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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-K
[_] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 NO. 0-19878
OPTION CARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3791193
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
100 CORPORATE NORTH, SUITE 212, BANNOCKBURN, ILLINOIS 60015
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (847) 615-1690
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK $.01 PAR VALUE PER SHARE
---------------------------------------
TITLE OF EACH CLASS
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 _______
-------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
-
The aggregate market value of voting stock held by non-affiliates of the
registrant as of January 31, 1997 was approximately $23,600,000 (based on
closing sale price of $6.813 per share as reported by the Nasdaq National Market
and published in the Wall Street Journal.)
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of January 31, 1997 was 10,537,616.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 1997 Annual Meeting of
Stockholders are incorporated by reference into items 10-13 in Part III of this
Report.
Page 1 of 48 pages
Exhibit index is on Page 45 of this Annual Report on Form 10-K.
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OPTION CARE, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I:
Item 1. Business....................................................................................... 3
Item 2. Properties..................................................................................... 12
Item 3. Legal proceedings.............................................................................. 12
Item 4. Submission of matters to a vote of security holders............................................ 14
PART II:
Item 5. Market for registrant's common equity and related stockholder matters.......................... 15
Item 6. Selected financial data........................................................................ 17
Item 7. Management's discussion and analysis of financial condition and results of operations.......... 19
Item 8. Financial statements and supplementary data.................................................... 24
Item 9. Changes in and disagreements with accountants on accounting and financial disclosure........... 41
PART III:
Item 10. Directors and executive officers of the registrant............................................. 41
Item 11. Executive compensation......................................................................... 41
Item 12. Security ownership of certain beneficial owners and management................................. 41
Item 13. Certain relationships and related transactions................................................. 41
PART IV:
Item 14. Exhibits, financial statement schedules, and reports on Form 8-K............................... 41
</TABLE>
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this Annual
Report on Form 10-K and other materials filed or to be filed by the Company with
the Securities and Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the Company)
contains statements that are or will be forward looking, such as statements
relating to acquisitions and other business development activities, future
capital expenditures and the effects of future regulation and competition. Such
forward looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly,
such results may differ from those expressed in any forward-looking statements
made by, or on behalf of, the Company. These risks and uncertainties include,
but are not limited to, uncertainties affecting businesses of the Company and
its franchisees relating to acquisitions and divestitures (including continuing
obligations with respect to completed transactions), sales and renewals of
franchises, government and regulatory policies (including federal, state and
local efforts to reform the delivery of and payment for healthcare services),
general economic conditions (including economic conditions affecting the
healthcare industry in particular) the pricing and availability of equipment and
services, technological developments and changes in the competitive environment
in which the Company operates.
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PART I
ITEM 1. BUSINESS
Introduction
Option Care, Inc. (together with its subsidiaries, collectively "Option
Care" or "the Company") is a full service home healthcare business providing
services through its owned locations and through its supporting franchise
network. The Company was incorporated in Delaware on July 9, 1991. The
Company's predecessor was incorporated in California in January 1984.
Option Care has established a nationwide presence. The advantages of a
national presence include a strong brand identity and accessibility for managed
care payors and customers. As of December 31, 1996, 186 Option Care locations
were operating in 37 states. Existing offices include 164 locations owned and
operated by franchise owners and 22 locations owned and operated by the Company.
Aggregate gross billings for patient care services for all owned and franchised
Option Care offices were approximately $255,000,000 for the year ended December
31, 1996.
The Company owns and operates alternate site healthcare businesses. The
Company operated 22 such locations at December 31, 1996. These Company-owned
locations offer infusion therapy services, nursing, respiratory therapy and
durable medical equipment. The Company expects to increase the number of its
owned locations through acquisitions.
The Company and its franchise network provide managed care companies and
payors with one-stop shop services. Many referral sources, such as hospitals,
physicians, third-party payors and case management companies, may prefer making
patient referrals to multi-office companies or systems, such as the Option Care
system. Under the Company's OPTIONET program, the Company has contracted with
certain regional and national third-party payors and case management companies
to refer patients to participating Option Care locations.
The Company is committed to the provision of high quality care and believes
that an important measure of quality in the home healthcare industry is
accreditation by the Joint Commission on Accreditation of Healthcare
Organizations ("JCAHO") or similar organizations. As of December 31, 1996, 165
of the Company's franchised and owned locations were accredited. All new
franchises since April 1, 1990 have been required by the Company to apply for
accreditation within their first year of operation. The Company's goal is for
substantially all Option Care locations to become accredited.
The Company plans to continue to expand and develop its business through
(i) acquiring selected existing franchised locations or other providers of home
healthcare services, (ii) providing managed care companies and payors one-stop
services through owned or networked providers, (iii) entering into strategic
alliances with outpatient services providers, hospitals, physicians and payors,
and (iv) increasing the volume of current therapies and adding new therapies and
services. Additional debt or equity financing may be required to carry out the
Company's future acquisition strategy. The Company can give no guarantees that
such financing will be available or available at an acceptable cost.
THE HOME HEALTHCARE MARKET
Home healthcare principally involves the in-home or non-hospital provision
of nursing services, infusion therapy, respiratory services and durable medical
equipment. These services often begin during hospitalization and continue in
the
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home or other non-acute care setting, but may also be provided following
outpatient surgery or in connection with the treatment of conditions not
requiring hospitalization.
The market for home healthcare services has experienced significant growth.
The Company believes that the following factors have contributed to this growth:
(i) cost containment efforts by third-party payors promoting use of relatively
less expensive home healthcare therapy rather than longer hospital stays; (ii)
increased awareness and acceptance among physicians and third-party payors of
alternatives to in-hospital treatment; (iii) the desire of patients to be
treated at home; and (iv) improved technology. Consolidation of providers has
been a recent dominant trend in the home healthcare industry.
SERVICES
The Company is a full service home healthcare provider with a supporting
franchise network. The Company offers infusion therapy, nursing services,
respiratory therapy and durable medical equipment through its owned offices and
infusion therapy through its franchise network. The Company's franchise network
locations compound, dispense and administer pharmaceuticals, sell medical
supplies, sell or rent associated medical equipment, provide skilled nursing
services, train patients and their care givers, consult with attending
physicians, and process reimbursement claims. The decision to proceed with
alternate-site therapies is generally made jointly by the patient, the attending
physician and a representative of the Option Care office involved. This
decision involves obtaining and evaluating information about the patient's
medical history, care environment and insurance coverage, as well as discussing
the patient's or care giver's willingness and ability to participate in the
management of care in the home setting.
The majority of the Company's patient care service revenue is derived from
home infusion therapy related services. The principal home infusion therapies
include the following:
Total Parenteral Nutrition ("TPN")
TPN involves the intravenous administration of life sustaining nutrients to
patients whose digestive tracts are unable to function normally due to severe
gastrointestinal illness or injury. In many cases the TPN patient's underlying
condition is chronic in nature and he or she may require TPN for life.
Anti-infective Therapy
Anti-infective therapy involves the parenteral administration of
antibiotics, antivirals and antifungals to treat a variety of serious
infections such as those associated with AIDS, osteomyelitis, endocarditis,
urinary tract infection or wounds. Anti-infective therapy is generally
administered in the patient's home as a continuation of therapy initiated on an
outpatient basis or during hospitalization.
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Pain Management
Pain management therapy is the parenteral administration of analgesic drugs
to patients suffering from acute or chronic pain. Specialized infusion devices
permit patients to control the administration of analgesic drugs to respond to
the severity of their pain.
Enteral Nutrition
Enteral patients are usually unable to receive adequate nutrition orally
due to disorders including stroke, intestinal obstruction or cancer. Patients
receive nutritional formulas via a tube placed directly into the stomach or
small intestine, bypassing the dysfunctional portion of the patient's digestive
tract.
Chemotherapy
Chemotherapy is the parenteral administration of drugs to treat patients
suffering from cancer. As chemotherapy is commonly administered periodically for
several weeks or months, patients may receive their therapy regimen in alternate
settings.
Other therapies provided by Option Care offices may include: (i) hydration
therapy; (ii) blood components (packed red blood cells, Factor VIII and
immunoglobin); (iii) human growth hormone; (iv) aerosolized pentamidine for
prevention of pneumonia often contracted by AIDS patients; (v) intradialytic
parenteral nutrition for chronic kidney failure patients; (vi) deferoxamine for
patients with chronic iron overload; and (vii) pre-term labor monitoring and
tocolytic infusions for high-risk pregnancies.
The following table sets forth the aggregate percentages of revenues by
home infusion therapy of Company-owned offices for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Total parenteral nutrition therapy.. 19% 22% 29%
Anti-infective therapies............ 34 37 22
Pain management therapy............. 8 8 10
Enteral nutrition therapy........... 10 7 6
Chemotherapy........................ 4 5 4
Other therapies or services......... 25 21 29
---- ---- ----
Total.......................... 100% 100% 100%
==== ==== ====
</TABLE>
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Approximately 20% of the Company's patient care service revenue is derived
from nursing services. Option Care's nursing services include providing support
for infusion therapies and providing traditional home health nursing services
in many markets. These services include patient assessment, training,
monitoring, documentation and physician communication. In addition to nursing
support for infusion therapies, many Option Care locations provide skilled
nursing care for a full range of other services, as well as private duty
nursing.
In addition to the services mentioned above, Option Care derives
approximately 6% of its patient care service revenue from the sale of home
medical equipment (HME) and respiratory therapy.
COMPANY-OWNED LOCATIONS
The Company operates and owns controlling interests in the following Option
Care locations:
<TABLE>
<CAPTION>
DATE OF OWNED BY
OWNERSHIP COMMENCEMENT COMPANY
OWNED LOCATIONS INTEREST OF OPERATIONS SINCE
- ------------------------------- ---------- -------------- --------------
<S> <C> <C> <C>
Chico, California.............. 100% April 1980 January 1984
Fort Myers, Florida............ 100 July 1984 April 1991
Tampa, Florida................. 100 August 1993 August 1993
Columbia, Missouri............. 100 March 1985 April 1992
Kirksville, Missouri........... 100 July 1989 January 1996
Jefferson City, Missouri....... 100 May, 1988 March 1996
Bethlehem, Pennsylvania........ 80 November 1986 May 1992
Horsham, Pennsylvania.......... 80 February 1989 May 1992
Bullhead City, Arizona......... 100 March 1988 April 1993
Bellingham, Washington......... 100 November 1984 November 1993
Omaha, Nebraska................ 100 May 1984 August 1994
Grand Junction, Colorado....... 100 December 1991 November 1994
Grand Medical Supply........... 100 February 1981 October 1996
Gadsden, Alabama............... 50 June 1987 November 1994
Houston, Texas................. 100 January 1988 January 1996
Bellaire Infusion Center, TX. 100 May 1994 June 1996
Ontario, California............ 100 December 1989 February 1996
Bethel, Ohio................... 100 July 1987 April 1996
Milford, Ohio.................. 100 July 1987 April 1996
Everett, Washington............ 100 April 1985 May 1996
Oklahoma City, Oklahoma........ 100 April 1986 September 1996
Kennewick, Washington.......... 100 September 1985 December 1996
</TABLE>
FRANCHISING PROGRAM
As of December 31, 1996, the Company had 165 franchise locations. The
Company's current franchise agreement grants the franchise owner the authority
to own and operate an Option Care franchise within a granted territory for a 20-
year term. The initial franchise fee for start-up franchises ranges from
$15,000 to $35,000 and is payable by the franchise owner upon execution of the
franchise agreement. The exact amount of the initial franchise fee is
determined by the
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Company based on the population in the territory granted to the franchise owner.
Conversion franchise fees are lower than those for start-ups.
The Company's franchise agreements generally provide for royalties on a
sliding scale ranging from a high of 9% to a low of 2% of annual gross cash
receipts depending on the levels of such receipts, whether the franchise owner
conducted a similar business prior to the execution of the franchise agreement,
and other factors.
Each Option Care office is required to maintain a licensed pharmacy
equipped to prepare sterile patient medications and parenteral solutions as
prescribed by the patient's physician. Each location operates under a
confidential, proprietary system developed by the Company which includes
procedures for quality assurance, office administration and patient care,
consistency and uniformity of pharmaceuticals and offered services, initial
training and ongoing assistance.
Key employees of each franchised Option Care office, including pharmacists,
nurses, and managers, must complete initial training programs provided by the
Company. In addition to required initial training, the Company offers advanced
training in selected topics to franchise owners and their employees.
The Company furnishes Option Care franchisees with its system of training,
marketing and operating support services. In addition, franchised locations
may, but are not required to, purchase or otherwise acquire from or through the
Company certain pharmaceuticals, supplies, and pharmacy-related equipment. The
Company's initial training and ongoing support provided to its owned and
franchised locations stresses the importance of consistent quality and
responsive service.
The Company's franchise agreements require, among other things, franchise
owners to meet the Company's policies on quality assurance, clinical services
and local marketing and to obtain specified liability insurance protecting the
franchise owner and the Company against claims arising out of the operation of
the franchised business.
The Company conducts franchise owner meetings on both regional and
national levels to provide operating assistance, information on new Option Care
programs, new marketing concepts and other assistance. The Company also works
with its franchise owners' National Advisory Council in communicating with
franchise owners and receiving their recommendations for changes and
improvements to the Option Care system.
The following table indicates the number of Option Care franchise locations
at the beginning of the year, the number of new franchises sold, the number of
franchises terminated or consolidated and the number of franchises at the end of
each year in the three-year period ended December 31, 1996:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Number of franchise locations at beginning of year.. 166 173 192
New franchises opened............................... 13 13 2
Franchises terminated or consolidated............... 15 20 21
---- ---- ----
Number of franchise locations at end of year........ 164 166 173
==== ==== ====
</TABLE>
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REIMBURSEMENT FOR SERVICES
Most of the patient care revenues of owned Option Care locations are
derived from third-party payors, such as insurance companies, health maintenance
organizations, self-insured employers, Medicare and Medicaid. Where permitted
by law or contract, patients are billed for amounts not reimbursed by third-
party payors. Private third-party payors typically reimburse a higher amount
and faster for a given service and provide a broader range of benefits than
government programs.
Reimbursement from Medicare and Medicaid programs is subject to statutory
and regulatory requirements, administrative rulings, interpretations of policy,
implementation of reimbursement procedures, retroactive payment adjustments and
governmental funding restrictions, all of which may materially affect payments
to home healthcare providers.
Reimbursement of home healthcare is covered to varying degrees by third-
party payors. Obtaining reimbursement can be subject to delays and is not
always assured. Slower receivable collections may result in a need for higher
levels of short-term financing. Lack of adequate financing may limit growth.
The following table sets forth the approximate percentages of revenues
attributable to private and government reimbursement sources for Company-owned
locations for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Private insurance and other private payors.. 55% 58% 68%
Medicare and Medicaid programs.............. 45 42 32
--- --- ---
Total.................................. 100% 100% 100%
=== === ===
</TABLE>
SALES AND MARKETING
Generating patient referrals is vital to the success of any home healthcare
business. Option Care offices are required to employ sales personnel whose
primary responsibility is to market Option Care services to potential referral
sources. Marketing efforts focus on area hospitals, physicians, managed-care
and other payors and case management companies. The active role which general
managers and franchise owners typically play in the operation of the business
also helps create a focused effort on developing the market for each office.
In 1991, the Company initiated a field sales and marketing program to
support the efforts of its franchise system. The field staff focus varies with
the strategy of the Company. Currently, the field staff assist Option Care
offices in developing business and marketing plans, marketing their services
locally, introducing additional therapies and services and coordinating regional
sales programs largely targeted to managed care organizations.
The Company has established a program called OPTIONET, through which the
Company contracts with certain regional and national third-party payors (e.g.,
insurance companies, health maintenance organizations and large self-insured
employers) and case management companies to refer patients to participating
Option Care offices. Under OPTIONET agreements, each participating Option Care
office provides local services for covered patients. Based on payor preference
or requirements, Option Care offices bill the payor directly for services
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rendered, or the Company arranges for a third-party billing service to bill the
payor for a billing fee.
The Company maintains a National Advertising and Education Fund for
marketing the services of Option Care offices to patient referral sources such
as physicians, hospitals, nursing agencies, third-party payors and case
management companies, and for the cost of educational programs for franchise
owners. Option Care offices are required to contribute at various rates up to 1
1/2% of gross receipts to these funds.
SUPPLIERS
Option Care offices must acquire pharmaceuticals, supplies, equipment and
services relating to their businesses from suppliers which satisfy certain
standards and possess adequate quality controls. The Company may derive revenue
through administrative fees received from contracted manufacturers.
Neither the Company nor its franchises have experienced significant
difficulty in purchasing pharmaceuticals, supplies or equipment. In the event
that current suppliers cease to sell pharmaceuticals, supplies or equipment to
the Company or its franchises, the Company believes that alternate sources can
be located without undue burden, which would adequately meet their needs.
GOVERNMENT REGULATION
Health Care Regulation
Home healthcare is subject to regulation by the various states in which the
Company and its franchise owners conduct their businesses, as well as by the
federal government. Option Care locations are subject to state laws (including
licensing laws) governing pharmacies, home health agencies, nursing services,
health planning and professional conduct. Each Option Care location must be
appropriately registered with the United States Food and Drug Administration and
Drug Enforcement Administration and comply with record keeping and inventory
requirements for the dispensing of controlled substances. Although the Company
provides its franchised locations guidance in compliance with regulatory
requirements, it is not responsible for such compliance. The failure of an
Option Care location to obtain, renew or maintain any required regulatory
approvals or licenses could adversely affect that location and could prevent
such location from offering services to patients.
To the extent Option Care locations provide services under the Medicare and
Medicaid programs, they are subject to a broad body of laws regulating those
programs, including "fraud and abuse" laws. Among other things, these laws
prohibit any bribe, kickback or rebate in return for the referral of Medicare or
Medicaid patients. In addition, many of the states in which Option Care
locations operate have laws that prohibit certain direct or indirect payments or
fee-splitting arrangements between health care providers that are designed to
induce or encourage the referral of patients to, or the recommendation of, a
particular provider for medical products and services. Bills have been
introduced in several states that would increase restrictions or prohibit
referrals where a physician has a financial relationship with the provider. In
addition, some states restrict certain business relationships between physicians
and pharmacies. These statutes vary from state to state. The Company exercises
care in structuring its arrangements with health care providers and referral
sources to comply with the relevant statutes, but there can be no assurance that
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such laws will ultimately be interpreted in a manner consistent with the
practices of the Company or the franchise owners.
Other state and federal laws and regulations could also adversely affect
existing or future financial relationships between physicians and health care
businesses, including franchised businesses. The Omnibus Reconciliation Act of
1993 prohibits physicians, subject to certain exceptions, who have a "financial
relationship" with an entity from referring patients to that entity for the
provision of "designated health services" which may be reimbursed by Medicare or
Medicaid. The eleven "designated health services" include parenteral and
enteral nutrients, equipment and supplies; outpatient prescription drugs; and
durable medical equipment. With certain exceptions, this Act also requires
entities seeking payment from the Medicare and Medicaid programs to report any
ownership and compensation arrangements with physicians. This federal law bars,
with limited exceptions, physician ownership of an Option Care franchised
business.
The United States Department of Health and Human Services, Office of the
Inspector General ("OIG"), has been utilizing a civil statute, the False Claims
Act, in challenging Medicare billing practices. In particular, the False Claims
Act provides that any person who knowingly presents, or causes to be presented,
to an officer or employee of the United States Government or a member of the
Armed Forces of the United States a false or fraudulent claim for payment or
approval is liable to the United States Government for a civil penalty of not
less than $5,000 and not more than $10,000, plus 3 times the amount of damages
which the Government sustains because of the act of that person.
It is the Company's understanding that the OIG considers each claim that is
submitted for reimbursement to the Medicare program to be a claim for purposes
of the False Claims Act. Accordingly, if 100 claims are submitted knowingly
containing false or fraudulent information, the party submitting the claim may
be liable for not only treble damages, but also $1,000,000 in fines.
There are also various proposals under development or consideration to
enact health care reform. In broad terms, most of these proposals are designed
to control health care costs through regulatory actions and/or market forces and
limit self-referrals. Health care reform could impact providers of Option Care
services, although it is not possible at this time to predict the nature or
extent of any impact upon franchised businesses.
The Company is unable to predict whether any new legislation or regulations
may be enacted in the future which may affect the business of the Company,
Option Care locations or the health care industry, including third-party
reimbursement. Accordingly, the Company cannot predict whether any such new
legislation or regulations would have a material adverse impact on the Company.
Franchise Regulation
The Company's franchising operations are subject to Federal Trade
Commission ("FTC") regulation and state laws which regulate the offer and sale
of franchises. The Company is also subject to a number of state laws which
regulate substantive aspects of the relationship between franchisors and
franchise owners.
The FTC's Trade Regulation Rule on Franchising (the "FTC Rule") requires
the Company to furnish prospective franchise owners with a franchise offering
circular containing information prescribed by the FTC Rule. At least 12 states
presently regulate the offer and sale of franchises and, in almost all cases,
require registration of the franchise offering with state authorities.
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State laws which regulate the relationship between franchisors and
franchise owners presently exist in a substantial number of states. Such laws
regulate the franchise relationship by, for example, requiring the franchisor to
deal with its franchise owners in good faith, prohibiting interference with the
right of free association among franchise owners, and limiting the imposition of
standard charges, royalties or fees. These laws have not precluded the Company
from seeking franchise owners in any given area and have not had a significant
effect on the Company's operations.
The Company is not aware of any pending franchise legislation which in its
view is likely to significantly affect the operations of the Company. The
Company believes that its operations comply substantially with the FTC Rule and
applicable state franchise laws.
COMPETITION
The home healthcare market is intensely competitive. Although the market
is somewhat fragmented, there are several major providers of home healthcare
services and increasing pressures toward market consolidation. Home Care
Magazine, in its December 1996 issue, named Option Care the 28th largest home
healthcare company. Certain other national competitors are larger and have
greater resources than those of the Company. Competition varies by market
location. Option Care's competitors include numerous small, local companies and
physician groups, major national and regional companies, hospital-based
programs, and nursing agencies. To the extent that the Company acquires or
franchises operations in new areas, the Company may face additional competition.
In addition, new competitors may enter the home healthcare market and
existing competitors may expand the variety of services that they offer. Option
Care locations compete on the basis of a number of factors, including quality,
consistency, responsiveness and diversity of services; geographic coverage; the
ability to develop and maintain goodwill or contractual relationships with
referral sources such as hospitals, managed care providers, physicians and other
related entities; and price. Option Care continues to develop ways to present
comprehensive home healthcare services in response to payor interest in "one
stop shop" home care service. Purchasing, diversification and network
development are alternative routes to providing this service.
SERVICE MARKS
The Company has registered with the federal government OPTION CARE(R),
among others, as a service mark. The Company believes that this service mark is
becoming increasingly recognized by many referral sources as representing a
reliable, cost-effective source of home healthcare services. The Company
believes that its use of this service mark does not violate or otherwise
infringe on the rights of others.
EMPLOYEES
At December 31, 1996, the Company employed 532 persons on a full-time basis
and 55 persons on a part-time basis. Of the Company's full-time employees, 81
were corporate management and administrative personnel and the remaining 451
were
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employees of Company-owned locations, primarily in clinical, management and
administrative positions.
The Company considers its employee relations to be good. None of the
Company's employees are covered by a collective bargaining agreement.
INSURANCE
The Company currently maintains insurance for general and professional
liability claims in an aggregate amount which it believes to be sufficient given
the nature of its business. In addition, the Company maintains insurance for
vicarious liability of the Company, if any, for the acts and omissions of its
franchises, and the Company requires each franchise to maintain general
liability insurance and professional liability insurance on each of its
professionals, in each case covering both the franchise and the Company, with
coverage at levels which the Company believes to be sufficient. These policies
generally provide coverage on a claims made or occurrence basis and have certain
exclusions from coverage. These insurance policies must generally be renewed
annually. There can be no assurance that insurance coverage will be adequate to
cover liability claims that may be asserted against the Company or that adequate
insurance will be available in the future at acceptable cost. To the extent
that liability insurance is not adequate to cover liability claims against the
Company, the Company will be responsible for the excess.
ITEM 2. PROPERTIES
The Company maintains executive offices at 100 Corporate North, Suite 212,
Bannockburn, Illinois 60015, consisting of approximately 13,655 square feet of
leased space.
At December 31, 1996, the Company owned operations located in Bullhead
City, AZ, Chico, CA, Columbia, MO, Bethlehem, PA, Horsham, PA, Bellingham, WA,
Omaha, NE, Grand Junction, CO, Gadsden, AL, Houston, TX, Little Rock, AR,
Bellaire, TX, Bethel, OH, Milford, OH, Everett, WA, Oklahoma City, OK, Tampa,
FL, Kirksville, MO, Jefferson City, MO, Ontario, CA, Kennewick, WA and Ft.
