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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from __________ to__________
Commission File Number : 0-19758
Access Health, Inc.
(Exact name of registrant as specified in its charter)
Delaware 68-0163589
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11020 White Rock Road, Rancho Cordova, California 95670
(Address of principal executive offices) (Zip code)
(916) 851-4000
(Registrant's telephone number, including area code)
Access Health Marketing, Inc.
(Former name)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes___X___ No______
Number of shares of Common Stock Outstanding at July 31, 1996: 12,576,674
shares*
* The number of shares is on a post-split basis. On January 26, 1996, the
Registrant declared a 3-for-2 stock split which was effected as a stock dividend
for all stockholders of record on February 15, 1996.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
10.1* Amended and Restated Agreement of Limited Partnership of
AHN Partners, L.P.
10.2* Admission Agreement dated April 15, 1996
10.3* Partnership Interest Option Agreement dated April 15, 1996
10.4 Line of Credit Note dated May 7, 1996.
* Confidential Treatment Requested
b) There have been no reports on Form 8-K filed during the quarter
ended June 30, 1996.
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Signature
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 thereunto duly authorized.
ACCESS HEALTH, INC.
Date: January 10, 1997 /S/ John V. Crisan
-----------------------------------------
John V. Crisan
Senior Vice President and Chief
Financial Officer (principal financial
officer of Registrant)
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AHN PARTNERS, L.P.
This Amended and Restated Agreement of Limited Partnership of AHN
Partners, L.P. (the "Company"), a limited partnership formed under the Act
(as defined below), is entered into and shall be effective as of April 3,
1996 (the "Effective Date"), by and among the Company and the Persons
identified on SCHEDULE A-1.
RECITALS
America's Health Network, L.L.C. ("AHN LLC"), a Delaware limited
liability company, and The Providence Journal Company (the "Initial Limited
Partner") have heretofore formed the Company, as a Delaware limited
partnership, under an Agreement of Limited Partnership (the "Partnership
Agreement"), dated as of November 25, 1995.
Under the Partnership Agreement, AHN LLC is the sole general partner and
the Initial Limited Partner is the sole limited partner of the Company.
AHN LLC and the Initial Limited Partner now desire to admit additional
limited partners and to amend and restate in full the Partnership Agreement.
Accordingly, the Partnership Agreement is hereby amended and restated in
full as follows.
ARTICLE I
DEFINITIONS
For purposes of this Agreement (as defined below), unless the context
clearly indicates otherwise, the following terms shall have the following
meanings:
1.1. ACCESS. Access Health, Inc., a Delaware corporation.
1.2. ACCESS REPRESENTATIVE. As defined in Section 3.4.1(a).
1.3. ACT. The Delaware Uniform Limited Partnership Act (Chapter 17 of
Title 6 of the Delaware Code), as amended from time to time, and any
successor statute.
1.4. ACTIVELY PARTICIPATE/ACTIVE PARTICIPATION. To participate with or
in or to become involved with or in any business, enterprise or activity,
including, without limitation, by owning or controlling (directly or
indirectly), or by acting as an executive officer, director, partner,
employee of or consultant to any such business, enterprise or activity;
PROVIDED, that Active Participation shall not include the ownership or
control (direct or indirect) of 5% or less of the issued and outstanding
shares of capital
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stock of a corporation or 5% or less of the outstanding interests in a
partnership or limited liability company (which limit shall be 10% in the
case of investment positions taken in the ordinary course of trading
activities by either SC Fundamental Value Fund BVI, Ltd. or SC Fundamental
Value Fund, L.P.).
1.5. ADDITIONAL PARTNER. A Partner other than AHN LLC, the Initial
Limited Partner, National Call Center, Inc. ("NCCI") or the Class A Partners
or the Class B Partners (or any Substitute Partner of any of the foregoing)
who acquires a Partnership Interest from the Company.
1.6. ADJUSTED CAPITAL ACCOUNT DEFICIT. With respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant Taxable Year after giving effect to the following adjustments:
(a) increased by (i) the amount of any unpaid capital contributions, if any,
unconditionally agreed to be contributed by such Partner, (ii) an amount
equal to the sum of such Partner's allocable share of Company Minimum Gain
and such Partner's allocable share of Partner Minimum Gain, in each case as
computed on the last day of such fiscal year in accordance with applicable
Regulations, and (iii) the amount of Company liabilities allocable to such
Partner under Code SECTION 752 with respect to which such Partner bears the
Economic Risk of Loss to the extent such liabilities do not constitute
Partner Nonrecourse Liabilities, and (b) reduced by all reasonably expected
adjustments, allocations and distributions described in SECTION
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations. This definition of
Adjusted Capital Account Deficit is intended to comply with the provisions of
SECTION 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
1.7. ADMISSION AGREEMENT. The Agreement between a Class A Partner or a
Class B Partner and the Company referred to in Section 4.1.1.
1.8. AFFILIATE. When used with reference to a specified Person, any
Person that, at the relevant time, directly or indirectly controls, is
controlled by, or is under common control with, the specified Person.
Without limiting the foregoing, for purposes of this definition (except as
otherwise provided in Section 3.5(b)), ownership of 20% or more of the
outstanding voting securities or interests of any Person shall be deemed to
be "control" of that Person.
1.9. AGREEMENT. This Agreement, including all amendments hereto.
1.10. AHN, INC. America's Health Network, Inc., a Delaware
corporation.
1.11. ALLEN. Allen & Company Incorporated, a Delaware corporation.
1.12. ANNUAL BUSINESS PLAN. The business plan for the Company and
its operations for the year in question, including a capital and operating
budget, as approved by the Management Committee or as provided in Section
3.4.5.
1.13. ASSIGNEE. A transferee of a Partnership Interest who has not
been admitted as a Substitute Partner. Except for the right to receive
distributions which would otherwise be made to the Partner who has assigned
its Partnership Interest, the Assignee shall have none of the rights of a
Partner.
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1.14. BANKRUPT PARTNER. A Partner who: (a) has become the subject of
an order for relief under the United States Bankruptcy Code or (b) has
initiated, either in an original proceeding or by way of answer in any state
insolvency or receivership proceeding, an action for liquidation arrangement,
composition, readjustment, dissolution or similar relief.
1.15. BUSINESS DAY. Any day other than Saturday, Sunday or any U.S.
national holiday.
1.16. CAPITAL ACCOUNT. The account maintained for a Partner or
Assignee determined in accordance with Section 4.3.
1.17. CAPITAL CONTRIBUTION. Any contribution of Property made or to
be made by or on behalf of a Partner, including, in the case of each Class A
Partner or Class B Partner, the Initial Capital Contribution of such Class A
Partner or Class B Partner.
1.18. CARRYING VALUE. (a) With respect to Property contributed to
the Company, the fair market value of such Property reduced (but not below
zero) by all depreciation, amortization and cost recovery deductions charged
to the Partners' Capital Accounts in respect of such contributed Property,
and (b) with respect to any other Company Property, the adjusted basis of
such Property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any Property shall be adjusted at the
time of liquidation of the Company and from time to time in accordance with
SECTION 1.704-1(b)(2)(iv)(f) of the Regulations.
1.19. CAUSE. Cause shall have the meaning given it in the Management
Agreement.
1.20. CHANNEL. A television programming service devoted to health,
medicine and other related topics and the sale of related products, which is
owned and operated by the Company.
1.21. CLASS A PARTNERS. Those Persons identified as such on SCHEDULE
A-1.
1.22. CLASS B PARTNERS. Those Persons identified on SCHEDULE A-1 as
Class B Partners.
1.23. CODE. The Internal Revenue Code of 1986 as amended from time
to time, or corresponding provisions of any replacement or reenactment
thereof.
1.24. COMPANY. AHN Partners, L.P., a limited partnership formed
under the Act, and any successor partnership.
1.25. COMPANY LIABILITY. Any enforceable debt or obligation for
which the Company is liable or which is secured by any Company Property.
1.26. COMPANY MINIMUM GAIN. An amount determined by first computing
for each Company Nonrecourse Liability any gain the Company would realize if
it disposed of the Company Property subject to that liability for no
consideration other than full satisfaction of the liability, and then
aggregating the separately computed gains. The amount of Company Minimum
Gain includes such minimum gain arising
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from a conversion, refinancing, or other change to a debt instrument, only to
the extent a Partner is allocated a share of that minimum gain. For any
Taxable Year, the net increase or decrease in Company Minimum Gain is
determined by comparing the Company Minimum Gain on the last day of the
immediately preceding Taxable Year with the Company Minimum Gain on the last
day of the current Taxable Year. Notwithstanding any provision to the
contrary contained herein, Company Minimum Gain and increases and decreases
in Company Minimum Gain are intended to be computed in accordance with Code
SECTION 704 and the Regulations issued thereunder, as the same may be issued
and interpreted from time to time. A Partner's share of Company Minimum Gain
at the end of any Taxable Year equals: the sum of Nonrecourse Deductions
allocated to that Partner (and to that Partner's predecessors in interest) up
to that time and the Distributions made to that Partner (and to that
Partner's predecessors in interest) up to that time of proceeds of a
nonrecourse liability allocable to an increase in Company Minimum Gain minus
the sum of that Partner's (and that Partner's predecessors in interest)
aggregate share of net decreases in Company Minimum Gain plus decreases
resulting from revaluations of Company Property subject to one or more
Company Nonrecourse Liabilities.
1.27. COMPANY NONRECOURSE LIABILITY. A Company Liability to the
extent that no Partner or Related Person bears the economic risk of loss (as
defined in SECTION 1.752-2 of the Regulations) with respect to the liability.
1.28. COMPANY PROPERTY. Any Property owned by the Company.
1.29. CURATIVE ALLOCATION. Any allocation of an item of income,
gain, deduction, loss or credit pursuant to the provisions of Section 5.3.
1.30. DEFAULT INTEREST RATE. The lower of (a) the maximum legal rate
or (b) the then-current prime rate as published by THE NEW YORK TIMES (or
announced by Chemical Bank, if not so published) plus three percent.
1.31. DELINQUENT PARTNER. As defined in Section 4.2.
1.32. DISASSOCIATION (DISASSOCIATE). Any action or event which
causes a Person to cease to be a Partner as described in Section 10.5.
1.33. DISPOSITION (DISPOSE). Any sale, assignment, transfer,
exchange, mortgage, pledge, grant, hypothecation, or other transfer, absolute
or as security or encumbrance (including dispositions by operation of law).
1.34. DISTRIBUTION. A distribution of Property by, or on behalf of,
the Company to a Partner as described in Article VI.
1.35. ECONOMIC RISK OF LOSS. As defined in SECTION 1.752-2 of the
Regulations.
1.36. EFFECTIVE DATE. The date provided in the first paragraph of
this Agreement.
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1.37. FAIR MARKET VALUE. The fair market value of any Partner's
Partnership Interest, determined as follows: The Fair Market Value of any
Partnership Interest shall be determined as of the last day of the month
preceding the month in which the event resulting in a right to purchase a
Partnership Interest occurred (the "Valuation Date"). The Fair Market Value
of any Partnership Interest shall be determined by mutual agreement of the
Management Committee (determined by Majority Vote of the Committee) and the
Partner (the "Affected Partner") whose Partnership Interest has become
subject to valuation on account of (a) a breach of Section 3.5, (b) a
Disassociation under Section 10.5 and 10.6, (c) a Redemption Election made
under Section 13.3 or (d) a reorganization that is subject to Section 13.1.
Such determination shall be made by such mutual agreement reached within 20
days of the Valuation Date, failing which the Fair Market Value shall be
determined by a Qualified Appraiser selected by mutual agreement of the
Management Committee and the Affected Partner within 30 days after the
Valuation Date. If the Management Committee and such Affected Partner fail
to agree on the selection of a Qualified Appraiser during such period, then
they shall each designate a Qualified Appraiser within ten days after the
30-day period following the Valuation Date and shall jointly instruct the two
Qualified Appraisers to appoint a third Qualified Appraiser within ten days
after the second Qualified Appraiser is appointed. Each Qualified Appraiser
shall submit a signed appraisal within 30 days after the appointment of the
third Qualified Appraiser, and the Fair Market Value shall be the average of
the middle appraisal and the appraisal closest to it. Any determination of
Fair Market Value hereunder shall not discount for a minority interest or the
illiquidity of a Partnership Interest. If either the Management Committee or
the Affected Partner fails to appoint a Qualified Appraiser, or if no
agreement on the third Qualified Appraiser is reached or if said three
Qualified Appraisers have not each submitted a signed appraisal, all within
the applicable periods specified above, the unresolved issue shall be
determined by arbitration in accordance with Article XVI. The cost of the
Appraisal incurred with respect to the determination of the Fair Market Value
of the Partnership Interests shall be paid equally by the Company and the
Affected Partner in all cases other than a reorganization under Section 13.1
and solely by the Company in the case of a reorganization under Section 13.1.
1.38. GENERAL PARTNER. The Partner designated as the General Partner
on SCHEDULE A-1.
1.39. LIMITED PARTNERS. Those Class A Partners and Class B Partners,
any Substitute Partner thereof and any Additional Partner who are designated
as Limited Partners on SCHEDULE A-1.
1.40. LIMITED PJHP DISPOSITION. The Disposition by PJHP of that portion
of its Partnership Interest permitted by Section 10.2.2 and subject to the
terms and conditions thereof.
1.41. LIQUIDATING EVENT. As defined in Section 14.1.
1.42. LIQUIDATION YEAR(S). The taxable year or years (or period
thereof) in which the Company Disposes of all or substantially all of the
Company Property and the other assets of the Company.
1.43. MAJORITY IN INTEREST. Partners holding an aggregate of more
than 50% of the Post Recoupment Percentage Interests of all the Partners
entitled to vote on a given matter; PROVIDED, that, notwithstanding any
provision of this Agreement or the Management Agreement to the contrary, any
Partner that holds, or whose Affiliate holds, any direct or indirect
financial interest in the matter to be
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voted upon or consented to by the Partners shall not have the right to vote
or give or withhold its consent with respect to such matter unless such
Partner and its Affiliates hold a Post Recoupment Percentage Interest of 20%
or less.
1.44. MAJORITY VOTE OF THE COMMITTEE. The affirmative vote or
consent of the following members of the Management Committee:
(a) until such time, if any, as the New Representative has become a
member of the Management Committee, the representatives of AHN LLC and the
PJHP Representatives, so long as such members are eligible to vote or consent
as provided in Section 3.4.1(d); PROVIDED, that if either the representatives
of AHN LLC or the PJHP Representatives are prohibited from voting or giving
consent to any matter because of the operation of the final proviso of this
definition, the affirmative vote or consent of the Access Representative or
the representative succeeding such member as provided in Section 3.4.1(c)
shall also be required (so long as such member is eligible to vote or consent
as provided in Section 3.4.1(c)), to approve such matter; and
(b) from and after such time, if any, as the New Representative has
become a member of the Management Committee, the representatives of AHN LLC,
the PJHP Representatives and at least either one of the Access Representative
or the New Representative, or representatives respectively succeeding such
members as provided in 3.4.1(e), so long as such members are eligible to vote
or consent as provided in Section 3.4.1(c);
PROVIDED, that, notwithstanding any provision of this Agreement or the
Management Agreement to the contrary, any member of the Management Committee
that represents a Partner that holds, or whose Affiliate holds, any direct or
indirect financial interest in the matter to be voted upon or consented to by
the Management Committee shall not have the right to vote or give or withhold
its consent with respect to such matter unless such Partner and its
Affiliates hold a Post Recoupment Percentage Interest of 20% or less.
1.45. MAJORITY VOTE OF THE PARTNERS. The affirmative vote of the
Partners holding more than 50% of the Post Recoupment Percentage Interests;
PROVIDED, that, notwithstanding any provision of this Agreement or the
Management Agreement to the contrary, any Partner that holds, or whose
Affiliate holds, any direct or indirect financial interest in the matter to
be voted upon or consented to by the Partners shall not have the right to
vote or give or withhold its consent with respect to such matter unless such
Partner and its Affiliates hold a Post Recoupment Percentage Interest of 20%
or less.
1.46. MANAGEMENT AGREEMENT. The Management Agreement, dated as of
February 29, 1996, between the Manager and the Company.
1.47. MANAGEMENT COMMITTEE. Those individuals designated by the
Partners to manage the affairs of the Company under Section 3.4.
1.48. MANAGER. AHN LLC or any substitute manager selected pursuant
to the terms of Section 3.2.
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1.49. NCCI. National Call Center, Inc., a wholly-owned subsidiary of
Home Shopping Network, Inc.
1.50. NET AVAILABLE CASH. For each Taxable Year, an amount equal to the
sum of the following: (a) the cash receipts of the Company during such
Taxable Year, including receipts from the sale of assets, but excluding funds
received from borrowings and any Capital Contributions made to the Company
during such Taxable Year, and (b) liquidations of reserves during such
Taxable Year in excess of those reasonably required to pay for any working
capital needs, improvements, replacements or any other contingencies for
which the reserves were created, minus the sum of the following: (c) any
reserves made during that Taxable Year reasonably considered necessary by the
Management Committee for operating requirements, for the payment of debts and
for other contingencies, and (d) the cash expenditures of the Company during
such Taxable Year, including the repayment of debts.
1.51. NET LOSS. For any Taxable Period the excess, if any, of the
Company's items of loss and deduction for such Taxable Period over the
Company's items of income and gain for such Taxable Period. The items
included in the calculation of Net Loss shall be determined in accordance
with Section 4.3.2 and shall not include any items specially allocated under
Section 5.2. If an item of income, gain, loss or deduction that has been
included in the initial computation of Net Loss is subsequently subjected to
a Regulatory Allocation or a Curative Allocation, Net Profits or Net Loss, as
the case may be, shall be recomputed without regard to such item.
1.52. NET PROFITS. For any Taxable Period, the excess, if any, of
the Company's items of income and gain for such Taxable Period over the
Company's items of loss and deduction for such Taxable Period. The items
included in the calculation of Net Profits shall be determined in accordance
with Section 4.3.2 and shall not include any items specially allocated under
Section 5.2. If an item of income, gain, loss or deduction that has been
included in the initial computation of Net Profits is subsequently subjected
to a Regulatory Allocation or a Curative Allocation, Net Profits or Net Loss,
as the case may be, shall be recomputed without regard to such item.
1.53. NEWCO. As defined in Section 13.1.
1.54. NEW REPRESENTATIVE. As defined in Section 3.4.1(b)(iii).
1.55. NONRECOURSE DEDUCTIONS. The meaning set forth in SECTION 1.704-2(b)
of the Regulations. The amount of Nonrecourse Deductions for a Taxable Year
equals the excess, if any, of the net increase in Company Minimum Gain during
that Taxable Year, over the aggregate amount of any Distributions during that
Taxable Year of proceeds of a Nonrecourse Liability that are allocable to an
increase in Company Minimum Gain, determined according to the provisions of
SECTION 1.704-2(c) of the Regulations.
1.56. NONRECOURSE LIABILITIES. Nonrecourse Liabilities include
Company Nonrecourse Liabilities and Partner Nonrecourse Liabilities.
1.57. NOTIFICATION OR NOTICE. A writing, containing the information
required by this Agreement to be communicated to a party, delivered in the
manner provided in Section 17.2.
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1.58. ORGANIZATION. A Person other than a natural person, trust or
estate. Organization includes, without limitation, corporations (both
non-profit and other corporations), partnerships (both limited and general),
joint ventures, limited liability companies, and unincorporated associations,
but the term does not include joint tenancies and tenancies by the entirety.
1.59. ORGANIZATION EXPENSES. Those expenses incurred in connection
with the organization of the Company, including the costs of preparation of
this Agreement and the other agreements referred to herein and the filing of
the Certificate of Limited Partnership and all amendments thereto required
hereby.
1.60. PARTNER. Those persons listed on SCHEDULE A-1.
1.61. PARTNER MINIMUM GAIN. An amount determined by first computing
for each Partner Nonrecourse Liability any gain the Company would realize if
it disposed of the Company Property subject to that liability for no
consideration other than full satisfaction of the liability, and then
aggregating the separately computed gains. The amount of Partner Minimum
Gain includes such minimum gain arising from a conversion, refinancing, or
other change to a debt instrument, only to the extent a Partner is allocated
a share of that minimum gain. For any Taxable Year, the net increase or
decrease in Partner Minimum Gain is determined by comparing the Partner
Minimum Gain on the last day of the immediately preceding Taxable Year with
the Partner Minimum Gain on the last day of the current Taxable Year.
Notwithstanding any provision to the contrary contained herein, Partner
Minimum Gain and increases and decreases in Partner Minimum Gain are intended
to be computed in accordance with Code SECTION 704 and the Regulations issued
thereunder, as the same may be issued and interpreted from time to time.
1.62. PARTNER NONRECOURSE LIABILITY. Any Company Liability to the
extent the liability is nonrecourse under state law, and on which a Partner
or Related Person bears the Economic Risk of Loss, because, for example, the
Partner or Related Person is a creditor or a guarantor.
1.63. PARTNERSHIP INTEREST. The rights of a Partner or, in the case
of an Assignee, the rights of the assigning Partner, in Distributions
(liquidating or otherwise) and allocations of the profits, losses, gains,
deductions, and credits of the Company as set forth in SCHEDULE A-2.
1.64. PERSON. An individual, trust, estate, or any incorporated or
unincorporated Organization.
1.65. PJHP. PJ Health Programming, Inc., a Delaware corporation.
1.66. PJHP REPRESENTATIVES. As defined in Section 3.4.1(a).
1.67. PJHP'S ASSIGNEE. The Person acquiring its Partnership Interest
in the Limited PJHP Disposition.
1.68. POST RECOUPMENT PERCENTAGE INTERESTS. The Post Recoupment
Percentage Interest of each Partner as specified on SCHEDULE A-2, as adjusted
from time to time, pursuant to the terms of this Agreement.
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1.69. PREFERRED PARTNERS. The Class A Partners and the Class B
Partners, collectively.
1.70. PREFERRED PARTNER'S AGGREGATE PREFERENCE AMOUNT. With respect
to each Preferred Partner, on any given date, an amount (but not less than
zero) equal to (a) the aggregate amount of the Preferred Partner's Annual
Preference Amounts since the inception of the Company through such date,
minus (b) the aggregate amount of Distributions made to the Preferred Partner
under Section 6.1.1(a) since the inception of the Company.
1.71. PREFERRED PARTNER'S ANNUAL PREFERENCE AMOUNT. With respect to
each Preferred Partner, for each annual period an amount equal to (a) the
average daily balance of the Preferred Partner's Unrecovered Preferred
Capital Amount during that annual period, multiplied by (b) 8% (prorated for
any period consisting of less than 365 days).
1.72. PREFERRED PARTNER'S PREFERRED CAPITAL AMOUNT. With respect to
each Preferred Partner, on any given date, an amount (but not less than zero)
equal to the aggregate Capital Contributions made by such Preferred Partner
(valued by reference to the Carrying Value of such contribution as of the
date on which such contribution was made), minus any Distributions to such
Preferred Partner under Section 6.1.2(a).
1.73. PREFERRED PARTNER'S UNRECOVERED PREFERRED CAPITAL AMOUNT. With
respect to each Preferred Partner, on any given date, an amount (but not less
than zero) equal to (a) the Preferred Partner's Preferred Capital Amount,
plus (b) the Preferred Partner's Aggregate Preference Amount (determined
without taking into account the Preferred Partner's Annual Preference Amount
for the taxable period in which such date falls).
1.74. PREFERRED PARTNER'S UNTAXED PREFERENCE AMOUNT. With respect to
each Preferred Partner, on any given date, an amount (but not less than zero)
equal to (a) the aggregate amount of the Preferred Partner's Annual
Preference Amounts through such date, minus (b) the aggregate amount of Net
Profits previously allocated to such Preferred Partner under Section 5.1.1(a).
1.75. PROCEEDING. Any judicial or administrative trial, hearing or
other activity, civil, criminal or investigative, the result of which may be
that a court, arbitrator, or governmental agency may enter a judgment, order,
decree, or other determination which, if not appealed or reversed, would be
binding upon the Company, a Partner or other person subject to the
jurisdiction of such court, arbitrator, or governmental agency.
1.76. PROPERTY. Any property real or personal, tangible or
intangible, including money and any legal or equitable interest in such
property, but excluding services and promises to perform services in the
future.
1.77. QUALIFIED APPRAISER. An appraiser having a national reputation
qualified to appraise cable television channels in the United States, or
interests therein, and reputable in his, her or its field, and who is not
affiliated with the Company, any Partner, or the assets of any of them or
their Affiliates.
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1.78. RECOUPMENT. Such time as the aggregate Preferred Partners'
Preferred Capital Amounts shall be zero.
1.79. REDEMPTION AMOUNT. The amount payable to Class B Partners
pursuant to Section 13.3.1.
1.80. REDEMPTION ELECTION. The election Notification by a Class B
Partner to have its Partnership Interest or Securities redeemed pursuant to
Section 13.3.1 or Section 13.3.3.
1.81. REDEMPTION PERIOD. The two 45-day periods commencing on the
earlier of (a) the day which is 10 days after the day on which the Management
Committee delivers the financial information referred to in clause (a) of
Section 7.1 with respect to the Taxable Year immediately preceding the fourth
anniversary of the Effective Date (in respect of the first of such periods)
and the fifth anniversary of the Effective Date (in respect of the second of
such periods) and (b) the day which is 120 days after the end of the Taxable
Year immediately preceding the fourth anniversary of the Effective Date (in
respect of the first of such periods) and the fifth anniversary of the
Effective Date (in respect of the second of such periods). In the event that
the Company transfers assets to Newco (as defined in Section 13.1) prior to
the commencement of any Redemption Period, the Redemption Period shall be
determined for purposes of Section 13.3.2 under the same principles set forth
in the preceding sentence by substituting for the delivery of the financial
information of the Company the delivery of similar financial information of
Newco.
1.82. REGULATIONS. The permanent, temporary, proposed, or proposed
and temporary regulations of Department of the Treasury under the Code, as
such regulations may be changed from time to time.
1.83. RELATED PERSON. A person having a relationship to a Partner
that is described in SECTION 1.752-4(b) of the Regulations.
1.84. REGISTRATION EXPENSES. All expenses incident to the Company's
performance of or compliance with any registrations pursuant to Article XIII
of this Agreement, including, without limitation, (a) registration, filing
and fees of the National Association of Securities Dealers, Inc., (b) fees
and expenses of complying with securities or blue sky laws, (c) fees and
expenses associated with listing securities on an exchange or NASDAQ, (d)
word processing, duplicating and printing expenses, (e) messenger and
delivery expenses, (f) transfer agents', trustees', depositories',
registrars', and fiscal agents' fees, (g) fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters, (h) reasonable fees
and disbursements of any one counsel retained by the Selling Partners, and
(i) any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities, but excluding underwriting discounts and commissions
and transfer taxes, if any.
1.85. SPECIAL VOTE OF THE CLASS A PARTNERS. The affirmative vote or
consent of those Class A Partners holding at least 80% of the Post Recoupment
Percentage Interests held by all of the Class A Partners; PROVIDED, that,
notwithstanding any provision of this Agreement or the Management Agreement
to the contrary (other than the provisions of Section 4.1.4 as the same
relate to the approval by the Class
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A Partners of the offer to the Partners to contribute their pro rata shares
of additional Capital Contributions), any Class A Partner that holds, or
whose Affiliate holds, any direct or indirect financial interest in the
matter to be voted upon or consented to by the Class A Partners shall not
have the right to vote or give or withhold its consent with respect to such
matter unless such Partner and its Affiliates hold a Post Recoupment
Percentage Interest of 20% or less.
1.86. SUBSTITUTE PARTNER. An Assignee who has been admitted to all
of the rights of a partner of the Partnership pursuant to Section 11.2 of
this Agreement.
1.87. TAX MATTERS PARTNER. The Person designated as such pursuant to
Section 8.2.
