend on, or make any
other distribution in respect of, or redeem, purchase or otherwise acquire any
shares of Common Stock or any other shares of capital stock of the Company
ranking junior to or on a parity with the Preferred Stock.
6.5. Compliance with Laws. The Company will, and will cause
each Subsidiary to, comply with all Applicable Laws with respect to the conduct
of its business and the ownership of its properties, including, without
limitation, social security laws, workers' protection laws, environmental laws,
human health and equal employment opportunity laws, laws regarding the provision
of insurance, corporate practice of medicine, health maintenance organization,
OSHA and all rules of professional conduct applicable to the Company or any
Subsidiary by which any of its properties are bound or subject; provided that,
the Company shall not be deemed to be in violation of this Section 6.5 as a
result of any failure to comply with any provisions of such statutes, rules,
regulations, and orders, the noncompliance with which would not result in fines,
penalties, injunctive relief or other civil liabilities which, individually or
in the aggregate, would have a Material Adverse Effect.
6.6. Limitation on Agreements. The Company will not, and will
not permit any Subsidiary to, enter into any agreement, or any amendment,
modification, extension or supplement to any existing agreement, which
contractually prohibits the Company from paying interest, if any, payable on the
Notes or dividends on the Preferred Stock, or redeeming the Notes or the
Preferred Stock other than the Revolving Credit Agreement as in effect on the
date hereof.
6.7. Preservation of Franchises and Existence. Except as
otherwise permitted by this Agreement, the Company will (i) maintain its
corporate existence, rights and franchises in full force and effect and (ii)
cause the Subsidiaries to maintain their respective corporate existences, rights
and franchises in full force and effect; provided that nothing in this Section
6.7 shall prevent the Company or any Subsidiary from discontinuing its
operations in any particular state or at any particular location or locations
within the state, or prevent the corporate existence, rights and franchises of
any Subsidiary from being terminated if, in the opinion of the Board of
Directors of the Company, the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries taken as a whole.
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<PAGE> 29
6.8. Insurance. (a) The Company will, and will cause each of
the Subsidiaries to, maintain with insurers believed by the Company to be
responsible such insurance, in such amounts and of such types as are carried on
the date hereof or customarily carried under similar circumstances by companies
engaged in the same or a similar business or having similar properties similarly
situated.
(b) The Company shall (i) provide, maintain and perform
in the same manner as prior to the date hereof the Company's existing
indemnification provisions with respect to present and future directors and
officers of the Company for all losses, claims, damages, expenses or liabilities
arising out of actions or omissions or alleged actions or omissions occurring
after the Closing Date to the extent permitted or required under all Applicable
Laws and the Company's Certificate of Incorporation and By-Laws in effect at the
date hereof (to the extent consistent with the Applicable Laws); and (ii)
maintain directors and officers liability coverage, with limits, terms and
conditions no less advantageous than in effect on the date hereof. Such coverage
will be maintained with the current insurance carriers or insurance carriers of
financial strength equal to or greater than the financial strength of the
current insurance carriers. Evidence of such coverage will be provided to the
individual officers and directors upon request. Any new directors or officers of
the Company will be added to such policies.
6.9. Payment of Taxes and Other Charges. The Company will pay
or discharge, and will cause each of the Subsidiaries to pay or discharge,
before the same shall become delinquent, (i) all taxes, assessments and other
governmental charges or levies imposed upon it or any of its properties or
income (including, without limitation, such as may arise under Section 4062,
4063, or 4064 of ERISA or any similar provision of law) and (ii) all claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords and other
like persons which, in the case of either clause (i) or clause (ii), if unpaid,
might result in the creation of a material lien upon any of its properties;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith pursuant to
appropriate proceedings.
6.10. Financial Statements and Other Reports. (a) The Company
will, as soon as available and in any event within 30 days after the end of each
month, furnish to the Purchasers an unaudited consolidated balance sheet of the
Company and its Subsidiaries as of the end of such month, the statements of
consolidated net income and cash flows and a statement of changes in
consolidated Common Stock, Additional Paid-In Capital, Retained Earnings
(Deficit) and Treasury Stock of the Company and its Subsidiaries for such month,
setting forth in each case in comparative form figures for the corresponding
period or date in the preceding fiscal year, all in reasonable detail and
certified by an authorized financial officer of the Company, subject to changes
resulting from year-end adjustments.
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<PAGE> 30
(b) The Company will, as soon as practicable and in any
event within 45 days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, furnish to the Purchasers statements of
consolidated net income and cash flows and a statement of changes in
consolidated Common Stock, Additional Paid-In Capital, Retained Earnings
(Deficit) and Treasury Stock of the Company and its Subsidiaries for the period
from the beginning of the then current fiscal year to the end of such quarterly
period, and consolidated balance sheets of the Company and its Subsidiaries as
of the end of such quarterly period, setting forth in each case in comparative
form figures for the corresponding period or date in the preceding fiscal year,
all in reasonable detail and certified by an authorized financial officer of the
Company, subject to changes resulting from year-end adjustments; provided,
however, that delivery pursuant to paragraph (d) below of a copy of the
Quarterly Report on Form 10-Q of the Company for such quarterly period filed
with the Commission shall be deemed to satisfy the requirements of this
paragraph (b).
(c) The Company will, as soon as practicable and in any
event within 90 days after the end of each fiscal year, furnish to the
Purchasers statements of consolidated net income and cash flows and a statement
of changes in consolidated Common Stock, Additional Paid-In Capital, Retained
Earnings (Deficit) and Treasury Stock of the Company and its Subsidiaries for
such year, and consolidated balance sheets of the Company and its Subsidiaries
as of the end of such year, setting forth in each case in comparative form the
corresponding figures from the preceding fiscal year, all in reasonable detail
and examined and reported on by independent public accountants of recognized
national standing selected by the Company; provided, however, that delivery
pursuant to paragraph (d) below of a copy of the Annual Report on Form 10-K of
the Company for such fiscal year filed with the Commission shall be deemed to
satisfy the requirements of this paragraph (c).
(d) The Company will, promptly upon transmission thereof,
furnish to the Purchasers copies of all such press releases, financial
statements, proxy statements, notices and reports as it shall send to its
stockholders and copies of all such registration statements (without exhibits),
other than registration statements relating to employee benefit or dividend
reinvestment plans, and all such regular and periodic reports as it shall file
with the Commission.
(e) The Company will promptly furnish to the Purchasers
(i) copies of (x) any compliance certificates furnished to lenders in respect of
Indebtedness of the Company and its Subsidiaries and (y) any notices of default
from lenders in respect of any such Indebtedness and (ii) notice of (x) the
commencement of any Litigation which, if determined adversely to the Company,
would have a Material Adverse Effect and (y) the issuance by any governmental
authority of any injunction, order, restraint or other decision which has
resulted in, or which is likely to have, in the reasonable judgment of the
Company or any such Subsidiary, a Material Adverse Effect.
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<PAGE> 31
(f) Together with each delivery of financial statements
required by paragraph (c) above, the Company will deliver to the Purchasers a
certificate of the Chief Financial Officer, Treasurer or other financial officer
of the Company regarding compliance by the Company with the covenants set forth
in Sections 6.1 and 6.4.
6.11. Inspection of Property. The Company will permit
representatives of the Purchasers to visit and inspect, at the Purchasers'
expense, any of the properties of the Company and its Subsidiaries, to examine
the corporate books and make copies or extracts therefrom and to discuss the
affairs, finances and accounts of the Company and its Subsidiaries with the
officers, consultants, directors, employees, attorneys or independent
accountants of the Company, all at such reasonable times, upon reasonable notice
and as often as the Purchasers may reasonably request.
6.12. Board Membership. In connection with the issuance of
shares of Preferred Stock issued hereunder, on the Closing Date, the Board will
take all necessary action to fix and maintain the number of directors at eight
members and cause the appointment of one nominee of the Purchasers as a member
of the Board. Upon conversion of all of the outstanding aggregate principal
amount of Notes into shares of the Preferred Stock and for as long as the
Purchasers and their Affiliates and Affiliates of the general partner of the
Purchasers own the percentage of the aggregate Face Value of Preferred Stock
issued hereunder or Common Stock issuable upon conversion of such Preferred
Stock specified in the table below, the Company shall fix and maintain the
number of directors as specified in such table and shall take all necessary
action to cause the appointment of the number of nominees of the Purchasers
specified in such table as members of the Board.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Number of
Percentage Size of Purchasers'
of Stock Board Directors
- ---------------------------------------------------------------------------
<S> <C> <C>
>66 2/3% 9 3
-
- ---------------------------------------------------------------------------
<66 2/3%, but 8 2
>33 1/3%
- ---------------------------------------------------------------------------
<33 1/3%, but 7 1
-
>25%
- ---------------------------------------------------------------------------
</TABLE>
So long as the Purchasers are entitled to designate at least
one director, the Company shall cause the Board to appoint at least one Director
designated by
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<PAGE> 32
the Purchasers to the executive, audit and compensation committees of the Board
and each other committee established by the Board. At each subsequent annual
meeting for the election of directors the Purchasers will be entitled to propose
(and the Company will nominate and recommend) such person or persons, as the
case may be, nominated by the Purchasers as a member of the Board. In the event
of any vacancy arising by reason of the resignation, death, removal or inability
to serve as the Purchasers' nominee, the Purchasers shall be entitled to
designate a successor to fill such vacancy until the next annual meeting for the
election of directors. The Company agrees that if such nominee or nominees is
not elected, (i) the Purchasers will be entitled to have observational rights at
all meetings of the Board of Directors and the Purchasers shall have the same
access to information concerning the business and operations of the Company and
its Subsidiaries at the same time as directors of the Company and shall be
entitled to participate in discussions and consult with the Board, without
voting, and (ii) the Company will nominate and recommend such person or persons,
as the case may be, proposed by the Purchasers at each subsequent annual meeting
until the nominee or nominees proposed by the Purchasers has been elected to the
Board. If at any time the number of Purchasers' designees exceeds the number to
which the Purchasers are entitled based on the table set forth above, then at
the Board's request the Purchasers shall submit resignations for a sufficient
number of designees to reduce the number of remaining designees to the number to
which the Purchasers are then entitled.
6.13. Lost, Stolen, Damaged and Destroyed Stock Certificates.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of any certificate
for shares of Preferred Stock (which evidence shall be, in the case of the
Purchasers or any Affiliate of the Purchasers or FFT, an affidavit from FFT,
from the Purchasers or such Affiliate of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it; provided that if the holder of
such shares of Preferred Stock is, or is a nominee for, the Purchasers,
an Affiliate of the Purchasers or FFT or another holder of the shares
of Preferred Stock with a minimum net worth of at least $5,000,000,
such Person's own unsecured agreement of indemnity shall be deemed to
be satisfactory, or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
certificate, dated and paying dividends from the date to which dividends shall
have been paid on such lost, stolen, destroyed or mutilated certificate or dated
the date of such lost, stolen, destroyed or mutilated certificate if no dividend
shall have been paid thereon.
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<PAGE> 33
6.14. HSR. The Company shall file its HSR Notification as soon
as practicable after the Closing Date but in no event later than February 15,
1999. Notwithstanding any other provision of this Agreement or the Notes, the
Company shall not deliver any notice of conversion pursuant to Article 10 unless
(a) the Company shall have filed its HSR Notification, (b) the applicable
waiting period shall have expired or been terminated, (c) the date fixed for
conversion in accordance with Article 10 shall be a date upon which the
Purchasers shall not be prohibited from owning Voting Securities under the HSR
Act, (d) the Stockholder Approval with respect to the Stock Issuance shall have
been obtained, (e) the Common Stock issuable upon conversion of the Preferred
Stock issuable upon conversion of the Notes shall be approved for quotation on
Nasdaq National Market and (f) each of the representations and warranties of the
Company contained in this Agreement on the date of such notice of conversion and
on the conversion date as set forth in the notice of conversion shall be true
and correct in all material respects.
6.15. Certain Tax Matters. (a) In the event (i) of a Final
Determination (as defined below) that the Purchasers are required to include in
income for any taxable year amounts ("OID") determined pursuant to the
principles of Sections 1271-75 of the Code and the regulations thereunder,
including by application of Section 305(c) of the Code, or any successor
provisions thereto (collectively, the "OID Rules") with respect to the Notes,
the Warrants or the Preferred Stock (an "OID Inclusion") or (ii) the OID Rules
or any similar or corresponding state or local law is amended to require an OID
Inclusion for any taxable year, the Company shall pay to such Purchasers with
respect to each such OID Inclusion no later than the Payment Due Time (as
defined below), an additional payment (the "Gross-Up Payment") such that the
amount of such Gross-Up Payment shall equal the sum of (i) (A) the product of
(x) the amount of the OID Inclusion for such taxable year plus penalties, if
any, actually payable by any direct or indirect partner or member of the
Purchasers with respect to the OID Inclusion to the Internal Revenue Service or
any other applicable taxing authority by reason of such events ("Applicable
Penalties"), and (y) the maximum combined federal, state and local income tax
rate for an individual resident in New York City, after giving due allowance for
the deductibility of state and local income taxes (the "Applicable Tax Rate")
divided by (B) 1 minus the Applicable Tax Rate, plus (ii) interest, on the
amount of OID Inclusion multiplied by the Applicable Tax Rate, at the rates in
effect from time to time for individual taxpayers resident in New York City with
respect to income tax deficiencies for all periods from the date with respect to
which the deficiency arose until the payment of tax on the amount of the OID
Inclusion, plus (iii) Applicable Penalties.
(b) A "Final Determination" with respect to a
federal tax liability shall mean (i) a decision, judgment, decree or other order
by any court of competent jurisdiction, which decision, judgment, decree or
other order has become final, or (ii) a closing agreement entered into under
Section 7121 (or any successor to such Section) of the Code or any other
settlement agreement entered into a connection with an administrative or
judicial proceeding and consented to by the Purchasers or any member
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<PAGE> 34
of their consolidated group. The "Payment Due Time" shall mean 5:00 p.m. Eastern
time, of the day two banking days before the date on which expires the period
allowed by applicable law for timely payment of the tax liability imposed on the
related OID Inclusion pursuant to an applicable Final Determination.
(c) In the event that the Purchasers are notified
formally or informally of any audit, examination or proceeding by the Internal
Revenue Service or other taxing authority with respect to the includability in
income of OID with respect to the Notes, Warrants or Preferred Stock, the
Purchasers will promptly notify the Company of such audit, examination or
proceeding; provided, however, that the Purchasers' failure to give such notice
or to keep the Company fully informed concerning a Contest (as defined below)
shall not affect the Company's obligation to make Gross-Up Payments in
accordance with this Section 6.15. Subject to the requirement that the
Purchasers shall proceed in good faith and shall pursue the issue diligently,
the Purchasers shall have exclusive control and responsibility to conduct any
audit, examination, proceeding or litigation (a "Contest") with respect to such
treatment. The Purchasers shall bear all costs and expenses in connection with
such Contest.
(d) The Company expressly acknowledges that
Affiliates of the Purchasers that acquire Notes, Warrants or Preferred Stock as
permitted by this Agreement shall be entitled to the benefits of this Section
6.15. No other subsequent holder shall be entitled to the benefits of this
Section 6.15.
6.16. [Intentionally Omitted]
6.17. Notice of Breach. As promptly as practicable, and in any
event not later than (i) thirty days after such breach in the case of a breach
of Section 6.1(a) or 6.21 and (ii) five Business Days after executive officers
of the Company become aware of any other breach by the Company of any provision
of this Agreement, including, without limitation, any other provision of this
Article 6, the Company shall provide the Purchasers with written notice
specifying the nature of such breach and any actions proposed to be taken by the
Company to cure such breach.
6.18. Limitation on Transactions with Affiliates. The Company
will not, and will not permit any of its Subsidiaries to, directly or indirectly
enter into any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with or for the benefit of any Affiliate of the Company (other than
the Company or a wholly-owned Subsidiary) unless such transaction or series of
related transactions is entered into in good faith and (a) such transaction or
series of related transactions is on terms that are no less favorable to the
Company or such Subsidiary, as the case may be, than those that would be
available in a comparable transaction in arm's-length dealings with an unrelated
third party and (b) with respect to any transaction or series of related
transactions involving aggregate value in excess of $100,000, such transaction
or series of related transactions has been approved
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<PAGE> 35
by a majority of Disinterested Directors of the Company, or in the event there
is only one Disinterested Director, by such Disinterested Director; provided,
however, that this provision shall not apply to any transaction (x) with an
officer or director of the Company entered into in the ordinary course of
business (including compensation and employee benefit arrangements with any
officer, director or employee of the Company, including under any stock option
or stock incentive plans) or (y) agreed to in writing prior to the date hereof.
6.19. Stockholders Meeting. The Company shall, as soon as
practicable, take all action necessary in accordance with applicable law and its
Certificate of Incorporation and By-Laws to convene a meeting of its
stockholders to consider and vote upon the approval of the Stock Issuance by
stockholders (the "Stockholders Meeting") and shall convene such Stockholders
Meeting no later than six months from the Closing Date.
6.20. Proxy Statement. (a) The Company shall prepare and file
with the Commission as soon as practicable, but in no event later than 60 days
following the Closing Date, a proxy statement (the "Proxy Statement") under the
Exchange Act with respect to the Stockholders Meeting. The Company shall cause
the Proxy Statement to comply as to form in all material respects with the
applicable provisions of the Exchange Act. At the Stockholders Meeting and in
the Proxy Statement, the Company shall recommend that holders of the Common
Stock approve the Stock Issuance.
B. The Company covenants that so long as any principal
amount of the Notes shall remain outstanding:
6.21. Financial Covenants. The Company will not permit its
Consolidated Fixed Charge Coverage Ratio to be less than 1.15 to 1.
6.22. Limitation on Indebtedness. (a) The Company will not
permit any Subsidiary to incur any Indebtedness (other than (i) guarantees of
the Senior Indebtedness and (ii) Indebtedness owed to the Company).
6.23. Limitation on Other Senior Subordinated Indebtedness.
Except for Redemption Indebtedness, the Company will not, and will not permit
any Subsidiary to, incur, create, assume, Guarantee or in any other manner
become directly or indirectly liable with respect to or responsible for, or
permit to remain outstanding, any Indebtedness that is subordinate or junior in
right of payment to any Senior Indebtedness unless such Indebtedness is also
pari passu with, or subordinate in right of payment to, the Notes pursuant to
subordination provisions substantially similar to those contained in Section 11
of this Agreement.
6.24. Limitation on Guarantees of Indebtedness by
Subsidiaries. The Company will not permit any Subsidiary to Guarantee the
payment of any Indebtedness
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<PAGE> 36
(other than the Senior Indebtedness or the Notes) of the Company or any
Indebtedness of any other Person.
6.25. Limitation on Issuances and Sales of Subsidiary
Stock. The Company will not permit:
(a) any Subsidiary to issue any Capital
Stock (other than to the Company or a wholly-owned Subsidiary) and
(b) any Person (other than the Company
or a wholly-owned Subsidiary) to own any Capital Stock of any
Subsidiary; provided, however, that this subsection shall not prohibit
(i) the issuance and sale of all, but not less than all, of the issued
and outstanding Capital Stock of any Subsidiary owned by the Company or
any of its Subsidiaries in compliance with the other provisions of this
Agreement, (ii) the ownership by directors of director's qualifying
shares, or (iii) the ownership by any Person of any Capital Stock of a
Subsidiary, if, in each case, the Company has made, or is making, a
Permitted Investment in such Subsidiary that is less than wholly-owned.
In connection with any assets or property contributed or transferred to
any Person as an Investment, such property and assets shall be equal to
the Fair Market Value at the time of Investment.
6.26. Limitation on Liens Securing Pari Passu Indebtedness or
Subordinated Indebtedness. (a) The Company will not, directly or indirectly,
create, incur, assume or suffer to exist any Lien (other than Permitted Liens)
securing Pari Passu Indebtedness or Subordinated Indebtedness of the Company on
or with respect to any of its property or assets, including any shares of stock
or indebtedness of any Subsidiary, whether owned at the date of this Agreement
or thereafter acquired, or any income, profits or proceeds therefrom, or assign
or otherwise convey any right to receive income thereon, unless (i) in the case
of any Lien securing Pari Passu Indebtedness of the Company, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to or pari passu with such Lien and (ii) in the case of any Lien
securing Subordinated Indebtedness of the Company, the Notes are secured by a
Lien on such property, assets or proceeds that is senior in priority to such
Lien.
(b) The Company will not permit any Subsidiary
to, directly or indirectly, create, incur, assume or suffer to exist
any Lien (other than Permitted Liens) securing Indebtedness of such
Subsidiary or any other Person.
6.27. Limitation on Dividends and other Payment Restrictions
Affecting Subsidiaries. The Company will not, and will not permit any Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Subsidiary
of the Company to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock or any other interest or
participation in, or measured by, its profits, (b) pay
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<PAGE> 37
any Indebtedness owed to the Company or any other Subsidiary of the
Company, (c) make loans or advances to the Company or any other
Subsidiary of the Company, (d) transfer any of its properties or assets
to the Company or any other Subsidiary of the Company or (e) Guarantee
any Indebtedness of the Company or any other Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by
reason of:
(i) Applicable Law;
(ii) customary non-assignment provisions of
any lease governing a leasehold interest of the Company or any
Subsidiary of the Company;
(iii) any agreement or other instrument of a
Person acquired by the Company or any Subsidiary of the Company in
existence at the time of such acquisition (but not created in
contemplation thereof), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person so
acquired; and
(iv) any agreement in existence on the
Closing Date including the Revolving Credit Agreement (to the extent of
any encumbrances or restrictions in existence thereunder on the Closing
Date).
6.28. Limitation on Investments. (a) The Company will not, and
will not permit any Subsidiary to, directly or indirectly, make any Investment
(other than any Permitted Investment) in any Person.
6.29. Mergers, Consolidations and Certain Sales of Assets. The
Company shall not, in a single transaction or a series of related transactions,
(a) consolidate with or merge into any other Person or permit any other Person
to consolidate with or merge into the Company and (b) directly or indirectly,
transfer, sell, lease or otherwise dispose of all or substantially all of its
assets unless: (1) in a transaction in which the Company does not survive or in
which the Company sells, leases or otherwise disposes of all or substantially
all of its assets, the successor entity to the Company is organized under the
laws of the United States of America or any State thereof or the District of
Columbia and shall expressly assume, by a written instrument executed and
delivered to FFT in the form satisfactory to FFT, all of the Company's
obligations under the Notes; (2) immediately before and after giving effect to
such transaction and treating any Indebtedness which becomes an obligation of
the Company or any of its Subsidiaries as a result of such transaction as having
been incurred by the Company or such Subsidiaries at the time of the
transaction, no Event of Default or event that with the passing of time or the
giving of notice, or both, would constitute an Event of Default shall have
occurred and by continuing; (3) immediately after giving effect to such
transaction, the Consolidated Net Worth of the Company (or other successor
entity to the Company) is equal to or greater than that of the Company
immediately prior to the transaction;
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<PAGE> 38
(4) immediately after giving effect to such transaction and treating any
Indebtedness which becomes an obligation of the Company or any of its
Subsidiaries as a result of such transaction as having been incurred by the
Company or such Subsidiaries at the time of the transaction, the Company
(including any successor entity to the Company) could incur at least $1.00 of
additional Indebtedness pursuant to the provisions of Sections 6.1(b) and 6.21
hereof; and (5) the Company has delivered to the FFT an Officer's Certificate
and an opinion of counsel (which opinion of counsel may rely, as to factual
matters, on such Officer's Certificate), each stating that such consolidation,
merger, conveyance, transfer, lease or acquisition complies with this Section
6.29 and that all conditions precedent herein provided for relating to such
transaction have been complied with, and, with respect to such Officer's
Certificate, setting forth the manner of determination of the Consolidated Net
Worth and the ability to incur Indebtedness in accordance with clause (4) above
of the Company or, if applicable, of the successor Company as required pursuant
to the foregoing.
6.30. NASDAQ Approval. The Company shall obtain, within 30
days after the Stockholder Approval, approval for quotation on the NASDAQ
National Market of the Common Stock to be issued upon conversion of the
Preferred Stock issuable upon conversion of the Notes, subject to official
notice of issuance ("NASDAQ Approval").
C. The Company covenants that so long as the Purchasers
(and/or any of their Affiliates and Affiliates of the general partner of the
Purchasers) own any of the Notes or at least 25% of the aggregate Face Value of
Preferred Stock issued pursuant to this Agreement:
6.31. Redemption of Redeemable Common Stock. The Company shall
not, and shall not permit any Subsidiary to, redeem, repurchase or otherwise
acquire for value the Redeemable Common Stock or declare or pay any dividend or
distribution in respect thereof.
7. Nondisclosure of Confidential Information. (a) Without the
prior written consent of the Company, any information relating to the Company
provided to the Purchasers in connection with this Agreement, or to the persons
nominated by the Purchasers to be elected to the Board, which is either
confidential, proprietary, or otherwise not generally available to the public
(but excluding information the Purchasers have obtained independently from
third-party sources without the Purchasers' knowledge that the source has
violated any fiduciary or other duty not to disclose such information) (the
"Confidential Information") will be kept confidential by the Purchasers and
their directors, officers, employees, and representatives (collectively,
"Representatives"), using the same standard of care in safeguarding the
Confidential Information as the Purchasers employ in protecting their own
proprietary information which the Purchasers desire not to disseminate or
publish, and will not be disclosed to any Person, except for Representatives of
the Purchasers who need to know such Confidential Information. It is understood
(i) that such Representatives shall be informed by the Purchasers of the
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confidential nature of the Confidential Information, (ii) that such
Representatives shall be bound by the provisions of this Section 7 as a
condition of receiving the Confidential Information and (iii) that, in any
event, the Purchasers shall be responsible for any breach of this Agreement by
any of their Representatives.
(b) Without the prior consent of the Company, other
than as required by Applicable Law, the Purchasers will not, and will direct
their Representatives not to, disclose to any Person either the fact that the
Confidential Information has been made available to the Purchasers or that the
Purchasers have inspected any portion of the Confidential Information.
(c) If the Purchasers or their Representatives are
requested or required (by oral question, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any Confidential Information, the Purchasers will, as soon
as practicable, notify the Company of such request or requirement so that the
Company may seek an appropriate protective order. If, in the absence of a
protective order, the Purchasers or their Representatives are, in the opinion of
such Purchasers' counsel, compelled to disclose the Confidential Information or
else stand liable for contempt or suffer other censure or significant penalty,
the Purchasers may disclose only such of the Confidential Information to the
party compelling disclosure as is required by law. The Purchasers shall not be
liable for the disclosure of Confidential Information pursuant to the preceding
sentence. The Purchasers will, at the Company's expense, cooperate with the
Company's reasonable efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information.
8. Events of Default and Remedies
8.1. Events of Default. Each of the following shall constitute
an Event of Default with respect to the Notes under this Agreement:
(a) Nonpayment of Principal of the Notes. If the
Company fails to pay the principal of or interest on or any other sum, if any,
due on any Note, when and as the same becomes due and payable, whether at the
maturity thereof, on a dated fixed for a redemption, or otherwise and fails to
cure such failure within five days; or
(b) Cross-Default. If the Company or any Subsidiary (i)
fails to make any payment in respect of any Indebtedness having an aggregate
principal amount (including undrawn committed or available amounts and including
amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $1,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure; or (ii) fails to perform or
observe any other condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to any such
Indebtedness, and such failure
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continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure if the effect of such failure,
event or condition is to cause such Indebtedness to be declared to be due and
payable prior to its stated maturity, or collateral in respect thereof to be
demanded; or (iii) there occurs under any Swap Contract an early Termination
Date (as defined in and provided for in any such Swap Contract that is in the
form of an ISDA Master Agreement) or equivalent termination event (as provided
in any other Swap Contract) resulting from (x) any event of default under such
Swap Contract as to which the Company or any Subsidiary is the Defaulting Party
(as defined in such Swap Contract) or (y) any Termination Event (as so defined
in such Swap Contract) as to which the Company or any Subsidiary is an Affected
Party (as so defined in such Swap Contract), and, in either event, the Swap
Termination Value owned by the Company or such Subsidiary as a result thereof is
greater than $1,000,000; or
(c) Voluntary Bankruptcy and Insolvency Proceedings.
If the Company or any Subsidiary (i) shall file a petition in bankruptcy or for
reorganization or for an arrangement or any composition, readjustment,
liquidation, dissolution or similar relief pursuant to the Federal Bankruptcy
Code of 1978, as amended, or under any similar present or future federal law or
the law of any other jurisdiction; or (ii) shall be adjudicated a bankrupt or
become insolvent; or (iii) shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of the Company or such Subsidiary or for all or any
substantial part of its respective property; or (iv) shall make an assignment
for the benefit of its creditors; or (v) shall admit in writing its inability to
pay its debts generally as they become due; or (vi) shall take any corporate
action, as the case may be, in furtherance of any of the foregoing; or
(d) Adjudication of Bankruptcy. If (i) a petition
or answer shall be filed proposing the adjudication of the Company or any
Subsidiary as a bankrupt or its reorganization or arrangement, or any
composition, readjustment, liquidation, dissolution or similar relief with
respect to it pursuant to the Federal Bankruptcy Code of 1978, as amended, or
under any similar present or future federal law or the law of any other
jurisdiction applicable to the Company or such Subsidiary; and (ii) the Company
or any Subsidiary shall consent to or acquiesce in the filing thereof, or such
petition or answer shall not be discharged or denied within 60 days after the
filing thereof; or
(e) Receivership or Sequestration. If a decree or
order is rendered by a court having jurisdiction (i) for the appointment of a
receiver or custodian or liquidator or trustee or sequestrator or assignee (or
similar official) in bankruptcy or insolvency of the Company or any Subsidiary
or of all or a substantial part of its property; or (ii) for the winding-up or
liquidation of its affairs, and such decree or order shall have remained in
force undischarged and unstayed for a period of 60 days; or (iii) for the
sequestration or attachment of any property of the Company or any
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Subsidiary without its return to the possession of the Company or such
Subsidiary or its release from such sequestration or attachment within 60 days
thereafter; or
(f) Covenant Defaults. (i) If the Company shall
have breached any of the covenants set forth in Section 6.19, 6.20 or 6.21
hereof; or (ii) if the Company shall have breached in any material respect any
of the covenants set forth herein other than Sections 6.19, 6.20 and 6.21 and
such breach shall continue for 30 days following (x) the date notice is required
to be given under Section 6.17(i) or (ii) with respect to breaches under 6.1(a)
and (y) otherwise from the date of the breach; or
(g) Judgment Default. A judgment or order for the
payment of money in excess of $1,000,000 shall be entered against the Company or
any of its Subsidiaries by any court, and such judgment or order shall continue
undischarged and unstayed for a period of 60 days or until five days after
enforcement proceedings shall have been commenced upon such judgment or order,
whichever comes first; or
(h) Untrue or Incorrect Representation or Warranty.
Any of the representations and warranties of or with respect to the Company or
any of its Subsidiaries contained herein shall be untrue in any material respect
on or as of the date made and the facts or circumstances to which such
representation or warranty relates shall not have been subsequently corrected to
make such representation or warranty no longer incorrect within 30 days after
notice in writing by a holder to the Company; or
(i) Nonmonetary Judgment. A nonmonetary judgment or
order shall be rendered against the Company or any of its Subsidiaries that,
either individually or in the aggregate, has a Material Adverse Effect and there
shall be any period of 10 consecutive days after entry thereof during which a
stay of enforcement of any such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect.
8.2. Acceleration of Maturity. If any Event of Default shall
have occurred and be continuing, the holders of 66 2/3% of the outstanding
principal amount of Notes may, by notice to the Company, declare the entire
outstanding principal balance of the Notes, and all accrued and unpaid interest,
if any, thereon, to be due and payable immediately, and upon any such
declaration the entire outstanding principal balance of the Notes, and said
accrued and unpaid interest, if any, shall become and be immediately due and
payable, without presentment, demand, protest or other notice whatsoever, all of
which are hereby expressly waived, anything in the Notes or in this Agreement to
the contrary notwithstanding; provided, that if an Event of Default under clause
(c), (d), or (e) of Section 8.1 with respect to the Company shall have occurred,
the outstanding principal amount of all of the Notes, and all accrued and unpaid
interest, if any, thereon, shall immediately become due and payable, without any
declaration and without presentment, demand, protest or other notice whatsoever,
all of which are hereby expressly waived, anything in the Notes or this
Agreement to the contrary notwithstanding; and provided, further, that if an
Event of Default under clause (a) of
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Section 8.1 shall have occurred and be continuing with respect to any Note, any
of the Purchasers or Affiliate of the Purchasers (but not any transferee thereof
other than an Affiliate of such Purchasers) holding one or more Notes in an
aggregate outstanding principal amount of at least $1,000,000 may, by notice to
the Company, declare the entire outstanding principal of such Notes and all
accrued and unpaid interest, if any, thereon, to be due and payable immediately,
and upon any such declaration the entire outstanding principal of such Notes and
said accrued and unpaid interest, if any, shall become and be immediately due
and payable, without presentment, demand, protest or other notice whatsoever,
all of which are hereby expressly waived, anything in such Notes or in this
Agreement to the contrary notwithstanding; provided, further that so long as any
Senior Indebtedness shall be outstanding pursuant to the Revolving Credit
Agreement or the administrative agent, the issuing bank or the lenders thereto
have any further obligation to extend credit thereunder, if an Event of Default
shall have occurred and be continuing (other than an Event of Default under
clause (c), (d) or (e) of Section 8.1), any such acceleration shall not be
effective until the first to occur of:
(i) the day that is five (5) days after
the date that such holder of Notes shall have given written notice
(including notice by telegram, telex or facsimile) to the
Administrative Agent under the Revolving Credit Facility,
(ii) the acceleration of the maturity of
the Revolving Credit Facility or the institution of a civil action to
collect any Indebtedness in respect of the Revolving Credit Facility,
(iii) the institution of any case or
proceeding described in subsection 11.1(a) by or against the Company,
and
(iv) full and final payment in cash of all
Senior Indebtedness.