Myers, FL. These facilities consist of approximately 124,522 square feet in
total.
All the Company's offices and facilities are leased by the Company with
remaining lease terms ranging from six months to six years. All the Company's
offices and facilities are in good condition and well maintained, and are
adequate to fulfill the operational needs of the Company for the foreseeable
future.
ITEM 3. LEGAL PROCEEDINGS/LITIGATION
On January 17, 1995, an action entitled Dennis H. Birenbaum v. Option Care,
Inc., Case No. 95-439, was filed with the District Court of Dallas County,
Texas. Plaintiff alleged breach of contract, promissory estoppel and negligent
misrepresentation concerning an alleged agreement for the sale and purchase of
Plaintiff's company. In response, the Company produced evidence showing no
agreement was ever made. Dr. Birenbaum's lawsuit was dismissed and the Company
was awarded summary judgment by the Court. Dr. Birenbaum has filed an appeal
which the Company is vigorously contesting.
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On January 28, 1994, an action entitled George Harvey v. Option Care, Inc.,
et al. (U.S. District Court, Clark County, Nevada, Case No. A329456), was filed
against Option Care, Inc., Option Care Enterprises, Inc., a former employee of
Option Care, Inc., and the corporate owner of the Las Vegas Option Care Office
and two of its employees. At the time the action was filed, Option Care
Enterprises, Inc. managed the Las Vegas Option Care Office through a management
agreement. The plaintiff is pursuing claims for breach of contract, breach of
fiduciary duties, fraud, negligent misrepresentation and breach of implied
covenant of good faith and fair dealing relating to the performance of the
Management Agreement. The Company has filed a motion to dismiss, which was
granted on April 1, 1994 regarding the alleged breach of fiduciary duty, breach
of contract and fraud. There has been no subsequent pursuit of the remaining
claims. Should the plaintiff pursue these claims in the future, the Company
will vigorously contest such claims.
On August 29, 1991, an action entitled Ronald L. Rennick, et al. v. Option
Care, Inc., Case No. CV-S-91-1169 GEB-GGH, was filed in the United States
District Court, Eastern District of California. Plaintiffs were owners of two
former Option Care franchises located in Oregon, and related persons and
entities which wanted to introduce alternate setting infusion care into Canada
and to expand their Option Care franchise holdings in the United States.
Following an amendment of their complaint, the dismissal of some of their
claims, and the withdrawal of other of their claims, plaintiffs pursued claims
for breach of contract, breach of the covenant of good faith and fair dealing,
breach of alleged fiduciary duties, promissory estoppel and violations of
California franchise laws. Their claims were based on allegations that Option
Care breached an agreement with plaintiffs whereby plaintiffs acquired exclusive
rights for the Option Care system in Canada, rights to open 10 new Option Care
franchises in the United States, and rights to acquire 10 existing Option Care
franchises in the United States. Plaintiffs alleged lost profits of $24.197
million. Option Care denied the existence of any such agreement, and filed
counterclaims against plaintiffs, including claims for monies owed under two
terminated franchise agreements with certain of plaintiffs. By order dated
September 28, 1993, the court granted Option Care's motion for summary judgment
on all counts of the amended complaint and entered judgment in favor of Option
Care on several of its counterclaims. The plaintiffs appealed the district
court's ruling to the United States Court of Appeals for the Ninth Circuit,
which, on February 22, 1996, affirmed the district court's decision. The
Plaintiffs then petitioned the Supreme Court of the United States for a writ of
certiorari. The Supreme Court of the United Stated denied the petition for a
writ of certiorari on October 7, 1996.
Despite the inherent uncertainties of litigation, management of the Company
at this time does not believe that the lawsuits will have a material adverse
impact on the financial condition of the Company.
The Company is also a party to other legal proceedings incidental to its
business. The Company does not believe that these other legal proceedings will
have a material adverse impact on its financial position or results of
operations.
13
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders through the
solicitation of proxies, or otherwise during the fourth quarter of the fiscal
year ended December 31, 1996.
EXECUTIVE OFFICERS
The names, ages and positions of the executive officers of the Company are set
forth below. Executive officers of the Company serve at the discretion of the
Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Erick E. Hanson 50 President, Chief Executive Officer and
Director
Cathy Bellehumeur 46 Senior Vice President, General Counsel
and Secretary
Paul S. Jurewicz 41 Senior Vice President and Chief Financial
Officer
James W. Duncan 57 Senior Vice President
</TABLE>
All executive officers are elected for one year terms. There are no family
relationships between any of the Company's executive officers and directors and
there are no arrangements or understandings between any of the executive
officers and any other person pursuant to which the executive officer was
selected as an officer.
Mr. Erick E. Hanson joined the Company as Senior Vice President in April
1995, was appointed Executive Vice President and Chief Operating Officer in
August 1995, and was appointed Director and President in March 1996. Mr. Hanson
was appointed Chief Executive Officer in April 1996. From November 1991 to
April 1995 Mr. Hanson held executive positions, including that of Vice President
Corporate Sales and Marketing, at Caremark, Inc., in Northbrook, IL. From April
1989 to November 1991 Mr. Hanson served as President and Chief Operating Officer
of Clinical Partners, Inc. in Boston, MA. Prior to April 1989, Mr. Hanson was
with Blue Cross & Blue Shield of Indiana for over twenty years, holding a
variety of executive positions with that organization.
Ms. Cathy Bellehumeur has been General Counsel since February 1994,
Secretary since March 1994, Vice President since August 1994 and Senior Vice
President since January 1997. Prior to joining the Company, Ms. Bellehumeur was
an attorney in private practice with Ross & Hardies, Chicago, Illinois from
August 1991 to January 1994.
14
<PAGE>
Mr. Paul S. Jurewicz has been Chief Financial Officer and Senior Vice
President-Finance since January 1997. Prior to joining the Company, Mr. Jurewicz
was Chief Financial Officer of Health Management Inc. from December 1995 through
December 1996 and served in various financial executive positions at Caremark
International from 1985 through 1995.
Mr. James Duncan has been Senior Vice President of Option Care, Inc. and
President of Option Care Enterprises, Inc. since January 1997. Prior to joining
the Company, Mr. Duncan was Executive Vice President and Chief Operating Officer
of Medisense, Inc., a medical device manufacturer, from February 1995 through
September 1995. Mr. Duncan also served as President and Chief Executive Officer
of Cardiac Alliance, Inc. from September 1991 through August 1994.
For purposes of determining the aggregate market value of the Company's
common stock held by non-affiliates, shares held by all directors and executive
officers of the Company have been excluded. The exclusion of such shares is not
intended to, and shall not, constitute a determination as to which persons may
be "affiliates" of the Company as defined by the Securities and Exchange
Commission.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "OPTN". The following table sets forth, for the periods indicated,
the high and low sales prices for the Company's common stock.
RANGE OF HIGH AND LOW SALES PRICE INFORMATION
<TABLE>
<CAPTION>
CALENDAR QUARTER HIGH LOW
---------------- ---- ---
<S> <C> <C>
1996
----
First Quarter $4.50 $3.12
Second Quarter $8.38 $4.12
Third Quarter $7.88 $5.75
Fourth Quarter $6.62 $4.75
1995
----
First Quarter $3.38 $1.75
Second Quarter $4.38 $2.88
Third Quarter $5.12 $2.62
Fourth Quarter $5.25 $3.00
</TABLE>
As of December 31, 1996, there were approximately 319 holders of record of
the Company's Common Stock. Closing price at January 31, 1997 was $6.813 per
share as reported by the Nasdaq National Market.
15
<PAGE>
The Company did not pay cash dividends in 1995 or 1996, and is prohibited
by its revolving credit agreement with PNC Bank from doing so. See Note 4 of
Notes to Consolidated Financial Statements.
On September 19, 1996 the Company sold two hundred fifty thousand (250,000)
unregistered shares of common stock of the Company to Linda J. Addison. No
underwriters were utilized in this transaction. This sale was made in
consideration of and in exchange for two hundred fifty (250) shares of Addison
Home Care, Inc. pursuant to an Agreement and Plan of Merger under which the
Company purchased all of the issued and outstanding shares of Addison Home Care,
Inc. These shares were not registered under (I) the Securities Act of 1933, as
amended (the "Act"), by reason of an exemption to registration provided under
Section 4(2) of the Act; (II) The Illinois Securities Law of 1953, as amended,
by reason of their issuance pursuant to the exemption provided by Section 3(g)
and the rules and regulations promulgated thereunder or (III) the Texas
Securities Act, as amended by reasons of their issuance pursuant to the
exemption provided by Section 6(F) and the rules and regulations promulgated
thereunder. In order to convert these unregistered shares into registered shares
Linda J. Addison must send written notice to the Company demanding that all of
such unregistered shares in the Company be registered under the Act, which
demand must be made within two years of the date of the sale, or such shorter
period as may be specified from time to time by Rule 144(d) under the Act or any
successor rule relating to the resale of "restricted stock".
On September 19, 1996 the Company sold two hundred fifty thousand (250,000)
unregistered shares of common stock of the Company to Jerry G. Addison. No
underwriters were utilized in this transaction. This sale was made in
consideration of and in exchange for two hundred fifty (250) shares of Addison
Home Care, Inc. pursuant to an Agreement and Plan of Merger under which the
Company purchased all of the issued outstanding shares of Addison Home Care,
Inc. These shares were not registered under (I) the Securities Act of 1933, as
amended (the "Act"), by reason of an exemption to registration provided under
Section 4(2) of the Act; (II) The Illinois Securities Law of 1953, as amended,
by reason of their issuance pursuant to the exemption provided by Section 3(g)
and the rules and regulations promulgated thereunder or (III) the Texas
Securities Act, as amended by reasons of their issuance pursuant to the
exemption provided by Section 6(F) and the rules and regulations promulgated
thereunder. In order to convert these unregistered shares into registered
shares Jerry G. Addison must send written notice to the Company demanding that
all of such unregistered shares in the Company be registered under the Act,
which demand must be made within two years of the date of the sale, or such
shorter period as may be specified from time to time by Rule 144(d) under the
Act or any successor rule relating to the resale of "restricted stock".
On December 29, 1995 the Company sold sixty-five thousand eight hundred
eighty-seven (65,887) shares of unregistered shares of common stock of the
Company to Greg Steinhoff. No underwriters were utilized in this transaction.
This sale was made in consideration of and in exchange for one thousand (1000)
shares of Pharmacy I.V. Associates, Inc. and six thousand six hundred sixty-six
and two-thirds (6,666.2/3) shares of Home Care of Boone County, Inc. These
shares were not registered under (I) the Securities Act of 1933, as amended (the
"Act"), by reason of an exemption to registration provided under Section 4(2) of
16
<PAGE>
the Act; or (II) Section 409.402(b)(10) of the Missouri statutes. Before Greg
Steinhoff may transfer any of such shares, Steinhoff shall give Company written
notice of his intention to effect such transfer, which notice shall describe the
manner of the proposed transfer and, if requested by Company, shall be
accompanied by an opinion of counsel, obtained by Steinhoff, satisfactory to
Company, to the effect that the proposed transfer may be effected without
registration under the Act or qualification under any applicable state
securities law.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data for the
Company for each of the five years ended December 31, 1996. The selected
consolidated financial data are affected by the Company's acquisitions, all of
which were accounted for using the purchase method of accounting, except for
Oklahoma City, which was treated as a pooling of interests. This summary should
be read in conjunction with the consolidated financial statements of the
Company, including the related notes, included elsewhere herein.
STATEMENT OF OPERATIONS DATA:
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1996 (1) 1995(1) 1994 1993 1992
--------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Patient care services................................ $49,035 $41,989 $34,703 $23,861 $18,699
Royalty fees and other............................... 12,193 12,517 11,915 12,323 11,960
Product sales.......................................... 9,293 10,997 15,401 16,659 12,940
------ ------- ------- ------- -------
Total revenues...................................... 70,521 65,503 62,019 52,843 43,599
------ ------- ------- ------- -------
Cost of revenues:
Patient care services operations..................... 29,038 24,838 19,947 14,392 8,813
Products sold to franchises and patients............. 22,160 22,275 23,401 19,859 16,275
------ ------- ------- ------- -------
Total cost of revenues............................ 51,198 47,113 43,348 34,251 25,088
------ ------- ------- ------- -------
Gross profit.......................................... 19,323 18,390 18,671 18,592 18,511
Operating expenses:
Selling, general and administrative.................. 10,676 10,709 12,112 11,534 9,692
Provision for doubtful accounts...................... 1,861 1,653 1,899 2,044 1,322
Amortization of goodwill............................. 960 914 825 729 694
Asset write-offs and other charges (2)............... 24,164 --- 6,536 --- ---
Reorganization expenses (2).......................... --- --- --- 4,250 ---
------ ------- ------- ------- -------
Total operating expenses........................... 37,661 13,276 21,372 18,557 11,708
------ ------- ------- ------- -------
Operating income (loss)............................... (18,338) 5,114 (2,701) 35 6,803
Other income (expense), net........................... 380 93 130 808 (231)
------ ------- ------- ------- -------
Income (loss) before income taxes..................... (17,958) 5,207 (2,571) 843 6,572
Provision (benefit) for income taxes.................. 2,298 2,219 (593) 571 2,883
------ ------- ------- ------- -------
Net income (loss).................................... $(20,256) $ 2,988 $(1,978) $ 272 $ 3,689
========= ======== ======== ======== =======
Net income (loss) per common share................... $ (1.93) $ 0.29 $ (0.19) $ 0.03 $ 0.36
========= ======== ======== ======== =======
Dividends per common share............................ $ --- $ --- $ --- $ --- $ ---
========= ======== ======== ======== =======
Average common and common equivalent
shares outstanding................................... 10,494 10,453 10,435 10,383 10,130
========= ======== ======== ======== =======
</TABLE>
17
<PAGE>
BALANCE SHEET DATA:
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Accounts receivable..... $20,558 $16,558 $16,575 $14,978 $10,287
Working capital......... 21,458 16,131 16,614 12,204 9,833
Intangible assets....... 9,832 30,328 30,554 30,720 28,352
Total assets............ 44,041 58,997 59,525 60,314 49,143
Long-term debt.......... 12,461 6,696 9,517 6,759 523
Stockholders' equity... $23,540 $43,506 $40,847 $43,209 $41,713
</TABLE>
_______________
(1) Refer to Note 2 in the Notes to Consolidated Financial Statements for
information regarding businesses acquired in fiscal 1995 and 1996.
(2) Refer to Note 9 in the Notes to Consolidated Financial Statements. The
Company recorded a write-off of certain assets in 1994 and a write-off of
certain intangible assets in 1996.
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Option Care, Inc. (the "Company") is a full service home healthcare
provider with a supporting franchise network. The Company offers infusion
therapy, nursing services, respiratory therapy and durable medical equipment
through its owned locations and infusion therapy through its franchise network.
The Company has also developed capability to manage networks of outpatient
service providers.
RESULTS OF OPERATIONS
The Company's revenues are derived primarily from three sources: (i)
patient care services from Company-owned offices, (ii) royalty fees and other
revenues from franchise owners and (iii) product sales to the franchised
locations. Revenues from network management were immaterial during the
reporting periods. The following table sets forth the percentage relationships
that certain items from the Company's Consolidated Statements of Operations bear
to revenues for the years ended December 31, 1996, 1995, and 1994. This
information should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto contained elsewhere in this Annual Report
on Form 10-K:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Revenues
Patient care services 69.5% 64.1% 56.0%
Royalty fees and other 17.3 19.1 19.2
Product sales 13.2 16.8 24.8
----- ----- -----
Total revenues 100.0 100.0 100.0
Gross profit 27.4 28.1 30.1
Selling, general &
administrative expenses 15.1 16.3 19.5
Operating income (loss) (26.0) 7.8 (4.4)
Net income (loss) (28.7%) 4.6% (3.2%)
====== ===== ======
</TABLE>
1996 COMPARED TO 1995
For 1996, total revenue rose 7.7 percent to $70,521,000 from $65,503,000 in
1995. Patient care services revenue rose 16.8 percent, primarily reflecting the
results of 1996 acquisitions as well as a full year's operations of the
Company's 1995 acquisitions. Product sales revenue decreased 15.5 percent or
$1,704,000 due primarily to management's transition to direct billing of
franchisees by selected manufacturers, which was completed in mid-1996. The
administrative fees that the Company recognizes from such sales are recorded as
other income rather than as revenue. Management expects the transition to
continue to have a negative effect on gross profit but an immaterial effect on
net income. Royalty fees and other revenue decreased 2.6 percent, reflecting
the acquisition of several large franchises in 1996. The Company sold fourteen
new
19
<PAGE>
franchises during 1996, and terminated or consolidated fifteen franchises,
continuing the trend towards consolidation. The Company has only two franchise
agreements up for renewal before 2004. Management generally makes extensive
efforts to renew its franchise agreements, since existing franchises provide a
greater royalty stream than new franchises. The terms of the renewal agreements
may not be identical to those under existing agreements. Though the loss of
larger, mature franchises tends to reduce royalties, the Company expects
increased patient care services revenue to offset the decrease in royalty fees
and product sales revenue.
Gross profit increased 5.1 percent for the year to $19,323,000, primarily
due to increased patient care services revenue. As a percentage of revenues,
gross profit declined from 28.1 percent to 27.4 percent. The decline in gross
margin is due primarily to changes in the Company's revenue mix, specifically
the decline in royalty fees and product sales coupled with growth in patient
care service revenue. Revenues from patient care services (associated with
Company-owned Option Care offices) have a higher cost of revenue than the
Company's franchise business, which is generally associated with revenues from
royalty and other fees. Three owned office locations were sold and three
locations closed in 1996 due to population demographics and financial trends
which limited the potential for long-term profitability. These transactions
were part of management's program to improve profitability of Company operations
through a reduced cost structure. Management will continue to evaluate the
profitability of operations as it also evaluates strategies to increase
revenues.
Total operating expenses increased 183.7 percent to $37,661,000 from
$13,276,000 in 1995. Selling, general and administrative expenses decreased 0.3
percent as a result of increased personnel productivity. The Company's
provision for doubtful accounts increased 12.6% or $208,000, due to increased
patient care service revenue. Amortization of goodwill increased 5.0 percent due
to 1995 and 1996 acquisitions. During 1996, the Company recognized $24,164,000
in non-cash charges relating to write-offs of goodwill. This write-off
primarily relates to goodwill recorded through pushdown accounting for a change
of control in 1990, as well as goodwill related to prior year acquisitions. The
write-off resulted from the Company's stated objective of purchasing existing
franchises as well as from evaluation of expected future cash flows for
purchased businesses. If the effect of these 1996 charges is excluded, total
operating expenses increased 1.7 percent in 1996.
The effective combined federal and state income tax rate was negative 12.8
percent and 42.6 percent for 1996 and 1995, respectively. The effective tax
rate is higher than the federal statutory tax rate of 34% due to state taxes and
to non-tax deductible expenses, primarily goodwill amortization. Goodwill
amortization is a fixed expense, so the effective tax rate decreases as pre-tax
income increases. The 1996 negative effective tax rate is due to the non-
deductible nature of the write-off of goodwill. The Company had a net loss of
$20,256,000 in 1996 versus net income of $2,988,000 in 1995. Net income for
1996 was $3,563,000 excluding the write-off of goodwill.
20
<PAGE>
1995 COMPARED TO 1994
For 1995, total revenue rose 5.6 percent to $65,503,000 from $62,019,000 in
1994. Patient care services revenue rose 21.0 percent, primarily reflecting a
full year's operations of the Company's 1994 acquisitions as well as the results
of 1995 acquisitions. Same store growth of patient care services revenue was
approximately 7.1 percent in 1995. Product sales revenue decreased 28.6 percent
or $4,400,000 due primarily to management's planned transition to direct
billing of franchisees by selected manufacturers. The administrative fees that
the Company recognizes from such sales are recorded as other income rather than
as revenue. Management expects the transition to continue to have a negative
effect on gross profit but an immaterial effect on net income. Royalty fees and
other revenue increased 5.1 percent, reflecting increased fees earned from new
franchise sales. The Company sold thirteen new franchises during 1995, and
terminated or consolidated twenty franchises, continuing the trend towards
consolidation.
Gross profit decreased 1.5 percent for the year to $18,390,000, primarily
due to the planned decline in product sales. This decline in gross profit was
substantially offset by increased vendor administration fees recorded as other
income. As a percentage of revenues, gross profit declined from 30.1 percent to
28.1 percent. The decline in gross margin is due primarily to changes in the
Company's revenue mix, specifically the decline in product sales coupled with
growth in patient care service revenue. Revenues from patient care services
(associated with Company-owned offices) have a higher cost of revenue than the
Company's franchise business, which is generally associated with revenues from
royalty and other fees. Two owned office locations were closed in the third
quarter of 1995 due to population demographics and financial trends which
limited the potential for long-term profitability. The closures were part of
management's program to improve profitability of Company operations through a
reduced cost structure. Management will continue to evaluate the profitability
of operations as it also evaluates strategies to increase revenues.
Total operating expenses decreased 37.9 percent to $13,276,000 from
$21,372,000 in 1994. Selling, general and administrative expenses decreased
11.6 percent as a result of increased personnel productivity and streamlining of
headquarters operations. The Company's provision for doubtful accounts
decreased 13.0% or $246,000, with increased expense associated with increased
patient care revenue offset by decreased expense on the franchise business due
to improved receivable aging. Amortization of goodwill increased 10.8 percent
due to 1994 and 1995 acquisitions. During 1994, the Company recognized
$6,536,000 in primarily non-cash charges relating to write-offs of notes
receivable and capitalized software development costs, additional reserves for a
note receivable, and severance. If the effect of these 1994 charges is
excluded, total operating expenses decreased 10.5 percent in 1995.
The effective combined federal and state income tax rate was 42.6 percent
and 23.1 percent (benefit) for 1995 and 1994, respectively. The 1995 effective
tax rate is higher than the federal statutory tax rate of 34% due to state taxes
and to non-tax deductible expenses, primarily goodwill amortization. Goodwill
amortization is a fixed expense, so the effective tax rate decreases as pre-tax
income increases. The Company had net income of $2,988,000 in 1995 versus a net
loss of $1,978,000 in 1994.
21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company had cash and cash equivalents of
$1,223,000. Working capital at that date was $21,458,000 versus $16,131,000 at
December 31, 1995. The Company attempts to manage its cash balances to minimize
interest expense on its line of credit borrowing. The Company has implemented
strict policies and procedures for controlling cash collections and
disbursements.
As indicated in Note 4 to the Consolidated Financial Statements, in 1996
the Company entered into a $30 million revolving credit arrangement, subject to
certain financial covenants. The credit availability was increased to $35
million in early 1997. Management believes that cash flow from operations, in
conjunction with borrowing availability under its credit facility, will be
sufficient to meet the cash needs of the business for the immediate future, but
additional long-term financing may be needed to meet the Company's acquisition
plans. There are no guarantees that such financing will be available or
available at an acceptable cost.
There are currently various proposals under development to enact health
care reform on a national, state and local level. It is not possible at this
time to predict the cash flow impact, if any, which any such changes may have
on providers of home healthcare services and on the Option Care locations.