1.88. TAXABLE YEAR. The calendar year.
1.89. TAXING JURISDICTION. Any state, local or foreign government
that collects tax, interest or penalties, however designated, on any
Partner's share of the income, gain or distribution of the Company.
1.90. UNANIMOUS VOTE OF THE COMMITTEE. The affirmative vote or
consent of all of the members of the Management Committee who are eligible to
vote or consent; PROVIDED, that, notwithstanding any provision of this
Agreement or the Management Agreement to the contrary, any member of the
Management Committee that represents a Partner that holds, or whose Affiliate
holds, any direct or indirect financial interest in the matter to be voted
upon or consented to by the Management Committee shall not have the right to
vote or give or withhold its consent with respect to such matter unless such
Partner and its Affiliates hold a Post Recoupment Percentage Interest of 20%
or less.
ARTICLE II
CONTINUATION OF THE COMPANY
2.1. AMENDMENT AND RESTATEMENT. The Partners hereby execute this
Agreement for the purpose of amending and restating the Partnership Agreement
as heretofore in effect. The rights and liabilities of the Partners shall be
as provided in this Agreement and in the Act.
2.2. NAME. The business of the Company shall be conducted under the name
of the AHN Partners, L.P., or such other name(s) as the General Partner may
select from time to time, subject to the approval of the Management
Committee.
2.3. TERM. The Company shall be effective as of the Effective Date and
shall continue in full force and effect until December 31, 2021, unless the
Company is sooner dissolved by the happening of any Liquidating Event. The
termination of the Company shall not affect the rights of any Partner with
respect to Distributions under this Agreement, except as set forth in Section
14.1.5.
2.4. PURPOSE. The Company shall engage in the business of providing
television programming for the Channel, the sale of merchandise on and in
connection with the Channel, owning and operating the Channel and any related
or necessary business permitted by the Act or the laws of any jurisdiction in
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which the Company may do business related thereto or in connection therewith.
AHN LLC has heretofore contributed and assigned to the Company the
outstanding capital stock of AHN, Inc., and AHN, Inc. has thereafter been
liquidated, such that the Company now owns all the assets of and is subject
to all the liabilities of AHN, Inc. The Company shall have the authority to
do all things necessary or convenient to accomplish its purpose and operate
its business as described in this Section. The Company shall exist only for
the purpose specified in this Section of this Article and may not conduct any
other business without the unanimous consent of the Partners.
2.5. REGISTERED AGENT AND OFFICE. The registered agent for the service
of process and the registered office shall be United Corporate Services,
Inc., 15 East North Street, Dover, Delaware 19901. If the registered agent
ceases to act as such for any reason or the registered office shall change,
the General Partner shall promptly designate a replacement registered agent
or file a notice of change of address as the case may be.
2.6. PRINCIPAL OFFICE. The principal place of business of the Company
shall be located initially at 1000 Universal Studios Plaza, Suite 247,
Orlando, Florida 32819, but other places of business may be selected from
time to time by Majority Vote of the Management Committee, Notice of which
shall be given to the Partners. The Company may not move its principal
office to a jurisdiction other than Florida without the Unanimous Vote of the
Committee. The Company has qualified to do business under the name America's
Health Network.
2.7. LOANS BY PARTNERS. No Partner shall make any loan or lend
money to the Company or advance monies on its behalf without the Majority
Vote of the Committee. Any such loan or advance shall be repayable on such
terms and conditions as shall be agreed upon by the Partner making such loan
or advance and a Majority Vote of the Committee. No Partner shall, without
the consent of such Partner, be required to make any loans or advances to the
Company.
2.8. POWER OF ATTORNEY. Each Limited Partner does hereby constitute and
appoint each General Partner as its true and lawful representative and
attorney-in-fact, in his name, place and stead, to make, execute, sign,
acknowledge, swear to and file:
2.8.1 a Certificate of Limited Partnership of the Company and,
subject to the requisite consent of the Management Committee set forth in
Section 3.4, all amendments thereto as may be required under the Act;
2.8.2 any and all instruments, certificates, and other documents
which may be deemed necessary or desirable to effect the winding-up and
termination of the Company (including, but not limited to, a Certificate of
Cancellation of the Certificate of Limited Partnership) in accordance with
the terms of this Agreement; and
2.8.3 such documents as may be appropriate to comply with the
requirements of law for the formation, qualification or operation of a
limited partnership in all of the counties, states and other jurisdictions
where the Company elects to do business, including any trade name affidavits
and any other notices, certificates, statements or other instruments required
by any provision of law governing the formation of the Company or the conduct
of its business.
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This power of attorney is coupled with an interest, is irrevocable, and shall
survive, and shall not be affected by, the subsequent adjudication of
incompetency, bankruptcy or death of any of the Limited Partners, and shall
be binding upon any assignee thereof. Such representatives and
attorneys-in-fact shall not, however, have any right, power or authority to
amend or modify this Agreement when acting in such capacity.
2.9. COMPANY PROPERTY. The Company Property shall be held in the name of
the Company.
2.10. CERTIFICATE OF LIMITED PARTNERSHIP. To the extent that such
action is determined by the General Partner to be reasonable and appropriate,
but subject to Section 3.4.4(m), the General Partner shall file amendments to
and restatements of the Certificate of Limited Partnership of the Company and
do all things required to maintain the Company as a limited partnership (or a
partnership in which the limited partners have limited liability) under the
laws of the State of Delaware and each other state or the District of
Columbia, and in any jurisdictions outside the United States, in which the
Company may elect to do business or own any asset. The Certificate as filed
shall contain no provision that is inconsistent with this Agreement.
2.11. ORGANIZATION EXPENSES. Promptly after the Effective Date, the
Company shall reimburse AHN LLC for Organization Expenses previously incurred
by it. The Company shall thereafter indemnify and defend each of them from
any cost, claim or liability in connection therewith.
ARTICLE III
RIGHTS, POWERS AND DUTIES OF THE
PARTNERS AND THE COMPANY; MANAGEMENT
3.1. THE GENERAL PARTNER.
3.1.1 POWERS OF THE GENERAL PARTNER. All control of the business
of the Company, and all management powers in respect of the business and
affairs of the Company, shall be vested exclusively in the General Partner;
PROVIDED, that the authority of the General Partner shall be subject to the
rights and powers of the Management Committee as described below in Section
3.4. Without limiting the generality of the foregoing, and in furtherance of
the purposes of the Company, but subject to any specific limitations provided
in this Agreement, including, without limitation, Sections 3.1.3 and 3.4, the
General Partner is hereby authorized to do, and may delegate to the Manager
(under the General Partner's supervision), any and all of the following:
(a) the conduct of the Company's business, the establishment
of Company offices and the exercise of the powers of the Company within or
without the State of Delaware;
(b) the purchase, receipt, lease or other acquisition,
ownership, holding, improvement, use and other dealing with, Company
Property, wherever located;
(c) the sale, conveyance, mortgage, pledge, lease, exchange,
and other disposition of Property;
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(d) the entering into contracts and guaranties, incurring of
liabilities, borrowing money, issuance of notes, bonds and other obligations,
and the securing of any of its obligations by mortgage or pledge of any of
its property or income;
(e) the lending of money, investment and reinvestment of the
Company's funds, and receipt and holding of Property as security for
repayment, including, without limitation, the loaning of money to, and
otherwise helping Partners, officers, employees and agents;
(f) the institution, prosecution and defense of any Proceeding
in the Company's name;
(g) the appointment of employees and agents of the Company,
the defining of their duties and the establishment of their compensation;
(h) the payment of pensions and establishment of pension
plans, pension trusts, profit sharing plans and benefit and incentive plans
for all or any of the current or former Partners, employees and agents of the
Company;
(i) the making of donations to the public welfare or for
religious, charitable, scientific, literary or educational purposes;
(j) the payment of compensation or additional compensation to
any or all Partners and employees on account of services previously rendered
to the Company, whether or not an agreement to pay such compensation was made
before such services were rendered;
(k) the purchase of insurance on the life of any employee for
the benefit of the Company;
(l) the participation in partnership agreements, joint
ventures or other associations of any kind with any person or persons; and
(m) the indemnification of Partners or any other Person;
PROVIDED, that the General Partner shall not have the power to indemnify,
defend or hold itself harmless other than as provided in Section 9.1.
3.1.2 DUTIES OF THE GENERAL PARTNER. Subject to the rights and
powers of the Management Committee as described in Section 3.4, the General
Partner shall manage and control the business and affairs of the Company in
the manner the General Partner deems appropriate and necessary in order to
carry out the purpose of the Company as set forth in Section 2.4.
3.1.3 LIMITATIONS ON THE GENERAL PARTNER. Notwithstanding
anything in this Agreement to the contrary, the General Partner shall not:
(a) do any act in contravention of any applicable law or
regulation, or provision of this Agreement or of the Certificate of Limited
Partnership;
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(b) possess Company Property or assign its rights in specific
Company Property for other than a Company purpose;
(c) take any action that would adversely affect the status of
the Company as a Delaware limited partnership under the Act or that would
adversely affect the limited partner status or the limited liability status
of a Limited Partner or subject a Limited Partner to (i) personal liability
for any obligation of the Partners or the Company under this Agreement or
(ii) liability as a general partner under any applicable laws;
(d) alter the purpose of the Company as set forth in Section
2.4; or
(e) appropriate funds of the Company for the use of any Person
other than the Company.
3.1.4 AUTHORITY TO BIND. Only the General Partner (and the
Manager to whom the General Partner shall have delegated its authority
pursuant to Section 3.2) shall have the authority to bind the Company,
subject to obtaining the requisite Management Committee consent under Section
3.4.
3.1.5 MANAGEMENT. The General Partner shall use commercially
reasonable best efforts in their management of the Company and shall devote
the expertise and other resources they have developed relating to the Channel
to the business of the Company as provided herein. The General Partner is
authorized to delegate to the Manager its obligations under this Section;
PROVIDED, that no delegation of obligations shall relieve the General Partner
of any of its obligations hereunder.
3.1.6 MAJORITY VOTE. Whenever any matter is required to be
approved by the General Partner under the Act or required or allowed to be
approved by the General Partner under this Agreement and is not subject to
the vote of the Management Committee, such matter shall be considered
approved or consented to upon the consent or other affirmative action of the
General Partner. If there shall be more than one General Partner, all General
Partners shall be entitled to vote and, whenever any matter is required to be
approved by the General Partners under the Act or required or allowed to be
approved by the General Partners under this Agreement, such matter shall be
considered approved or consented to upon the receipt of the affirmative vote
or consent of the General Partners holding a Majority in Interest of the
General Partners that are entitled to vote or consent on the matter at issue;
PROVIDED, that neither any Assignee nor, in the case of approvals to
withdrawal where consent of the remaining General Partners is required, any
General Partner that is a Disassociating Partner, shall be entitled to vote
or consent.
3.1.7 CONFLICTS OF INTEREST. Without the unanimous consent of
the Class A Partners, the General Partner shall not be entitled to enter into
transactions that may be considered to be competitive with, or a business
opportunity that may be beneficial to, the Company. Without limiting the
foregoing, the General Partner shall account to the Company and hold as
trustee for it any property, profit or benefit derived by the General Partner
without the Special Vote of the Class A Partners in the conduct and winding
up of the Company business or from a use or appropriation by the General
Partner of Company Property including information developed exclusively for
the Company and opportunities within the business of the Company expressly
offered to the Company. In the case of any conflict between the best
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interests of a General Partner and the best interests of the Company, the
General Partner shall not act in a manner inconsistent with the best
interests of the Company or inconsistent with this Agreement.
3.1.8 FIDUCIARY DUTY. To the extent that, at law or in equity,
the General Partner has duties (including fiduciary duties) and liabilities
to the Company or to any other Partner, the General Partner acting under this
Agreement shall not be liable to the Company, or to any other Partner, for
its good faith reliance on the provisions of this Agreement. The provisions
of this Agreement, to the extent that they restrict the duties and
liabilities of the General Partner otherwise existing at law or in equity,
are agreed by the parties hereto to replace such other duties and liabilities
of such General Partner.
3.1.9 BANK ACCOUNTS. Funds of the Company shall be deposited in
an account or accounts of a type, in form and name in a bank or banks
selected by the Manager. Any person so designated by the General Partner, or
by the Manager, pursuant to the delegation of authority contained in this
Agreement, shall be authorized to sign checks, either singly or jointly, on
behalf of the Company.
3.2. THE MANAGER. AHN LLC shall be the Manager acting pursuant to the
Management Agreement; PROVIDED, that the Management Committee upon a
Unanimous Vote of the Committee shall have the right to remove AHN LLC as
Manager for Cause pursuant to the Management Agreement. Upon the removal of
AHN LLC as Manager, a Majority in Interest of the Limited Partners shall have
the right to elect a new general partner and to cause AHN LLC's general
partnership interest to convert into a limited partnership interest;
PROVIDED, that AHN LLC shall remain liable for any losses, liabilities or
obligations incurred by the Company or any of its Partners as a result of any
willful breach of this Agreement or the Management Agreement by AHN LLC, or
any other willful misconduct, gross negligence, fraud or bad faith. The
General Partner is authorized to delegate to the Manager all of its rights
and obligations under this Agreement.
3.3. THE LIMITED PARTNERS.
3.3.1 NO PARTICIPATION IN MANAGEMENT, ETC. No Limited Partner
shall take part in the management or control of the Company's business or
affairs, transact any business in the Company's name or have the power to
sign documents for or otherwise bind the Company.
3.3.2 LIMITATION OF LIABILITY. Except as may otherwise be
provided by law or except as shall be agreed in writing by a Limited Partner,
a Limited Partner shall have no personal liability for any debts or other
obligations of the Company.
3.3.3 NO AUTHORITY TO BIND, ETC. No Limited Partner shall take
any action as a Partner to bind the Company, and each shall indemnify the
Company for any costs or damages incurred by the Company as a result of any
such unauthorized action by it.
3.4. THE MANAGEMENT COMMITTEE.
3.4.1 COMPOSITION OF MANAGEMENT COMMITTEE; TERM OF MEMBERS.
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(a) There is hereby established a committee of the Partners to
be known as the Management Committee and having the rights and powers set
forth in this Section 3.4 and as expressly set forth in this Agreement. The
Management Committee shall consist of seven persons and shall initially be
comprised of those individual Persons who are identified on SCHEDULE B.
Three of such Persons have been designated by AHN LLC. One of such Persons
(the "Access Representative") has been designated by Access. The remaining
three of such Persons (the "PJHP Representatives") have been designated by
PJHP. Any Substitute Partner that succeeds to the respective Partnership
Interest of Access or PJHP shall have the right to remove the existing
representatives of Access or PJHP, respectively, and to appoint a
representative of its own to the extent set forth in Section 3.4.1(f)(ii). If
any member of the Management Committee shall cease to serve as such, he shall
be replaced by (i) the General Partner, if he or his direct or indirect
predecessor was designated by AHN LLC or the General Partner; or (ii) the
Class A Partner designating such member.
(b) (i) Notwithstanding the Provisions of Section 3.4.1(a),
if, following the Effective Date, the Company sells an additional Partnership
Interest to any Person, then, subject to such approvals as may be required by
Section 3.4.3(b) or 3.4.3(c), PJHP shall have the right, exercisable in its
sole and absolute discretion without any obligation to do so, if no
representative has theretofore been designated pursuant to Section
3.4.1(b)(ii), to grant the Partner which purchased such Partnership Interest
and was so admitted the right to designate a representative to the Management
Committee in lieu of one of the PJHP Representatives, which PJHP
Representative shall resign from the Management Committee. Any Substitute
Partner that succeeds to the Partnership Interest of such Partner shall have
the right to remove the existing New Representative and to appoint a
representative of its own to the extent set forth in Section 3.4.1(f)(ii).
(ii) If PJHP makes a Limited PJHP Disposition to a single
Assignee and its Assignee thereby holds a Partnership Interest entitling such
Assignee to a Post Recoupment Percentage Interest of at least 9.00%, then, at
the option of PJHP made in writing and delivered to the Company and to PJHP's
Assignee, if no representative has theretofore been designated pursuant to
Section 3.4.1(b)(i), PJHP's Assignee shall have the right exercisable in its
sole and absolute discretion to remove one of the PJHP Representatives and to
replace such representative with a representative of its own at such time as
it becomes a Substitute Partner pursuant to Section 11.2.
(iii) The representative designated by the Partner which
purchased a Partnership Interest as described in Section 3.4.1(b)(i) or the
representative designated by PJHP's Assignee pursuant to Section 3.4.1(b)(ii)
is referred to herein as the "New Representative."
(c) Each Partner entitled to designate a member of the
Management Committee shall do so by Notification to the Company. The members
of the Management Committee shall serve in such capacity without compensation
by the Company, but shall be reimbursed for their reasonable and actual
out-of-pocket expenses incurred in performing their duties as members of the
Management Committee. Any member of the Management Committee may designate
another individual to attend any meeting of the Management Committee in
substitution for that member and to exercise the powers and rights of that
member; PROVIDED, that such designation is in writing and is delivered to the
Company at or prior to the meeting.
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(d) Other than as set forth herein, no Person that serves as a
member of the Management Committee shall have any contractual right to such
position. Each member of the Management Committee shall serve and shall be
eligible to vote as a member of the Management Committee until the earliest
of: (i) the death or disability of such member of the Management Committee;
(ii) the removal of such member of the Management Committee by the Partner or
Partners appointing such member; (iii) the resignation of such member,
tendered in writing to each other member of the Management Committee; (iv)
the withdrawal or bankruptcy of the Partner that has designated such member
pursuant to Section 3.4.1(a); or (v) the transfer to any Person (other than
an Affiliate of such transferring Partner) by the Partner that has designated
such member of more than 50% of its Post Recoupment Percentage Interest as
the same shall be as of the date hereof. Vacancies created as a result of
(iv) or by any transfer by a Partner of 50% or more (but less than 100%) of
its Post Recoupment Percentage Interest shall not be filled and the number of
members of the Management Committee shall be reduced accordingly.
(e) The Management Committee shall meet quarterly at regularly
scheduled times. The Company or any three members of the Management
Committee may call a special meeting of the Management Committee at any time
upon at least five Business Days' prior Notification.
(f) If either of Access or PJHP's Assignee make a Disposition
of all (but not less than all) of their respective Partnership Interests, the
Assignee thereof, when such Assignee becomes a Substitute Partner hereunder,
shall have the right to remove the member of the Management Committee that
represents the Partner from which it acquired its Partnership Interest and to
replace such representative with a representative designated by it. The
equivalent right shall be available to any Substitute Partner that acquires
its Partnership Interest in a Disposition by any direct or indirect Assignee
of Access or PJHP's Assignee, so long as such Substitute Partner has acquired
all, but not less than all, of the Partnership Interest originally held by
Access or PJHP's Assignee.
(g) A Person designated in writing from time to time by Allen,
a Person designated in writing from time to time by Medical Innovation Fund
II, a Limited Partnership ("MIP"), and a Person designated in writing from
time to time by IVI Publishing, Inc. ("IVI") shall each be entitled to
receive notice of and to attend all regular meetings of the Management
Committee as long as Allen and MIP, respectively, shall be Partners and as
long as IVI shall be a member of the General Partner. As long as Access
shall be a Partner, the Access Representative shall have the right to be
accompanied by one professional advisor who shall not have the right to
participate directly in the discussions of the Management Committee. If at
such time as the Company reorganizes itself as a corporation pursuant to
Section 13.1 Allen is a Partner and has not Disposed of any of its
Partnership Interest, Allen shall then be entitled to nominate one member of
the board of directors of the Company, and the Partners agree to vote for the
election of such nominee to the board of directors.
3.4.2 VOTING, ETC. Except as specifically provided in Sections
3.4.3 or 3.4.4, all acts and decisions made or taken by the Management
Committee shall be made or taken by (a) a majority in number of the members
thereof at a meeting, which meeting may be held telephonically, (i) at which
meeting either all of the members of the Management Committee eligible to
vote on each such act or question are present or have been afforded an
opportunity to participate, or (ii) of which meeting all of the eligible
members of the Management Committee have been given at least five Business
Days' prior
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Notification and (iii) at which meeting a majority in number of the
Management Committee members eligible to vote on each such act or question
are present or participate; or (b) the written approval or consent of a
majority in number of the members of the Management Committee authorizing or
ratifying the action for which the approval or consent is solicited with
copies thereof being promptly provided thereafter to any members who have not
so approved or consented in writing.
3.4.3 UNANIMOUS VOTE OF THE COMMITTEE REQUIRED. The following
acts and decisions may be made or taken by the Company or the General Partner
only upon (1) a Unanimous Vote of the Committee at a meeting of the
Management Committee which meeting may be held telephonically, (i) at which
meeting either all of the members of the Management Committee eligible to
vote on each such act or question are present or have been afforded an
opportunity to participate, or (ii) of which meeting all of the eligible
members of the Management Committee have been given at least five Business
Days' prior Notification and (iii) at which meeting a majority in number of
the Management Committee members eligible to vote on each such act or
question are present or participate; or (2) the written approval or consent
of all members of the Management Committee authorizing or ratifying the
action for which the approval or consent is solicited:
(a) The approval of any Disposition of all or substantially
all of the Company Property, whether structured as a sale of assets,
spin-off, merger or otherwise;
(b) The approval of any substantial change to the capital
structure of the Company (including the redemption or repurchase of any
Partner's Partnership Interest other than pursuant to Section 3.2 or 10.6.2),
except as otherwise specifically contemplated by Section 4.1.4 or 4.2 of this
Agreement;
(c) The approval of any event which would have the effect of
diluting the Partnership Interest of any Partner, except as otherwise
specifically contemplated by Section 4.1.4 or 4.2 of this Agreement;
(d) The entering into, or the material modification or waiver
of any material rights under, any contract with (a) any Partner or any
Affiliate thereof or (b) any employee, officer or director of any such
Partner or any such Affiliate, including, without limitation, the Management
Agreement;
(e) The admission of any additional General Partner; and
(f) Those acts and decisions described elsewhere in this
Agreement as requiring the approval of a Unanimous Vote of the Committee.
3.4.4 MAJORITY VOTE OF THE COMMITTEE REQUIRED. The following
acts and decisions may be made or taken by the Company or the General Partner
only upon (a) the Majority Vote of the Committee at a meeting of the
Management Committee which meeting may be held telephonically, (i) at which
meeting either all of the members of the Management Committee eligible to
vote on each such act or question are present or have been afforded an
opportunity to participate, or (ii) of which meeting all of the eligible
members of the Management Committee have been given at least five Business
Days'
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prior Notification and (iii) at which meeting a majority in number of
the Management Committee members eligible to vote on each such act or
question are present or participate; or (b) the written approval or consent
of the members thereof constituting a Majority of the Management Committee
which approval or consent authorizes or ratifies the action for which the
approval or consent is solicited and copies thereof are promptly provided
thereafter to any members who have not so approved or consented in writing:
(a) The incurrence of any indebtedness, or the prepayment,
refinancing, recasting, increasing, modifying or extending of any
indebtedness;
(b) The approval of the Annual Business Plan or any amendment
thereto which would require the Company to incur obligations in the aggregate
in excess of the lesser of $5,000,000 or 5% of the approved expenditures in
the combined operating and capital expenditures budget included in the Annual
Business Plan;
(c) The selection of, or any change of, the accountants or
attorneys for the Company;
(d) The determination of, or any change to, the Company's
accounting methods;
(e) The approval of the nature and the terms and conditions of
any investment of funds of the Company in excess of $1,000,000 and the form
of all material contracts and agreements relating thereto;
(f) The sale, leasing, or licensing of any Company Property
(except for all or substantially all of the Company's assets) other than in
the ordinary course of the Company's business or other than as contemplated
by the Annual Business Plan;
(g) The mortgaging, pledge, or encumbrance or granting of a
security interest in any Company Property;
(h) The acquisition of any Company Property, or any interest
therein, other than as contemplated by the Annual Business Plan or in the
ordinary course of the Company's business;
(i) The execution, signing, sealing or delivery of any deed,
lease, mortgage, note, bill of sale, contract, agreement, document,
certification or other instrument other than as contemplated by the Annual
Business Plan or in the ordinary course of the Company's business;
(j) The establishment of reserves for working capital or for
the satisfaction of debts, obligations, contingencies or liabilities of the
Company other than as contemplated by the Annual Business Plan or in the
ordinary course of the Company's business;
(k) The payment of any incentive bonus to any one or more
employees of or consultants to the Company;
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(l) Unless included in the Annual Business Plan approved under
(b) above, the entering into, or materially modifying or waiving of any
material rights under, any contract or related set of contracts involving
aggregate payments to or by the Company in excess of $500,000 during the term
of such contract or contracts;
(m) The amendment of the Company's Certificate of Limited
Partnership except to the extent that the General Partner believes, on the
basis of a written opinion of counsel, that such amendment is required by
Section 17-202(c) of the Act; PROVIDED, in no event shall any amendment
contain any provision that is inconsistent with this Agreement;
(n) The sale, pledge, encumbrance, donation, abandonment or
other Disposition of any equity interest in any subsidiary or vote as a
stockholder with respect to any subsidiary;
(o) Subject to the requirements of Section 3.4.3(b) and (c),
and other than pursuant to this Agreement or an Admission Agreement, the
issuance of any partnership interests, warrants, options or other rights to
acquire Partnership Interests or securities convertible into Partnership
Interests;
(p) The making of any loans or advances to or investment in
any Person other than a subsidiary, except extensions of trade credit in the
ordinary course of business and loans and advances to employees for travel
expenses in the ordinary course of business;
(q) The commencement or settlement of any Proceeding, except
for Proceedings brought or defended in the ordinary course of business where
the amount of potential damages does not exceed $250,000;
(r) Except as otherwise provided in Section 8.4, the approval
of annual financial statements and the annual consolidated federal tax
returns of the Company and any elections for federal, state and local tax
purposes involving a tax, timing effect or valuation issue of more than
$250,000; and
(s) Those acts and decisions described elsewhere in this
Agreement as requiring the approval of a Majority Vote of the Committee.
3.4.5 ANNUAL BUSINESS PLAN.
(a) Not later than 60 days before the end of each Taxable Year
of the Company, the Manager shall submit to the Management Committee the
proposed Annual Business Plan for the succeeding Taxable Year in such form
and detail as the Management Committee may reasonably direct. The Management
Committee shall consult with the Manager regarding the proposed Annual
Business Plan, and the Management Committee shall approve a final Annual
Business Plan by the Majority Vote of the Committee. The Management
Committee shall have the right at any time to compel an amendment to the
Annual Business Plan by a Majority Vote of the Committee. The General
Partner and the Management Committee shall have full authority to implement
the Annual Business Plan. The
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Partners hereby agree that the Annual Business Plan for the interim period
commencing as of the Closing and ending December 31, 1996 is in the form
attached hereto as SCHEDULE C.
(b) Anything herein to the contrary notwithstanding, if the
Annual Business Plan is not approved by the Majority Vote of the Committee
prior to the commencement of a new Taxable Year of the Company, the expense
portion of the operating budget for such Taxable Year shall be deemed to be
equal to the expense portion of the immediately preceding quarter's operating
budget included in the prior Taxable Year's Annual Business Plan, plus 7.5%
for each line item, multiplied by four.
3.4.6 FIDUCIARY DUTIES.
(a) To the extent that, at law or in equity, a member of the
Management Committee has duties (including fiduciary duties) and liabilities
to the Company or to any other Partner or member of the Management Committee,
a member of the Management Committee acting under this Agreement shall not be
liable to the Company, or to any other Partner or member of the Management
Committee for his good faith reliance on the provisions of this Agreement.