8.3. Other Remedies. (a) If any Event of Default shall have
occurred and be continuing, from and including the date of such Event of Default
to but not including the date such Event of Default is cured or waived, any
holder may enforce its rights by suit in equity, by action at law, or by any
other appropriate proceedings, whether for the specific performance (to the
extent permitted by law) of any covenant or agreement contained in this
Agreement or the Notes or in aid of the exercise of any power granted in this
Agreement or the Notes, and any holder may enforce the payment of any Note held
by such holder and any of its other legal or equitable rights. Except with
respect to Default or Event of Default described in clause (b) of this Section
8.3, from the date that a Default or Event of Default shall have occurred and
during the continuance of any Default or Event of Default, the Company shall pay
interest on the outstanding principal amount of the Notes and (to the extent
legally enforceable) on any overdue installment of interest, if any, at the rate
of 15% per annum until such overdue amount is paid or until such Default or
Event of Default is cured or waived.
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(b) In the event the Company shall (i) fail to
pay the principal of and accrued and unpaid interest due on the Notes at
maturity, (ii) fail to obtain the Stockholder Approval with respect to the Stock
Issuance on or before July 26, 1999, (iii) fail to convene the Stockholders
Meeting on or before July 26, 1999), (iv) withdraw or modify in any manner
adverse to the Purchasers the approval or recommendation of the Board of
Directors of the Company of the Stock Issuance, (v) fail to reaffirm such
approval or recommendation within 5 days following receipt of written request
for such reaffirmation from the Purchasers, (vi) fail to obtain the
reaffirmation of the Fairness Opinion in connection with the mailing of the
Proxy Statement, (vii) fail to obtain NASDAQ Approval within 30 days after the
Stockholder Approval, or (viii) resolve to take any of the actions specified in
clauses (i) through (vii), from the date that such Default or Event of Default
shall have occurred and during the Continuance of such Default or Event of
Default, the monthly rate of interest on the outstanding principal amount of the
Notes and (to the extent legally enforceable) on any overdue installment of
interest, if any, shall immediately increase 0.05% and shall further increase by
0.05% on the first day of each succeeding month during which such Default or
Event of Default shall be continuing, but in no event shall the monthly rate at
which the interest accrues in respect of indebtedness evidenced by the Notes
exceed 1.5% per month, provided, however, such increase in interest shall not
commence until the maturity of the Notes if the Company's failure to obtain the
Stockholder Approval with respect to the Stock Issuance is caused solely by the
failure of the holders of Common Stock representing a majority of the shares of
Common Stock (excluding shares Beneficially Owned by the Purchasers) present and
voting at a meeting duly called and convened in accordance with Section 6.19
hereof to approve the Stock Issuance and none of the conditions described in
clauses (iii) through (viii) of this Section 8.3(b) shall have occurred and SESC
shall not have withdrawn its Fairness Opinion.
(c) In the event that (i) any dividend payable on the
Preferred Stock pursuant to Section 2 of the Certificate of Designation shall
not have been paid in full, (ii) the Company shall have breached in any material
respect any of the covenants contained in Section 6 hereof (provided the
applicable covenant shall then be in effect pursuant to the terms of this
Agreement) or (iii) the Company shall have failed to redeem in full the shares
of Preferred Stock pursuant to Section 5(a) of the Certificate of Designation
whether or not by reason of the absence of legally available funds, then, in any
such case, the size of the Board of Directors shall be increased by one and the
Purchasers shall be entitled to elect an additional member to the Board (such
director, the "Default Director"). The Default Director shall be appointed and
shall serve in accordance with Section 6.12 hereof.
8.4. Conduct No Waiver; Collection Expenses. No course of
dealing on the part of any holder, nor any delay or failure on the part of any
holder to exercise any of its rights, shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and remedies. If the Company
fails to pay, when due, the principal or the premium, if any, or the interest,
if any, on any Note, the Company will pay to each
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holder, to the extent permitted by law, on demand, all costs and expenses
incurred by such holder in the collection of any amount due in respect of any
Note hereunder, including reasonable legal fees incurred by such holder in
enforcing its rights hereunder.
8.5. Annulment of Acceleration. If a declaration is made in
accordance with Section 8.2, then and in every such case, the holders of at
least 66 2/3% of the outstanding principal amount of the Notes may, by an
instrument delivered to the Company, annul such declaration and the consequences
thereof, provided that, at the time such declaration is annulled:
(a) no judgment or decree has been entered for the
payment of any monies due on the Notes or pursuant to this Agreement;
(b) all arrears of interest on the Notes and all other
sums payable on the Notes and pursuant to this Agreement (except any principal
of or interest or premium on the Notes which has become due and payable by
reason of such declaration) shall have been duly paid; and
(c) every other Event of Default shall have been duly
waived or otherwise made good or cured;
provided, however, that only the Purchasers or Affiliate of the Purchasers (but
not any transferee thereof other than an Affiliate of such Purchasers) of the
Note or Notes making the declaration permitted by the last proviso of Section
8.2 may annul such declaration; and provided, further, that no such annulment
shall extend to or affect any subsequent Event of Default or impair any right
consequent thereon.
8.6. Remedies Cumulative. No right or remedy conferred upon or
reserved to the holders of Notes under this Agreement is intended to be
exclusive of any other right or remedy, and every right and remedy shall be
cumulative and in addition to every other right and remedy given hereunder or
now and hereafter existing under applicable law. Every right and remedy given by
this Agreement or by applicable law to the holders of Notes may be exercised
from time to time and as often as may be deemed expedient by the holders.
8.7. Limitations. Notwithstanding the foregoing provisions of
this Article 8, the exercise of remedies by the holders of the Notes is subject
to the provisions of Article 11 hereof.
9. Redemption
9.1. Optional Redemption. (a) Prior to the occurrence of the
Stockholders Meeting and (b) thereafter, if and so long as either (i) the Notes
are then convertible at the option of the Company in accordance with Section
10.2 into shares of Series A Preferred Stock or (ii) the Company is entitled to
defer the payment of penalty
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interest pursuant to the proviso to Section 8.3(b), the Company shall have the
right, at its sole option and election made in accordance with Section 9.3, to
redeem the Notes at any time following the Closing Date, in whole but not in
part, subject to the final paragraph of this Section 9.1, at a redemption price
equal to the Liquidation Value plus an amount equal to all accrued and unpaid
interest, if any, to the date of redemption, in cash (the "Redemption Price").
In the event that at any time a Change of Control has occurred
prior to a redemption pursuant to this Section 9.1, the Redemption Price of each
Note until the expiration of the 90-day period referred to in Section 9.3(b)
shall equal the Change of Control Price (as defined in Section 9.2 below).
9.2. Change of Control. In the event that there occurs a
Change of Control, any record holder of Notes, in accordance with the procedures
set forth in Section 9.3(b), may require the Company to redeem any or all of the
Notes held by such holder for, at such holder's option, an amount ("Change of
Control Price") equal to the greater of (i) 100% of the Liquidation Value of the
Notes or (ii) the form and amount of consideration that such holder would have
received had such holder converted such Notes into Preferred Stock and converted
such Preferred Stock into Common Stock, plus, all accrued and unpaid interest,
on the Notes being redeemed to and including the date of redemption, in cash.
9.3. Redemption Procedures. (a) Notice of any redemption of
Notes pursuant to Section 9.1 shall be mailed at least 20 but not more than 30
days prior to the date fixed for redemption to each holder of Notes to be
redeemed, at such holder's address as it appears in the Note Register. In order
to facilitate the redemption of Notes, the Board of Directors may fix a record
date for the determination of Notes to be redeemed.
(b) Promptly following a Change of Control (but in no
event more than five Business Days thereafter), the Company shall mail to each
holder of Notes, at such holder's address as it appears on the transfer books of
the Company, notice of such Change of Control, which notice shall set forth each
holder's right to require the Company to redeem any or all Notes held by it. The
Company shall thereafter during a period of 90 days from the date of such notice
(or the date the Company was required to give such notice) redeem any Notes, in
whole or in part, at the option of the holder, upon at least five days' written
notice to the Company by such holder specifying (i) the principal amount of
Notes to be redeemed and (ii) the redemption date; provided, however, if payment
of the Change of Control Price is restricted by the terms of any instrument or
agreement to which any of the Company's Senior Indebtedness was created or
incurred, such 90-day period shall not commence until the date on which payment
of the Change of Control Price is no longer so restricted.
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(c) On the date of any redemption being made
pursuant to Section 9.1 or 9.2 which is specified in a notice given pursuant to
this Section 9.3, the Company shall wire transfer to such holder the Redemption
Price or Change of Control Price, as the case may be, for the principal amount
of notes so redeemed, together with an amount equal to all accrued and unpaid
interest, if any, thereon to the date of redemption.
10. Conversion
10.1. Holder's Option to Convert into Preferred Stock. The
Notes shall be converted, in whole but not in part, at the direction of the
holders of not less than 66-2/3% of all outstanding Notes at any time after the
Closing into shares of Preferred Stock, at a conversion ratio of one share of
Preferred Stock for each $100 of outstanding principal amount of Notes (the
"Preferred Ratio"), provided the Stockholder Approval and the HSR Approval shall
have been obtained.
10.2. Company's Option to Convert. The Notes shall be
convertible at the option of the Company, in whole but not in part, at any time
into shares of Preferred Stock at the Preferred Ratio; provided that (a) no
Default or Event of Default shall have occurred and be continuing, (b) the
Company has paid in full all accrued and unpaid interest on the Notes to and
including the date of conversion of the Notes pursuant to this Section 10.2 (the
"Company Conversion Date"), (c) the Company has complied in all material
respects with all of the covenants set forth in this Agreement and in any
instruments or agreements relating to Senior Indebtedness of the Company, (d)
each of the representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects on the Company
Conversion Date, (e) the HSR Approval and the Stockholder Approval shall have
been obtained, (f) the NASDAQ Approval shall have been obtained, and (g) the
Current Market Price of the Common Stock shall have exceeded the Minimum
Conversion Price during the 30 consecutive Trading Days immediately preceding
the Stockholders Meeting.
10.3. Exercise of Conversion Privilege. (a) Any conversion by
the holders of Notes into Preferred Stock shall be in an aggregate outstanding
principal amount equal to at least $100,000, unless the amount so converted
shall be such holder's entire outstanding principal amount of Notes. Conversion
of the Notes may be effected by any holder thereof upon the surrender to the
Company at the office of the Company designated for notices in accordance with
Section 13.6 or at the office of any agent or agents of the Company, as may be
designated by the Board of Directors (the "Transfer Agent"), of the Notes to be
converted, accompanied by a written notice stating that such holder elects to
convert all or a specified portion of the outstanding principal amount of such
Notes in accordance with the provisions of this Article 10 and specifying the
name or names in which such holder wishes the certificate or certificates for
shares of Preferred Stock to be issued; provided that, in the case of the
conversion of the Notes into Preferred Stock in accordance with Section 10.2,
the Company shall provide each holder written notice stating that such holder's
Notes have been converted pursuant to Section 10.2, and
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each holder shall thereupon promptly surrender to the Company or the Transfer
Agent, as the case may be, the Notes so converted, specifying the name or names
in which such holder wishes the certificates for shares of Preferred Stock to be
issued. In case any holder's notice shall specify a name or names other than
that of such holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Preferred Stock in such name or
names and the opinion of counsel required by the legend set forth in Section
13.12. Other than such taxes, the Company will pay any and all issue and other
taxes (other than taxes based on income) that may be payable in respect of any
issue or delivery of shares of Preferred Stock on conversion of Notes pursuant
hereto. As promptly as practicable, and in any event within five Business Days
after the surrender of such Notes and the receipt of such notice relating
thereto and, if applicable, payment of all transfer taxes (or the demonstration
to the satisfaction of the Company that such taxes have been paid), the Company
shall deliver or cause to be delivered (i) certificates representing the number
of validly issued, fully paid and nonassessable full shares of Preferred Stock
to which the holder of the Notes being converted shall be entitled and (ii) if
less than the entire outstanding principal amount of any Note surrendered is
being converted, a new Note in the principal amount which remains outstanding
upon such partial conversion. Such conversion shall be deemed to have been made
at the close of business on the date of giving such notice so that the rights of
the holder thereof as to the Note or Notes (or portion thereof) being converted
shall cease except for the right to receive shares of Preferred Stock in
accordance herewith, and the person entitled to receive the shares of Preferred
Stock shall be treated for all purposes as having become the record holder of
such shares of Preferred Stock at such time, so long as such holder's Notes are
delivered to the Company within two Business Days after the date of the giving
of notice. In any other case of conversion at the holder's option, the date of
delivery of the Notes shall be deemed to be the date of conversion.
(b) In case any Notes are to be redeemed pursuant to
Section 9.1, such right of conversion shall cease and terminate as to the Notes
to be redeemed at the close of business on the Business Day preceding the date
fixed for redemption unless the Company shall default in the payment of the
Redemption Price or the Change of Control Price, as the case may be.
10.4. Fractions of Shares; Interest. In connection with the
conversion of any Note into Preferred Stock, no fractions of shares shall be
issued, but in lieu thereof the Company shall pay a cash adjustment in respect
of such fractional interest in an amount equal to such fractional interest
multiplied by the Face Value of the Preferred Stock. If more than one Note shall
be surrendered for conversion by the same holder at the same time, the number of
full shares of Preferred Stock issuable on conversion thereof shall be computed
on the basis of the aggregate outstanding principal amount of Notes so
surrendered. Promptly upon conversion, the Company shall pay to holders of Notes
so converted an amount equal to any accrued and unpaid interest on the Notes
surrendered
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for conversion to the date of such conversion, together with cash in lieu of any
fractional share of Preferred Stock.
10.5. Reservation of Stock. The Company shall at all times
reserve and keep available for issuance upon the conversion of the Notes,
conversion of the Preferred Stock, conversion of the Preferred Stock issuable
upon conversion of the Notes and exercise of the Warrants, free from any
preemptive rights, such number of its authorized but unissued shares of
Preferred Stock or Common Stock, as the case may be, as will from time to time
be sufficient to permit (a) the conversion of the entire outstanding principal
amount of the Notes into Preferred Stock, (b) the conversion of the Preferred
Stock issued hereunder into Common Stock, (c) the conversion of all of the
Preferred Stock issuable upon conversion of the Notes into Common Stock and (d)
the exercise of all of the Warrants issued pursuant to the Warrant Agreement,
and shall take all action required to increase the authorized number of shares
of Preferred Stock or Common Stock, if necessary, to permit (a) the conversion
of the entire outstanding principal amount of the Notes, (b) the conversion of
the Preferred Stock issued hereunder into Common Stock, (c) the conversion of
all of the Preferred Stock issuable upon conversion of the Notes into Common
Stock and (d) the exercise of all of the Warrants issued pursuant to the Warrant
Agreement.
11. Subordination of Notes
11.1. Subordination of Notes to Senior Indebtedness. The
Indebtedness evidenced by the Notes and all modifications, renewals and
extensions thereof, all obligations of the Company under this Agreement, the
Certificate of Designation, the Warrant Agreement and all other instruments and
agreements arising out of or relating to any or all of the foregoing and all
modifications, renewals and extensions thereof (collectively called the "Junior
Indebtedness") shall at all times be wholly subordinate and junior in right of
payment to any and all Senior Indebtedness of the Company (including any claims
by the holders of such Senior Indebtedness for interest accruing after any
assignment for the benefit of creditors by the Company or the institution by or
against the Company of any proceedings under the Bankruptcy Code or any law for
the relief of or relating to debtors, or any other claim by such holders for any
such interest which would have accrued in the absence of such assignment or the
institution of such proceedings) in the manner and with the force and effect
hereafter set forth:
(a) In the event of any liquidation, dissolution or
winding up of the Company, or of any execution, sale, receivership, insolvency,
bankruptcy, liquidation, readjustment, reorganization or other similar
proceeding relative to the Company or its property (including any Subsidiary of
the Company), all sums owing in respect of all Senior Indebtedness of the
Company (including cash collateral and amounts not yet due and payable) shall
first be paid in full before any payment (other than distributions of Permitted
Junior Securities) is made in respect of the Junior Indebtedness; and in any
such event any payment or distribution of any kind or character, whether in
cash,
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property, or securities (excluding Permitted Junior Securities), which
shall be made upon or in respect of the Junior Indebtedness shall be paid over
to the holders of the Senior Indebtedness of the Company, pro rata, for
application in payment thereof unless and until such Senior Indebtedness shall
have been paid or satisfied in full. In case of any assignment for the benefit
of creditors by the Company or in case any proceedings under the Bankruptcy Code
or any other law for the relief of or relating to debtors are instituted by or
against the Company, or in case of the appointment of any receiver for the
Company's business or assets (including any Subsidiary of the Company), or in
case of any liquidation, dissolution or winding up of the affairs of the
Company, the Company and any assignee, trustee in bankruptcy, receiver, debtor
in possession or other person or persons in charge are hereby directed to pay to
the holders of the Senior Indebtedness of the Company the full amount of such
holders' claims against the Company (including interest to the date of payment)
before making any payments (excluding distributions of Permitted Junior
Securities) to the holders of Junior Indebtedness, and insofar as may be
necessary for that purpose, the Purchasers hereby assign and transfer to the
holders of Senior Indebtedness of the Company all rights to any payments,
dividends or other distributions.
(b) In the event that all or any part of the Junior
Indebtedness is declared or becomes due and payable because of the occurrence of
any Event of Default or otherwise than at the option of the Company or pursuant
to its terms at its final maturity, under circumstances when the foregoing
subsection (a) shall not be applicable, the holders of the Junior Indebtedness
shall be entitled to payments (excluding distributions of Permitted Junior
Securities) only after there shall first have been paid in full all Senior
Indebtedness of the Company or payment shall have been provided therefor in a
manner satisfactory to the holders of such Senior Indebtedness.
(c) Upon the occurrence for any reason of any
payment default in respect of any Senior Indebtedness of the Company (including
any payment default arising or existing because of the acceleration of the
maturity of all or any part of such Senior Indebtedness), regardless of whether
nonpayment results from or is authorized, permitted or excused by any stay or
other similar event, no payment (excluding distributions of Permitted Junior
Securities) may be made on any Junior Indebtedness unless and until such default
shall have been cured or waived in writing or shall have ceased to exist.
(d) Without limiting the foregoing subsection
11.1(c), no payment (excluding distributions of Permitted Junior Securities) may
be made on any Junior Indebtedness if any event (other than (i) a payment
default described in subsection 11.1(c) or (ii) a cross-default under the
Revolving Credit Facility arising solely from the Company's failure to perform
any of its covenants in Section 6 hereof) that is, or with the lapse of time or
notice or both would be, an event that gives any holder of Senior Indebtedness
of the Company the right to demand payment or cash collateral, accelerate the
maturity of such Senior Indebtedness or terminate any commitment to extend
credit
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and if such holder gives notice of such default in writing (including
notices by telegram, telex or facsimile) to the Company and to FFT (a "Blockage
Notice"). A Blockage Notice shall be effective as follows:
(i) A Blockage Notice issued prior to
January 26, 2000 shall be effective for a period commencing on the date
of issuance and ending on the earlier to occur of (A) the day that is
one hundred eighty (180) days after the date of issuance, or (B) the
date on which the Indebtedness evidenced by the Note matures, or (C)
the date on which any holder of Senior Indebtedness commences the
institution of a civil action to collect such Senior Indebtedness or
(D) the date on which such event of default or potential event of
default shall have been waived or cured; provided, however that in all
events a Blockage Notice shall be effective for a period of not less
than five (5) days after the date of issuance; and
(ii) A Blockage Notice issued on or after
January 26, 2000 shall be effective for a period commencing on the date
of issuance and ending on the day that is five (5) days after the date
of issuance.
No holder of Senior Indebtedness of the Company shall be entitled to give notice
pursuant to this subsection (d) more than once with respect to any default which
was specified in such notice and which has continued without interruption since
the date such notice was given, nor shall such holder be entitled to give a
separate notice with respect to any default not so specified which (to the
knowledge of the holder giving notice) was existing on the date such notice was
given pursuant to this subsection (d) and which has continued without
interruption from the date such notice was given. Upon receipt of any notice
from any holder of any Senior Indebtedness of the Company pursuant to this
subsection (d), the Company shall forthwith send a copy thereof to each holder
of Junior Indebtedness and each holder of its Senior Indebtedness at the time
outstanding.
(e) All payments, or other distributions (whether in
cash or other property, but excluding distributions of Permitted Junior
Securities) made to the holders of Junior Indebtedness which are made at any
time that such payments or other distributions were not permitted under the
Revolving Credit Agreement or hereunder or which should have been made to the
holders of Senior Indebtedness of the Company shall be received and held by the
former in trust for the benefit of the latter, and the holders of Junior
Indebtedness shall forthwith remit such payments or distributions to the holders
of the Senior Indebtedness of the Company, pro rata, in the form in which
received, together with such endorsements or documents as may be necessary to
effectively negotiate or transfer the same to the holders of the Senior
Indebtedness of the Company.
(f) Each holder of Senior Indebtedness of the Company
is hereby authorized by the Purchasers to:
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(i) renew, compromise, extend, accelerate
or otherwise change the time of payment, or any other terms or
conditions, of any Senior Indebtedness of the Company held by such
holder;
(ii) increase or decrease the rate of
interest payable thereon or any part thereof;
(iii) obtain, accept, exchange, enforce,
waive or release any security therefor;
(iv) direct the order or manner of sale of
any such security and the application of the proceeds thereof in such
manner as such holder may at its discretion determine; and/or
(v) release the Company or any guarantor
of any Senior Indebtedness of the Company from liability.
If any such action is taken, the Company shall promptly notify the Purchasers
and any holder of Junior Indebtedness. Notwithstanding anything set forth in
this Section 11.1, nothing set forth herein shall restrict holders of the Notes
and Preferred Stock from exercising their rights of conversion hereunder.
11.2. Proofs of Claim of Holders of Senior Indebtedness;
Voting. The Purchasers and any subsequent holders of the Junior Indebtedness
undertake and agree for the benefit of each holder of Senior Indebtedness of the
Company to execute, verify, deliver and file any proofs of claim relating to the
Junior Indebtedness which any holder of such Senior Indebtedness may at any time
require in order to prove and realize upon any rights or claims pertaining to
the Junior Indebtedness and to effectuate the full benefit of the subordination
contained herein. Upon failure of the Purchasers to file the required proof or
proofs of claim prior to 30 days before the expiration of the time to file
claims in such proceeding, each holder of Senior Indebtedness of the Company is
hereby irrevocably appointed by the Purchasers to be such Purchasers' agent to
file the appropriate claim or claims and if such holder of Senior Indebtedness
elects at its sole discretion to file such claim or claims (i) to accept or
reject any plan of reorganization or arrangement on behalf of the Purchasers,
and (ii) to otherwise vote the Purchasers' claim in respect of the Junior
Indebtedness in any manner deemed appropriate for the benefit and protection of
the holders of the Senior Indebtedness of the Company.
11.3. Rights of Holders of Senior Indebtedness Unimpaired. No
right of any holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time or in any way be affected or impaired by any
failure to act on the part of the Company or any of its Subsidiaries or the
holders of Senior Indebtedness, or by any noncompliance by the Company with any
of the terms, provisions and covenants of this Agreement, regardless of any
knowledge thereof that any such holder of Senior Indebtedness may have or be
otherwise charged with.
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11.4. Effects of Event of Default. The Company agrees, for the
benefit of the holders of Senior Indebtedness, that in the event that a Note is
declared due and payable before its maturity because of the occurrence of an
Event of Default, (i) the Company will give prompt notice in writing of such
happening to the holders of Senior Indebtedness and (ii) all Senior Indebtedness
shall forthwith become immediately due and payable in full at the option of the
holder(s) thereof (or otherwise as provided by the terms thereof), regardless of
the expressed maturity thereof.
11.5. Company's Obligations Unimpaired. The provisions of this
Article 11 are solely for the purpose of defining the relative rights of the
holders of Senior Indebtedness on the one hand, and the Purchasers on the other
hand, and nothing herein shall impair, as among the Company and the Purchasers,
the obligation of the Company which is unconditional and absolute, to pay the
principal, premium, if any, and interest, if payable, on the Notes in accordance
with the terms of this Agreement (including this Article 11) and the Notes, nor
shall anything herein prevent the Purchasers from exercising all remedies
otherwise permitted by applicable law or under this Agreement or the Notes upon
the occurrence of an Event of Default, subject to the conditions and limitations
set forth herein and the rights of the holders of Senior Indebtedness as herein
provided for.
11.6. Subrogation. Subject to the prior payment in full of all
Senior Indebtedness of the Company, holders of the Notes shall be subrogated to
the rights of the holders of such Senior Indebtedness to receive payments or
distributions of cash, property or securities made in respect of such Senior
Indebtedness until the Senior Indebtedness shall be paid in full; and, for the
purposes of such subrogation, payments or distributions to the holders of Senior
Indebtedness of the Company of any cash, property or securities to which any
holder of Notes would be entitled except for the provisions of this Agreement
shall, as between the Company and its creditors other than the holders of Senior
Indebtedness of the Company and holders of the Notes, be deemed to be a payment
by the Company to or on account of the Notes, it being understood that the
provisions of this Article 11 are and are intended solely for the purpose of
defining the relative rights of the holders of the Notes on the one hand, and
the holders of Senior Indebtedness of the Company, on the other hand. The
purpose of this Section 11.6 is to grant to holders of the Notes the same rights
against the Company with respect to the aggregate amount of such payments or
distributions as the holders of Senior Indebtedness of the Company would have
against the Company if such aggregate amount were considered overdue Senior
Indebtedness of the Company.
11.7. Avoided Payments in Respect of Senior Indebtedness of
the Company. The Purchasers acknowledge and agree that if and to the extent that
any obligation, payment or distribution in respect of Senior Indebtedness of the
Company (whether consisting of a payment or proceeds of security or the exercise
of a right of setoff or otherwise) is declared invalid, fraudulent or
preferential or otherwise is set aside or required to be returned or repaid, any
Senior Indebtedness of the Company purportedly
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satisfied thereby shall be deemed reinstated and outstanding as if the same had
not occurred and the provisions of this Article 11 shall continue to be
applicable to such Senior Indebtedness.
11.8. Independence of Provisions. All provisions of this
Article 11 shall be given independent effect so that if a particular payment,
distribution, action or condition is not permitted by any of such provisions,
the fact that it would be permitted by an exception to, or otherwise would be
within the limitations of, another provision shall not be deemed to permit such
payment, distribution, action or condition.
11.9. References to "Payments". As used herein with reference
to the Junior Indebtedness, "payment" shall include not only payments made in
respect of such Junior Indebtedness but also any purchase or redemption of such
Junior Indebtedness and/or any instrument evidencing same (excluding any
purchase or redemption in exchange for Permitted Junior Securities).
11.10. Reliance by Certain Holders of Senior Indebtedness of
the Company; Amendments and Modifications. The Purchasers acknowledge and agree
that the Administrative Agent, the Lenders and the Issuing Bank (all as defined
in the Revolving Credit Agreement), and their respective successors and assigns
(including participants) have relied and will continue to rely upon the
provisions of this Article 11 in determining to extend credit and in extending
credit to the Company. Until the Senior Indebtedness of the Company outstanding
pursuant to or in connection with the Revolving Credit Agreement has been fully
and finally repaid and the Administrative Agent, the Issuing Bank and the
Lenders have no further obligation to extend credit thereunder, this Article 11
may not be rescinded, amended or modified without the prior express written
consent of the Administrative Agent and Requisite Lenders (as defined in the
Revolving Credit Agreement).
12. Interpretation
12.1. Definitions.
"Acquired Indebtedness" shall mean Indebtedness of a Person
(a) assumed in connection with an Asset Acquisition from such Person or (b)
existing at the time such Person becomes a subsidiary of any other Person (other
than any Indebtedness incurred in connection with, or in contemplation of, such
Asset Acquisition or such Person becoming such a subsidiary).
"Adjustment Period" shall mean the period of five consecutive
Trading Days preceding the date as of which the Fair Market Value of a security
is to be determined.
"Advisory Fee" shall have the meaning set forth in Section
1.5.
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"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
"Applicable Laws" shall have the meanings set forth in Section
2.6.
"Applicable Tax Rate" shall have the meaning set forth in
Section 6.15(a).
"Asset Acquisition" shall mean (a) an Investment by the
Company or any Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Subsidiary of the Company or any Subsidiary of the
Company shall be merged with or into the Company or any Subsidiary of the
Company or (b) the acquisition by the Company or any Subsidiary of the Company
of the assets of any Person which constitute all or substantially all of the
assets of such Person or any division or line of business of such Person.
"Average Life" shall mean, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (a) the sum
of the products of (i) the number of years from such date to the date or dates
of each successive scheduled principal payment (including, without limitation,
any sinking fund requirements) of such Indebtedness multiplied by (ii) the
amount of such principal payment by (b) the sum of all such principal payments.
"Beneficially Own" or "Beneficial Owners" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing.
"Board of Directors" or "Board" shall mean the board of
directors of the Company.
"Budgeted Maintenance Capital Expenditure" shall mean, as to
the Company and its Subsidiaries on a consolidated basis for any fiscal year,
the aggregate of all Maintenance Capital Expenditures included in the budget for
such fiscal year delivered to NationsBank as administrative agent under, and
pursuant to, the Revolving Credit Agreement, with a copy delivered to FFT.
"Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the States of New York and
Tennessee are authorized or obligated by law or executive order to close.
"By-Laws" shall have the meaning set forth in Section 2.2.
"Capital Stock" shall mean, with respect to any Person, any
and all shares, interests, participation, rights in or other equivalents
(however designated) of such
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Person's capital stock, and any rights (other than debt securities convertible
into capital stock), warrants or options exchangeable for or convertible into
such capital stock.
"Capital Expenditures" shall mean, as to any Person for any
period, the aggregate capital expenditures recorded by such Person and its
Subsidiaries on a consolidated basis in conformity with generally accepted
accounting principles, including charges in respect of Capitalized Lease
Obligations exclusive of imputed interest on such Capitalized Lease Obligations;
provided, however, that for purposes of determining Capital Expenditures for the
Company and its Subsidiaries on a consolidated basis, there shall be excluded
therefrom any Capital Expenditure attributable solely to the making of Permitted
Acquisitions (as defined in the Revolving Credit Agreement in effect as of the
date hereof)].
"Capitalized Lease" shall mean, with respect to any person,
any lease or any other agreement for the use of property which, in accordance
with generally accepted accounting principles, should be capitalized on the
lessee's or user's balance sheet.
"Capitalized Lease Obligation" of any person shall mean and
include, as of any date as of which the amount thereof is to be determined, the
amount of the liability capitalized or disclosed (or which should be disclosed)
in a balance sheet of such person in respect of a Capitalized Lease of such
person.
"Cash Equivalents" shall mean, at any time,
(a) Government Obligations having a maturity not
exceeding one hundred eighty (180) days;
(b) commercial paper rated at least A-1 by S&P or P-1
by Moody's, having a maturity not
exceeding one hundred eighty (180) days;
(c) certificates of deposit or time deposits of (i)
the Lenders or (ii) other commercial banks having capital and undivided surplus
of at least $500 million and issuing commercial paper rated as described in the
preceding clause (b) and organized and existing under, or chartered or otherwise
qualified to do business under, the laws of the United States of America or any
State thereof or the District of Columbia, having a maturity not exceeding
ninety (90) days;
(d) repurchase agreements or investment contracts
having a maturity not exceeding ninety (90) days with a financial institution
insured by the Federal Deposit Insurance Corporation, or any broker or dealer
(as defined in the Securities Exchange Act of 1934) that is a dealer in
government bonds and that is recognized by trades with and reports to, a Federal
Reserve Bank as a primary dealer in government securities; provided that in any
case (i) collateral is pledged for the repurchase agreement or investment
contract, which collateral consists of (A) Government Obligations or evidences
or ownership of proportionate interests in future interest and principal
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payments on Government Obligations held by a bank or trust company as custodian,
under which the owner of the investment is the real party in interest and has
the right to proceed directly and individually against the obligor on such
obligations, and which underlying obligations are held in a segregated account
and not available to satisfy any claim of the custodian or any person claiming
through the custodian or to whom the custodian may be obligated or (B) evidences
of indebtedness issued by any of the following: Bank of Cooperatives,
Export-Import Bank of the United States, Farmers Home Administration, Federal
Financing Bank, Federal Loan Bank System, Federal Home Loan Mortgage Corporation
(including participation certificates), Federal Housing Administration, Federal
Farm Credit Banks, Federal National Mortgage Association, Government National
Mortgage Association, Inter-American Development Bank, International Bank for
Reconstruction and Development, Small Business Administration or any other
agency or instrumentality of the United States of America created by an act of
Congress that is substantially similar to the foregoing in its legal
relationship to the United States of America, (ii) the current market value of
the collateral securing the repurchase agreement or investment agreement or
investment contract is at least equal to the amount of the repurchase agreement
or investment contract and (iii) the current market value of the collateral is
determined not less frequently than monthly;
(e) investments in money market funds substantially
all of whose assets consist of securities of the types described in the
foregoing clauses (a) through (d);
(f) investments in obligations the return with
respect to which is excludable from gross income under Section 103 of the Code,
having a maturity of not more than six (6) months or providing the holder the
right to put such obligations for purchase at par upon not more than twenty
eight days' notice, and which are rated at least A-1 by S&P or P-1 by Moody's;
(g) investments in tax free money market funds all of
whose assets consist of securities of the types described in the foregoing
clause (f); and
(h) investments, redeemable upon not more than seven
(7) days' notice, in money market
preferred municipal bond funds that are rated at least AAA by S&P or Aaa by
Moody's.
"Certificate of Designation" shall have the meaning set forth
in Section 1.3(b)(v).
"Certificate of Incorporation" has the meaning set forth in
Section 1.3(b)(v).
"Change of Control" shall mean:
(a) a "person" or "Group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act) becoming, in a transaction or series of
related transactions, the Beneficial Owner of Voting Securities entitled to
exercise 50% or more of the total
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voting power of all outstanding Voting Securities of the Company (including any
Voting Securities that are not then outstanding of which such person or Group is
deemed the Beneficial Owner) (the "Control Party"); or
(b) the acquisition of Beneficial Ownership of 20% or more of
the Voting Securities of the Company by any Person or Group, together with
contractual rights, which would enable such Person or Group to prevent a merger,
consolidation, sale of all or substantially all of the assets or other sale of
the Company; or
(c) individuals who at the beginning of any period of two
consecutive calendar years constituted the Board of Directors (together with any
new directors whose election by such Board of Directors or whose nomination for
election by the Company's stockholders occurred pursuant to an express provision
of the Agreement or was approved by a vote of at least two-thirds of the members
of the Board of Directors then still in office who either were members of the
Board of Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors then in office;
or
(d) sale of all or substantially all of the assets of the
Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the Securities and Exchange
Commission.