22
<PAGE>
QUARTERLY INFORMATION
Presented below is a summary of the unaudited consolidated quarterly
financial information for the years ended December 31, 1996 and 1995 (in
thousands, except per share data):
<TABLE>
<CAPTION>
QUARTER
1996: FIRST SECOND THIRD FOURTH
- ----- ----- ------ ----- ------
<S> <C> <C> <C> <C>
Total revenues $15,706 $18,110 $18,019 $ 18,686
Gross profit 4,582 5,027 5,120 4,594
Pretax income (loss) 1,523 1,538 1,653 (22,672)
Net income (loss) 850 866 1,004 (22,976)
Earnings (loss)
per share $ .08 $ .08 $ .09 $ (2.18)
======= ======= ======= ========
<CAPTION>
1995: FIRST SECOND THIRD FOURTH
- ----- ----- ------ ----- ------
<S> <C> <C> <C> <C>
Total revenues $16,168 $16,915 $16,186 $ 16,234
Gross profit 4,671 4,925 4,560 4,234
Pretax income 1,215 1,516 1,508 968
Net income 666 888 873 561
Earnings
per share $ .06 $ .08 $ .08 $ .05
======= ======= ======= ========
</TABLE>
23
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements of the Company and its
subsidiaries, and the Independent Auditors' Report thereon are included on pages
23 through 37 of this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................................ 24
Consolidated Balance Sheets - December 31, 1996 and 1995.................... 25
Consolidated Statements of Operations - Years Ended
December 31, 1996, 1995 and 1994.......................................... 27
Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 1996, 1995 and 1994.......................................... 28
Consolidated Statements of Cash Flows - Years Ended
December 31, 1996, 1995 and 1994.......................................... 29
Notes to Consolidated Financial Statements.................................. 30
</TABLE>
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Option Care, Inc.:
We have audited the consolidated financial statements of Option Care, Inc.
and subsidiaries as listed in the accompanying index. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Option Care,
Inc. and subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Chicago, Illinois
March 5, 1997
25
<PAGE>
OPTION CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................... $ 1,223 $ 502
Trade accounts receivable, less allowance
for doubtful accounts of $1,738 in 1996
and $1,273 in 1995........................... 20,558 16,558
Current portion of notes receivable and
net investment in direct financing
leases, less allowance for uncollectible
notes of $116 in 1996 and $342 in 1995...... 1,202 1,668
Inventory...................................... 1,598 1,395
Deferred income taxes.......................... 1,154 1,402
Other assets................................... 3,081 2,081
------- -------
Total current assets................. 28,816 23,606
Notes receivable and net investment in direct
financing leases, less current portion....... 539 1,076
Property and equipment, net of accumulated
depreciation and amortization................ 4,322 3,502
Goodwill, net.................................. 7,873 30,228
Other assets................................... 2,491 585
------- -------
Total assets......................... $44,041 $58,997
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
OPTION CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
--------- -------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt.................. 1,399 1,341
Trade accounts payable............................. 2,685 2,947
Accrued wages and related employee benefits........ 1,838 1,940
Accrued expenses................................... 1,436 1,247
-------- -------
Total current liabilities...................... 7,358 7,475
-------- -------
Long-term debt, less current portion............... 12,461 6,696
Deferred income taxes.............................. 637 1,024
Minority interest.................................. 45 296
-------- -------
Total liabilities.............................. 20,501 15,491
-------- -------
Stockholders' equity:
Common stock, $.01 par value, 30,000,000
shares authorized, 10,527,000 and 10,415,000
shares issued and outstanding at December 31,
1996 and 1995, respectively.................... 106 105
Additional paid-in capital....................... 41,517 41,151
Retained earnings (deficit)...................... (18,083) 2,250
-------- -------
Total stockholders' equity..................... 23,540 43,506
-------- -------
Total liabilities and
stockholders' equity......................... $ 44,041 $58,997
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
OPTION CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Revenues:
Patient care services................. $ 49,035 $41,989 $34,703
Royalty fees and other................ 12,193 12,517 11,916
Product sales......................... 9,293 10,997 15,401
-------- ------- -------
Total revenues................... 70,521 65,503 62,019
Cost of revenues:
Patient care services operations..... 29,038 24,838 19,947
Products sold to franchises and
patients............................ 22,160 22,275 23,401
-------- ------- -------
Total cost of revenues........... 51,198 47,113 43,348
-------- ------- -------
Gross profit........................... 19,323 18,390 18,671
Operating expenses:
Selling, general and administrative
expenses........................... 10,676 10,709 12,112
Provision for doubtful accounts...... 1,861 1,653 1,899
Amortization of goodwill............. 960 914 825
Asset write-offs and other charges... 24,164 --- 6,536
-------- ------- -------
Total operating expenses......... 37,661 13,276 21,372
-------- ------- -------
Operating income (loss)................ (18,338) 5,114 (2,701)
Other income (expense), net:
Interest expense..................... (550) (403) (709)
Other, net........................... 930 496 839
-------- ------- -------
Total other income, net................ 380 93 130
-------- ------- -------
Income (loss) before income taxes...... (17,958) 5,207 (2,571)
Provision (benefit) for income taxes... 2,298 2,219 (593)
-------- ------- -------
Net income (loss).................... $(20,256) $ 2,988 $(1,978)
======== ======= =======
Net income (loss) per common and
common equivalent share.............. $(1.93) $0.29 $(0.19)
======== ======= =======
Weighted average common and common
equivalent shares outstanding........ 10,494 10,453 10,435
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
OPTION CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
COMMON PAID-IN EARNINGS STOCKHOLDERS'
STOCK CAPITAL (DEFICIT) EQUITY
------ ----------- ---------- --------------
<S> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1993............ 105 $41,273 $ 1,832 $ 43,210
------ ------- -------- --------
Net loss............................... --- --- (1,978) (1,978)
Distribution from Subchapter S
Corporation.......................... --- --- (404) (404)
Issuance of common stock............... --- 20 --- 20
------ ------- -------- --------
BALANCES, DECEMBER 31, 1994............ 105 41,293 (550) 40,848
------ ------- -------- --------
Net income............................. --- --- 2,988 2,988
Distribution from Subchapter S
Corporation.......................... --- --- (188) (188)
Issuance (retirement) of common stock --- (142) --- (142)
------ ------- -------- --------
BALANCES, DECEMBER 31, 1995............ 105 41,151 2,250 43,506
------ ------- -------- --------
Net loss............................... --- --- (20,256) (20,256)
Distribution from Subchapter S
Corporation.......................... --- --- (77) (77)
Issuance of common stock............... 1 366 --- 367
------ ------- -------- --------
BALANCES, DECEMBER 31, 1996............ $106 $41,517 $(18,083) $ 23,540
====== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
OPTION CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................... $(20,256) $ 2,988 $(1,978)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization............... 2,521 2,078 1,919
Asset write-offs and other charges.......... 24,164 --- 6,536
Provision for doubtful accounts............. 1,861 1,654 1,899
Changes in assets and liabilities, net
of effects from purchase of infusion
therapy companies:
Accounts and notes receivable............... (2,320) (2,171) (3,836)
Inventory................................... 180 (42) 343
Other current assets........................ (1,205) 31 (227)
Deferred income taxes....................... (139) 573 (343)
Accounts payable............................ (1,015) 687 481
Accrued expenses and minority interest. (975) (1,212) (1,969)
-------- ------- -------
Net cash provided by
operating activities............... 2,816 4,586 2,825
-------- ------- -------
Cash flows from investing activities:
Payments for purchase of property
and equipment............................. (1,423) (1,010) (1,587)
Additions to other assets................... (426) (411) (1,382)
Payments for acquisitions, net
of cash acquired.......................... (4,636) (7) (871)
-------- ------- -------
Net cash used by
investing activities.............. (6,485) (1,428) (3,840)
-------- ------- -------
Cash flows from financing activities:
Net (payments) borrowing under
line-of-credit agreement.................. 5,800 (1,920) 3,600
Proceeds from (payments on) long-term
debt and capitalized leases............... (543) 340 (365)
Repayments of notes payable................. (1,157) (1,141) (1,868)
Issuance (retirement) of common stock,
net of related costs...................... 367 (142) 20
Distribution from S Corporation............. ( 77) (188) (404)
-------- ------- -------
Net cash provided (used)by
financing activities.................... 4,390 (3,051) 983
-------- ------- -------
Net increase (decrease) in cash and
cash equivalents.............................. 721 107 (32)
Cash and cash equivalents, beginning of year 502 395 427
-------- ------- -------
Cash and cash equivalents, end of year.......... $ 1,223 $ 502 $ 395
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
OPTION CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS
Option Care, Inc. is a full service provider of home healthcare services.
The Company was incorporated in Delaware on July 9, 1991. The Company's
predecessor was incorporated in California in January 1984. As of December 31,
1996, 187 Option Care locations were operating in assigned territories in 37
states. Existing offices include 165 locations owned and operated by franchise
owners and 22 locations owned and operated by the Company.
(B) CONSOLIDATION
The financial statements include Option Care, Inc. and its 50 percent or
more owned subsidiaries. The Company uses the cost method to account for
affiliates less than 20 percent owned. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(C) INVENTORY
Inventory, which consists of medical supplies, pharmaceuticals, and
displays and brochures is stated at cost, which approximates market, on a first-
in, first-out (FIFO) basis.
(D) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Equipment purchased under
capital leases is stated at the lower of the present value of minimum lease
payments at the beginning of the lease term or fair value at the inception of
the lease.
Depreciation on equipment is calculated on the straight-line or double
declining balance method over the estimated useful lives of the assets (3-7
years for equipment). Leasehold improvements and equipment purchased under
capital leases are both amortized on the straight-line method over the shorter
of the lease term or estimated useful life of the asset.
(E) GOODWILL
Goodwill, which represents the excess of fair market value over the cost of
net assets acquired, is amortized on a straight-line basis over 40 years.
Accumulated amortization was $592,000, $3,753,000, and $2,805,000 at December
31, 1996, 1995, and 1994, respectively.
The Company assesses the recoverability of goodwill related to acquired
franchises by determining whether the amortization of such goodwill balance over
its remaining life can be recovered through undiscounted future operating cash
flows of the acquired operations. With regard to other goodwill, the Company
31
<PAGE>
assesses impairment of this asset based on several factors, including probable
fair market value, cash flows, and the aggregate value of the franchise business
as a whole. See Note 9 of Notes to Consolidated Financial Statements.
(F) INCOME TAXES
The Company files a consolidated federal income tax return with all of its
80 percent or more owned subsidiaries.
(G) PATIENT CARE SERVICES REVENUES
A substantial portion of the Company's revenues are billed to third-party
payors. These revenues are recognized when service is provided, net of
contractual allowances. Payment from third-party payors is dependent upon the
specific benefits provided in the patient's policy. The Company adjusts
recognized revenues and the carrying value of patient receivables to provide for
the difference between billed charges and expected collections.
(H) ROYALTY FEES AND OTHER REVENUES
Royalty fees and other revenues consist primarily of initial franchise fees
and royalty fees. Initial franchise fees are recognized when the franchise
training is completed and substantially all services have been provided. Royalty
fees are recognized when cash is reported as received by the franchises.
Franchise agreements provide for royalties to be paid to the Company based on
either 9 percent of gross cash receipts (subject to certain minimums and
discounts), or on a sliding scale ranging from 9 percent to 2 percent of gross
cash receipts depending on the levels of such receipts and other factors.
(I) NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is based upon average common and common
equivalent shares outstanding. Common equivalent shares include the dilutive
effect of stock options, if any.
(J) STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents.
(K) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
(L) FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments approximates their
carrying value.
32
<PAGE>
(2) BUSINESS COMBINATIONS
At various dates during 1996, the Company purchased the assets of
franchises located in Bethel and Milford, OH, Everett, WA and Kennewick, WA as
well as all the outstanding stock of the franchise located in Oklahoma City, OK.
The Company also purchased the outstanding minority interest in the Bullhead
City, AZ location. The Company also purchased the assets of other healthcare
related businesses in Bethel and Milford, OH, Kirksville, MO, Jefferson City,
MO, Bullhead City, AZ, Grand Junction, CO, Little Rock, AR, Ontario, CA and
Houston, TX. The aggregate purchase price for these transactions, except for the
Oklahoma City acquisition was $7,220,000, of which $4,636,000 was paid in cash,
$1,305,000 in short-term obligations, $471,000 in long-term obligations and
$808,000 in forgiveness of accounts receivable. The purchase method of
accounting was used and $2,518,000 of goodwill was recorded.
The Oklahoma City franchise, which was acquired through the issuance
of 500,000 shares of common stock, was treated as a pooling of interests, and
the accompanying financial statements have been restated by immaterial amounts
to reflect this transaction. The accompanying financial statements include the
results of operations of all other acquired businesses from the date of
acquisition. The unaudited pro-forma results of operations, affected by the
acquisitions accounted for as purchases as if they had occurred as of January 1,
1995, was as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Net Revenue $ 77,502 $88,017
Net Income (Loss) (20,233) 3,397
Net Income (Loss) per
common equivalent share (1.93) 0.32
</TABLE>
At various dates during 1995, the Company purchased the outstanding
minority interest in its Columbia, MO and Dallas, TX locations as well as the
assets of franchises located in Danbury, CT and Mansfield, OH. The aggregate
purchase price for these transactions was $1,272,000, of which $441,000 was paid
in cash, $244,000 in short-term notes, $91,000 in long-term notes, and $496,000
in forgiveness of accounts receivable. The purchase method of accounting was
used and $452,000 of goodwill was recorded. The accompanying financial
statements include the results of operations of these acquired businesses from
the date of acquisition. Had the acquisitions taken place at the beginning of
1994, the effect on the Company's financial position and results of operations
would have been immaterial.
(3) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Equipment..................................... $ 8,604 $ 6,968
Leasehold improvements........................ 748 613
--------- ---------
9,352 7,581
Less accumulated depreciation and
amortization................................ 5,030 4,079
--------- ---------
$ 4,322 $ 3,502
========= =========
</TABLE>
33
<PAGE>
(4) LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Payable under lines of credit.................... $ 11,900 $ 6,100
Notes payable, secured by various assets,
with maturities through 2005 at interest
rates ranging from 6.0% to 10.5%................ 1,640 1,627
Capitalized lease obligations.................... 320 310
-------- -------
13,860 8,037
Less current portion............................. 1,399 1,341
-------- -------
Long-term debt................................... $ 12,461 $ 6,696
======== =======
</TABLE>
Maturities of long-term debt and capitalized lease obligations are as follows
(in thousands):
<TABLE>
<CAPTION>
CAPITALIZED
YEAR ENDING LONG-TERM LEASE
DECEMBER 31, DEBT OBLIGATIONS
------------ --------- -----------
<S> <C> <C>
1997........................................... $ 1,205 $ 207
1998........................................... 12,010 88
1999........................................... 91 51
2000........................................... 42 0
2001 and beyond................................ 192 0
-------- ----------
$13,540 346
========
Less amounts representing interest.............. 26
----------
Present value of net minimum lease payments..... $ 320
==========
</TABLE>
All equipment purchased under capital leases is pledged as collateral.
In December 1996, the Company entered into a $30,000,000 revolving credit
agreement ($15,000,000, $10,000,000 and $5,000,000 with PNC Bank, Harris Bank
and The Northern Trust Company, respectively), of which there were outstanding
borrowings of $11,900,000 at December 31, 1996. The agreement was amended in
early 1997 to increase the maximum available amount to $35,000,000 and to add
The First National Bank of Chicago to the lending syndicate. Borrowing under
this revolving credit facility will be used to satisfy the Company's working
capital requirements, as needed, and to fund acquisitions. The total outstanding
principal balance is payable in full on December 20, 1998. Outstanding
borrowings under this facility currently bear interest at the lenders' prime
rate plus 0.5 percent, which interest rate was 8.75 percent at December 31,
1996.
The agreement provides that an annual commitment fee be paid by the Company
based on 0.375 percent average daily unused amount of the facility. The
agreement also requires the Company to maintain certain financial covenants
including, but not limited to: maximum leverage ratio, minimum interest coverage
ratio, minimum net worth and minimum capitalization. The agreement prohibits the
Company from declaring any cash dividends on its common stock. The revolving
credit facility is secured by all of the issued and outstanding common stock of
the Company and it's subsidiaries.
34
<PAGE>
(5) LEASE COMMITMENTS
The Company leases certain medical equipment under long-term lease
agreements. Most of the lease agreements have a term of 36 months and are
classified as capital leases. A majority of the medical equipment leased under
capital leases has been subleased to franchises.
The Company leases office space under leases which are classified as
operating leases. Operating lease expense for 1996, 1995 and 1994 was
$2,609,000, $2,100,000, and $1,570,000, respectively. The future minimum lease
payments for these leases are as follows:
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31,
1997............................................... $1,479,000
1998............................................... 1,059,000
1999............................................... 754,000
2000............................................... 592,000
2001 and beyond.................................... 730,000
----------
$4,614,000
==========
</TABLE>
(6) RETIREMENT PLAN
All employees who have attained the age of 20 1/2 with one year's service
are eligible for participation in the Company's 401(k) Plan. The expense
recognized in 1996, 1995, and 1994 related to this plan totaled $298,000,
$421,000, and $392,000, respectively. The employer's matching contribution is a
percentage of the amount contributed by each employee and is funded on a current
basis. The restated amounts for 1995 and 1994 include discretionary
contributions to the Oklahoma City retirement plan.
(7) INCOME TAXES
The income tax provision (benefit) consisted of the following (in
thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- --------- --------
<S> <C> <C> <C>
1996:
Federal............................... $ 2,012 $ (108) $ 1,904
State................................. 425 (31) 394
-------- --------- --------
$ 2,437 $ (139) $ 2,298
======== ========= ========
1995:
Federal............................... $ 1,214 $ 443 $ 1,657
State................................. 433 129 562
-------- --------- --------
$ 1,647 $ 572 $ 2,219
======== ========= ========
1994:
Federal............................... $ (6) $ (450) $ (456)
State................................. 64 (201) (137)
-------- --------- --------
$ 58 $ (651) $ (593)
======== ========= ========
</TABLE>
35
<PAGE>
Income tax expense (benefit) differs from the "expected" tax expense
(benefit) for those years computed by applying the U.S. Federal corporate income
tax rate of 34% to earnings (loss) before income taxes as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Computed "expected" tax expense
(benefit)....................................... $(6,124) $ 1,669 $ (818)
Increase in income taxes resulting
from:
Amortization & writeoff of
goodwill..................................... 8,248 262 281
State income taxes, net of federal
income tax benefit........................... 260 371 (91)
Other, net..................................... (86) (83) 35
-------- -------- -------
Total provision (benefit)...................... $ 2,298 $ 2,219 $ (593)
======== ======== =======
</TABLE>
Deferred tax assets and (liabilities) at December 31, 1996 and 1995
include:
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
CURRENT NONCURRENT CURRENT NONCURRENT
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts $ 939 $ --- $ 614 $ ---
Allowance for notes
receivable 46 --- 115 ---
Accrued expenses 256 --- 695 ---
Non-compete covenant --- --- --- ---
Tax accounting changes (102) (102) (38) ---
Intangible assets --- 160
Capital loss --- 590
Depreciation --- (113) --- (107)
Other, net 15 (582) 16 (917)
------ --------- ------ ---------
$1,154 $ (47) $1,402 $ (1,024)
====== =========
Valuation allowance --- (590)
------ ---------
$1,154 $ (637)
====== =========
</TABLE>
The Company has a capital loss carryforward of $1,475,000, which expires in
2001. The valuation allowance of $590,000 and $0 at December 31, 1996 and 1995
respectively, increased due to the capital loss carryforward.
(8) STOCK OPTIONS AND INCENTIVE PLAN
The Company's 1991 Stock Incentive Plan (the "Incentive Plan") was adopted
by the Board and approved by the stockholders on September 11, 1991. The
Incentive Plan provides for the award of cash, stock, and stock unit bonuses,
and the grant of stock options and stock appreciation rights (SARs), to officers
and employees of the Company and its subsidiaries and other persons who provide
services to the Company on a regular and substantial basis. The Company has
reserved an aggregate of 1,660,000 shares of Common Stock for issuance under the
36
<PAGE>
Incentive Plan. A proposal to increase reserved shares of Common Stock to
2,000,000 will be voted upon at the Company's 1997 Annual Meeting of
Shareholders. All options under the Incentive Plan must be exercised within ten
years after the grant date. As of December 31, 1996, no stock, stock unit
bonuses, or SARs have been granted pursuant to the Incentive Plan.
The following schedule details the changes in the Company's Stock Incentive
Plan for the three years ending December 31, 1996:
<TABLE>
<CAPTION>
1994 1995 1996
-----------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
- --------------------- ---------- --------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning
of year 886,100 $4.36 868,730 $4.10 870,230 $3.52
Granted 332,920 3.46 665,050 3.49 197,350 4.47
Exercised (5,500) 3.75 (24,625) 2.25 (42,428) 2.66
Terminated (324,790) 4.32 (638,925) 3.60 (59,705) 2.88
--------- --------- --------
Outstanding at
end of year 868,730 4.10 870,230 3.52 965,447 3.58
========= ========= ========
Options exercisable
at year-end 179,995 139,490 317,223
Weighted Average
fair value of
options granted
during the year $1.33 $1.33 $1.71
</TABLE>
The following table summarizes information about the Company's Stock Incentive
Plan and options outstanding at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- -------------------------------
WEIGHTED-AVG.
RANGE OF NUMBER REMAINING NUMBER
EXERCISE OUTSTANDING CONTRACTUAL WEIGHTED-AVG. EXERCISABLE WEIGHTED-AVG.
PRICES AT 12/31/96 LIFE EXERCISE PRICE AT 12/31/96 EXERCISE PRICE
- -------- ------------- ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$2.25 to $3.38 354,097 7.6 years $2.59 159,448 $2.44
$3.75 to $4.25 393,600 8.2 years $3.95 113,788 $3.75
$4.38 to $7.50 217,750 9.0 years $4.54 43,987 $4.38
------- -------
$2.25 to $7.50 965,447 8.2 years $3.58 317,223 $3.18
======= =======
</TABLE>
37
<PAGE>
On February 21, 1995, the Stock Option Committee of the Company's Board of
Directors repriced all outstanding employee stock options at the day's closing
price of $2.25. All vesting schedules remained unchanged.
The 1996 Employee Stock Purchase Plan permits eligible employees to acquire
shares of the Company's common stock through payroll deductions not exceeding
15% of base wages, at a 15% discount from market price on the grant date. There
were no shares related to the plan issued during 1996.
The Company applies Accounting Principles Board (APB) Opinion 25 and related
interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its stock option plans.
Had compensation cost for the Company's stock-based compensations plans been
determined based on FASB Statement 123, the Company's net loss and loss per
share in 1996 and net income and earnings per share in 1995 would have been the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
--------- -------
<S> <C> <C> <C>
Net income (loss): as reported $(20,256) $2,988
pro forma $(20,410) $2,876
Net income (loss) per common
and equivalent share: as reported $ (1.93) $ 0.29
pro forma $ (1.95) $ 0.28
</TABLE>
The fair value of options granted under the Company's stock option plan during
1995 and 1996 was estimated on the date of grant using the Black-Scholes option-
pricing model with the following assumptions used: no dividend yield, expected
volatility of 30%, risk free interest rate of 6.5% and expected lives of 5
years.
(9) REORGANIZATION EXPENSES AND OTHER CHARGES
During 1996, the Company recorded a $24,164,000 non-cash charge related to
write-offs of various intangible assets. These write downs primarily relate to
goodwill recorded through pushdown accounting for a change of control in 1990,
as well as goodwill related to prior year acquisitions. The write-off resulted
from the Company's stated objective of purchasing existing franchises and from
evaluation of estimated future cash flows of acquired businesses.
During 1994, the Company recognized $6,536,000 in primarily non-cash
charges relating to write-offs of notes receivable and capitalized software
development costs, additional reserves for a note receivable, and severance.
(10) COMMITMENTS AND CONTINGENCIES
The Company was a defendant in a lawsuit filed in U.S. District Court,
Eastern District of California, by the former owners of two Option Care
franchises and other entities with which they are affiliated. The plaintiffs
were pursuing claims for breach of contract, breach of the covenant of good
faith and fair dealing, breach of alleged fiduciary duties, promissory estoppel,
and violations of California franchise law. On September 28, 1993, the U.S.
District Court, Eastern District of California, entered summary judgement for
the Company on all claims. The plaintiffs appealed to the United States Court
of Appeals for the Ninth Circuit, which, on February 22, 1996, affirmed the
district court's
38
<PAGE>
decision. The plaintiffs then petitioned the Supreme Court of the United States
for a writ of certiorari. The Supreme Court of the United States denied the
petition for a writ of certiorari on October 7, 1996.
The Company is a defendant in a lawsuit filed January 28, 1994 in U.S.
District Court, Clark County, Nevada, by one of the owners of the Las Vegas, NV,
franchise, which the Company managed through a subsidiary. The plaintiff is
pursuing claims for breach of contract, breach of fiduciary duties, fraud,
negligent misrepresentation, and breach of implied covenant of good faith and
fair dealing. The Company believes that the plaintiff's claims are without
merit, and intends to vigorously defend the lawsuit. The Company has filed a
motion to dismiss, which was granted on April 1, 1994 regarding the alleged
breach of fiduciary duty, breach of contract and fraud. There has been no
subsequent pursuit of the remaining claims. Should the plaintiff pursue these
claims in the future, the Company will vigorously contest such claims.
On January 17, 1995, an action entitled Dennis H. Birenbaum v. Option Care,
Inc., Case No. 95-439, was filed with the District Court of Dallas County,
Texas. Plaintiff alleged breach of contract, promissory estoppel and negligent
misrepresentation concerning an alleged agreement for the sale and purchase of
Plaintiff's company. In response, the Company produced evidence showing no
agreement was ever made. Dr. Birenbaum's lawsuit was dismissed and the Company
was awarded summary judgment by the Court. Dr. Birenbaum has filed an appeal
which the Company is vigorously contesting.
Despite the inherent uncertainties of litigation, management of the Company
at this time does not believe that the lawsuits will have a material adverse
impact on the financial condition of the Company.
The Company may also be required, upon death or termination of employment,
to purchase stock of certain minority shareholders of subsidiaries.