(b) Whenever in this Agreement a member of the Management
Committee is permitted or required to make a decision (i) in his "discretion"
or under a grant of similar authority or latitude, the member of the
Management Committee shall be entitled to consider only such interests and
factors as he desires, including his own interests, and shall have no duty or
obligation to give any consideration to any interest of or factors affecting
the Company or any other Person, or (ii) in his "good faith" or under another
express standard, the member of the Management Committee shall act under such
express standard and shall not be subject to any other or different standard
imposed by this Agreement or other applicable law. Notwithstanding the
foregoing, each member of the Management Committee shall be under the
affirmative obligation to act with a duty of care for the Company and have a
duty of loyalty to the Company as if the Company were a Delaware corporation
and such member were a director thereof to the extent required by Delaware
law.
3.5. RESTRICTIVE COVENANT.
(a) Except with respect to businesses and interests in businesses
existing at the Closing, during the period in which such Partner has any
interest in the Company and, with respect to any Partner and its Affiliates,
for a period of one year immediately following the termination of this
Agreement or the termination of such Partner's interest in the Company, no
Partner (other than NCCI) nor any Affiliate of any Partner (other than NCCI)
shall Actively Participate with or in any business venture competitive with
the business of the Company as it shall exist at the time in question (such
business venture being referred to as a "Restricted Business Venture"), if
such Restricted Business Venture develops or operates (or plans to develop or
operate) a television programming service having similar focus or format as
the Channel in the United States, its territories or possessions, or
elsewhere in the world, or if such Restricted Business Venture develops or
operates (or plans to develop or operate) a regularly scheduled television
channel in the United States, its territories or possessions, or elsewhere in
the world if any substantial part of such channel's programming is devoted to
human or animal health, medicine or related topics or if such channel has the
word "health" in its title. Anything in this Agreement to the contrary
notwithstanding,
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if any Partner or any Affiliate of a Partner breaches any provisions of this
Section, without limiting any other right the Company or any of the Partners
may have, the Company shall have the right, exercisable on written notice to
the Partner who, or whose Affiliate, has breached this Agreement, to purchase
the Partnership Interest of such Partner for a price equal to 50% of the Fair
Market Value of such Partnership Interest (which price shall be decreased by
the amount, if any, of tax liability incurred by the Company or its Partners
arising from the purchase of such Partnership Interest) at the date of breach
pursuant to procedures established by Majority Vote of the Committee.
(b) Notwithstanding the provisions of Section 3.5(a), Access shall not
be deemed to have violated the provisions of Section 3.5(a) if after the date
of this Agreement it acquires or possesses any interest in, or engages in,
independently or with others, a Restricted Business Venture in the geographic
territory specified below, as applicable, if such Restricted Business Venture
develops or operates (or plans to develop or operate) a television
programming service having similar focus or format as the Channel in the
United States, its territories or possessions, or elsewhere in the world, or
if such Restricted Business Venture develops or operates (or plans to develop
or operate) a regularly scheduled television channel in the United States,
its territories or possessions, or elsewhere in the world if any substantial
part of such channel's programming is devoted to human or animal health,
medicine or related topics or if such channel has the word "health" in its
title, but only to the extent provided by one or more of the following
exemptions, as applicable:
(i) after the third anniversary of the Effective Date, in the territories
of the United States of America, Canada and Mexico (collectively,
"North America"), but only if the number of the Channel's FTE
Subscribers (as defined below in this Section 3.5(b)) as at the
anniversary of the Effective Date that immediately precedes the date
as of which such determination is to be made is fewer than the target
set forth for such immediately preceding anniversary in the following
table:
Anniversary of
Effective Date in Year FTE Subscriber Target
---------------------- ---------------------
1999 12,467,300
2000 24,189,300
2001 27,671,000
As used herein, "FTE Subscribers" shall mean the number of authorized
consumer households that receive television service on a full-time
basis (24 hours per day, 7 days per week) from any distribution
system or other means of television distribution that also makes the
Channel available, calculated as provided in the applicable carriage,
distribution or programming service license agreements with the
Company; or
(ii) after the third anniversary of the Effective Date, in territories
other than North America; PROVIDED, that the exemption provided by
this clause (ii) of Section 3.5(b) shall be afforded only if all of
the following three conditions have been satisfied: (A) Access and
its Affiliates control (as defined below in this Section 3.5(b)) the
Restricted Business Venture, (B) prior thereto Access and its
Affiliates have used best efforts to cause the Restricted Business
Venture to negotiate a joint venture or other similar agreement with
the Company on terms reasonably satisfactory to Access for the
exploitation of the Channel in such territory, and (C) if the
Restricted Business Venture and its Affiliates operate (or plan to
operate) a business directly competitive with the business of the
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Company, the Restricted Business Venture and its Affiliate
operate such business only in territories other than (1) any
territory in which the Company at the time is making the Channel
available to viewers located therein, either directly or in
conjunction with a third party, and (2) any territory in which the
Company has a plan (subject to the following sentence) to make the
Channel available. For purposes of determining whether the
Company has a plan to make the Channel available in a particular
territory, Access shall have the right to rely on the Annual
Business Plan then in effect (if the Company has specifically and
in good faith authorized the expenditure of funds for such plan in
the current or the immediately following Taxable Year) or (during
the last half of any Taxable Year) as submitted in good faith by
the General Partner for consideration to the Management Committee
for the Taxable Year immediately following the current Taxable
Year, in either case as long as there have been no discussions at
a meeting of the Management Committee noted in the minutes thereof
stating that the Company is in good faith developing a plan for
entering that particular territory within the following Taxable
Year; or
(iii) after the Effective Date has occurred, in territories
other than North America; PROVIDED, that the exemption provided by
this clause (iii) of Section 3.5(b) shall be afforded only if all
of the following conditions (as applicable) have been satisfied:
(A) Access and its Affiliates do not control (as defined below in
this Section 3.5(b)) the Restricted Business Venture; (B) except
as set forth in (C) of this clause (iii), the Restricted Business
Venture is not then, or does not then intend to become, a business
which would compete with the business of the Company were the
Company making the Channel available in that particular territory;
and (C) if the Restricted Business Venture is other than as
described in (B) of this clause (iii), prior thereto Access or its
Affiliates have used best efforts to cause the Restricted Business
Venture to negotiate a joint venture or other similar agreement
with the Company on terms reasonably satisfactory to the
Restricted Business Venture for the exploitation of the Channel in
such territory.
As used in this Section 3.5(b), for purposes of this Section, ownership of
50% or more of the outstanding voting securities or voting interests of any
Person shall be deemed to be "control" of that Person.
(c) Notwithstanding the provisions of Section 3.5(a), actions taken by
the entity formed pursuant to the joint venture agreement between Access and
MDS Health Group, Ltd. shall be exempt from and shall not be deemed to
violate or cause a breach of Section 3.5(a), as long as Access does not
control (as such term is defined in Section 3.5(b)) such venture.
(d) Notwithstanding the provisions of Section 3.5(a), neither Access
nor any of its Affiliates will be prohibited from advertising through any
media, nor will either be prohibited from entering into programming
arrangements with any channel, network or other programming service (whether
or not such channel, network or service dedicates any amount of programming
to health, medicine or health-related topics).
(e) The provisions of the last sentence of Section 3.5(a) shall be
subject to the following:
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(i) Access shall have the right to receive written Notice from the
Company specifying any breach by it of Section 3.5(a) and shall have 180
days after the Company sends such Notice in which to cure such breach
before a breach or violation of Section 3.5(a) shall deemed to have
occurred;
(ii) If the violation of Section 3.5(a) shall occur other than in
North America (and shall not be exempted pursuant to Section 3.5(b)(ii),
3.5(b)(iii), 3.5(c) or 3.5(d)), then the Company's sole remedy with
respect to Access shall be to terminate the strategic alliance agreement
(the "Access Alliance Agreement"), dated the Effective Date, between the
Company and Access and to remove the Access Representative from the
Management Committee by Notice to the Access Representative given after the
expiration of the cure period, if any.
(iii) If Access exercises its Termination Right (as defined therein)
under the Access Alliance Agreement based on the Company's breach of
Section II.B.6 thereof (or any replacement provision) after Due Notice (as
defined therein), the provisions of Section 3.5 shall cease to be
applicable to Access after such termination.
(f) Subject to the exemptions provided by Section 3.5 (b) through
3.5(d), the provisions of Section 3.5(a) shall be applicable throughout the
term of the Company as provided in Section 2.3; PROVIDED, that Section 3.5(a)
shall remain applicable beyond the five year term of the Access Alliance
Agreement only to the extent that Access and the Company agree to extend the
term of such agreement thereafter and the applicable targets shall be as set
forth in the preceding table for the year following the fifth anniversary of
the Effective Date and thereafter shall be 75% of the number of FTE
Subscribers forecast in the Company's Annual Business Plan, as approved by
the Management Committee, for such year.
(g) The exemptions from Section 3.5(a) provided by Sections 3.5(b),
3.5(c), 3.5(d) and 3.5(e) shall be personal to Access and, notwithstanding
any other provision of this Agreement to the contrary (including without
limitation Sections 11.1 and 11.2) shall not be assignable to, or exercisable
by, any Assignee of Access or to or by any Substitute Partner (except by
merger of Access with or into another Person or by sale of all, or
substantially all, of the assets of Access).
(h) Notwithstanding the provisions of Section 3.5(a), Allen shall be
deemed to have violated the provisions of Section 3.5(a) only if John
Josephson or Raymond Martin Actively Participate in or with a Restricted
Business Venture after the date of this Agreement.
ARTICLE IV
CONTRIBUTIONS AND CAPITAL ACCOUNTS
4.1. CONTRIBUTIONS.
4.1.1 Each Class A Partner and each Class B Partner shall make
its respective Capital Contribution as set forth on SCHEDULE A-2, subject to
the terms and conditions of the Admission Agreement. No interest shall
accrue on any Capital Contribution, and no Partner shall have the right to
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withdraw or be repaid any Capital Contribution except as provided in this
Agreement. Each Class A Partner's and each Class B Partner's Post Recoupment
Percentage Interest is listed in SCHEDULE A-2.
4.1.2 AHN LLC has previously contributed property with an
agreed value of $[ ] to the Company. AHN LLC's Post Recoupment
Percentage Interest shall be as set forth on SCHEDULE A-2.
4.1.3 Except for unpaid amounts set forth on SCHEDULE A-2 which
a Partner is required to pay under the terms and conditions of the Admission
Agreement, no Partner shall be required to make any additional Capital
Contributions to the capital of the Company, except that any provision of
this Agreement to the contrary notwithstanding, whenever a Limited Partner
makes a Capital Contribution to the Company, the General Partner shall make
an additional Capital Contribution in cash to the Company in an amount equal
to the excess, if any, of (a) the lesser of (i) $500,000 and (ii) 1% of the
aggregate Capital Account balances of the Partners (as determined in
accordance with SECTION 1.704-1(b)(2)(iv) of the Regulations after giving
effect to such Limited Partner's Capital Contribution and the General
Partner's Capital Contribution required by this Section 4.1.3) over (b) the
General Partner's Capital Account balance (as so determined before giving
effect to the General Partner's Capital Contribution required by this Section
4.1.3). This Section is intended to comply with Section 4.03 of Rev. Proc.
89-12, 1989-1 C.B. 798, and shall be interpreted consistently therewith.
4.1.4 From time to time the Company may determine that
additional Capital Contributions are required for the business of the
Company. Subject to approval by the General Partner and the Special Vote of
the Class A Partners (excluding the vote of any Partner that is a Delinquent
Partner (as defined in Section 4.2.1) and pursuant to a procedure established
by a Majority Vote of the Committee, the Company shall offer first to each of
the Partners the opportunity to contribute their pro rata share (based on
such Partners' Post Recoupment Percentage Interests) of such additional
Capital Contributions on such terms and conditions applicable to all Partners
as the Majority Vote of the Committee may prescribe. If any Partner declines
to contribute its pro rata share of any additional Capital Contributions,
then the Company shall make successive offers to the Partners to make further
Capital Contributions in accordance with their pro rata shares (based on such
Partners' Post Recoupment Percentage Interests) until either (i) the full
amount of such additional Capital Contributions have all been made or (ii)
all of the Partners have declined to make any further Capital Contributions.
To the extent additional Capital Contributions are not made by the Partners,
the Company may solicit contributions from third parties who are not
Partners, subject to approval by the General Partner and the Special Vote of
the Class A Partners. The provisions of this Section 4.1.4 shall not apply
to the issuance of Partnership Interests pursuant to an Admission Agreement.
4.1.5 Subject to approval by the General Partner and the
Special Vote of the Class A Partners, the Partnership Interests, including,
without limitation, Post Recoupment Percentage Interests, shall be
appropriately adjusted by the General Partner from time to time to reflect
any additional Capital Contributions made by the Partners pursuant to Section
4.1.4. Nothing in this Section shall permit the Company to impose any
adjustment to any Partner's Partnership Interest that is not proportionate to
the adjustments imposed upon all other Partners based upon the Partners'
respective Post Recoupment Percentage Interests.
[ ] = Confidential Treatment Requested
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4.2. ENFORCEMENT OF COMMITMENTS.
4.2.1 If any Partner (a "Delinquent Partner") fails to make a
Capital Contribution required under the terms and conditions of an Admission
Agreement, or any additional Capital Contribution which such Partner has
agreed to make pursuant to Section 4.1.4, the Management Committee shall give
the Delinquent Partner a Notice of such failure. If the Delinquent Partner
fails to make such Capital Contribution and to pay the Company any costs
associated with the need to demand compliance hereunder and, together with
interest on such obligation at the Default Interest Rate, within ten Business
Days of the giving of Notice, the Management Committee: (a) first, shall
enforce such obligation in the court of appropriate jurisdiction in the state
in which the Principal Office is located or the state of the Delinquent
Partner's address as reflected in this Agreement; each Partner expressly
agrees to the jurisdiction of such court for any such enforcement action;
(b) second, shall offer to each of the other Partners the opportunity to
contribute their pro rata share of such obligation based on the Partners'
Post Recoupment Percentage Interests; (c) third, if any Partner declines to
contribute its pro rata share of such obligation, shall make successive
offers to the Partners to make further Capital Contributions in proportion to
such Partners' Post Recoupment Percentage Interests until either (i) such
additional Capital Contributions are equal to the full amount of such
obligation or (ii) all of the Partners have declined to make any further
Capital Contributions; and (d) fourth, to the extent that Partners'
additional Capital Contributions are not equal to the full amount of such
obligation and subject to receiving the approval of the General Partner and
the Special Vote of the Class A Partner, may solicit contributions from third
parties who are not Partners. If and to the extent that any Partners have
accepted the offer referred to in (c) above and have made an additional
Capital Contribution in respect thereof, such Partners (the "Contributing
Partners") shall be entitled to treat the amounts contributed pursuant to
this Section as a loan from the Contributing Partners bearing interest at the
Default Interest Rate secured by the Delinquent Partner's Partnership
Interest. Until such loans are fully repaid, the Contributing Partners shall
be entitled to all Distributions to which the Delinquent Partner would have
been entitled, which Distributions shall be applied to reduce accrued
interest and, thereafter, principal of such loan. In the case of clause (a)
above, the Management Committee may take such action it deems advisable,
including, but not limited to, (1) denying the Delinquent Partner the right
to participate in votes or consents of the Management Committee or the
Company, (2) prohibiting the Delinquent Partner from making further Capital
Contributions, and (3) terminating all of the Delinquent Partner's rights
under this Agreement.
4.2.2 Subject to approval by the General Partner and the
Special Vote of the Class A Partners, the Partnership Interests, including,
without limitation, the Post Recoupment Percentage Interests, shall be
appropriately adjusted by the General Partner from time to time to reflect
any additional Capital Contributions made by any Partners pursuant to Section
4.2.1, which adjustment may, without limitation, disproportionately affect
the Post Recoupment Percentage Interest of the Delinquent Partner.
4.3. MAINTENANCE OF CAPITAL ACCOUNTS.
4.3.1 The Company shall establish and maintain Capital Accounts
for each Partner and Assignee in the books of the Company in accordance with
SECTION 1.704-1(b)(2)(iv) of the Regulations. Each Partner's Capital Account
shall be increased by (a) the amount of any cash contributed by the Partner
to the capital of the Company, (b) the fair market value of any property
contributed, as
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determined by the Company and the contributing Partner at arm's length at the
time of contribution, such determination to be acceptable to all of the Class
A Partners (net of liabilities assumed by the Company or subject to which the
company takes such Property, within the meaning of Code SECTION 752), and (c)
the Partner's share of Net Profits and of any separately allocated items of
income or gain except adjustments required by the Code (including any gain
and income from unrealized income with respect to accounts receivable
allocated to the Partner to reflect the difference between the book value and
tax basis of assets contributed by the Partner). Each Partner's Capital
Account shall be decreased by (i) the amount of any cash distributed to the
Partner from the capital of the Company, (ii) the fair market value of any
property distributed to the Partner, as determined by the Company and the
contributing Partner at arm's length at the time of distribution, such
determination to be acceptable to all of the Class A Partners (net of
liabilities of the Company assumed by the Partner or subject to which the
Partner takes such Property within the meaning of Code SECTION 752), and
(iii) the Partner's share of Net Losses and of any separately allocated items
of deduction or loss (including any loss or deduction allocated to the
Partner to reflect the difference between the book value and tax basis of
assets contributed by the Partner).
4.3.2 For purposes of computing the amount of any item of
income, gain, loss or deduction to be reflected in the Partners' Capital
Accounts, the determination, recognition and classification of any such item
shall be the same as its determination, recognition and reclassification for
federal income tax purposes (including, without imitation, any method of
depreciation, cost recovery or amortization used for that purpose); PROVIDED,
that:
(a) Except as otherwise provided in SECTION
1.704-1(b)(2)(iv)(m) of the Regulations, the computation of all items of
income, gain, loss and deduction shall be made without regard to any election
under Code SECTION 754 which may be made by the Company and, as to those
items described in Code SECTION SECTION 705(a)(1)(B) or 705(a)(2)(B), without
regard to the fact that such items are not includible in gross income or are
neither currently deductible nor capitalized for federal income tax purposes;
(b) Any income, gain or loss attributable to the taxable
Disposition of any Company Property shall be determined as if the adjusted
basis of such property as of such date of Disposition were equal in amount to
the Company's Carrying Value with respect to such Property as of such date;
and
(c) In accordance with the requirements of Code SECTION
704(b), any deductions for depreciation, cost recovery or amortization
attributable to any contributed Property shall be determined as if the
adjusted tax basis of such Property on the date it was acquired by the
Company were equal to the fair market value of such Property. Upon an
adjustment to the Carrying Value of any Company Property subject to
depreciation, cost recovery or amortization, any further deductions for such
depreciation, cost recovery or amortization attributable to such Property
shall be determined (i) as if the adjusted tax basis of such Property were
equal to the Carrying Value of such Property immediately following such
adjustment and (ii) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if applicable,
the remaining useful life) as if applied for federal income tax purposes;
PROVIDED, that if the asset has a zero adjusted basis for federal income tax
purposes, depreciation, cost recovery or amortization deductions shall be
determined using any reasonable method that the Tax Matters Partner may adopt.
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4.4. DISTRIBUTION OF ASSETS. If the Company at any time distributes
any of its assets in kind to any Partner, the Capital Account of each Partner
shall be adjusted to account for that Partner's allocable share (as
determined under Article V) of the Net Profits or Net Losses that would have
been realized by the Company had it sold the assets that were distributed at
their respective fair market value immediately prior to their distribution.
4.5. DISPOSITION OF INTEREST. In the event of a Disposition of some or
all of a Partner's Interest in the Company, the Capital Account of the
Disposing Partner shall become the Capital Account of the Assignee, to the
extent it relates to the portion of the Interest Disposed of.
4.6. COMPLIANCE WITH CODE SECTION 704(B). The provisions of this
Article IV as they relate to the maintenance of Capital Accounts are intended
to cause the allocations of profits, losses, income, gain and credit pursuant
to Article V to have substantial economic effect under the Regulations under
Code SECTION 704(b), in light of the Distributions made pursuant to Articles
VI and VIII and the Capital Contributions made pursuant to this Article IV.
Notwithstanding anything to the contrary, this Agreement shall not be
construed as creating a deficit restoration obligation or otherwise as
personally obligating any Partner to make a Capital Contribution in excess of
the Initial Contribution.
4.7. DEFICIT RESTORATION.
4.7.1 Upon the liquidation of the Company, if there is a
deficit in the General Partner's Capital Account (after Capital Accounts have
been adjusted as provided in this Agreement for all taxable years including
the Liquidation Year), the General Partner (meaning for this purpose the
General Partner at the time and not any predecessor) shall contribute the
amount of such deficit to the Company before the end of the Liquidation Year
(or, if later, within 90 days after the date of such liquidation) or by such
earlier date as may be required to complete the liquidation in accordance
with a duly adopted plan of liquidation. Amounts thus contributed shall be
distributed to or among the creditors and Partners in accordance with the
provisions of Section 14.3 for distribution of Company Property on
dissolution, winding up, and liquidation. Notwithstanding anything to the
contrary contained herein, in no event shall the aggregate amount the General
Partner is required to contribute to the Company pursuant to this Section
4.7.1 exceed the aggregate for all taxable years of the product of (a) the
aggregate amount of Net Losses allocated to the General Partner in any
taxable year pursuant to Section 5.1.2(a) times (b) the Combined Marginal
Rate (as hereinafter defined) for the taxable year immediately preceding the
year of allocation.
4.7.2 Upon the liquidation of the Company, if the Company has
withheld or paid tax with respect to any Partner in accordance with
applicable law by reason of other than a Distribution to such Partner, such
Partner (meaning for this purpose any successor to Partner) shall contribute
the amount of such withheld tax to the Company to the extent subsequent
Distributions (including any distribution anticipated to be paid pursuant to
Section 14.3.3) have not been sufficient to allow the Company to recoup such
taxes pursuant to Section 6.3. Amounts thus contributed shall be distributed
to or among the creditors and other Partners in accordance with the
provisions of Section 14.3 for distribution of Company Property on
dissolution, winding up and liquidation.
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ARTICLE V
ALLOCATIONS
5.1. ALLOCATIONS OF NET PROFITS AND NET LOSSES. For purposes of
maintaining the Capital Accounts and in determining the rights of the
Partners among themselves, the Company's items of income, gain, loss and
deduction (computed in accordance with Section 4.3.2) shall be allocated
among the Partners for each Taxable Year other than any Liquidation Year (or
portion thereof) as provided herein:
5.1.1 After giving effect to the special allocations set forth
in Section 5.2, Net Profits for each taxable period and all items of income
and gain taken into account in computing Net Profits for such taxable period
shall be allocated to the Partners in the following order and priority:
(a) first, to the Preferred Partners to the extent of and in
proportion to such Preferred Partners' Untaxed Preference Amounts;
(b) second, to AHN LLC in an amount equal to the excess of
Net Losses previously allocated to AHN LLC under Section 5.1.2(e) over
aggregate Net Profits previously allocated to AHN LLC under this Section
5.1.1(b);
(c) third, to each Partner in an amount equal to the excess
of aggregate Net Losses previously allocated to such Partner under Section
5.1.2(c) over aggregate Net Profits previously allocated to such Partner
under this Section 5.1.1(c). For purposes of this Section 5.1.1(c), Net
Profits shall be allocated among the Partners in a manner that "unwinds" the
allocation of Net Losses set forth in Section 5.1.2(c), i.e., taking into
account allocations made under the second sentence of Section 5.1.2(c) before
taking into account allocations made under the first sentence of Section
5.1.2(c);
(d) fourth, to AHN LLC in an amount equal to the excess of
Net Losses previously allocated to AHN LLC under Section 5.1.2(b) over
aggregate Net Profits, previously allocated to AHN LLC under this Section
5.1.1(d); and
(e) fifth, to all the Partners, in accordance with their
respective Post Recoupment Percentage Interests.
5.1.2 After giving effect to the special allocations set forth
in Section 5.2, Net Loss for each taxable period and all items of loss and
deduction taken into account in computing Net Loss for such taxable period
shall be allocated to the Partners in the following order and priority:
(a) first, to the Partners in proportion to the aggregate Net
Profits previously allocated to the Partners under Section 5.1.1(e), in an
amount equal to the excess of aggregate Net Profits previously allocated to
the Partners under Section 5.1.1(e) over aggregate Net Losses previously
allocated to the Partners under this Section 5.1.2(a);
(b) second, to AHN LLC, but only (x) until the aggregate
amount of Net Losses allocated to AHN LLC under this Section 5.1.2(b) equals
AHN LLC's Capital Contribution, and
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(y) to the extent such amount when so allocated would not cause AHN LLC to
have an Adjusted Capital Account Deficit;
(c) third, to the Preferred Partners in accordance with their
respective Capital Contributions; but only (x) until the aggregate amount of
Net Losses allocated to the Preferred Partners under this Section 5.1.2 (c)
equals the aggregate Capital Contributions of the Preferred Partners, and (y)
to the extent such amount when so allocated would not cause any Preferred
Partner to have Adjusted Capital Account Deficit. This Section 5.1.2(c)
shall continue to be applied, MUTATIS MUTANDIS, until the allocation of Net
Losses hereunder would cause each of the Preferred Partners to have an
Adjusted Capital Account Deficit;
(d) fourth, to each Partner in proportion to their respective
Post Recoupment Percentage Interests, but only to the extent that Net Losses
can be allocated to the Limited Partners under this Section 5.1.2(d) without
resulting in an Adjusted Capital Account Deficit for any Limited Partner; and
(e) fifth, to AHN LLC.
5.2. SPECIAL ALLOCATIONS. The following special allocations shall be
made in the order required by the Regulations.
5.2.1 MINIMUM GAIN CHARGEBACK. If there is a net decrease in
Company Minimum Gain during any Taxable Year (other than a decrease
attributable to a "book up" in the value of the Company's assets, a decrease
offset by an increase in Partner Minimum Gain, and any other decrease for
which a Company Minimum Gain chargeback is not required under SECTION
1.704-2(f) of the Regulations), each Partner shall be specially allocated
items of Company income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Partner's share of the net decrease in
Company Minimum Gain, determined in accordance with SECTION 1.704-2(g)(2) of
the Regulations. The items to be so allocated shall be determined in
accordance with SECTION 1.704-2(j)(2) of the Regulations. This Section 5.2.1
is intended to comply with the minimum gain chargeback requirement in SECTION
1.704-2(f) of the Regulations and shall be interpreted consistently therewith.
5.2.2 PARTNER MINIMUM GAIN CHARGEBACK. If there is a net
decrease in Partner Minimum Gain during any Taxable Year (other than a
decrease attributable to a "book up" in the value of the Company's assets, a
decrease offset by an increase in Company Minimum Gain, and any other
decrease for which a Partner Minimum Gain chargeback is not required under
SECTION 1.704-2(i)(4) of the Regulations) then, after the allocations set forth
in Section 5.2.1, each Partner shall be specially allocated items of Company
income and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Partner's share of the net decrease in Partner Minimum
Gain determined in accordance with SECTION 1.704-2(i)(3) of the Regulations.
The items to be so allocated shall be determined in accordance with
SECTION 1.704-2(j)(2) of the Regulations. This Section 5.2.2 is intended to
comply with the minimum gain chargeback requirement in SECTION 1.704-2(i)(4) of
the Regulations and shall be interpreted consistently therewith.
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5.2.3 QUALIFIED INCOME OFFSET. If, at any time during any
Taxable Year any Partner (other than the General Partner) unexpectedly
receives any adjustments, allocations or distributions described in
SECTION 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and if such
adjustment, allocation or distribution would cause an Adjusted Capital
Account Deficit for such Partner as of the end of such Taxable Year, then
items of Company income and gain shall be specially allocated to such Partner
in an amount and manner sufficient to eliminate (to the extent required by
the foregoing Regulations) such Adjusted Capital Account Deficit as quickly
as possible; PROVIDED, that an allocation pursuant to this Section 5.2.3
shall be made only if and to the extent that such Partner would have an
Adjusted Capital Account Deficit after all other allocations provided for
have been tentatively made as if this Section 5.2.3 were not in this
Agreement.