"Company Conversion Date" shall have the meaning set forth in
Section 10.2.
"Confidential Information" shall have the meaning set forth in
Section 7(a).
"Consolidated" or "consolidated", when used with reference to
any financial term in this Agreement (but not when used with respect to any tax
return or tax liability), shall mean the aggregate for two or more persons of
the amounts signified by such term for all such persons, with inter-company
items eliminated and, with respect to earnings, after eliminating the portion of
earnings properly attributable to minority interests, if any, in the capital
stock of any such person or attributable to shares of preferred stock of any
such person not owned by any other such person.
"Consolidated Fixed Charge Coverage Ratio" of any Person shall
mean, for the most recent fiscal quarter after giving pro forma effect to any
Asset Acquisitions made during the most recent 12 month period ending on and
including the date of determination] the ratio of (a) the sum of Consolidated
Net Income, Consolidated Interest Expense, Consolidated Rental Expense and
Consolidated Noncash Charges, less Restricted Payments and less the lesser of
25% of Budgeted Maintenance Capital Expenditures for the corresponding fiscal
year or 100% actual Maintenance Capital Expenditures during such fiscal quarter,
in each case, for such period, of such Person and
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its Subsidiaries on a consolidated basis, all determined in accordance with
generally accepted accounting principles, to (b) the sum of (i) such
Consolidated Interest Expense for such period (provided that (A) in making such
computation, the Consolidated Interest Expense of such Person attributable to
interest on any Indebtedness computed on a pro forma basis and bearing a
floating interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period; (B) in making
such computation, the Consolidated Interest Expense of such Person attributable
to interest on any Indebtedness under a revolving credit facility computed on a
pro forma basis shall be computed based upon the average daily balance of such
Indebtedness during the applicable period; and (C) notwithstanding clauses (A)
and (B) above, interest on Indebtedness determined on a fluctuating basis, to
the extent such interest is covered by agreements relating to Interest Rate
Protection Obligations, shall be deemed to have accrued at the rate per annum
resulting after giving effect to the operation of such agreements), plus (ii)
25% of Current Maturities of Long-Term Debt, plus (iii) Consolidated Rental
Expense. If such Person or any of its Subsidiaries directly or indirectly
Guarantees Indebtedness of a third Person, the above clause shall give effect to
the incurrence of such Guaranteed Indebtedness as if such Person or such
Subsidiary had directly incurred or otherwise assumed such Guaranteed
Indebtedness.
"Consolidated Funded Debt" shall mean consolidated
Indebtedness of the Company and its Subsidiaries, determined in accordance with
generally accepted accounting principles consistently applied; provided,
however, that Consolidated Funded Debt shall not include any unsecured current
liabilities incurred in the ordinary course of business and not represented by
any note, bond, debenture or other instrument.
"Consolidated Interest Expense" shall mean, as to any Person
for any period, the aggregate interest expense and amortization of deferred loan
costs of such Person and its Subsidiaries on a consolidated basis for such
period (calculated without regard to any limitations on the payment thereof),
imputed interest on Capitalized Lease Obligations, commissions, discounts and
other fees and charges owed with respect to letters of credit and unused
commitments and net costs under interest rate protection agreements, all as
determined in conformity with generally accepted accounting principles.
"Consolidated Net Income (Loss)" of any Person shall mean, for
any period, the consolidated net income (or loss) of such Person and its
Subsidiaries for such period on a consolidated basis as determined in accordance
with generally accepted accounting principles, adjusted, to the extent included
in calculating such net income (or loss), by excluding, without duplication, (i)
all extraordinary gains (less all fees and expenses relating thereto), (ii) the
portion of net income (or loss) of such Person and its Subsidiaries on a
Consolidated basis allocable to minority interests in unconsolidated Persons to
the extent that cash dividends or distributions have not actually been received
by such Person or one of its Consolidated Subsidiaries, (iii) any gain or loss,
net of taxes, realized upon the termination of any employee pension benefit
plan, (iv) net gains (or
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losses) (less all fees and expenses relating thereto) in respect of dispositions
of assets other than in the ordinary course of business, (v) the net income of
any Subsidiary to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (vi) any
restoration to income of any contingency reserve, except to the extent provision
for such reserve was made out of income accrued at any time following the date
of this Agreement, or (vii) any gain arising from the acquisition of any
securities, or the extinguishment, under generally accepted accounting
principles, of any Indebtedness of such Person.
"Consolidated Net Worth" shall mean the consolidated
stockholders' equity of the Company and its Subsidiaries, less the amount of
Disqualified Stock, determined in accordance with generally accepted accounting
principles consistently applied.
"Consolidated Noncash Charges" shall mean, with respect to any
Person for any period, the aggregate depreciation, amortization and other
non-cash expenses of such Person and its Subsidiaries reducing Consolidated Net
Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Consolidated Rental Expense" shall mean, as to any Person for
any period, the aggregate rent and lease expenses recorded by such Person and
its Subsidiaries on a consolidated basis in conformity with generally accepted
accounting principles pursuant to any Operating Lease.
"Consolidated Total Capital" shall mean the sum of (i)
Consolidated Funded Debt plus (ii) Consolidated Net Worth.
"Conversion Price" shall mean the Conversion Price of the
Preferred Stock which is equal to the lower of (a) $9.45 per share, or (b) the
Current Market Price of a share of Common Stock during the thirty consecutive
Trading Days prior to the Stockholders Meeting; provided that the Conversion
Price shall in no event be less than $5.50 per share (subject to adjustment in
accordance with Section 8 of the Certificate of Designation). In the event the
Company shall not have duly called and convened a Stockholders Meeting to
consider and vote upon the Stockholder Approval with respect to the Stock
Issuance within one year from the Closing Date, the Conversion Price shall equal
the lower of (A) $9.45 per share or (B) the Current Market Price of a share of
Common Stock during the thirty consecutive Trading Days immediately prior to
January 26, 2000, provided that such price shall in no event be less than $5.50
per share (subject to adjustment in accordance with Section 8 of the Certificate
of Designation). Notwithstanding the foregoing, at any time prior to the
Stockholder Approval Date, the
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Conversion Price shall in no event be less than the price at which the maximum
number of shares of Common Stock issued or issuable upon conversion of the
Preferred Stock, together with shares of the Common Stock issued or issuable
upon exercise of the Warrants, would exceed the greater of (i) 711,241 shares of
Common Stock (19.9% of the outstanding shares of Common Stock of the Company as
of the Closing Date) and (ii) 19.9% of the outstanding shares of Common Stock of
the Company at the time of determination; provided, however, that if the
Conversion Price is greater than the price that would be in effect but for this
sentence and, subsequently, the Company shall have obtained the Stockholder
Approval, the Conversion Price shall be retroactively recalculated in accordance
with the first sentence of this definition of the "Conversion Price.".
"Current Market Price", when used with reference to shares of
Common Stock or other securities on any date, shall mean the closing sale price
per share of Common Stock or such other securities on such date and, when used
with reference to shares of Common Stock or other securities for any period
shall mean the average of the daily closing sale prices per share of Common
Stock or such other securities for such period. The closing price for each day
shall be the closing sale price in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotation System
or such other system then in use, or, if on any such date the Common Stock or
such other securities are not quoted by any such organization, the closing sale
price as furnished by a professional market maker making a market in the Common
Stock or such other securities selected by the Board of Directors of the
Company. If the Common Stock is listed or admitted to trading on a national
securities exchange, the closing price shall be the closing sale price, regular
way, as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Common Stock or such other securities are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock or such
other securities are listed or admitted to trading. If the Common Stock or such
other securities are not publicly held or so listed or publicly traded, "Current
Market Price" shall mean the Fair Market Value per share of Common Stock or of
such other securities as determined in good faith by the Board of Directors of
the Company based on an opinion of an independent investment banking firm
acceptable to holders of a majority of the Notes, which opinion may be based on
such assumptions as such firm shall deem to be necessary and appropriate.
"Current Maturities of Long-Term Debt" shall mean (a) as of
any date of determination occurring on or before December 31, 1999, $5,000,000
and (b) as of any date of determination subsequent to December 31, 1999, that
portion of Consolidated Funded Debt that is due and payable within the twelve
(12) month period immediately following the date of determination, calculated in
conformity with generally accepted accounting principles.
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"Default" shall mean any event which, with or without notice
or the passage of time, would be an Event of Default.
"Disinterested Director" shall mean, with respect to any
transaction or series of related transactions, a member of the Board of
Directors who does not have any material direct or indirect financial interest
in or with respect to such transaction or series of related transactions.
"Disqualified Stock" shall mean any capital stock of the
Company which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable, except to the extent such capital
stock is exchangeable into Indebtedness at the option of the Company and only
subject to the terms of any debt instrument to which the Company is a party), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, or convertible or exchangeable into
Indebtedness on or prior to date that is 91 days after the date on which the
Notes mature; provided, however, that notwithstanding the foregoing, Redeemable
Common Stock shall not be deemed to be Disqualified Stock.
"Employee Benefit Plan" shall mean each plan, program, policy,
payroll practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits of any kind,
whether formal or informal, funded or unfunded, written or oral and whether or
not legally binding, including, without limitation, each "employee benefit
plan," within the meaning of Section 3(3) of ERISA and each "multiemployer plan"
within the meaning of Sections 3(37) or 4001(a)(3) of ERISA, pursuant to which
the Company, any Subsidiary or any ERISA Affiliate has or may have any
liability, contingent or otherwise.
"Environmental Laws" shall mean, at any date, all provisions
of federal, state, local or foreign law (including applicable principles of
common and civil law), statutes, ordinances, rules, regulations, published
standards and directives that have the force and effect of Laws, permits,
licenses, judgments, writs, injunctions, decrees and orders enacted, promulgated
or issued by any Public Authority, and all indemnity agreements and other
contractual obligations, as in effect at such date, relating to (i) the
protection of the environment, including the air, surface and subsurface soils,
surface waters, groundwaters and natural resources, and (ii) occupational health
and safety and exposure of persons to Hazardous Materials. Environmental Laws
shall include the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss.ss.9601 et seq., and any other Laws imposing or
creating liability with respect to Hazardous Materials.
"Environmental Liability" shall mean any liabilities,
obligations, costs, losses, payments or damages, including compensatory and
punitive damages, incurred
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(i) to contain, remove, clean up, assess, abate or otherwise remedy any actual
or alleged release or threatened release of Hazardous Materials, any actual or
alleged contamination (by Hazardous Materials) of air, surface or subsurface
soil, groundwater or surface water, or any personal injury or damage to natural
resources or property resulting from any such release or contamination, pursuant
to the requirements of any Environmental Law or in response to any claim by any
Public Authority or other Third Party under any Environmental Law; (ii) to
modify facilities or processes or take any other remedial action in response to
any claim by any Public Authority of non-compliance with any Environmental Law;
(iii) as a result of the imposition of any civil or criminal fine or penalty by
any Public Authority for the violation or alleged violation of any Environmental
Law; or (iv) as a result of any action, suit, proceeding or claim by any Third
Party under any Environmental Law. The term "Environmental Liability" shall
include: (i) reasonable fees of counsel and consultants (but not any corporate
allocation for management time or for the use of similar in-house services or
facilities) and (ii) the costs and expenses of any investigation undertaken to
ascertain the existence or extent of any potential or actual Environmental
Liability.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean each business or entity which is
a member of a "controlled group of corporations," under "common control" or an
"affiliated service group" with the Company or its Subsidiaries within the
meaning of Sections 414(b), (c) or (m) of the Code, or required to be aggregated
with the Company or its Subsidiaries under Section 414(o) of the Code, or is
under "common control" with the Company or its Subsidiaries, within the meaning
of Section 4001(a)(14) of ERISA.
"Event of Default" shall mean each of the happenings or
circumstances enumerated in Section 8.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include reference to the comparable section, if any, of any such
successor Federal statute.
"Face Value" with respect to a share of Preferred Stock shall
mean $100.00 per share.
"Fair Market Value" shall mean, as to shares of Common Stock
or any other class of capital stock or securities of the Company or any other
issuer which are publicly traded, the average of the Current Market Prices of
such shares of securities for each day of the Adjustment Period. The "Fair
Market Value" of any security which is not publicly traded or of any other
property shall mean the fair value thereof as determined by an independent
investment banking or appraisal firm experienced in the valuation
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of such securities or property selected in good faith by the Board of Directors
of the Company or a committee thereof.
"Fairness Opinion" shall have the meaning set forth in Section
1.3(b)(iii).
"Governing Instruments" shall mean, collectively, this
Agreement, the Notes, the Warrant Agreement and the Certificate of Designation.
"Government Obligations" shall mean direct obligations of the
United States of America or obligations for the full and prompt payment of which
the full faith and credit of the United States of America are pledged.
"Guarantee" by any Person shall mean all obligations (other
than endorsements in the ordinary course of business of negotiable instruments
for deposit or collection) of any Person guaranteeing, or in effect
guaranteeing, any Indebtedness, dividend or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, all obligations incurred through an agreement,
contingent or otherwise, by such Person: (i) to purchase such Indebtedness or
obligation or any property or assets constituting security therefor; (ii) to
advance or supply funds (x) for the purchase or payment of such Indebtedness or
obligation, (y) to maintain working capital or other balance sheet condition or
otherwise to advance or make available funds for the purchase or payment of such
Indebtedness or obligation; (iii) to lease property or to purchase securities or
other property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of such Indebtedness or obligation; or (iv) otherwise to assure the
owner of the Indebtedness or obligation of the primary obligor against loss in
respect thereof. For the purposes of any computations made under this Agreement,
a Guarantee in respect of any Indebtedness for borrowed money shall be deemed to
be Indebtedness equal to the principal amount of the Indebtedness for borrowed
money which has been guaranteed, and a Guarantee in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Hazardous Material" shall mean any substance regulated by any
Environmental Law or which may now or in the future form the basis for any
Environmental Liability.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder.
"HSR Approval" shall have the meaning set forth in Section
2.8.
"HSR Notification" shall have the meaning set forth in Section
3.7.
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"Indebtedness" shall mean, with respect to any person, (i) all
obligations of such person for borrowed money, or with respect to deposits or
advances of any kind (other than deposits or advances incurred in the ordinary
course of business), (ii) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments (other than performance bonds incurred
in the ordinary course of business), (iii) all obligations of such person under
conditional sale or other title retention agreements relating to property
purchased by such person, (iv) all obligations of such person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the ordinary
course of business and paid in a manner consistent with industry practice), (v)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien or security interest on property owned or acquired by such person
whether or not the obligations secured thereby have been assumed, (vi) all
Capitalized Lease Obligations of such person, (vii) all Guarantees of such
person, (viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all Swap Contracts.
"Initial Principal Balance" shall have the meaning set forth
in Section 1.1.
"Intellectual Property" shall have the meaning set forth in
Section 2.23(a).
"Interest Rate Protection Obligations" shall mean the
obligations of any Person pursuant to any arrangement with any other Person
whereby, directly or indirectly, such person is entitled to receive from time to
time periodic payments calculated by applying either a floating or a fixed rate
of interest on a stated notional amount in exchange for periodic payments made
by such Person calculated by applying a fixed or floating rate of interest on
the same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.
"Investment" shall mean, with respect to any Person, any
direct or indirect loan or other extension of credit or capital contribution to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition by such Person of any Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by, any other Person.
"Investments" shall exclude extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices.
"Issuable Preferred Stock" shall mean ownership or possession
of the right to acquire through conversion of the Notes all (100%) of the Series
A Preferred Stock issued or issuable hereunder or of the Common Stock issuable
upon conversion of the Series A Preferred Stock.
"Junior Indebtedness" shall have the meaning set forth in
Section 11.1.
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"Lenders" shall mean the lenders identified in the Revolving
Credit Agreement.
"Lien" shall mean any mortgage, charge, pledge, lien
(statutory or other), security interest, hypothecation, assignment for security,
claim, or preference or priority or other encumbrance upon or with respect to
any property of any kind. A person shall be deemed to own subject to a Lien any
property which such Person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Liquidation Value" shall mean the outstanding principal
amount of any Note.
"Litigation" shall have the meaning set forth in Section 2.6.
"Maintenance Capital Expenditures" shall mean, as to the
Company and its Subsidiaries on a consolidated basis for any period, the
aggregate of all Capital Expenditures for maintenance purposes.
"Material Adverse Effect" and "Material Adverse Change" shall
mean any event, change or effect, individually or in the aggregate with such
other events, changes or effects, that has occurred which has a material adverse
effect upon the properties, prospects, condition (financial or otherwise),
results of operations or business of the Company and its Subsidiaries taken as a
whole; provided, however, that a Material Adverse Effect and Material Adverse
Change shall not include any event, change in or effect upon the properties,
prospects, condition (financial or otherwise), results of operations or business
of the Company and its Subsidiaries taken as a whole, directly or indirectly,
arising out of, attributable to or as a consequence of: (a) conditions, events
or circumstances (other than proposed or pending federal, state or local
legislation, regulation or administration of any governmental authority)
affecting the health care industry generally and the overall economy or (b) the
public announcement of either the execution of this Agreement or the
transactions contemplated hereunder.
"Moody's" shall mean Moody's Investors Service, Inc. and its
successors.
"Multiemployer Plan" shall mean each Employee Benefit Plan
which is a "multiemployer plan" within the meaning of Sections 3(37) or
4001(a)(3) of ERISA.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Nasdaq" shall mean the National Association of Securities
Dealers, Inc. Automated Quotation System.
"Nasdaq Approval" shall have the meaning set forth in Section
6.30.
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"NationsBank" shall mean NationsBank, N.A., a successor by
merger to NationsBank of Tennessee, N.A.
"Non-Disclosable Contracts" shall mean Contracts to which the
Company or any Subsidiary is a party with or for the benefit of any officer,
director or Affiliate of the Company or any Subsidiary or Associate thereof
meeting none of the disclosure requirements nor any of the exhibit filing
requirements for an annual, quarterly or periodic report on Form 10-K, 10-Q or
8-K of the Company covering reporting periods that include any of the date of
this Agreement, the Closing Date, the date such Contract is entered into or the
date or dates of the Company's performance under such Contract.
"Note Register" shall have the meaning set forth in Section
4.2.
"Operating Lease" shall mean, as to any Person, any lease of
property (whether real, personal or mixed) by such Person as lessee that is not
a Capitalized Lease.
"Opinion of Counsel" shall have the meaning set forth in
Section 1.3(b)(ii).
"OSHA" shall have the meaning set forth in Section 2.6.
"Outstanding" or "outstanding" shall mean when used with
reference to the Notes at a particular time, all Notes theretofore issued as
provided in this Agreement, except (i) Notes therefore reported as lost, stolen,
damaged or destroyed, or surrendered for transfer, exchange or replacement, in
respect to which replacement Notes have been issued; (ii) Notes theretofore paid
in full; and (iii) Notes theretofore canceled by the Company except that, for
the purpose of determining whether holders of the requisite principal amount of
Notes have made or concurred in any waiver, consent, approval, notice or other
communication under this Agreement, Notes registered in the name of, or owned
beneficially by, the Company or any Subsidiary of any thereof, shall not be
deemed to be outstanding.
"Pari Passu Indebtedness" shall mean Indebtedness of the
Company which is pari passu with the Notes.
"Payment Rate" shall have the meaning set forth in Section
5.3.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or
any successor thereto.
"Pension Plan" shall mean any multiemployer plan or single
employer plan, as defined in Section 4001 of ERISA, that is subject to Title IV
of ERISA, that the Company, any Subsidiary or any ERISA Affiliate maintains or
is or ever has been obligated to contribute to for the benefit of employees or
former employees of the Company, any Subsidiary or any ERISA Affiliate.
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"Permitted Investments" means any of the following:
(i) Investments in Cash Equivalents;
(ii) Investments in the Company or wholly-owned
Subsidiaries;
(iii) Investments by the Company or any Subsidiary of the
Company in another Person, if as a result of such Investment (A) such other
Person becomes a wholly-owned Subsidiary or (B) such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all of
its assets to, the Company or a wholly-owned Subsidiary;
(iv) Investments from date of this Agreement in a
Subsidiary that is less than wholly-owned in an aggregate amount measured at the
time of Investment (less payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in each case to
the Company or any Subsidiary, to the extent not otherwise included in the
Company's Consolidated Net Income) not to exceed 5% of Consolidated Tangible Net
Worth of the Company. In connection with any assets or property contributed or
transferred to any Person as an Investment, such property and assets shall be
equal to the Fair Market Value at the time of Investment;
(v) accounts receivable representing trade credit
extended in the ordinary course of business; or
(vi) unsecured loans or advances by the Company or any
Subsidiary to any Subsidiary or the Company.
"Permitted Junior Securities" shall mean securities of the
Company or any successor thereto that are equity securities or are subordinated
in right of payment to all Senior Indebtedness to substantially the same extent
as, or to a greater extent than, the Notes are so subordinated as provided in
Article 11.
"Permitted Liens" shall mean the following types of Liens:
(i) Liens on any property or assets of a Subsidiary
granted in favor of the Company or any Subsidiary;
(ii) Liens securing the Notes;
(iii) Liens securing the Revolving Credit Facility;
(iv) Liens securing Acquired Indebtedness created prior to
(and not in connection with or in contemplation of) the incurrence of such
Indebtedness by the Company or any Subsidiary; provided that any such Lien does
not extend to any property or assets of the Company or any Subsidiary other than
the assets acquired in connection with the incurrence of such Acquired
Indebtedness;
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(v) any extension, renewal or replacement, in whole or in
part, of any Lien described in the foregoing clauses (i) through (iv); provided
that any such extension, renewal or replacement shall be no more restrictive in
any material respect that the Lien so extended, renewed or replaced and shall
not extend to any additional property or assets; and
(vi) Liens securing Purchase Money Debt and Capitalized Lease
Obligations; provided, however, that any such lien attaches only to the item or
items of property or asset financed with such Purchase Money Debt or Capitalized
Lease.
"Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger or
otherwise) of such entity.
"Preferred Ratio" shall have the meaning set forth in Section
10.1.
"Preferred Stock Consideration" shall have the meaning set
forth in Section 1.1.
"Proxy Statement" shall have the meaning set forth in Section
6.20.
"Public Authority" shall mean any supranational, national,
regional, state or local government court, governmental agency, authority,
board, bureau, instrumentality or regulatory body.
"Purchase Money Debt" shall mean (a) Indebtedness of the
Company or any of its Subsidiaries that, within thirty (30) days of the purchase
of equipment in which neither the Company nor any of its Subsidiaries at any
time prior to such purchase had any interest, is incurred to finance part or all
of (but not more than) the purchase price of such equipment, and that bears
interest at a rate per annum that is commercially reasonable at the time, and
(b) Indebtedness that constitutes a renewal, extension or refunding of, but not
an increase in the principal amount of, Purchase Money Debt that is such by
virtue of clause (a), is binding only upon the obligor or obligors under the
Purchase Money Debt being renewed, extended or refunded and bears interest at a
rate per annum that is commercially reasonable at the time.
"Purchase Price" shall have the meaning set forth in Section
1.1.
"Redeemable Common Stock" shall mean 186,000 shares of Common
Stock Beneficially Owned by Mr. and/or Mrs. Scott L. Mercy, who are Affiliates
of the Company, which shares Mr. and Mrs. Mercy may require the Company to
repurchase at $9.90 per share under the circumstance set forth in Mr. Mercy's
Amended and Restated Employment Agreement, dated as of September 1, 1998, with
the Company.
"Redemption Indebtedness" shall mean Indebtedness incurred or
created concurrently with the redemption of the Notes in accordance with Section
9.
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"Registration Rights Agreement" shall have the meaning set
forth in Section 1.3(b)(xii).
"Representative" shall have the meaning set forth in Section
7(a).
"Required Net Worth Amount" shall mean the sum of (i) 50% of
Consolidated Net Income for each fiscal quarter ending after the Closing Date in
which the Company has positive Consolidated Net Income, plus (ii) the principal
amount of Notes theretofore converted into Preferred Stock, plus (iii) $10
million.
"Restricted Payment" shall have the meaning set forth in the
Revolving Credit Agreement as in effect as of the date hereof.
"Retained Earnings (Deficit)" shall have the meaning assigned
to it in the 1997 10-K.
"Revolving Credit Agreement" shall mean the Revolving Credit
Agreement, dated the date hereof, among the Company, the lenders identified
therein and NationsBank, and as administrative agent and as issuing bank and any
amendments, renewals, extensions, modifications and refundings thereof.
"Revolving Credit Facility" shall mean the lending facility
under the Revolving Credit Agreement.
"S&P" shall mean Standard & Poor's Corporation and its
successors.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Senior Indebtedness" shall mean and include, as of any date
as of which the amount thereof is to be determined, the principal of and
premium, if any, and interest due on, and any other amount from time to time
payable in respect of, (a) any Indebtedness arising under the Revolving Credit
Agreement and (b) any amendments, renewals, extensions, modifications and
refundings of any such Indebtedness.
"SESC" shall mean Sun Trust Equitable Securities Corporation.
"Stated Maturity" means, when used with respect to any Note or
any installment of interest thereon, the date specified in such Note as the
fixed date on which the principal of such Note of such installment of interest
is due and payable and, when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Stockholder Approval" shall have the meaning set forth in
Section 2.8.
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"Stockholder Approval Date" shall mean the date on which the
Stockholder Approval is obtained.
"Stockholders Meeting" shall have the meaning set forth in
Section 2.8.
"Stock Issuance" shall have the meaning set forth in Section
2.8.
"Subordinated Indebtedness" shall mean Indebtedness of the
Company which is expressly subordinated in right of payment to the Notes.
"Subsidiary" shall mean, with respect to any Person, (i) a
corporation a majority of whose voting power or voting equity securities or
equity interest is at the time, directly or indirectly, owned by such Person, by
one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) other Person (other than a corporation), including,
without limitation, a joint venture, in which such Person, one or more
Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, has at least
majority ownership interest entitled to vote in the election of directors,
managers or trustees thereof (or other Person performing similar functions).
"Swap Contract" shall mean any agreement whether or not in
writing, relating to any transaction that is a rate swap, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index swap
or option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other similar
transaction (including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
"Swap Termination Value" shall mean, in respect of any one or
more Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for any date
on or after the date such Swap Contracts have been closed out and termination
value(s) determined in accordance therewith, such termination value(s), and (b)
for any date prior to the date referenced in subclause (a) the amount(s)
determined as the mark-to-market value(s) for such Swap Contracts, as determined
by the Company based upon one or more mid-market or other readily available
quotations provided by any recognized dealer in such Swap Contracts.
"Third Party" shall mean a person who or which is neither the
Company or its Subsidiaries nor the Purchasers.
"Trading Day" shall mean a Business Day or, if the Common
Stock is listed or admitted to trading on any national securities exchange, a
day on which such exchange is open for the transaction of business.
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"Transaction Documents" shall mean the Acquisition Agreement,
this Agreement and each document contemplated by this Agreement.
"Voting Securities" shall mean at any time shares of any class
of Capital Stock of the Company which are then entitled to vote generally in the
election of directors.
"Warrant Agreement" shall have the meaning set forth in
Section 1.3(b)(iv).
"Year 2000 Compliant" shall have the meaning set forth in
Section 2.26.
"1997 Financial Statements" shall have the meaning set forth
in Section 2.5.
"1997 Form 10-K" shall have the meaning set forth in Section
2.4.
12.2. Accounting Principles. The character or amount of any
asset, liability, capital account or reserve and of any item of income or
expense required to be determined pursuant to this Agreement, and any
consolidation or other accounting computation required to be made pursuant to
this Agreement, and the construction of any definition in this Agreement
containing a financial term, shall be determined or made, as the case may be, in
accordance with United States generally accepted accounting principles, to the
extent applicable, unless such principles are inconsistent with the express
requirements of this Agreement.
13. Miscellaneous
13.1. Payments. The Company agrees that, so long as any of the
Purchasers shall hold any Convertible Securities, it will make all cash payments
thereon in immediately available funds in such manner as such Purchasers may
reasonably request in writing; provided, however, that the Company shall incur
no liability to any Purchaser by reason of its non-compliance with this Section
13.1 so long as it is in compliance with Section 5.1.
13.2. Severability. If any term, provision, covenant or
restriction of this Agreement or any exhibit hereto is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement and such
exhibits shall remain in full force and effect and shall in no way be affected,
impaired or invalidated. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
13.3. Specific Enforcement. The Purchasers, on the one hand,
and the Company, on the other, acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance
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with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
they may be entitled at law or equity.
13.4. Entire Agreement. This Agreement (including the
documents set forth in the exhibits hereto) contains the entire understanding of
the parties with respect to the transactions contemplated hereby.
13.5. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been signed
by each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
13.6. Notices and Other Communications. All notices, consents,
requests, instructions, approvals, financial statements, proxy statements,
reports and other communications provided for herein shall be rapidly given, if
in writing and delivered personally, by telecopy or sent by registered mail,
postage prepaid, if to:
THE COMPANY:
America Service Group Inc.
105 Westpark Drive, Suite 300
Brentwood, TN 37027
Attention: Jean L. Byassee, General Counsel
With a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Philip A. Theodore, Esq.
THE PURCHASERS:
Health Care Capital Partners L.P. and
Health Care Executive Partners L.P.
The Mill
10 Glenville Street
Greenwich, CT 06831
Attention: David A. Freeman, Member
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With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: David Golay, Esq.
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
13.7. Amendments. This Agreement may be amended as to the
Purchasers and their successors and assigns, and the Company may take any action
herein prohibited, or omit to perform any act required to be performed by it, if
the Company shall obtain the written consent of the Purchasers and/or such
successors and assigns who are the registered holders of not less than 66 2/3%
of the outstanding principal amount of the Notes or Face Value of the Preferred
Stock then held by the Purchasers and their successors or assigns. This
Agreement may not be waived, changed, modified, or discharged orally, but only
by an agreement in writing signed by the party or parties against whom
enforcement of any waiver, change, modification or discharge is sought or by
parties with the right to consent to such waiver, change, modification or
discharge on behalf of such party.
13.8. Cooperation. The Purchasers and the Company agree to
take, or cause to be taken, all such further or other actions as shall
reasonably be necessary to make effective and consummate the transactions
contemplated by this Agreement.
13.9. Successors and Assigns. All covenants and agreements
contained herein shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns, it being understood however that the
covenants set forth in Sections 6.12 and 13.10 shall not inure to the benefit of
any assignee of the Purchasers other than Affiliates of the Purchasers. Neither
this Agreement nor any rights hereunder may be transferred prior to the Closing
Date without the consent of the other party, except that the Purchasers may
assign any of their rights and obligations hereunder to any fund for which
Ferrer Freeman Thompson & Co. LLC is the general partner.
13.10. Expenses and Remedies. (a) The Company agrees to pay
the Purchasers for all of their out-of-pocket expenses (not to exceed $300,000),
including reasonable outside legal, accounting and consulting fees of the
Purchasers, incurred in connection with this Agreement and the consummation of
all transactions contemplated hereby. The Company further agrees to pay the
Purchasers all of their reasonable out-of-pocket costs and expenses relating to
any future amendment or supplement to this Agreement or any of the Securities
(or any proposal by the Company for such amendment or supplement) whether or not
consummated or any waiver or consent with respect
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thereto (or any proposal for such waiver or consent) whether or not consummated,
and all costs and expenses of the Purchasers relating to the enforcement of this
Agreement, the Registration Rights Agreement, the Warrant Agreement or any of
the Securities.
(b) The Company further agrees to indemnify and
save harmless the Purchasers and any of their officers, directors, partners,
employees, trustees and agents, and each person who controls any of the
Purchasers within the meaning of the Securities Act or the Exchange Act, from
and against any and all costs, expenses, damages or other liabilities resulting
from any breach of this Agreement by the Company (including the breach of any
covenant or representation or warranty made by the Company and any claim
relating to Indemnified Losses (as defined in the Acquisition Agreement)) or any
legal, administrative or other proceedings arising out of the transactions
contemplated hereby (other than such costs, expenses, damages or other
liabilities resulting, directly or indirectly, (i) from the breach by such
Purchasers of any of their agreements contained herein or (ii) from the gross
negligence or willful misconduct of such Purchasers or any of their officers,
directors, partners, employees or agents, or any person who controls such
Purchasers within the meaning of the Securities Act or the Exchange Act);
provided, however, that, if and to the extent that such indemnification is
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of such indemnified liability which shall be
permissible under applicable laws.
(c) The indemnified party under this Section 13.10
will, promptly after the receipt of notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought from
the Company on account of an indemnity agreement contained in this Section
13.10, notify the Company in writing of the commencement thereof. The omission
of any indemnified party so to notify the Company of any such action shall not
relieve the Company from any liability which it may have to such indemnified
party except to the extent the Company shall have been materially prejudiced by
the omission of such indemnified party so to notify the Company, pursuant to
this Section 13.10. In case any such action shall be brought against any
indemnified party and it shall notify the Company of the commencement thereof,
the Company shall be entitled to participate therein and, to the extent that it
may wish, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the Company to such indemnified
party of its election so to assume the defense thereof, the Company will not be
liable to such indemnified party under this Section 13.10 for any legal or other
expense subsequently incurred by such indemnified party in connection with the
defense thereof nor for any settlement thereof entered into without the consent
of the Company; provided, however, that (i) if the Company shall elect not to
assume the defense of such claim or action or (ii) if the indemnified party
reasonably determines (x) that there may be a conflict between the positions of
the Company and of the indemnified party in defending such claim or action or
(y) that there may be legal defenses available to such indemnified party
different from or in addition to those available to the Company, then separate
counsel for the
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<PAGE> 75
indemnified party shall be entitled to participate in and conduct the defense,
in the case of (i) and (ii)(x), or such different defenses, in the case of
(ii)(y), and the Company shall be liable for any reasonable legal or other
expenses incurred by the indemnified party in connection with the defense.
13.11. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the issuance and delivery of the Securities, regardless of any
investigation made by or on behalf of any party.