39
<PAGE>
(11) SUPPLEMENTAL CASH FLOW INFORMATION (IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -----
<S> <C> <C> <C>
Interest and taxes paid:
Interest............................. $ 899 $ 998 $ 701
======= ======= ======
Income taxes......................... $2,105 $1,298 $ 70
======= ======= ======
Noncash investing and financing
activities:
Stock issued for acquired franchise $ 244 $ --- $ ---
Notes issued for franchise ======= ======= ======
acquisitions....................... $1,776 $ --- $ 619
======= ======= ======
Additions to obligations under
capital leases.................. $ 85 $ 27 $ 40
======= ======= ======
Additions to subleases under
direct financing leases......... $ 45 $ 22 $ 36
======= ======= ======
</TABLE>
40
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEMS 10. THROUGH 13.
Information regarding executive officers is contained in Item 4 of Part I
of this Report and is incorporated herein by reference. Information on
directors of the registrant, executive compensation, security ownership of
certain beneficial owners and management and certain relationships and related
transactions is set forth under the Election of Directors, Security Ownership
of Certain Beneficial Owners and Management, Executive Compensation and Certain
Transactions with Management and Directors captions of the Registrant's
definitive proxy statement dated April 18, 1997 for its May 9, 1997 Annual
Meeting of Shareholders, to be filed with the Securities and Exchange Commission
in April 1997, and such information is incorporated herein by reference;
provided, however the report of the compensation committee on executive
compensation, the performance graph and the ten-year option repricing table
shall not be deemed to be so incorporated by reference. The information under
the caption " Beneficial Ownership Reporting Compliance" of the 1997 Proxy
Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following Consolidated Financial Statements of the Company and
its subsidiaries and independent auditors' report thereon are included as pages
21 through 35 of this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................. 25
Consolidated Balance Sheets - December 31, 1996 and 1995.. 26
Consolidated Statements of Operations - Years End
December 31, 1996, 1995 and 1994........................ 28
Consolidated Statements of Stockholders' Equity -
Years Ended December 31, 1996, 1995 and 1994............ 29
Consolidated Statements of Cash Flows - Years Ended
December 31, 1996, 1995 and 1994........................ 30
Notes to Consolidated Financial Statements................ 31
</TABLE>
(a)(2) The following supporting financial statement schedule and
independent auditors' report thereon are included as pages 46 through 47 of this
Annual Report on Form 10-K:
41
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................. 46
Schedule II - Valuation and Qualifying Accounts........... 47
</TABLE>
All other Schedules are omitted because the required information is
not applicable or information is presented in the Consolidated Financial
Statements or related notes.
(a)(3) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
3.1 Certificate of Incorporation of the Registrant, together with
Certificate of Amendment thereto filed February 18, 1992. Filed as
Exhibit 3(a) to the Company's Registration Statement (No. 33-45836)
dated April 15, 1992 and incorporated by reference herein.
3.2 Certificate of Amendment to Certificate of Incorporation of the
Registrant filed March 25, 1992. Filed as Exhibit 3(c) to the
Company's Registration Statement (No. 33-45836) dated April 15, 1992
and incorporated by reference herein.
3.3 Restated By-laws of the Registrant dated June 1, 1994. Filed as
Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year
ending December 31, 1994 and incorporated by reference herein.
10.1 Stock Purchase Agreement dated February 18, 1992, among the
Registrant, OCE and the stockholders of Young's I.V. Therapy, Inc.
Filed as Exhibit 2(f) to the Company's Registration Statement (No. 33-
45836) dated April 15, 1992 and incorporated by reference herein.
10.2 1991 Stock Incentive Plan of the Registrant and related forms of
Incentive and Nonqualified Stock Option Agreements. Filed as Exhibit
10(a) to the Company's Registration Statement (No. 33-45836) dated
April 15, 1992 and incorporated by reference herein.
10.2(a) Amendment to the 1991 Stock Incentive Plan of the Registrant and
related forms of Incentive and Nonqualified Stock Option Agreements,
dated February 21, 1995. Filed as Exhibit 10.6(a) to the Company's
Annual Report on Form 10-K for the year ending December 31, 1994 and
incorporated by reference herein.
10.3 Option Care, Inc. 401(k) Profit Sharing Plan. Filed as Exhibit 10(b)
to the Company's Registration Statement (No. 33-45836) dated April
15, 1992 and incorporated by reference herein.
10.4 Consulting Agreement dated as of September 27, 1990 between EJ
Financial Enterprises and Michael Prime. Filed as Exhibit 10(h) to the
Company's Registration Statement (No. 33-45836) dated April 15, 1992
and incorporated by reference herein.
</TABLE>
42
<PAGE>
10.5 Form of Franchise Agreement. *
10.6 Lease dated as of October 23, 1996 between the Registrant and
LaSalle National Trust, N.A., as Trustee.*
10.7 Consulting Agreement between the Registrant and EJ Financial
Enterprises, Inc. Filed as Exhibit 10(o) to the Company's
Registration Statement (No. 33-45836) dated April 15, 1992 and
incorporated by reference herein.
10.8 Credit Agreement with ancillary documentation dated December 23,
1996, among Registrant, Option Care Enterprises, Inc. ("OCE"),
Option Care, Inc. (California), and Option Care Capital Services
and PNC Bank as agent and lender and Harris Bank and The Northern
Trust Company as lenders re: $30,000,000 credit agreement.*
10.9 Stock Sale Agreement, Franchise Agreement and Addendum to
Franchise Agreement dated December 31, 1996 among the Registrant
and J. Harris Morgan, Jr. *
10.10 Promissory Note between Convention Center Drug, Inc., and Option
Care, Inc., dated November 15, 1996.*
10.11 Security Agreement between Convention Center Drug, Inc. and
Option Care, Inc., dated November 15, 1996.*
10.12 Promissory Notes between Home I.V., Inc. and Option Care, Inc.,
dated March 17, 1995. Filed as Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ending December 31, 1995
and incorporated by reference herein.
10.13 Promissory Note between F.Y.V.O., Inc., and Option Care, Inc.,
dated November 1, 1995. Filed as Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ending December 31, 1995
and incorporated by reference herein.
10.14 Promissory Note between Option Home Health, Inc. and Option Care,
Inc., dated November 1, 1995. Filed as Exhibit 10.19 to the
Company's Annual Report on Form 10-K for the year ending December
31, 1995 and incorporated by reference herein.
10.15 Amended Option Care, Inc. 1996 Employee Stock Purchase Plan,
dated January 1, 1996. Filed as Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ending December 31, 1995
and incorporated by reference herein.
10.16 Executive Severance Agreement between Erick E. Hanson and Option
Care, Inc., dated June 28, 1996.*
10.17 Executive Severance Agreement between Jeffery Fox and Option
Care, Inc., dated June 28, 1996.*
10.18 Executive Severance Agreement between Cathy Bellehumeur and
Option Care, Inc., dated June 28, 1996.*
43
<PAGE>
11 Statement re: Computation of Per Share Earnings. *
21 Subsidiaries of the Registrant. *
23 Consent of KPMG Peat Marwick LLP. *
* Filed as an Exhibit herewith.
The following management contracts and compensatory plans and arrangements are
filed as Exhibit 10 in this Annual Report on Form 10-K, or are incorporated by
reference herein.
EXHIBIT
NUMBER
- -------
10.2 1991 Stock Incentive Plan of the Registrant and related forms of
Incentive and Nonqualified Stock Option Agreements. Filed as
Exhibit 10(a) to the Company's Registration Statement (No. 33-
45836) dated April 15, 1992 and incorporated by reference herein.
10.2(a) Amendment to the 1991 Stock Incentive Plan of the Registrant and
related forms of Incentive and Nonqualified Stock Option
Agreements, dated February 21, 1995. Filed as Exhibit 10.6(a) to
the Company's Annual Report on Form 10-K for the year ending
December 31, 1994 and incorporated by reference herein.
10.3 Option Care, Inc. 401(k) Profit Sharing Plan. Filed as Exhibit
10(b) to the Company's Registration Statement (No. 33-45836)
dated April 15, 1992 and incorporated by reference herein.
10.4 Consulting Agreement dated as of September 27, 1990 between EJ
Financial Enterprises and Michael Prime. Filed as Exhibit 10(h)
to the Company's Registration Statement (No. 33-45836) dated
April 15, 1992 and incorporated by reference herein.
10.7 Consulting Agreement between the Registrant and EJ Financial
Enterprises, Inc. Filed as Exhibit 10(o) to the Company's
Registration Statement (No. 33-45836) dated April 15, 1992 and
incorporated by reference herein.
10.15 Amended Option Care, Inc. 1996 Employee Stock Purchase Plan,
dated January 1, 1996. Filed as Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ending December 31, 1995
and incorporated by reference herein.
10.16 Executive Severance Agreement between Erick E. Hanson and Option
Care, Inc., dated June 28, 1996.
10.17 Executive Severance Agreement between Jeffery Fox and Option
Care, Inc., dated June 28, 1996.
10.18 Executive Severance Agreement between Cathy Bellehumeur and
Option Care, Inc., dated June 28, 1996.
44
<PAGE>
OPTION CARE, INC.
EXHIBIT INDEX
(FOR EXHIBITS FILED WITH THIS ANNUAL REPORT ON FORM 10-K)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- --------- ----------- ----
<S> <C> <C>
10.5 Form of Franchise Agreement.
10.6 Lease, dated October 23, 1996.
10.8 Credit Agreement, dated December 23, 1996.
10.9 Stock Sale Agreement, Franchise Agreement and Addendum
to Franchise Agreement, dated December 31, 1996.
10.10 Promissory Note, dated November 15, 1996
10.11 Security Agreement, dated November 15, 1996
10.16 Executive Severance Agreement, dated June 28, 1996.
10.17 Executive Severance Agreement, dated June 28, 1996.
10.18 Executive Severance Agreement, dated June 28, 1996.
11 Statement re: Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
23 Consent of KPMG Peat Marwick LLP.
</TABLE>
(D) REPORTS ON FORM 8-K.
The Company has not filed any Reports on Form 8-K during the last quarter
of the fiscal year ended December 31, 1996.
45
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Option Care, Inc.:
Under date of March 5, 1997, we reported on the consolidated balance sheets
of Option Care, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996, as
contained in this annual report on Form 10-K for the year 1996. In connection
with our audits of the aforementioned consolidated financial statements, we also
have audited the related financial statement schedule as listed in the
accompanying index. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement schedule based on
our audits.
In our opinion, the related financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Chicago, Illinois
March 5, 1997
46
<PAGE>
OPTION CARE, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
<TABLE>
<CAPTION>
BALANCE BALANCE
YEAR BEGINNING (A) CHARGED (B) END
ENDED OF PERIOD ACQUISITIONS TO EXPENSE DEDUCTIONS OF PERIOD
- ------ --------- ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
December 31, 1994 1,836 --- 1,899 (1,393) 2,342
======== ======== ======== ========= =========
December 31, 1995 2,342 --- 1,653 (2,722) 1,273
======== ======== ======== ========= =========
December 31, 1996 1,273 306 1,861 (1,702) 1,738
======== ======== ======== ========= =========
</TABLE>
ALLOWANCE FOR UNCOLLECTIBLE NOTES RECEIVABLE:
<TABLE>
<CAPTION>
BALANCE BALANCE
YEAR BEGINNING (A) CHARGED (B) END
ENDED OF PERIOD ACQUISITIONS TO EXPENSE DEDUCTIONS OF PERIOD
- ------ --------- ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
December 31, 1994 79 --- 671 (79) 671
======== ======== ======== ========= =========
December 31, 1995 671 --- --- (329) 342
======== ======== ======== ========= =========
December 31, 1996 342 --- 30 (256) 116
======== ======== ======== ========= =========
</TABLE>
(A) Represents balances related to companies acquired during the year.
(B) Represents accounts written off.
47
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Option Care, Inc.
By: /S/ Erick E. Hanson
-------------------------------------
Erick E. Hanson
President, Chief Executive Officer
and Director
Date: March 20, 1997
-------------------------------------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT, AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Erick E. Hanson President, Chief Executive March 20, 1997
- ---------------------------- Officer and Director --------------
Erick E. Hanson (Principal Executive Officer)
/s/ Paul S. Jurewicz Senior Vice President and March 20, 1997
- ---------------------------- Chief Financial Officer --------------
Paul Jurewicz (Principal Accounting Officer
and Principal Financial Officer)
/s/ James G. Andress Director March 20, 1997
- ---------------------------- --------------
James G. Andress
/s/ John N. Kapoor Chairman and Director March 20, 1997
- ---------------------------- --------------
Dr. John N. Kapoor
/s/ Jerome F. Sheldon Director March 20, 1997
- ---------------------------- --------------
Jerome F. Sheldon
/s/ Roger W. Stone Director March 20, 1997
- ---------------------------- --------------
Roger W. Stone
</TABLE>
48
<PAGE>
EXHIBIT 10.5
OPTION CARE, INC.
FRANCHISE AGREEMENT
This Franchise Agreement ("Agreement") between Option Care, Inc., a
California corporation, with its principal place of business at Bannockburn,
Illinois ("Franchisor") and Option Care Camilla, Inc., a Georgia corporation,
("Franchise Owner"), is made and entered into effective the date signed by
Franchisor on the signature page hereof (the "Effective Date").
RECITALS
A. Franchisor has developed and owns a proprietary business method and
concept (the "System") relating to the operation of an outpatient health care
business that compounds pharmaceuticals, dispenses and administers
pharmaceuticals and physician prescribed biologicals, nutrients, medications and
solutions via parenteral and enteral routes in the home and in, subacute,
extended care, and other outpatient settings, furnishes clinical, pharmaceutical
and nursing services necessary to the provision of such therapies, sells related
products and supplies and sells or leases related equipment. For purposes of
this Agreement, "parenteral" shall mean any administration route other than by
way of the intestines (e.g., without limitation, inhalation, transdermal and
intravenous).
B. The therapies under the System (the "Therapies") are set forth in the
Confidential Franchise Operations Manual (the "Manual") and include "Core
Therapies" and "Permitted Therapies", both as defined in the Manual.
C. The distinguishing characteristics of the System are set forth in the
Manual, which contains, without limitation, policies and procedures for the
Therapies; uniform standards, specifications and procedures for operation of the
business under the System, including the nature and manner of products and
services offered; procedures for quality improvement; training requirements;
group purchasing availability; and management, operational, and marketing
methods, techniques, materials, assistance and programs.
D. Pursuant to a license from Franchisor, each of Franchisor's franchise
owners does business under the name and mark "Option Care," and such other names
and marks as Franchisor may designate for use by each franchise owner under the
System (collectively, the "Proprietary Marks").
E. Franchise Owner wishes to obtain a franchise in order to operate a
business utilizing the System and the Proprietary Marks, as well as to receive
the Manual, the training and other assistance provided by Franchisor in
connection with the System pursuant to this Agreement.
<PAGE>
F. The business to be conducted by Franchise Owner pursuant to and under
the license granted by this Agreement is sometimes referred to herein as the
"Franchised Business".
G. Franchise Owner understands and acknowledges the importance of
Franchisor's high and uniform standards of quality and service and the necessity
of operating the Franchised Business in conformity with Franchisor's standards
and specifications, including the Manual.
H. Franchise Owner acknowledges that it has received a copy of this
Agreement, and the related exhibits and agreements, at least five (5) business
days prior to the date on which this Agreement was executed by Franchise Owner.
Franchise Owner further acknowledges that it has received the disclosure
document required by the Trade Regulation Rule of the Federal Trade Commission,
entitled "Offering Circular for Prospective Franchise Owners," at least ten (10)
business days prior to the date on which this Agreement was executed.
NOW, THEREFORE, Franchisor and Franchise Owner, in consideration of the
undertakings and commitments of each party to the other party set forth herein
and the recitals set forth above, which are incorporated into and made a part
of this Agreement, mutually agree as follows:
1. GRANT
1.1 Grant of Franchise. Franchisor hereby grants to Franchise Owner, on
------------------
the terms and conditions contained in this Agreement, the right and franchise,
and Franchise Owner undertakes the obligation, to operate the Franchised
Business and to use solely in connection with the Franchised Business the System
and the Proprietary Marks.
1.2 Deliveries on Grant. Contemporaneous with Franchise Owner delivering
-------------------
this executed Agreement to Franchisor, it shall also deliver to Franchisor the
following:
(a) A check in the amount specified in Section 5.1 hereof;
(b) A copy of the fronts and backs of its issued stock certificates,
the backs of which shall contain the following legend: "The transfer of this
stock is subject to the terms and conditions of a Franchise Agreement with
Option Care, Inc. dated _____________________, 1996";
(c) An executed "Site Selection Addendum; and
(d) A fully executed "Guarantee".
2
<PAGE>
2. TERRITORY
2.1 Territory Defined. Franchisor hereby grants to Franchise Owner the
-----------------
right to operate the Franchised Business during the term of this Agreement
within the defined area (the "Territory") described on attached Exhibit A, which
Exhibit is incorporated herein by reference thereto. Franchise Owner
acknowledges and agrees that this Agreement affords it no right, title or
interest in or to additional franchises or any right to acquire additional
franchises or territory, nor does it obligate Franchisor in any way to grant or
sell any additional franchises or territory to Franchise Owner.
2.2 Patient Freedom of Choice. Notwithstanding the grant of the Territory,
-------------------------
Franchise Owner acknowledges and agrees that (i) patients residing within the
Territory are entitled to the freedom to choose their health care provider and
may seek health care services of the type provided by Franchise Owner from
others, including another franchise owner of Franchisor; and (ii) health care
referral sources may refer patients residing within the Territory to health care
providers of their choosing, including to another franchise owner of Franchisor.
2.3 Marketing Efforts in Territory. Franchise Owner agrees to devote its
------------------------------
best efforts to serving patients that reside within the Territory. Except as
otherwise permitted herein or as approved in advance and in writing by
Franchisor, Franchise Owner's marketing and promotional activities shall be
directed only toward obtaining patients who reside within the Territory.
Franchise Owner acknowledges and agrees that Franchisor, as part of its business
strategy, may advertise or market on behalf of the System in the Territory and
may maintain itself, or through its affiliates, a presence in the Territory for
the purpose of providing a managed care program offering services of the type
provided by the Franchised Business. Franchise Owner agrees to abide by
Franchisor's then current policies on marketing outside of the Territory, and on
cooperating with neighboring Option Care franchisees, as the same may be set
forth from time to time in the Manual.
2.4 Presence in Territory. Franchise Owner shall maintain such manner and
---------------------
degree of presence in the Territory as from time to time required by the Manual.
Such presence requires Franchise Owner to maintain an I.V. pharmacy within the
Territory unless Franchise Owner has the prior written approval of Franchisor to
utilize the I.V. pharmacy services of another Option Care Franchise and utilize
such services on the basis approved by Franchisor. Even if Franchise Owner is
not required to itself maintain an I.V. pharmacy in the Territory, it must
maintain a physical presence in the Territory consistent with Franchisor's
requirements therefor as then set forth in the current Manual. The initial
pharmacy and/or office site must be selected by Franchise Owner and disclosed to
Franchisor at the time of filing the application for a franchise, but not later
than sixty (60) days after execution of the Franchise Agreement. A location
shall be selected by Franchise Owner in accordance with the then-current Site
Selection Addendum. The Franchise Owner's presence within the Territory shall
3
<PAGE>
at all times comply with Franchisor's reasonable standards and conditions and
any relocations of a physical pharmacy or office or change in the manner or
degree of presence must be approved in advance in writing by Franchisor.
Franchise Owner shall not relocate any part of the Franchised Business without
the prior written consent of Franchisor. Franchise Owner agrees that
disapproval of a location will not be unreasonable if the proposed location does
not meet Franchisor's reasonable standards, including spacing between franchised
offices.
2.5 Servicing Unowned Territory. Franchise Owner acknowledges that while
---------------------------
it is granted the right hereunder only to the Territory, Franchise Owner may
provide goods and services to patients in unowned areas until such time as those
areas are granted by Franchisor to a party. Franchise Owner acknowledges and
agrees that it is obligated to pay royalties to Franchisor, in accordance with
Section 5 hereof, on all Gross Receipts (as hereafter defined), whether from
patients residing within or outside the Territory. Franchise Owner further
acknowledges and agrees that neither the ability to service nor the grant of our
permission to service patients residing outside the Territory affords it any
right, title or interest in or to such area whatsoever (including any right to
acquire such area or any right of first refusal as to such area).
3. TERM ; RENEWAL; CONSEQUENCES OF EXPIRATION (NON-RENEWAL)
3.1 Term. Unless sooner terminated as hereinafter provided, this Agreement
----
shall expire twenty (20) years from the Effective Date of this Agreement. If
this Agreement reaches the end of its term and is not renewed, it will be said
to have "expired" and the "consequences of expiration" set forth at Section 3.3,
below, shall apply.
3.2 Renewal. If Franchise Owner, in Franchisor's sole interpretation,
-------
meets all of the requirements described in this Section 3.2, then Franchise
Owner shall have the right to extend the right to operate the Franchised
Business for one (1) consecutive additional period of ten (10) years. To
exercise the right to extend, Franchise Owner shall send to Franchisor, at least
one six (6) months, but not more than twelve (12) months, prior to the
expiration date of this Agreement a written notice of intention to extend. At
the time of the notice and at the time of the execution of the renewal franchise
agreement, Franchise Owner must satisfy the following conditions:
3.2.1 Franchise Owner shall not be in default of any provision of
this Agreement and shall have substantially complied with all the terms and
conditions of this Agreement, as amended, throughout its term;
3.2.2 Franchise Owner shall have satisfied all of its monetary
obligations to Franchisor and Franchisor's affiliates and shall have met those
obligations in a timely manner throughout the term of this Agreement;
4
<PAGE>
3.2.3 Franchise Owner shall execute Franchisor's then-current form of
renewal franchise agreement for the renewal term, which franchise agreement may
have terms different from the terms of this Agreement, and such other ancillary
agreements as Franchisor may require for the Franchised Business. The Territory
described in this Agreement shall remain the same;
3.2.4 Franchise Owner shall pay, in lieu of an initial fee, a renewal
fee not to exceed the conversion fee that would then be charged a conversion
candidate for this Territory;
3.2.5 Franchise Owner shall execute a general release, in a form
prescribed by Franchisor, of any and all claims against Franchisor and
Franchisor's affiliates, and their respective shareholders, partners, directors,
officers, employees and agents, in this capacity and in their individual
capacities, to the fullest extent permitted by law; and
3.2.6 Franchise Owner shall comply with Franchisor's then-current
qualification and training requirements.
3.3 Consequences of Expiration. If either Franchise Owner or Franchisor
--------------------------
elects not to renew this Agreement, then, upon expiration of its term, all
rights granted Franchisor Owner by this Agreement shall terminate, and Franchise
Owner shall immediately:
3.3.1 Cease to operate the Franchised Business and not, directly or
indirectly, represent itself as a franchise owner of Franchisor;
3.3.2 Permanently cease to use, in any manner whatsoever, any
Confidential Information associated with the System, as well as the Proprietary
Marks and all signs, equipment, marketing materials, stationery, forms and other
items which display the Proprietary Marks;
3.3.3 Pay all liquidated or ascertainable sums owing from Franchise
Owner to Franchisor, without set-off or other reduction on account of
unliquidated claims, including, without limitation, any fees accruing after the
expiration of the term on Gross Receipts attributable to accounts receivable
from goods or services furnished during the term of this Agreement;
3.3.4 Deliver to Franchisor via U.P.S. or comparable carrier, via
first class service, the Manual, all patient file lists and business records
(other than prescriptions, patient records, tax returns and bank statements),
files and brochures, and any and all other materials relating to the operation
of the Franchised Business, all of which are acknowledged to be Franchisor's
property, and shall retain no copy or record of any of the foregoing, except
Franchise Owner's copy of this Agreement and any other agreements with
Franchisor or any
5
<PAGE>
affiliate, copies of any correspondence between the parties, and any copies of
other documents which Franchise Owner reasonably needs for compliance with any
provision of law; and
3.3.5 Comply with the applicable covenants contained in Section 9 of
this Agreement, which covenants shall survive the expiration of this Agreement.
4. DUTIES OF FRANCHISOR
4.1 Provide the Manual. Franchisor shall provide to Franchise Owner one
------------------
copy of the Manual for Franchise Owner's use during the term of this Agreement.
Franchisor shall also provide Franchise Owner with updates to the Manual. The
Manual, updates and all copies thereof shall be promptly returned to Franchisor
upon expiration or termination of this Agreement, unless this Agreement is
renewed. The Manual is proprietary to the Franchisor, and is provided for use
exclusively by Franchise Owner and its employees in the operation of the
Franchised Business and is subject to the provisions of Sections 8.1-8.5 below.
4.2 Policies and Procedures. Franchisor shall include within the Manual
-----------------------
policies and procedures on Therapies and Services encompassed within the System.
Franchisor shall make available such clinical consultative support services for
the System as Franchisor deems appropriate.