5.2.4 NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any
Taxable Year or other period shall be specially allocated to the Partners in
accordance with their respective Capital Contributions.
5.2.5 PARTNER NONRECOURSE DEDUCTIONS ATTRIBUTABLE TO PARTNER
NONRECOURSE DEBT. Any Partner Nonrecourse Deductions for any Taxable Year or
other period shall be specially allocated to the Partner who bears the
Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with
SECTION 1.704-2 of the Regulations.
5.2.6 SECTION 754 ADJUSTMENT. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code SECTION 734(b) or Code
SECTION 743(b) is required, pursuant to SECTION 1.704-1(b)(2)(iv)(m) of the
Treasury Regulations, to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which
their Capital Accounts are required to be adjusted pursuant to such Section
of the Regulations.
5.2.7 MATERIAL ITEMS. Any provisions of this Agreement to the
contrary notwithstanding, at all times during the existence of the Company,
the aggregate interest of the General Partner in each material item of
income, gain, loss, deduction or credit shall equal at least one percent
(1.0%) of each such material item.
5.3. CURATIVE ALLOCATIONS. The allocations set forth in Section 5.2
(the "Regulatory Allocations") are intended to comply with certain
requirements of SECTION 1.704-1(b) and -2 of the Regulations. Notwithstanding
any other provisions of this Article V (other than the Regulatory Allocations),
the Regulatory Allocations shall be taken into account in allocating other
Net Profits, Net Losses, and items of income, gain, loss, deduction and Code
SECTION 705(a)(2)(B) expenditures among the Partners so that, to the extent
possible, the net amount of such allocations of other Net Profits, Net
Losses, and other items and the Regulatory Allocations to each Partner shall
be equal to the net amount that would have been allocated to each such
Partner if the Regulatory Allocations had not occurred. For purposes of
applying the foregoing sentence: (a) Nonrecourse Deductions shall not be
taken into account prior to the Taxable Year during which there is a net
decrease in Company Minimum Gain, and then only to the extent the Management
Committee determines that it is necessary to avoid any potential economic
distortions
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caused by such net decrease in Company Minimum Gain; (b) Partner
Nonrecourse Deductions shall not be taken into account prior to the Taxable
Year during which there is a net decrease in Partner Minimum Gain, and then
only to the extent the Management Committee determines that it is necessary
to avoid any potential economic distortions caused by such net decrease in
Partner Minimum Gain; (c) allocations pursuant to this Section shall be
deferred with respect to allocations pursuant to Section 5.2.3 to the extent
the Management Committee reasonably determines that such allocations are
likely to be offset by subsequent allocations pursuant to Section 5.2.1; (d)
allocations pursuant to this Section shall be deferred with respect to
allocations pursuant to Section 5.2.4 to the extent the Management Committee
reasonably determines that such allocations are likely to be offset by
subsequent allocations pursuant to Section 5.2.2; and (e) allocations
pursuant to this Section shall only be made with respect to allocations
pursuant to Section 5.2.5 to the extent the Management Committee reasonably
determines that such allocations will otherwise be inconsistent with the
economic arrangement among the parties to the Agreement.
5.4. GENERAL.
5.4.1 Except as otherwise provided in this Agreement, all items
of Company income, gain, loss, deduction and any other allocations not
otherwise provided for shall be divided among the Partners in the same
proportions as they share Net Profits or Net Losses, as the case may be, for
the year.
5.4.2 For purposes of determining the Net Profits, Net Losses
or any other items allocable to any period, Net Profits, Net Losses or any
such other items shall be determined on a daily, monthly, or other basis, as
determined by the Management Committee using any permissible method under
Code SECTION 706 and the Regulations thereunder.
5.4.3 Solely for purposes of determining a Partner's
proportionate share of the "excess nonrecourse liabilities" of the Company
within the meaning of SECTION 1.752-3(a)(3) of the Regulations, the Partners'
interests in Company profits shall be allocated among the Partners pro rata
in proportion to their relative Capital Contributions.
5.4.4 To the extent permitted by SECTION SECTION 1.704-2(h)(3)
and 1.704-2(i)(6) of the Regulations, the Management Committee shall endeavor
not to treat Distributions of Net Available Cash as having been made from the
proceeds of a Nonrecourse Liability or a Partner Nonrecourse Debt.
5.4.5 The Management Committee shall have reasonable
discretion, with respect to each Taxable Year, to request a waiver from the
Commissioner of the Internal Revenue Service of the minimum gain chargeback
requirement pursuant to SECTION SECTION 1.704-2(f)(4) or 1.704-2(i)(4) of the
Regulations, if the application of such chargeback would cause a permanent
distortion of the economic arrangement of the Partners.
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5.5. TAX ALLOCATIONS; CODE SECTION 704(c).
5.5.1 Except as otherwise provided for herein, for federal,
state and local income tax purposes (a) each item of income, gain, loss and
deduction shall be allocated among the Partners in the same manner as its
correlative item of "book" income, gain, loss or deduction is allocated
pursuant to Sections 5.1, 5.2 and 5.3, and (b) each tax credit shall be
allocated to the Partners in the same manner as the receipt or expenditure
giving rise to such credit is so allocated.
5.5.2 In accordance with Code SECTION 704(c) and the Regulations
thereunder, income, gain, loss and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Partners so as to take account of any variation between
the adjusted basis of such property to the Company for federal income tax
purposes and its fair market value on the date of such contribution. In
order to eliminate distortions caused by the "ceiling rule" of
SECTION 1.704-3(b)(l) of the Regulations, except to the extent otherwise
required by law, the Company will adopt the "remedial allocation method" set
forth in SECTION 1.704-3(d) of the Regulations.
5.5.3 If the gross asset value of any Company asset is
adjusted, subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take account of any variation between the
adjusted basis of such asset for federal income tax purposes and its gross
asset value in the same manner as under Code SECTION 704(c) and the Regulations
hereunder.
5.5.4 Any elections or other decisions relating to such
allocations shall be made by the Management Committee in any manner that
reasonably reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 5.5 are solely for purposes of federal, state and
local taxes and shall not affect, or in any way be taken into account in
computing, any Partner's Capital Account or share of Net Profits, Net Losses,
other items or distributions pursuant to any provision of this Agreement.
5.5.5 The Management Committee shall have the discretion
(exercisable only with the Special Vote of the Class A Partners) to provide
only Partners recognizing gain on Partnership distributions covered by Code
SECTION 734 with the federal income tax benefits attributable to any increased
basis in Partnership property resulting from any election under Code
SECTION 754.
ARTICLE VI
DISTRIBUTIONS
6.1. NON-LIQUIDATING DISTRIBUTIONS.
6.1.1 Except as otherwise provided by this Agreement, required
by law, or prohibited by any other agreement to which the Company is a party,
the Company shall distribute Property to the Partners as set forth below:
(a) first, to the extent of Net Available Cash, within sixty
(60) days after each Taxable Year, the Company shall distribute an amount
equal to the Preferred Partners' Aggregate
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Preference Amounts to the Preferred Partners in proportion to their respective
Preferred Partners' Aggregate Preference Amounts; and
(b) second, to the extent of Net Available Cash after
distributions pursuant to Section 6.1.1(a), no less than three Business Days
prior to April 15 of each year the Company shall make a tax distribution to
the Partners (pro rata in proportion to their Post Recoupment Percentage
Interests) in an amount equal to the amount by which the "tax liability" (as
defined below) for the preceding Taxable Year exceeds the Distributions made
to the Partners with respect to the preceding Taxable Year pursuant to this
Section 6.1.1(b).
The "tax liability" shall mean the product of (A) Net Profits for the
preceding taxable year allocated to the Partners under clause (e) of Section
5.1.1, times (B) the Combined Marginal Rate (as hereinafter defined) for such
preceding taxable year. The "Combined Marginal Rate" shall mean for any
taxable year the sum of (y) the highest marginal New York state income tax
assessable for such year on the ordinary income of individual taxpayers or
corporate taxpayers, whichever is higher, and (z) the highest marginal
federal income tax rate assessable for such year on the ordinary income of
individual taxpayers or corporate taxpayers, whichever is higher, as such
federal income tax rate shall be adjusted to take into account the
deductibility of state income taxes; PROVIDED, that in no event shall the
Combined Marginal Rate exceed 50%. If the Company has insufficient funds to
make the tax distributions pursuant to this Section at the time required by
this Section, such tax distributions shall be made to the Partners within a
reasonable period of time after such funds become available.
6.1.2 After giving effect to Section 6.1.1, for each Taxable
Year of the Company, any remaining Net Available Cash shall be distributed to
the Partners no later than 60 days after the expiration of such Taxable Year
in the following order and priority:
(a) First, until Recoupment has occurred, to the Preferred
Partners pro rata in proportion to each Preferred Partner's Preferred Capital
Amount; and
(b) Second, to all Partners, other than the Preferred
Partners, pro rata in proportion to the Carrying Value of such other
Partners' Capital Contributions at the time of the contribution until the
aggregate amount distributed to such other Partners under this Section
6.1.2(b) equals the Carrying Value of such Partners' Capital Contributions
determined at the time of contribution; PROVIDED, that no Partner shall
receive any amount under this Section in excess of the Carrying Value of such
Partner's Capital Contribution at the time of contribution.
(c) Then, to all of the Partners pro rata in proportion to
their Post Recoupment Percentage Interests.
6.1.3 From time to time the Management Committee shall
determine in its reasonable judgment to what extent, if any, Net Available
Cash may be distributed after considering the current and anticipated needs
of the Company, including, without limitation, needs for operating expenses,
debt service, acquisitions, reserves and mandatory Distributions, if any. To
the extent such excess exists, the Management Committee may make
Distributions to the Partners in proportion to their Post Recoupment
Percentage Interests subject to the provisions of Section 6.2.
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6.2. Limitations on Distributions. No Distribution shall be declared
and paid to a Partner unless, (a) after the Distribution is made, the assets
of the Company are in excess of all liabilities of the Company and (b) such
Distribution would not cause such Partner to have an Adjusted Capital Account
Deficit as of the end of the Taxable Year in which such Distribution would be
made, taking into account all allocations (other than those pursuant to
Section 5.2.3) which would be made to such Partner during such Taxable Year,
calculated without reference to any other amounts to be contributed or
returned or required to be returned to the Company.
6.3. Withholding. If the General Partner is required to withhold or
pay tax with respect to a Partner in accordance with applicable law, the
amount of the Distribution to such Partner with respect to which such tax was
required to be withheld (or, in the case of a tax required to be paid with
respect to a Partner other than by reason of a Distribution to such Partner,
subsequent distributions to such Partner) shall be reduced by the amount of
such tax withheld or paid.
ARTICLE VII
BOOKS AND RECORDS, ACCOUNTING, ETC.
7.1. REPORTS. The Management Committee shall prepare or cause to be
prepared all tax returns and statements, if any, which must be filed on
behalf of the Company with any taxing authority, and shall make timely filing
thereof. The Management Committee shall deliver to each Partner: (a) within
90 days of the end of each Taxable Year, sufficient financial information
concerning the results of the Company's operations as is necessary for such
Partner to file its own federal and state income tax returns for the
preceding year (including Internal Revenue Service Form 1065, SCHEDULE K-1
and a copy of the Company's balance sheet, a statement of Partners' Capital
Accounts and a statement of income and surplus, certified to by the Company's
independent firm of public accountants); (b) within 45 days after the end of
each fiscal quarter, an unaudited balance sheet of the Company at the end of
such quarter and an unaudited statement of income of the Company for the
quarter then ended, together with a summary discussion of the performance of
the Company for that quarter; (c) within 15 days after the end of each month,
an unaudited balance sheet of the Company at the end of such month and an
unaudited statement of income of the Company for the month then ended; and
(d) such other information or reports as the Partners may reasonably request
from time to time (including copies of the Company's state and local income
tax returns). The General Partner shall not have the right to keep
confidential from the other Partners any information that the General Partner
would otherwise be permitted to keep confidential pursuant to Section
17-305(b) of the Act.
7.2. ACCOUNTING.
7.2.1 The books of account of the Company, together with an
executed copy of the Certificate of Limited Partnership, and any amendments
thereto, shall be kept and maintained at all times at the place or places
selected by the General Partner, subject to the Management Committee's
approval. The books of account shall be maintained in accordance with
generally accepted accounting principles, consistently applied, and shall
show all items of income and expense.
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7.2.2 Each Partner shall have the right at all reasonable times
during usual business hours to audit, examine and make copies of or extracts
from the books of account of the Company. Such right may be exercised
through any agent or employee of such Partner designated by it or by an
independent public accountant designated by such Partner. Each Partner shall
bear its own expenses incurred in any examination made for such Partner's
account.
ARTICLE VIII
TAXES
8.1. ELECTIONS. In accordance with Section 3.4.4(r), the Management
Committee may make any tax elections for the Company allowed under the Code
or the tax laws of any state or other jurisdiction having taxing jurisdiction
over the Company.
8.2. TAX MATTERS PARTNER. The Management Committee shall designate the
Manager as the Tax Matters Partner of the Company pursuant to Code
SECTION 6231(a)(7). The Manager, or any other Partner who subsequently may be
designated as the Tax Matters Partner, shall take such action as may be
necessary to cause each other Partner to become a notice partner within the
meaning of Code SECTION 6223. The Tax Matters Partner may not take any action
contemplated by Code SECTION SECTION 6222 through 6232 without the consent of
the Management Committee. The Tax Matters Partner shall not, without the
Majority Vote of the Committee:
8.2.1 agree to extend any statute of limitations with respect
to the Company under Code SECTION 6229;
8.2.2 file a request for administrative adjustment (including a
request for substituted return treatment) under Code SECTION 6227;
8.2.3 file a petition for judicial review, or any appeal with
respect to any judicial determination, under Code SECTION 6226;
8.2.4 take any action to consent to, or to refuse to consent
to, a settlement reflected in a decision of a court; or
8.2.5 enter into any settlement agreement affecting the
Company. The Tax Matters Partner shall promptly give Notification to the
Management Committee of the commencement of any administrative or judicial
proceedings involving the tax treatment of any items of Company income, loss,
deduction and credit, and shall further keep the Management Committee fully
informed of all material developments involved in such proceedings. In
addition, the Tax Matters Partner shall give the Management Committee prompt
Notification of the preparation of any material submission to the Internal
Revenue Service or to any court in connection with any such proceedings. The
Tax Matters Partner shall also give Notification to the Management Committee
of its intention to meet with any representative of the Internal Revenue
Service at least 30 days prior to such meeting (or immediately upon arranging
such meeting if such meeting is arranged fewer than 30 days prior to such
meeting), and shall inform the Management Committee of the results of the
meeting within two Business Days after such meeting. The
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Tax Matters Partner shall inform the Management Committee of the contents of
any material communication (oral or written) from the Internal Revenue Service
within two Business Days of receiving such communication (or on the same day, if
any action is required in response to such communication within fewer than 30
days of receipt of such communication). If in any instance the Management
Committee believes in good faith that the failure to perform any act for
which the consent of the Management Committee is required hereunder would
materially adversely affect the Company, and such consent has been requested
and has not been provided, the Tax Matters Partner is authorized to perform
such act. In such event the Tax Matters Partner shall immediately give
Notification thereof to the Management Committee.
8.3. NOTIFICATION OF AUDIT. The Management Committee shall give prompt
Notification to each Partner upon receipt of advice that the Internal Revenue
Service intends to examine or audit any income tax returns of the Company.
8.4. SECTION 754 ELECTION. If a Distribution of Company property as
described in Code SECTION 734 occurs, or if a transfer of a Partnership Interest
as described in Code SECTION 743 occurs, upon the written request of the Partner
either receiving such Distribution or making such transfer or of the transferee,
and with the consent of the Tax Matters Partner (which consent shall not be
unreasonably withheld), the Company shall elect pursuant to Code SECTION 754 to
adjust the basis of Company properties.
ARTICLE IX
INDEMNIFICATION
9.1. INDEMNIFICATION BY THE COMPANY. Neither (a) any General Partner
nor any Affiliate, officer, director, controlling person, partner, employee
or shareholder of a General Partner or its Affiliates acting in a partner
capacity or as an agent for the Partnership within the scope of its duties,
(b) nor any member of the Management Committee (each, an "Indemnified
Person") shall be liable, responsible or accountable in damages or otherwise
to any of the other Partners or any third party for any loss or damage
incurred by reason of any act or omission performed or omitted by it in good
faith on behalf of the Company and in a manner reasonably believed by it to
be within the scope of the respective authority granted to it by this
Agreement and in the best interests of the Company; PROVIDED, that such
Indemnified Person was not guilty of bad faith, willful misconduct, gross
negligence or fraud. The Company shall indemnify, save harmless and (unless
the Indemnified Person elects otherwise) defend each Indemnified Person from
any loss, claim, damage, liability or expense (including legal fees and
expenses) incurred by such Indemnified Person or any such designee by reason
of any such act or omission; PROVIDED, that such Indemnified Person was not
guilty of bad faith, willful misconduct, gross negligence or fraud and,
FURTHER, PROVIDED, that the satisfaction of any indemnification, any saving
harmless and any defense shall be from and limited to Company assets and no
Partner shall have any personal liability on account hereof. The Company may
maintain insurance, at its expense, to protect any Person against any
expense, liability or loss, to the extent that the Company would have the
power to indemnify such Person under the laws of the State of Delaware. In
addition, the Company shall indemnify and save harmless and (unless the
Indemnified Person elects otherwise) defend each Indemnified Person from any
loss, claim, damage, liability or expense (including legal fees and expenses)
incurred by such Indemnified Person by reason of any third party claim
relating to the Company or arising out of any act or omission by the Company,
the
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Manager, any other Partner, or any employee, officer, director or partner
thereof, or any member of the Management Committee, relating to the Company;
PROVIDED, that such Indemnified Person was not guilty of bad faith, willful
misconduct, gross negligence or fraud; and further, PROVIDED, that (i) the
satisfaction of any indemnification, any saving harmless and any defense
shall be from and limited to Company Property, and no Partner shall have any
personal liability on account hereof, and (ii) the Company's indemnification
obligation hereunder shall not apply to amounts paid in settlement for any
loss, claim, damage, liability or expense (including legal fees and expenses)
if such settlement is effected without the consent of the Majority Vote of
the Management Committee, which consent shall not be unreasonably withheld.
9.2. INDEMNIFICATION BY AHN LLC. AHN LLC shall indemnify, save
harmless and defend the Partnership and each Limited Partner from and against
any breach of any of its representations and warranties made in the Admission
Agreement.
ARTICLE X
DISPOSITION OF PARTNERSHIP INTERESTS; WITHDRAWALS
10.1. DISPOSITION. Any Partner or Assignee may Dispose of all or a
portion of the Partner's or Assignee's Partnership Interest only upon
compliance with this Article X and Article XII, if applicable. No
Partnership Interest (and, with regard to Section 10.1.5, no other interest
in or relating to the Partnership) shall be Disposed of:
10.1.1 if such Disposition, alone or when combined with other
transactions, would result in a termination of the Company within the meaning
of Code SECTION 708;
10.1.2 without an opinion of counsel satisfactory to the
Management Committee that such Disposition is subject to an effective
registration under, or exempt from the registration requirements of, the
applicable state and federal securities laws;
10.1.3 unless and until the Company receives from the Assignee
the information and agreements that the Management Committee may reasonably
require, including but not limited to any taxpayer identification number, and
representations and warranties substantially identical to those set forth in
the Admission Agreement;
10.1.4 unless the Partner disposing of his Partnership Interest
obtains the prior written consent of a Majority Vote of the Partners (not
including the Disposing Partner);
10.1.5 unless in compliance with Section 13.2.1 or 13.4.1, if such
Disposition could result in the Company being classified as a publicly traded
partnership within the meaning of Code SECTION 7704 or otherwise taxable as a
corporation for federal income tax purposes; and
10.1.6 except pursuant to the agreements referred to in Section
10.2, prior to the second anniversary of the Effective Date.
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10.2. APPROVED DISPOSITIONS.
10.2.1 The Partners acknowledge that AHN LLC has granted NCCI
the right to acquire [ ]% of the Partnership Interest held by AHN LLC on terms
and conditions set forth in the Partnership Interest Purchase Agreement (the
"NCCI Purchase Agreement") dated January 31, 1996, between AHN LLC and NCCI.
Upon any full or partial exercise of its rights under the NCCI Purchase
Agreement, NCCI will become a Substitute Partner and a Limited Partner in the
Partnership subject to the rights and obligations of this Agreement without
any requirement of compliance with Section 10.1. NCCI has become a party to
this Agreement subject to its acquisition of a Partnership Interest from AHN
LLC. Neither the Partnership nor any General or Limited Partner (other than
AHN LLC) shall have any obligation to NCCI with respect to its acquisition of
a Partnership Interest in the NCCI Purchase Agreement.
10.2.2 The Partners acknowledge that, subject to compliance by
PJHP with Section 10.1.1 through 10.1.3 and Section 10.1.5 until December 31,
1997, PJHP may dispose of not more than [ ]% of its Partnership Interest to a
Person or Persons selected by it without approval by any other Partners.
10.2.3 The Partners acknowledge that, in addition to, and not as
part of, the Limited PJHP Disposition, PJHP has entered into separate
agreements with (a) SC Fundamental Value Fund, L.P. and SC Fundamental Value
Fund BVI, Ltd. (collectively, "SC"), pursuant to which SC has the right to
purchase from PJHP a Partnership Interest, comprised of a Post Recoupment
Percentage Interest of [ ]% on or prior to the date of the Second Closing
under the Admission Agreement and (b) Access, pursuant to which Access has
the right to purchase from PJHP a Partnership Interest comprised of a Post
Recoupment Percentage Interest of [ ]% on or prior to the date of the Second
Closing under the Admission Agreement. The Partners consent to and approve
such Dispositions as the same may occur pursuant to such rights.
10.3. DISPOSITIONS NOT IN COMPLIANCE WITH THIS ARTICLE. Any attempted
Disposition of a Partnership Interest, or any part thereof, not in compliance
with this Article is null and void ab initio.
10.4. LIABILITY OF A WITHDRAWN PARTNER. Any Partner who voluntarily or
involuntarily for any reason withdraws or resigns or is removed or Disposes
of its Partnership Interest shall remain liable for obligations and
liabilities incurred by it as a Partner prior to the time such withdrawal,
resignation or Disposition becomes effective, but it shall be free of any
obligation or liability incurred on account of the activities of the Company
from and after the time such withdrawal, resignation, removal or Disposition
becomes effective.
10.5. DISASSOCIATION. Any Person shall cease to be a Partner upon the
happening of any of the following events:
10.5.1 the withdrawal of a Partner with the consent of a
Majority Vote of the Partners (not including the withdrawing Partner);
10.5.2 any Partner becomes a Bankrupt Partner;
[ ] = Confidential Treatment Requested
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10.5.3 in the case of any Partner who is a natural person, the
death of that Partner or the entry of an order by a court of competent
jurisdiction adjudicating that Partner incompetent to manage that Partner's
personal estate;
10.5.4 in the case of any Partner who is acting as a Partner by
virtue of being a trustee of a trust, the termination of the trust (but not
merely the substitution of a new trustee);
10.5.5 in the case of any Partner that is a separate
Organization other than a corporation, the dissolution and commencement of
winding up of the separate Organization;
10.5.6 in the case of any Partner that is a corporation, the
filing of a certificate of dissolution, or its equivalent, for the
corporation or the revocation of its charter; PROVIDED, that in no event
shall the merger of any Partner, whether or not such Partner survives such
merger, result in a Disassociation of such Partner; or
10.5.7 in the case of any Partner that is an estate, the
distribution by the fiduciary of the estate's entire interest in the Company.
10.6. RIGHTS OF DISASSOCIATING PARTNER. In the event any Partner
Disassociates prior to the expiration of the Term:
10.6.1 if the Disassociation causes a dissolution and winding up
of the Company under Article XIV, the Partner shall be entitled to
participate in the winding up of the Company to the same extent as any other
Partner except that any Distributions to which the Partner would have been
entitled shall be reduced by the damages sustained by the Company as a result
of the dissolution and winding up; and
10.6.2 if the Disassociation does not cause a dissolution and
winding up of the Company under Article XIV, the Disassociating Partner (or
its successors, assigns or personal representative, as the case shall be)
shall be treated as an Assignee, unless admitted as a Substitute Partner
pursuant to Section 11.2; PROVIDED, that at the option of the Management
Committee, the Company shall have the right to purchase such Disassociating
Partner's Partnership Interest for an amount equal to the Fair Market Value
of the Partner's Partnership Interest in the Company, to be paid over five
years from the date of disassociation. The Fair Market Value of the
Partner's Partnership Interest shall be reduced by any damages sustained by
the Company as a result of the Partner's Disassociation.
ARTICLE XI
ADMISSION OF ASSIGNEES AND ADDITIONAL PARTNERS
11.1. RIGHTS OF ASSIGNEES. The Assignee of a Partnership Interest has
no right to vote, participate in the management of the business and affairs
of the Company or to become a Partner. The Assignee is entitled only to
receive the Distributions and to be allocated the Net Profits and Net Losses
attributable the Partnership Interest.
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11.2. ADMISSION OF SUBSTITUTE PARTNERS. Notwithstanding that the
Disposition to an Assignee has been made in compliance with Section 10.1 or
Section 12.1, an Assignee of a Partnership Interest shall be admitted as a
Substitute Partner and admitted to all the rights of the Partner who
initially assigned the Partnership Interest only with approval by the General
Partner and the Special Vote of the Class A Partners; PROVIDED, that neither
the acquisition by NCCI of a Partnership Interest pursuant to the NCCI
Purchase Agreement nor the Limited PJHP Disposition shall require any
approval or consent of either the Management Committee or any Partners to
constitute NCCI or the PJHP Assignee, as the case may be, a Substitute
Partner; and, PROVIDED, further, that upon NCCI's acquisition of a
Partnership Interest pursuant to the NCCI Purchase Agreement, NCCI will
become a Limited Partner; and, PROVIDED, further, that no Person or any
Affiliate of such Person which at the time is a direct competitor of Access
may become a Substitute Partner without the prior written consent of Access.
The Partners may grant or withhold the approval of such admission in their
sole and absolute discretion. If so admitted, the Substitute Partner
(including, without limitation, NCCI and the PJHP Assignee) shall execute an
instrument by which it shall become a party to this Agreement and, upon such
execution, shall have all the rights and powers and is subject to all the
restrictions and liabilities of the Partners originally assigning the
Partnership Interest. The admission of a Substitute Partner shall not
release the Partner originally assigning the Partnership Interest from any
liability to the Company that may exist prior to the approval.
11.3. ADMISSION OF ADDITIONAL PARTNERS. No Additional Partners may be
admitted except as provided in Sections 4.14, 4.2, 3.4.3(b) or (c), 10.2.2,
10.2.3 or 12.1. Notwithstanding the foregoing, no Additional Partner shall
have any right to designate any members of the Management Committee except as
provided in Section 3.4.1, and, PROVIDED, FURTHER, that no Person or any
Affiliate of such Person which at the time is a direct competitor of Access
may become an Additional Partner without the prior written consent of Access.
11.4 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP.
For admission to the Company of any Partner, the Manager shall take all steps
necessary and appropriate under the Act to amend the records of the Company
and, if necessary, to prepare as soon as practical an amendment of this
Agreement (including an amendment of SCHEDULES A-1 or A-2) and, if required
by law, shall prepare and file an amendment to the Certificate of Limited
Partnership.