13.12. Transfer of Securities. The Purchasers understand and
agree that the Securities have not been registered under the Securities Act or
the securities laws of any state and that they may be sold or otherwise disposed
of only in one or more transactions registered under the Securities Act and,
where applicable, such laws or transactions as to which an exemption from the
registration requirements of the Securities Act and, where applicable, such laws
are, in the opinion of counsel reasonably satisfactory to the Company, a copy of
which opinion shall be delivered to the Company in connection with any such sale
or other disposition, available. The Purchasers acknowledge that, except as
provided in the Registration Rights Agreement, the Purchasers have no right to
require the Company to register the Securities. The Purchasers understand and
agree that each Note or certificate representing the Securities shall bear the
following legend:
"[THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE] [THIS
NOTE HAS] NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO THE COMPANY TO THE EFFECT THAT THE TRANSACTION PURSUANT TO
WHICH SUCH [SECURITIES/NOTES] WILL BE OFFERED FOR SALE OR
OTHERWISE DISPOSED OF IS SUBJECT TO AN APPLICABLE EXEMPTION TO
THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
13.13. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
Litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any Litigation relating thereto
except in such courts), and further agrees that service of any process,
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<PAGE> 76
summons, notice or document by U.S. registered mail to its respective address
set forth in this Agreement, or such other address as may be given by one or
more parties to the other parties in accordance with the notice provisions of
Section 13.6, shall be effective service of process for any Litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any Litigation
arising out of this Agreement or the transactions contemplated hereby in the
courts of the State of New York or the United States of America, in each case
located in the County of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such Litigation brought in any such court has been brought in an
inconvenient forum.
13.14. Publicity. Each of the parties hereto agrees that it
will make no statement regarding the transactions contemplated hereby (which for
purposes of this Section 13.14 shall not be deemed to include the Acquisition)
unless such statement has been approved by both of the parties hereto.
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the Commission or other regulatory bodies, make
such statements with respect to the transactions contemplated hereby as each may
be advised is legally necessary upon advice of its counsel.
13.15. Signatures. This Agreement shall be effective upon
delivery of original signature pages or facsimile copies thereof executed by
each of the parties hereto.
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<PAGE> 77
IN WITNESS WHEREOF, the Company and the Purchasers have caused
this Agreement to be executed and delivered by their respective officers
thereunto duly authorized.
AMERICA SERVICE GROUP INC.
By: /s/ Michael Catalano
--------------------------------------------
Name: Michael Catalano
Title President and Chief
Executive Officer
HEALTH CARE CAPITAL PARTNERS L.P.
By: FERRER FREEMAN THOMPSON
& CO. LLC., its General Partner
By: /s/ David A. Freeman
--------------------------------------------
Name: David A. Freeman
Title: Member
HEALTH CARE EXECUTIVE PARTNERS L.P.
By: FERRER FREEMAN THOMPSON
& CO. LLC., its General Partner
By: /s/ David A. Freeman
--------------------------------------------
Name: David A. Freeman
Title: Member
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<PAGE> 1
EXHIBIT 99.3
AMERICA SERVICE GROUP INC.
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151(g) of the General Corporation Law of the State
of Delaware, America Service Group Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware ("DGCL"), DOES HEREBY CERTIFY that:
Pursuant to the authority conferred upon the Board of Directors of the
Corporation by Section B of Article FOURTH of the Amended and Restated
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), and in accordance with the provisions of Section 151(g) of the
DGCL, the Board of Directors of the Corporation on January 22, 1999, adopted the
following resolution creating a series of Preferred Stock designated as Series A
Convertible Preferred Stock.
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the DGCL and the provisions of
the Certificate of Incorporation, a series of the class of authorized Preferred
Stock, par value $.01 per share, of the Corporation is hereby created and that
the designation and number of shares thereof and the voting powers, preferences
and relative, participating, optional and other special rights of the shares of
such series, and the qualifications, limitations and restrictions thereof, are
as follows:
SECTION 1. DESIGNATION; NUMBER; RANK.
(a) Designation; Number. The shares of such series shall be
designated "Series A Convertible Preferred Stock" (the "Series A Preferred
Stock"). The number of shares initially constituting the Series A Preferred
Stock shall be 500,000 (the "Initial Shares"), which number may be decreased
(but not increased) by the Board of Directors without a vote of stockholders;
provided, however, that such number may not be decreased (i) prior to conversion
or redemption of all of the Corporation's 12% Subordinated Convertible Bridge
Notes due January 26, 2000 (the "Notes") and (ii) after conversion or redemption
of all of the Notes, below the number of then outstanding shares of Series A
Preferred Stock. The Corporation may issue (x) up to 50,000 shares of the Series
A Preferred Stock as an original issuance; (y) up to 150,000 shares of the
Series A Preferred Stock upon conversion of the Notes; and (z) such number of
additional shares as may be required to pay dividends on the Series A Preferred
Stock in additional shares of Series A Preferred Stock pursuant to Section 2(a).
The Corporation shall take all actions necessary or advisable to increase the
number of shares of Series A Preferred Stock authorized to provide for
additional issuance of Series A Preferred Stock pursuant to clause (z) of the
preceding sentence.
<PAGE> 2
(b) Rank. The Series A Preferred Stock shall, except as provided
in Section 4(b) hereof, with respect to dividend rights and rights on
liquidation, dissolution or winding up, rank senior to the Common Stock, par
value $.01 per share, of the Corporation (the "Common Stock") and other capital
stock of the Corporation designated by the Board of Directors of the Corporation
prior to or on or after the date hereof.
SECTION 2. DIVIDENDS.
(a) Payment of Dividends. The holders of shares of Series A
Preferred Stock, in preference to the holders of shares of Common Stock and of
any shares of other capital stock of the Corporation as to payment of dividends,
shall be entitled to receive, when, as and if declared by the Board of
Directors, out of the assets of the Corporation legally available therefor,
cumulative dividends at an annual rate equal to 5% from and after the respective
dates of issuance of applicable shares of Series A Preferred Stock (the "Issue
Date"), as long as the shares of Series A Preferred Stock remain outstanding.
Dividends shall be (i) computed on the basis of the Liquidation Preference (as
defined in Section 11); (ii) accrue and be payable quarterly, in arrears, on
March 1, June 1, September 1 and December 1 in each year or, if not a Business
Day, on the next Business Day (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date following the Issue Date; and (iii) payable in cash; provided,
however, that if payment of cash dividends is restricted by the terms of any
instrument or agreement to which any of the Corporation's Senior Indebtedness
was created or incurred, the dividends provided in this Section 2 shall be
payable in additional Series A Preferred Stock (the "Additional Series A
Preferred Stock"), which shall be issued on the applicable Quarterly Dividend
Payment Date and shall be subject to the terms, voting powers, preferences and
relative, participating, optional and other special rights provided hereunder,
and dividends shall accrue on each share of Additional Series A Preferred Stock
from the issuance date of such Additional Series A Preferred Stock.
(b) Accrual of Dividends. Dividends payable pursuant to paragraph
(a) of this Section 2 shall begin to accrue and be cumulative from the Issue
Date, whether or not earned or declared. The amount of dividends so payable
shall be determined on the basis of twelve 30-day months and a 360-day year.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend declared thereon, which record date shall be no more than 60 days or
less than 10 days prior to the date fixed for the payment thereof.
(c) Restricted Payments. No dividend or distribution in cash,
shares of stock or other property on the Common Stock or other capital stock of
the Corporation shall be declared or paid or set apart for payment unless (i)
all accumulated and unpaid dividends on the Series A Preferred Stock have been
declared and paid and (ii) at the same time, the same dividend or distribution
is declared or paid or set apart, as the case may be, on the Series A Preferred
Stock payable on the same date, at the rate per share of Series A Preferred
Stock based upon the number of shares of Common Stock into which each share of
Series A Preferred Stock is
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<PAGE> 3
convertible (as adjusted pursuant to Section 8) on the record date for such
dividend or distribution on the Common Stock.
(d) Penalty Dividend Rate. In the event that (i) any dividend
payable on the Series A Preferred Stock pursuant to Section 2(a) shall not have
been paid in full, whether in cash or in kind, (ii) a Default or an Event of
Default under Section 8.1(f) of the Securities Purchase Agreement shall have
occurred and be continuing for 30 days following the date notice of such event
is required to be given, or (iii) the Corporation shall have failed to redeem in
full the shares of Series A Preferred Stock pursuant to Section 5(a), whether or
not by reason of the absence of legally available funds, then, in any such case,
the holders of Series A Preferred Stock shall be entitled to annual dividends
(in addition to any dividend payable pursuant to Section 2(a)) at a rate of 7.0%
per annum from the applicable Quarterly Dividend Payment Date or date of such
breach, Default or Event of Default or failure to redeem, as the case may be,
through the date of payment of such dividend, cure of such breach, Default or
Event of Default or redemption, as the case may be.
SECTION 3. VOTING RIGHTS.
In addition to any voting rights provided by law, the holders of shares
of Series A Preferred Stock shall have the following voting rights:
(a) Right to Vote as a Single Class with Holders of Common Stock.
So long as any of the Series A Preferred Stock is outstanding, each share of
Series A Preferred Stock shall entitle the holder thereof to vote on all matters
submitted to a vote of the stockholders of the Corporation, voting together as a
single class with the holders of Common Stock. The holders of each share of
Series A Preferred Stock shall be entitled to vote with respect to each share of
Series A Preferred Stock held by each such holder a number of votes equal to the
number of votes which could be cast in such vote by a holder of the number of
shares of Common Stock into which such share of Series A Preferred Stock is
convertible (as adjusted pursuant to Section 8) on the record date for such
vote. Fractional votes shall not, however, be permitted and any fractional
voting rights available on an as-converted basis (after aggregation of all
shares of Common Stock into which shares of Series A Preferred Stock held by
each holder could be converted) shall be rounded to the nearest whole number
(with one-half being rounded upward).
(b) Fundamental Change Not to be Taken Without Vote of Holders of
Series A Preferred Stock. So long as 100% of the shares of Series A Preferred
Stock issued under the Securities Purchase Agreement are outstanding, the
Corporation may not take any of the actions (each, a "Fundamental Change") set
forth below without first obtaining the approval of the holders of 66-2/3% of
the outstanding shares of Series A Preferred Stock (the "66-2/3% Holders"):
(i) sell all or substantially all of the assets of the
Corporation or undertake a merger or consolidation transaction in which the
stockholders of the Corporation immediately prior to the transaction possess
less than 50% of the Voting Securities of the surviving entity immediately after
the transaction;
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<PAGE> 4
(ii) effect a reclassification or recapitalization of the
issued and outstanding capital stock of the Corporation; or
(iii) file a petition in bankruptcy or for reorganization
or for an arrangement or any composition, readjustment, liquidation, dissolution
or similar relief pursuant to the Federal Bankruptcy Code of 1978, as amended,
or under any similar present or future federal law or the law of any other
jurisdiction or consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Corporation or any Subsidiary or for all or any
substantial part of its respective property, or an assignment for the benefit of
the Corporation's or any of its Subsidiaries' creditors, or an admission in
writing the Corporation's or its Subsidiaries' inability to pay its debts
generally as they become due, or take any corporate action, as the case may be,
in furtherance of any of the foregoing.
(c) Actions Not to be Taken Without Vote of Holders of Series A
Preferred Stock. The affirmative vote of the 66-2/3% Holders shall be necessary
to (i) authorize, increase the authorized number of shares of, or issue
(including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) any shares of any class or classes or series
within a class of the Corporation's capital stock ranking prior to (either as to
dividends or upon voluntary or involuntary liquidation, dissolution or winding
up), or pari passu with, the Series A Preferred Stock (other than as
contemplated herein); (ii) increase the authorized number of shares of, or issue
(including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) any shares of, Series A Preferred Stock other
than upon the conversion of the Notes or as required by the proviso to Section
2(a) hereof; or (iii) authorize, adopt or approve an amendment to the
Certificate of Incorporation or this Certificate of Designation which would
increase or decrease the par value of the shares of Series A Preferred Stock, or
alter or change the powers, preferences or special rights of the Series A
Preferred Stock.
(d) Exercise of Voting Rights. (i) The foregoing rights of holders
of shares of Series A Preferred Stock to take any actions as provided in this
Section 3 may be exercised at any annual meeting of stockholders or at a special
meeting of stockholders held for such purpose as hereinafter provided or at any
adjournment thereof.
So long as such right to vote continues, the Chairman of the Board of
the Corporation may call, and if the holders of Series A Preferred Stock are to
vote separately as a single class, upon the written request of holders of record
of 51% of the outstanding shares of Series A Preferred Stock, addressed to the
Secretary of the Corporation, at the principal office of the Corporation, the
Chairman of the Board of the Corporation shall call, a special meeting of the
holders of shares of Series A Preferred Stock entitled to vote as provided
herein. The Corporation shall use its best efforts to hold such meeting within
60, but in any event not later than 90, days after delivery of such request to
the Secretary, at the place and upon the notice provided by law and in the
By-Laws of the Corporation for the holding of meetings of stockholders; provided
that the Corporation shall not be required to call such a special meeting if
such request is received fewer than 90 days before the date fixed for the next
ensuing annual meeting of stockholders of the Corporation, at which meeting such
newly created directorships
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<PAGE> 5
shall be filled by the holders of the Series A Preferred Stock; and provided,
further, however, that if it is necessary for the Corporation to solicit proxies
for use at such special meeting, the Corporation's obligation to conduct such
special meeting shall be delayed for such period of time as is necessary for the
Corporation to prepare and file a proxy statement and to obtain the Commission's
clearance of such proxy statement.
(ii) At each meeting of stockholders at which the holders
of shares of Series A Preferred Stock shall have the right, voting separately as
a single class, to take any action, the presence in person or by proxy of the
holders of record of one-half of the total number of shares of Series A
Preferred Stock then outstanding and entitled to vote on the matter shall be
necessary and sufficient to constitute a quorum. At any such meeting or at any
adjournment thereof, in the absence of a quorum of the holders of shares of
Series A Preferred Stock, a majority of the holders of such shares present in
person or by proxy shall have the power to adjourn the meeting as to the actions
to be taken by the holders of shares of Series A Preferred Stock from time to
time and place to place without notice other than announcement at the meeting
until a quorum shall be present.
(iii) For the taking of any action as provided in
paragraphs (b) and (c) of this Section 3 by the holders of shares of Series A
Preferred Stock, each such holder shall have one vote for each share of such
stock standing in his name on the transfer books of the Corporation as of any
record date fixed for such purpose or, if no such date be fixed, at the close of
business on the Business Day (as defined in Section 11) next preceding the day
on which notice is given, or if notice is waived, at the close of business on
the Business Day next preceding the day on which the meeting is held.
SECTION 4. CERTAIN RESTRICTIONS.
(a) Dividends or Distributions. Whenever (i) any dividend payable
on the Series A Preferred Stock pursuant to Section 2(a) or 2(d) shall not have
been paid in full, whether in cash or in kind; (ii) a Default or an Event of
Default under Section 8.1(f) of the Securities Purchase Agreement shall have
occurred and be continuing for 30 days following the date notice of such event
is required to be given; (iii) the Corporation shall have failed to redeem in
full the shares of Series A Preferred Stock pursuant to Section 5(a), whether or
not by reason of the absence of legally available funds therefor; or (iv) a
Cross-Default or Fundamental Change shall have occurred and be continuing, the
Corporation shall not declare or pay dividends, or make any other distributions,
on any shares of Parity Stock or Junior Stock, except for dividends or
distributions payable in Junior Stock pursuant to Section 2(c).
(b) Redemption and Purchase of Capital Stock. Whenever dividends
on the Series A Preferred Stock shall not have been paid in full, whether in
cash or in kind, or any of the events set forth in clauses (ii) through (iv) of
clause (a) of this Section 4 shall have occurred and be continuing, the
Corporation shall not: (A) redeem, purchase or otherwise acquire for
consideration any shares of Parity Stock or Junior Stock; provided, however,
that the Corporation may (1) at any time redeem, purchase or otherwise acquire
shares of Parity Stock in exchange for any shares of Junior Stock, (2) accept
shares of any Parity Stock or Junior Stock for conversion into shares of Junior
Stock, (3) at any time redeem, purchase or otherwise acquire shares of any
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<PAGE> 6
Parity Stock pursuant to any mandatory redemption, put, sinking fund or other
similar obligation, pro rata with the Series A Preferred Stock in proportion to
the total amount then required to be applied by it to redeem, repurchase or
otherwise acquire shares of Series A Preferred Stock and shares of such Parity
Stock, and (4) pay cash in lieu of issuing fractional shares of Common Stock; or
(B) redeem, purchase or otherwise acquire for consideration any shares of Series
A Preferred Stock; provided, however, that the Corporation may (1) accept shares
of Series A Preferred Stock surrendered for conversion into shares of capital
stock of the Corporation pursuant to Section 8, (2) elect to redeem all
outstanding shares of Series A Preferred Stock pursuant to Section 5(a) or (3)
redeem shares of Series A Preferred Stock pro rata pursuant to Section 5(a).
(c) Redeemable Common Stock. So long as at least 25% of the shares
of Series A Preferred Stock issued pursuant to the Securities Purchase Agreement
remain outstanding, the Corporation shall not, and shall not permit any
Subsidiaries of the Corporation to, purchase, redeem or retire for value any
shares of Redeemable Common Stock.
(d) Purchase of Capital Stock. The Corporation shall not permit
any Subsidiaries of the Corporation to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to paragraph (b) of this Section 4, purchase such
shares at such time and in such manner.
SECTION 5. REDEMPTION; CHANGE OF CONTROL.
(a) Mandatory Redemption. On July 26, 2005 (such date, the
"Mandatory Redemption Date"), the Corporation shall redeem, out of funds legally
available therefor, all outstanding shares of Series A Preferred Stock, by
paying therefor the Liquidation Preference in cash (the "Redemption Price"). If
the funds of the Corporation legally available for redemption of shares of
Series A Preferred Stock on the Mandatory Redemption Date are insufficient to
redeem the total number of shares to be redeemed on such date, those funds which
are legally available will be used to redeem the maximum possible number of such
shares ratably among the holders of such shares to be redeemed based upon the
number of shares of Series A Preferred Stock held by each such holder. The
shares of the Series A Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided in this Certificate of
Designation at any time. Thereafter, when additional funds of the Corporation
are legally available for the redemption of shares of the Series A Preferred
Stock, such funds shall immediately be used to redeem the balance of the shares
of Series A Preferred Stock that the Corporation has become obliged to redeem on
the Mandatory Redemption Date but which the Corporation has not redeemed.
(b) Optional Redemption. The Corporation shall have the right, at
its sole option and election made in accordance with clause (d) below, to redeem
the Series A Preferred Stock, in an amount not less than one-third of the amount
of Series A Preferred Stock issued pursuant to the Securities Purchase
Agreement, for an amount equal to the Redemption Price; provided, however, that,
subject to the final paragraph of this clause (b), (A) the Corporation shall not
be permitted to redeem any shares of Series A Preferred Stock on or prior to
June 30, 2001 unless the Current Market Price per share of the Common Stock is
equal to or greater than the
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<PAGE> 7
Conversion Price multiplied by 225% for at least 45 consecutive Trading Days
immediately preceding the date of the Redemption Notice (as defined in clause
(d) below) and (B) the Corporation shall not be permitted to redeem any shares
of Series A Preferred Stock any time after June 30, 2001 unless the Current
Market Price per share of the Common Stock is equal to or greater than the
Conversion Price multiplied by 225% for at least 30 consecutive Trading Days
immediately preceding the date of the Redemption Notice; and provided, further,
that (i) the Company shall have given the notice required by Section 2.2(c) of
the Registration Rights Agreement and (ii) a registration statement providing
for the resale of the shares of Common Stock issuable upon the conversion of the
Series A Preferred Stock and upon the exercise of the Warrants (collectively,
the "Conversion Shares") held by persons who become Requesting Holders (as
defined by the Registration Rights Agreement) and fulfill their respective
obligations pursuant to Section 2.7 of the Registration Rights Agreement shall
have been declared effective by the Commission; provided, however, that such
registration statement shall not be deemed to have been effected (x) if after it
has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason other than an act or omission of the holders of
such Conversion Shares and has not thereafter become effective, or (y) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied or waived, other
than by reason of a failure on the part of the holders of such Conversion
Shares. The provisions of the Registration Rights Agreement shall apply in
connection with the registration of the Conversion Shares required by this
Section 5(b) to the extent not inconsistent herewith, except that Section 2.6 of
the Registration Rights Agreement shall in no event apply to such Registration
Statement.
In the event that at any time a Change of Control has occurred prior to
the delivery of a Redemption Notice pursuant to this Section 5(b), the
Redemption Price of each share of Series A Preferred Stock until the expiration
of the 90-day period referred to in clause (e) of this Section 5 shall equal the
Change of Control Price (as defined in clause (c) below).
(c) Change of Control. In the event that there occurs a Change of
Control, any record holder of Series A Preferred Stock, in accordance with the
procedures set forth in clause (e) of this Section 5, may require the
Corporation to redeem any or all of the Series A Preferred Stock held by such
holder for an amount ("Change of Control Price") equal to the greater of (i)
150% of the Face Value of the Preferred Stock, plus any accrued and unpaid
dividends or (ii) the form and amount of consideration that such holder would
have received had such holder converted such Series A Preferred Stock into
Common Stock prior to the Change of Control.
(d) Notice of Redemption. Notice of any redemption of shares of
Series A Preferred Stock pursuant to clauses (a) and (b) of this Section 5 shall
be mailed, first class postage prepaid, to each holder of shares of Series A
Preferred Stock to be redeemed, at such holder's address as it appears on the
transfer books of the Corporation, notifying such holder of the redemption to be
effected, specifying (i) the number of shares to be redeemed from such holder,
(ii) the redemption date, (iii) the Redemption Price and (iv) the place at which
payment may be obtained; and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, such holder's
certificate or certificates representing the shares to be redeemed
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(the "Redemption Notice"). Each Redemption Notice shall be mailed not less than
20 and not more than 30 days prior to the proposed redemption date. In order to
facilitate the redemption of shares of Series A Preferred Stock, the Board of
Directors may fix a record date for the determination of shares of Series A
Preferred Stock to be redeemed.
(e) Notice of Change of Control. Promptly following a Change of
Control (but in no event more than five Business Days thereafter), notice of
such Change of Control shall be mailed, first class postage prepaid, to each
holder of Series A Preferred Stock, at such holder's address as it appears on
the transfer books of the Corporation, notifying such holder of such Change of
Control, setting forth each holder's right to require the Corporation to redeem
any or all Series A Preferred Stock held by it. The Corporation shall thereafter
during a period of 90 days from the date of such notice (or the date the
Corporation was required to give such notice) redeem any Series A Preferred
Stock, in whole or in part, at the option of the holder, upon at least five
days' written notice to the Corporation by such holder, specifying (i) the Face
Value of Series A Preferred Stock to be redeemed and (ii) the redemption date;
provided, however, if payment of the Change of Control Price is restricted by
the terms of any instrument or agreement to which any of the Corporation's
Senior Indebtedness was created or incurred, such 90-day period shall not
commence until the date on which payment of the Change of Control Price is no
longer so restricted.
(f) Payment of Redemption Price or Change of Control Price. On the
date of any redemption being made pursuant to this Section 5 which is specified
in a notice given pursuant to paragraph (d) or (e) of this Section 5, the
Corporation shall wire transfer to such holder the Redemption Price or Change of
Control Price, as the case may be, for the shares of Series A Preferred Stock so
redeemed. If the funds of the Corporation legally available for redemption of
shares of Series A Preferred Stock on any such Redemption Date are insufficient
to redeem the total number of shares to be redeemed on such date, those funds
which are legally available will be used to redeem the maximum possible number
of such shares ratably among the holders of such shares to be redeemed based
upon the number of shares of Series A Preferred Stock held by such holder. The
shares of the Series A Preferred Stock not redeemed on any such Redemption Date
because of the insufficiency of legally available funds shall remain outstanding
and be entitled to all the rights and preferences provided in this Certificate
of Designation at any time and shall be redeemed on the earliest date upon which
such funds are available.
SECTION 6. STATUS OF CONVERTED OR REDEEMED STOCK.
(a) Status of Converted or Redeemed Stock. Any shares of Series A
Preferred Stock converted, redeemed, purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such shares of Series A Preferred Stock shall
upon their cancellation, and upon the filing of any document required by the
DGCL, become authorized but unissued shares of Preferred Stock, $.01 par value,
of the Corporation and may be reissued as part of another series of Preferred
Stock, $.01 par value, of the Corporation, subject to the conditions or
restrictions on issuance set forth in Section 3(b) and (c) or elsewhere herein.
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SECTION 7. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) (i) If the Corporation shall (A) commence a voluntary case
under the Federal bankruptcy laws or any other applicable Federal or state
bankruptcy, insolvency or similar law, or (B) consent to the entry of an order
for relief in an involuntary case under such law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation, or of any substantial part of its
property, or (C) make an assignment for the benefit of its creditors, or (D)
admit in writing its inability to pay its debts generally as they become due, or
(ii)(x) if a decree or order for relief in respect of the Corporation shall be
entered by a court having jurisdiction in the premises in an involuntary case
under the Federal bankruptcy laws or any other applicable Federal or state
bankruptcy, insolvency or similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and (y) any such decree or order shall be
unstayed and in effect for a period of 60 consecutive days and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or (iii) if the
Corporation shall otherwise liquidate, dissolve or wind up, after payment or
provision for the payment for the debts and other liabilities of the
Corporation, no distribution shall be made to the holders of shares of Junior
Stock or Parity Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock, subject to Section 8, shall have received the Liquidation
Preference (as defined in Section 11) with respect to each share held by holders
of the Series A Preferred Stock.
(b) Neither the consolidation, merger or other business
combination of the Corporation with or into any other Person or Persons nor the
sale of all or substantially all the assets of the Corporation shall be deemed
to be a liquidation, dissolution or winding up of the Corporation for purposes
of this Section 7.
(c) Whenever the distribution provided for in this Section 7 shall
be payable in securities or property other than cash, the value of such
distribution shall be the Fair Market Value.
SECTION 8. CONVERSION.
(a) Right to Convert. Subject to the provisions for adjustment
hereinafter set forth, each share of Series A Preferred Stock shall be
convertible into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing the Face Value by the Conversion Price (as
defined in Section 11) at the option of the holder at any time after the Issue
Date and prior to the close of business on the day prior to the Redemption Date.
(b) Mechanics of Conversion. Any conversion by the holders of the
Series A Preferred Stock shall be in an aggregate amount with a Face Value equal
to at least $100,000 or all shares of Series A Preferred Stock of such holder.
Conversion of the Series A Preferred Stock may be effected by any such holder
upon the surrender to the Corporation at the principal office of the Corporation
in the State of Tennessee or at the office of any agent or agents of the
Corporation, as may be designated by the Board of Directors of the Corporation
(the "Transfer Agent"), of the certificate(s) for such Series A Preferred Stock
to be converted, accompanied by a
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written notice stating that such holder elects to convert all or a specified
whole number of such shares in accordance with the provisions of this Section 8
and specifying the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. In case any holder's
notice shall specify a name or names other than that of such holder, such notice
shall be accompanied by payment of all transfer taxes payable upon the issuance
of shares of Common Stock in such name or names and upon receipt of the opinion
referred to in Section 13.12 of the Securities Purchase Agreement. Other than
such taxes, the Corporation will pay any and all issue and other taxes (other
than taxes based on income) that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of Series A Preferred Stock
pursuant hereto. As promptly as practicable, and in any event within five
Business Days after the surrender of such certificate or certificates and the
receipt of such notice relating thereto and, if applicable, payment of all
transfer taxes (or the demonstration to the satisfaction of the Corporation that
such taxes have been paid), the Corporation shall deliver or cause to be
delivered (i) certificates representing the number of validly issued, fully paid
and nonassessable full shares of Common Stock, to which the holder of shares of
Series A Preferred Stock being converted shall be entitled and (ii) if less than
the full number of shares of Series A Preferred Stock evidenced by the
surrendered certificate or certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares being
converted. Such conversion shall be deemed to have been made at the close of
business on the date of giving such notice so that the rights of the holder
thereof as to the shares being converted shall cease except for the rights
pursuant to Section 8(c) to receive shares of Common Stock, in accordance
herewith, and the person entitled to receive the shares of Common Stock shall be
treated for all purposes as having become the record holder of such shares of
Common Stock at such time.
In case any shares of Series A Preferred Stock are to be redeemed
pursuant to Section 5, such right of conversion shall cease and terminate as to
the shares of Series A Preferred Stock to be redeemed at the close of business
on the Business Day preceding the date fixed for redemption unless the
Corporation shall default in the payment of the Redemption Price or the Change
of Control Price, as the case may be.
(c) Fractional Shares. In connection with the conversion of any
shares of Series A Preferred Stock into Common Stock, no fractions of shares of
Common Stock shall be issued, but in lieu thereof the Corporation shall pay a
cash adjustment in respect of such fractional interest in an amount equal to
such fractional interest multiplied by the Current Market Price per share of
Common Stock on the Trading Day on which such shares of Series A Preferred Stock
are deemed to have been converted. If more than one share of Series A Preferred
Stock shall be surrendered for conversion by the same holder at the same time,
the number of full shares of Common Stock issuable on conversion thereof shall
be computed on the basis of the total number of shares of Series A Preferred
Stock so surrendered. Promptly upon conversion, the Corporation shall pay to the
holder of shares of Series A Preferred Stock so converted out of funds legally
available, an amount equal to any accrued and unpaid dividends on the shares of
Series A Preferred Stock surrendered for conversion to the date of such
conversion, together with cash in lieu of any fractional interest of such
holder.
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(d) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available for issuance upon the conversion
of the Series A Preferred Stock, free from any preemptive rights, such number of
its authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Series A
Preferred Stock issued or issuable pursuant to the Securities Purchase Agreement
into Common Stock, and shall take all actions required to increase the
authorized number of shares of Common Stock if necessary to permit the
conversion of all outstanding shares of Series A Preferred Stock.
(e) Initial Conversion Price. (i) Subject to Sections 8(e)(ii) and
(e)(iii), the initial Conversion Price shall equal the lower of (A) $9.45 per
share or (B) the Current Market Price of the Common Stock during the 30
consecutive Trading Days prior to the Stockholders Meeting (as defined in the
Securities Purchase Agreement); provided that, the Conversion Price shall in no
event be less than $5.50 per share (the "Initial Conversion Price") (subject to
adjustment from time to time as provided in this section).
(ii) In the event the Corporation shall not have duly
called and convened a Stockholders Meeting (as defined in the Securities
Purchase Agreement) to consider and vote upon the Stock Issuance (as defined in
the Securities Purchase Agreement) within one year from the Closing Date, the
Initial Conversion Price shall equal the lower of (A) $9.45 per share or (B) the
Current Market Price of the Common Stock during the 30 consecutive Trading Days
immediately prior to January 26, 2000; provided, that the Initial Conversion
Price shall in no event be less than $5.50 per share (subject to adjustment from
time to time as provided in this section).
(iii) Notwithstanding any other provisions in this Section
8(e), at any time prior to the Stockholder Approval Date (as defined in the
Securities Purchase Agreement) the Initial Conversion Price shall in no event be
less than the price at which the maximum number of shares of Common Stock issued
or issuable upon conversion of the Series A Preferred Stock, together with
shares of Common Stock issued or issuable upon exercise of the Warrants, would
exceed the greater of (i) 711,241 shares (19.9% of the outstanding shares of
Common Stock of the Corporation as of the Closing Date) and (ii) 19.9% of the
outstanding shares of Common Stock of the Corporation, provided, however, that
if the Conversion Price is greater than the price that would be in effect but
for this sentence and, subsequently, the Company shall have obtained the
Stockholder Approval, the Initial Conversion Price shall be retroactively
recalculated as of the Stockholder Approval Date in accordance with paragraph
(e)(i) above.
(f) Adjustment to Conversion Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock. (i) In case the Corporation shall
at any time or from time to time after the Closing Date (A) pay a dividend, or
make a distribution, on the Outstanding shares of Common Stock in shares of
Common Stock, (B) subdivide the Outstanding shares of Common Stock, (C) combine
the Outstanding shares of Common Stock into a smaller number of shares or (D)
issue by reclassification of the shares of Common Stock any shares of capital
stock of the Corporation, then, and in each such case, the Conversion Price in
effect immediately prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the holder of any shares of Series A
Preferred Stock thereafter surrendered for conversion into Common Stock
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<PAGE> 12
shall be entitled to receive the number of shares of Common Stock or other
securities of the Corporation which such holder would have owned or have been
entitled to receive after the happening of any of the events described above,
had such shares of Series A Preferred Stock been surrendered for conversion
immediately prior to the happening of such event or the record date therefor,
whichever is earlier. An adjustment made pursuant to this clause (i) shall
become effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of such subdivision, reclassification or
combination, at the close of business on the day upon which such corporate
action becomes effective. No adjustment shall be made pursuant to this clause
(i) in connection with any transaction to which paragraph (h) applies.