4.3 Training Opportunities. Franchisor shall provide such training and
----------------------
educational opportunities including training on newly designated core and
permitted therapies, and initial franchise training as deemed necessary by
Franchisor.
4.4 Install Program. Franchisor shall provide to Franchise Owner guidance
---------------
in, and a specific program for, the opening and start-up of the Franchised
Business (the "Install Program"), as currently described in the Manual.
4.5 Accreditation Assistance. Franchisor shall counsel and assist
------------------------
Franchise Owner in complying with the certification or accreditation or standard
requirements of those organizations whose accreditation is deemed necessary by
Franchisor to the operation of the Franchised Business.
4.6 Management Advice. Franchisor shall provide consultation and
-----------------
assistance to Franchise Owner on a continuing basis on such terms and conditions
as Franchisor deems advisable, concerning the management and operation of the
Franchised Business.
4.7 Referral Opportunity. Franchisor shall provide Franchise Owner with an
--------------------
opportunity to participate in such referral arrangements as are established by
Franchisor from time to time which are applicable to the Franchised Business.
6
<PAGE>
4.8 Sales, Marketing Advice. Franchisor shall provide, on such terms and
-----------------------
conditions as Franchisor deems advisable, advice and consultation to Franchise
Owner in the preparation of sales, marketing and promotional campaigns and
materials.
4.9 Group Purchasing Opportunity. Franchisor shall provide Franchise Owner
----------------------------
with an opportunity to participate in such group purchasing plans as Franchisor
may provide from time to time.
5. FEES; ROYALTY; PAYMENT
5.1 Initial Fee. Franchise Owner shall pay an initial fee of______________
-----------
_________________________________________ Dollars ($ __________________) for the
grant of this franchise. Upon execution of this Agreement, Franchise Owner shall
deliver the initial fee to Franchisor in cash or other immediately available
funds or, if permitted by Franchisor, execute and deliver to Franchisor a
promissory note in form and substance satisfactory to Franchisor. The initial
fee, whether financed or not, is fully earned by Franchisor upon execution and
delivery of this Agreement by Franchisor and is not refundable under any
circumstances.
5.2 Continuing Royalty. In addition to the initial fee, during the initial
------------------
term of this Agreement, and for so long thereafter as Franchise Owner realizes
Gross Receipts (as defined in Section 5.7), Franchise Owner agrees to pay to
Franchisor a continuing monthly royalty fee (the "Continuing Monthly Royalty
Fee") in the amount equal to nine percent (9%) of the first $1,000,000 of Gross
Receipts during each calendar year, seven percent (7%) of the next $1,000,000 of
Gross Receipts during each calendar year, and five percent (5%) of all Gross
Receipts in excess of $2,000,000 during each calendar year. The dollar amounts
subject to the 9%, 7% and 5% royalty percentage rates ("Dollar Amounts") shall
be subject to annual revision as provided herein. On each January 1st, the
Dollar Amounts shall be multiplied by a fraction (the "Fraction") determined as
follows: The numerator shall be equal to the Consumer Price Index for all Urban
Consumers, Medical Care Component ("index"), published for the preceding October
by the United States Bureau of Labor Statistics. The denominator shall be the
index published for the month one (1) year prior to the month used in
calculating the numerator. The Dollar Amounts shall be replaced with the
product resulting from multiplying each Dollar Amount by such Fraction rounded
down to the nearest One Dollar ($1.00), but not less than the then-existing
Dollar Amounts. All royalty payments due Franchisor during the calendar year of
the adjustment shall be calculated based on the replacement Dollar Amounts. If
the index is changed such that the base year differs for the two months used in
determining the Fraction, the index shall be converted in accordance with the
conversion factor published by the United States Department of Labor, Bureau of
Labor Statistics. If the index is discontinued or revised during the term of
this Agreement, such other governmental index or computation with which it is
replaced shall be used to obtain substantially the same result as would be
obtained if the index had not been discontinued or revised.
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5.3 Minimum Royalty. If the total of the Continuing Monthly Royalty Fees
---------------
owed Franchisor for any period during the term of this Agreement is less than
the minimum royalty fee (the "Minimum Royalty Fee") applicable to that period,
Franchise Owner also agrees to pay to Franchisor the difference between the
Minimum Royalty Fee applicable to that period and the total Continuing Monthly
Royalty Fees owed for that period. The Minimum Royalty Fee is the following
amounts:
5.3.1 During the period commencing with the first full month
following Franchisor's execution of the Agreement and continuing through
December 31st of the second calendar year of this Agreement, the Minimum Royalty
Fee shall be Two Hundred Dollars ($200.00) per month. For example, if the
Agreement is signed by Franchisor on April 15, 1996, then the $200.00 monthly
Minimum Royalty Fee shall commence May 1, 1996 and continue through December 31,
1997;
5.3.2 For the third calendar year, the Minimum Royalty Fee shall be a
sum equal to the population of the Territory multiplied by three cents;
5.3.3 For the fourth calendar year, the Minimum Royalty Fee shall be
a sum equal to the population of the Territory multiplied by six cents;
5.3.4 For the fifth calendar year, the Minimum Royalty Fee shall be a
sum equal to the population of the Territory multiplied by nine cents; and
5.3.5 For the sixth and subsequent calendar years, the Minimum
Royalty Fee shall be a sum equal to the population of the Territory multiplied
by twelve cents.
5.3.6 For purposes of this Section 5.3 and Section 5.4, below,
"calendar year" means the period from January 1-December 31, and any partial
year. For example, if you sign this Agreement on March 1, 1996, the first
calendar ends December 31, 1996 and your second calendar year ends December 31,
1997.
5.3.7 For purposes of this Agreement, the population of the Territory
shall be _______________ persons.
5.4 National Fund Contribution. Subject to Section 10.3, below, Franchise
--------------------------
Owner agrees to pay to Franchisor for the National Advertising and Educational
Fund (the "National Fund") a monthly contribution in the amount equal to one and
one-half percent (1.5%) of the Gross Receipts, but not more than a maximum
contribution of $10,000 per calendar year. The National Fund shall be
administered as provided in Section 10.3.
5.5 Due Date. The Continuing Monthly Royalty Fee and the National Fund
--------
contribution due Franchisor on Gross Receipts received in a particular month are
both due and payable on or before the fifteenth (15th) day of the following
month, or on such other day as
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Franchisor may reasonably specify. The Minimum Royalty Fee during calendar years
1 and 2 shall be due and payable and on or before the fifteenth (15th) day of
the month. The Minimum Royalty Fee during calendar year 3 and subsequent
calendar years shall be due and payable on the January 15th which next follows
the close of that calendar year. Each payment shall be accompanied by the
reports or statements required by this Agreement or otherwise reasonably
required by Franchisor from time to time.
5.6 INTEREST. FRANCHISE OWNER AGREES TO PAY INTEREST TO FRANCHISOR (OR ITS
--------
DESIGNATED AFFILIATE) ON ALL PAYMENTS REQUIRED HEREUNDER THAT ARE OVERDUE.
INTEREST SHALL ACCRUE AT THE RATE OF TWO PERCENT (2%) PER MONTH OR AT THE
MAXIMUM RATE PERMITTED BY LAW, WHICHEVER IS LESS, STARTING THE DAY FOLLOWING THE
DUE DATE AND CONTINUING UNTIL THE OVERDUE AMOUNT IS PAID. ENTITLEMENT TO SUCH
INTEREST SHALL BE IN ADDITION TO ANY OTHER REMEDIES FRANCHISOR MAY HAVE.
5.7 Gross Receipts Defined. As used in this Agreement, "Gross Receipts"
----------------------
shall include all amounts received by Franchise Owner in connection with the
operation of the Franchised Business other than amounts collected from
compounding services rendered for other franchise owners of Franchisor. "Gross
Receipts" includes, without limitation, amounts collected for Core Therapies and
Permitted Therapies, even if such Therapies are added to the System subsequent
to the execution of this Agreement. "Gross Receipts" also include, without
limitation, all amounts collected, regardless of whether the patient to whom
goods or services were provided resided within or outside of the Territory.
"Gross Receipts" shall also include, without limitation, all payments to
Franchise Owner under any business interruption insurance or similar insurance
policy, and income of every kind and nature related to the Franchised Business.
"Gross Receipts" shall not, however, include any taxes collected by Franchise
Owner for transmittal to appropriate taxing authorities.
6. DUTIES OF FRANCHISE OWNER
6.1 Preserve Integrity of System. Franchise Owner understands and
----------------------------
acknowledges that every detail of the Franchised Business is important to
Franchise Owner, Franchisor, and other franchise owners in order to maintain
high and uniform operating standards, to increase the demand for the services
offered as part of the System, and to protect the name, reputation and goodwill
of the System and Franchisor.
6.2 Commence and Operate Franchised Business. Franchise Owner agrees that
----------------------------------------
time is of the essence both as to its completion of the Install Program and its
commencement of operation of the Franchised Business. Franchise Owner shall
complete the "Foundation Phase" of the Install Program (as described in the
Manual) within four (4) months of signing an initial Franchise Agreement and
within two (2) months of signing a conversion or re-sale Franchise Agreement.
Franchise Owner shall complete the "Building for Success Phase" of the Install
Program (as described in the Manual) within six (6) months of signing an initial
Franchise Agreement and within three (3) months of signing a conversion or re-
sale Franchise
9
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Agreement. Franchise Owner acknowledges and agrees that it may accept patients
only after receiving a certificate of completion from Franchisor stating that
Franchise Owner successfully completed the Foundation Phase of the Install
Program and Franchisor's Operations Review (as described in the Manual).
Franchise Owner also agrees to operate the Franchised Business continuously
throughout the term of this Agreement.
6.3 Manager. Franchise Owner agrees, throughout the term of this
-------
Agreement, to designate and retain a full-time Manager for the Franchised
Business. The Manager shall be designated in writing to Franchisor and approved
by Franchisor, which approval will not be unreasonably withheld. Franchise
Owner agrees to ensure that the Manager devotes full time and effort to the
active management and operation of the Franchised Business, and the Manager
shall be granted and have full authority to act on behalf of Franchise Owner in
all dealings with Franchisor.
6.4 Personnel Trained. Franchise Owner acknowledges that properly trained
-----------------
personnel are essential to the maintenance of the highest degree of quality and
service and agrees to comply with Franchisor's reasonable training requirements.
Franchise Owner agrees that:
6.4.1 Franchise Owner, prior to commencing business under the System,
shall retain core service supervisory staff (manager, pharmacist, nurse, sales,
reimbursement) prior to completion of the Foundation Phase of the Install
Program. The core service supervisory staff then required by Franchisor shall
attend and complete, to Franchisor's reasonable satisfaction, the first
available basic franchise training program offered by Franchisor subsequent to
their hire date. The core supervisors of Franchise Owner shall assume
responsibility for training their respective staff members and future personnel
of the Franchise Owner; all training shall follow the then current guidelines of
Franchisor.
6.4.2 Personnel reasonably specified by Franchisor shall attend such
additional or supplemental training programs and seminars offered by Franchisor
as Franchisor may designate.
6.4.3 Franchise Owner agrees to be responsible for all costs and
expenses required for its personnel to attend both the basic franchise training
program and all other training programs and seminars. With the exception of the
basic franchise training program attended by Franchise Owner's initial
personnel, Franchisor may charge a fee for attending programs and seminars.
6.5 Provide Therapies. Franchise Owner shall provide all Therapies
-----------------
identified in the Manual as "Core Therapies". Franchise Owner may provide all
Therapies identified in the Manual as "Permitted Therapies". Franchise Owner
may also provide such other therapies as
10
<PAGE>
are approved in writing by Franchisor from time to time, even if such therapies
are not incorporated into the Manual.
6.6 Joint Commission on Accreditation of Health Care Organizations (JCAHO).
-------------------------------------------------------------- ------
Franchise Owner agrees to obtain, within such reasonable times as may be
specified by Franchisor, accreditation by those organizations specified by
Franchisor. Franchise Owner agrees to maintain required accreditation(s) during
the entire term of this Agreement. Franchise Owner must apply for and obtain
JCAHO accreditation at the earliest possible time. Time is of the essence. All
costs of obtaining and maintaining accreditation(s) shall be borne and paid by
Franchise Owner.
6.7 Provide Quality Service. Franchise Owner agrees at all times to insure
-----------------------
that the highest degree of quality and service is maintained.
6.7.1 To offer all Core Therapies and sell all types of supplies,
equipment and services related thereto; to refrain from any deviation from
Franchisor's then existing standards and specifications, as set forth in the
Manual, without Franchisor's prior written consent; and to discontinue offering
such therapies as Franchisor may disapprove in writing at any time;
6.7.2 To operate the Franchised Business in strict conformity with
all lawful and reasonable methods, standards and specifications as Franchisor
may prescribe from time to time. In particular, Franchise Owner agrees to comply
with such policies and procedures as are reasonably specified by Franchisor in
the Manual from time to time for the compounding, delivery and administration of
pharmaceuticals, and for the teaching, monitoring and care of patients;
6.7.3 To maintain an inventory of (or demonstrate immediate access to
a compounding center approved by Franchisor) pharmaceuticals, supplies and
equipment adequate to fulfill the demand in the Territory for Core Therapies and
any other therapies provided by Franchise Owner; and
6.7.4 To purchase all pharmaceuticals, supplies, equipment and
services for use in the Franchised Business solely from suppliers who
demonstrate, to the continuing reasonable satisfaction of Franchisor, the
ability to meet Franchisor's then-current standards and specifications for such
items; who possess adequate quality controls; and who have been approved in
writing by Franchisor and not thereafter disapproved. If Franchise Owner desires
to purchase any pharmaceuticals, supplies, equipment or services from an
unapproved supplier, Franchise Owner shall submit to Franchisor a written
request for approval, or shall request the supplier itself to do so. Franchisor
shall have the right to require that Franchisor's representatives be permitted
to inspect the supplier's facilities, and that samples from the supplier (where
a good is at issue) be delivered for evaluation and testing either to Franchisor
or to an independent testing facility designated by Franchisor. A charge not to
exceed the
11
<PAGE>
reasonable cost of the evaluation and testing shall be paid by Franchise Owner
or the supplier. Franchisor reserves the right, at its option, to re-inspect the
facilities and pharmaceuticals, supplies, equipment or services of any such
approved supplier and to revoke its approval upon the supplier's failure to
continue to meet any of Franchisor's then-current criteria.
6.8 Presence in Territory. Prior to commencing business under the System
---------------------
and during the entire term of this Agreement, Franchise Owner agrees to maintain
a presence in the Territory, at Franchise Owner's expense, in accordance with
Section 2.4 hereof and the then applicable provisions of the Manual.
6.9 Appropriate Personnel. Franchise Owner agrees to maintain a competent,
---------------------
conscientious, trained staff. Franchise Owner shall be solely responsible for
all employment decisions and functions. Franchise Owner shall employ and
maintain in full-time employment throughout the term of this Agreement such
number and types of pharmacists, nurses, reimbursement specialists, marketing
representatives and other employees as may be reasonably specified by
Franchisor. Franchise Owner agrees to require all employees to comply with all
federal, state and local laws that apply to the Franchised Business.
6.10 Hours of Operation. Franchise Owner agrees to provide 24-hour-per-day,
------------------
7-day-per-week patient care service availability. Franchise Owner agrees to
staff any office for such minimum hours per day and days per year as Franchisor
may then specify in the Manual.
6.11 Telephone. Franchise Owner agrees to maintain a telephone line and
---------
number which shall be used exclusively in the conduct of the Franchised
Business. Incoming calls on this line shall be answered by a reference to the
name "Option Care" only, unless Franchisor, in Franchisor's sole discretion,
approves otherwise in advance. This line shall be answered by an employee of
Franchise Owner, and not by an answering service, during such hours as
Franchisor may specify in the Manual.
6.12 Use of Proprietary Marks. Franchise Owner agrees to display the
------------------------
Proprietary Marks in the form and manner prescribed by Franchisor on all
business, promotional, sales and marketing materials of every kind and nature.
Franchise Owner agrees to disclose, in the manner specified by Franchisor, that
the Franchised Business is independently owned and operated by Franchise Owner
pursuant to a franchise from Franchisor.
6.13 Inspection and Audit Rights. Franchise Owner agrees to permit
---------------------------
Franchisor and its employees or agents to inspect the Franchised Business and
its books and records at any reasonable time during the term of this Agreement,
and for two (2) years following the expiration or termination of this Agreement.
Franchise Owner agrees to cooperate fully with Franchisor's representatives in
such inspections by rendering such assistance as they may reasonably request,
and, upon written notice from Franchisor or its employees or agents, and without
limiting Franchisor's other rights under this Agreement, shall immediately take
such steps as may be necessary to correct any deficiencies detected during such
inspections.
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Franchise Owner shall allow Franchisor to inspect and copy the records,
prescriptions and charts of Franchise Owner's patients. Franchise Owner agrees
to solicit the consent of its patients to Franchisor's inspection and copying of
their prescriptions and medical records.
6.14 Compliance with Laws. Franchise Owner agrees to comply with all
--------------------
applicable federal, state and local laws, rules and regulations. Franchise
Owner shall timely obtain, and keep or require to be kept in force at all times
during the term of this Agreement, all permits, certificates and licenses
necessary for the full and proper conduct of the Franchised Business, including,
without limitation, the necessary pharmacy permits, professional pharmacy and
nursing licenses, licenses to do business, fictitious name registrations and
sales tax permits. Franchise Owner shall, at Franchisor's request, provide
Franchisor with copies of any professional and other licenses and permits
required to conduct the Franchised Business.
6.15 Discoveries and Ideas. Franchise Owner agrees to disclose promptly to
---------------------
Franchisor all discoveries made or ideas conceived by Franchise Owner or a
person affiliated with Franchise Owner that pertain to the System. Franchise
Owner hereby grants to Franchisor all right, title and interest to such
discoveries and ideas, and agrees to cooperate with Franchisor in securing
Franchisor's rights to such discoveries and ideas. "Discoveries" and "ideas"
shall be interpreted broadly and shall not be limited to those discoveries or
ideas which are potentially patentable or copyrightable. Franchisor shall not
be obligated to compensate Franchise Owner for any such discoveries or ideas.
6.16 Comply with Agreement. Franchise Owner agrees to comply with all other
---------------------
requirements set forth in this Agreement and with all agreements with Franchisor
and any affiliate of Franchisor.
6.17 Audit Rights, Etc. If Franchise Owner conducts business other then the
-----------------
Franchised Business, then Franchise Owner shall permit Franchisor to audit the
books pertaining to all business conducted by Franchise Owner. If Franchise
Owner is affiliated with another entity which possesses a pharmacy license and
Franchisee is unable to obtain a pharmacy license owing to such affiliation,
Franchise Owner shall enter into, and provide Franchisor with copies of, written
agreements, in a form approved by Franchisor, with the affiliated licensed
pharmacy to fill the prescriptions of Franchise Owner's patients.
6.18 Disclose Owners. Franchise Owner shall maintain a current list of all
---------------
of its general, managing, and limited partners and shareholders and owners in
addition to the profit interest of each such person, and shall furnish a copy of
these lists to Franchisor. Franchise Owner shall promptly furnish a revised
copy of these lists to Franchisor each time a change occurs to the information
on any list.
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7. PROPRIETARY MARKS
7.1 Representations of Franchisor. Franchisor represents with respect to
-----------------------------
the Proprietary Marks that:
7.1.1 Franchisor is the owner of all rights, title and interest in
and to the Proprietary Marks in the United States; and
7.1.2 Franchisor has taken and will take steps reasonably necessary
to preserve and protect the ownership and validity of such Proprietary Marks in
the United States.
7.2 Franchise Owner's Use of Marks. With respect to Franchise Owner's
------------------------------
licensed use of the Proprietary Marks pursuant to this Agreement, Franchise
Owner agrees that:
7.2.1 Franchise Owner shall use only the mark "Option Care" and such
other Proprietary Marks as are designated from time to time in writing by
Franchisor for Franchise Owner's current use, and may use them only in the
manner authorized and permitted by Franchisor;
7.2.2 Franchise Owner shall use the Proprietary Marks only in
connection with the operation of the Franchised Business and only in the manner
specified by Franchisor. Unless otherwise approved by Franchisor, Franchise
Owner agrees to operate the Franchised Business under the name "Option Care"
with such prefix or suffix as may be approved from time to time by Franchisor;
7.2.3 Franchise Owner's right to use the Proprietary Marks is limited
to such uses as are authorized under this Agreement, and any unauthorized use
thereof shall constitute an infringement of Franchisor's rights;
7.2.4 Franchise Owner shall not use the Proprietary Marks to incur
any obligation or indebtedness on behalf of Franchisor;
7.2.5 Franchise Owner shall not use the Proprietary Marks as part of
its corporate or other legal name;
7.2.6 Franchise Owner shall file and maintain requisite fictitious or
assumed name registrations as required by laws applicable to the location of the
Territory;
7.2.7 Except as provided in Section 7.2.6, Franchise Owner agrees to
execute any documents deemed necessary by Franchisor to obtain protection for
the Proprietary Marks or to maintain their continued validity and
enforceability. Franchise Owner shall not register the Proprietary Marks at the
state, federal or international level; and
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7.2.8 In the event that litigation involving the Proprietary Marks is
instituted or threatened against Franchise Owner, Franchise Owner agrees to
promptly notify Franchisor and to cooperate fully with Franchisor in defending
or settling such litigation.
7.3 Acknowledgement of Franchisor's Rights in Marks. Franchise Owner
-----------------------------------------------
expressly understands and acknowledges that:
7.3.1 Franchisor is the owner of all right, title and interest in and
to the Proprietary Marks and the goodwill associated with and symbolized by
them;
7.3.2 The Proprietary Marks are valid and serve to identify the
System and those who are franchised under the System;
7.3.3 Franchise Owner shall not directly or indirectly contest the
validity or the ownership of the Proprietary Marks;
7.3.4 Franchise Owner's use of the Proprietary Marks pursuant to this
Agreement does not give Franchise Owner any ownership interest or any other
interest in or to the Proprietary Marks, except the franchise granted herein;
7.3.5 Any and all goodwill arising from Franchise Owner's use of the
Proprietary Marks and the System shall inure solely and exclusively to
Franchisor's benefit, and upon termination of this Agreement and the franchise
herein granted, no monetary amount shall be assigned as attributable to any
goodwill associated with Franchise Owner's use of the Proprietary Marks or the
System;
7.3.6 The right and license of the Proprietary Marks granted to
Franchise Owner is nonexclusive, and Franchisor thus has and retains the rights,
among others:
7.3.6.1 To use the Proprietary Marks itself in connection
with selling products and services;
7.3.6.2 To grant other licenses for the Proprietary Marks, in
addition to those licenses already granted to existing franchise owners;
7.3.6.3 To develop and establish other systems using the same
or similar Proprietary Marks, or any other proprietary marks, and to grant
licenses or franchises thereto without providing any rights therein to Franchise
Owner; and
7.3.7 Franchisor reserves the right to substitute different
Proprietary Marks for use in identifying the System and the businesses operating
under the System if Franchisor, in its sole discretion, determines that
substitution of different Proprietary Marks will be necessary or beneficial to
the System.
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8. CONFIDENTIAL FRANCHISE OPERATIONS MANUAL
8.1 In General. In order to protect the reputation and goodwill of
----------
Franchisor and to maintain operating standards under the System and the
Proprietary Marks, Franchise Owner shall conduct the Franchised Business in
accordance with the terms of this Agreement and in compliance with the
provisions of the Manual, as updated from time to time (which may consist of
more than one volume, and which may include information provided by means of
audio, video, computer or other media). Franchise Owner acknowledges having
received one copy of the Manual on loan from Franchisor for so long as this
Agreement shall remain in effect.
8.2 Manual Confidential. Franchise Owner agrees to at all times treat the
-------------------
Manual and the information contained therein as confidential, and agrees to use
all reasonable efforts to maintain such information as secret and confidential.
Franchise Owner agrees not to copy, duplicate, record or otherwise reproduce the
foregoing materials, in whole or in part, nor otherwise make the same available
to any unauthorized person, except as such sharing may be permitted by the
Manual.
8.3 Property of Franchisor. The Manual, written directives, other manuals
----------------------
and any other confidential communications provided or approved by Franchisor,
and any copies thereof, shall at all times remain the sole property of
Franchisor, shall at all times be kept in a secure and convenient place and
shall be returned to Franchisor immediately upon termination of this Agreement.
8.4 Revisions of Manual. Franchisor, at its discretion, may alter, modify
-------------------
or supplement the Manual from time to time. Changes to and additions of
Therapies and policies of an accreditation body shall be effective immediately
upon notification to Franchise Owner of the change or addition.