ARTICLE XII
RIGHTS TO PURCHASE CERTAIN PARTNERSHIP INTERESTS
12.1. RIGHT OF FIRST REFUSAL.
12.1.1 Except for a Limited PJHP Disposition and for any sale of
a portion of AHN LLC's Partnership Interest pursuant to the NCCI Purchase
Agreement, whenever any Partner (the "Offering Partner") shall desire to sell
any of its Partnership Interest to a third party and intends to solicit a
bona fide written offer from any Person to purchase, for a specified price
payable in cash or otherwise and on specified terms and conditions, such
Partner's Partnership Interest in the Company (whether such offer is
initiated by such Person or by such Partner), then prior to soliciting such
offer to purchase such Partnership Interest, the Offering Partner shall
deliver to the other Partners a letter (the "Offer Letter") signed by the
Offering Partner setting forth the following information:
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(a) the prospective purchase price of the Partnership
Interest and the other material terms and conditions for such sale, including
the identity of the third party to whom the Offering Partner intends to
solicit an offer;
(b) the Offering Partner's offer, as the case may be,
(irrevocable by its terms for 20 days following receipt) to sell to the other
Partners all (but not less than all) of its Partnership Interest to such
other Partners for such purchase price (allocated pro rata among the Partners
proposing to purchase such Partnership Interest (each, a "Purchaser") based
on their Post Recoupment Percentage Interests) and on such other terms and
conditions (the "Offer); and
(c) closing arrangements and a closing date (not less than 20
nor more than 40 days following the date of such letter) for any purchase and
sale that may be effected by Purchasers pursuant to this Section 12.1.1.
12.1.2 If any of the other Partners (or the Company, pursuant to
Section 12.1.3) shall have accepted such Offer, the closing of the purchase
and sale pursuant to such acceptance shall take place upon the terms and
subject to the conditions as set forth in the Offer Letter pursuant to
Section 12.1.1(c). If the other Partners (or the Company pursuant to Section
12.1.3) fail to accept the Offer within such 20 day period or fail to
consummate the closing of the purchase of the Partnership Interest covered by
the Offer within the time period set forth therein, then the Offering Partner
may sell to the third party or parties identified in the Offer Letter all
(but not less than all) of the Partnership Interest covered by such Offer,
for a purchase price not less than the purchase price set forth in the Offer
letter and on terms and conditions (taken as a whole) no more favorable than
those set forth in the Offer Letter. If such sale has not been completed
within 90 days after the expiration of such 40-day period (unless the
Offering Partner is acting in good faith to sell its Partnership Interest, in
which case such 90 day period will be extended to 120 days), the Partnership
Interest covered by such Offer may not thereafter be sold by the Offering
Partner unless the procedures set forth in Section 12.1.1 shall have again
been complied with.
12.1.3 If the other Partners do not elect to purchase the
Partnership Interest covered by the Offer in its entirety then the Offering
Partner shall, within 10 days following the date of the Offer, notify the
Company of such Offer and make available to it the right to purchase the
portion of the Partnership Interest covered by the Offer which is not being
purchased by the other Partners. Notwithstanding the foregoing, in no event
shall the Purchasers or the Company be entitled to purchase the Partnership
Interest pursuant to this Section 12.1 unless all of the Partnership Interest
covered by the Offer is purchased. Any purchases made by the Company
hereunder shall be made in accordance with Section 12.1.1.
12.1.4 Subject to approval by the General Partner and the
Special Vote of the Class A Partners, the Partnership Interests, including,
without limitation, the Post Recoupment Percentage Interests, shall be
appropriately adjusted by the General Partner from time to time to reflect
any additional Capital Contributions made by any Partners pursuant to this
Section 12.1.
12.1.5 The closing of the sale of any Partnership Interest
pursuant to Section 12.1.2 or 12.1.3 shall occur at a place mutually
convenient to the parties. At the closing, any Partner
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selling pursuant to Section 12.1.1 (the "Selling Partner") shall deliver to the
appropriate purchaser (the "Purchaser") such instruments and documents as shall
be necessary or appropriate to transfer the Partnership Interest being
transferred by the Selling Partner and to evidence the withdrawal of any
Selling Partner from the Company, in the event the Selling Partner is
transferring all of its Partnership Interest, and the Purchaser shall
purchase the Partnership Interest and shall deliver the purchase price to the
Selling Partner by wire transfer of funds or by bank cashier's or certified
check, as determined by the Purchaser in its sole discretion. At the
closing, each Selling Partner shall agree to indemnify and hold the Purchaser
harmless from and against any and all liens and encumbrances on the
Partnership Interest to be transferred which were incurred or created while
such interests were held by such Selling Partner.
12.1.6 The following are conditions precedent to the Purchaser's
obligation to close on the purchase of the Partnership Interest transferred
pursuant to Section 12.1.2 or 12.1.3 (unless such conditions are waived by
the party benefited thereby):
(a) all material consents necessary to effect such
transaction have been obtained; and
(b) the consummation of the purchase shall not be subject to
any injunction or restraining order.
12.2. TAG-ALONG RIGHTS. Whenever AHN LLC or PJHP (as the case may be,
the "Seller Partner") shall determine to make a Disposition of a Partnership
Interest comprised of more than 50% of the Post Recoupment Percentage
Interest allocated to it (other than a Disposition to (i) another Partner,
(ii) an Affiliate of either AHN LLC or PJHP or (iii) pursuant to Article
XIII), the Selling Partner shall first give Notice of such proposed
Disposition to the other Partners and each of the other Partners shall have
the option (the "Co-Sale Option") to participate in such proposed Disposition
by selling, for a purchase price and on other terms and conditions not less
favorable than those applicable to the intended Disposition by the Selling
Partner, that portion of such other Partner's Partnership Interest which
equals the product of (a) the Partnership Interest (measured by its Post
Recoupment Percentage Interest) proposed to be sold by the Selling Partner
and (b) a fraction the numerator of which is such other Partner's Post
Recoupment Percentage Interest and the denominator of which is the aggregate
of the Post Recoupment Percentage Interests of all the Partners (including
the Selling Partner) participating in such Disposition. The Co-Sale Option
shall be exercisable by Notice to the Selling Partner within 10 Business Days
following receipt of the Notice of proposed Disposition. Such option shall
terminate if not exercised by Notice sent to the Selling Partner within such
period of 10 Business Days.
ARTICLE XIII
REGISTRATION RIGHTS, PUT RIGHTS, ETC.
13.1. REORGANIZATION OF COMPANY. Upon the exercise by the Class A
Partners of the registration right provided in Section 13.2.1 or upon
determination by a Majority Vote of the Committee, the General Partner shall
transfer all or substantially all of the assets of the Company to a
corporation or other entity ("Newco") in anticipation of an initial public
offering of some or all of the capital stock or other equity interests of
Newco (an "IPO"), and each Partner shall take such steps to effect the IPO as
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may be requested by the General Partner, including, without limitation,
consenting to and/or voting in favor of any necessary or desirable
recapitalization, reorganization or exchange (collectively, a
"Reorganization") and exchanging such Partner's interests in the Company to
Newco in connection with any such Reorganization for capital stock or other
equity interests of Newco; PROVIDED, HOWEVER, that no Partner shall be
required to take any action or omit to take any action to the extent such
action or omission violates applicable law and PROVIDED, further, that in no
event will any transaction contemplated hereby materially disadvantage the
economic position hereunder of any Limited Partner prior to such
Reorganization (it being understood that taxation as a stockholder of a
corporation shall not be deemed a disadvantage). In connection with any
Reorganization, each Partner shall receive a share of the aggregate
consideration received as part of the Reorganization equal in amount to the
amount such Partner would receive as a Distribution if all assets of the
Company as of the end of the month immediately preceding such Reorganization
were sold for cash equal to their Fair Market Value, and all Company
liabilities were satisfied to the extent required by their terms, and the net
assets of the Company were distributed in full to the Partners pursuant to
Section 6.1.1. At such time as the Company reorganizes itself as a
corporation pursuant to this Section, each of the Partners that has one or
more representatives on the Management Committee shall be entitled to
nominate the same number of members of the board of directors of the Company
as it has representatives on the Management Committee, and the Partners agree
to vote for the election of such nominees to the board of directors.
13.2. REGISTRATION RIGHTS.
13.2.1 REGISTRATIONS UPON REQUEST. Upon the request of a
Majority in Interest of the Class A Partners, the General Partner shall
effect the registration under the Securities Act of 1933, as amended (the
"Securities Act"), of Partnership Interests or any security into which such
Partnership Interests may have been converted pursuant to Section 13.1 (the
"Securities"). Upon any such request, the General Partner will promptly, but
in any event within 15 Business Days, give written notice of such request to
all holders of the Securities and thereupon the General Partner will use its
best efforts to effect the prompt registration under the Securities Act of
all Securities which the General Partner has been requested to register by
the holders thereof by written request given to the General Partner within 20
Business Days after the giving of such written notice by the General Partner.
(Notwithstanding the foregoing, but subject to the rights of holders of
Securities under this Section 13.2.1, if, by a Majority Vote of the
Committee, the Management Committee determines in its good faith judgment
that the disclosures that would be required to be made by the Company in
connection with such registration would be materially harmful to the Company
because of transactions then being considered by, or other events then
concerning the Company, the Company may defer the filing (but not the
preparation) of the registration statement which is required to effect any
registration pursuant to this Section 13.2 for a reasonable period of time,
but not in excess of 90 days (or any longer period consented to by a Majority
in Interest of the Class A Partners); PROVIDED, that at all times the Company
is in good faith using all reasonable efforts to cause such registration
statement to be filed as soon as practicable, and, PROVIDED, further, that
such period shall end on such earlier date as may be consented to by the
underwriters of such underwritten public offering. Notwithstanding the
foregoing,
(a) The Company shall not be obligated to file and cause to
become effective more than one registration statement in which Securities are
registered under the Securities Act pursuant to this Section 13.2 and
effectively sold thereunder.
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(b) The Company shall not be obligated to effect any
registration statement pursuant to this Section 13.2 unless the aggregate
gross public offering price of all Securities to be sold pursuant to such
registration shall be at least $15,000,000; PROVIDED, that if at the time of
any request made pursuant to this Section 13.2.1 the Company shall be an
entity registered under the Securities Exchange Act of 1934, as amended, then
the Company shall not be obligated to effect any registration statement
pursuant to this Section 13.2 unless the gross public offering price of all
Securities to be sold pursuant to such registration shall be at least
$5,000,000, unless the Company shall be eligible to file a registration
statement on Form S-3, in which case such minimum shall not apply.
13.2.2 EXPENSES. The Company will pay all of the Registration
Expenses in connection with such registration requested in Section 13.2.1;
PROVIDED that the Partners selling Securities (the "Registering Partners") in
such registration shall pay all Registration Expenses to the extent required
to be paid by a seller under applicable law. For purposes of Section 13.2.1
and this Section 13.2.2, a registration shall not be deemed effective if (a)
a registration statement for such registration is not declared effective
within 90 days of the date such registration statement is first filed with
the Securities and Exchange Commission (the "Commission") (or such later date
as may be expressly agreed to in writing by the Registering Partners), (b)
within 180 days after such registration statement 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; PROVIDED, that such delay, stop order, injunction, order or
requirement is not due to the fault of the Registering Partners or (c) the
conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied
(other than conditions to be satisfied by the Registering Partners).
13.2.3 PRIORITY IN DEMAND REGISTRATIONS. If a registration
pursuant to Section 13.2.1 involves an underwritten offering, and the
managing underwriter (or, in the case of an offering which is not
underwritten, an investment banker) shall advise the Company in writing (with
a copy to each Registering Partner) that, in its opinion, the number of
securities requested and otherwise proposed to be included in such
registration exceeds the number that can reasonably be sold in such offering
without materially and adversely affecting the offering price or otherwise
materially and adversely affecting such offering, the Company will include in
such registration (but only to the extent of the number of securities that
the Company is so advised can reasonably be sold in such offering), FIRST,
the Securities of the Registering Partners requested to be included in such
registration, pro rata, among such Registering Partners on the basis of the
number of Securities owned by such Registering Partners but to an amount
which in no event shall be less than 25% of the Securities as to which
registration has been requested, and SECOND, the Securities, if any, being
sold by the Company.
13.2.4 UNDERWRITTEN OFFERING. If requested by the underwriters
for any underwritten offering by Registering Partners pursuant to a
registration requested under Section 13.2.1, the Company shall enter into an
underwriting agreement with the underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to the Company,
the Registering Partners and the underwriters and to contain such
representations and warranties by the Company and such other terms and
provisions as are customarily contained in agreements of this type,
including, without limitation, indemnities of the kind customarily provided
between a company and a selling stockholder.
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13.3. LIMITED RIGHT OF REDEMPTION, ETC.
13.3.1 Notwithstanding anything to the contrary in this
Agreement, but subject to Section 13.3.2, each of the Class B Partners shall
have the right to elect to have its partnership interest redeemed for an
amount (the "Redemption Amount") equal to (a) 80% of the Fair Market Value of
such Partnership Interest by Notification to the Company if given during the
first of the Redemption Periods and (b) 100% of the Fair Market Value of such
Partnership Interest by Notification to the Company if given during the
second of the Redemption Periods. For purposes of determining the Fair
Market Value of a Partnership Interest pursuant to this Section 13.3.1, the
Valuation Date shall be the final day of the month immediately preceding the
commencement of the Redemption Period in which Notification is given.
13.3.2 In the event that the Company issues Securities in an
IPO, or the General Partner transfers assets of the Company to Newco and
Newco issues Securities in an IPO, during or prior to either Redemption
Period, a Class B Partner shall no longer have the right to have its
Partnership Interest redeemed by the Company under Section 13.3.1, but shall
have the right to have the Company or Newco, as the case may be, effect a
registration under the Securities Act pursuant to Section 13.4.3 for any
Securities which the Class B Partners hold or which the Class B Partners
would be entitled to receive hereunder in a Reorganization.
13.3.3 If the Company or Newco is unable to effect a
registration under the Securities Act within 120 days of a request therefor
under 13.4.1, a Class B Partner shall have the right to have the Company or
Newco redeem the Securities which such Partner requested to be so registered
by providing a Redemption Election to Newco within 20 days following the end
of such 120-day period. Upon receipt of a Redemption Election relating to the
Securities of any Class B Partners, the Company or Newco shall redeem the
Securities of any Class B Partner so electing for an amount per Security
equal to the average of the Closing Trading Prices for such Security during
the week immediately preceding such Redemption Election; PROVIDED, that, if
the Securities are Non-listed Securities, the Company or Newco and the Class
B Partners shall value the Securities by utilizing the valuation procedure
for determining Fair Market Value of a Partnership Interest pursuant to
Section 1.37. For purposes of this Section 13.3.3, "Closing Trading Prices"
shall mean (a) if such Securities are listed on a national securities
exchange or the NASDAQ National Market System, the last sale price of such
securities on such date, or, if no sales occurred on such date, the high bid
price at the close of business on such date; or (b) if such Securities are
not listed on any securities exchange or the NASDAQ National Market System,
but are traded in a listed over-the-counter market, the bid price for long
positions of the Security in such market at the close of business on such
date, and "Non-listed Securities" shall mean Securities which are neither
listed on any national securities exchange nor traded in a listed
over-the-counter market.
13.3.4 The Redemption Amount, or the amount calculated pursuant
to Section 13.3.3, as the case may be, shall be payable to each Class B
Partner, which elects to have its Partnership interest redeemed under Section
13.3.1 or its Securities redeemed under 13.3.3, in immediately available
funds by wire transfer, pursuant to written instructions delivered to the
Company with the Notification of election (a "Redemption Election"), within
10 Business Days after the Fair Market Value of such Partnership Interest or
Security, as the case may be, is finally determined pursuant to the valuation
procedures of Section 1.37. If the Company (or its successor or assigns)
fails to pay the Redemption
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Amount when due, the Redemption Amount shall bear interest at the Default
Interest Rate until paid in full and the Company (or such successor or assign)
shall pay any costs associated with the collection of the Redemption Amount by
any Class B Partner.
13.4. REGISTRATION RIGHTS OF CLASS B PARTNERS.
13.4.1 Upon the request of a Class B Partner, the Company or
Newco, as the case may be, shall effect the registration under the Securities
Act of the Securities of such Class B Partner. Upon any such request, Newco
will promptly, but in any event within 15 Business Days, give written notice
of such request to all Class B Partners and will use its best efforts to
effect the prompt registration under the Securities Act of all Securities of
such Class B Partners which it has been requested to register by the holders
thereof by written request given to the Management Committee of the Company
or the Board of Directors of Newco within 20 Business Days after the giving
of such written notice by the Company or Newco. Notwithstanding the
foregoing, but subject to the rights of holders of Securities under this
Section 13.4.1, if the Management Committee of the Company or the Board of
Directors of Newco determines in its good faith judgment that the disclosures
that would be required to be made by Newco in connection with such
registration would be materially harmful to the Company or Newco because of
transactions then being considered by, or other events then concerning Newco,
the Company or Newco may defer the filing (but not the preparation) of the
registration statement which is required to effect any registration pursuant
to this Section 13.4.1 for a reasonable period of time, but not in excess of
90 days; PROVIDED, that at all times the Company or Newco is in good faith
using all reasonable efforts to cause such registration statement to be filed
and to become effective as soon as practicable; and PROVIDED, further, that
such period shall end of such earlier date as may be consented to by the
underwriters in the event of an underwritten public offering.
Notwithstanding the foregoing, (a) the Company or Newco, as the case may be,
shall not be obligated to file or cause to become effective (i) any
registration statement of the Company or Newco, as the case may be, unless
the Company or Newco, as the case may be, shall have previously filed a
registration statement under the Securities Act covering its Securities and
such registration has become effective as defined in Section 13.2.2; and (ii)
to file and cause to become effective more than one registration statement in
which Securities are registered under the Securities Act pursuant to this
Section 13.4.1 and effectively sold thereunder, and (b) the Company shall not
be obligated to effect any registration statement pursuant to this Section
13.4.1 unless the aggregate gross offering price of all Securities to be sold
pursuant to such registration shall be at least $5,000,000. The rights of
registration offered to any Class B Partner hereunder shall not diminish such
Partner's rights to participate in any other registration of Securities under
Section 13.2 or otherwise.
13.4.2 The Company or Newco, as the case may be, will pay all of
the Registration Expenses in connection with the registration requested in
Section 13.4.1 that become effective; PROVIDED, that the Class B Partners
selling Securities (the "Class B Registering Partners") in such registration
shall pay all Registration Expenses to the extent required to be paid by a
seller under applicable law. For purposes of Section 13.4.1 and this Section
13.4.2, a registration shall not be deemed effective if: (a) a registration
statement for such registration is not declared effective within 90 days of
the date such registration statement is first filed with the Commission (or
such later date as may be expressly agreed to in writing by the Class B
Registering Partners); (b) within 180 days after such registration statement
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
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any reason; PROVIDED, that such delay, stop order, injunction, order or
requirement is not due to the fault of the Class B Registering Partners; or (c)
the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied
(other than conditions to be satisfied by the Class B Registering Partners).
13.4.3 If a registration pursuant to Section 13.4.1 involves an
underwritten offering, and the managing underwriter (or, in the case of an
offering which is not underwritten, an investment banker) shall advise the
Company or Newco, as the case may be, in writing (with a copy to each Class B
Registering Partner) that, in its opinion, the number of securities requested
and otherwise proposed to be included in such registration exceeds the number
that can reasonably be sold in such offering without materially and adversely
affecting the offering price or otherwise materially and adversely affecting
such offering, the Company or Newco will include in such registration (but
only to the extent of the number of securities that the Company or Newco is
so advised can reasonably be sold in such offering), FIRST, the Securities of
the Class B Registering Partners requested to be included in such
registration, pro rata among such Class B Registering Partners on the basis
of the number of Securities owned by such Class B Registering Partners and
second, the Securities, if any, being sold by the Company or Newco.
13.4.4 If requested by the underwriters for any underwritten
offering by Class B Registering Partners pursuant to a registration requested
under Section 13.4.1, the Company shall enter into an underwriting agreement
with the underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to the Company or Newco, the Class B
Registering Partners and the underwriters and to contain such representations
and warranties by the Company or Newco and such other terms and provisions as
are customarily contained in agreements of this type, including, without
limitation, indemnities of the kind customarily provided between a company
and a selling stockholder.
13.5. OTHER REGISTRATIONS.
13.5.1 RIGHT TO PIGGYBACK. Whenever the Company or Newco
proposes to register any securities under the Securities Act for its own
account or for the account of others, each Partner will have the right to
have included in such registration all of its Securities subject to the
provisions of this Article XIII. The Company or Newco, as the case may be,
shall give prompt notification to all Partners of its intention to effect
such a registration at least 45 days prior to the filing of said registration
statement and will include in such registration all Securities with respect
to which the Company or Newco has received written requests for inclusion
therein within 15 days after the receipt of the Company's Notification.
13.5.2 PIGGYBACK EXPENSES. The expenses of the Partners (other
than underwriters' discount or brokers' commissions incurred to sell any
Securities for the account of any Partner) incurred in connection with any
Registration pursuant to Section 13.3.1 shall be paid by the Company or
Newco, as the case may be.
13.5.3 PRIORITY ON PRIMARY REGISTRATIONS. If the Company is
registering any of its securities for the Company's own account and Partners
have subsequently requested inclusion of their Securities pursuant to the
exercise of Piggyback Registration rights, and the managing underwriters
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advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will allocate securities to be included in
such registration in the following order: (a) FIRST, the securities the
Company proposes to register, and (b) SECOND, PROVIDED that no securities the
Company proposes to register have been excluded from such registration, the
Securities of the Partners requested to be included pursuant to Piggyback
Registration rights in proportion, as nearly as practicable, to the
respective amounts of Securities entitled to inclusion in such registration
held by such participating Partners; PROVIDED, that the right of the
underwriters to exclude from such registration the Securities of the Partners
requested to be included pursuant to Piggyback Registration rights shall be
limited so that the number of such Partner's Securities included in any such
registration is not reduced below twenty-five percent (25%) of the total of
all securities included in the registration (such minimum amount of
Securities to be allocated among the participating Partners in proportion, as
nearly as practicable, to the respective amounts of Securities entitled to
inclusion in such registration held by such participating Partners) except
for an IPO from which all Securities of the Partners may be excluded.
13.5.4 PRIORITY ON SECONDARY REGISTRATIONS. If pursuant to a
registration demand under Section 13.2.1 exercised prior to notification of a
registration of Securities for the Company's own account, or if the Company
is registering Securities for the account of any Person and any Partners have
requested inclusion of their Securities pursuant to the exercise of Piggyback
Registration rights, and the managing underwriters advise the Company in
writing that in their opinion the number of Securities requested to be
included in such registration exceeds the number which can be sold in such
offering, the Company will allocate those Securities to be included in such
registration in the following order: (a) FIRST, the Securities of the
Partners requested to be included pursuant to Piggyback Registration rights
in proportion, as nearly as practicable, to the respective amounts of
Securities entitled to inclusion in such registration held by such
participating Partners, (b) SECOND, PROVIDED that no Securities the Partners
proposed to register pursuant to Piggyback Registration rights have been
excluded from such registration, the securities the Company proposes to
register, and (c) THIRD, any other securities requested to be included in
such registration.
13.6. DILUTION. Whenever the Company or Newco proposes to register any
Securities in any registered public offering, the Post Recoupment Percentage
Interest of the General Partner in the Company or Newco shall be diluted to
the same extent to which the Post Recoupment Percentage Interests of the
other Partners are diluted as a result of such registered public offering.
13.7. FORM S-3 REGISTRATION. In case the Company shall receive from one
or more Partners a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Securities owned by such Partners, provided
the number of Securities requested to be sold would have an aggregate price
to the public of at least $1,000,000, then the Company will:
(a) Promptly give written notice of the proposed registration and
the Partner's request therefor, and any related qualification or compliance,
to all other holders of Securities; and
- 50 -
<PAGE>
(b) As soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of the Partner's
Securities as are specified in such request together with all or such portion
of the Securities of any Partner or Partners joining in such request as are
specified in a written request received by the Company within 15 days after
written notice from the Company is given under Section 13.7(a); PROVIDED,
that the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 13.7:
(i) if Form S-3 is not available to the Company for
such offering by thePartners;
(ii) if the Company shall furnish to the Partners a
certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement no more than once duringany twelve-month period for a period of not
more than 90 days after receipt of the request of the holders under this
Section 13.7;
(iii) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification
or compliance; or
(iv) if the Company has filed a registration statement
on Form S-3 relating to Securities in the six months preceding the request of
the Partners.
Subject to the foregoing, the Company shall file a Form S-3 registration
statement covering the Securities and other securities so requested to be
registered pursuant to this Section 13.7 as soon as practicable after receipt
of the request of the Partners for such registration.
13.8. OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Securities under this Agreement, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the Commission a registration statement
with respect to such Securities and use its best efforts to cause such
registration statement to become effective, and keep such registration
statement effective until the distribution is completed, but not more than
180 days for a Form S-1 or Form SB-2 Registration Statement or more than 120
days for a Form S-3 Registration Statement;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement;
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<PAGE>
(c) Furnish to the Partners such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as they may reasonably request
in order to facilitate the disposition of the Securities owned by them that
are included in such registration; and
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the
Partners, PROVIDED, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
ARTICLE XIV
DISSOLUTION AND WINDING UP
14.1. LIQUIDATING EVENTS. Notwithstanding any provisions of the Act,
the Company shall not be dissolved prior to the occurrence of a Liquidating
Event. The Company shall dissolve and commence winding up and liquidating
upon the first to occur of any of the following events (each, a "Liquidating
Event"):
14.1.1 the close of business on December 31, 2021;
14.1.2 the sale of all or substantially all of the Company's
Property;
14.1.3 a vote to dissolve, wind up, and liquidate by a Majority
Vote of the Committee;
14.1.4 the happening of an event that makes it impossible or
unlawful for the Company to carry on its business; or 14.1.5
the occurrence of any event that results in dissolution under the Act.
Notwithstanding the provisions of this Section, upon a Liquidating Event, the
business of the Company may be reconstituted and continued by the agreement
of the remaining Partners holding at least a majority of the capital
interests and a majority of the profit interests in the Company or such
greater percentage of such Partners as may be required by the Code or the
Regulations in order to avoid such ability to elect to continue the business
causing the Company to not fail to have the characteristic of "continuity of
life." From and after any such vote to dissolve, wind up and liquidate, no
Partner shall have any subsequent liability for any additional Capital
Contribution; and in no event shall any Partner, or the Company, have any
liability to any other Partner (including the General Partner) relating to
the vote by the Management Committee to dissolve, wind up or liquidate, as
the case may be.
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<PAGE>
14.2. WINDING UP. Except as otherwise provided in Section 14.2, upon
the happening of a Liquidating Event, the Company shall conduct no business
nor engage in any activity that is not necessary or appropriate to winding up
its business and liquidating, and shall proceed promptly to wind up its
affairs in an orderly manner, to liquidate its assets, to satisfy the claims
of its creditors and Partners, and to distribute its remaining assets to its
Partners. The General Partner shall be responsible for supervising the
winding up and liquidation and shall dispose of the Company's property as
promptly as is consistent with obtaining its fair market value. In the
discretion of the General Partner, a pro rata portion of the amounts that
otherwise would be distributed to the Partners or winding up may be (a)
withheld to provide a reasonable reserve for unknown or contingent
liabilities of the Company; or (b) distributed to a trust created for the
benefit of the Partners for purposes of liquidating Company assets,
collecting amounts owed to the Company, or paying contingent or unknown
liabilities of the Company. Any amounts so withheld or distributed to a trust
shall be distributed to the Partners from time to time as the General Partner
deems it to be practicable in the same proportions such amounts would have
been distributed to the Partners had they not been withheld or distributed to
such a trust. Notwithstanding anything to the contrary in Article V, (i) at
the end of the day immediately prior to the date of any Distribution of the
proceeds of the disposition of the Company Property and the other assets of
the Company pursuant to Section 14.3.2, the books of the Company shall close
and the Company's items of income, gain, loss and deduction for the period
ending on such day shall be allocated among the Partners in the manner
provided in clause (ii) of this sentence and (ii) for any Liquidation Year,
the Company's items of income, gain, loss and deduction shall be allocated
among the Partners in a manner such that each Partner's Capital Account shall
equal the amount such Partner would receive as a Distribution if all assets
of the Company as of such day were sold for cash equal to the Carrying Value
thereof for federal income tax purposes, and all Company liabilities were
satisfied to the extent required by their terms, and the net assets of the
Company were distributed in full to the Partners pursuant to Sections 6.1.1
(other than clause (b) thereof) and 6.1.2, all as of such day, computed after
the distributions pursuant to Section 6.1 have been made for the period
ending on such day and taking into account any required reduction in a
Distribution pursuant to Section 6.3.