(ii) In case the Corporation shall issue shares of Common
Stock (or rights, warrants or other securities convertible into or exchangeable
for shares of Common Stock) (collectively, "Additional Shares") after the
Closing Date at a price per share (or having a conversion price per share) less
than the greater of (A) the Current Market Price per share of Common Stock for
the period of 20 Trading Days preceding the earlier of the issuance or the
public announcement of the issuance of such shares of Common Stock and (B) the
Conversion Price as of the date of issuance of such shares (or, in the case of
convertible or exchangeable securities, less than the Conversion Price as of the
date of issuance of the rights, warrants or other securities in respect of which
shares of Common Stock were issued), then, and in each such case, the Conversion
Price shall be reduced so that the holder of each share of Series A Preferred
Stock shall be entitled to receive, upon the conversion thereof into Common
Stock, the number of shares of Common Stock determined by multiplying (A) the
Conversion Price in effect on the day immediately prior to such date by (B) a
fraction, the numerator of which shall be the sum of (1) the number of shares of
Common Stock Outstanding immediately prior to such sale or issue multiplied by
the greater of (a) the then applicable Conversion Price per share and (b) the
Current Market Price per share of Common Stock for the period of 20 Trading Days
preceding the earlier of the issuance or public announcement of the issuance of
such Additional Shares of Common Stock (the greater of (a) and (b) above
hereinafter referred to as the "Adjustment Price") and (2) the aggregate
consideration receivable by the Corporation for the total number of shares of
Common Stock so issued (or into of for which the rights, warrants or other
convertible securities may convert or be exercisable), and the denominator of
which shall be the sum of (x) the total number of shares of Common Stock
Outstanding immediately prior to such sale or issue and (y) the number of
Additional Shares issued (or into or for which the rights, warrants or
convertible securities may be converted or exercised), multiplied by the
Adjustment Price. An adjustment made pursuant to this clause (ii) shall be made
on the next Business Day following the date on which any such issuance is made
and shall be effective retroactively to the close of business on the date of
such issuance. For purposes of this clause (ii), the aggregate consideration
receivable by the Corporation in connection with the issuance of shares of
Common Stock or of rights, warrants or other securities convertible into shares
of Common Stock shall be deemed to be equal to the sum of the aggregate offering
price (before deduction of underwriting discounts or commissions and expenses
payable to third parties) of all such Common Stock, rights, warrants and
convertible securities plus the aggregate amount (as determined on the date of
issuance), if any, payable upon exercise or conversion of any such rights,
warrants and convertible securities
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into shares of Common Stock. If, subsequent to the date of issuance of such
right, warrants or other convertible securities, the exercise or conversion
price thereof is reduced, such aggregate amount shall be recalculated and the
Conversion Price adjusted retroactively to give effect to such reduction. If
Common Stock is sold as a unit with other securities, the aggregate
consideration received for such Common Stock shall be deemed to be net of the
Fair Market Value of such other securities. The issuance or reissuance of (i)
any shares of Common Stock or rights, warrants or other securities convertible
into shares of Common Stock (whether treasury shares or newly issued shares) (A)
pursuant to a dividend or distribution on, or subdivision, combination or
reclassification of, the Outstanding shares of Common Stock requiring an
adjustment in the Conversion Price pursuant to clause (i) of this paragraph (f);
(B) pursuant to any restricted stock or stock option plan or program of the
Corporation involving the grant of options or rights to acquire Common Stock to
directors, officers and employees of the Corporation and its Subsidiaries so
long as the granting of such options or rights has been approved by the full
Board of Directors or a committee of the Board of Directors on which the
director designated by the HCCP Group is a member; (C) pursuant to any option,
warrant, right, or convertible security outstanding as of the Closing Date or
the Corporation's Employee Stock Purchase Plan, as in effect on the date hereof,
or (ii) the Series A Preferred Stock, Warrants and any shares of Common Stock
issuable upon conversion or exercise thereof shall not be deemed to constitute
an issuance of Common Stock or convertible securities by the Corporation to
which this clause (ii) applies. Upon the expiration of any unexercised options,
warrants or rights to convert any convertible securities for which an adjustment
has been made pursuant to this clause (ii), the adjustments shall forthwith be
reversed to effect such rate of conversion as would have been in effect at the
time of such expiration or termination had such options, warrants or rights or
convertible securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued. No adjustment shall be made
pursuant to this clause (ii) in connection with any transaction to which
paragraph (h) applies.
(iii) In case the Corporation shall at any time or from
time to time after the Closing Date declare, order, pay or make a dividend or
other distribution (including, without limitation, any distribution of stock or
other securities or property or rights or warrants to subscribe for securities
of the Corporation or any of its Subsidiaries by way of dividend) on its Common
Stock, other than dividends or distributions of shares of Common Stock which are
referred to in clause (i) of this paragraph (f), then, and in each such case,
the Conversion Price shall be reduced so that the holder of each share of Series
A Preferred Stock shall be entitled to receive, upon the conversion thereof, the
number of shares of Common Stock determined by multiplying (1) the applicable
Conversion Price on the day immediately prior to the record date fixed for the
determination of stockholders entitled to receive such dividend or distribution
by (2) a fraction, the numerator of which shall be such Current Market Price of
the Common Stock for a period of 20 Trading Days preceding such record date less
the Fair Market Value (as defined in Section 11) per share of Common Stock, and
the denominator of which shall be such Current Market Price of the Common Stock
for a period of 20 Trading Days preceding such record date. No adjustment shall
be made pursuant to this clause (iii) in connection with any transaction to
which paragraph (h) applies or by reason of the issuance of stock purchase
rights under a stockholder rights plan adopted by the Company; provided that the
adjustments required by this
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clause (iii) shall be made if any "flip in" or "flip-over" event shall occur
under such stockholder rights plan not triggered by the holder hereof.
(iv) The term "dividend," as used in this paragraph (f),
shall mean a dividend or other distribution upon stock of the Corporation.
(v) Anything in this paragraph (f) to the contrary
notwithstanding, the Corporation shall not be required to give effect to any
adjustment in the Conversion Price (x) if such adjustment was previously taken
into account in determining the Conversion Price on the Issue Date, (y) if, in
connection with any event which would otherwise require an adjustment pursuant
to this paragraph (f), the holders of Series A Preferred Stock have received the
dividend or distribution to which such holders are entitled under Section 2
hereof or (z) unless and until the net effect of one or more adjustments (each
of which shall be carried forward), determined as above provided, shall have
resulted in a change of the Conversion Price such that the number of shares of
Common Stock receivable upon conversion of each share of Series A Preferred
Stock would differ by at least one one-hundredth of one share of Common Stock,
and when the cumulative net effect of more than one adjustment so determined
shall be to change the Conversion Price by at least one one-hundredth of one
share of Common Stock, such change in Conversion Price shall thereupon be given
effect.
(vi) The certificate of any firm of independent public
accountants of recognized national standing selected by the Board of Directors
of the Corporation (which may be the firm of independent public accountants
regularly employed by the Corporation) shall be presumptively correct for any
computation made under this paragraph (f).
(vii) If the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this
paragraph (f) or in the Conversion Price then in effect shall be required by
reason of the taking of such record.
(viii) If any event occurs as to which the provisions of
this Section 8(f) are not strictly applicable or if strictly applicable would
not fairly protect the rights of the holders of the Series A Preferred Stock in
accordance with the essential intent and principles of such provisions, the
Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such rights of the holders of the Series A Preferred Stock.
(g) Adjustment to Conversion Price for Changes in Current Market
Price. (i) Except with respect to the shares of Series A Preferred Stock which
have been converted or redeemed prior to June 30, 2001, if (A) the Initial
Conversion Price exceeds $8.00 per share and (B) during the period beginning on
the earlier of (x) June 30, 2000 and (y) the date twelve months after the
Stockholders Meeting and ending on June 30, 2001, the Current Market Price of
Common Stock per share does not exceed 225% of the Initial Conversion Price for
45
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consecutive Trading Days, the Conversion Price shall be reduced to $8.00
(subject to adjustment for the events set forth in paragraph (f) above).
(ii) Except with respect to the shares of Series A
Preferred Stock which have been converted or redeemed prior to June 30, 2001, if
(A) the Initial Conversion Price exceeds $8.00 per share and (B) during the
period beginning on the earlier of (x) June 30, 2000 and (y) the date twelve
months after the Stockholders Meeting and ending on June 30, 2001, the Current
Market Price of Common Stock per share is more than 225% but less than 250% of
the Initial Conversion Price for 45 consecutive Trading Days, the Conversion
Price shall be reduced to an amount equal to the product of the Initial
Conversion Price multiplied by a quotient, the numerator of which shall equal
the sum of (x) the Initial Conversion Price and (y) $8.00 and the denominator of
which shall be 2 (subject to adjustment for the events set forth in paragraph
(f) above).
(h) Adjustment to Conversion Price for Reclassification and
Reorganization. In the case of any consolidation or merger of the Corporation
with or into another corporation, or in case of any sale or conveyance to
another corporation of all or substantially all of the assets or property of the
Corporation (each of the foregoing being referred to as a "Transaction")
occurring in each case at any time, each share of Series A Preferred Stock then
outstanding shall thereafter be convertible into, in lieu of the Common Stock
issuable upon such conversion prior to consummation of such Transaction, the
kind and amount of shares of stock and other securities and property receivable
(including cash) upon the consummation of such Transaction by a holder of that
number of shares of Common Stock into which one share of Series A Preferred
Stock was convertible immediately prior to such Transaction. In case securities
or property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 8 shall be deemed
to apply, so far as appropriate and nearly as may be, to such other securities
or property.
(i) Notice of Record Date. In case at any time or from
time to time (i) the Corporation shall pay any stock dividend or make any other
non-cash distribution to the holders of its Common Stock, or offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class or any other right, or (ii) there shall be any capital
reorganization or reclassification of the Common Stock of the Corporation or
consolidation or merger of the Corporation with or into another corporation, or
any sale or conveyance to another corporation of the property of the Corporation
as an entirety or substantially as an entirety, or (iii) there shall be a
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, then, in any one or more of said cases the Corporation shall give
at least 20 days' prior written notice (the time of mailing of such notice shall
be deemed to be the time of giving thereof) to the registered holders of the
Series A Preferred Stock at the addresses of each as shown on the books of the
Corporation maintained by the Transfer Agent thereof of the date on which (A) a
record shall be taken for such stock dividend, distribution or subscription
rights or (B) such reorganization, reclassification, consolidation, merger, sale
or conveyance, dissolution, liquidation or winding up shall take place, as the
case may be; provided that, in the case of any Transaction to which paragraph
(h) applies the Corporation shall give at least 30 days' prior written notice as
aforesaid. Such notice shall also specify the date as of which the holders of
the Common Stock of record shall participate in said dividend, distribution or
subscription rights or shall be entitled to
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exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale or conveyance
or participate in such dissolution, liquidation or winding up, as the case may
be. Failure to give such notice shall not invalidate any action so taken.
SECTION 9. REPORTS AS TO ADJUSTMENTS.
Upon any adjustment of the Conversion Ratio then in effect and any
increase or decrease in the number of shares of Common Stock issuable upon the
operation of the conversion provisions set forth in Section 8, then, and in each
such case, the Corporation shall promptly deliver to the Transfer Agent of the
Series A Preferred Stock and Common Stock, a certificate signed by the President
or a Vice President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the Conversion Ratio then in
effect following such adjustment and the increased or decreased number of shares
issuable upon the conversion granted by Section 8, and shall set forth in
reasonable detail the method of calculation of each and a brief statement of the
facts requiring such adjustment. Where appropriate, such notice to holders of
the Series A Preferred Stock may be given in advance and included as part of the
notice required under the provisions of Section 8(i).
SECTION 10. CERTAIN COVENANTS.
Any registered holder of Series A Preferred Stock may proceed to
protect and enforce its rights and the rights of such holders by any available
remedy by proceeding at law or in equity to protect and enforce any such rights,
whether for the specific enforcement of any provision in this Certificate of
Designation or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
SECTION 11. DEFINITIONS.
For the purpose of this Certificate of Designation of Series A
Convertible Preferred Stock, the following terms shall have the meanings
indicated:
"Adjustment Period" shall mean the period of five consecutive
Trading Days preceding the date as of which the Fair Market Value of a
security is to be determined.
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
"Beneficially Own" or "Beneficial Owners" with respect to any
securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Exchange Act),
including pursuant to any agreement, arrangement or understanding,
whether or not in writing.
"Board of Directors" shall mean the board of directors of the
Corporation.
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"Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the States of New
York or Tennessee are authorized or obligated by law or executive order
to close.
"Capitalized Lease" shall mean, with respect to any person,
any lease or any other agreement for the use of property which, in
accordance with generally accepted accounting principles, should be
capitalized on the lessee's or user's balance sheet.
"Capitalized Lease Obligation" of any person shall mean and
include, as of any date as of which the amount thereof is to be
determined, the amount of the liability capitalized or disclosed (or
which should be disclosed) in a balance sheet of such person in respect
of a Capitalized Lease of such person.
"Change of Control" shall mean:
(a) a "person" or "Group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act) becoming, in a transaction or
series of related transactions, the Beneficial Owner of Voting
Securities entitled to exercise 50% or more of the total voting power
of all outstanding Voting Securities of the Corporation (including any
Voting Securities that are not then outstanding of which such person or
Group is deemed the Beneficial Owner) (the "Control Party"); or
(b) the acquisition of Beneficial Ownership of 20 percent
or more of the number of Voting Securities of the Corporation by any
Person or Group, together with contractual rights, which would enable
such Person or Group to prevent a merger, consolidation or sale of all
or substantially all of the assets or other sale of the Corporation; or
(c) individuals who at the beginning of any period of two
consecutive calendar years constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or
whose nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds of the members of the Board
of Directors then still in office who either were members of the Board
of Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the members of the Board of
Directors then in office; or
(d) sale of all or substantially all of the assets of the
Corporation.
"Closing Date" shall mean the date on which the closing of the
transactions contemplated by the Securities Purchase Agreement
occurred.
"Commission" shall mean the Securities and Exchange
Commission.
"Conversion Price" shall mean the Initial Conversion Price,
subject to adjustment as provided in Section 8.
-17-
<PAGE> 18
"Cross-Default" shall mean (i) the Corporation or any
Subsidiary (x) fails to make any payment in respect of any Indebtedness
having an aggregate principal amount (including undrawn committed or
available amounts and including amounts owing to all creditors under
any combined or syndicated credit arrangement) of more than $1,000,000
when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) and such failure continues after
the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure; or (y) fails to perform
or observe any other condition or covenant, or any other event shall
occur or condition exist, under any agreement or instrument relating to
any such Indebtedness, and such failure continues after the applicable
grace or notice period, if any, specified in the relevant document on
the date of such failure if the effect of such failure, event or
condition is to cause such Indebtedness to be declared to be due and
payable prior to its stated maturity, or collateral in respect thereof
to be demanded; or (ii) there occurs under any Swap Contract an early
Termination Date (as defined in and provided for in any such Swap
Contract that is in the form of an ISDA Master Agreement) or equivalent
termination event (as provided in any other Swap Contract) resulting
from (x) any event of default under such Swap Contract as to which the
Corporation or any Subsidiary is the Defaulting Party (as defined in
such Swap Contract) or (y) any Termination Event (as so defined in such
Swap Contract) as to which the Corporation or any Subsidiary is an
Affected Party (as so defined in such Swap Contract), and, in either
event, the Swap Termination Value owned by the Corporation or such
Subsidiary as a result thereof is greater than $1,000,000.
"Current Market Price," when used with reference to shares of
Common Stock or other securities on any date, shall mean the closing
sale price per share of Common Stock or such other securities on such
date and, when used with reference to shares of Common Stock or other
securities for any period shall mean the average of the daily closing
sale prices per share of Common Stock or such other securities for such
period. The closing price for each day shall be the closing sale price
in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System or such other
system then in use, or, if on any such date the Common Stock or such
other securities are not quoted by any such organization, the closing
sale price as furnished by a professional market maker making a market
in the Common Stock or such other securities selected by the Board of
Directors of the Corporation. If the Common Stock is listed or admitted
to trading on a national securities exchange, the closing price shall
be the closing sale price, regular way, as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the
Common Stock or such other securities are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the
Common Stock or such other securities are listed or admitted to
trading. If the Common Stock or such other securities are not publicly
held or so listed or publicly traded, "Current Market Price" shall mean
the Fair Market Value per share of Common Stock or of such other
securities as determined in good faith by the Board of Directors of the
Corporation based on an opinion of an
-18-
<PAGE> 19
independent investment banking firm acceptable to holders of a majority
of the shares of Series A Preferred Stock, which opinion may be based
on such assumptions as such firm shall deem to be necessary and
appropriate.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor Federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Securities
Exchange Act of 1934, as amended, shall include reference to the
comparable section, if any, of any such successor Federal statute.
"Face Value" with respect to the Series A Preferred Stock
shall mean $100.00 per share.
"Fair Market Value" shall mean, as to shares of Common Stock
or any other class of capital stock or securities of the Corporation or
any other issuer which are publicly traded, the average of the Current
Market Prices of such shares of securities for each day of the
Adjustment Period. The "Fair Market Value" of any security which is not
publicly traded or of any other property shall mean the fair value
thereof as determined by an independent investment banking or appraisal
firm experienced in the valuation of such securities or property
selected in good faith by the Board of Directors of the Corporation or
a committee thereof.
"HCCP Group" shall mean Health Care Capital Partners L.P., its
Affiliates and the general partners of its Affiliates.
"Guarantee" by any Person shall mean all obligations (other
than endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) of any Person guaranteeing, or
in effect guaranteeing, any Indebtedness, dividend or other obligation
of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, all obligations
incurred through an agreement, contingent or otherwise, by such Person:
(i) to purchase such Indebtedness or obligation or any property or
assets constituting security therefor, (ii) to advance or supply funds
(x) for the purchase or payment of such Indebtedness or obligation, (y)
to maintain working capital or other balance sheet condition or
otherwise to advance or make available funds for the purchase or
payment of such Indebtedness or obligation, (iii) to lease property or
to purchase securities or other property or services primarily for the
purpose of assuring the owner of such Indebtedness or obligation of the
ability of the primary obligor to make payment of such Indebtedness or
obligation, or (iv) otherwise to assure the owner of the Indebtedness
or obligation of the primary obligor against loss in respect thereof.
For the purposes of any computations made under this Agreement, a
Guarantee in respect of any Indebtedness for borrowed money shall be
deemed to be Indebtedness equal to the principal amount of the
Indebtedness for borrowed money which has been guaranteed, and a
Guarantee in respect of any other obligation or liability or any
dividend shall be deemed to be Indebtedness equal to the maximum
aggregate amount of such obligation, liability or dividend.
-19-
<PAGE> 20
"Indebtedness" shall mean, with respect to any person, (i) all
obligations of such person for borrowed money, or with respect to
deposits or advances of any kind, (ii) all obligations of such person
evidenced by bonds, debentures, notes or similar instruments (other
than performance bonds incurred in the normal course of business),
(iii) all obligations of such person under conditional sale or other
title retention agreements relating to property purchased by such
person, (iv) all obligations of such person issued or assumed as the
deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the
ordinary course of business and paid in a manner consistent with
industry practice), (v) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any lien or security interest on
property owned or acquired by such person whether or not the
obligations secured thereby have been assumed, (vi) all Capitalized
Lease Obligations of such person, (vii) all Guarantees of such person,
(viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the
account of such person, (ix) all obligations arising out of foreign
exchange contracts, and (x) all Swap Contracts.
"Initial Conversion Price" shall have the meaning as set forth
in Section 8(e)(i) and (e)(ii) hereof.
"Issue Date" shall mean the date of issuance of the shares of
Series A Preferred Stock upon conversion of the Notes.
"Junior Stock" shall mean any capital stock of the Corporation
ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Preferred Stock.
"Liquidation Preference" with respect to a share of Series A
Preferred Stock shall mean $100.00 per share (as adjusted for any stock
dividends, combinations or splits with respect to such share), plus an
amount equal to all accrued but unpaid dividends (whether or not
declared) on such share.
["Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, fully diluted shares of Common Stock (calculated as
prescribed by generally accepted accounting principles), except shares
then owned or held by or for the account of the Company or any
subsidiary thereof, and shall include all shares (i) issuable in
respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock and (ii) issuable in
respect of options or warrants to purchase, or securities convertible
into, shares of Common Stock.]
"Parity Stock" shall mean any capital stock of the Corporation
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock.
-20-
<PAGE> 21
"Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger
or otherwise) of such entity.
"Redeemable Common Stock" shall have the meaning in the
Securities Purchase Agreement.
"Registration Rights Agreement" shall mean the registration
rights agreement, dated as of the date hereof, among the Company and
the Purchasers.
"Securities Purchase Agreement" shall mean the securities
purchase agreement, dated as of January 26, 1999, among the
Corporation, Health Care Capital Partners L.P. and Health Care
Executive Partners L.P.
"Senior Indebtedness" shall mean and include, as of any date
as of which the amount thereof is to be determined, the principal of
and premium, if any, and interest due on (a) any Indebtedness arising
under the Revolving Credit Agreement (as defined in the Securities
Purchase Agreement) and (b) any amendments, renewals, extensions, and
refundings of any such Indebtedness.
"Subsidiary" of any Person means any corporation or other
entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such
Person.
"Swap Contract" shall mean any agreement whether or not in
writing, relating to any transaction that is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap or option, bond, note or bill option, interest rate
option, forward foreign exchange transaction, cap, collar or floor
transaction, currency swap, cross-currency rate swap, swaption,
currency option or any other similar transaction (including any option
to enter into any of the foregoing) or any combination of the
foregoing, and, unless the context otherwise clearly requires, any
master agreement relating to or governing any or all of the foregoing.
"Swap Termination Value" shall mean, in respect of any one or
more Swap Contracts, after taking into account the effect of any
legally enforceable netting agreement relating to such Swap Contracts,
(a) for any date on or after the date such Swap Contracts have been
closed out and termination value(s) determined in accordance therewith,
such termination value(s), and (b) for any date prior to the date
referenced in subclause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined by the
Corporation based upon one or more mid-market or other readily
available quotations provided by any recognized dealer in such Swap
Contracts.
"Trading Day" means a Business Day or, if the Common Stock is
listed or admitted to trading on any national securities exchange, a
day on which such exchange is open for the transaction of business.
"Voting Securities" shall mean at any time shares of any class
of capital stock of the Corporation which are then entitled to vote
generally in the election of directors.
-21-
<PAGE> 22
"Warrants" shall mean the Warrants issued pursuant to the
Securities Purchase Agreement and subject to the terms and conditions
(including adjustments pursuant to Section 4 thereof) of the Warrant
Agreement, dated the date hereof, among the Corporation, Health Care
Capital Partners L.P., and Health Care Executive Partners L.P.
-22-
<PAGE> 23
IN WITNESS WHEREOF, the officers named below, acting for and
on behalf of America Service Group Inc., have hereunto subscribed their names on
this 26th day of January, 1999.
AMERICA SERVICE GROUP INC.
By:
--------------------------------
Name: Michael Catalano
Title: President and Chief
Executive Officer
Attest:
By:
------------------------------
Name: Jean L. Byassee
Title: Senior Vice President,
General Counsel
and Secretary
-23-
<PAGE> 1
EXHIBIT 99.4
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT THE TRANSACTION PURSUANT TO WHICH THIS NOTE WILL BE
OFFERED FOR SALE OR OTHERWISE DISPOSED OF IS SUBJECT TO AN APPLICABLE EXEMPTION
TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
AMERICA SERVICE GROUP INC.
12% Subordinated Convertible Bridge Notes
due January 26, 2000
No. 1 Brentwood, TN
$14,404,000 January 26, 1999
AMERICA SERVICE GROUP INC. (the "Company"), a Delaware corporation, for
value received, hereby promises to pay to HEALTH CARE CAPTIAL PARTNERS L.P. or
its registered assigns, the principal amount of FOURTEEN MILLION FOUR-HUNDRED
AND FOUR THOUSAND AND 00/100 DOLLARS ($14,404,000) on January 26, 2000, with
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid balance of such principal amount at the rate of 12% per annum from
the date hereof, payable monthly, in arrears, on the last Business Day of each
month, until such unpaid balance shall become due and payable (whether at
maturity or at a date fixed for redemption or by declaration or otherwise).
Capitalized terms used herein and not otherwise defined herein shall have the
meanings set forth in the Securities Purchase Agreement, dated January 26, 1999,
among the Company, Health Care Capital Partners L.P. and Health Care Executive
Partners L.P. (the "Securities Purchase Agreement").
Except with respect to Default or Event of Default described in the
paragraph immediately below, from the date that a Default or Event of Default
shall have occurred and during the continuance of any Default or Event of
Default, the Company shall pay interest on the outstanding principal of, and
premium, if any, on this Note and (to the extent legally enforceable) on any
overdue installment of interest, if any, at the rate of 15% per annum until such
overdue amount is paid or until such Default or Event of Default is cured or
waived.
In the event of the failure of the Company to pay the principal of and
accrued and unpaid interest due on this Note at maturity or to comply with
Sections 6.19
<PAGE> 2
and 6.20 of the Securities Purchase Agreement, from the date that such Default
or Event of Default shall have occurred and during the continuance of such
Default or Event of Default, the monthly rate of interest on the outstanding
principal of this Note and (to the extent legally enforceable) on any overdue
installment of interest, if any, shall immediately increase 0.05% and shall
further increase by 0.05% on the first day of each succeeding month during which
such Default or Event of Default shall be continuing, but in no event shall the
monthly rate at which interest accrues in respect of indebtedness evidenced by
this Note exceed 1.5% per month; provided, however, such increase in interest
shall not commence until the maturity of this Note if the Company's failure to
obtain the Stockholder Approval with respect to the Stock Issuance is caused
solely by the failure of the holders of Common Stock representing a majority of
the shares of Common Stock (excluding shares Beneficially Owned by the
Purchasers) present and voting at a meeting duly called and convened in
accordance with Section 6.19 of the Securities Purchase Agreement to approve the
Stock Issuance and none of the conditions described in clauses (iii) through
(viii) of Section 8.3(b) of the Securities Purchase Agreement shall have
occurred and SESC shall not have withdrawn its Fairness Opinion.
All payments on this Note shall be made in lawful money of the United
States of America at the address specified by the holder hereof for such purpose
in the Securities Purchase Agreement, in the manner set forth in the Securities
Purchase Agreement.
Any interest on this Note that is not paid when due shall accrue and
compound monthly, to the extent permitted by applicable law.
This Note is one of the Company's 12% Subordinated Convertible Bridge
Notes due January 26, 2000 originally issued in the aggregate principal amount
of $15,000,000 pursuant to the Securities Purchase Agreement. The registered
holder of this Note is entitled to the benefits of such Securities Purchase
Agreement and may enforce the agreements of the Company contained therein and
exercise the remedies provided for thereby or otherwise available in respect
thereof.
This Note is convertible, upon the terms and subject to the conditions
specified in the Securities Purchase Agreement, into shares of Preferred Stock.
This Note, the indebtedness evidenced hereby and all amounts payable
hereunder or otherwise in respect of said indebtedness are expressly
subordinated to the extent and in the manner provided in Section 11 of the
Securities Purchase Agreement to all Senior Indebtedness (as defined therein) of
the Company.
<PAGE> 3
This Note is a registered Note and, as provided in the Securities
Purchase Agreement, is transferable only upon surrender of this Note for
registration of transfer, duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the registered holder hereof or his attorney duly
authorized in writing. The Company may treat the person in whose name this Note
is registered as the owner hereof for the purpose of receiving payment and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
This Note is subject to redemption, in whole or in part, all as
specified in the Securities Purchase Agreement.
In case a Default or Event of Default shall occur and be continuing,
the unpaid balance of the principal, interest and any other amounts payable on
this Note may be declared and become due and payable in the manner and with the
effect provided in the Securities Purchase Agreement.
THIS NOTE IS MADE AND DELIVERED IN NEW YORK, NEW YORK, AND SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
AMERICA SERVICE GROUP INC.
By:
-----------------------------------------
Name: Michael Catalano
Title: President and Chief
Executive Officer
<PAGE> 1
EXHIBIT 99.5
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT THE TRANSACTION PURSUANT TO WHICH THIS NOTE WILL BE
OFFERED FOR SALE OR OTHERWISE DISPOSED OF IS SUBJECT TO AN APPLICABLE EXEMPTION
TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
AMERICA SERVICE GROUP INC.
12% Subordinated Convertible Bridge Notes
due January 26, 2000
No. 2 Brentwood, TN
$596,000 January 26, 1999
AMERICA SERVICE GROUP INC. (the "Company"), a Delaware corporation, for
value received, hereby promises to pay to HEALTH CARE EXECUTIVE PARTNERS L.P. or
its registered assigns, the principal amount of FIVE-HUNDRED AND NINETY-SIX
THOUSAND AND 00/100 DOLLARS ($596,000) on January 26, 2000, with interest
(computed on the basis of a 360-day year of twelve 30-day months) on the unpaid
balance of such principal amount at the rate of 12% per annum from the date
hereof, payable monthly, in arrears, on the last Business Day of each month,
until such unpaid balance shall become due and payable (whether at maturity or
at a date fixed for redemption or by declaration or otherwise). Capitalized
terms used herein and not otherwise defined herein shall have the meanings set
forth in the Securities Purchase Agreement, dated January 26, 1999, among the
Company, Health Care Capital Partners L.P. and Health Care Executive Partners
L.P. (the "Securities Purchase Agreement").
Except with respect to Default or Event of Default described in the
paragraph immediately below, from the date that a Default or Event of Default
shall have occurred and during the continuance of any Default or Event of
Default, the Company shall pay interest on the outstanding principal of, and
premium, if any, on this Note and (to the extent legally enforceable) on any
overdue installment of interest, if any, at the rate of 15% per annum until such
overdue amount is paid or until such Default or Event of Default is cured or
waived.
In the event of the failure of the Company to pay the principal of and
accrued and unpaid interest due on this Note at maturity or to comply with
Sections 6.19
<PAGE> 2
and 6.20 of the Securities Purchase Agreement, from the date that such Default
or Event of Default shall have occurred and during the continuance of such
Default or Event of Default, the monthly rate of interest on the outstanding
principal of this Note and (to the extent legally enforceable) on any overdue
installment of interest, if any, shall immediately increase 0.05% and shall
further increase by 0.05% on the first day of each succeeding month during which
such Default or Event of Default shall be continuing, but in no event shall the
monthly rate at which interest accrues in respect of indebtedness evidenced by
this Note exceed 1.5% per month; provided, however, such increase in interest
shall not commence until the maturity of this Note if the Company's failure to
obtain the Stockholder Approval with respect to the Stock Issuance is caused
solely by the failure of the holders of Common Stock representing a majority of
the shares of Common Stock (excluding shares Beneficially Owned by the
Purchasers) present and voting at a meeting duly called and convened in
accordance with Section 6.19 of the Securities Purchase Agreement to approve the
Stock Issuance and none of the conditions described in clauses (iii) through
(viii) of Section 8.3(b) of the Securities Purchase Agreement shall have
occurred and SESC shall not have withdrawn its Fairness Opinion.
All payments on this Note shall be made in lawful money of the United
States of America at the address specified by the holder hereof for such purpose
in the Securities Purchase Agreement, in the manner set forth in the Securities
Purchase Agreement.
Any interest on this Note that is not paid when due shall accrue and
compound monthly, to the extent permitted by applicable law.
This Note is one of the Company's 12% Subordinated Convertible Bridge
Notes due January 26, 2000 originally issued in the aggregate principal amount
of $15,000,000 pursuant to the Securities Purchase Agreement. The registered
holder of this Note is entitled to the benefits of such Securities Purchase
Agreement and may enforce the agreements of the Company contained therein and
exercise the remedies provided for thereby or otherwise available in respect
thereof.
This Note is convertible, upon the terms and subject to the conditions
specified in the Securities Purchase Agreement, into shares of Preferred Stock.
This Note, the indebtedness evidenced hereby and all amounts payable
hereunder or otherwise in respect of said indebtedness are expressly
subordinated to the extent and in the manner provided in Section 11 of the
Securities Purchase Agreement to all Senior Indebtedness (as defined therein) of
the Company.
<PAGE> 3
This Note is a registered Note and, as provided in the Securities
Purchase Agreement, is transferable only upon surrender of this Note for
registration of transfer, duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the registered holder hereof or his attorney duly
authorized in writing. The Company may treat the person in whose name this Note
is registered as the owner hereof for the purpose of receiving payment and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
This Note is subject to redemption, in whole or in part, all as
specified in the Securities Purchase Agreement.
In case a Default or Event of Default shall occur and be continuing,
the unpaid balance of the principal, interest and any other amounts payable on
this Note may be declared and become due and payable in the manner and with the
effect provided in the Securities Purchase Agreement.
THIS NOTE IS MADE AND DELIVERED IN NEW YORK, NEW YORK, AND SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
AMERICA SERVICE GROUP INC.
By:
-----------------------------------------
Name: Michael Catalano
Title: President and Chief
Executive Officer
<PAGE> 1
EXHIBIT 99.6
WARRANT
To Purchase Shares of Common Stock of
AMERICA SERVICE GROUP INC.
Warrant No. 1
No. of Shares of Common Stock: 129,640
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
1. DEFINITIONS...........................................................................................1
2. EXERCISE OF WARRANT...................................................................................7
2.1. Manner of Exercise...........................................................................7
2.2. Payment of Taxes.............................................................................8
2.3. Fractional Shares............................................................................8
3. TRANSFER, DIVISION AND COMBINATION....................................................................8
3.1. Transfer.....................................................................................8
3.2. Division and Combination.....................................................................9
3.3. Expenses.....................................................................................9
3.4. Maintenance of Books.........................................................................9
4. ADJUSTMENTS...........................................................................................9
4.1. Current Warrant Price........................................................................9
4.2. Stockholder Approval Failure; Payment Default; NASDAQ
Approval Failure.............................................................................10
4.3. Stock Dividends, Subdivisions and Combinations...............................................11
4.4. Certain Other Distributions..................................................................11
4.5. Issuance of Additional Shares of Common Stock................................................12
4.6. Issuance of Warrants or Other Rights.........................................................13
4.7. Issuance of Convertible Securities...........................................................14
4.8. Superseding Adjustment.......................................................................15
4.9. Other Provisions Applicable to Adjustments under this Section................................16
4.10. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets.............18
4.11. Other Action Affecting Common Stock..........................................................19
4.12. Certain Limitations..........................................................................19
5. NOTICES TO WARRANT HOLDERS............................................................................19
5.1. Notice of Adjustments; Change in Warrant Status..............................................19
5.2. Notice of Corporate Action...................................................................20
6. RIGHTS OF HOLDERS.....................................................................................21
6.1. No Impairment................................................................................21
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL OF ANY
GOVERNMENTAL AUTHORITY................................................................................21
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS....................................................22
9. RESTRICTIONS ON TRANSFERABILITY.......................................................................22
9.1. Restrictive Legend...........................................................................22
9.2. Registration Rights..........................................................................22
10. LOSS OR MUTILATION....................................................................................22
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
11. LIMITATION OF LIABILITY...............................................................................23
12. MISCELLANEOUS.........................................................................................23
12.1. Nonwaiver and Expenses.......................................................................23
12.2. Notice Generally.............................................................................23
12.3. Remedies.....................................................................................24
12.4. Successors and Assigns.......................................................................24
12.5. Amendment....................................................................................24
12.6. Severability.................................................................................24
12.7. Headings.....................................................................................24
12.8. Governing Law................................................................................25
SIGNATURES.....................................................................................................26
EXHIBITS
Exhibit A.............................................................................................A-1
Exhibit B.............................................................................................B-1
</TABLE>
-ii-
<PAGE> 4
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT THE TRANSACTION
PURSUANT TO WHICH SUCH WARRANT OR SECURITIES WILL BE OFFERED FOR SALE OR
OTHERWISE DISPOSED OF IS SUBJECT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
No. of Shares of Common Stock: 129,640 Warrant No. 1
WARRANT
To Purchase Shares of Common Stock of
AMERICA SERVICE GROUP INC.