Notwithstanding the foregoing, other changes to the Manual shall be effective
ten (10) days following notification of the change to Franchise Owner. Any
change which results in adding a Core Therapy, while effective immediately upon
notice, need not be implemented as a Core Therapy until thirty (30) days
following notice of such change to Franchise Owner. Franchise Owner expressly
agrees to comply with each new or changed provision, standard, policy or
procedure. Revisions to the Manual shall not unreasonably affect Franchise
Owner's obligations, including economic requirements, under this Agreement.
8.5 Obligation to Maintain Manual. Franchise Owner shall at all times
-----------------------------
ensure that its copy of the Manual is kept current and up-to-date. In the event
of any dispute as to the contents of the Manual, the terms of the master copy of
the Manual maintained by Franchisor at Franchisor's home office shall be
controlling. All costs to bring an outdated copy of Franchise Owner's Manual up
to date shall be borne by Franchise Owner.
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9. CONFIDENTIAL INFORMATION
9.1 Obligation of Confidentiality. Franchise Owner shall not, during the
-----------------------------
term of this Agreement or thereafter, communicate, divulge or use for the
benefit of any other person, partnership, association or corporation any
proprietary information, trade secrets, knowledge, techniques or know-how
concerning the methods of operation of the Franchised Business which may be
communicated to Franchise Owner or of which Franchise Owner may be apprised by
virtue of Franchise Owner's operation of the Franchised Business, including all
information conceived, originated, discovered or developed by Franchisor,
Franchise Owner or any other franchise owner which pertains to the Franchised
Business (the "Confidential Information"). Franchise Owner shall divulge the
Confidential Information only to such of its employees and contractors as must
have access to it in order to operate the Franchised Business. Any and all
information, knowledge, know-how and techniques which Franchisor designates as
confidential shall be deemed Confidential Information for purposes of this
Agreement, except information which Franchise Owner can demonstrate came to its
attention prior to disclosure thereof by Franchisor; or which, at or after the
time of disclosure by Franchisor to Franchise Owner, had become or later becomes
a part of the public domain, through lawful publication or communication by
others.
9.2 Employees Bound to Confidentiality. All employees and contractors
----------------------------------
having access to any Confidential Information from Franchisor shall execute such
covenants as Franchisor may require covenanting that they will maintain the
confidentiality of information they receive in connection with their association
with Franchise Owner. Such covenants shall be in a form satisfactory to
Franchisor, including, for example, specific identification of Franchisor as a
third party beneficiary of such covenants. The original of each executed
covenant shall be sent promptly to Franchisor.
9.3 Irreparable Injury. Franchise Owner acknowledges that any failure to
------------------
comply with the requirements of this Section 9 will cause Franchisor irreparable
injury, and Franchise Owner agrees to pay all court costs and reasonable
attorneys' fees incurred by Franchisor in obtaining specific performance of, or
an injunction against violation of, the requirements of this Section 9.
10. MARKETING AND PROMOTION; NATIONAL FUND
Recognizing the value of marketing and promotion and the importance of the
standardization of marketing programs to the furtherance of the System, the
parties agree as follows:
10.1 Comply with Marketing Policies. Franchise Owner agrees to comply with
------------------------------
all reasonable marketing and promotion policies and procedures prescribed by
Franchisor. Such policies and procedures may include opening and ongoing
marketing and promotional campaigns; a direct mail campaign directed to a list
representative of Franchise Owner's local
17
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referral sources; and advertising programs or campaigns in which Franchise
Owner's participation shall be deemed necessary by Franchisor.
10.2 Submit Marketing Plans. Franchise Owner agrees to submit to
----------------------
Franchisor, through the mail, return receipt requested, for its prior approval
(except with respect to prices to be charged), samples of all marketing and
promotional plans and materials that Franchise Owner desires to use and which
have not been prepared or previously approved by Franchisor within the prior
twelve month period. If written disapproval thereof is not received by
Franchise Owner from Franchisor within fifteen (15) days of receipt by
Franchisor of such samples or materials, Franchisor shall be deemed to have
given the required approval. Franchisor reserves the right to communicate, in
whole or in part, marketing and promotional plans and materials which it
receives from the Franchise Owner to other franchise owners for their use, or to
use the same in any marketing and promotion by Franchisor.
10.3 National Fund. Franchise Owner's monthly contribution to the National
-------------
Fund may be increased to exceed one and one-half percent (1.5%) of Gross
Receipts, and/or the maximum annual contribution may exceed $10,000, if two-
thirds (2/3) of all franchise owners who are obligated to contribute to the
National Fund vote for an increase in the contribution to the National Fund. In
connection with any vote to increase contributions to the National Fund,
Franchise Owner shall have one vote for each franchise agreement under which
Franchise Owner is required to become a member of the National Fund. The
National Fund shall be maintained and administered by Franchisor or its
designee, as follows:
10.3.1 The National Fund, all contributions thereto, and any earnings
thereon shall be used exclusively to meet any and all costs of preparing,
offering, distributing, obtaining, conducting and administering marketing, and
educational activities, and providing training opportunities for Option Care
franchisees;
10.3.2 Franchisor shall direct all activities of the National Fund
with sole discretion over the concepts, materials, and media used and the
placement and allocation thereof. Franchise Owner agrees and acknowledges that
Franchisor undertakes no obligation in administering the National Fund to make
expenditures for Franchise Owner which are equivalent or proportionate to
Franchise Owner's contribution or to insure that any particular franchise owner
benefits directly or pro rata from expenditures by the National Fund;
10.3.3 Franchise Owner agrees to contribute to the National Fund by
separate check made payable to the National Fund. All sums paid by Franchise
Owner to the National Fund shall be maintained in an account separate from the
other monies of Franchisor and shall not be used to defray any of Franchisor's
expenses, except for such reasonable administrative costs and overhead, if any,
as Franchisor may incur in activities reasonably related to the conduct of
activities under and maintenance and administration of the National Fund. The
National Fund and its earnings shall not otherwise inure to the benefit of
Franchisor. Franchisor shall maintain separate bookkeeping accounts for the
National Fund, which shall
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not be an asset of Franchisor. A statement of the operations of the National
Fund as shown on the books of the National Fund shall be prepared annually and
shall be made available to Franchise Owner;
10.3.4 It is intended that contributions to, and earnings of, the
National Fund shall not be taxable income to Franchisor. Toward this end, it is
anticipated that all contributions to and earnings of the National Fund will be
expended for marketing, educational training and promotional purposes during the
taxable year of receipt. If, however, excess amounts remain in the National
Fund at the end of a taxable year, all expenditures in the following taxable
year(s) shall be made first out of accumulated earnings from previous years,
next out of earnings in the current year and finally from contributions; and
10.3.5 Although the National Fund is intended to be of perpetual
duration, Franchisor maintains the right to terminate the National Fund. The
National Fund shall not be terminated, however, until all monies in the National
Fund have been expended in accordance with the provisions of this Section 5.4
or returned to contributors on the basis of their respective contributions.
11. ACCOUNTING AND RECORDS
11.1 Preserve Records. Franchise Owner shall preserve, for at least five
----------------
(5) years from the dates of their preparation, full, complete and accurate
books, records and accounts for the Franchised Business in accordance with
generally accepted accounting principles and in the form and manner prescribed
by Franchisor from time to time in the Manual or otherwise in writing.
11.2 Provide Financial Statements. Franchise Owner shall, at its expense,
----------------------------
provide to Franchisor financial statements, including a balance sheet and income
statement, accompanied by a review report prepared by an independent certified
public accountant in a form satisfactory to Franchisor, within ninety (90) days
after the end of each fiscal year of the Franchised Business, showing the
results of operations of the Franchised Business during the fiscal year.
11.3 Provide Other Business Records. Franchise Owner shall also submit to
------------------------------
Franchisor, for review or auditing, such other forms, reports, records,
information and data as Franchisor may reasonably designate, including but not
limited to income tax returns, in the form and manner, and at the times and
places, as are reasonably specified by Franchisor.
11.4 Right to Inspect Business Records. Franchisor or its designated agents
---------------------------------
shall have the right at all reasonable times to inspect, audit and copy, at
Franchisor's expense, without notice, Franchise Owner's books, business tax
returns and other business records for the Franchised Business. Franchisor
shall also have the right, at any time, to have an independent audit made of the
books and records of the Franchised Business. If an inspection or audit
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should reveal that any Gross Receipts have been understated in any report to
Franchisor, then Franchise Owner shall immediately pay to Franchisor, upon
demand, all royalties due on the amount understated, in addition to interest
from the date such royalties were due until paid, at the rate which is two
percent (2%) per month or the maximum rate permitted by law, whichever is less.
If an inspection or audit discloses an understatement of five percent (5%) or
more in any report of Gross Receipts, Franchise Owner shall, in addition,
reimburse Franchisor for any and all costs and expenses connected with the
inspection or audit (including, without limitation, travel, lodging and wage
expenses and reasonable accounting and legal costs). The foregoing remedies
shall be in addition to any other remedies Franchisor may have.
12. INSURANCE
12.1 Procure and Maintain Insurance. Franchise Owner agrees to procure,
------------------------------
prior to the commencement of business, and maintain in full force and effect
during the term of this Agreement, at Franchise Owner's expense, an insurance
policy or policies protecting Franchise Owner and Franchisor, and each of their
respective shareholders, partners, directors, employees and agents against any
loss, liability, personal injury, death, property damage or expense whatsoever
arising or occurring in connection with the establishment or operation of the
Franchised Business. All insurance required by this Agreement, with the
exception of worker's compensation insurance, shall name Franchisor as an
additional insured and shall expressly provide that any interests it may have in
the policies shall not be affected by any breach by Franchise Owner of any
policy provisions.
12.2 Types of Insurance. Each insurance policy shall be written by an
------------------
insurance company satisfactory to Franchisor in accordance with standards and
specifications prescribed by Franchisor from time to time, and shall include at
a minimum the following:
12.2.1 Comprehensive general liability insurance, expressly including
coverage for contractual liability; broad form property damage;
product/completed operations liability; and automobile liability and personal
injury coverage in the amount of One Million Dollars ($1,000,000) per person,
per occurrence and Three Million Dollars ($3,000,000) in the aggregate;
12.2.2 Professional liability insurance in the amount of Three Million
Dollars ($3,000,000) in the aggregate, with a minimum limit of One Million
Dollars ($1,000,000) per occurrence. Coverage shall be on an occurrence basis,
and not on a claims made basis, unless otherwise approved in advance and in
writing by Franchisor;
12.2.3 Worker's compensation and employer's liability insurance, as
well as such other insurance, as may be required by statute or rule of the state
in which the Franchised Business is operated;
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12.2.4 Such other policies or additional amounts of insurance as may
be required under the terms of any lease or sublease applicable to any office
maintained by the Franchised Business; and
12.2.5 Franchise Owner agrees that Franchisor may, upon adequate
notice, and for its reasonable business purposes, from time-to-time specify
additional types of coverage and higher policy limits than as described in this
Section 12.2.
12.3 No Limitation. Franchise Owner's obligations to obtain and maintain
-------------
the required policy or policies in the amounts specified shall not be limited in
any way by reason of any insurance which may be maintained by Franchisor, nor
shall Franchise Owner's performance of that obligation relieve it of liability
under the indemnity provisions set forth in Section 20 of this Agreement.
12.4 Evidence of Insurance. At least thirty (30) days prior to the time any
---------------------
insurance is first required to be carried by Franchise Owner, and thereafter
upon renewal or replacement of any such policy, Franchise Owner shall deliver to
Franchisor Certificates of Insurance evidencing the proper coverage with limits
not less than those required by this Agreement. All Certificates shall expressly
provide that no less than thirty (30) days' prior written notice shall be given
to Franchisor in the event of material alteration to, or cancellation or lapse
of, the coverages evidenced by such Certificates.
12.5 Franchisor's Right to Procure. Should Franchise Owner, for any reason,
-----------------------------
fail to procure or maintain the insurance required by this Agreement, Franchisor
shall have the right and authority (without, however, any obligation to do so)
to immediately procure such insurance and to charge the same to Franchise Owner.
The foregoing remedies shall be in addition to any other remedies Franchisor may
have.
12.6 Waiver of Subrogation. To the maximum extent permitted by insurance
---------------------
policies which may be owned by Franchisor and Franchise Owner, Franchise Owner
and Franchisor, for the benefit of each other, waive any and all rights of
subrogation which might otherwise exist.
13. TRANSFER OF INTEREST
13.1 Transfer by Franchise Owner.
---------------------------
13.1.1 Franchise Owner understands and acknowledges that the rights
and duties set forth in this Agreement are personal to Franchise Owner, and that
Franchisor has granted this franchise in reliance on Franchise Owner's business
skill, financial capacity, personal character and professional reputation.
Accordingly:
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13.1.1.1 Neither Franchise Owner nor any individual,
partnership, corporation or other legal entity which directly or indirectly owns
any interest in this Franchise (as defined below) shall sell, assign, transfer,
convey, give away, pledge, mortgage or otherwise encumber (all of which shall be
referred to as a "Transfer" for purposes of this Section only) any direct or
indirect interest in Franchise Owner, this Agreement, the Franchised Business or
all or a substantial portion of the stock or assets of the Franchise Owner or
the Franchised Business, including any portion of the Territory (all of which
shall be referred to as the "Franchise" for purposes of this Section 13 only)
without the prior written consent of Franchisor;
13.1.1.2 Franchisor's prior written consent shall not be
required for a transfer of less than a five percent interest in a publicly-held
corporation; and
13.1.1.3 Any purported assignment or transfer, by operation
of law or otherwise, not having the prior written consent of Franchisor shall be
null and void and shall constitute a material breach of this Agreement, for
which Franchisor may terminate without opportunity to cure pursuant to Section
14.1.6 of this Agreement;
13.1.2 Franchisor shall not unreasonably withhold its consent to a
Transfer of an interest in the Franchise, provided that Franchisor may require
any or all of the following of the Franchise Owner and its beneficial owners
(collectively referred to as "Transferor" for purposes of this Section) and the
transferee and its beneficial owners (collectively referred to as "Transferee"
for purposes of this Section) as conditions of its approval:
13.1.2.1 Each Transferee shall execute the form of personal
guarantee attached to this Agreement;
13.1.2.2 All of Transferor's accrued monetary obligations
and other outstanding obligations to Franchisor and its affiliates shall have
been satisfied;
13.1.2.3 Transferor is not in default of any provision of
this Agreement, any amendment to this Agreement, or any other agreement between
Transferor and Franchisor or its affiliates;
13.1.2.4 Transferor shall have executed a general release
in a form satisfactory to Franchisor of any and all claims against Franchisor
and its affiliates and their respective shareholders, partners, directors,
officers, employees and agents, in their corporate and individual capacities, to
the fullest extent permitted by law;
13.1.2.5 Each Transferee shall enter into a written
assignment in a form satisfactory to Franchisor, assuming and agreeing to
discharge all of Franchise Owner's obligations under this Agreement;
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13.1.2.6 Each Transferee shall demonstrate to Franchisor's
satisfaction that such Transferee meets Franchisor's professional, educational,
managerial, financial and business standards, and possesses a good moral
character;
13.1.2.7 Any person who is to be substituted as Manager of
the Franchised Business shall have been approved by Franchisor and, unless
waived in writing by Franchisor, shall successfully complete the next available
franchise training and complete the Install Program training course then in
effect;
13.1.2.8 Transferor shall pay to Franchisor a non-
refundable transfer fee to cover Franchisor's legal, accounting, record keeping
and other costs related to the Transfer in an amount not to exceed fifty percent
(50%) of the initial fee that then would be charged to new franchise owners
under the System for a comparable territory;
13.1.2.9 Transferor shall agree to remain liable for all of
the obligations to Franchisor in connection with the Franchised Business prior
to the effective date of the Transfer;
13.1.2.10 In the event that the proposed Transfer is to a
corporation formed by Franchise Owner for the convenience of ownership,
Transferor shall be the owner of all the voting stock of the corporation; and
13.1.2.11 In the event a Transfer, alone or together with
other Transfers, would have the effect of transferring a controlling interest in
the Franchise, the Transferee shall execute, for a term ending on the expiration
date of this Agreement, the standard form of franchise agreement then offered to
new franchise owners, which franchise agreement may have terms different from
the terms of this Agreement; provided, however, in lieu of any initial fee, the
Transferor shall pay the transfer fee described in Section 13.1.2.8 above, and
the royalty fee, the National Fund contribution limitation, and the Territory
shall remain the same. The Transferee shall also execute such other ancillary
agreements as Franchisor may require for the Franchised Business.
13.2 Offerings by Franchise Owner. Securities or partnership interests in
----------------------------
Franchise Owner may be sold, by public or private offering or otherwise, only
with the prior written consent of Franchisor (whether or not Franchisor's
consent is required under Section 13.1 hereof), which consent shall not be
unreasonably withheld. All materials required for such offering by federal or
state law shall be submitted to Franchisor for review prior to being filed with
any government agency; and any materials to be used in any exempt offering shall
be submitted to Franchisor for review prior to their use. Franchise Owner shall
provide all such materials to Franchisor at least thirty (30) days prior to the
commencement of any offering. No Franchise Owner offering shall imply (by use of
the Proprietary Marks or otherwise) that Franchisor is participating as an
underwriter, issuer or offeror of securities; and Franchisor's review of any
offering shall be limited solely to the subject of the relationship between
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Franchise Owner and Franchisor. Franchise Owner and the other participants in
the offering must fully indemnify Franchisor in connection with the offering.
For each proposed offering, Franchise Owner shall pay to Franchisor a non-
refundable fee, not to exceed fifty percent (50%) of the initial fee that then
would be charged to new franchise owners under the System for a comparable
territory, to reimburse Franchisor for its reasonable costs and expenses
associated with reviewing the proposed offering.
13.3 Right of First Refusal.
----------------------
13.3.1 Any party holding any interest in the Franchise who desires to
accept any offer from a third party to purchase such interest shall notify
Franchisor in writing of the offer, and shall provide such information and
documentation relating to the offer as Franchisor may require.
13.3.2 Except for a Transfer among the original owners who were
granted the franchise hereunder or a Transfer from an original owner to that
owner's spouse or child(ren), Franchisor shall have the right and option,
exercisable within sixty (60) days after receipt of written notification and
receipt of any required information or documentation, to send written notice to
the seller that Franchisor intends to purchase the seller's interest on the same
terms and conditions contained in a bona fide offer from the third party, or the
---- ----
cash equivalent. In the event that Franchisor elects to purchase the seller's
interest, closing on such purchase must occur within sixty (60) days from the
date of notice to the seller of the election to purchase by Franchisor. In the
event that Franchisor does not elect to purchase the sellers' interest, closing
on such purchase shall occur within ninety (90) days after the expiration of
Franchisor's right to purchase. Failure to close the sale within said period or
any material change in the terms of the offer prior to closing shall constitute
a new offer subject to the same rights of first refusal by Franchisor described
in this Section 13.3.
13.3.3 Failure of Franchisor to exercise the option afforded by this
Section 13.3 shall not constitute a waiver of any other provision of this
Agreement, including all the requirements of this Section 13, with respect to a
proposed Transfer.
13.4 Transfer Upon Death or Mental Incapacity. Upon the death or finding
----------------------------------------
by a court of mental incapacity of any person with an interest in the Franchise,
the executor, administrator or personal representative of such person shall
transfer within six (6) months after such death or mental incapacity the
deceased or incompetent owner's interest to a third party approved by
Franchisor. Such transfers, including transfers by devise or inheritance, shall
be subject to the same conditions as any Transfer. However, in the case of
transfer by devise or inheritance, if the heirs or beneficiaries of any such
person are not approved by Franchisor, the personal representative of the
deceased shall have a reasonable time to dispose of the deceased's interest,
which disposition shall be subject to all the terms and conditions for Transfers
contained in this Agreement. If the interest is not disposed of within six (6)
months, Franchisor may terminate this Agreement.
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13.5 Non-Waiver of Claims. Franchisor's consent to a Transfer shall not
--------------------
constitute a waiver of any claims it may have against the Transferor, nor shall
it be deemed a waiver of Franchisor's right to demand exact compliance with any
of the terms of this Agreement by the Transferee.
13.6 Transfer by Franchisor. Franchisor shall have the right to transfer
----------------------
or assign all or any part of its rights or obligations herein to any person or
legal entity.
14. DEFAULT AND TERMINATION
14.1 Termination by Franchisor With Notice But Without Opportunity to Cure.
---------------------------------------------------------------------
Franchisor may, without providing an opportunity to cure, terminate this
Agreement by giving written notice to Franchise Owner stating the reasons for
and effective date of termination if:
14.1.1 Franchise Owner abandons the Franchised Business or otherwise
forfeits the right to transact business in the Territory. However, if such
abandonment results from the governmental exercise of the power of eminent
domain or is due to fire, flood, earthquake or other similar cause beyond
Franchise Owner's control, then in such event this Agreement shall not be
terminated for that reason for sixty (60) days thereafter, provided Franchise
Owner recommences operation of the Franchised Business within that time;
14.1.2 Franchise Owner engages in a pattern of material, willful and
repeated deception of patients concerning the source, nature or quality of
products sold or services rendered;
14.1.3 Franchise Owner fails to comply with the ethical standards
established in the state(s) where the professional services of the Franchised
Business are performed. Franchise Owner shall be deemed to have failed to comply
with those ethical standards whenever a state agency regulating the practice of
pharmacy or nursing initially determines that actions of Franchise Owner merit
the suspension or revocation of Franchise Owner's pharmacy permit or any nursing
license Franchise Owner may have obtained;
14.1.4 Franchise Owner fails, for a period of ten (10) days after
notification of noncompliance from any applicable agency, to comply with any
federal, state or local law applicable to the operation of the Franchised
Business;
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14.1.5 Franchise Owner is convicted of a felony or any other criminal
misconduct which is relevant to the operation of the Franchised Business or is
disbarred or suspended from participation in the Medicare or any Medicaid
programs;
14.1.6 Franchise Owner, or any partner or shareholder in Franchise
Owner, purports to transfer any rights or obligations under this Agreement to
any third party without Franchisor's prior written consent, contrary to the
terms of Section 13;
14.1.7 Franchise Owner fails to permit Franchisor or Franchisor's
agents or representatives to inspect the Franchised Business or the books or
records associated with the Franchised Business, at such times and places as
provided for under this Agreement;
14.1.8 Franchise Owner misuses or makes any unauthorized use of the
Proprietary Marks or other identifying characteristics of the System, or
otherwise materially impairs the goodwill associated with the System or
Franchisor's rights therein;
14.1.9 Franchise Owner knowingly maintains false books or records or
submits any false reports to Franchisor;
14.1.10 Franchise Owner is repeatedly or habitually in default under
Section 14.1 or in material default pursuant to any other agreement with
Franchisor or any affiliate of Franchisor, or, after curing any default
following notice pursuant to Section 14.3, commits the same default, whether or
not cured after notice;
14.1.11 Franchise Owner fails to comply with the in-term covenants in
Section 16 or fails to obtain execution of the covenants required under Section
9 or Section 16;
14.1.12 Franchise Owner discloses or divulges the contents of the
Manual or other Confidential Information contrary to the terms of this
Agreement;
14.1.13 Franchise Owner or any beneficial owner makes a material
misrepresentation or omits to disclose material information to Franchisor in
connection with the application to Franchisor for this Franchise Agreement;
14.1.14 Franchisor determines that continued operation of the
Franchised Business poses a material threat to public health or safety; or
14.1.15 The Franchised Business fails to obtain or maintain any
required accreditation.
14.2 Termination by Franchisor Without Notice or Opportunity to Cure.
---------------------------------------------------------------
Should any of the following events occur, Franchise Owner shall be deemed to be
in default under this
26
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Agreement, and this Agreement shall automatically terminate without notice to
Franchise Owner:
14.2.1 Franchise Owner becomes insolvent, makes an assignment for the
benefit of its creditors of all or any part of the assets used in the Franchised
Business, or a petition of bankruptcy is filed by Franchise Owner or such a
petition is filed against and not opposed by Franchise Owner;
14.2.2 Franchise Owner is adjudicated a bankrupt or insolvent;
14.2.3 A bill in equity or other proceeding or the appointment of a
receiver of Franchise Owner or other custodian for Franchise Owner's business or
assets is filed and consented to by Franchise Owner, or a receiver or other
custodian (permanent or temporary) of Franchise Owner's business or assets, or
any part thereof, is appointed by any court of competent jurisdiction;
14.2.4 Proceedings for a composition with creditors under any state or
federal law is initiated by or against Franchise Owner;
14.2.5 A final judgment against Franchise Owner remains unsatisfied or
of record for thirty (30) days or longer (unless a supersedeas bond is filed),
execution is levied against Franchise Owner's business or assets, a suit to
foreclose any lien or mortgage against Franchise Owner is filed and not
dismissed within thirty (30) days, or the real or personal property of Franchise
Owner is sold after levy thereupon by any sheriff, marshal or constable; or
14.2.6 Franchise Owner is dissolved and if such dissolution is by
reason of failure to file a franchise tax return with the state, the corporation
is not re-instated in good standing within thirty (30) days following
dissolution.