14.3. ORDER OF DISTRIBUTION OF PROCEEDS OF LIQUIDATION. The proceeds of
the disposition of the Company Property and the other assets of the Company
shall be distributed in the following order of priority:
14.3.1 first, to creditors, including Partners who are
creditors, to the extent permitted by law, in satisfaction of Company
Liabilities;
14.3.2 second, to the Partners pro rata in accordance with the
positive balances in their Capital Accounts; and
14.3.3 then, to the Partners pro rata in accordance with their
Post Recoupment Percentage Interests.
Liquidation proceeds shall be paid 90 days after the date of liquidation.
Such distributions shall be in cash or Property (which need not be
distributed proportionately) or partly in
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<PAGE>
both, as determined by the Management Committee and shall be made only with the
unanimous consent of the Class A Partners or the consent of the Partner
receiving the same.
14.4. PARTNERS' RIGHTS. Except as otherwise specifically provided in
this Agreement, a Partner has the right to look only to the assets of the
Company for a return of its Capital Contribution, has no right to receive
anything other than money in a Distribution from the Company, and has no
priority over any other Partner with respect to Distributions, allocations,
or the return of Capital Contributions.
14.5. NOTIFICATION OF DISSOLUTION. Within 30 days of the happening of a
Liquidating Event, the General Partner shall give Notification thereof to
each of the Partners, to all creditors of the Company, to the banks and other
financial institutions with which the Company normally does business, and to
all other parties with whom the Company regularly conducts business, and
shall publish notice of dissolution in a newspaper of general circulation in
each place in which the Company generally conducts business.
ARTICLE XV
AMENDMENT
15.1. AMENDMENTS GENERALLY. This Agreement and the SCHEDULES hereto may
be amended only if approved by a Unanimous Vote of the Committee; PROVIDED,
that this Agreement and the SCHEDULES hereto may not be amended in any way
which materially and adversely affects any Partner's economic or governance
rights or in a manner which discriminates against any Partner or which
changes the Capital Contribution obligations of any Partner set forth in
SCHEDULE A-2 without the consent of such Partner. Notwithstanding the
foregoing, without the consent of the Management Committee, the General
Partner shall have the right to amend SCHEDULE A-2 from time to time to
reflect sales of Partnership Interests at the Second Closing under the
Admission Agreement and to reflect any Disposition of one or more Partnership
Interests that has or have otherwise been effected in compliance with the
applicable provisions of this Agreement.
15.2. AMENDMENTS BY MAJORITY VOTE. Notwithstanding Section 15.1, this
Agreement may be amended from time to time by a Majority Vote of the
Committee to cure any ambiguity or correct or supplement any provisions of
this Agreement that may be inconsistent with any other provisions of this
Agreement, or correct any printing or clerical errors or omissions; PROVIDED,
that, such amendment is not adverse to the interest of any Partner.
ARTICLE XVI
ARBITRATION
16.1. ARBITRATION PROCEDURE. In the event of any dispute or controversy
arising out of or in connection with this Agreement, or the breach of this
Agreement, including any as to its validity or enforceability (a "Dispute"),
any Partner may notify the other Partners of such Dispute (the "Dispute
- 54 -
<PAGE>
Notice") and the Partners shall use commercially reasonable efforts to
attempt to resolve such Dispute in good faith keeping in mind the expense of
an arbitration proceeding in accordance with this Article XVI. If the
Partners cannot agree within 30 days after the delivery of the Dispute
Notice, such dispute shall be resolved by a panel composed of three
arbitrators (the "Panel") one of whom shall be selected by the Management
Committee and one of whom shall be selected by the Partner affected by the
Dispute, each of such two to be selected within 15 days from the expiration
of the foregoing 30-day period. The two arbitrators so selected shall
promptly name the third arbitrator comprising the Panel. The Management
Committee and the Partner affected by the Dispute shall jointly instruct the
Panel in writing to reach a decision with regard to the Dispute within 20
days following the appointment of the Panel. The arbitration proceeding
shall take place in New York City unless otherwise directed by the Panel.
The Panel's written decision shall be final and binding on the Company and
all of the Partners. Judgment upon any award rendered may be entered in any
federal or state court having jurisdiction. The costs of any such
arbitration shall be borne equally by the parties involved and each shall
bear its own attorneys' fees and costs, unless the Panel deems such
allocation of costs to be inequitable, in which event the Panel may allocate
the costs of arbitration and related attorneys' fees and expenses among the
parties involved or the Company as it determines to be equitable under the
circumstances.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1. RIGHTS OF CREDITORS AND THIRD PARTIES. This Agreement is entered
into among the Company and the Partners for the exclusive benefit of the
Company, its Partners, and their permissible successors and assignees. This
Agreement is expressly not intended for the benefit of any creditor of the
Company or any other Person, other than the Partners and their permissible
successors and assigns in accordance with the provisions of this Agreement.
Except and only to the extent provided by applicable statute, no such
creditor or third party shall have any rights under this Agreement or any
agreement between the Company and any Partner with respect to any Capital
Contribution or otherwise.
17.2. NOTIFICATION. Any Notification to the Company shall be at the
address of the Company as set forth in Section 2.6. Any Notification to a
Partner shall be at the address of such Partner set forth on SCHEDULE A-1 or
such other mailing address of which such Partner shall give Notification to
the General Partner. Any Notification shall be deemed to have been duly
given if personally delivered or sent by United States mails or by facsimile
confirmed by letter and will be deemed given, unless earlier received: (a) if
sent by certified mail, return receipt requested, or by first-class mail,
three Business Days after being deposited in the United States mail, postage
prepaid; (b) if sent by United States Express mail, one Business Day after
being deposited in the United States mail, postage prepaid; (c) if sent by
facsimile transmission, on the date sent provided confirmatory notice is sent
on the same day by first-class mail, postage prepaid; (d) if delivered by
hand, on the date of receipt; or (e) if sent by overnight courier, one
Business Day after being deposited with such courier, delivery charges
prepaid.
- 55 -
<PAGE>
17.3. GOVERNING LAW. This Agreement and the obligations of the Partners
hereunder shall be interpreted, construed and enforced in accordance with the
internal laws of the State of Delaware without regard to the principles of
conflicts of laws.
17.4. ENTIRE AGREEMENT. This Agreement, the Admission Agreement and the
Management Agreement contain the entire agreement among the parties hereto
relative to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto. No variations, modifications, or changes
herein or hereof or therein or thereof shall be binding upon any party hereto
except as expressly provided herein or therein.
17.5. WAIVER. No consent or waiver, express or implied, by any Partner
to or of any breach or default by any other Partner in the performance by
such other Partner of its obligations hereunder shall be deemed or construed
to be a consent or waiver to or of any other breach or default in the
performance by such other Partner of the same or any other obligation of such
Partner hereunder. Failure on the part of any Partner to complain of any act
or failure to act of any other Partner or to declare any other Partner in
default, irrespective of how long such failure continues, shall not
constitute a waiver by such Partner of its rights hereunder.
17.6. SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other Persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by
law.
17.7. TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural, and vice versa. Titles
of Articles and Sections are for convenience of reference only, and neither
limit nor amplify the provisions of the Agreement itself, and all references
herein to Articles, Sections or subdivisions thereof shall refer to
corresponding Articles, Sections or subdivisions thereof of this Agreement
unless specific reference is made to such Articles, Sections or subdivisions
of another document or instrument.
17.8. BINDING AGREEMENT. Subject to the restrictions on transfers and
encumbrances set forth herein, this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs,
administrators, successors and assigns.
17.9. CONFIDENTIALITY. Except as required by law, including without
limitation, the rules and regulations of the Securities and Exchange
Commission or of any self-regulatory organization, and except for disclosures
to attorneys, advisors, accountants and other agents who are bound by
obligations of confidentiality to the Company, each Partner will hold all
non-public information furnished to it relating to the Company in confidence
and will not disclose such non-public information to any third party nor use
the same for any purpose without the prior written consent of the General
Partner. Prior to making any disclosure of any non-public information, any
Partner will give the General Partner reasonable notice of such disclosure
and the reasons therefor.
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<PAGE>
17.10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart.
IN WITNESS WHEREOF, we have hereunto set our hands and seals on the date
set forth beside our names.
GENERAL PARTNER
Date: ___________________ AMERICA'S HEALTH NETWORK, LLC
By:_______________________________________
Name:
Title: Manager
LIMITED PARTNERS
PJ HEALTH PROGRAMMING, INC.
Date: ___________________ By:_______________________________________
Name:
Title:
- 57 -
<PAGE>
SCHEDULES TO
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF AHN PARTNERS, L.P.
SCHEDULE A-1 Partners
SCHEDULE A-2 Allocations of the profits, losses, gains, deductions, and
credits of the Company; Partners' Capital Contributions; and
Partners' Post Recoupment Percentage Interests
SCHEDULE B Members of Management Committee
SCHEDULE C Annual Business Plan for 1996
- 58 -
<PAGE>
Schedule A-1
Page 1 of 2
CLASS A PARTNERS -- NAMES, ADDRESSES, AND TAXPAYER ID NUMBERS
PJ Health Programming, Inc.
75 Fountain Street
Providence, Rhode Island 02902
ID#: 05-0488138
Access Health, Inc.
11020 White Rock Road
Rancho Cordova, California 95670
ID#: 68-0163589
CLASS B PARTNERS -- NAMES, ADDRESSES, AND TAXPAYER ID NUMBERS
Allen & Company Incorporated
711 Fifth Avenue
New York, New York 10022
ID#: 13-617976
Medical Innovation Fund II, A Limited Partnership
c/o Medical Innovation Partners
9900 Bren Road East, Suite 421
Minnetonka, Minnesota 55343-9667
ID#: 41-1736834
Amandex Limited
Oak Walk
St. Peter
Jersey JE3 7EF
Channel Islands
SC Fundamental Value Fund, L.P.
712 Fifth Avenue, 19th Floor
New York, New York 10019
ID#: 13-3563962
<PAGE>
Schedule A-1
Page 2 of 2
SC Fundamental Value BVI, Ltd.
Citco Fund Services
Corporate Center
West Bay Road
Grand Cayman
Cayman Island
P.O. Box 31106SMB
Paul William Hobby
2131 San Felipe
Houston, Texas 77019
SSN#: ###-##-####
<PAGE>
Schedule A-2
Page 1 of 2
POST RECOUPMENT PERCENTAGE INTERESTS
From and after the Effective Date
until the Second Closing as
defined in the Admission
Agreement (or if the Second
Closing does not occur):
General Partner Post Recoupment
Percentage Interest
- ---------------------------------------- ---------------------
AHN LLC [ ]
LIMITED PARTNERS
CLASS A PARTNERS
Access Health, Inc. [ ]
PJ Health Programming, Inc. [ ]
CLASS B PARTNERS
Allen & Company Incorporated [ ]
Medical Innovation Partners Fund, L.P. [ ]
Amandex Limited [ ]
SC Fundamental Value Fund, L.P. [ ]
SC Fundamental Value BVI, Ltd. [ ]
Paul Hobby [ ]
[ ] = Confidential Treatment Requested
<PAGE>
Schedule A-2
Page 1 of 2
POST RECOUPMENT PERCENTAGE INTERESTS
From and after the consummation
of the transactions to occur
at the Second Closing:
Post Recoupment
General Partner Percentage Interest
- -------------------------------------- ---------------------
AHN LLC [ ]
LIMITED PARTNERS
CLASS A PARTNERS
Access Health, Inc. [ ]
PJ Health Programming, Inc. [ ]
CLASS B PARTNERS
Allen & Company Incorporated [ ]
Medical Innovation Partners Fund, L.P. [ ]
Amandex Limited [ ]
SC Fundamental Value Fund, L.P. [ ]
SC Fundamental Value BVI, Ltd. [ ]
Paul Hobby [ ]
[ ] = Confidential Treatment Requeted
<PAGE>
SCHEDULE B
MEMBERS OF MANAGEMENT COMMITTEE
Jeffrey C. Wayne
Jack C. Clifford
Stephen A. Baker
<PAGE>
SCHEDULE C
AMERICA'S HEALTH NETWORK
PROJECTED FINANCIAL SUMMARY
FOR THE PERIOD APRIL 1, 1996 THROUGH DECEMBER 31, 1996
<TABLE>
<CAPTION>
Q2 - 1996 Q3 - 1996 Q4 - 1996 Total 1996
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
REVENUE
Product Revenue (Net of Returns)
Bounceback Revenue
Advertising Revenue
Licensing Revenue
GROSS REVENUE
Cost of Product
Ad Agency Commissions
NET REVENUE
OPERATING EXPENSES
Product Merchandising
Advertising Sales
Affiliate Relations
Programming [ ]
Production
Marketing Services
General & Administrative
TOTAL OPERATING EXPENSES
OPERATING LOSS
OPERATING MARGIN
Depreciation
Amortization
EARNINGS BEFORE INCOME TAXES
Income Taxes
NET LOSS
HEADCOUNT
Executives
Managers
Support Personnel
TOTAL HEADCOUNT
AVERAGE SUBSCRIBERS
</TABLE>
[ ] Confidential Treatment Requested
<PAGE>
AHN PARTNERS, L.P.
ADMISSION AGREEMENT
ADMISSION AGREEMENT, dated as of April __, 1996, by and between ACCESS
HEALTH, INC., a Delaware corporation (the "Subscriber"), and AHN PARTNERS, L.P.,
a Delaware limited partnership (the "Company") of which AMERICA'S HEALTH
NETWORK, L.L.C., a Delaware limited liability company (the "General Partner"),
is the sole general partner.
1. AGREEMENT TO SUBSCRIBE.
(a) The Subscriber hereby subscribes for and agrees to purchase,
[X] as a Class A Partner, or
[_] as a Class B Partner,
(i) the interest in the Company (the "First Closing Partnership
Interest") set forth opposite the name of the Subscriber on the
signature page to this Admission Agreement (expressed in terms of a
percentage representing the Post Recoupment Percentage Interest (as
defined in the Partnership Agreement [as defined below] to be owned by
the Subscriber subject to the terms and conditions of the Partnership
Agreement), and the Company hereby agrees to issue and sell such
Percentage Interests to the Subscriber, on the terms set forth herein,
for the purchase price (the "First Closing Purchase Price") equal to
the dollar amount set forth as such opposite the name of the
Subscriber on the signature page to this Admission Agreement; and
(ii) the interest in the Company (the "Second Closing
Partnership Interest"), if any, set forth opposite the name of the
Subscriber on the signature page to this Admission Agreement (also
expressed in terms of a percentage representing the Post Recoupment
Percentage Interest to be owned by the Subscriber subject to the terms
and conditions of the Partnership Agreement), and the Company hereby
agrees to issue and sell the Second Closing Partnership Interest to
the Subscriber, on the terms set forth herein, for the purchase price
(the "Second Closing Purchase Price") equal to the dollar amount set
forth as such opposite the name of the Subscriber on the signature
page to this Admission Agreement.
1
<PAGE>
The Subscriber acknowledges that the First Closing Partnership Interest shall be
subject to dilution from the sale of the Second Closing Partnership Interest to
the Subscriber, if any, and from sales of interests in the Company to other
subscribers contemporaneously with the Second Closing (as defined in Section
1(c)).
(b) The First Closing Partnership Interest and the Second Closing
Partnership Interest are collectively referred to in this Agreement as the
"Partnership Interest." The First Closing Purchase Price shall be payable to
the following account, which shall be a separate, segregated account (the
"Escrow Account") maintained by Allen & Company Incorporated in its capacity as
escrow agent (the "Escrow Agent"):
To: Chemical Bank
ABA# 021000128
Account Name: ALLEN & COMPANY INCORPORATED
A/C No.: 610-661-566
The Subscriber agrees and acknowledges that Allen shall have full discretion to
invest the funds in Dreyfus Treasury Prime Cash Management (the "Fund"), which
is a money market fund investing in securities issued and guaranteed as to
principal and interest by the U.S. Government, including U.S. Treasury
Securities.
If and to the extent that (i) on or prior to the date hereof PJHP (as defined in
the Partnership Agreement) or any Affiliate (as defined in the Partnership
Agreement) of PJHP (collectively, "PJHP") delivers to the Company a fully
executed Admission Agreement in the form of this Agreement (other than with
respect to the information set forth on Schedule A hereto), pursuant to which
PJHP has agreed to subscribe for a First Closing Partnership Interest of
[ ]% for a First Closing Purchase Price of $[ ] and a Second Closing
Partnership Interest of [ ]% for a Second Closing Purchase Price of $[ ] (in
each subject to the receipt of consent from its board of directors) and (ii) on
or prior to May 15, 1996 PJHP pays the First Closing Purchase Price for its
First Closing Partnership Interest by cancelling all of obligations for borrowed
money due PJHP from the Company and the balance of such price by cash, then the
First Closing Purchase Price paid by the Subscriber into the Escrow Account and
any Affiliate will be paid to the Company. In all other cases, the Company will
cause the First Closing Purchase Price paid by the Subscriber to be returned to
the Subscriber promptly after May 15, 1996, together with all interest earned
therein at the rate paid by the Fund to an account to be designated in writing
by the Subscriber, in which case all transactions occurring at the First Closing
shall automatically be fully rescinded and shall be of no further force or
effect with respect to either the Company or the Subscriber. The Second Closing
Purchase Price shall be payable by wire transfer of immediately available funds
to the following bank account of the Company:
To: SunTrust Bank, Central Florida, N.A.
[ ] Confidential Treatment Requested
2
<PAGE>
200 South Orange Avenue
Orlando, FL 32801
407-237-4986
ABA# 063102152
For Benefit of:
AHN Partners, L.P.
1000 Universal Studios Plaza B-22A
Orlando, FL 32819-7610
Account No: 0215-252-137-195
(c) The Escrow Agent's obligations and duties in connection herewith
are confined to those specifically stated in this Agreement. The Escrow Agent
shall not be in any manner liable or responsible for the sufficiency,
correctness, genuineness or validity of any instruments deposited with it or
with reference to the form of execution thereof, or the identity, authority or
rights of any person executing or depositing same. The Escrow Agent shall not
be liable for any loss which may occur, except for its own gross negligence or
willful misconduct. The Company and the Subscriber hereby agree to jointly
indemnify the Escrow Agent for, and to hold it harmless against any loss,
liability or expense arising out of or in connection with this Agreement and
carrying out its duties hereunder, including the costs and expenses of defending
itself against any claim of liability, except in those cases where the Escrow
Agent has been guilty of gross negligence or willful misconduct. Anything in
this agreement to the contrary notwithstanding, in no event shall the Escrow
Agent be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Escrow
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action.
(d) The closing of the purchase and the sale of the First Closing
Partnership Interest (the "First Closing") and the closing of the purchase and
the sale of the Second Closing Partnership Interest (the "Second Closing," and,
together with the First Closing, the "Closings") shall take place at the offices
of Blumenthal & Lynne, a Professional Corporation, at 488 Madison Avenue, New
York, New York, counsel for the Company, or at such other place as may be agreed
upon by the Company, the Subscriber and each of the other persons (the "Other
Subscribers") whose names are set forth on Schedule A-1 to the Partnership
Agreement as persons who will become Class A Partners of the Company. The First
Closing shall take place on April 16, 1996, or other date or other time, as may
be agreed upon by the Company, the Subscriber and each of the Other Subscribers.
The Second Closing shall be held on January 6, 1997, or other date or other
time, as may be agreed upon by the Company, the Subscriber and each of the Other
Subscribers.
3
<PAGE>
2. ADOPTION OF THE PARTNERSHIP AGREEMENT.
The Subscriber hereby intends that its signature hereon shall
constitute an irrevocable subscription to the Company for the Partnership
Interest as well as the specific acceptance and adoption of each and every
provision of that certain Amended and Restated Limited Partnership Agreement,
dated as of April 3, 1996 (the "Partnership Agreement"), which Partnership
Agreement is incorporated herein and made a part hereof by reference, and hereby
agrees to be bound and governed by the provisions of the Partnership Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a material
inducement to the Subscriber to enter into and perform its obligations under
this Agreement, the Company hereby represents and warrants that, except as
disclosed in the Disclosure Schedule dated as of the date of this Agreement and
attached to this Agreement (the "Disclosure Schedule"):
(a) ORGANIZATION, STANDING, ETC. The Company is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite partnership power and authority
to own and operate its properties and to carry on its business and to enter into
this Agreement and issue the Partnership Interests. The Company has delivered
to the Subscriber a complete and correct copy of the Partnership Agreement. The
Company has no direct or indirect ownership interest (by way of stock ownership
or otherwise) in any other firm, corporation, association or business
enterprise.
(b) QUALIFICATION TO DO BUSINESS. The Company is duly qualified or
licensed and in good standing as a foreign corporation duly authorized to do
business in each jurisdiction wherein the ownership of its property or the
conduct of its business requires such qualification or license and where the
failure to be so qualified or licensed might have a material adverse effect on
the Company. The Company has all requisite power and authority to own and
operate its properties, to lease the properties it leases and to conduct its
business in the manner and in the jurisdictions where now conducted.
(c) CAPITALIZATION.
(i) After giving effect to the issuance of the all partnership
interests contemplated by the Partnership Agreement, the respective Post
Recoupment Percentage Interests of the Partners will be as set forth in Schedule
A-2 to the Partnership Agreement.
(ii) Except as set forth in Schedule A-2 to the Partnership
Agreement, the Company has neither granted or issued, nor agreed to grant or
issue, any option, warrant or other commitment to issue or to acquire any
partnership interest.
(d) FINANCIAL STATEMENTS. Incorporated as part of the Disclosure
Schedule is the unaudited consolidated balance sheet of the Company as of March
31, 1996 (the "Balance
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Sheet"). The Balance Sheet (i) was compiled from the books and records of the
Company regularly maintained by management and used to prepare the financial
statements of the Company prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied with prior periods; and (ii)
present fairly the financial position of the Company at March 31, 1996 in
accordance with GAAP.
(e) ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities which
are set forth in the Balance Sheet which have arisen in the ordinary course of
business in amounts usual and normal, both individually and in the aggregate,
for the Company (none of which are liabilities for breach of contract, breach of
warranty, torts, infringements, claims or lawsuits), the Company has no material
obligations or liabilities (whether accrued, absolute, contingent, unliquidated,
or otherwise, whether due or to become due) arising out of actions, inactions or
transactions entered into or any state of facts existing at or prior to the date
hereof, including without limitation any liabilities for federal state or local
taxes arising from the dissolution of America's Health Network, Inc.
(f) NO VIOLATION. The performance by the Company and the General
Partner of their respective obligations hereunder and the consummation of the
transactions contemplated hereby will not (i) violate, conflict with or result
in a breach of any provision of the Partnership Agreement; (ii) violate, or be
in conflict with, or constitute a default (with or without due notice or lapse
of time or both) under, or permit the termination of, or cause the acceleration
of the maturity of any debt or obligation of the Company under, require the
consent of any other party to, constitute a breach of, create a loss of a
material benefit under, or result in the creation or imposition of any lien upon
any property or assets of the Company or the General Partner under, any
mortgage, indenture, lease, agreement or other instrument to which the Company
or the General Partner is a party or by which the Company or the General Partner
or the assets thereof, may be bound; (iii) violate any statute or law or violate
any judgment, decree, order, regulation or rule of any court or governmental
authority to which the Company or the General Partner is subject; or (iv)
violate any contract, agreement or commitment to which the Company or the
General Partner is bound.
(g) NO MATERIAL ADVERSE CHANGE. Since December 31, 1995, neither the
business, operations, property nor affairs of the Company have been materially
adversely affected by any occurrence or development, whether or not insured
against, and the Company has no knowledge of any threatened occurrence or
development which would, individually or in the aggregate, materially adversely
affect its properties or assets, its business, operations or affairs.
(h) VALIDITY OF THIS AGREEMENT. The execution, delivery and
performance by the Company of this Agreement, and the consummation of the
transactions contemplated
5
<PAGE>
hereby have been duly authorized and approved by all necessary corporate
actions. The execution and delivery of this Agreement will not violate any
provision of law and will not conflict with, or result in a breach of any of the
terms of, or constitute a default under any agreement, instrument or other
restriction to which the Company is a party or by which it is bound.
(i) CONSENTS. No consent, approval or authorization of or
designation, declaration or filing with any other person, including without
limitation any governmental authority, on the part of the Company is required in
connection with the valid execution, delivery or performance of this Agreement
or the consummation of any transaction contemplated hereby.
(j) TITLE TO PROPERTIES; ENCUMBRANCES. The Company has good and
marketable title to all of its properties and assets (tangible and intangible),
subject to no Liens (as defined below) other than the following:
(i) the Company's leases of its office and production
facilities;
(ii) the Company's license of intangible rights from IVI
Publishing, Inc. pursuant to the License Agreement, dated May 25, 1995 and other
license agreements entered into in the ordinary course of its business;
(iii) deposits under worker's compensation, unemployment insurance
and similar laws or secure statutory obligations; and
(iv) Liens created in conjunction with equipment leases to secure
the lease obligation created thereby.
As used herein, "Liens" shall mean any mortgage, pledge, security interest,
conditional sale or other title retention agreement, encumbrance, lien,
easement, claim, right, covenant, restriction, right of way, warrant, option or
charge of any kind.
(k) CONTRACTS AND COMMITMENTS. The Disclosure Schedule contains a
complete list (stated without duplication) of all contracts and commitments of
the Company which are material to the operations, business or financial
condition of the Company (the "Material Contracts") and which will be
enforceable against the Company after the Effective Date (other than agreements
with physician/hosts paid at an annual rate of $100,000 or less). The Material
Contracts are valid and binding and in full force and effect and there does not
exist any default by the Company, or, to the Company's best knowledge, by any
other party thereto, or event which with notice or lapse of time or both would
constitute a default by the Company, or, to
6
<PAGE>
the Company's best knowledge, by any other party thereto, under a Material
Contract which default would allow the termination thereof.
(l) LITIGATION. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of the Company, threatened in any
court or before any governmental agency or instrumentality against or affecting
the Company or the business, operations, financial condition or properties or
assets of the Company, or which would prevent the carrying out of this Agreement
of the Partnership Agreement, or any of the transactions contemplated hereby or
thereby, or declare the same unlawful or cause the rescission hereof. The
Company has not been charged with, nor to its knowledge, is it threatened with
or under an investigation with respect to, any charge concerning any violation
of any provision of any federal, state or local law, regulation, ordinance,
order or administrative ruling, nor is the Company in default with respect to
any order, writ, injunction or decree of any court, governmental agency or
instrumentality.
(m) SECURITIES LAWS. The sale of the Securities, as provided in this
Agreement, is exempt from the registration and prospectus delivery requirement
of the Securities Act of 1933, as amended (the "Securities Act"), and is
registered or qualified (or is exempt from registration or qualification) under
the registration or qualification requirements of all applicable state
securities laws. Neither the Company nor anyone acting on its behalf will take
any action hereafter that would cause the loss of such exemption.
(n) DISCLOSURE. None of this Agreement, the Disclosure Schedule, the
Memorandum and the Forecast (Memorandum and Forecast being defined in Section
4.1) nor any certificate or other instrument referred to herein or otherwise
furnished to the Subscriber by the Company contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading. There is no fact known to the Company
relating to the business, affairs, operations, condition or prospects of the
Company which materially adversely affects the same and which has not been
disclosed to the Subscriber by the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER.