THIS IS TO CERTIFY THAT HEALTH CARE CAPITAL PARTNERS L.P. ("HCCP"), or
its registered assigns, is entitled, at any time prior to the Expiration Date
(as hereinafter defined), to purchase from America Service Group Inc., a
Delaware corporation (the "Company"), 129,640 shares of Common Stock (as
hereinafter defined and subject to adjustment as provided herein), in whole or
in part, at the Current Warrant Price (as hereinafter defined), all on the terms
and conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than Warrant Stock.
"Adjustment Period" shall mean the period of five consecutive Trading
Days preceding the date as of which the Fair Market Value of a security is to be
determined.
<PAGE> 5
"Board of Directors" shall mean the board of directors of the Company.
"Business Day" shall mean any day other than a Saturday or Sunday or a
day on which banking institutions in the States of New York or Tennessee are
authorized or obligated by law or executive order to close.
"Certificate of Designation" shall mean the Certificate of Designation
establishing the Preferred Stock, dated as of the Closing Date.
"Change of Control" shall mean:
(a) a "person" or "Group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act) becoming, in a transaction or
series of related transactions, the Beneficial Owner of Voting
Securities entitled to exercise 50% or more of the total voting power
of all outstanding Voting Securities of the Company (including any
Voting Securities that are not then outstanding of which such person or
Group is deemed the Beneficial Owner) (the "Control Party"); or
(b) the acquisition of Beneficial Ownership of 20 percent
or more of the number of Voting Securities of the Company by any Person
or Group, together with contractual rights, which would enable such
Person or Group to prevent a merger, consolidation or sale of all or
substantially all of the assets or other sale of the Company; or
(c) individuals who at the beginning of any period of two
consecutive calendar years constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or
whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the Board
of Directors then still in office who either were members of the Board
of Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the members of the Board of
Directors then in office; or
(d) sale of all or substantially all of the assets of the
Company.
"Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement.
"Commission" shall mean the Securities and Exchange Commission.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $.01 par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how
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<PAGE> 6
denominated) issued to the holders of shares of Common Stock upon any
reclassification thereof which is not preferred as to dividends or assets over
any other class of stock of the Company and which is not subject to redemption
and (ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.10) received by or distributed to the holders of Common
Stock of the Company in the circumstances contemplated by Section 4.10.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable or
exercisable, with or without payment of additional consideration in cash or
property, for Additional Shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Market Price" when used with reference to shares of Common
Stock or other securities on any date, shall mean the closing sale price per
share of Common Stock or such other securities on such date and, when used with
reference to shares of Common Stock or other securities for any period shall
mean the average of the daily closing sale prices per share of Common Stock or
such other securities for such period. The closing price for each day shall be
the closing sale price in the over-the-counter market, as reported by the Nasdaq
Stock Market or such other system then in use, or, if on any such date the
Common Stock or such other securities are not quoted by any such organization,
the closing sale price as furnished by a professional market maker making a
market in the Common Stock or such other securities selected by the Board of
Directors of the Company. If the Common Stock is listed or admitted to trading
on a national securities exchange, the closing price shall be the closing sale
price, regular way, as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Common Stock or such other securities are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Stock
or such other securities are listed or admitted to trading. If the Common Stock
or such other securities are not publicly held or so listed or publicly traded,
"Current Market Price" shall mean the Fair Market Value per share of Common
Stock or of such other securities as determined in good faith by the Board of
Directors of the Company based on an opinion of an independent investment
banking firm acceptable to holders of a majority of the Warrants, which opinion
may be based on such assumptions as such firm shall deem to be necessary and
appropriate.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date or the price per share
which shall equal the Initial Warrant Price, subject to adjustments as provided
herein.
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<PAGE> 7
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include reference to the comparable section, if any, of such
successor Federal statute.
"Expiration Date" shall mean a date which is seven years from the
issuance of this Warrant.
"Fair Market Value" shall mean, as to shares of Common Stock or any
other class of capital stock or securities of the Company or any other issuer
which are publicly traded, the average of the Current Market Prices of such
shares of securities for each day of the Adjustment Period. The "Fair Market
Value" of any security which is not publicly traded or of any other property
shall mean the fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of such securities or
property selected in good faith by the Board of Directors of the Company or a
committee thereof and acceptable to the Majority Holders.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, (i) all shares of Common Stock outstanding at such date and (ii) all
shares of Common Stock issuable in respect of this Warrant, and other options or
warrants to purchase, or securities convertible into, shares of Common Stock
outstanding on such date, the exercise or conversion price of which is less than
the Current Market Price on such date.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"HCCP Group" shall mean Health Care Capital Partners L.P., its
Affiliates and the general partner of HCCP and its Affiliates.
"Holder" shall mean the Person in whose name this Warrant is registered
on the books of the Company maintained for such purpose. "Holders" shall mean,
collectively, each Holder of a Warrant, in the event of any division of this
Warrant.
"Initial Warrant Price" shall mean in respect of a share of Common
Stock, the price at which a share of Common Stock may initially be purchased
pursuant to this Warrant, which shall equal to the lower of (a) $9.45 per share,
or (b) the Current Market Price of a share of the Common Stock during the thirty
consecutive Trading Days prior to the Stockholders Meeting (as defined in the
Securities Purchase Agreement); provided, that such price shall in no event be
less than $5.50 per share (subject to adjustment from time to time as provided
herein). Notwithstanding the foregoing, at any time prior to the Stockholder
Approval Date, the Initial Warrant Price shall in no event be less than the
price at which the maximum number of shares of Common Stock issued or issuable
upon
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<PAGE> 8
conversion of the Preferred Stock, together with shares of Common Stock issued
or issuable upon conversion of the Warrants, would exceed the greater of (i)
711,241 shares of Common Stock (19.9% of the outstanding shares of Common Stock
of the Company) and (ii) 19.9% of the shares of Common Stock of the Company then
outstanding; provided, however, that if the Initial Warrant Price is greater
than the price that would be in effect but for this sentence and, subsequently,
the Company shall have obtained the Stockholder Approval, the Initial Warrant
Price shall be retroactively recalculated in accordance with the first sentence
of this definition of the "Initial Warrant Price."
"Majority Holders" shall mean the holders of Warrants exercisable for
in excess of 50% of the aggregate number of shares of Warrant Stock then
purchasable upon exercise of all Warrants.
"Notes" shall mean the 12% Subordinated Convertible Bridge Notes due
January 26, 2000, purchased by HCCP and HCEP pursuant to the Securities Purchase
Agreement and convertible into Preferred Stock.
"Other Property" shall have the meaning set forth in Section 4.10.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, fully
diluted shares of Common Stock (calculated as prescribed by generally accepted
accounting principles), except shares then owned or held by or for the account
of the Company or any subsidiary thereof, and shall include all shares (i)
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock and (ii) issuable in respect of
options or warrants to purchase, or securities convertible into, shares of
Common Stock.
"Permitted Issuances" shall mean the issuance or reissuance of (a) any
shares of Common Stock or rights, warrants or other securities convertible into
shares of Common Stock (whether treasury shares or newly issued shares) (i)
pursuant to a dividend or distribution on, or subdivision, combination or
reclassification of, the outstanding shares of Common Stock requiring an
adjustment in the Current Warrant Price pursuant to Section 4.3; (ii) pursuant
to any restricted stock or stock option plan or program of the Company involving
the grant of options or rights to acquire Common Stock to directors, officers
and employees of the Company and its Subsidiaries pursuant to the Company's
Employee Stock Purchase Plan so long as the granting of such options or rights
has been approved by the full Board of Directors or a committee of the Board of
Directors on which a director designated by the HCCP Group is a member; (iii)
pursuant to any option, warrant, right, or convertible security outstanding as
of the date hereof, or (b) the Series A Preferred Stock, the Warrants and any
shares of Common Stock issuable upon conversion or exercise thereof.
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<PAGE> 9
"Person" shall mean any individual, firm, corporation, partnership or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
"Preferred Stock" shall mean the Company's Series A Convertible
Preferred Stock, par value $.01.
"Registration Rights Agreement" shall mean the registration rights
agreement, dated as of the Closing Date, among the Company, HCCP and HCEP.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" shall mean the securities purchase
agreement, dated as of January 26, 1999, among the Company, HCCP and HCEP.
"Stockholder Approval" shall have the meaning assigned to it in the
Securities Purchase Agreement
"Stockholder Approval Date" shall have the meaning assigned to it in
the Securities Purchase Agreement.
"Stock Issuance" shall have the meaning assigned to it in the
Securities Purchase Agreement.
"Trading Day" means a Business Day or, if the Common Stock is listed or
admitted to trading on any national securities exchange, a day on which such
exchange is open for the transaction of business.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Warrants" shall mean this Warrant (as adjusted pursuant to Section 4)
and all warrants issuable upon transfer, division or combination of, or in
substitution for, any thereof. All Warrants shall at all times be identical as
to terms and conditions and date, except as to the number of shares of Common
Stock for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
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<PAGE> 10
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) At any time or from time to time from
and after the Closing Date and until 5:00 P.M., New York time, on the Expiration
Date, Holder may exercise this Warrant, on any Business Day, for all or any part
of the number of shares of Common Stock purchasable hereunder.
(b) In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at 105 Westpark Drive,
Suite 300, Brentwood, Tennessee 37027 (i) a written notice of Holder's election
to exercise this Warrant, which notice shall specify the number of shares of
Common Stock to be purchased; (ii) payment of the Warrant Price; and (iii) this
Warrant. Such notice shall be substantially in the form appearing at the end of
this Warrant as Exhibit A, duly executed by Holder.
(c) As promptly as practicable, and in no event later than five
Business Days after the receipt of the items specified in paragraph (b) of this
Section 2.1, the Company shall execute or cause to be executed and deliver or
cause to be delivered to Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share, as hereinafter provided.
The stock certificate or certificates so delivered shall be in such denomination
or denominations as Holder shall request in the notice and shall be registered
in the name of Holder or, subject to Section 9, such other name as shall be
designated in the notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
Holder or any other Person so designated shall be deemed to have become a holder
of record of such shares for all purposes, as of the date the notice, together
with the Warrant Price and this Warrant, are received by the Company as
described above. If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
Warrant Stock, deliver to Holder a new Warrant evidencing the right of Holder to
purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant,
or, at the request of Holder, appropriate notation may be made on this Warrant
and the same returned to Holder.
(d) Payment of the Warrant Price shall be made at the option of
Holder (i) by certified or official bank check or (ii) by the surrender of this
Warrant to the Company, with a duly executed exercise notice marked to reflect
"Net Issue Exercise," and, in either case, specifying the number of shares of
Common Stock to be purchased, during normal business hours on any Business Day.
Upon a Net Issue Exercise, Holder shall be entitled to receive shares of Common
Stock equal to the value of this Warrant (or the portion thereof being exercised
by Net Issue Exercise) by surrender of this Warrant to the Company together with
notice of such election, in which event the Company shall
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<PAGE> 11
issue to Holder a number of shares of the Company's Common Stock computed as of
the date of surrender of this Warrant to the Company using the following
formula:
X = Y x (A - B)
-----------
A
Where X = the number of shares of Common Stock to be issued to Holder;
Y = the number of shares of Common Stock otherwise purchasable
under this Warrant (at the date of such calculation);
A = the Current Market Price of one share of the Company's Common
Stock (at the date of such calculation);
B = the Current Warrant Price (as adjusted to the date of such
calculation).
2.2 Payment of Taxes. All shares of Common Stock issuable upon the
exercise of this Warrant shall be validly issued, fully paid and nonassessable
and without any preemptive rights. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof.
2.3. Fractional Shares. The Company shall not be required to issue
a fractional share of Common Stock upon exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of exercise.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 9, transfer of
this Warrant and all rights hereunder, in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1,
together with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by Holder and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be canceled. A Warrant, if properly
assigned in compliance with Section 9, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new Warrant issued.
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<PAGE> 12
3.2. Division and Combination. Subject to Section 9, this Warrant
may be divided into multiple Warrants or combined with other Warrants upon
presentation hereof at the aforesaid office or agency of the Company, together
with a written notice specifying the names and denominations in which new
Warrants are to be issued, signed by Holder. Subject to compliance with Section
3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at its
own expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at its
aforesaid office, books for the registration and the registration of transfer of
the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable and/or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at the
time of such event.
4.1. Current Warrant Price. Unless the Company shall have redeemed
or converted all of the outstanding Notes, subject to adjustment as set forth in
other provisions of this Section 4, the Current Warrant Price shall be decreased
by $1.00 on the last Business Day of each month, commencing July 31, 1999
through and including December 31, 1999; provided, that the Current Warrant
Price shall never be less than the par value per share of Common Stock; and
provided, further, that at any time prior to the Stockholder Approval Date, the
Initial Warrant Price shall in no event be less than the price at which the
maximum number of shares of Common Stock issued or issuable upon conversion of
the Preferred Stock, together with shares of Common Stock issued or issuable
upon exercise of the Warrants, would exceed the greater of (a) 711,241 shares of
Common Stock (19.9% of the outstanding shares of Common Stock of the Company)
and (b) 19.9% of the outstanding shares of Common Stock of the Company.
4.2. Stockholder Approval Failure; Payment Default; NASDAQ Approval
Failure. Notwithstanding Section 4.1, in the event that:
(a) the Corporation shall (i) fail to obtain the Stockholder
Approval with respect to the Stock Issuance on or before July 26, 1999, (ii)
fail to convene the Stockholders Meeting on or before July 26, 1999, (iii)
withdraw or modify its approval or recommendation of the Stock Issuance in any
manner adverse to HCCP, its Affiliates or the general partner of its Affiliates,
(iv) fail to reaffirm such approval or recommendation
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<PAGE> 13
within 5 days following receipt of written request for such reaffirmation from
the HCCP, its Affiliates or the general partner of its Affiliates, (v) fail to
obtain the reaffirmation of the Fairness Opinion (as defined in the Securities
Purchase Agreement) in connection with the mailing of the Proxy Statement (as
defined in the Securities Purchase Agreement), (vi) fail to obtain NASDAQ
Approval (as such term is defined in the Securities Purchase Agreement) within
30 days after the Stockholder Approval, (vii) resolve to take any of the actions
specified in clauses (a)(i) through (a)(vi) above, or (viii) fail to pay the
principal amount of and accrued and unpaid interest due, if any, on the Notes at
maturity, or
(b) (i) a Change of Control; (ii) the Maturity Date of the Notes
shall occur; or (iii) notice of redemption of the Notes shall be given, and on
any such date the Notes may not be converted, at the election of the Company,
into shares of Preferred Stock,
then the Current Warrant Price shall be reduced to $.01 per share;
provided, however, that the Current Warrant Price shall not be adjusted as
provided in this Section 4.2 as a result of the occurrence of the condition
described in clause (a)(i) if (A) the holders of Common Stock representing a
majority of the shares of Common Stock present and voting at a meeting duly
called and convened in accordance with Section 6.19 of the Securities Purchase
Agreement to approve the Stock Issuance (as defined in the Securities Purchase
Agreement) for reasons other than those described in clauses (a)(ii) through
(a)(vi) of this Section 4.2 do not approve the Stock Issuance (a "Stockholders
Rejection") and (B) prior to the Stockholder Rejection, none of the events
described in clauses (a)(ii) through (vi) above or paragraph (b) above shall
have occurred. Notwithstanding the foregoing, at any time prior to the
Stockholder Approval Date, the Initial Warrant Price shall in no event be less
than the price at which the maximum number of shares of Common Stock issued or
issuable upon conversion of the Preferred Stock, together with shares of Common
Stock issued or issuable upon exercise of the Warrants, would exceed the greater
of (i) 711,241 shares of Common Stock (19.9% of the outstanding shares of Common
Stock of the Company) and (ii) 19.9% of the outstanding shares of Common Stock
of the Company; provided, however, that if the Current Warrant Price is greater
than the price that would be in effect but for this sentence and, subsequently,
the Company shall have obtained the Stockholder Approval, the Initial Warrant
Price shall be retroactively recalculated as of the Stockholder Approval Date in
accordance with Sections 4.1 and 4.2 above.
4.3. Stock Dividends, Subdivisions and Combinations. In case the
Company shall at any time or from time to time:
(a) pay a dividend, or make a distribution, on its outstanding
Common Stock in Additional Shares of Common Stock,
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(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then and in each such case, (i) the number of shares of Common Stock for which
this Warrant is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock which a record
holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (ii) the Current
Warrant Price per share shall be adjusted to equal (A) the Current Warrant Price
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such adjustment.
4.4. Certain Other Distributions. In case the Company shall at any time
or from time to time after the issuance of this Warrant declare, order, pay or
make a dividend or other distribution on its Common Stock of:
(a) cash,
(b) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever by
way of dividend (other than cash, Convertible Securities or Additional
Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such adjustment
multiplied by a fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock for the period of 20 Trading Days preceding such
record (the "Period") and (B) the denominator of which shall be such Current
Market Price per share of Common Stock for the Period less the Fair Market Value
per share of Common Stock of any such dividend or distribution and (ii) the
Current Warrant Price shall be adjusted to equal (A) the Current Warrant Price
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such adjustment.
A reclassification of the Common Stock (other than a reduction in par value, or
from par
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<PAGE> 15
value to no par value) into shares of Common Stock and shares of any other class
of stock shall be deemed a distribution by the Company to the holders of its
Common Stock of such shares of such other class of stock within the meaning of
this Section 4.4 and, if the outstanding shares of Common Stock shall be changed
into a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.3. Notwithstanding the foregoing, no adjustment shall be required
under this Section 4.4 solely by reason of the issuance of stock purchase rights
under a stockholder rights plan of the Company, provided that the adjustments
required by this Section 4.4 shall be made if any "flip-in" or "flip-over" event
shall occur under such stockholder rights plan not triggered by the holder
hereof.
4.5. Issuance of Additional Shares of Common Stock. If at any time
the Company shall (except as hereinafter provided) issue or sell any Additional
Shares of Common Stock, other than Permitted Issuances, in exchange for
consideration in an amount per Additional Share of Common Stock less than the
greater of (1) the Current Market Price per share of Common Stock for the period
of 20 Trading Days preceding the earlier of the issuance or public announcement
of the issuance of such Additional Shares of Common Stock and (2) the Current
Warrant Price at the time the Additional Shares of Common Stock are issued, then
(i) the Current Warrant Price as to the number of shares for which this Warrant
is exercisable prior to such adjustment shall be reduced to a price determined
by multiplying the Current Warrant Price by (A) a fraction, the numerator of
which shall be the sum of (x) the number of shares of Common Stock Outstanding
immediately prior to such issue or sale multiplied by the greater of (1) the
then applicable Current Warrant Price and (2) the Current Market Price per share
of Common Stock for the period of 20 Trading Days preceding the earlier of the
issuance or public announcement of the issuance of such Additional Shares of
Common Stock (the greater of (1) and (2) above hereinafter referred to as the
"Adjustment Price") and (y) the aggregate consideration receivable by the
Company for the total number of shares of Common Stock so issued (or into or for
which the rights, warrants or other Convertible Securities may convert or be
exercisable), and the denominator of which shall be the sum of (a) the total
number of shares of Common Stock Outstanding on such date and (b) the number of
Additional Shares issued (or into or for which the rights, warrants or
convertible securities may be converted or exercised), multiplied by the
Adjustment Price; and (ii) the number of shares of Common Stock for which this
Warrant is exercisable shall be adjusted to equal the product obtained by
multiplying the Current Warrant Price in effect immediately prior to such issue
or sale by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such issue or sale and dividing the product
thereof by the Current Warrant Price resulting from the adjustment made pursuant
to clause (i) above. For purposes of this Section 4.5 and for the purposes of
making adjustments of the number of shares of Common Stock for which this
Warrant is exercisable and the Current Price as provided in this Section 4, the
aggregate consideration receivable by the Company in connection with the
issuance of shares of
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<PAGE> 16
Common Stock or of rights, warrants or other securities convertible into shares
of Common Stock shall be deemed to be equal to the sum of the aggregate offering
price (before deduction of underwriting discounts or commissions and expenses
payable to third parties) of all such Common Stock, rights, warrants and
convertible securities plus the aggregate amount (as determined on the date of
issuance), if any, payable upon exercise or conversion of any such rights,
warrants and convertible securities into shares of Common Stock. If, subsequent
to the date of issuance of such rights, warrants or Convertible Securities, the
exercise or conversion price thereof is reduced, such aggregate amount shall be
recalculated and the Current Warrant Price and number of shares of Common Stock
for which the Warrant is exercisable adjusted retroactively to give effect to
such reduction. If Common Stock is sold as a unit with other securities, the
aggregate consideration received for such Common Stock shall be deemed to be net
of the Fair Market Value of such other securities.
4.6. Issuance of Warrants or Other Rights. If at any time the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or (other than Permitted
Issuances) shall in any manner (whether directly or by assumption in a merger in
which the Company is the surviving corporation) issue or sell, any warrants or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Warrants or other rights or upon
conversion or exchange of such Convertible Securities shall be less than the
greater of (1) the Current Market Price per share of Common Stock for the period
of 20 Trading Days preceding the earlier of the issuance or public announcement
of the issuance of such Additional Shares of Common Stock, warrants or other
rights and (2) the Current Warrant Price in effect immediately prior to the time
of such issue or sale, then the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be adjusted as provided in
Section 4.5 on the basis that the maximum number of Additional Shares of Common
Stock issuable pursuant to all such warrants or other rights or necessary to
effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and outstanding and the Company shall have received
all of the consideration payable therefor, if any, as of the date of the actual
issuance of the number of shares for which this Warrant is exercisable and such
warrants or other rights. No further adjustments of the Current Warrant Price
shall be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such warrants or other rights or upon the actual
issue of such Common Stock upon such conversion or exchange of such Convertible
Securities. Notwithstanding the foregoing, no adjustment shall be required under
this Section 4.6 solely by reason of the issuance of stock purchase rights under
a stockholder rights plan of the Company, provided that the adjustments required
by this Section 4.6 shall be made if any "flip-in" or "flip-over" event shall
occur under such stockholder rights plan not triggered by the holder hereof.
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<PAGE> 17
4.7. Issuance of Convertible Securities. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or (other than Permitted Issuances)
shall in any manner (whether directly or by assumption in a merger in which the
Company is the surviving corporation) issue or sell, any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange shall be less than the greater of (a) the Current
Market Price per share of Common Stock for the period of 20 Trading Days
preceding the earlier of the issuance or public announcement of the issuance of
such Convertible Securities and (b) the Current Warrant Price in effect
immediately prior to the time of such issue or sale, then the number of shares
for which this Warrant is exercisable and the Current Warrant Price shall be
adjusted as provided in Section 4.5 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.7
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.6. No further adjustments of the
number of shares for which this Warrant is exercisable and the Current Warrant
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities and, if any issue or sale of such
Convertible Securities is made upon exercise of any warrant or other right to
subscribe for or to purchase any such Convertible Securities for which
adjustments of the number of shares for which this Warrant is exercisable and
the Current Warrant Price have been or are to be made pursuant to other
provisions of this Section 4, no further adjustments of the number of shares for
which this Warrant is exercisable and the Current Warrant Price shall be made by
reason of such issue or sale.
4.8. Superseding Adjustment. If, at any time after any adjustment
of the number of shares of Common Stock for which this Warrant is exercisable
and the Current Warrant Price shall have been made pursuant to Section 4.6 or
Section 4.7 as the result of any issuance of warrants, rights or Convertible
Securities,
(a) such warrants or rights, or the right of conversion
or exchange in such other Convertible Securities, shall expire, and all
or a portion of such warrants or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible
Securities, as the case may be, shall not have been exercised, or
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<PAGE> 18
(b) the consideration per share for which shares of
Common Stock are issuable pursuant to such warrants or rights, or the
terms of such other Convertible Securities, shall be increased solely
by virtue of provisions therein contained for an automatic increase in
such consideration per share upon the occurrence of a specified date or
event,
then for each outstanding Warrant such previous adjustment shall be rescinded
and annulled and the Additional Shares of Common Stock which were deemed to have
been issued by virtue of the computation made in connection with the adjustment
so rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of the
effect of such rights or options or other Convertible Securities on the basis of
(c) treating the number of Additional Shares of Common
Stock or other property, if any, theretofore actually issued or
issuable pursuant to the previous exercise of any such warrants or
rights or any such right of conversion or exchange, as having been
issued on the date or dates of any such exercise and for the
consideration actually received and receivable therefor, and
(d) treating any such warrants or rights or any such
other Convertible Securities which then remain outstanding as having
been granted or issued immediately after the time of such increase of
the consideration per share for which shares of Common Stock or other
property are issuable under such warrants or rights or other
Convertible Securities; whereupon a new adjustment of the number of
shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price shall be made, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.
4.9. Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional
Shares of Common Stock or any Convertible Securities shall be issued
for cash consideration, the consideration received by the Company
therefor shall be the amount of the cash received by the Company
therefor, or, if such Additional Shares of Common Stock or Convertible
Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or
Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering
price (in any such case subtracting any amounts paid or
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<PAGE> 19
receivable for accrued interest or accrued dividends and without taking
into account any compensation, discounts or expenses paid or incurred
by the Company for and in the underwriting of, or otherwise in
connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the amount of such consideration
shall be deemed to be the Fair Market Value of such consideration at
the time of such issuance. In case any Additional Shares of Common
Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase such Additional Shares of Common Stock or
Convertible Securities shall be issued in connection with any merger in
which the Company issues any securities, the amount of consideration
therefor shall be deemed to be the Fair Market Value of such portion of
the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such Additional
Shares of Common Stock, Convertible Securities, warrants or other
rights, as the case may be. The consideration for any Additional Shares
of Common Stock issuable pursuant to any warrants or other rights to
subscribe for or purchase the same shall be the consideration received
by the Company for issuing such warrants or other rights plus the
additional consideration payable to the Company upon exercise of such
warrants or other rights. The consideration for any Additional Shares
of Common Stock issuable pursuant to the terms of any Convertible
Securities shall be the consideration received by the Company for
issuing warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any,
payable to the Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the issuance at any
time of any Additional Shares of Common Stock or Convertible Securities
in payment or satisfaction of any dividends upon any class of stock
other than Common Stock, the Company shall be deemed to have received
for such Additional Shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or
satisfied. If Additional Shares of Common Stock are sold as a unit with
other securities or rights of value, the aggregate consideration
received for such Additional Shares of Common Stock shall be deemed to
be net of the Fair Market Value of such other securities or rights of
value.
(b) When Adjustments to Be Made. The adjustments required
by this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any adjustment
of the number of shares of Common Stock for which this Warrant is
exercisable that would otherwise be required may be postponed (except
in the case of a subdivision or combination of shares of the Common
Stock, as provided for in Section 4.3) up to, but not beyond the date
of exercise if such adjustment either by itself or with other
adjustments
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<PAGE> 20
not previously made results in an increase or decrease of less than 1%
of the shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon
as such adjustment, together with other adjustments required by this
Section 4 and not previously made, would result in a minimum adjustment
or on the date of exercise. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be taken
into account to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall
take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or subscription or
purchase rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If Holder exercises this
Warrant after any property becomes distributable pursuant to this
Section 4 by reason of the taking of any record of the holders of
Common Stock, but prior to the occurrence of the event for which such
record is taken, any additional shares of Common Stock issuable upon
exercise by reason of such adjustment shall be deemed the last shares
of Common Stock for which this Warrant is exercised (notwithstanding
any other provision to the contrary herein) and such shares or other
property shall be held in escrow for Holder by the Company to be issued
to Holder when and to the extent that the event actually takes place,
upon payment of the then Current Warrant Price. Notwithstanding any
other provision to the contrary herein, if the event for which such
record was taken fails to occur or is rescinded, then such escrowed
shares shall be canceled by the Company and escrowed property returned.
(f) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under this
Section 4, such determination may be challenged in good faith by the
Majority Holders, and any dispute shall be resolved by an investment
banking firm of recognized national standing selected by the Company
and acceptable to the Majority Holders.
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<PAGE> 21
4.10. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant and payment of the Warrant Price, the number of shares
of common stock of the successor or acquiring corporation or of the Company, if
it is the surviving corporation, and Other Property receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. In case of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed and observed by
the Company and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Company) in order to provide for adjustments of shares
of the Common Stock for which this Warrant is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in this Section
4. For purposes of this Section 4.10, "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any class
which is not preferred as to dividends or assets over any other class of stock
of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities which
are convertible into or exchangeable for any such stock, either immediately or
upon the arrival of a specified date or the happening of a specified event and
any warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 4.10 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.11. Other Action Affecting Common Stock. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock, other than any action described in this Section 4, then the number of
shares of Common Stock or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
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<PAGE> 22
4.12. Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to (i) increase the par value of its Common
Stock or (ii) enter into any transaction which, by reason of any adjustment
hereunder, would cause the Current Warrant Price to be less than the par value
per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
5.1. Notice of Adjustments; Change in Warrant Status. (a) Whenever
the number of shares of Common Stock for which this Warrant is exercisable, or
whenever the price at which a share of such Common Stock may be purchased upon
exercise of the Warrants, shall be adjusted pursuant to Section 4, the Company
shall forthwith prepare a certificate to be executed by the chief financial
officer of the Company setting forth, in reasonable detail, the event requiring
the adjustment and the method by which such adjustment was calculated (including
a description of the basis on which the Board of Directors of the Company
determined the Fair Market Value of any evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights referred to in Section 4.4 or 4.9(a)), specifying the number of
shares of Common Stock for which this Warrant is exercisable and (if such
adjustment was made pursuant to Section 4.10 or 4.11) describing the number and
kind of any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change.
(b) The Company shall promptly cause a signed copy of
such certificate to be delivered to each Holder in accordance with
Section 12.2. The Company shall keep at its principal office copies of
all such certificates and cause the same to be available for inspection
at said office during normal business hours by any Holder or any
prospective purchaser of a Warrant designated by a Holder thereof.
5.2. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
(other than a cash dividend payable out of earnings or earned surplus
legally available for the payment of dividends under the laws of the
jurisdiction of incorporation of the Company) or other distribution, or
any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) there shall be any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock
of the Company or any consolidation or merger of the Company with, or
any sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation, or
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<PAGE> 23
(c) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 20 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(x) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (y) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 12.2.
6. RIGHTS OF HOLDERS
6.1 No Impairment. The Company shall not by any action, including,
without limitation, amending its Certificate of Incorporation or comparable
governing instruments or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, the Company will (a) not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise of
this Warrant, and (c) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
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<PAGE> 24
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all times reserve
and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record and will take such record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. Restrictive Legend. Except as otherwise provided in this
Section 9, each Warrant and each certificate for Warrant Stock initially issued
upon the exercise of a
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<PAGE> 25
Warrant, and each certificate for Warrant Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
the legend required by Section 13.12 of the Securities Purchase Agreement.
9.2. Registration Rights. The holders of Warrants and Warrant Stock
shall have the registration rights set forth in the Registration Rights
Agreement among the Company, HCCP and HCEP dated the date hereof.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it, and in
case of mutilation upon surrender and cancellation hereof, the Company will
execute and deliver in lieu hereof a new Warrant of like tenor to such Holder;
provided, that in the case of mutilation, no indemnity shall be required if this
Warrant in identifiable form is surrendered to the Company for cancellation.
11. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
12. MISCELLANEOUS
12.1. Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies.
If the Company fails to make, when due, any payments provided for hereunder, or
fails to comply with any other provision of this Warrant, the Company shall pay
to Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
12.2. Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback, addressed as follows:
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<PAGE> 26
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at
105 Westpark Drive, Suite 300
Brentwood, Tennessee 37027
Attention: Michael Catalano
Telecopy Number: (615) 376-1309
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, or three Business Days after the same shall have been deposited in
the United States mail. Failure or delay in delivering copies of any notice,
demand, request, approval, declaration, delivery or other communication to the
person designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, approval, declaration, delivery
or other communication.
12.3. Remedies. Each holder of Warrant and Warrant Stock, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under of this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.
12.4. Successors and Assigns. Subject to the provisions of Section
3.1, this Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of
all Holders from time to time of this Warrant and, with respect to Section 9
hereof, holders of Warrant Stock, and shall be enforceable by any such Holder or
holder of Warrant Stock.
12.5. Amendment. This Warrant and all other Warrants may be modified
or amended or the provisions hereof waived with the written consent of the
Company and the Majority Holders; provided, that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such Warrant
is exercisable or to increase the price at which such shares may be purchased
upon exercise of such Warrant (before giving effect to any adjustment as
provided therein) without the prior written consent of the Holder thereof.
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<PAGE> 27
12.6. Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
12.7. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
12.8. Governing Law. This Warrant shall be governed by the laws of
the State of New York, without regard to the provisions thereof relating to
conflict of laws.
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<PAGE> 28
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: January 26, 1999
AMERICA SERVICE GROUP INC.
By:
-----------------------------------------
Name: Michael Catalano
Title: President and Chief
Executive Officer
Attest:
By:
------------------------------
Name: Jean L. Byassee
Title: Secretary
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<PAGE> 29
EXHIBIT A
EXERCISE FORM
[To be executed only upon exercise of Warrant]
Net Issue Exercise _____No ______Yes
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of _____ shares of Common Stock of America Service
Group Inc. and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
________________________ whose address is __________________________________
and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
--------------------------------------------
(Name of Registered Owner)
--------------------------------------------
(Signature of Registered Owner)
--------------------------------------------
(Street Address)
--------------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
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<PAGE> 30
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
- ---------------------------- -----------------------------
and does hereby irrevocably constitute and appoint ________________
attorney-in-fact to register such transfer on the books of America Service Group
Inc. maintained for the purpose, with full power of substitution in the
premises.
Dated:_______________ Print Name:
---------------------------------
Signature:
----------------------------------
Witness:
------------------------------------
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
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<PAGE> 1
EXHIBIT 99.7
WARRANT
To Purchase Shares of Common Stock of
AMERICA SERVICE GROUP INC.