14.3 Termination by Franchisor With Notice and Opportunity to Cure. Except
-------------------------------------------------------------
as provided in Section 14.1 and 14.2 of this Agreement, Franchisor may terminate
this Agreement only by giving written notice of termination to Franchise Owner
stating the nature of the default or breach at least thirty (30) days prior to
the effective date of termination or such longer period as applicable law may
require (the "Cure Period"); provided, however, that Franchise Owner may avoid
termination by immediately initiating a remedy to cure such default or breach
and curing it to Franchisor's satisfaction within the Cure Period. If any such
default is not cured within the Cure Period, this Agreement shall terminate
without further notice to Franchise Owner effective immediately upon the
expiration of the Cure Period.
15. OBLIGATIONS UPON TERMINATION
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15.1 Post-Termination Obligations of Franchise Owner. Except as otherwise
-----------------------------------------------
provided in this Section 15, upon termination of this Agreement all rights
granted hereunder to Franchise Owner by this Agreement are terminated, and
Franchise Owner shall immediately:
15.1.1 Cease to operate the Franchised Business and not, directly or
indirectly, represent itself as a franchise owner of Franchisor;
15.1.2 Permanently cease to use, in any manner whatsoever, any
Confidential Information associated with the System, and the Proprietary Marks
and all signs, equipment, marketing materials, stationery, forms and other items
which display the Proprietary Marks;
15.1.3 Cease utilizing, directly or indirectly, Franchise Owner's
telephone numbers, and complete all paperwork necessary to transfer immediately
Franchise Owner's telephone numbers to the party Franchisor designates
(Franchise Owner acknowledges and agrees that no additional consideration is due
Franchise Owner for this transfer);
15.1.4 Pay all liquidated or ascertainable sums owing from Franchise
Owner to Franchisor, without set-off or other reduction on account of
unliquidated claims, together with any fees accruing after the termination or
expiration on Gross Receipts attributable to accounts receivable from goods or
services furnished during the term of this Agreement;
15.1.5 Pay to Franchisor all damages, costs and expenses, including
reasonable attorneys' fees, incurred by Franchisor as a result of the
termination of this Agreement, including those incurred in obtaining injunctive
or other relief for the enforcement of any provisions of this Agreement, which
obligation shall give rise to and remain, until paid in full, a lien in favor of
Franchisor against any and all of the personal property, trade furnishings,
equipment, signs, fixtures and inventory owned by Franchise Owner and used in
connection with the Franchised Business;
15.1.6 Deliver to Franchisor via U.P.S. or comparable carrier, via
first class service, the Manual, all business records (other than
prescriptions, patient records, tax returns and bank statements), files, and
brochures, and any and all other materials relating to the operation of the
Franchised Business, all of which are acknowledged to be Franchisor's property,
and shall retain no copy or record of any of the foregoing, except Franchise
Owner's copy of this Agreement and any other agreements with Franchisor or any
affiliate, copies of any correspondence between the parties, and any copies of
other documents which Franchise Owner reasonably needs for compliance with any
provision of law;
15.1.7 Comply with the applicable covenants contained in Sections 9
and 16 of this Agreement, which covenants shall survive the termination of this
Agreement;
15.1.8 Offer Franchisor the first right of refusal to assume Franchise
Owner's existing lease for the premises of the Franchised Business; and
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15.1.9 Offer Franchisor the first right of refusal to purchase
Franchise Owner's equipment, supplies, signs and marketing material used in
operation of the Franchised Business, on the terms described in Section 15.2,
hereof.
15.2 Post-Termination Right of Franchisor. Upon termination of this
------------------------------------
Agreement, Franchisor shall have the right (but not the duty) to assume
Franchise Owner's occupancy rights under any existing lease for any premises of
the Franchised Business. Franchisor also shall have the right (but not the
duty) to purchase any or all equipment, supplies, signs and marketing materials
used in operation of the Franchised Business, in addition to any items bearing
Franchisor's Proprietary Marks and Franchise Owner's Medicare Part B Provider
Number (collectively, the "Assets"). Franchisor may exercise this right to
purchase by giving notice of intent to do so within thirty (30) days after
termination of this Agreement. Franchisor shall pay Franchise Owner the lower of
Franchise Owner's cost or fair market value of the Assets. If the parties
cannot agree on fair market value of the Assets within a reasonable time, an
independent appraiser shall be designated by Franchisor and its determination
shall be binding.
16. COVENANTS
16.1 Confidentiality Covenant. Franchise Owner and, if Franchise Owner is a
------------------------
corporation, partnership or limited liability company, its shareholders,
partners or owners, as the case may be (collectively, the "Owners"), each
specifically acknowledge that Franchise Owner and its Owners will receive
valuable specialized training and Confidential Information by entering into this
Agreement. Franchise Owner and each of its Owners covenant that during the term
of this Agreement, except as otherwise approved in advance and in writing by
Franchisor, neither Franchise Owner nor any of its Owners shall, either directly
or indirectly, for itself, or through, on behalf of, or in conjunction with any
person, persons or legal entity, own, maintain, operate, engage in, be employed
by or have any interest in any business which provides health-care services
similar to, or the same as, those provided by Franchise Owner pursuant to this
Agreement.
16.2 Non-Competition Restriction. Franchise Owner and each of its Owners
---------------------------
covenant that, except as otherwise approved in advance and in writing by
Franchisor, neither Franchise Owner nor any of its Owners shall, for a
continuous uninterrupted period commencing upon the termination (but not the
expiration) of this Agreement (or if the termination of this Agreement is
contested by Franchise Owner or an Owner, upon the final resolution of any
dispute concerning the termination of this Agreement) regardless of the cause
for termination and continuing for two (2) years thereafter, either directly or
indirectly, for itself, or through, on behalf of, or in conjunction with any
person, persons or legal entity:
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16.2.1 Own, maintain, operate, engage in, be employed by or have any
interest in any business which provides within the Territory health-care
services similar to, or the same as, those Franchise Owner could provide
pursuant to this Agreement;
16.2.2 Seek or accept referrals for the provision of health-care
services similar to, or the same as, those provided by Franchise Owner pursuant
to this Agreement from any referral source which referred patients to Franchise
Owner for goods or services of the Franchised Business at any time during the
two (2) years prior to the termination of this Agreement; or
16.2.3 Provide health-care services similar to, or the same as, those
provided by Franchise Owner pursuant to this Agreement to any patient to whom
Franchise Owner provided any health-care services under this Agreement at any
time during the two (2) years prior to the termination of this Agreement,
provided, however, that Franchise Owner shall be obligated to provide all
current patients with notice to seek alternate arrangements and shall assume
that arrangements have been made for the provision of such services.
16.3 Exceptions from Non-Competition Restrictions. Notwithstanding the
--------------------------------------------
foregoing, Section 16.2 shall not prohibit an Owner who is a licensed pharmacist
or nurse from: (a) engaging in activities which are unrelated to Therapies
provided under the System; (b) having an interest in any business (e.g., a
retail pharmacy, home health agency or durable medical equipment business) which
does not compound or dispense pharmaceuticals, or sell, rent or lease equipment,
associated with the Therapies provided under the System; or (c) being employed
in an acute-care facility solely to provide products or services to in-patients
of that facility. Section 16.2 also shall not apply to ownership by Franchise
Owner or any Owner of less than one percent (1%) beneficial interest in the
outstanding equity securities of any publicly-held corporation. Section 16.2
also shall not prohibit any person from owning an interest in other Option Care
franchises, or from being employed by any Option Care franchises.
16.4 Enforcement of Covenants. Franchise Owner and its Owners expressly
------------------------
agree that the existence of any claims they may have against Franchisor, whether
or not arising from this Agreement, shall not constitute a defense to the
enforcement by Franchisor of the covenants in this Section 16. Franchise Owner
and its Owners jointly and severally agree to pay all costs and expenses
(including reasonable attorneys' fees) incurred by Franchisor in connection with
the enforcement of this Section 16.
16.5 Irreparable Injury. Franchise Owner and its Owners acknowledge that
------------------
Franchise Owner's violation of the terms of this Section 16 would result in
irreparable injury to Franchisor for which no adequate remedy at law may be
available, and Franchise Owner and its Owners accordingly agree that Franchisor
may seek an injunction prohibiting any conduct by Franchise Owner and its Owners
in violation of the terms of this Section 16.
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16.6 Employee Covenants. At Franchisor's request, Franchise Owner agrees to
------------------
obtain execution of covenants similar to those set forth in this Section 16,
including covenants that are operative upon the termination of a person's
relationship with Franchise Owner, from supervisory personnel, officers and
directors, and other persons reasonably determined by Franchisor to be in a
position to use information gained from their association with Franchise Owner
to compete with the Franchise Owner and the System. Every covenant required by
this Section 16.6 shall be in a form satisfactory to Franchisor, including,
without limitation, specific identification of Franchisor as a third party
beneficiary of such covenants with the independent right to enforce them.
17. CORPORATE AND PARTNERSHIP FRANCHISE OWNERS
17.1 Evidence of Legal Entity. If Franchise Owner is a corporation, limited
------------------------
liability company or a partnership, Franchise Owner agrees that the entity will
confine its activities to the operation of the Franchised Business throughout
the term of this Agreement. Franchise Owner agrees to have a written
partnership agreement, unit ownership agreement or buy-sell agreement in effect
during the entire term of this Agreement. Franchise Owner agrees to provide to
Franchisor information about Franchise Owner's organization and management,
including copies of documents, as may be reasonably specified by Franchisor from
time-to-time. The requested information may include the following items as
applicable:
17.1.1 Copies of Franchise Owner's Articles of Incorporation or
Partnership Agreement, or Unit Ownership Agreement, Bylaws, and any other
governing documents, and any amendments to any of these documents.
17.1.2 A current list of the name and title of each officer and
director or managing partner, and a list of each owner of record or beneficial
owner of Franchise Owner showing the number of shares of each class of stock in
Franchise Owner owned by each shareholder, or the capital and profit interests
of each partner. Franchise Owner also agrees to furnish a revised copy of these
lists to Franchisor each time a change occurs to the information.
17.1.3 Franchise Owner shall maintain stop transfer instructions
against the transfer on its records of any equity securities. If Franchise
Owner is a corporation, Franchise Owner shall legibly and conspicuously maintain
on the face of all the securities the following legend:
The transfer of this stock is subject to the terms and
conditions of a Franchise Agreement with Option Care,
Inc. dated __________________19_________.
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17.1.4 If Franchise Owner is a partnership, or limited liability
company, the Partnership Agreement or Unit Ownership Agreement (as the case may
be) shall contain a reference to the terms and conditions of this Agreement.
18. TAXES AND INDEBTEDNESS
18.1 Franchise Owner agrees to promptly pay when due all taxes, accounts and
other indebtedness of every kind levied or assessed against, or incurred by,
Franchise Owner. Franchise Owner agrees to pay to Franchisor an amount equal to
any sales, gross receipts or similar tax (other than income tax) imposed on
Franchisor with respect to any payments to Franchisor required under this
Agreement, unless the tax is credited against income tax otherwise payable by
Franchisor.
18.2 In the event of any bona fide dispute as to Franchise Owner's liability
for taxes, accounts, or other indebtedness, Franchise Owner may contest the
validity or the amount of the tax, account or indebtedness in accordance with
procedures of the taxing authority or applicable law; however, in no event shall
Franchise Owner permit a tax sale or seizure by levy of execution or similar
writ or warrant, or attachment by a creditor, to occur against the Franchised
Business, any office, any improvements to any office, or any other asset of
Franchise Owner.
18.3 Franchise Owner shall notify Franchisor in writing within five (5) days
of the commencement of any action, suit or proceeding, and of the issuance of
any order, writ, injunction, award or decree of any court, agency or other
governmental instrumentality, which may adversely affect the operation or
financial condition of the Franchised Business.
19. INDEPENDENT CONTRACTOR; AUTHORITY
It is understood and agreed by the parties hereto that this Agreement does
not create a fiduciary relationship between them; that Franchise Owner shall be
an independent contractor and shall hold itself out to the public as an
independent contractor including in such manner as Franchisor may reasonably
specify; and that nothing in this Agreement is intended to constitute either
party an agent, legal representative, subsidiary, joint venturer, partner,
employee or servant of the other for any purpose whatsoever.
It is understood and agreed that nothing in this Agreement authorizes
Franchise Owner to make any contract, agreement, warranty or representation on
Franchisor's behalf, or to incur any debt or other obligation in Franchisor's
name, and that Franchisor shall in no event assume liability for, or be deemed
liable under this Agreement as a result of, any such action or by reason of any
act or omission of Franchise Owner in its conduct of the Franchised Business, or
any claim or judgment arising therefrom against Franchisor.
20. INDEMNIFICATION
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20.1 Franchise Owner assumes sole responsibility for losses arising out of
the operation of the Franchised Business, and the acts or omissions of Franchise
Owner and its agents, servants and contractors. Franchise Owner shall
indemnify, defend and hold Franchisor and its shareholders, partners, directors,
officers, employees and agents harmless against and to reimburse them for all
losses arising out of or in any way connected with the operation of the
Franchised Business or the acts or omissions of Franchise Owner or its agents,
servants or contractors. These indemnities shall continue in full force and
effect subsequent to and notwithstanding the expiration or termination of this
Agreement. "Losses", as used in this Section 20.1, shall include all
liabilities, penalties, costs, losses, damages, expenses, causes of action,
claims or judgments, including reasonable attorneys' fees and costs.
20.2 Under no circumstances shall any person entitled to indemnity under
this Agreement be required or obligated to seek recovery from third parties or
otherwise mitigate their losses in order to maintain a claim against the
indemnifying party, nor shall a failure to seek such recovery or mitigate losses
in any way reduce the amounts recoverable from the indemnifying party.
21. APPROVALS AND WAIVERS
Whenever this Agreement requires the prior approval or consent of
Franchisor, Franchise Owner shall make a timely written request to Franchisor,
and such approval or consent shall be obtained in writing signed by the
President or any Vice President of Franchisor. No other communication from any
officer, employee or agent of Franchisor, whether oral or in writing, shall
constitute a valid approval or consent of Franchisor pursuant to this Section
21.
Franchisor makes no warranties or guarantees upon which Franchise Owner may
rely, and assumes no liability or obligation to Franchise Owner, by providing
any waiver, approval, consent or suggestion to Franchise Owner in connection
with this Agreement, or by reason of any neglect, delay, or denial of any
request therefor.
No delay, waiver, omission or forbearance on the part of Franchisor to
exercise any right, option, duty or power arising out of any breach or default
by Franchise Owner under any of the terms, provisions, covenants or conditions
hereof, shall constitute a waiver by Franchisor to enforce any such right,
option, duty or power as against Franchise Owner, or as to any subsequent breach
or default by Franchise Owner.
22. NOTICES
Any and all notices required or permitted under this Agreement shall be in
writing and shall be personally delivered or mailed by certified mail, return
receipt requested, postage prepaid, to the respective parties at the following
addresses unless and until a different address
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has been designated by written notice duly given in accordance with this section
to the other party:
Notices to Franchisor: General Counsel
Option Care, Inc.
100 Corporate North, Suite 212
Bannockburn, IL 60015
Notices to Franchise Owner: Manager
J. Harris Morgan, Jr.
159 East Broad Street, Box 394
Camilla, GA 31730
Notices Post-Termination to
Franchise Owner: _____________________________________________
_____________________________________________
_____________________________________________
Any notice by certified mail shall be deemed to have been given at the earlier
of (i) three (3) days after the date and time of mailing, or (ii) the date and
time of actual receipt.
23. ENTIRE AGREEMENT
This Agreement and the Exhibits attached hereto constitute the entire, full
and complete Agreement between Franchisor and Franchise Owner concerning the
subject matter hereof, and supersede all prior agreements, no other
representations having induced Franchise Owner to execute this Agreement. No
representations, inducements, promises or agreements, oral or otherwise, not
embodied herein or attached hereto (unless of subsequent date) were made by
either party, and none shall be of any force or effect with reference to this
Agreement or otherwise, except for purposes of Section 14.1.13. Franchisor is
nonetheless permitted, in its sole discretion, to reduce the scope of any
covenant or portion thereof set forth in Section 16, without Franchise Owner's
consent, effective immediately upon receipt by Franchise Owner of written
notice, and Franchise Owner agrees that it shall comply with the modified
covenant which shall be fully enforceable. Except for those permitted to be
made by Franchisor hereunder, no amendment, change, or variance from this
Agreement shall be binding on either party unless mutually agreed to by the
parties and executed by their authorized officers or agents in writing.
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24. SEVERABILITY AND CONSTRUCTION
Except as expressly provided to the contrary in this Agreement, nothing in
this Agreement is intended, nor shall be deemed, to confer any rights or
remedies under or by reason of this Agreement upon any person or legal entity
other than Franchise Owner, Franchisor, Franchisor's officers, directors and
employees, and such of Franchise Owner's and Franchisor's respective successors
and assigns as may be contemplated and permitted by Section 13 hereof.
Franchise Owner agrees that each promise or covenant of this Agreement that
may result from striking any portion or portions which a court may hold to be
unreasonable and unenforceable in a final decision to which Franchisor is a
party, or from reducing the scope of any promise or covenant to the extent
required to comply with such a court order, is separately enforceable to the
maximum extent permitted by law.
All captions in this Agreement are intended solely for the convenience of
the parties, and none shall be deemed to affect the meaning or construction of
any provision hereof.
All references herein to the masculine, neuter, singular or plural shall be
construed to include the masculine, feminine, neuter, singular or plural, where
applicable; and all acknowledgments, promises, covenants, agreements and
obligations herein made or undertaken by Franchise Owner shall be deemed jointly
and severally undertaken by all those executing this Agreement on behalf of
Franchise Owner.
This Agreement may be executed in several counterparts and each copy so
executed shall be deemed one and the same document.
25. APPLICABLE LAW
This Agreement takes effect upon its acceptance and execution by Franchisor
in Illinois, and shall be interpreted and construed under the laws of Illinois,
which laws shall prevail in the event of any conflict of law; provided, however,
that if any of the provisions of this Agreement would not be enforceable under
the laws of Illinois, then such provisions shall be interpreted and construed
under the laws of the state in which the Franchised Business is located.
The parties agree that any action brought by either party against the other
in any court, whether federal or state, shall be brought within the State of
Illinois in the Cook County judicial district and do hereby waive all questions
of personal jurisdiction or venue for the purpose of carrying out this
provision.
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No right or remedy conferred upon or reserved to Franchisor or
Franchise Owner by this Agreement is intended to be, nor shall be deemed,
exclusive of any other right or remedy herein or permitted by law or equity, but
each shall be cumulative of every other right or remedy.
Nothing herein contained shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
26. ACKNOWLEDGMENTS
Franchise Owner acknowledges that it has conducted an independent
investigation of the Franchised Business, and recognizes that the business
venture contemplated by this Agreement involves business risks and that the
success of the Franchised Business will be largely dependent upon the ability of
Franchise Owner as an independent businessperson. Franchisor expressly disclaims
the making of, and Franchise Owner acknowledges that it has not received, any
warranty or guarantee, express or implied, as to the potential volume, profits
or success of the business venture contemplated by this Agreement.
Franchise Owner acknowledges that it has received, read and understood
this Agreement, including all related exhibits and agreements, and that
Franchisor has accorded Franchise Owner ample time and opportunity to consult
with advisors of its own choosing about the potential benefits and risks of
entering into this Agreement.
Franchise Owner acknowledges that this Agreement shall not become
effective until signed by Franchisor's President or any Vice President of
Franchisor.
IN WITNESS WHEREOF, each party hereto has signed and delivered or has caused
its duly authorized representative to sign and deliver this Agreement on the
date first above written.
FRANCHISOR:
OWNERS OPTION CARE, INC.,
(as to Section 16 only) a California corporation
_________________________________ Date:___________________________________
/s/ J. Harris Morgan, Jr. By:_____________________________________
- ---------------------------------
Print Name
_________________________________ Name: Cathy Bellehumeur
-----------------------------------
_________________________________ Title: Secretary
Print Name ----------------------------------
_________________________________ FRANCHISE OWNER:
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OPTION CARE CAMILLA, INC.,
_________________________________ a Georgia corporation
Print Name
Date:___________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
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GUARANTEE
As an inducement to Option Care, Inc. ("Franchisor") to execute the
Franchise Agreement dated ________________________, 19___ including any
amendments thereto whenever made (the "Agreement"), the undersigned, jointly and
severally, hereby agree to be individually bound by all the terms and conditions
of the Agreement, copies of which the undersigned acknowledge reading. The
undersigned, jointly and severally, also hereby unconditionally guarantee to
Franchisor and its successors and assigns that all of Franchise Owner's
obligations under the Agreement will be punctually paid and performed.
Upon default by Franchise Owner or notice from Franchisor, the undersigned
will immediately make each payment and perform each obligation required of
Franchise Owner under this Agreement. Without affecting the obligations of the
undersigned under this Guarantee, Franchisor may without notice to the
undersigned extend, modify, or release any indebtedness or obligation of
Franchise Owner, or settle, adjust or compromise any claims against Franchise
Owner. The undersigned waive notice of demand for payment or performance by
Franchise Owner.
Upon the death of an individual guarantor, the estate of such guarantor will
be bound by this Guarantee but only for defaults and obligations hereunder
existing at the time of transfer of the interest of the individual guarantor as
required by the Agreement and the obligations of the other guarantors will
continue in full force and effect.
IN WITNESS WHEREOF, each of the undersigned has signed this Guarantee as of
the date of the above Agreement.
GUARANTOR(S)
_______________________________________________________
J. Harris Morgan, Jr.
_______________________________________________________
_______________________________________________________
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EXHIBIT 10.6
LEASE
THIS LEASE, made as of this 23rd day of October, 1996, between LaSALLE
NATIONAL TRUST, N.A., as Successor Trustee to LaSalle National Bank, not
personally but solely as Trustee under Trust Agreement dated October 8, 1982 and
known as Trust No. 105454 (hereinafter known as "Landlord"), and Option Care,
Inc., a Delaware corporation (hereinafter known as "Tenant");
WITNESSETH:
THAT Landlord hereby leases to Tenant, and Tenant accepts the demised
premises consisting of approximately 13,655 rentable square feet of space on the
second floor and not more than 800 square feet of storage space on the lower
level in the building (hereinafter known as "Building") known as the 100
Corporate North Building, Bannockburn, Illinois, all as described in the floor
plans attached hereto as (i) Exhibits "A-1" and "A-2", for the term of five (5)
years and six (6) months unless sooner terminated as provided herein, commencing
November 1, 1996 ("Commencement Date") and ending May 31, 2002 ("Expiration
Date") and (ii) approximately 5,190 rentable square feet as described on Exhibit
"B," commencing June 1, 1997 ("Expansion Space Commencement Date"), subject to
Section 5 hereof, to be occupied and used by the Tenant for general offices and
no other purpose, subject to the agreements herein contained (the space
described in Exhibits "A-1" and "A-2" and Exhibit "B" shall hereinafter be
referred to collectively as the "Premises." Exhibits "A-1" and "A-2" shall be
referred to separately as the "Initial Space" and Exhibit "B," the "Expansion
Space").
IN CONSIDERATION THEREOF, THE PARTIES COVENANT AND AGREE:
1. RENT. The Tenant shall pay as Net Base Rent for the Initial Space to
Property & Facility Management Group LLC, or to such other person or at such
other place as Landlord may direct in writing beginning on the Commencement
Date, an Annual Base Rent of $187,756.20 payable in equal monthly installments
of $15,646.35 in advance on or before the first day of each month of the term
and
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thereafter as set forth in the rent schedule attached as Exhibit "C" and after
the Expansion Space Commencement Date, as set forth in Exhibit "D," rent shall
be paid without any set-off or deduction whatsoever. Unpaid rent shall bear
interest at the rate set forth in Section 27(f), commencing on the eleventh
(11th) day after the date due until paid. Time is of the essence of this Lease.
Tenant agrees to do and perform each and every covenant, agreement and
obligation to be performed by Tenant hereunder.
2. RENT ADJUSTMENT. Tenant shall pay additional annual rent for Taxes
and Expenses in accordance with the provisions of this Section 2. Such
additional rent is hereinafter referred to as "Rent Adjustment."
(a) Intentionally deleted.
(b) (1) Tenant shall pay to the Landlord, as additional rent, an
amount equal to that proportion of the amount of Taxes (as defined in Section
2(b)(2) attributable to any calendar year of the Lease term as the rentable area
of the premises bears to the rentable area of the Building (such proportion
hereinafter being called "Tenant's Proportion"). The amount of Taxes
attributable to a calendar year shall be the amount payable during any such
year, even though the assessment for such Taxes may be for a different year.