The Subscriber acknowledges that the Partnership Interest is offered
pursuant to an exemption from registration under the Securities Act. In
connection therewith the Subscriber makes the following representations,
warranties and acknowledgements, realizing that they are being relied upon by
the Company for purposes of determining the Subscriber's suitability as an
investor in the Company and compliance by the Company with applicable Federal
and state securities laws and regulations:
7
<PAGE>
(a) The Subscriber has read the Confidential Private Placement
Memorandum entitled "America's Health Network, G.P." and dated August 1995,
together with the supplement thereto dated March 18, 1996 (as so amended, the
"Memorandum") and the Forecast Financial Statements of AHN Partners, L.P.
(together with assumptions) dated March 29, 1996 (the "Forecast"). The
Subscriber has such knowledge and expertise in financial and business matters
that the Subscriber is capable of evaluating the merits and risks of an
investment in the Partnership Interest and the Subscriber is able to bear the
economic risk of investment in the Company Interest and the complete loss of the
Subscriber's investment.
(b) The Subscriber has received and read or reviewed and is familiar
with the Partnership Agreement and such other documents which relate to its
subscription for the Partnership Interest, and the Subscriber confirms that all
documents, agreements, records and books pertaining to the investment in the
Company and requested by the Subscriber have been made available or delivered to
the Subscriber.
(c) The Subscriber has obtained, to the extent the Subscriber has
deemed necessary, the Subscriber's own personal professional advice with respect
to the risks inherent in investment in the Partnership Interest, the suitability
of such investment in light of the Subscriber's financial condition and
investment needs, and legal, tax and accounting matters.
(d) In connection with the Subscriber's acquisition of the
Partnership Interest, the Subscriber has been afforded the opportunity to ask
questions of and receive answers from representatives of the General Partner and
from persons authorized to act on the Company's behalf concerning (i) the terms
and conditions of this investment, and (ii) the Company and its operations. In
addition, the Subscriber has been afforded the opportunity to obtain any
additional information which the Company possesses or could acquire without
unreasonable effort or expense which the Subscriber requires in order to verify
the accuracy of the information provided by the Company.
(e) The Subscriber understands that future operating results of the
Company are subject to events over which the Company will have only partial or
no control and to various uncertainties inherent in the Company's activities.
No representation has been made or could be made as to the amount of future
profits or losses of the Company.
(f) The Subscriber has adequate means of providing for its current
needs and possible business contingencies, has no need for liquidity of
investment in the Partnership Interest and has no reason to anticipate any
change in business circumstances, financial or otherwise, which may cause or
require any sale or distribution of the Partnership Interest.
(g) The Subscriber understands that investment in the Company is an
illiquid investment. In particular, the Subscriber recognizes that:
8
<PAGE>
(i) The Subscriber must bear the economic risk of investment in
the Partnership Interest for an indefinite period of time, since the Partnership
Interest has not been registered under the Securities Act, and, therefore,
cannot be sold unless either it is subsequently registered under the Securities
Act or an exemption from such registration is available and a favorable opinion
of counsel for the Partnership to that effect is obtained (if requested by the
General Partner);
(ii) The Subscriber will not have the right to require
registration of the Partnership Interest under the Securities Act and will not
be entitled to the benefits of Rule 144 thereunder, and
(iii) No established market for the Partnership Interest will
exist and it is extremely unlikely that any public market for the Partnership
Interest will develop.
(h) The Subscriber represents that the Partnership Interest is being
purchased by it or for its own account, for purposes of investment and not for
the account of any other person and not for distribution, assignment or resale
to others, and no other person has a direct or beneficial interest in the
Partnership Interest. The Subscriber understands and acknowledges that the
Partnership Interest has not been registered under the Securities Act or under
state laws.
(i) The Subscriber, if a corporation, partnership, trust or other
entity, is authorized and otherwise duly qualified to purchase and hold the
Partnership Interest and to enter into this Admission Agreement.
(j) All information which the Subscriber has provided to the Company
concerning the Subscriber's financial position and knowledge of financial and
business matters, or, in the case of a corporation, partnership, trust or other
entity, concerning the knowledge of financial and business matters of the
person(s) making the investment decision on behalf of such entity, is correct
and complete as of the date set forth on the signature page hereof, and if there
should be any adverse change in such information prior to his, her, or its
subscription being accepted, he, she, or it will immediately provide the Company
with such information.
(k) The Subscriber acknowledges and is aware that the Company has no
financial operating history; this is the Company's first venture; and the
Partnership Interest involves a high degree of risk of loss by the Subscriber of
its entire investment in the Company.
(l) The Subscriber is an "accredited investor" as defined in Rule 501
under the Securities Act, inasmuch as the Subscriber is:
9
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(Please initial all applicable descriptions)
____ An entity with total assets at the time of purchase in excess of
$5,000,000, which was not formed for the purpose of investing in
the Company and which is one or more of the following:
_______ corporation;
_______ partnership;
_______ limited liability company; or
_______ a tax-exempt organization as described in
Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended.
____ A personal (non-business) trust with total assets in excess of
$5,000,000, which was not formed for the purpose of investing in
the Company and whose decision to invest in the Company has been
directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating
the merits and risks of the investment.
____ Licensed, or subject to supervision, by U.S. Federal or state
examining authorities as a "bank," "savings and loan
association," "insurance company" or "small business investment
company" (as such terms are used and defined in 17 CFR Section
230.501(a)).
____ Registered with the U.S. Securities and Exchange Commission (the
"Commission") as a broker or dealer or an investment company, or
has elected to be treated or qualifies as a "business development
company" (within the meaning of Section 2(a)(48) of the
Investment Company Act of 1940 or Section 202(a)(22) of the
Investment Advisers Act of 1940).
____ Any other entity in which all of the equity owners are persons
described above.
5. CONDITIONS OF THE SUBSCRIBER'S OBLIGATIONS.
(a) CONDITIONS TO BE MET AT THE FIRST CLOSING. The Subscriber's
obligations to purchase the First Closing Partnership Interest and pay the First
Closing Purchase Price therefor are subject to the fulfillment to its reasonable
satisfaction of the following conditions:
(i) The representations and warranties of the Company made in
writing by or on behalf of the Company in connection with the transactions
contemplated hereby shall be true and correct at and as of the date of the First
Closing (the "First Closing Date").
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<PAGE>
(ii) Each of the other persons (the "Other Subscribers") whose
names are set forth on Schedule A to the Partnership Agreement as persons who
will become Class A Partners of the Company (other than PJHP) has entered into a
Subscription Agreement with the Company substantially in the form of this
Agreement and each of the Other Partners (other than PJHP) has paid the First
Closing Purchase Price pursuant to the terms and conditions of such Subscription
Agreement. PJHP has entered into a Subscription Agreement with the Company
substantially in the form of this Agreement, except that its obligations shall
be subject to the receipt of consent from its board of directors to the
transactions contemplated thereby and which agreement shall terminate if such
consent shall not have been received by May 15, 1996.
(iii) The Subscriber and the Company shall have entered into that
certain joint venture agreement, substantially in the form of Schedule II
annexed hereto.
(iv) The Subscriber and PJHP have entered into the Partnership
Interest Option Agreement pursuant to which PJHP has granted the Subscriber the
right to require a 4.00% Post Recoupment Percentage Interest from PJHP on thge
terms and conditions set forth therein.
(v) The Subscriber shall have received a certificate executed by
the President of the Company, dated as of the Closing Date, certifying that the
conditions specified in clauses (i) through (ii) of this Section 5(a) have been
fulfilled.
(vi) All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory in substance and form to the
Subscriber, and Subscriber shall have received all such counterpart originals or
certified or other copies of the Partnership Agreement and this Agreement as the
Subscriber may reasonably request.
(b) CONDITIONS TO BE MET AT THE SECOND CLOSING. The Subscriber's
obligations to purchase the Second Closing Partnership Interest and pay the
Second Closing Purchase Price therefor are subject to the fulfillment to its
reasonable satisfaction of the following conditions:
(i) The representations and warranties of the Company made in
writing by or on behalf of the Company in connection with the transactions
contemplated hereby shall be true and correct at and as of the date of the
Second Closing (the "Second Closing Date").
(ii) (A) As of December 31, 1996, the Company's television
programming service (the "Network") shall be available for regular viewing by at
least [ ]% of the number of full-time equivalent subscribers ("FTE's")
projected by the Company's
[ ] Confidential treatment requested
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business plan dated March 29, 1996 (the "Business Plan") at the end of the third
quarter of Year 1 (at least [ ] FTE's, based on a target of [ ] FTE's); or,
(B) Determined on a daily average basis, the Network shall
have been available for regular viewing by at least [ ]% of the Average FTE's
(as defined below) projected by the Business Plan during the first three
quarters of Year 1 (at least [ ] Average FTE's, based on a target of [ ]
Average FTE's). "Average FTE's" shall be determined by cumulating the number of
FTE's according to the date on which the systems are to be added to the Network
(pursuant to information provided by carriage affiliates as of March 13, 1996)
multiplied by the number of days until the last day of the third quarter of Year
1, divided by 270 days.
The Company shall base its calculations on numbers of FTE's reported to the
Company by its affiliates pursuant to their respective carriage agreements.
(iii) (A) As at December 31, 1996, the Company's actual Gross
Product Revenue (as defined below) shall be at least [ ]% of the Gross Product
Revenue projected in the Business Plan cumulatively for the first three quarters
of Year 1 (at least $[ ], based on a target of $[ ] Gross Product Revenue); or
(B) during the first nine months of operation, the Company's
Gross Product Revenue shall be at least [ ]% of the Gross Product Revenue that
would have been projected (using the formula set forth below) if the Average
FTE's during the first three quarters of Year 1 had been projected to be less
than the Average FTE's projected by the Business Plan, but in no event less than
[ ]% of the projection contained in the Business Plan. In the case of (B),
projected cumulative Gross Product Revenue shall be computed by using the
following formula: Average FTE's during the first three quarters of Year [ ]
Rating x [ ]% Buy Rate x $[ ] Average Order Size.
As used herein, "Gross Product Revenue" shall mean Gross Revenues (net of
product returns), less Advertising/Syndication Revenue and Licensing Revenue, as
determined from the Company's unaudited quarterly financial statements for the
periods in question. Assumptions for Rating, Buy Rate and Average Order Size
shall be those assumptions in the Business Plan.
(iv) Aggregate Fixed Expenses (as defined below) and Capital
Expenditures actually incurred by the Company during the nine months ending
December 31, 1996 shall not exceed [ ]% of the aggregate amount budgeted
therefor in the Annual Business Plan. As used herein, "Fixed Expenses" shall
refer to all expense items in the "Supplementary Five Year Expense Detail by
Department" included in the Company's Forecast Financial Statements dated March
29, 1996 (other than those expenses that vary as a function of the Company's
revenue volume or marketing efforts); and the operative amounts thereof for
[ ] Confidential Treatment Requested
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purposes of comparison shall be the sum of the line item amounts budgeted for
Q1-Year 1, Q2-Year 1 and Q3-Year 1.
(v) The Company shall have delivered to the Subscriber a
certificate at least 10 Business Days prior to the Second Closing to the effect
that the Company has received oral or written confirmations from its carriage
affiliates and others that operate and distribute systems that make the Channel
available to subscribers to the effect that the Channel will be available to not
fewer than [ ] FTE Subscribers (as defined in Section 3.5(b) of the Partnership
Agreement) at March 31, 1997, when aggregated with those FTE Subscribers that
have the Channel available as of December 31, 1996; and Access shall, in good
faith, be satisfied with such certificate.
(vi) PJHP has performed each of the obligations to be performed
by it at the Second Closing.
(vii) The Subscriber shall have received a certificate executed
by the President of the Company, dated as of the Closing Date, certifying that
the conditions specified in clauses (i) through (v) of this Section 5(b) have
been fulfilled.
(viii) All corporate and other proceedings in connection with
the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be satisfactory in substance and
form to the Subscriber.
(c) Any failure on the part of any Subscriber to pay any portion of
the First Closing Purchase Price or the Second Closing Purchase Price when due
shall render the Subscriber a "Delinquent Partner" under Section 4.2 of the
Partnership Agreement and shall enable the Company and its Partners to employ
the rights and remedies set forth therein, without limiting such additional
rights or remedies as the Company or its Partners may have at law or in equity.
6. SUBSCRIBER'S INDEMNIFICATION.
(a) The Subscriber acknowledges that the Company will rely upon the
representations, warranties and agreements of the Subscriber set forth in
Section 4, each of which shall survive after the date of the Subscriber's
execution and delivery of this Agreement. The Subscriber agrees to hold
harmless and indemnify the Company and the General Partner and its officers,
directors and stockholders and any other person who may be deemed to control the
General Partner from and against all liabilities, damages, losses, costs and
expenses (including reasonable attorneys' fees) which it may incur by reason of
the failure of the Subscriber to fulfill any of the terms or conditions of this
Admission Agreement, or by reason
[ ] Confidential Treatment Requested
13
<PAGE>
of any inaccuracy or breach of the representations and warranties and agreements
made by the Subscriber in Section 4 or in connection with the Partnership
Interest in any manner whatsoever.
(b) The Company acknowledges that the Subscriber will rely upon the
representations, warranties and agreements of the Company set forth in Section
3, each of which shall survive after the date of the Subscriber's execution and
delivery of this Agreement. The Company agrees to hold harmless and indemnify
the Subscriber from and against all liabilities, damages, losses, costs and
expenses (including reasonable attorneys' fees) which it may incur by reason of
the failure of the Company to fulfill any of the terms or conditions of this
Admission Agreement, or by reason of any inaccuracy or breach of the
representations and warranties and agreements made by the Company in Section 3
or in connection with the Partnership Interest in any manner whatsoever.
7. MISCELLANEOUS.
(a) The Subscriber agrees that this Admission Agreement shall be
binding upon the Subscriber's permitted successors and assigns. Notwithstanding
the foregoing, the Subscriber may not assign this Admission Agreement without
the prior written consent of the Company.
(b) Notwithstanding any of the representations, war ranties,
acknowledgements or agreements made herein by the Subscriber, the Subscriber
does not thereby or in any other manner waive any rights granted to the
Subscriber under United States or other applicable securities laws.
(c) This Admission Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof and may be amended
only by a writing executed by such parties.
(d) This Admission Agreement shall be enforced, governed and
construed (both as to validity and performance) in all respects in accordance
with the laws of the State of Delaware applicable to agreements made and to be
performed wholly in the State of Delaware.
(e) Within five days after receipt of a written request from the
Company, the Subscriber will provide such information, to execute and deliver
such documents and to take, or forbear from taking, such actions as reasonably
may be necessary to comply with any and all laws and ordinances to which the
Company is subject.
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<PAGE>
(f) All notices sent hereunder shall be in writing. If sent to the
Company, such notices shall be addressed to the Company at its address in the
Partnership Agreement. If sent to the Subscriber, such notices shall be
addressed to the Subscriber at the address (including telecopier number) set
forth below opposite its name.
(g) The Subscriber and the Company agree that any legal suit, action
or proceeding arising out of or relating to this Agreement may be instituted in
a state, city or federal court in the State of New York; PROVIDED, that the
Company may bring suit in the courts of any country or place where the
Subscriber or any of its assets may be found and, by execution and delivery of
this Agreement, the Subscriber irrevocably submits to such jurisdiction. To the
extent permitted by law, the Subscriber irrevocably waives trial by jury and any
objection which it may now or hereafter have to the venue of any suit, action or
proceeding, arising out of or relating to the Partnership Agreement or this
Agreement brought in the State of New York and to the extent permitted by law
hereby further irrevocably waives any claim that any such suit, action or
proceeding brought in the State of New York has been brought in an inconvenient
forum. If any agent appointed by the Subscriber refuses to accept service, the
Subscriber agrees that service upon it by certified mail return receipt
requested sent to the address specified by the Subscriber below shall constitute
sufficient notice. Nothing herein shall affect the right to serve process in
any other manner permitted by law or shall limit the right of the Company to
bring proceeding against the Subscriber in the courts of any other jurisdiction.
(h) If the Subscriber defaults in the performance of any of its
obligations under this Agreement, the Company shall have all rights and remedies
provided at law and equity. All costs and expenses of collection, including
attorneys' fees, shall be added to and become part of the obligations of the
Subscriber under this Agreement.
(i) This Admission Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each party hereto has caused this Admission Agreement
to be duly executed on the date indicated beneath its name.
AHN PARTNERS, L.P., a Delaware
limited partnership
By: America's Health Network, LLC,
General Partner
By:
-----------------------------
Name:
Title: Manager
ACCESS HEALTH, INC.
By:
-----------------------------
Name:
Title:
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Name and Address of Subscriber:
Access Health, Inc.
11020 White Rock Road
Rancho Cordova, California 95670
Telephone: (916) 851-4100
Telecopier: (916) 852-2047
First Closing Partnership
Interest (expressed as
Post Recoupment Percentage
Interest): [ ] Purchase Price: $5,000,000
Second Closing Partnership
Interest (expressed as
Post Recoupment Percentage
Interest): [ ] Purchase Price: $5,000,000
[ ] Confidential Treatment Requested
17
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DISCLOSURE SCHEDULE
Material Contracts of the Company are as follows:
1. Letter Agreement, dated as of May 25, 1995, between America's Health
Network, Inc. ("AHN, Inc.") and IVI Publishing, Inc.
2. Agreement, dated as of June 8, 1995, between AHN, Inc. and Mayo
Foundation for Medical Education and Research.
3. Business Center Lease, dated June 30, 1995, between AHN, Inc. and
Universal City Florida Partners ("Universal City").
4. Consulting Agreement, dated as of July 1, 1995, between AHN, Inc. and
The Providence Journal Broadcasting Corp.
5. Sublease Agreement, dated as of August 1, 1995, between AHN, Inc. and
Providence Journal Satellite Services, Inc.
6. Telemarketing and Fulfillment Services Agreement, executed on June 20,
1995 and June 28, 1995, between AHN, Inc. and National Call Center,
Inc.
7. Fiber Optics Service Agreement, dated February 29, 1996, between AHN,
Inc. and Triumph Communications, Inc. ("Triumph").
The Company is seeking the consent of Hughes Communications Galaxy, Inc.
("Hughes") to the assignment of the Sublease Agreement pursuant to which AHN
Inc. subleased a transmission signal from Providence Journal Satellite Services,
Inc.
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EXHIBIT 10.3
PARTNERSHIP INTEREST OPTION AGREEMENT
THIS PARTNERSHIP INTEREST OPTION AGREEMENT (the "Agreement"), dated as
of April 15, 1996 is made and entered into between Access Health, Inc., a
Delaware corporation (the "Purchaser"), and PJ Health Programming, Inc., a
Delaware corporation (the "Seller"), with respect to a portion of the
partnership interest of AHN PARTNERS, L.P., a Delaware limited partnership
(the "Partnership"), owned by the Seller.
RECITALS
WHEREAS, on or about April 8, 1996 the Seller acquired a Partnership
Interest in the Partnership as a Class A Partner entitling the Seller to a
Post Recoupment Percentage Interest of [ * %] in the Partnership
(capitalized terms used in this Agreement without definition shall have the
respective meanings given them in the Partnership Agreement);
WHEREAS, the Seller intends to acquire an additional Partnership
Interest entitling the Seller to a Post Recoupment Percentage Interest of up
to [ * %] in the Partnership (the "Tranche B Partnership Interest")
acquisition of which is to occur at the second closing (the "Second Closing")
under the Admission Agreement;
WHEREAS, on or about April 16, 1996 the Purchaser acquired a Partnership
Interest in the Partnership as a Class A Partner entitling the Purchaser to a
Post-Recoupment Percentage Interest of [ * %] in the Partnership; and
WHEREAS, subject to the terms and conditions set forth below, the
Purchaser and the Seller desire that the Purchaser shall have the right, but
not the obligation, to acquire from the Partnership Interest to be acquired
by the Seller at the Second Closing an additional Class A Partnership
Interest which additional Partnership Interest shall entitle the Purchaser to
a Post Recoupment Percentage Interest of [ * %] in the Partnership and a
capital account balance at the time of acquisition equal to the Purchase
Price (as defined below) (the "Acquired Interest").
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
1.1 Subject to the terms and conditions of this Agreement, the
Purchaser has the right to purchase from the Seller concurrently with the
Second closing, and upon the exercise of such right the Seller will sell to
the Purchaser concurrently with the Second Closing, the Acquired Interest for
a cash purchase price (the "Purchase Price") equal to [ * ]. Upon
acquiring the Acquired Interest, the Purchaser will hold the Acquired
Interest as a Class A Partner of the Partnership, subject to the terms and
conditions of the Restated Partnership Agreement.
1.2 The Purchaser understands that the Acquired Interest is subject to
dilution arising from the sale by the Company of Partnership Interests at the
Second Closing under the Admission Agreement entitling the purchasers thereof
to aggregate Post Recoupment Percentage Interests of [ * %].
1.3 The Purchaser and the Seller will confer with each other and with
the Company not later than [ * ] to ascertain the likely date for
the Second Closing. Once the Seller advises the Purchaser of such likely date
the Purchaser shall use its best efforts to advise the Seller not less than
30 days prior to such date, and will in all events advise the Seller not less
than 10 days prior such date, whether it elects to exercise its right to
purchase the Required Interest.
2. ELECTION TO PURCHASE. In order to exercise its rights under this
Agreement, the Purchaser shall send to the Seller a written notice stating
that it intends to purchase the Acquired Interest from the Seller, together
with payment therefor in the amount required under Section 1.1. No election
shall be effective if sent after the date on which the right relating thereto
has ceased to be exercisable or if the Partnership shall be a Delinquent
Partner.
3. PAYMENT OF THE PURCHASE PRICE. All payments to be made under this
Agreement shall be made by bank wire transfer of federal funds or by
certified or bank cashier's check drawn on a New York City bank which is a
member of the New York Clearing House Association.
4. REPRESENTATIONS OF THE SELLER. The Seller represents and warrants
to the Purchaser that the Seller is a corporation duly organized under the
laws of the State of Delaware and is duly authorized to sell the Acquired
Interest and to enter into this Agreement, and that upon each exercise by the
Purchaser of its rights hereunder:
4.1 The Acquired Interest will be delivered free and clear of all
liens, claims and adverse interests;
2
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
4.2 The Acquired Interest will entitle the Purchaser to all rights of a
Class A Partner; and
4.3 All material authorizations, consents or approvals of any and all
governmental regulatory authorities and other third parties necessary in
connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained and shall be in full force and effect.
5. REPRESENTATIONS OF THE PURCHASER. The Purchaser warrants and
represents to the Seller as follows:
5.1 The Purchaser has such knowledge and expertise in financial and
business matters that the Purchaser is capable of evaluating the merits
and risks of an investment in the Acquired Interest, and the Purchaser
is able to bear the economic risk of investment in the Acquired Interest
and the complete loss of the Purchaser's investment.
5.2 The Purchaser has received and read or reviewed and is familiar
with the Restated Partnership Agreement and such other documents which
relate to its subscription for the Acquired Interest, and the Purchaser
confirms that all documents, agreements, records and books pertaining to
the investment in the Partnership and requested by the Purchaser have
been made available or delivered to the Purchaser.
5.3 The Purchaser has obtained, to the extent the Purchaser has deemed
necessary, the Purchaser's own personal professional advice with respect
to the risks inherent in investment in the Acquired Interest, the
suitability of such investment in light of the Purchaser's financial
condition and investment needs, and legal, tax and accounting matters.
5.4 The Purchaser understands that investment in the Partnership is an
illiquid investment. In particular, the Purchaser recognizes that:
5.4.1 The Purchaser must bear the economic risk of investment in
the Acquired Interest for an indefinite period of time, since the
Acquired Interest has not been registered under the Securities Act
of 1933, as amended (the "Securities Act"), and, therefore, cannot
be sold unless either it is subsequently registered under the
Securities Act or an exemption from such registration is
available and a favorable opinion of counsel for the Partnership
to that effect is obtained (if requested by the General Partner);
5.4.2. The Purchaser will not have the right to require
registration of the Acquired Interest under the
3
<PAGE>
Securities Act and will not be entitled to the benefits of
Rule 144 thereunder; and
5.4.3 No established market for the Acquired Interest will exist
and it is extremely unlikely that any public market for the
Acquired Interest will develop.
5.5 The Purchaser represents that the Acquired Interest is being
purchased by it or for its own account, for purposes of investment and
not for the account of any other person and not for distribution,
assignment or resale to others, and no other person has a direct or
beneficial interest in the Acquired Interest. The Purchaser understands
and acknowledges that the Acquired Interest has not been registered under
the Securities Act or under state laws.
5.6 The Purchaser is duly authorized to purchase and hold the Acquired
Interest and to enter into this Agreement.
6. STATUS AS A RIGHTSHOLDER. Until the Purchaser has acquired the
Acquired Interest under this Agreement, the Purchaser shall not be entitled
to any rights of a partner in the Partnership in respect of the Acquired
Interest.
7. AMENDMENTS. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby and supersede all other prior commitments, arrangements or
understandings, both oral and written, between the parties with respect
thereto. There are no agreements, covenants, representations or warranties
with respect to the transactions contemplated hereby other than those
expressly set forth herein.
9. BINDING EFFECT. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors
and assigns to the extent that the same shall be permitted by the express
terms hereof.
10. ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any party without the prior
written consent of the other parties. Any assignment of this Agreement which
does not comply with the provisions of this Section shall be void AB INITIO.
11. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and shall be governed by, the laws of
4
<PAGE>
the State of Delaware without reference to conflicts of laws principles.
12. NOTICES. Any notices or other communications required or permitted
hereunder shall be in writing and personally delivered at the addresses
respectively designated for the Purchaser and the Seller in the Partnership
Agreement. All such notices and communications shall be deemed to be given
for purposes of this Agreement on the day such writing is received by the
intended recipient thereof.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which, when executed, shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
PJ HEALTH PROGRAMMING, INC.
By /s/ Harry Dyson
--------------------------------
Name: Harry Dyson
Title: Treasurer
ACCESS HEALTH, INC.
By /s/ John V. Crisan
--------------------------------
Name: John V. Crisan
Title: Senior V.P. and C.F.O.
5
<PAGE>
EXHIBIT 10.4
THE BANK OF CALIFORNIA
LINE OF CREDIT NOTE
$3,000,000.00 dated effective as of May 7, 1996
Each signer of this Note ("Borrower") promises to pay to the order of THE BANK
OF CALIFORNIA, N.A. ("Bank") at its office at 770 L. Street, Suite 1400,
Sacramento, CA 95814 or at such other place as Bank may designate in writing,
in lawful money of the United States of America, the principal sum of
THREE MILLION AND NO/100 DOLLARS ($3,000,000.00), or so much thereof as may be
advanced and outstanding, with interest on each advance under this Note from
the date it is disbursed until maturity, whether scheduled or accelerated, at
a fluctuating rate per annum at all times equal to the rate Bank announces to
be in effect from time to time as its prime rate (the "Prime Rate") plus
.50%. The Prime Rate is a rate set by Bank based upon various factors
including general economic and market conditions, and is used as a reference
point for pricing certain loans. Bank may price its loans at, above, or below
the Prime Rate.
During the term of this Note, Borrower may borrow, repay and reborrow as
Borrower may elect, in minimum amounts of ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00) and subject to all limitations, terms and conditions
contained herein and in any other agreements or documents executed in
connection with this Note; provided, however, that the outstanding principal
balance of this Note shall at no time exceed the maximum principal amount
stated above.
Interest shall be payable on the 1st day of each consecutive month beginning
the first such date after the first advance under this Note, and continuing
through May 1, 1997, on which date all accrued interest and principal
remaining unpaid shall be due and payable in full. Principal, interest, and
all other sums owed Bank under any Loan Document (as defined below) shall be
evidenced by entries in records maintained by Bank for such purpose. Each
payment on and any other credits with respect to principal, interest and all
other sums outstanding under any Loan Document shall be evidenced by entries
in such records. Bank's records shall be conclusive evidence thereof.