Warrant No. 2
No. of Shares of Common Stock: 5,360
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TABLE OF CONTENTS
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1. DEFINITIONS.................................................................1
2. EXERCISE OF WARRANT.........................................................7
2.1. Manner of Exercise.................................................7
2.2. Payment of Taxes...................................................8
2.3. Fractional Shares..................................................8
3. TRANSFER, DIVISION AND COMBINATION..........................................8
3.1. Transfer...........................................................8
3.2. Division and Combination...........................................9
3.3. Expenses ..........................................................9
3.4. Maintenance of Books...............................................9
4. ADJUSTMENTS.................................................................9
4.1. Current Warrant Price..............................................9
4.2. Stockholder Approval Failure; Payment Default; NASDAQ
Approval Failure...................................................9
4.3. Stock Dividends, Subdivisions and Combinations.....................10
4.4. Certain Other Distributions........................................11
4.5. Issuance of Additional Shares of Common Stock......................12
4.6. Issuance of Warrants or Other Rights...............................13
4.7. Issuance of Convertible Securities.................................14
4.8. Superseding Adjustment.............................................14
4.9. Other Provisions Applicable to Adjustments under this Section......15
4.10. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets..............................................18
4.11. Other Action Affecting Common Stock................................18
4.12. Certain Limitations................................................19
5. NOTICES TO WARRANT HOLDERS..................................................19
5.1. Notice of Adjustments; Change in Warrant Status....................19
5.2. Notice of Corporate Action.........................................19
6. RIGHTS OF HOLDERS...........................................................20
6.1. No Impairment......................................................20
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY...................................................................21
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS..........................21
9. RESTRICTIONS ON TRANSFERABILITY.............................................21
9.1. Restrictive Legend.................................................21
9.2. Registration Rights................................................22
10. LOSS OR MUTILATION..........................................................22
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11. LIMITATION OF LIABILITY.....................................................22
12. MISCELLANEOUS...............................................................22
12.1. Nonwaiver and Expenses.............................................22
12.2. Notice Generally...................................................22
12.3. Remedies ..........................................................23
12.4. Successors and Assigns.............................................23
12.5. Amendment..........................................................23
12.6. Severability.......................................................24
12.7. Headings...........................................................24
12.8. Governing Law......................................................24
SIGNATURES ..........................................................................25
EXHIBITS
Exhibit A...................................................................A-1
Exhibit B...................................................................B-1
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THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT THE TRANSACTION
PURSUANT TO WHICH SUCH WARRANT OR SECURITIES WILL BE OFFERED FOR SALE OR
OTHERWISE DISPOSED OF IS SUBJECT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
No. of Shares of Common Stock: 5,360 Warrant No. 2
WARRANT
To Purchase Shares of Common Stock of
AMERICA SERVICE GROUP INC.
THIS IS TO CERTIFY THAT HEALTH CARE EXECUTIVE PARTNERS L.P.
("HCEP"), or its registered assigns, is entitled, at any time prior to the
Expiration Date (as hereinafter defined), to purchase from America Service Group
Inc., a Delaware corporation (the "Company"), 129,640 shares of Common Stock (as
hereinafter defined and subject to adjustment as provided herein), in whole or
in part, at the Current Warrant Price (as hereinafter defined), all on the terms
and conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"Adjustment Period" shall mean the period of five consecutive
Trading Days preceding the date as of which the Fair Market Value of a security
is to be determined.
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"Board of Directors" shall mean the board of directors of the
Company.
"Business Day" shall mean any day other than a Saturday or
Sunday or a day on which banking institutions in the States of New York or
Tennessee are authorized or obligated by law or executive order to close.
"Certificate of Designation" shall mean the Certificate of
Designation establishing the Preferred Stock, dated as of the Closing Date.
"Change of Control" shall mean:
(a) a "person" or "Group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act) becoming, in a transaction or
series of related transactions, the Beneficial Owner of Voting
Securities entitled to exercise 50% or more of the total voting power
of all outstanding Voting Securities of the Company (including any
Voting Securities that are not then outstanding of which such person or
Group is deemed the Beneficial Owner) (the "Control Party"); or
(b) the acquisition of Beneficial Ownership of 20 percent
or more of the number of Voting Securities of the Company by any Person
or Group, together with contractual rights, which would enable such
Person or Group to prevent a merger, consolidation or sale of all or
substantially all of the assets or other sale of the Company; or
(c) individuals who at the beginning of any period of two
consecutive calendar years constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or
whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the Board
of Directors then still in office who either were members of the Board
of Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the members of the Board of
Directors then in office; or
(d) sale of all or substantially all of the assets of the
Company.
"Closing Date" shall have the meaning set forth in the
Securities Purchase Agreement.
"Commission" shall mean the Securities and Exchange
Commission.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $.01 par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how
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denominated) issued to the holders of shares of Common Stock upon any
reclassification thereof which is not preferred as to dividends or assets over
any other class of stock of the Company and which is not subject to redemption
and (ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.10) received by or distributed to the holders of Common
Stock of the Company in the circumstances contemplated by Section 4.10.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
or exercisable, with or without payment of additional consideration in cash or
property, for Additional Shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Market Price" when used with reference to shares of
Common Stock or other securities on any date, shall mean the closing sale price
per share of Common Stock or such other securities on such date and, when used
with reference to shares of Common Stock or other securities for any period
shall mean the average of the daily closing sale prices per share of Common
Stock or such other securities for such period. The closing price for each day
shall be the closing sale price in the over-the-counter market, as reported by
the Nasdaq Stock Market or such other system then in use, or, if on any such
date the Common Stock or such other securities are not quoted by any such
organization, the closing sale price as furnished by a professional market maker
making a market in the Common Stock or such other securities selected by the
Board of Directors of the Company. If the Common Stock is listed or admitted to
trading on a national securities exchange, the closing price shall be the
closing sale price, regular way, as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Stock or such other
securities are not listed or admitted to trading on the New York Stock Exchange,
as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the Common Stock or such other securities are listed or admitted to
trading. If the Common Stock or such other securities are not publicly held or
so listed or publicly traded, "Current Market Price" shall mean the Fair Market
Value per share of Common Stock or of such other securities as determined in
good faith by the Board of Directors of the Company based on an opinion of an
independent investment banking firm acceptable to holders of a majority of the
Warrants, which opinion may be based on such assumptions as such firm shall deem
to be necessary and appropriate.
"Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date or the price per
share which shall equal the Initial Warrant Price, subject to adjustments as
provided herein.
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"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include reference to the comparable section, if any, of such
successor Federal statute.
"Expiration Date" shall mean a date which is seven years from
the issuance of this Warrant.
"Fair Market Value" shall mean, as to shares of Common Stock
or any other class of capital stock or securities of the Company or any other
issuer which are publicly traded, the average of the Current Market Prices of
such shares of securities for each day of the Adjustment Period. The "Fair
Market Value" of any security which is not publicly traded or of any other
property shall mean the fair value thereof as determined by an independent
investment banking or appraisal firm experienced in the valuation of such
securities or property selected in good faith by the Board of Directors of the
Company or a committee thereof and acceptable to the Majority Holders.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, (i) all shares of Common Stock outstanding at such date and
(ii) all shares of Common Stock issuable in respect of this Warrant, and other
options or warrants to purchase, or securities convertible into, shares of
Common Stock outstanding on such date, the exercise or conversion price of which
is less than the Current Market Price on such date.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"HCCP Group" shall mean Health Care Capital Partners L.P., its
Affiliates and the general partner of HCCP and its Affiliates.
"Holder" shall mean the Person in whose name this Warrant is
registered on the books of the Company maintained for such purpose. "Holders"
shall mean, collectively, each Holder of a Warrant, in the event of any division
of this Warrant.
"Initial Warrant Price" shall mean in respect of a share of
Common Stock, the price at which a share of Common Stock may initially be
purchased pursuant to this Warrant, which shall equal to the lower of (a) $9.45
per share, or (b) the Current Market Price of a share of the Common Stock during
the thirty consecutive Trading Days prior to the Stockholders Meeting (as
defined in the Securities Purchase Agreement); provided, that such price shall
in no event be less than $5.50 per share (subject to adjustment from time to
time as provided herein). Notwithstanding the foregoing, at any time prior to
the Stockholder Approval Date, the Initial Warrant Price shall in no event be
less than the price at which the maximum number of shares of Common Stock issued
or issuable upon
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conversion of the Preferred Stock, together with shares of Common Stock issued
or issuable upon conversion of the Warrants, would exceed the greater of (i)
711,241 shares of Common Stock (19.9% of the outstanding shares of Common Stock
of the Company) and (ii) 19.9% of the shares of Common Stock of the Company then
outstanding; provided, however, that if the Initial Warrant Price is greater
than the price that would be in effect but for this sentence and, subsequently,
the Company shall have obtained the Stockholder Approval, the Initial Warrant
Price shall be retroactively recalculated in accordance with the first sentence
of this definition of the "Initial Warrant Price."
"Majority Holders" shall mean the holders of Warrants
exercisable for in excess of 50% of the aggregate number of shares of Warrant
Stock then purchasable upon exercise of all Warrants.
"Notes" shall mean the 12% Subordinated Convertible Bridge
Notes due January 26, 2000, purchased by HCCP and HCEP pursuant to the
Securities Purchase Agreement and convertible into Preferred Stock.
"Other Property" shall have the meaning set forth in Section
4.10.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
fully diluted shares of Common Stock (calculated as prescribed by generally
accepted accounting principles), except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
(i) issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock and (ii) issuable in respect of
options or warrants to purchase, or securities convertible into, shares of
Common Stock.
"Permitted Issuances" shall mean the issuance or reissuance of
(a) any shares of Common Stock or rights, warrants or other securities
convertible into shares of Common Stock (whether treasury shares or newly issued
shares) (i) pursuant to a dividend or distribution on, or subdivision,
combination or reclassification of, the outstanding shares of Common Stock
requiring an adjustment in the Current Warrant Price pursuant to Section 4.3;
(ii) pursuant to any restricted stock or stock option plan or program of the
Company involving the grant of options or rights to acquire Common Stock to
directors, officers and employees of the Company and its Subsidiaries pursuant
to the Company's Employee Stock Purchase Plan so long as the granting of such
options or rights has been approved by the full Board of Directors or a
committee of the Board of Directors on which a director designated by the HCCP
Group is a member; (iii) pursuant to any option, warrant, right, or convertible
security outstanding as of the date hereof, or (b) the Series A Preferred Stock,
the Warrants and any shares of Common Stock issuable upon conversion or exercise
thereof.
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"Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger or
otherwise) of such entity.
"Preferred Stock" shall mean the Company's Series A
Convertible Preferred Stock, par value $.01.
"Registration Rights Agreement" shall mean the registration
rights agreement, dated as of the Closing Date, among the Company, HCCP and
HCEP.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" shall mean the securities
purchase agreement, dated as of January 26, 1999, among the Company, HCCP and
HCEP.
"Stockholder Approval" shall have the meaning assigned to it
in the Securities Purchase Agreement
"Stockholder Approval Date" shall have the meaning assigned to
it in the Securities Purchase Agreement.
"Stock Issuance" shall have the meaning assigned to it in the
Securities Purchase Agreement.
"Trading Day" means a Business Day or, if the Common Stock is
listed or admitted to trading on any national securities exchange, a day on
which such exchange is open for the transaction of business.
"Transfer" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would constitute a
sale thereof within the meaning of the Securities Act.
"Warrants" shall mean this Warrant (as adjusted pursuant to
Section 4) and all warrants issuable upon transfer, division or combination of,
or in substitution for, any thereof. All Warrants shall at all times be
identical as to terms and conditions and date, except as to the number of shares
of Common Stock for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of this Warrant pursuant
to Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the holders of the Warrants upon the exercise thereof.
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2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) At any time or from time to
time from and after the Closing Date and until 5:00 P.M., New York time, on the
Expiration Date, Holder may exercise this Warrant, on any Business Day, for all
or any part of the number of shares of Common Stock purchasable hereunder.
(b) In order to exercise this Warrant, in whole or in
part, Holder shall deliver to the Company at its principal office at 105
Westpark Drive, Suite 300, Brentwood, Tennessee 37027 (i) a written notice of
Holder's election to exercise this Warrant, which notice shall specify the
number of shares of Common Stock to be purchased; (ii) payment of the Warrant
Price; and (iii) this Warrant. Such notice shall be substantially in the form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder.
(c) As promptly as practicable, and in no event later
than five Business Days after the receipt of the items specified in paragraph
(b) of this Section 2.1, the Company shall execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be in such denomination or denominations as Holder shall request in the notice
and shall be registered in the name of Holder or, subject to Section 9, such
other name as shall be designated in the notice. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and Holder or any other Person so designated shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the notice, together with the Warrant Price and this Warrant, are received by
the Company as described above. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the right of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same returned to Holder.
(d) Payment of the Warrant Price shall be made at the
option of Holder (i) by certified or official bank check or (ii) by the
surrender of this Warrant to the Company, with a duly executed exercise notice
marked to reflect "Net Issue Exercise," and, in either case, specifying the
number of shares of Common Stock to be purchased, during normal business hours
on any Business Day. Upon a Net Issue Exercise, Holder shall be entitled to
receive shares of Common Stock equal to the value of this Warrant (or the
portion thereof being exercised by Net Issue Exercise) by surrender of this
Warrant to the Company together with notice of such election, in which event the
Company shall
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issue to Holder a number of shares of the Company's Common Stock computed as of
the date of surrender of this Warrant to the Company using the following
formula:
X = Y x (A - B)
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A
Where X = the number of shares of Common Stock to be issued to Holder;
Y = the number of shares of Common Stock otherwise purchasable
under this Warrant (at the date of such calculation);
A = the Current Market Price of one share of the Company's Common
Stock (at the date of such calculation);
B = the Current Warrant Price (as adjusted to the date of such
calculation).
2.2. Payment of Taxes. All shares of Common Stock issuable
upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable and without any preemptive rights. The Company shall pay all
expenses in connection with, and all taxes and other governmental charges that
may be imposed with respect to, the issue or delivery thereof.
2.3. Fractional Shares. The Company shall not be required
to issue a fractional share of Common Stock upon exercise of this Warrant. As to
any fraction of a share which Holder would otherwise be entitled to purchase
upon such exercise, the Company shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of exercise.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 9,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred to in
Section 2.1, together with a written assignment of this Warrant substantially in
the form of Exhibit B hereto duly executed by Holder and funds sufficient to pay
any transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be canceled. A Warrant, if properly
assigned in compliance with Section 9, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new Warrant issued.
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3.2. Division and Combination. Subject to Section 9, this
Warrant may be divided into multiple Warrants or combined with other Warrants
upon presentation hereof at the aforesaid office or agency of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by Holder. Subject to compliance with
Section 3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and
deliver at its own expense (other than transfer taxes) the new Warrant or
Warrants under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain,
at its aforesaid office, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable and/or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at the
time of such event.
4.1. Current Warrant Price. Unless the Company shall have
redeemed or converted all of the outstanding Notes, subject to adjustment as set
forth in other provisions of this Section 4, the Current Warrant Price shall be
decreased by $1.00 on the last Business Day of each month, commencing July 31,
1999 through and including December 31, 1999; provided, that the Current Warrant
Price shall never be less than the par value per share of Common Stock; and
provided, further, that at any time prior to the Stockholder Approval Date, the
Initial Warrant Price shall in no event be less than the price at which the
maximum number of shares of Common Stock issued or issuable upon conversion of
the Preferred Stock, together with shares of Common Stock issued or issuable
upon exercise of the Warrants, would exceed the greater of (a) 711,241 shares of
Common Stock (19.9% of the outstanding shares of Common Stock of the Company)
and (b) 19.9% of the outstanding shares of Common Stock of the Company.
4.2. Stockholder Approval Failure; Payment Default; NASDAQ
Approval Failure. Notwithstanding Section 4.1, in the event that:
(a) the Corporation shall (i) fail to obtain the
Stockholder Approval with respect to the Stock Issuance on or before July 26,
1999, (ii) fail to convene the Stockholders Meeting on or before July 26, 1999,
(iii) withdraw or modify its approval or recommendation of the Stock Issuance in
any manner adverse to HCCP, its Affiliates or the general partner of its
Affiliates, (iv) fail to reaffirm such approval or recommendation
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within 5 days following receipt of written request for such reaffirmation from
the HCCP, its Affiliates or the general partner of its Affiliates, (v) fail to
obtain the reaffirmation of the Fairness Opinion (as defined in the Securities
Purchase Agreement) in connection with the mailing of the Proxy Statement (as
defined in the Securities Purchase Agreement), (vi) fail to obtain NASDAQ
Approval (as such term is defined in the Securities Purchase Agreement) within
30 days after the Stockholder Approval, (vii) resolve to take any of the actions
specified in clauses (a)(i) through (a)(vi) above, or (viii) fail to pay the
principal amount of and accrued and unpaid interest due, if any, on the Notes at
maturity, or
(b) (i) a Change of Control; (ii) the Maturity Date of
the Notes shall occur; or (iii) notice of redemption of the Notes shall be
given, and on any such date the Notes may not be converted, at the election of
the Company, into shares of Preferred Stock,
then the Current Warrant Price shall be reduced to
$.01 per share; provided, however, that the Current Warrant Price shall not be
adjusted as provided in this Section 4.2 as a result of the occurrence of the
condition described in clause (a)(i) if (A) the holders of Common Stock
representing a majority of the shares of Common Stock present and voting at a
meeting duly called and convened in accordance with Section 6.19 of the
Securities Purchase Agreement to approve the Stock Issuance (as defined in the
Securities Purchase Agreement) for reasons other than those described in clauses
(a)(ii) through (a)(vi) of this Section 4.2 do not approve the Stock Issuance (a
"Stockholders Rejection") and (B) prior to the Stockholder Rejection, none of
the events described in clauses (a)(ii) through (vi) above or paragraph (b)
above shall have occurred. Notwithstanding the foregoing, at any time prior to
the Stockholder Approval Date, the Initial Warrant Price shall in no event be
less than the price at which the maximum number of shares of Common Stock issued
or issuable upon conversion of the Preferred Stock, together with shares of
Common Stock issued or issuable upon exercise of the Warrants, would exceed the
greater of (i) 711,241 shares of Common Stock (19.9% of the outstanding shares
of Common Stock of the Company) and (ii) 19.9% of the outstanding shares of
Common Stock of the Company; provided, however, that if the Current Warrant
Price is greater than the price that would be in effect but for this sentence
and, subsequently, the Company shall have obtained the Stockholder Approval, the
Initial Warrant Price shall be retroactively recalculated as of the Stockholder
Approval Date in accordance with Sections 4.1 and 4.2 above.
4.3. Stock Dividends, Subdivisions and Combinations. In
case the Company shall at any time or from time to time:
(a) pay a dividend, or make a distribution, on its
outstanding Common Stock in Additional Shares of Common Stock,
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(b) subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then and in each such case, (i) the number of shares of Common Stock for which
this Warrant is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock which a record
holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (ii) the Current
Warrant Price per share shall be adjusted to equal (A) the Current Warrant Price
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such adjustment.
4.4. Certain Other Distributions. In case the Company
shall at any time or from time to time after the issuance of this Warrant
declare, order, pay or make a dividend or other distribution on its Common Stock
of:
(a) cash,
(b) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever by
way of dividend (other than cash, Convertible Securities or Additional
Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such adjustment
multiplied by a fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock for the period of 20 Trading Days preceding such
record (the "Period") and (B) the denominator of which shall be such Current
Market Price per share of Common Stock for the Period less the Fair Market Value
per share of Common Stock of any such dividend or distribution and (ii) the
Current Warrant Price shall be adjusted to equal (A) the Current Warrant Price
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such adjustment.
A reclassification of the Common Stock (other than a reduction in par value, or
from par
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value to no par value) into shares of Common Stock and shares of any other class
of stock shall be deemed a distribution by the Company to the holders of its
Common Stock of such shares of such other class of stock within the meaning of
this Section 4.4 and, if the outstanding shares of Common Stock shall be changed
into a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.3. Notwithstanding the foregoing, no adjustment shall be required
under this Section 4.4 solely by reason of the issuance of stock purchase rights
under a stockholder rights plan of the Company, provided that the adjustments
required by this Section 4.4 shall be made if any "flip-in" or "flip-over" event
shall occur under such stockholder rights plan not triggered by the holder
hereof.
4.5. Issuance of Additional Shares of Common Stock. If at
any time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, other than Permitted Issuances, in exchange
for consideration in an amount per Additional Share of Common Stock less than
the greater of (1) the Current Market Price per share of Common Stock for the
period of 20 Trading Days preceding the earlier of the issuance or public
announcement of the issuance of such Additional Shares of Common Stock and (2)
the Current Warrant Price at the time the Additional Shares of Common Stock are
issued, then (i) the Current Warrant Price as to the number of shares for which
this Warrant is exercisable prior to such adjustment shall be reduced to a price
determined by multiplying the Current Warrant Price by (A) a fraction, the
numerator of which shall be the sum of (x) the number of shares of Common Stock
Outstanding immediately prior to such issue or sale multiplied by the greater of
(1) the then applicable Current Warrant Price and (2) the Current Market Price
per share of Common Stock for the period of 20 Trading Days preceding the
earlier of the issuance or public announcement of the issuance of such
Additional Shares of Common Stock (the greater of (1) and (2) above hereinafter
referred to as the "Adjustment Price") and (y) the aggregate consideration
receivable by the Company for the total number of shares of Common Stock so
issued (or into or for which the rights, warrants or other Convertible
Securities may convert or be exercisable), and the denominator of which shall be
the sum of (a) the total number of shares of Common Stock Outstanding on such
date and (b) the number of Additional Shares issued (or into or for which the
rights, warrants or convertible securities may be converted or exercised),
multiplied by the Adjustment Price; and (ii) the number of shares of Common
Stock for which this Warrant is exercisable shall be adjusted to equal the
product obtained by multiplying the Current Warrant Price in effect immediately
prior to such issue or sale by the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such issue or sale and dividing
the product thereof by the Current Warrant Price resulting from the adjustment
made pursuant to clause (i) above. For purposes of this Section 4.5 and for the
purposes of making adjustments of the number of shares of Common Stock for which
this Warrant is exercisable and the Current Price as provided in this Section 4,
the aggregate consideration receivable by the Company in connection with the
issuance of shares of
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Common Stock or of rights, warrants or other securities convertible into shares
of Common Stock shall be deemed to be equal to the sum of the aggregate offering
price (before deduction of underwriting discounts or commissions and expenses
payable to third parties) of all such Common Stock, rights, warrants and
convertible securities plus the aggregate amount (as determined on the date of
issuance), if any, payable upon exercise or conversion of any such rights,
warrants and convertible securities into shares of Common Stock. If, subsequent
to the date of issuance of such rights, warrants or Convertible Securities, the
exercise or conversion price thereof is reduced, such aggregate amount shall be
recalculated and the Current Warrant Price and number of shares of Common Stock
for which the Warrant is exercisable adjusted retroactively to give effect to
such reduction. If Common Stock is sold as a unit with other securities, the
aggregate consideration received for such Common Stock shall be deemed to be net
of the Fair Market Value of such other securities.
4.6. Issuance of Warrants or Other Rights. If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or (other than Permitted
Issuances) shall in any manner (whether directly or by assumption in a merger in
which the Company is the surviving corporation) issue or sell, any warrants or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Warrants or other rights or upon
conversion or exchange of such Convertible Securities shall be less than the
greater of (1) the Current Market Price per share of Common Stock for the period
of 20 Trading Days preceding the earlier of the issuance or public announcement
of the issuance of such Additional Shares of Common Stock, warrants or other
rights and (2) the Current Warrant Price in effect immediately prior to the time
of such issue or sale, then the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be adjusted as provided in
Section 4.5 on the basis that the maximum number of Additional Shares of Common
Stock issuable pursuant to all such warrants or other rights or necessary to
effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and outstanding and the Company shall have received
all of the consideration payable therefor, if any, as of the date of the actual
issuance of the number of shares for which this Warrant is exercisable and such
warrants or other rights. No further adjustments of the Current Warrant Price
shall be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such warrants or other rights or upon the actual
issue of such Common Stock upon such conversion or exchange of such Convertible
Securities. Notwithstanding the foregoing, no adjustment shall be required under
this Section 4.6 solely by reason of the issuance of stock purchase rights under
a stockholder rights plan of the Company, provided that the adjustments required
by this Section 4.6 shall be made if any "flip-in" or "flip-over" event shall
occur under such stockholder rights plan not triggered by the holder hereof.
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4.7. Issuance of Convertible Securities. If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or (other than Permitted
Issuances) shall in any manner (whether directly or by assumption in a merger in
which the Company is the surviving corporation) issue or sell, any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange shall be less than the greater of (a)
the Current Market Price per share of Common Stock for the period of 20 Trading
Days preceding the earlier of the issuance or public announcement of the
issuance of such Convertible Securities and (b) the Current Warrant Price in
effect immediately prior to the time of such issue or sale, then the number of
shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.5 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.7
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.6. No further adjustments of the
number of shares for which this Warrant is exercisable and the Current Warrant
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities and, if any issue or sale of such
Convertible Securities is made upon exercise of any warrant or other right to
subscribe for or to purchase any such Convertible Securities for which
adjustments of the number of shares for which this Warrant is exercisable and
the Current Warrant Price have been or are to be made pursuant to other
provisions of this Section 4, no further adjustments of the number of shares for
which this Warrant is exercisable and the Current Warrant Price shall be made by
reason of such issue or sale.
4.8. Superseding Adjustment. If, at any time after any
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price shall have been made pursuant to
Section 4.6 or Section 4.7 as the result of any issuance of warrants, rights or
Convertible Securities,
(a) such warrants or rights, or the right of conversion
or exchange in such other Convertible Securities, shall expire, and all
or a portion of such warrants or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible
Securities, as the case may be, shall not have been exercised, or
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(b) the consideration per share for which shares of
Common Stock are issuable pursuant to such warrants or rights, or the
terms of such other Convertible Securities, shall be increased solely
by virtue of provisions therein contained for an automatic increase in
such consideration per share upon the occurrence of a specified date or
event,
then for each outstanding Warrant such previous adjustment shall be rescinded
and annulled and the Additional Shares of Common Stock which were deemed to have
been issued by virtue of the computation made in connection with the adjustment
so rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of the
effect of such rights or options or other Convertible Securities on the basis of
(c) treating the number of Additional Shares of Common
Stock or other property, if any, theretofore actually issued or
issuable pursuant to the previous exercise of any such warrants or
rights or any such right of conversion or exchange, as having been
issued on the date or dates of any such exercise and for the
consideration actually received and receivable therefor, and
(d) treating any such warrants or rights or any such
other Convertible Securities which then remain outstanding as having
been granted or issued immediately after the time of such increase of
the consideration per share for which shares of Common Stock or other
property are issuable under such warrants or rights or other
Convertible Securities; whereupon a new adjustment of the number of
shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price shall be made, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.
4.9. Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:
(a) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional
Shares of Common Stock or any Convertible Securities shall be issued
for cash consideration, the consideration received by the Company
therefor shall be the amount of the cash received by the Company
therefor, or, if such Additional Shares of Common Stock or Convertible
Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or
Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering
price (in any such case subtracting any amounts paid or
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<PAGE> 19
receivable for accrued interest or accrued dividends and without taking
into account any compensation, discounts or expenses paid or incurred
by the Company for and in the underwriting of, or otherwise in
connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the amount of such consideration
shall be deemed to be the Fair Market Value of such consideration at
the time of such issuance. In case any Additional Shares of Common
Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase such Additional Shares of Common Stock or
Convertible Securities shall be issued in connection with any merger in
which the Company issues any securities, the amount of consideration
therefor shall be deemed to be the Fair Market Value of such portion of
the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such Additional
Shares of Common Stock, Convertible Securities, warrants or other
rights, as the case may be. The consideration for any Additional Shares
of Common Stock issuable pursuant to any warrants or other rights to
subscribe for or purchase the same shall be the consideration received
by the Company for issuing such warrants or other rights plus the
additional consideration payable to the Company upon exercise of such
warrants or other rights. The consideration for any Additional Shares
of Common Stock issuable pursuant to the terms of any Convertible
Securities shall be the consideration received by the Company for
issuing warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any,
payable to the Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the issuance at any
time of any Additional Shares of Common Stock or Convertible Securities
in payment or satisfaction of any dividends upon any class of stock
other than Common Stock, the Company shall be deemed to have received
for such Additional Shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or
satisfied. If Additional Shares of Common Stock are sold as a unit with
other securities or rights of value, the aggregate consideration
received for such Additional Shares of Common Stock shall be deemed to
be net of the Fair Market Value of such other securities or rights of
value.
(b) When Adjustments to Be Made. The adjustments required
by this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any adjustment
of the number of shares of Common Stock for which this Warrant is
exercisable that would otherwise be required may be postponed (except
in the case of a subdivision or combination of shares of the Common
Stock, as provided for in Section 4.3) up to, but not beyond the date
of exercise if such adjustment either by itself or with other
adjustments
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<PAGE> 20
not previously made results in an increase or decrease of less than 1%
of the shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon
as such adjustment, together with other adjustments required by this
Section 4 and not previously made, would result in a minimum adjustment
or on the date of exercise. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be taken
into account to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall
take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or subscription or
purchase rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If Holder exercises this
Warrant after any property becomes distributable pursuant to this
Section 4 by reason of the taking of any record of the holders of
Common Stock, but prior to the occurrence of the event for which such
record is taken, any additional shares of Common Stock issuable upon
exercise by reason of such adjustment shall be deemed the last shares
of Common Stock for which this Warrant is exercised (notwithstanding
any other provision to the contrary herein) and such shares or other
property shall be held in escrow for Holder by the Company to be issued
to Holder when and to the extent that the event actually takes place,
upon payment of the then Current Warrant Price. Notwithstanding any
other provision to the contrary herein, if the event for which such
record was taken fails to occur or is rescinded, then such escrowed
shares shall be canceled by the Company and escrowed property returned.
(f) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under this
Section 4, such determination may be challenged in good faith by the
Majority Holders, and any dispute shall be resolved by an investment
banking firm of recognized national standing selected by the Company
and acceptable to the Majority Holders.
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<PAGE> 21
4.10. Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets. In case the Company shall reorganize its
capital, reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant and payment of the Warrant Price, the number of shares
of common stock of the successor or acquiring corporation or of the Company, if
it is the surviving corporation, and Other Property receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. In case of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed and observed by
the Company and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Company) in order to provide for adjustments of shares
of the Common Stock for which this Warrant is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in this Section
4. For purposes of this Section 4.10, "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any class
which is not preferred as to dividends or assets over any other class of stock
of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities which
are convertible into or exchangeable for any such stock, either immediately or
upon the arrival of a specified date or the happening of a specified event and
any warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 4.10 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.11. Other Action Affecting Common Stock. In case at any
time or from time to time the Company shall take any action in respect of its
Common Stock, other than any action described in this Section 4, then the number
of shares of Common Stock or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
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<PAGE> 22
4.12. Certain Limitations. Notwithstanding anything herein
to the contrary, the Company agrees not to (i) increase the par value of its
Common Stock or (ii) enter into any transaction which, by reason of any
adjustment hereunder, would cause the Current Warrant Price to be less than the
par value per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
5.1. Notice of Adjustments; Change in Warrant Status. (a)
Whenever the number of shares of Common Stock for which this Warrant is
exercisable, or whenever the price at which a share of such Common Stock may be
purchased upon exercise of the Warrants, shall be adjusted pursuant to Section
4, the Company shall forthwith prepare a certificate to be executed by the chief
financial officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was calculated
(including a description of the basis on which the Board of Directors of the
Company determined the Fair Market Value of any evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights referred to in Section 4.4 or 4.9(a)), specifying the number
of shares of Common Stock for which this Warrant is exercisable and (if such
adjustment was made pursuant to Section 4.10 or 4.11) describing the number and
kind of any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change.
(b) The Company shall promptly cause a signed copy of
such certificate to be delivered to each Holder in accordance with Section 12.2.
The Company shall keep at its principal office copies of all such certificates
and cause the same to be available for inspection at said office during normal
business hours by any Holder or any prospective purchaser of a Warrant
designated by a Holder thereof.
5.2. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
(other than a cash dividend payable out of earnings or earned surplus
legally available for the payment of dividends under the laws of the
jurisdiction of incorporation of the Company) or other distribution, or
any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) there shall be any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock
of the Company or any consolidation or merger of the Company with, or
any sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation, or
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(c) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 20 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(x) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (y) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 12.2.
6. RIGHTS OF HOLDERS
6.1 No Impairment. The Company shall not by any action,
including, without limitation, amending its Certificate of Incorporation or
comparable governing instruments or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such actions as may
be necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, the Company will (a) not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise of
this Warrant, and (c) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
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Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to Holder, the continuing validity of this Warrant and
the obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued and fully paid and nonassessable, and not
subject to preemptive rights.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Current Warrant Price.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. Restrictive Legend. Except as otherwise provided in
this Section 9, each Warrant and each certificate for Warrant Stock initially
issued upon the exercise of a
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Warrant, and each certificate for Warrant Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
the legend required by Section 13.12 of the Securities Purchase Agreement.
9.2. Registration Rights. The holders of Warrants and
Warrant Stock shall have the registration rights set forth in the Registration
Rights Agreement among the Company, HCCP and HCEP dated the date hereof.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it, and in case of mutilation upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
such Holder; provided, that in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
11. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of Holder hereof, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
12. MISCELLANEOUS
12.1. Nonwaiver and Expenses. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any other provision of this Warrant, the
Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
12.2. Notice Generally. Any notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder to be
made pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged or
sent by registered or certified mail, return receipt requested, postage prepaid,
or by telecopy and confirmed by telecopy answerback, addressed as follows:
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(a) If to any Holder or holder of Warrant Stock, at its
last known address appearing on the books of the Company maintained for
such purpose.
(b) If to the Company at
105 Westpark Drive, Suite 300
Brentwood, Tennessee 37027
Attention: Michael Catalano
Telecopy Number: (615) 376-1309
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, or three Business Days after the same shall have been deposited in
the United States mail. Failure or delay in delivering copies of any notice,
demand, request, approval, declaration, delivery or other communication to the
person designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, approval, declaration, delivery
or other communication.
12.3. Remedies. Each holder of Warrant and Warrant Stock,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under of this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.
12.4. Successors and Assigns. Subject to the provisions of
Section 3.1, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant and, with respect to
Section 9 hereof, holders of Warrant Stock, and shall be enforceable by any such
Holder or holder of Warrant Stock.
12.5. Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written consent of
the Company and the Majority Holders; provided, that no such Warrant may be
modified or amended to reduce the number of shares of Common Stock for which
such Warrant is exercisable or to increase the price at which such shares may be
purchased upon exercise of such Warrant (before giving effect to any adjustment
as provided therein) without the prior written consent of the Holder thereof.