Notwithstanding the rights given to Borrower pursuant to California Civil
Code sections 1479 and 2822 or equivalent provisions in the laws of the state
specified in the governing law clause of this document (and any amendments or
successors thereto), to designate how payments will be applied, Borrower
hereby waives such rights and Bank shall have the right in its sole
discretion to determine the order and method of the application of payments
to this and/or any other credit facilities that may be provided by Bank to
Borrower and to revise such application prospectively or retroactively at its
discretion.
Borrower hereby expressly authorizes Bank to debit Borrower's account no.
018-086032 for the amount of each payment of principal and interest and all
other sums owed Bank under any Loan Document. Borrower shall have sufficient
collected balances in said account in order that each such payment shall be
available when due.
Borrower has paid or shall pay to Bank no later than June 1, 1996, a
non-refundable fee of $5,000.00 for this line of credit.
Each advance shall be made by a deposit to one of Borrower's accounts no.
018-086032 at Bank's Sacramento Office, unless Borrower shall otherwise
direct Bank in writing.
Advances may be requested in writing, by telephone, telex or otherwise on
behalf of Borrower. Borrower recognizes and agrees that Bank cannot
effectively determine whether a specific request purportedly made by or on
behalf of Borrower is actually authorized or authentic. As it is in
Borrower's best interest that Bank advance funds in response to these forms
of request, Borrower assumes all risks regarding the validity, authenticity
and due authorization of any request purporting to be made by or on behalf of
Borrower. Borrower promises to repay any sums, with interest, that are
advanced by Bank pursuant to any request which Bank in good faith believes to
be authorized, or when the proceeds of any advance are deposited to the
account of Borrower with Bank, regardless of whether any individual or
entity, including without limitation Bank where the context so permits and in
Bank's sole discretion ("Person"), other than Borrower may have authority to
draw against such account.
The obligation of Bank to make any advance to Borrower, the proceeds of which
are, at Borrower's request, to be wire-transferred to Borrower or any other
Person, shall be subject to all applicable laws and regulations, and the
policy of the Board of Governors of the Federal Reserve System on Reduction
of Payments System Risk in effect from time to time ("Applicable Law and
Policy"). Borrower acknowledges that, as a result of Applicable Law and
Policy, the transmission of the proceeds of any advance which Borrower has
requested to be wire-transferred may be significantly delayed.
Any unpaid payments of principal or interest on this Note shall bear interest
from their respective maturities, whether scheduled or accelerated, at a
fluctuating rate per annum at all times equal to the Prime Rate plus 5%,
until paid in full, whether before or after judgment.
Page 1
<PAGE>
Interest and fees shall be calculated for actual days elapsed on the basis of
a 360-day year, which results in higher interest payments than if a 365-day
year were used. Each change in the rate of interest shall become effective on
the date each Prime Rate change is announced within the Bank. In no event
shall Borrower be obligated to pay interest at a rate in excess of the
highest rate permitted by applicable law from time to time in effect.
The occurrence of any of the following shall (1) terminate any obligation of
Bank to make or continue the line of credit evidenced by this Note, and
shall, at Bank's option, (2) make all sums of interest, principal and any
other amounts owing under any Loan Documents immediately due and payable
without notice of default, presentment or demand for payment, protest or
notice of nonpayment or dishonor or any other notices or demands; and (3)
give Bank the right to exercise any other right or remedy provided by
contract or applicable law:
(a) Borrower shall fail to make any payment of principal or interest
when due under this Note or to pay any fees or other charges when due,
or Borrower or any other Person shall fail to provide Bank with, or to
perform any obligation under this Note or any contract, instrument,
addenda or document executed in connection with this Note, including
without limitation any rate option agreement, guaranty, pledge
agreement, security agreement or deed of trust (including this Note,
each a "Loan Document").
(b) Any representation or warranty made, or financial statement,
certificate or other document provided, by Borrower or any guarantor
("Guarantor") of the obligations evidenced by this Note ("Obligations")
shall prove to have been false or misleading.
(c) Borrower or any Guarantor shall fail to pay its debts generally as
they become due or shall file any petition or action for relief under
any bankruptcy, insolvency, reorganization, moratorium, creditor
composition law, or any other law for the relief of or relating to
debtors; an involuntary petition shall be filed under any bankruptcy law
against Borrower or any Guarantor, or a custodian, receiver, trustee,
assignee for the benefit of creditors, or other similar official, shall
be appointed to take possession, custody or control of the properties of
Borrower or any Guarantor; or the death, incapacity, dissolution or
termination of the business of Borrower or any Guarantor.
(d) Borrower or any Guarantor shall fail to perform under any other
agreement involving the borrowing of money, the purchase of property,
the advance of credit or any other monetary liability of any kind to any
Person; or any guaranty of the Obligations shall be revoked or
terminated.
(e) Any governmental or regulatory authority shall take any action, any
defined benefit pension plan maintained by Borrower or any Guarantor
shall have any unfunded liabilities, or any other event shall occur, any
of which, in the judgment of Bank, might have a material adverse effect
on the financial condition or business of Borrower or any Guarantor.
(f) Any sale, transfer or other disposition of all or a substantial or
material part of the assets of Borrower or any Guarantor, including
without limitation to any trust or similar entity, shall occur.
(g) Any Person shall fail to perform its obligations under the terms of
any promissory note, contract or other obligation that is held by Bank
as collateral for the Obligations; or Bank shall not have a perfected
security interest in, or shall deem itself insecure with respect to the
value of, any collateral being held for the Obligations.
(h) Any judgment(s) shall be entered against Borrower or any Guarantor,
or any involuntary lien(s) of any kind or character shall attach to any
assets or property of Borrower or any Guarantor, any of which, in the
judgment of Bank, might have a material adverse effect on the financial
condition or business of Borrower or any Guarantor.
(i) Without Bank's prior written consent: if Borrower is a corporation,
Borrower's shareholders or record as of the date of this Note shall
cease to own a majority of the voting interest in Borrower; or any
change shall occur in the executive management or managing partner(s) of
Borrower; or any change shall occur in the corporate or legal structure
of Borrower.
(j) Borrower shall fail to perform any of its duties or obligations
under any Loan Document not specifically referenced hereinabove.
No failure or delay on the part of Bank in exercising any power, right or
privilege under any Loan Document shall operate as a waiver thereof, and no
single or partial exercise of any such power, right or privilege shall
preclude any further exercise thereof or the exercise of any other power,
right or privilege.
Bank has the right at its sole option to continue to accept interest and/or
principal payments due under the Loan Documents after default, and such
acceptance shall not constitute a waiver of said default or an extension of
the maturity date unless Bank agrees otherwise in writing.
DISPUTE RESOLUTION.
(a) MANDATORY MEDIATION/ARBITRATION. Any controversy or claim between
or among the parties, their agents, employees and affiliates, including
but not limited to those arising out of or relating to this Note or any
related agreements or instruments ("Subject Documents"), including
without limitation any claim based on or arising from an alleged tort,
shall, at the option of any party, and at that party's expense, be
Page 2
<PAGE>
submitted to mediation, using either the American Arbitration
Association ("AAA") or Judicial Arbitration and Mediation Services, Inc.
("JAMS"). If mediation is not used, or if it is used and it fails to
resolve the dispute within 30 days from the date AAA or JAMS is engaged,
then the dispute shall be determined by arbitration in accordance with
the rules of either JAMS or AAA (at the option of the party initiating
the arbitration) and Title 9 of the U. S. Code, notwithstanding any
other choice of law provision in the Subject Documents. All statutes of
limitations or any waivers contained herein which would otherwise be
applicable shall apply to any arbitration proceeding under this
subparagraph (a). The parties agree that related arbitration proceedings
may be consolidated. The arbitrator shall prepare written reasons for
the award. Judgment upon the award rendered may be entered in any court
having jurisdiction. This subparagraph (a) shall apply only if, at the
time of the proposed submission to AAA or JAMS, none of the obligations
to Bank described in or covered by any of the Subject Documents are
secured by real property collateral or, if so secured, all parties
consent to such submission.
(b) JURY WAIVER/JUDICIAL REFERENCE. If the controversy or claim is not
submitted to arbitration as provided and limited in subparagraph (a),
but becomes the subject of a judicial action, each party hereby waives
its respective right to trial by jury of the controversy or claim. In
addition, any party may elect to have all decisions of fact and law
determined by a referee appointed by the court in accordance with
applicable state reference procedures. The party requesting the
reference procedure shall ask AAA or JAMS to provide a panel of retired
judges and the court shall select the referee from the designated panel.
The referee shall prepare written findings of fact and conclusions of
law. Judgment upon the award rendered shall be entered in the court in
which such proceeding was commenced.
(c) PROVISIONAL REMEDIES, SELF HELP, AND FORECLOSURE. No provision of,
or the exercise of any rights under, subparagraph (a) shall limit the
right of any party to exercise self help remedies such as setoff, to
foreclose against any real or personal property collateral, or to obtain
provisional or ancillary remedies such as injunctive relief or the
appointment of a receiver from a court having jurisdiction before,
during or after the pendency of any mediation or arbitration. At Bank's
option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of power of sale under the deed of trust
or mortgage, or by judicial foreclosure. The institution and maintenance
of an action for judicial relief or pursuit of provisional or ancillary
remedies or exercise of self help remedies shall not constitute a waiver
of the right of any party, including the plaintiff, to submit the
controversy or claim to mediation or arbitration.
To the extent any provision of the dispute resolution clause is different
than the terms of this Note, the terms of this dispute resolution clause
shall prevail.
Bank reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Bank's rights and
obligations under the Loan Documents. In that connection, Bank may disclose
all documents and information which Bank now or hereafter may have relating
to this credit facility, Borrower, or any Guarantor or their business.
Borrower shall pay and protect, defend and indemnify Bank and Bank's
employees, officers, directors, shareholders, affiliates, correspondents,
agents and representatives (other than Bank, collectively "Agents") against,
and hold Bank and each such Agent harmless from, all claims, actions,
proceedings, liabilities, damages, losses, expenses (including, without
limitation, attorneys' fees and costs) and other amounts incurred by Bank and
each such Agent, arising from (i) the matters contemplated by this Note or
any Loan Document or (ii) any contention that Borrower has failed to comply
with any law, rule, regulation, order or directive applicable to Borrower's
sales, leases or performance of services to Borrower's customers, including
without limitation those sales, leases and services requiring consumer or
other disclosures; PROVIDED, HOWEVER, that this indemnification shall not
apply to any of the foregoing incurred solely as the result of Bank's or any
Agent's gross negligence or willful misconduct. This indemnification shall
survive the payment and satisfaction of all of Borrower's obligations and
liabilities to Bank.
Borrower shall reimburse Bank for all costs and expenses, including without
limitation reasonable attorneys' fees and disbursements (and fees and
disbursements of Bank's in-house counsel) expended or incurred by Bank in any
arbitration, mediation, judicial reference, legal action or otherwise in
connection with (a) the negotiation, preparation, amendment, interpretation
and enforcement of the Loan Documents, including without limitation during
any workout, attempted workout, and/or in connection with the rendering of
legal advice as to Bank's rights, remedies and obligations under the Loan
Documents, (b) collecting any sum which becomes due Bank under any Loan
Document, (c) any proceeding for declaratory relief, any counterclaim to any
proceeding, or any appeal, or (d) the protection, preservation or enforcement
of any rights of Bank. For the purposes of this section, attorneys' fees
shall include, without limitation, fees incurred in connection with the
following: (1) contempt proceedings; (2) discovery; (3) any motion,
proceeding or other activity of any kind in connection with a bankruptcy
proceeding or case arising out of or relating to any petition under Title 11
of the United States Code, as the same shall be in effect from time to time,
or any similar law; (4) garnishment, levy, and debtor and third party
examinations; and (5) postjudgment motions and proceedings of any kind,
including without limitation any activity taken to collect or enforce any
judgment.
Each Borrower is jointly and severally liable for the obligations evidenced
by this Note, and all references to "Borrower" shall be to "each" or "any"
Borrower as the context requires.
Page 3
<PAGE>
This Note shall be governed by, and construed in accordance with, the laws of
the State of California.
All terms and conditions set forth in the Financial Covenants/Financial
Information Addendum(s) attached to this Note are incorporated by this
reference.
ACCESS HEALTH, INC., A DELAWARE CORPORATION
By: /s/ J.V. Crisan
---------------------------
Title: SVP/CFO
------------------------
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<PAGE>
THE BANK OF CALIFORNIA
ADDENDUM TO PROMISSORY NOTE
-FINANCIAL COVENANTS/FINANCIAL INFORMATION-
THIS ADDENDUM is attached to and made a part of that certain promissory note
executed by ACCESS HEALTH, INC., A DELAWARE CORPORATION ("Borrower"), payable
to the order of THE BANK OF CALIFORNIA, N.A. ("Bank"), in the principal
amount of $3,000,000.00 and dated effective as of May 7, 1996 (the "Note").
The following provisions are hereby incorporated into the Note:
1. FINANCIAL COVENANTS. So long as Borrower is indebted to Bank
under this Note and until its performance of all obligations to Bank,
Borrower will, unless Bank otherwise consents in writing:
1.1 TANGIBLE NET WORTH/DEBT TO WORTH. Maintain a Tangible Net
Worth of not less than $35,000,000.00; and not permit Borrower's
total indebtedness to exceed .50 times the Borrower's Tangible Net
Worth.
1.2 EBITDA RATIO. Maintain a ratio of earnings before interest
expense, charges against income for foreign, federal, state and
local taxes, depreciation and amortization for the previous financial
reporting period, to Borrower's interest expense plus principal debt
service and dividends, at the time of determination, of at least 6.0
to 1.0.
2. FINANCIAL STATEMENTS. So long as Borrower is indebted to Bank under
this Note, Borrower shall provide to Bank the following financial
information, which Borrower warrants shall be accurate and complete in all
material respects and prepared in accordance with generally accepted
accounting principles and practices, consistently applied:
INTERIM FINANCIAL STATEMENTS
As soon as available, but no later than 90 days after the end of
each quarter, Borrower's balance sheet as of the end of such period,
and Borrower's income statement for such period and for that portion
of Borrower's financial reporting year ending with such period,
prepared and attested by a responsible financial officer of Borrower
as being complete and correct and fairly presenting Borrower's
financial condition and the results of Borrower's operations.
YEAR-END FINANCIAL STATEMENTS
As soon as available, but no later than 90 days after the end of
each financial reporting year, a complete copy of Borrower's audit
report, which shall include balance sheet, income statement,
statement of changes in equity and statement of cash flows for such
year, prepared and certified by an independent certified public
accountant selected by Borrower and satisfactory to Bank (the
"Accountant"). The Accountant's certification shall not be qualified
or limited due to a restricted or limited examination by the
Accountant of any material portion of Borrower's records or
otherwise. The certification shall include, or be accompanied by, a
statement from the Accountant that during the examination there was
observed no Event of Default, or a statement of the Event of Default
if any is found. Borrower shall not change its financial reporting
year end from the current September 30th without Bank's prior
written consent.
Except as otherwise provided in this Note, accounting terms, and
financial covenants and information, shall be determined and
prepared in accordance with GAAP as in effect on the date of this
Note.
GOVERNMENT REQUIRED REPORTS.
Promptly after sending, making available, or filing, copies of all
reports, proxy statements and financial statements that Borrower
sends or makes available to its stockholders and all registration
statements and reports that Borrower files with the Securities and
Exchange Commission or any other governmental or regulatory
authority.
OTHER FINANCIAL INFORMATION
Such other statements, lists of property and accounts, budgets,
forecasts, reports or other financial information as Bank may from
time to time request.
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3. DEFINITIONS
The following definitions shall be applicable to both the singular and
plural forms of the defined terms.
"ACCOUNTS" means all rights to the payment of money now owned or
hereafter acquired by Borrower, whether due or to become due and
whether or not earned by performance, including but not limited to,
accounts, chattel paper, instruments, and general intangibles.
"AFFILIATE" means any Person which directly or indirectly controls,
is controlled by, or is under common control with, Borrower.
"Control", "controlled by" and "under common control with" means
direct or indirect possession of the power to direct or cause the
direction of management or policies (whether through ownership of
voting securities, by contract or otherwise); provided that control
shall be conclusively presumed when any Person or affiliated group
directly or indirectly owns five percent or more of the securities
having ordinary voting power for the election of directors of a
corporation.
"GAAP" means generally accepted accounting principles and practices
consistent with those principles and practices promulgated or
adopted by the Financial Accounting Standards Board and the Board of
the American Institute of Certified Public Accountants, their
respective predecessors and successors. Each accounting term used
but not otherwise expressly defined herein shall have the meaning
given it by GAAP.
"RELATED PERSON" means an Affiliate of Borrower, or any officer,
employee, director or shareholder of Borrower or any Affiliate, or a
relative of any of them.
"TANGIBLE NET WORTH", means the net book value of (a) all Borrower's
assets, exclusive of intangibles, and loans to and notes and
receivables from Related Persons, minus (b) all Borrower's
liabilities determined in accordance with GAAP.
IN WITNESS WHEREOF, the undersigned has executed this Addendum the first date
set forth above.
ACCESS HEALTH, INC., A DELAWARE CORPORATION
By: /s/ J.V. Crisan
---------------------------
Title: SVP/CFO
------------------------
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<PAGE>
[LETTERHEAD]
May 7, 1996
ACCESS HEALTH, INC.
11020 White Rock Rd.
Rancho Cordova, CA 95670
RE: EURODOLLAR RATE OPTION AGREEMENT
--------------------------------
Dear Sirs:
As of this date, you, ACCESS HEALTH, INC., A DELAWARE CORPORATION, have with
The Bank of California, N.A. ("Bank") a credit facility in the maximum
principal amount of $3,000,000.00, as such amount may change in accordance
with its terms ("Credit Facility"), the terms and conditions of which are
governed by a promissory note and/or loan agreement and various other
documents ("Loan Documents"). In conjunction with your current Credit
Facility, Bank is pleased to offer you a chance to participate in a special
commercial pricing program.
1. AVAILABILITY AND MATURITY
Bank usually extends financing based on a fluctuating rate that changes with
the rate Bank announces to be in effect from time to time as its prime rate
("Prime Rate"). The Prime Rate is a rate set by Bank based on various
factors, including general economic and market conditions, and is used as a
reference point in pricing certain loans. Bank may price its loans at, above
or below the Prime Rate.
In contrast, Bank's "Eurodollar Rate" is a fixed rate (more fully defined
below) Bank offers from time to time which, if you accept this proposal, will
apply to all or such portion of the principal amount outstanding under the
Credit Facility ("Covered Amount") and for such time periods as you and Bank
shall mutually agree. Pricing tied to the Eurodollar Rate is available for
periods of 1, 2, 3, 6, 9 or 12 months (each a "Period"), provided, however,
that no Period shall have a maturity date subsequent to the scheduled
maturity date for the Credit Facility. This pricing may be applied to
increments of $100,000 or more outstanding under the Credit Facility.
Bank's "Eurodollar Rate" is, for each Period, a rate comprised of (a) the
rate of interest at which Dollar deposits for such period and in such amount
would be offered to Bank in the Eurodollar Market at a time selected by Bank
prior to the commencement of the relevant Period, adjusted for the then
maximum reserve, capital adequacy, deposit insurance, and similar
requirements that under any circumstance could be applicable to Bank pursuant
to applicable law or regulation, and other amounts associated with Bank's
costs and desired return; plus (b) a margin equal to 2.75%. The Eurodollar
Market is the market in which the buying and selling of United States Dollar
deposits booked outside the United States of America occurs among the
international banking community.
Bank's Eurodollar Rate is available and may be accepted only at the time
quoted by Bank for the applicable Period beginning two (2) Banking Days
hence. Due to changes in legal, regulatory, economic or market conditions,
Bank may at any time determine that pricing based on the Eurodollar Rate is
not available, and thus, may be unable to offer such a rate.
2. QUOTE, EURODOLLAR RATE, AND PAYMENTS
For a quote of Bank's Eurodollar Rate which would apply to the specified
Covered Amount and Period, you may call Bank's Sacramento Regional Office
office between 8:00 a.m. and 11:00 a.m. Pacific time on any day on which such
office and Bank's San Francisco main office are open for business to the
public (each a "Banking Day"). As the Eurodollar Rate is established two (2)
Banking Days prior to the first day of the requested Period, you must call at
least two (2) Banking Days prior to such date. If you accept the Eurodollar
Rate when offered, that rate
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will apply to such Covered Amount for the applicable Period. Interest shall
be calculated for actual days elapsed on the basis of a three hundred and
sixty (360) day year.
During any Period, you agree to pay interest on the Covered Amount at the
Eurodollar Rate on the 1st day of each consecutive month beginning the first
such date after the commencement of the Period, until the last day of the
Period whether scheduled or accelerated ("Maturity Date"). During each
Period, you must maintain under your Credit Facility a principal balance
which is not a Covered Amount under any of your rate option agreements with
Bank sufficient to cover each scheduled instalment of principal coming due
during such Period under the Credit Facility. Should you have any obligation
under any other Loan Document to repay any portion of the Credit Facility
("Obligation") that would conflict with your obligation under the preceding
sentence ("Maintenance Obligation"), you shall nevertheless comply with the
Obligation and not with the Maintenance Obligation, and you shall not be
deemed in default hereunder. Nonetheless, payment of the Obligation shall be
deemed to be a "Prepayment", as defined below, to the extent it repays a
portion of a Covered Amount under this or any of your other rate option
agreements you may have with Bank.
If, prior to a Maturity Date and while the Credit Facility is still
available, you and Bank have not agreed that a new rate tied to the
Eurodollar Rate shall apply to a Covered Amount, then, if the term of your
Credit Facility extends beyond such Maturity Date, Bank's Prime Rate plus the
applicable margin under the terms of your Credit Facility shall be
automatically applicable to such Covered Amount.
Bank's records of the date, Covered Amount, Period, Eurodollar Rate, Maturity
Date, and all payments of principal and interest and all other payments and
amounts due under this letter agreement shall be conclusive and binding on
you, absent obvious error.
3. PREPAYMENT LIMITATION
Do not sign this letter agreement before you read it. This letter
agreement provides for payment of liquidated damages if you wish to
repay the loan (Covered Amount) prior to the date provided for repayment
under the Credit Facility.
Bank establishes the Eurodollar Rate with the understanding it will apply to
the Covered Amount for the entire scheduled Period. If for any reason,
including, without limitation, acceleration, foreclosure or prepayment, Bank
receives all or any portion of a Covered Amount (each a "Prepayment") prior
to the scheduled Maturity Date, then in consideration thereof you shall pay
to Bank on demand:
a. The amount, if any, by which the additional interest which would have
been payable on the Prepayment exceeds the interest which Bank would
receive had it placed an amount equal to the Prepayment, in United States
Dollars, on deposit in the Eurodollar Market (or, at Bank's sole discretion,
invested such amount in a domestic certificate of deposit issued by an
institution rated at least "investment grade" or "A" by Moody's or any
successor rating agency) for a period equal to the period of time
remaining until the maturity of the applicable Period. Should the
scheduled maturity fall between two periods for which rates are quoted or
available to Bank, then Bank, in its sole discretion, shall interpolate
this rate; and
b. Any other out of pocket costs to Bank associated with funding or
maintaining the Covered Amount.
Bank shall provide you a statement of the amount payable on account of each
Prepayment, which statement shall be a conclusive and binding determination
of the amount owed by you for such Prepayment, absent obvious error. All
Prepayments, subject to this Section 3, shall be applied on the most remote
instalment or instalments of principal then unpaid on the Credit Facility
being prepaid.
You acknowledge that any Prepayment may result in Bank incurring additional
costs, expenses or liabilities. Therefore, you agree to pay the
above-described liquidated damages and agree that said amount is a reasonable
estimate of the costs, expenses and liabilities of Bank associated with each
Prepayment.
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4. SPECIAL FUNDING PROVISIONS
If at any time Bank determines that:
a. United States Dollar deposits in principal amounts similar to the
Covered Amount bearing interest at the Eurodollar Rate and for periods
equal to the relevant Period are not available in the Eurodollar Market;
b. The Eurodollar Rate does not cover the cost to Bank of making,
funding or maintaining the Covered Amount at the Eurodollar Rate during
any Period;
c. Any change in financial, political or economic conditions or currency
exchange rates makes it impractical for Bank to make, fund or maintain
the Covered Amount at the Eurodollar Rate during any Period; or
d. Any change in applicable law or regulation or in the interpretation
thereof (whether or not having the force of law) makes it unlawful or
impractical for Bank to make, fund or maintain the Covered Amount at the
Eurodollar Rate, then Bank shall promptly give notice thereof to you and
as of the date stated in such notice, the Eurodollar Rate option shall
terminate, and Bank's Prime Rate plus the applicable margin under the
terms of your Credit Facility shall be automatically applicable to the
relevant Covered Amount through the end of the relevant Period.
5. RESERVES, DEPOSIT INSURANCE, CAPITAL ADEQUACY
You shall additionally compensate Bank upon demand for all costs incurred, or
losses suffered, including without limitation lost profits, by reason of:
a. any and all increases in reserve, deposit insurance, capital adequacy
or similar requirements against (or against any class of or change in or
in the amount of) the assets or liabilities of Bank, deposits with or for
the account of Bank, or loans by Bank, imposed by any governmental or
regulatory authority (whether or not having the force of law) in
connection with a Covered Amount bearing interest at the Eurodollar Rate;
or
b. compliance by Bank with any direction, requirement or request from
any governmental or regulatory authority (whether or not having the force
of law) in connection with a Covered Amount bearing interest at the
Eurodollar Rate to the extent any such costs have not been previously
blended or adjusted into the Eurodollar Rate.
Bank shall provide you with a written statement of the amount and basis of
its request for compensation under this Section, which statement shall be a
conclusive and binding determination of the amount owed by you, absent
obvious error.
6. TAXES
a. If at any time any taxes, fees or other charges of any nature are
imposed by any governmental or regulatory authority on any aspect of the
transactions referred to in this letter agreement including without
limitation all stamp or documentation duties (collectively, "Taxes"), you
shall pay such Taxes directly, or compensate Bank for such payment, as
set forth below, except for such Taxes as are imposed on Bank's net
income.
b. In the event you are prohibited by operation of law from making
payments or reimbursements to Bank without making such deductions or
paying, or causing to be paid, any and all Taxes, you shall pay to Bank
upon demand such additional amounts as may be necessary in order to
reimburse Bank for Taxes paid by Bank on your behalf such that the
aggregate net amounts received by Bank shall equal the amounts which
would have been received if such deduction or withholding had not been
required.
c. You shall confirm that all applicable Taxes shall have been paid to
appropriate taxing authorities or agencies by sending official tax
receipts or notarized copies of such receipts to Bank within thirty (30)
days after payment of any Taxes. Should Bank receive notice of any such
liability for Taxes, Bank will promptly so inform you.
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7. GENERAL PROVISIONS
a. To the extent interest rates, prepayment provisions and times for
payment of interest established under this letter agreement are different
than the terms of the note evidencing the Credit Facility, the terms of
this letter agreement shall prevail. All other provisions of the Loan
Documents remain in full force and effect.
b. This letter agreement shall be governed by the laws of the State of
California.
c. This letter agreement, and all confirmations provided hereunder,
evidence the entire agreement of the parties on the matters covered
herein, and supersede all prior understandings and agreements.
If you would like to participate in Bank's Eurodollar Rate Option program,
please execute the enclosed duplicate original of this letter and return it
to Bank, on or before May 17, 1996, at which time the option granted in this
letter will otherwise expire.
The Bank is pleased to serve you.
Very truly yours,
THE BANK OF CALIFORNIA, N.A.
By:
---------------------------
Kingman Tsang
Title: Vice President
ACCEPTED AND AGREED:
ACCESS HEALTH, INC., A DELAWARE CORPORATION
By: /s/ J.V. Crisan
---------------------------
Title: SVP/CFO
------------------------
Dated: May 23, 1996
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