-23-
<PAGE> 27
12.6. Severability. Wherever possible, each provision of
this Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Warrant.
12.7. Headings. The headings used in this Warrant are for
the convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
12.8. Governing Law. This Warrant shall be governed by the
laws of the State of New York, without regard to the provisions thereof relating
to conflict of laws.
-24-
<PAGE> 28
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: January 26, 1999
AMERICA SERVICE GROUP INC.
By:
--------------------------------------------
Name: Michael Catalano
Title: President and Chief Executive Officer
Attest:
By:
------------------------------
Name: Jean L. Byassee
Title: Secretary
-25-
<PAGE> 29
EXHIBIT A
EXERCISE FORM
[To be executed only upon exercise of Warrant]
Net Issue Exercise _____No ______Yes
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of _____ shares of Common Stock of
America Service Group Inc. and herewith makes payment therefor, all at the price
and on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to ________________________ whose address is _______________________
_______________________________________ and, if such shares of Common Stock
shall not include all of the shares of Common Stock issuable as provided in this
Warrant, that a new Warrant of like tenor and date for the balance of the shares
of Common Stock issuable hereunder be delivered to the undersigned.
------------------------------------------
(Name of Registered Owner)
------------------------------------------
(Signature of Registered Owner)
------------------------------------------
(Street Address)
------------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
- A-1 -
<PAGE> 30
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
and does hereby irrevocably constitute and appoint _____________________________
attorney-in-fact to register such transfer on the books of America Service Group
Inc. maintained for the purpose, with full power of substitution in the
premises.
Dated: Print Name:
--------------- ------------------------
Signature:
------------------------
Witness:
---------------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
- B-1 -
<PAGE> 1
EXHIBIT 99.8
[EXECUTION]
FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement, dated January 26,
1999 (this "Amendment"), is by and between INPHYNET ADMINISTRATIVE SERVICES,
INC., a Florida corporation (the "Buyer"), and AMERICA SERVICE GROUP INC., a
Delaware corporation (the "Seller").
BACKGROUND
A. The Buyer and the Seller have executed and delivered a Stock
Purchase Agreement, dated December 18, 1998 (the "Stock Purchase Agreement").
B. The Buyer and the Seller desire to amend the Stock Purchase
Agreement.
AGREEMENTS
1. Definitions. Any capitalized term not otherwise defined in this
Amendment shall have the same meaning as in the Stock Purchase Agreement.
2. Amendment of Schedules; Additional Representations and Warranties.
Copies of amended and restated Schedules 3.5, 3.10, 3.12, 3.14 and 3.15 are
attached to this Amendment. The Seller represents and warrants to the Buyer as
follows: (i) that EMSA Limited Partnership ("EMSA L.P.") will assign all of its
interests in the capital stock of EMZA, Inc., which interests are disclosed in
Schedule 3.5, to an Affiliate, at or before Closing; (ii) that the written lease
for the Company's headquarters in Florida was entered into by an Affiliate of
the Seller and the Company has not entered into a lease agreement with the
Affiliate; (iii) that the oral agreement relating to the employment of Marta
Prado disclosed in Schedule 3.14 is an agreement between Ms. Prado and
MedPartners, Inc.; and (iv) from and after 5:00 p.m. (Eastern Standard Time) on
December 2, 1998, the Seller possessed the right to terminate the Stock Purchase
Agreement, dated on or about November 25, 1998, between Seller and EMSA Group,
Inc., and Seller duly and validly terminated such agreement prior to Seller's
execution of a non-binding letter of intent with Buyer on December 8, 1998.
3. Amendment of Section 8.3(a). The parenthetical phrase included in the
first sentence of Section 8.3(a) shall be deleted and replaced by a
parenthetical phrase reading as follows: "(which for purposes of the
indemnification referred to in subparagraph (iv) below, shall include Ferrer
Freeman Thompson & Co., Health Care Capital Partners, L.P., Health Care
Executive Partners, L.P. and SunTrust Equitable Securities, Inc. and their
respective Affiliates, but shall not include NationsBank, N.A.)".
<PAGE> 2
4. Execution of Escrow Agreement. Simultaneously with the execution and
delivery of this Agreement, (i) the Buyer, the Seller and NationsBank, N.A., as
Escrow Agent, are executing and delivering an Escrow Agreement, dated as of the
date hereof, in the form attached to this Amendment as Exhibit "A" and (ii) the
Buyer is depositing into the escrow fund created by such Escrow Agreement the
sum of $2,000,000 in cash in immediately available funds, such funds to be held
and disbursed pursuant to the terms of such Escrow Agreement. Seller shall be
responsible for all fees and expenses of the Escrow Agent in accordance with
Section 5.5 of the Escrow Agreement.
5. Post Closing Covenants. The Seller shall (i) use reasonable efforts to
cause EMZA, Inc. to change its name to a name that is dissimilar to the name of
the Company and its Subsidiaries and (ii) notwithstanding the establishment of
the escrow fund referred to in paragraph 4 above, Seller shall pay any amount of
the premium for the Medical Malpractice/Professional Liability Coverage in
excess of the amount of the escrow fund in order to obtain the coverage required
pursuant to Section 5.12 of the Agreement. Seller acknowledges and agrees that a
claim by the Buyer against Seller for non-performance of its obligation to pay
such portion of the insurance premium or to pay any amounts relating to
liability or expenses exceeding such coverage, if any, shall not be subject to
the limitations on the indemnification obligations of the Seller set forth in
Sections 8.2(a) and 8.2(b) of the Agreement.
6. Assets to be Transferred. It is the intent of the parties to the
Agreement to transfer to Buyer all tangible personal property which is owned by
the Company or Subsidiaries, a preliminary listing of which is attached hereto
as Exhibit A (the "Personal Property List"). Within thirty (30) days following
the Closing Date, Buyer and Seller shall mutually agree upon a complete and
accurate listing of personal property owned by the Company or Subsidiaries and
shall agree to necessary additions or deletions to the Personal Property List.
7. Noncompetition, Nonsolicitation and Confidentiality. Buyer and Seller
acknowledge and agree that, as of the Closing, the noncompetition,
nonsolicitation and confidentiality provisions of Section 5.17 of the Agreement
supersede in its entirety that certain Non-Compete, Non-Solicitation and
Standstill Agreement dated as of February 25, 1998 and that such agreement shall
terminate on the Closing Date and be of no further force and effect.
8. Effect on Stock Purchase Agreement. Except as expressly modified by
this Amendment, the Parties ratify and confirm the Stock Purchase Agreement in
all respects.
[Signatures appear on the following page]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have each executed and delivered
this Agreement as of the day and year first above written.
BUYER:
AMERICA SERVICE GROUP INC.
By: /s/ Michael Catalano
-------------------------------------
Michael Catalano
President and Chief Executive Officer
SELLER:
INPHYNET ADMINISTRATIVE SERVICES, INC.
By: /s/ James H. Dickerson, Jr.
-------------------------------------
Name: James H. Dickerson, Jr.
Title: President
3
<PAGE> 1
EXHIBIT 99.9
REGISTRATION RIGHTS AGREEMENT
among
AMERICA SERVICE GROUP INC.,
HEALTH CARE CAPITAL PARTNERS L.P.
and
Health Care Executive Partners L.P.
Dated as of January 26, 1999
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT, dated as of January 26, 1999
among America Service Group Inc., a Delaware corporation (the "Company"), Health
Care Capital Partners L.P. ("HCCP") and Health Care Executive Partners L.P.
("HCEP").
1. Background. Pursuant to a Securities Purchase Agreement, dated
as of January 26, 1999 (the "Purchase Agreement"), among the Company, HCCP and
HCEP, HCCP and HCEP have purchased from the Company (a) $15,000,000 aggregate
principal amount of the Company's 12% Subordinated Convertible Bridge Notes due
January 26, 2000 (the "Notes") with detachable warrants (the "Warrants") to
purchase shares of the Company's Common Stock, par value $.01 per share ("Common
Stock") and (b) 50,000 shares of the Company's Series A Convertible Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock"). Subject to the
terms and conditions set forth in the Purchase Agreement, the Certificate of
Designation of the Series A Preferred Stock (the "Certificate of Designation")
and certain related documents, (a) the Notes are convertible into shares of
Series A Preferred Stock and (b) the shares of the Series A Preferred Stock are
convertible into, and the Warrants are exercisable for, shares of Common Stock.
The shares of Common Stock issued or issuable upon (a) the conversion of shares
of the Series A Preferred Stock, (b) the conversion of shares of the Series A
Preferred Stock issuable upon conversion of the Notes or otherwise issuable in
accordance with the Certificate of Designation, or (c) the exercise of the
Warrants are collectively referred to herein as the "Investor Registrable
Securities." "Registrable Securities" are referred to herein as (i) Investor
Registrable Securities owned by HCCP, HCEP, or any of their Affiliates or the
Affiliates of the general partner of HCCP or HCEP (the "Investor Group"), (ii)
shares of Common Stock acquired by any Person after the date hereof pursuant to
rights granted to the Investor Group, and that are transferable by the Investor
Group, under the Purchase Agreement, (iii) Investor Registrable Securities
acquired by any Person after the date hereof pursuant to rights granted to the
Investor Group under the Purchase Agreement and (iv) shares of Common Stock
issued or issuable, directly or indirectly, with respect to the Common Stock
referenced in clauses (ii) and (iii) above or any Series A Preferred Stock or
Investor Registrable Securities owned by the Investor Group, whether acquired on
the date hereof or hereafter acquired by way of stock dividend, stock split or
combination of shares. The Notes, Series A Preferred Stock and Warrants are
referred to herein as the "Convertible Securities."
2. Registration Under Securities Act, etc.
2.1. Demand Registrations.
(a) Request. Subject to Section 2.6 hereof, at any time
and from time to time, upon the written request of holders (the "Initiating
Holders") of Registrable Securities representing not less than 25% of the
Investor Registrable Securities that the Company effect the registration under
the Securities Act of all or part of such Initiating Holders' Registrable
Securities ("Demand Registration"); provided that in no event shall
<PAGE> 3
the Company be obligated to register shares of Common Stock pursuant to such
request having a Current Market Value on the date of such request less than
$5,000,000, the Company will promptly, and in any event within ten days, give
written notice of such requested registration to all registered holders of
Registrable Securities, and thereupon the Company will use its best efforts to
effect the registration under the Securities Act of
(i) the Registrable Securities which the Company
has been so requested to register by such Initiating Holders, and
(ii) all other Registrable Securities which the
Company has been requested to register by the holders thereof (such
holders together with the Initiating Holders are hereinafter referred
to as the "Selling Holders") by written request given to the Company
within ten days after the giving of such written notice by the Company,
all to the extent requisite to permit the disposition of the
Registrable Securities so to be registered.
(b) Registration of Other Securities. Whenever the
Company shall effect a registration pursuant to this Section 2.1 in connection
with an underwritten offering by one or more Selling Holders of Registrable
Securities, no securities other than Registrable Securities shall be included
among the securities covered by such registration unless the Selling Holders of
not less than a majority of all Investor Registrable Securities to be covered by
such registration shall have consented in writing to the inclusion of such other
securities.
(c) Registration Statement Form. Registrations under this
Section 2.1 shall be on such appropriate registration form of the Commission as
shall be selected by the Company.
(d) Effective Registration Statement. A registration
requested pursuant to this Section 2.1 shall not be deemed to have been effected
(i) unless a registration statement with respect thereto has been declared
effective by the Commission, (ii) if after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason other than an act or omission of the Selling Holders and has not
thereafter become effective, or (iii) if the conditions to closing specified in
the underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than by reason of a failure on
the part of the Selling Holders.
(e) Selection of Underwriters. The underwriter or
underwriters of each underwritten offering of the Registrable Securities so to
be registered shall be selected by the Company; provided, however, that such
underwriter shall be reasonably satisfactory to the Selling Holders who hold
more than 50% of the Registrable Securities so to be registered.
-2-
<PAGE> 4
(f) Priority in Demand Registrations. If the managing
underwriter of any underwritten offering shall advise the Company in writing
(with a copy to each Selling Holder of Registrable Securities requesting
registration) that, in its opinion, the number of securities requested to be
included in such registration exceeds the number which can be sold in such
offering within a price range reasonably related to the then current market
value of the securities, the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in such
offering, Registrable Securities requested to be included in such registration,
pro rata among the Selling Holders requesting such registration on the basis of
the percentage of the Registrable Securities then held by, or issuable upon
exercise or conversion of Convertible Securities then held by, such Selling
Holders. In connection with any such registration to which this Section 2.1(f)
is applicable, no securities other than Registrable Securities shall be covered
by such registration unless the written consent of Selling Holders holding at
least a majority of the Investor Registrable Securities included in such
registration shall have been obtained.
(g) Limitations on Demand Registrations. Notwithstanding
anything in this Section 2.1 to the contrary, (i) if the Company has issued
shares of Series A Preferred Stock having an aggregate Face Value of $14 million
or more, the holders of the Registrable Securities shall be limited to a maximum
of three Demand Registrations, and (ii) if the Company has issued shares of
Series A Preferred Stock having an aggregate Face Value of less than $14
million, the holders of the Registrable Securities shall be limited to a maximum
of two Demand Registrations.
2.2. Piggyback Registrations.
(a) Right to Include Registrable Securities. If the
Company proposes to register any of its securities under the Securities Act by
registration on Forms S-1, S-2 or S-3 or any successor or similar form(s)
(except registrations on such Forms or similar form(s) solely for registration
of securities in connection with an employee benefit plan or dividend
reinvestment plan or a merger or consolidation of the Company), whether or not
for sale for its own account, it will, subject to Section 2.8 hereof, each such
time give prompt written notice to all registered holders of Registrable
Securities of its intention to do so and of such holders' rights under this
Section 2.2. Upon the written request of any such holder (a "Requesting Holder")
made as promptly as practicable and in any event within 20 days after the
receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such Requesting Holder), the Company
will, subject to Section 2.8 hereof, use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Requesting Holders thereof;
provided, however, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
-3-
<PAGE> 5
securities, the Company may, at its election, give written notice of such
determination to each Requesting Holder of Registrable Securities and (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from any obligation of the Company to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 2.1 and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section
2.2 shall relieve the Company of its obligation to effect any registration upon
request under Section 2.1. The Company will pay all Registration Expenses in
connection with registration of Registrable Securities requested pursuant to
this Section 2.2.
(b) Priority in Piggyback Registrations. If the managing
underwriter of any underwritten offering shall inform the Company by letter of
its belief that the number or type of Registrable Securities requested to be
included in such registration would materially adversely affect such offering,
then the Company will include in such registration, to the extent of the number
and type which the Company is so advised can be sold in (or during the time of)
such offering, (i) first, all securities proposed by the Company to be sold for
its own account or which the Company is required to register on behalf of any
third party exercising rights similar to those granted in section 2.1(a), (ii)
second, such Investor Registrable Securities requested to be included in such
registration pro rata among such holders on the basis of the estimated gross
proceeds of the securities of such holders requested to be so included, (iii)
third, such Registrable Securities and all other securities of the Company
requested to be included in such registration by third parties exercising rights
similar to those granted in Section 2.2(a) pro rata among such holders on the
basis of the estimated gross proceeds of the securities of such holders
requested to be so included, and (iv) fourth, any other securities of the
Company requested to be included in such registration.
2.3. Registration Procedures. (a) If and whenever the
Company is required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Section 2.1 and
2.2, the Company will as expeditiously as possible:
(i) prepare and (as soon as practicable, and in
any event within 60 days after (x) receipt by the Company of a request
under Section 2.1 or (y) the end of the period within which requests
for registration may be given to the Company under Section 2.2) file
with the Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such
registration statement to become effective; provided, however, that the
Company may discontinue any registration of its securities which are
not Registrable
-4-
<PAGE> 6
Securities (and, under the circumstances specified in Section 2.2(a),
its securities which are Registrable Securities) at any time prior to
the effective date of the registration statement relating thereto;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the provisions
of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement for such
period as shall be required for the disposition of all of such
Registrable Securities; provided, that such period need not exceed 120
days in the case of registration required by Sections 2.1 or 2.2;
(iii) furnish to each seller of Registrable
Securities covered by such registration statement and the managing
underwriter, if any, such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents,
as such seller may reasonably request;
(iv) use its best efforts (x) to register or
qualify all Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such states of the United States of America where an exemption is not
available and as the sellers of Registrable Securities covered by such
registration statement shall reasonably request, (y) to keep such
registration or qualification in effect for so long as such
registration statement remains in effect, and (z) to take any other
action which may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the
securities to be sold by such sellers; provided, however, that the
Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this subdivision (iv) be
obligated to be so qualified or to consent to general service of
process in any such jurisdiction;
(v) use its best efforts to cause all
Registrable Securities covered by such registration statement to be
registered with or approved by such other federal or state governmental
agencies or authorities as may be necessary in the opinion of counsel
to the Company and counsel to the seller or sellers thereof to
consummate the disposition of such Registrable Securities;
-5-
<PAGE> 7
(vi) furnish to each seller of Registrable
Securities a signed counterpart of
(x) an opinion of counsel for the
Company, and
(y) a "cold comfort" letter signed by
the independent public accountants who have certified the
Company's financial statements included or incorporated by
reference in such registration statement
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountant's cold comfort letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountant's
comfort letters delivered to the underwriters in underwritten public
offerings of securities (and dated the dates such opinions and comfort
letters are customarily dated);
(vii) notify each seller of Registrable Securities
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of any event as a result of
which, in the judgment of the Company, the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were
made, and at the request of any such seller promptly prepare and
furnish to it a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, in the
judgment of the Company, as thereafter delivered to the purchasers of
such securities, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made;
(viii) otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months,
but not more than eighteen months, beginning with the first full
calendar month after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act and Rule 158 promulgated thereunder;
(ix) provide and cause to be maintained a
transfer agent and registrar (which, in each case, may be the Company)
for all Registrable Securities
-6-
<PAGE> 8
covered by such registration statement from and after a date not later
than the effective date of such registration; and
(x) use its best efforts to list all Registrable
Securities covered by such registration statement on any national
securities exchange on which Registrable Securities of the same class
and, if applicable, series, covered by such registration statement are
then listed.
(b) The Company may require each seller of Registrable
Securities as to which any registration is being effected to furnish the Company
such information regarding such seller and the distribution of such securities
as the Company may from time to time reasonably request in writing.
(c) Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities that upon receipt of any notice from
the Company of the happening of any event of the kind described in subdivision
(vii) of this Section 2.3, such holder will forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by subdivision
(vii) of this Section 2.3 and, if so directed by the Company, will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, then in such holder's possession, of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice; provided,
however, that any period during which a holder must discontinue disposition of
Registrable Securities shall not be included in determining whether such
registration has been effective for the period required by Section 2.3(a)(ii).
2.4. Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 2.1, the Company will enter
into an underwriting agreement with such underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to the Company,
each such holder and the underwriters and to contain such representations and
warranties by the Company and such other terms as are generally prevailing in
agreements of that type, including, without limitation, indemnities to the
effect and to the extent provided in Section 2.7. The holders of the Registrable
Securities proposed to be distributed by such underwriters will cooperate with
the Company in the negotiation of the underwriting agreement and will give
consideration to the reasonable suggestions of the Company regarding the form
thereof. Any such holder of Registrable Securities shall not be required to make
any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities, such holder's intended method of
distribution and any representations required by law.
-7-
<PAGE> 9
(b) Incidental Underwritten Offerings. If the Company
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, subject to Sections 2.1(f),
2.2(b) and 2.8 hereof, if requested by any Requesting Holder of Registrable
Securities arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such Requesting Holder among the securities
of the Company to be distributed by such underwriters. Any such Requesting
Holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Requesting Holder, such Requesting Holder's Registrable Securities and such
Requesting Holder's intended method of distribution or any representations
required by law.
(c) Holdback Agreements. If any registration of
Registrable Securities shall be in connection with an underwritten public
offering, each holder of Registrable Securities agrees not to effect any public
sale or distribution, including any sale pursuant to Rule 144 under the
Securities Act, of any Registrable Securities, and not to effect any such public
sale or distribution of any other equity security of the Company or of any
security convertible into or exchangeable or exercisable for any equity security
of the Company (in each case, other than as part of such underwritten public
offering) for such customary period of time (not exceeding 120 days) as may be
reasonably requested by the underwriter of such offering beginning on the
effective date of such registration statement (except as part of such
registration) provided that each holder of Registrable Securities has received
written notice of such registration at least 15 days prior to such effective
date.
If any registration of Registrable Securities shall be in
connection with an underwritten public offering, the Company agrees (i) not to
effect any public sale or distribution of any of its equity securities or of any
security convertible into or exchangeable or exercisable for any equity security
of the Company (other than any such sale or distribution of such securities in
connection with any merger or consolidation by the Company or any subsidiary of
the Company of the capital stock or substantially all the assets of any other
person or in connection with an employee stock option or other benefit plan)
during the 15 days prior to, and during the 90-day period beginning on, the
effective date of such registration statement (except as part of such
registration) and (ii) that any agreement entered into after the date of this
Agreement pursuant to which the Company issues or agrees to issue any privately
placed equity securities shall contain a provision under which holders of such
securities agree not to effect any public sale or distribution of any such
securities during the period referred to in the foregoing clause (i), including
any sale pursuant to Rule 144 under the Securities Act (except as part of such
registration, if permitted).
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2.5. Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the holders of
Registrable Securities registered under such registration statement, their
underwriters, if any, and their respective counsel and accountants the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and, to the
extent practicable, each amendment thereof or supplement thereto, and give each
of them such access to its books and records (to the extent customarily given to
underwriters of the Company's securities) and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of such holders' and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
2.6. Company Right to Postpone Registration. The Company
shall be entitled to postpone for a reasonable period of time (but not exceeding
120 days and no more than once in any twelve month period) the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to this Agreement if the Company determines, in its reasonable
judgment, that such registration and offering would interfere with any
financing, acquisition, corporate reorganization or other material transaction
involving the Company or any of its Affiliates or would require premature
disclosure thereof and gives the holders of Registrable Securities requesting
registration thereof pursuant to Section 2.1 written notice of such delay within
five Business Days of the receipt of a written request from Initiating Holders
as contemplated pursuant to Section 2.1(a). If the Company shall so postpone the
filing of a registration statement, such holders of Registrable Securities
requesting registration thereof pursuant to Section 2.1 shall have the right to
withdraw the request for registration by giving written notice to the Company
within 30 days after receipt of the notice of postponement and, in the event of
such withdrawal, such request shall not be counted for purposes of the requests
for registration to which holders of Registrable Securities are entitled
pursuant to Section 2.1 hereof.
2.7. Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless, in the case of any
registration statement filed pursuant to Section 2.1 or 2.2, each seller of any
Registrable Securities covered by such registration statement, its directors,
officers, partners, agents and affiliates and each other Person who participates
as an underwriter in the offering or sale of such securities and
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each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, insofar as losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto (each, a "Registration
Document"), or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein in
light of the circumstances in which they were made not misleading, and the
Company will reimburse such seller and each such director, officer, partner,
agent or affiliate, underwriter and controlling Person for any reasonable legal
or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such Registration Document in reliance upon and in conformity with written
information furnished to the Company through an instrument executed by or on
behalf of such seller or underwriter, as the case may be, specifically stating
that it is for use in the preparation thereof, it being agreed that, upon
written request of the Company, the Purchasers shall provide to the Company a
letter (the "Purchaser Letter") specifying the information in any Registration
Document that is based on information furnished to the Company for use in such
Registration Document; and provided, further, that the Company shall not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus so long as such final prospectus, and any
amendments or supplements thereto, have been furnished to such underwriter. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer, partner,
agent or affiliate or controlling Person and shall survive the transfer of such
securities by such seller.
(b) Indemnification by the Sellers. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking satisfactory to it from each holder joining
in such registration, severally and not jointly, to indemnify and hold harmless
and reimburse (in the same manner and to the same extent as set forth in
subdivision (a) of this Section 2.7) the Company, and each
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<PAGE> 12
director of the Company, each officer of the Company and each other Person, if
any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from any such Registration Document, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation of
thereof, it being agreed that, upon written request of the Company, the
Purchasers shall provide to the Company the Purchaser Letter; provided, however,
that the liability of such indemnifying party under this Section 2.7(b) shall be
limited to the amount of proceeds received by such indemnifying party in the
offering giving rise to such liability. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling Person and shall survive
the transfer of such securities by such seller. The Company shall be entitled to
receive indemnification from underwriters of any underwritten public offering,
to the same extent as provided above with respect to information and with
respect to such persons so furnishing such information in any Registration
Document.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 2.7, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties is reasonably likely to exist
in respect of such claim, the indemnifying party shall be entitled to
participate in and, to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation unless in such indemnified party's reasonable judgment a conflict
of interest between such indemnified and indemnifying parties arises in respect
of such claim after the assumption of the defense thereof and the indemnified
party notifies the indemnifying party of such indemnified party's judgment and
the basis therefor. No indemnifying party shall be liable for any settlement of
any action or proceeding effected without its written consent, which consent
shall not be unreasonably withheld. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement
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<PAGE> 13
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect of such claim or litigation.
(d) Contribution. If the indemnification provided for in
this Section 2.7 shall for any reason be held by a court to be unavailable to an
indemnified party under subparagraph (a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under subparagraph (a) or (b) hereof, the indemnified
party and the indemnifying party under subparagraph (a) or (b) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the relative fault of
the Company and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claims, damage or liability,
or action in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company and such prospective sellers from the offering of the securities
covered by such registration statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Such prospective sellers' obligations to
contribute as provided in this subparagraph (d) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding subdivisions of this
Section 2.7 (with appropriate modifications) shall be given by the Company and
each seller of Registrable Securities with respect to any required registration
or other qualification of securities under any federal or state law or
regulation of any governmental authority other than the Securities Act.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 2.7 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred;
provided, however, that if an indemnified party is adjudged to not be entitled
to such payments in a final non-appealable judgement of a federal or state court
of competent jurisdiction, it shall promptly return such payments to the
indemnifying party.
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<PAGE> 14
2.8. Limitations on Registrations of Registrable
Securities. The Company shall not be required to effect any registration of
Registrable Securities pursuant to Section 2.1 or 2.2 hereof if it shall deliver
to the holder or holders requesting such registration an opinion of counsel
(which opinion and counsel shall be reasonably satisfactory to such holder or
holders) to the effect that all Registrable Securities held by such holder may
be sold in the public market without registration under the Securities Act and
any applicable state securities laws.
2.9. Participation in Underwritten Registrations.
Notwithstanding anything in this Agreement to the contrary, no holder of
Registrable Securities may participate in any registration of any underwritten
public offering hereunder pursuant to Section 2.2 unless such holder of
Registrable Securities: (i) agrees to sell its Common Stock on the basis
provided in any underwriting arrangements approved by the Company; and (ii)
accurately completes in a timely manner and executes all questionnaires, powers
of attorney, the Purchaser Letter, underwriting agreements and all other
documents customarily required by the registrant or the underwriters, if any, in
similar stock offerings.
2.10. Expenses. The Company will pay the Registration
Expenses in connection with any registration requested pursuant to Section 2.1
or 2.2.
3. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include a reference to the comparable section, if any, of any such similar
Federal statute.
"Face Value" with respect to the Series A Preferred Stock
shall mean $100 per share.
"Person" means a corporation, an association, a partnership,
an organization, a business, an individual, a governmental or political
subdivision thereof or a governmental agency.
"Purchaser Letter" has the meaning set forth in Section
2.7(a).
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with Section 2, including, without
limitation, all
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<PAGE> 15
registration, filing and fees of the National Association of Securities Dealers,
Inc. ("NASD"), all listing fees, all fees and expenses of complying with
securities or blue sky laws (including, without limitation, reasonable fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities), all word processing, duplicating
and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of "cold comfort" letters required by or
incident to such performance and compliance, any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities and the
reasonable fees and expenses of one counsel to the Selling Holders (selected by
Selling Holders representing at least 50% of the Investor Registrable Securities
covered by such registration); provided, however, that Registration Expenses
shall exclude, and the sellers of the Registrable Securities being registered
shall pay, underwriters' fees and underwriting discounts and commissions,
expenses incurred in connection with promotional efforts or "roadshows" and
transfer taxes in respect of the Registrable Securities being registered.
"Registrable Securities" has the meaning set forth in Section
1 hereof. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) they shall have been sold
as permitted by, and in compliance with, Rule 144 (or successor provision)
promulgated under the Securities Act, (c) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer under the Securities Act shall have been delivered by the Company and
subsequent public distribution of them shall not require registration of them
under the Securities Act, or (d) they shall have ceased to be outstanding.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such similar federal statute.
"Selling Holders" has the meaning set forth in Section
2.1(a)(ii).
4. Rule 144. The Company shall take all actions reasonably
necessary to enable holders of Registrable Securities to sell such securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission including, without limiting the generality of the
foregoing, using its best efforts to file on a timely basis all reports required
to be filed by the Exchange Act. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
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<PAGE> 16
5. Amendments and Waivers. This Agreement may be amended with the
consent of the Company and HCCP or its successors and assigns. The Company may
not take any action herein prohibited, or omit to perform any act herein
required to be performed by it, unless the Company has obtained the written
consent to such amendment, action or omission to act, of the beneficial owner or
owners of at least 66-2/3% of the Investor Registrable Securities. Each
beneficial owner of any Registrable Securities at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 5, whether
or not such Registrable Securities shall have been marked to indicate such
consent.
6. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
Registrable Securities held by any holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership of such Registrable Securities.
7. Notices. All communications provided for hereunder shall be
sent by courier or other overnight delivery service, shall be effective upon
receipt, and shall be addressed as follows:
(a) if to HCCP, addressed to it in the manner set forth
in the Purchase Agreement, or at such other address as HCCP shall have furnished
to the Company in writing;
(b) if to any other holder of Registrable Securities, at
the address that such holder shall have furnished to the Company in writing, or,
until any such other holder so furnishes to the Company an address, then to and
at the address of the last holder of such Registrable Securities who has
furnished an address to the Company; or
(c) if to the Company, addressed to it in the manner set
forth in the Purchase Agreement, or at such other address as the Company shall
have furnished to each holder of Registrable Securities at the time outstanding.
8. Assignment; Calculation of Percentage Interests in Registrable
Securities.
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and, with respect to the
Company, its respective
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<PAGE> 17
successors and assigns and, with respect to HCCP, any beneficial owner of any
Registrable Securities, subject to the provisions respecting the minimum numbers
of percentages of shares of Registrable Securities required in order to be
entitled to certain rights, or take certain actions, contained herein. The HCCP
Group (and not any other holder of Registrable Securities or any other Person)
shall be permitted, in connection with a transfer or disposition of Registrable
Securities permitted by the Purchase Agreement, to impose conditions or
constraints on the ability of the transferee, as a holder of Registrable
Securities, to request a registration pursuant to Section 2.1 and shall provide
the Company with copies of such conditions or constraints and the identity of
such transferees.
(b) For purposes of this Agreement, all references to a
percentage of the Registrable Securities or Investor Registrable Securities
shall be calculated based upon the number of Registrable Securities or Investor
Registrable Securities, as the case may be, outstanding at the time such
calculation is made, assuming (i) the conversion of all Series A Preferred Stock
into, (ii) the conversion of the Series A Preferred Stock issuable upon
conversion of the Notes into, and (iii) the exercise of all Warrants for, shares
of Common Stock.
9. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York.
11. No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which (a) is
inconsistent with the rights granted to the holders of Registrable Securities in
this Agreement or (b) grants registration rights to any security holder unless
at the time holders of the Registrable Securities have or are granted without
further consideration no less favorable registration rights.
12. Recapitalizations, etc. In the event that any capital stock or
other securities are issued in respect of, in exchange for, or in substitution
of, any Registrable Securities by reason of any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any other
change in the Company's capital structure, appropriate adjustments shall be made
in this Agreement so as to fairly and equitably preserve, as far as practicable,
the original rights and obligations of the parties hereto under this Agreement.
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<PAGE> 18
13. Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the prevailing party to such action or proceeding
shall be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
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<PAGE> 19
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
AMERICA SERVICE GROUP INC.
By:
---------------------------------------------
Name: Michael Catalano
Title: President and Chief Executive Officer
HEALTH CARE CAPITAL PARTNERS L.P.
By: FERRER FREEMAN THOMPSON & CO. LLC,
its General Partner
By:
---------------------------------------------
Name: David A. Freeman
Title: Member
HEALTH CARE EXECUTIVE PARTNERS L.P.
By: FERRER FREEMAN THOMPSON & CO. LLC,
its General Partner
By:
---------------------------------------------
Name: David A. Freeman
Title: Member
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<PAGE> 1
EXHIBIT 99.10
2ND STORY of Level 1 printed in FULL format.
Copyright 1999 PR Newswire Association, Inc.
PR Newswire
January 26, 1999, Tuesday
SECTION: Financial News
DISTRIBUTION: TO BUSINESS EDITOR
LENGTH: 246 words
HEADLINE: America Service Group Completes Acquisition
DATELINE: NASHVILLE, Tenn., Jan. 26
BODY:
America Service Group Inc. (Nasdaq: ASGR) today announced that it
has completed the acquisition of the Government Services Division of
MedPartners, Inc. (NYSE: MDM). Comprised of EMSA Correctional Care and EMSA
Military Services, the division provides healthcare at correctional facilities,
military bases and Veterans Administration hospitals. Combined with Prison
Health Services, ASG's operating subsidiary, the company will manage medical
services for approximately 100 government agencies, with annualized revenues of
approximately $300 million.
"We are very pleased to welcome EMSA clients and employees to our
company," stated Michael Catalano, ASG's President and CEO. "Going forward our
efforts will focus on continuity of client service, operating performance and
marketing momentum."
Execution of the acquisition agreement was previously announced on
December 18, 1998. The purchase price of $67 million, subject to adjustment
upon closing audit, included target working capital of $27.6 million.
America Service Group Inc., based in Brentwood, Tennessee, is a leading
national provider of correctional healthcare services in the United States. ASG
contracts with approximately 100 government agencies to provide a wide range of
managed healthcare programs tailored to specific client needs. The Company
employs over 4,200 medical, professional and administrative staff nationwide.
SOURCE America Service Group Inc.
CONTACT: Michael Catalano, President & CEO, 615-376-1319, or Bruce Teal,
Senior Vice President and CFO, 615-376-1361, both of America Service Group Inc.
LANGUAGE: ENGLISH
LOAD-DATE: January 27, 1999