(2) The term "Taxes" shall mean real estate taxes, assessments,
sewer rents, sewer rates and sewer charges, transit taxes, taxes based upon the
receipt of rent, and any other federal, state or local governmental charge,
general, special ordinary or extraordinary which may now or hereafter be levied
or assessed against the property upon which the Building stands and upon the
Building, hereinafter collectively known as "Real Property." In case of special
Taxes or assessments which may be payable in installments, only the amount of
each installment paid during a calendar year shall be included in Taxes for that
year. Taxes shall also include any personal property taxes (attributable to the
year in which paid) imposed upon the furniture, fixtures, machinery, equipment,
apparatus, systems and appurtenances used in connection with said Real Property
for the operation thereof and all fees and costs (including attorneys' fees)
incurred by Landlord in seeking to obtain a reduction of, or a limit on the
increase in,
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any Taxes, regardless of whether any reduction or limitation is obtained.
Notwithstanding the foregoing, there shall be excluded from
Taxes: income taxes, franchise, capital stock and state and federal inheritance
taxes, all interest and penalties on such Taxes (to the extent such interest and
penalties arise out of Landlords failure to pay the Taxes and not as a result of
Tenants failure to pay Taxes), other taxes imposed upon or measured by the
Landlords income or profits, unless the same shall be imposed in lieu of real
estate taxes and other ad valorem taxes.
(3) If the tax year for real estate taxes shall be changed by
the applicable governmental authority resulting in the payment by the Landlord
in one calendar year of Taxes which relate to more than one calendar year, then
notwithstanding anything to the contrary contained in this Lease, for purposes
of determining the Rent Adjustment for such calendar year, such amount of taxes
shall be adjusted to an amount which is equivalent to a one-year payment of
Taxes.
(c) Tenant shall pay to the Landlord as additional rent Tenant's
Proportion of the amount of Expenses (as herein defined) attributable to any
calendar year of the Lease. For the purposes of this Section 2(c), the term
"Expenses" shall mean and include all expenses paid or incurred by the Landlord
for managing, maintaining, operating, insuring, replacing and repairing the Real
Property, appurtenances and personal property used in conjunction therewith
(hereinafter referred to as "Project"). Expenses shall not include: (1) costs of
alterations of the premises of tenants of the Building; (2) expenses incurred by
Landlord for repairs or other work occasioned by fire, windstorm, or other
insurable casualty or condemnation, which expenses are recovered by insurance
proceeds; (3) expenses incurred by Landlord to lease space to new tenants or to
retain existing tenants, including, without limitation, leasing commissions,
advertising and promotional expenditures; (4) expenses incurred by Landlord to
resolve disputes, enforce or negotiate lease terms with prospective or existing
tenants or in connection with any financing, sale or syndication of the
Property; (5) Interest, principal, points and fees, amortization or other costs
associated with any debt and rent payable under any lease to which this Lease is
subject and all costs and expenses associated with any such debt or lease and
any ground lease rent, irrespective of whether this Lease is subject or
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subordinate thereto; (6) expenses for the replacement of any item reimbursed to
Landlord under warranty; (7) any penalty or fine incurred by Landlord due to
Landlord's violation of any federal, state, or local law or regulation and any
interest or penalties due for late payment by Landlord; (8) cost of correcting
any latent defects or original design defects in the Building construction
materials or equipment, but only to the extent such costs relate to the
structural systems of the Building; (9) expenses for any item or service not
made available by Landlord to all tenants of the Building which Tenant pays
directly to a third party or, if provided by Landlord, Tenant separately
reimburses Landlord and expenses incurred by Landlord due to special request of
tenants or third parties to the extent the same are reimbursable or reimbursed
from any other tenants or third parties; (10) fees paid to affiliates of
Landlord to the extent that such fees exceed the customary amount charged for
the services provided; (11) the operating expenses incurred by Landlord relative
to retail stores, hotels and any specialty service owned and operated by
Landlord in the Building or on the Property; (12) costs of sculptures, paintings
and other objects of art; and (13) costs associated with the removal of
substances considered to be detrimental to the environment or the health of
occupants of the Building, except for those costs as a result of Tenant's, its
employees', contractors', or invitees' introduction of such substances, which
shall be remediated at the sole cost of Tenant. Expenses shall include (i) the
cost of any capital expenditures incurred in connection with the operation or
maintenance of the Project, as reasonably amortized by Landlord; such capital
expenditures include without limitation the cost of any capital improvements
installed for the purposes of reducing or controlling Expenses; and (ii) the
cost of any capital improvements which are necessary to keep the Project in
compliance with all governmental rules, regulations, ordinances and statutes. If
the building is not fully rented during all or a portion of any year subsequent
to the Base Year, then Landlord may elect to make an appropriate adjustment of
the Expenses for such year employing sound accounting and management principles,
to determine the amount of Expenses that would have been paid or incurred by the
Landlord had the Building been fully occupied; and the amount so determined
shall be the amount of Expenses attributable to such year. If any Project
expense, though paid in one year, relates to more than one calendar year, at the
option of Landlord such expenses may be proportionately allocated among such
related calendar years.
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(d) In the event the Renewal Option (as hereinafter defined) is
exercised, then on the anniversary date of the commencement of the Renewal Term,
and on each anniversary date thereafter, Tenant shall pay Landlord as additional
rent, a compounded increase of three percent (3%) of the Annual Base Rent as
determined pursuant to Section 26 of this Lease.
(e) Upon possession and acceptance of the demised premises by Tenant
as set forth in this Lease, and after the expiration of each calendar year
thereafter, Tenant will pay the Rent Adjustment in the amounts and at the times
provided herein and according to the statement ("Landlord's Statement")
furnished to Tenant by Landlord showing the following:
(1) The Expenses and Taxes for said expired calendar year.
(2) The amount of Rent Adjustment due to the Landlord or credit
to the Tenant for said expired calendar year.
(3) The amount of Rent Adjustment to be paid during the then
calendar year (and thereafter until receipt of a new Landlord's Statement) based
upon the Rent Adjustment for said expired calendar year plus the estimated Rent
Adjustment for the then calendar year. The amount of Rent Adjustment to be paid
during the then calendar year shall be broken down to show:
(i) a lump sum due for the number of months of the then
calendar year preceding and including the month of the date of the Landlord's
Statement; and
(ii) the amount for the period of the then calendar year
following the date of the Landlord's Statement to be paid in equal monthly
installments on the first day of each month subsequent to the month of the
statement during said period in the same manner as provided for Base Rent.
(4) A copy of the most recent tax bill.
(f) The Tenant or its representative shall have the right to examine
the Landlord's books and records with respect to the items in the Landlord's
Statement of Expenses and Taxes during normal business hours at any time within
forty-five (45) days
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following the furnishing by the Landlord to the Tenant of such statement. Unless
the Tenant shall take written exception to any item within sixty (60) days after
the furnishing of the Landlord's Statement, such statement shall be considered
as final and accepted by the Tenant. Any amount due to the Landlord as shown on
Landlord's Statement, whether or not written exception is taken thereto, shall
be paid by the Tenant within thirty (30) days after the Landlord shall have
submitted the Landlord's Statement, without prejudice to any such written
exception.
In the event Tenant provides Landlord with timely written objection to
any amounts on the Landlord's Statement then such objection shall be submitted
to one of three independent Certified Public Accountants ("CPA") to be chosen by
Tenant from a list of three CPAs selected by Landlord. The three CPAs chosen by
Landlord and submitted to Tenant shall be selected from the "big six." The
decision of the selected CPA shall be final and binding on Landlord and Tenant.
If Tenants review shall disclose an inaccuracy in favor of Landlord greater than
a 5% error with respect to the amount due from Tenant for the period of the
Landlord's Statement, then Landlord shall pay the reasonable cost of the CPA;
otherwise the cost of the CPA shall be paid by Tenant. Landlord shall promptly
pay to Tenant any amounts shown by the audit to have been collected by Landlord
but not due from Tenant.
(g) If the first year of the term of this Lease commences on any day
other than the first day of January, or if the last year of the term of this
Lease ends on any day other than the last day of December, any payment due to
the Landlord from the Tenant for Taxes and Expenses shall be prorated according
to the time the Lease was in effect and the Tenant shall pay any amount due to
the Landlord within thirty (30) days after being billed therefor. This covenant
shall survive the expiration or termination of this Lease.
(h) The Tenant's Proportion for all purposes of this Lease shall be
thirteen and eighty-four hundredths (13.84%) Percent from the Commencement Date
to the Expansion Space Commencement Date and nineteen and one-tenth (19.10%)
percent from and including the Expansion Space Commencement Date to and
including the Expiration Date. For the purpose of determining the Tenants
Proportion the rentable square feet of the Building shall be 98,680.
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3. SERVICE. The Landlord shall furnish:
(a) Air-cooling when necessary to provide comfortable temperature
conditions under normal business operations and, in the absence of the use of
machines or equipment which affect the temperature otherwise maintained in the
Premises, daily from 8:00 A.M. to 6:00 P.M. (Saturdays 8:00 A.M. to 1:00 P.M.),
Sundays and holidays excepted. Whenever nonstandard heat generating machines or
equipment (excluding reasonable standard office equipment such as personal
computers, copy machines, fax machines, telephones) are used by Tenant in the
Premises which affect the temperature otherwise maintained by the air-cooling
system, Landlord reserves the right to install supplementary air-conditioning
units in the demised premises, and the expense of installation, operation and
maintenance shall be paid by Tenant. The expense resulting from the operation
and maintenance of the supplementary air-conditioning system shall be paid by
the Tenant to the Landlord as additional rent at rates fixed by Landlord.
Provided, however, such rates shall be the same as charged to other tenants in
the Building. The Landlord agrees to furnish heat to the demised premises, when
required by law on business days from 8:00 A.M. to 6:00 P.M. and on Saturdays
from 8:00 A.M. to 1:00 P.M. Landlord's obligations to furnish heat and air
cooling shall be subject to the voluntary and mandatory regulations or laws of
public authorities. In the event that Tenant desires heating or air cooling
services after hours, Tenant shall give Landlord at least two business days
written notice of such desired services. Tenant shall pay for such services, as
additional rent at rates fixed from time to time by Landlord. The rate in effect
and to be charged by the Landlord at the Commencement Date shall be $50.00 per
hour.
(b) Cold water in common with other tenants for drinking, lavatory
and toilet purposes drawn through fixtures installed by the Landlord, or by
Tenant in the demised premises with Landlord's written consent provided that
Tenant shall not needlessly waste such water, and heated water in common with
other tenants for lavatory purposes from regular Building supply. Tenant shall
pay Landlord as additional rent at rates fixed by Landlord for water furnished
for any other purpose.
(c) Customary janitor service and customary cleaning in and about the
demised premises, Saturdays, Sundays and holidays excepted. The Tenant shall not
provide any janitor service or
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cleaning without the Landlord's written consent and then only subject to
supervision of Landlord and at Tenant's sole responsibility and by janitors or
cleaning contractors or employees at all times satisfactory to Landlord. The
janitor service to be provided at the Commencement Date is described on attached
Exhibit E and shall thereafter be subject to such changes or modifications as
reasonably required by Landlord.
(d) Automatic passenger elevator service. Freight service subject to
scheduling by Landlord.
(e) Electricity for the demised premises shall not be furnished by
Landlord, but shall be furnished by the approved electric utility company
serving the area. Landlord shall permit the Tenant to receive such service
direct from such public utility company at Tenant's cost, and shall permit
Landlord's wire and conduits, to the extent available, suitable and safely
capable, to be used for such purposes. Tenant shall make all necessary
arrangements with the local utility company for metering and paying for electric
current furnished by it to Tenant and Tenant shall pay for all charges for
electric current consumed on the demised premises during Tenant's occupancy
thereof. The electricity used during the performance of janitor service, the
making of alterations or repairs in the demised premises, and for the operation
of the Building's air-conditioning system at times other than as provided in
Paragraph (a) hereof, or the operation of any special air-conditioning systems
which may be required for data processing equipment or for other special
equipment or machinery installed by Tenant, shall be paid for by Tenant. Tenant
shall make no alterations or additions to the electric equipment and/or
appliances without the prior written consent of the Landlord in each instance.
Tenant also agrees to purchase from the Landlord or its agents all lamps, bulbs,
ballast and starters used in the demised premises after the installation thereof
so long as Landlord replaces all bulbs within a reasonable period of time.
Tenant covenants and agrees that at all times its use of electric current shall
never exceed the capacity of the feeders to the Building or the risers or wiring
installation.
The Landlord does not warrant that any of the services above mentioned will
be free from interruptions caused by war, insurrection, civil commotion, riots,
acts of God or the enemy, governmental action, repairs, renewals, improvements,
alterations,
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strikes, lockouts, picketing, whether legal or illegal, accidents, inability of
the Landlord to obtain fuel or supplies or any other cause or causes beyond the
reasonable control of the Landlord. Any such interruption of service shall never
be deemed an eviction or disturbance of the Tenant's use and possession of the
premises or any part thereof, or render the Landlord liable to the Tenant for
damages, or relieve the Tenant from performance of the Tenant's obligations
under this Lease.
4. CONDITION OF PREMISES. The Tenant's taking possession shall be
conclusive evidence as against the Tenant that the demised premises were in good
order and satisfactory condition when the Tenant took possession except for a
list of items to be completed or repaired, signed by Landlord and Tenant. No
promise of the Landlord to alter, remodel, decorate, clean or improve the
demised premises or the Building and no representation respecting the condition
of the demised premises or the Building have been made by the Landlord to the
Tenant, unless the same is contained herein, or made a part hereof, or in a
written document signed by Landlord. This Lease does not grant any rights to air
over property.
5. EXPANSION SPACE POSSESSION. If the Landlord shall be unable to give
possession of the Expansion Space on the Expansion Space Commencement Date by
reason of the following: (i) the Landlord has not substantially completed the
Tenant Improvements (as hereinafter defined in the Work Letter attached to and
made a part of this Lease), (ii) the Landlord is unable to give possession of
the Expansion Space by reason of the holding over or retention of possession of
any tenant, tenants or occupants, or (iii) for any other reason, Landlord shall
not be subject to any liability for the failure to give possession on said date.
Under such circumstances the rent reserved and covenanted to be paid herein for
the Expansion Space shall not commence until the Expansion Space is available
for occupancy by Tenant, and no such failure to give possession of the Expansion
Space on the Expansion Space Commencement Date shall affect the validity of this
Lease or the obligation of the Tenant hereunder. At the option of Landlord to be
exercised within thirty (30) days of the delayed delivery of possession to
Tenant, the Lease shall be amended so that the term shall be extended by the
period of time possession is delayed. If the Expansion Space is ready for
occupancy prior to the date of the Expansion Date Commencement Date and Tenant
occupies the Expansion Space prior to said date, Tenant shall pay rental for the
period of
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occupancy prior to the Expansion Space Commencement Date at the rent stated in
Exhibit "D." The Expansion Space shall be deemed ready for Tenant's occupancy
and substantially complete on the Expansion Space Commencement Date if only
punchlist items of construction, decoration or mechanical adjustments remain to
be completed in the Expansion Space or any part thereof, or if the delay in the
availability of the Expansion Space for occupancy shall be due to special work,
changes, alterations or additions required or made by Tenant in the layout or
finish of the Expansion Space or any part thereof or shall be caused in whole or
in part by Tenant through the delay of Tenant in submitting plans, supplying
information, approving plans, specifications or estimates, giving authorizations
or otherwise or shall be caused in whole or in part by delay and/or default on
the part of Tenant and/or its subtenant or subtenants. In the event of any
dispute as to whether the Expansion Space is ready for Tenant's occupancy or as
to whether the delay in the availability of the Expansion Space for occupancy is
the result of the aforementioned acts or omissions of Tenant, the decision of
Landlord's architect shall be final and binding on the parties.
In the event the Landlord shall be unable to obtain possession of the
Expansion Space from the current tenant, Lumbermans Mutual Casualty Company
("Lumbermans") and commence the Tenant Improvements on or prior to August 1,
1997 (the "First Termination Date"), Tenant shall have the option ("First
Termination Option") to terminate the Lease by written notice of such
termination delivered to Landlord on or prior to the expiration of five (5) days
after the First Termination Date. In the event Landlord obtains possession of
the Expansion Space from Lumbermans but is unable to substantially complete the
Tenant Improvements or deliver possession of the Expansion Space on or prior to
November 1, 1997 (hereinafter referred to as the "Second Termination Date"),
Tenant shall have the option ("Second Termination Option") to terminate the
Lease by written notice of such termination delivered to Landlord on or prior to
the expiration of five (5) days after the Second Termination Date. Provided,
however, that Landlord's obligation to pay broker commissions are subject to and
conditioned upon the provisions of Paragraph 27(k) of this Lease. Landlord shall
not be deemed in default with respect to delivery of possession or substantial
completion of Tenant's Improvements, if the failure to timely perform is due in
whole or in part to any strike, labor trouble
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(whether legal or illegal), civil disorder, failure of power, restrictive
governmental laws and regulations, riots, insurrections, war, shortages,
accidents, casualties, Acts of God, acts, omissions or delays of or caused by
Tenant or any other cause beyond the reasonable control of the Landlord. In such
event the First Termination Date and the Second Termination Date as the case may
be shall be extended, by the number of days possession or substantial completion
has been delayed by such act or events.
6. USE OF PREMISES. The Tenant shall occupy and use the demised premises
during the term for the purpose above specified and none other and shall comply
with the following provisions concerning use:
(a) the Tenant will not make or permit to be made any use of the
demised premises which, directly or indirectly is forbidden by public law,
ordinance or governmental regulation or which may by dangerous to persons or
property, or which may invalidate or increase the premium cost of any policy of
insurance carried on the Building or covering its operations; the Tenant shall
not do, or permit to be done, any act or thing upon the demised premises which
will be in conflict with fire insurance policies covering the Building of which
the demised premises form a part. The Tenant, at its sole expense shall comply
with all rules, regulations or requirements of the local Inspection and Rating
Bureau, or any other similar body, and shall not do, or permit anything to be
done upon said premises, or bring or keep anything thereon in violation of
rules, regulations or requirements of the Fire Department, local Inspection and
Rating Bureau, Fire Insurance Rating Organization or other authority having
jurisdiction and then only in such quantity and manner of storage as not to
increase the rate of fire insurance applicable to the Building.
(b) Tenant agrees that it will not use, handle, generate, treat,
store or dispose of, or permit the use, handling, generation, treatment, storage
or disposal of any Hazardous Materials in, on, under, around or above the
demised premises now or at any future time and will indemnify, defend and save
Landlord harmless from any and all actions, proceedings, claims, costs, expenses
and losses of any kind, including, but not limited to, those arising from injury
to any person, including death, damage to or loss of use or value of real or
personal property, and costs of
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investigation and cleanup or other environmental remedial work, which may arise
in connection with the existence of hazardous materials on the demised premises
during the term hereof. The term "Hazardous Materials", when used herein, shall
include, but shall not be limited to, any substances, materials or wastes that
are regulated by any local governmental authority, the state where the demised
premises is located, or the United States of America because of toxic,
flammable, explosive, corrosive, reactive, radioactive or other properties that
may be hazardous to human health or the environment, including asbestos and
including any materials or substances that are listed in the United States
Department of Transportation Hazardous Materials Table, as amended 49 C.F.R.
172.101, or in the Comprehensive Environmental Response, Compensation and
Liability Act, as amended 42 U.S.C. subsections 9601 et seq, or the Resources
Conservation and Recovery Act, as amended, 42 U.S.C. subsections 6901, et seq,
or any other applicable governmental regulation imposing liability or standards
of conduct concerning any hazardous, toxic or dangerous substances, waste or
material, now or hereafter in effect.
Tenant does hereby indemnify, defend and hold harmless the Landlord
and its agents and their respective officers, directors, beneficiaries,
shareholders, partners, agents and employees from all fines, suits, procedures,
claims and actions of every kind, and all costs associated therewith (including
reasonable attorneys' and consultants' fees) arising out of or in any way
connected with any deposit, spill, discharge or other release of Hazardous
Materials that occurs during the term of this Lease, at or from the Premises,
which arises at any time from Tenant's use or occupancy of the Premises, or from
Tenant's failure to provide all information, make all submissions, and take all
steps required by all applicable governmental authorities. Tenant's obligations
and liabilities under this Paragraph 6b shall survive the expiration of this
Lease.
(c) no sign shall be installed by Tenant outside the demised premises
and any sign installed in the demised premises shall be installed by Landlord at
Tenant's cost and in such manner, character and style as Landlord may approve in
writing:
(d) the Tenant shall not advertise the business, profession or
activities of the Tenant conducted in the Building in
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any manner which violates the letter or spirit of any code of ethics adopted by
any recognized association or organization pertaining to such business,
profession or activities, and shall not use the name of the Building for any
purpose other than that of the business address of the Tenant, and shall never
use any picture or likeness of the Building in any circular, notices,
advertisements or correspondence without the Landlord's express consent in
writing;
(e) the Tenant shall not obstruct, or use for storage, or for any
other purpose other than ingress and egress, the sidewalks, entrances, passages,
courts, corridors, vestibules, halls, elevators and stairways of the Building;
(f) no bicycle or other vehicle and no dog or other animal or bird
shall be brought or permitted to be in the Building or any part thereof;
(g) the Tenant shall not make or permit any noise or odor that is
objectionable to other occupants of the Building to emanate from the demised
premises, and shall not create or maintain a nuisance thereon, and shall not
disturb, solicit or canvass any occupant of the Building, and shall not do any
act tending to injure the reputation of the Building;
(h) the Tenant shall not install any musical instrument or equipment
in the Building or any antennas, aerial wires or other equipment inside or
outside the Building, without, in each and every instance, prior approval in
writing by the Landlord. The use thereof, if permitted, shall be subject to
control by the Landlord to the end that others shall not be disturbed or
annoyed;
(i) the Tenant shall not waste water by tying, wedging or otherwise
fastening open, any faucet;
(j) no additional locks or similar devices shall be attached to any
door or window. No keys for any door or window other than those provided by the
Landlord shall be made. If more than two keys for one lock are desired by the
Tenant, the Landlord may provide the same upon payment by the Tenant. Upon
termination of this Lease or of the Tenant's possession, the Tenant shall
surrender all keys of the demised premises and shall make known to
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the Landlord the explanation of all combination locks on safes, cabinets and
vaults;
(k) the Tenant shall be responsible for the locking of doors in and
to the demised premises. Any damage resulting from neglect of this clause shall
be paid for by the Tenant;
(l) if the Tenant desires telegraphic, telephonic, card key service,
burglar alarm or signal service, the Landlord will, upon request, direct where
and how connections and all wiring for such service shall be introduced and run.
Without such directions, no boring, cutting or installation of wires or cables
is permitted;
(m) shades, draperies or other forms of inside window covering must
be of such shape, color and material as approved by the Landlord;
(n) the Tenant shall not overload any floor. Safes, furniture and all
large articles shall be brought through the Building and into the demised
premises at such times and in such manner as the Landlord shall direct and at
the Tenant's sole risk and responsibility. The Tenant shall list all furniture,
equipment and similar articles to be removed from the Building, and the list
must be approved at the Office of the Building or by a designated person before
Building employees will permit any article to be removed.
(o) unless the Landlord gives advance written consent in each and
every instance, the Tenant shall not install or operate any steam or internal
combustion engine, boiler, machinery, refrigerating or heating device or air-
conditioning apparatus in or about the demised premises, or carry on any
mechanical business therein, or use the demised premises for housing
accommodations or lodging or sleeping purposes, or do any cooking therein or
install or permit the installation of any vending machines, or use any
illumination other than electric light, or use or permit to be brought into the
Building any inflammable oils or fluids such as gasoline, kerosene, naphtha and
benzene, or any explosive or other articles hazardous to persons or property.
Notwithstanding anything in this subsection (o) or the Lease to the contrary,
Tenant may operate and maintain a machine for dispensing beverages such as soft
drinks and soda pop, a microwave oven, a coffee maker,
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a refrigerator, and a dishwasher for the exclusive use and enjoyment by and of
its employees;
(p) the Tenant shall not place or allow anything to be against or
near the glass of partitions, doors or windows of the demised premises which may
diminish the light in, or be unsightly from the exterior of the Building, public
halls or corridors;
(q) the Tenant shall not install in the demised premises any
equipment which uses an abnormal amount of electricity without the advance
written consent of the Landlord. The Tenant shall ascertain from the Landlord
the maximum amount of electrical current which can safely be used in the demised
premises, taking into account the capability of the electric wiring in the
Building and the demised premises and the needs of other tenants in the Building
and shall not use more than such safe capacity. The Landlord's consent to the
installation of electric equipment shall not relieve the Tenant from the
obligation not to use more electricity than such safe capacity;
(r) the Tenant may not install carpet padding or carpet by means of a
mastic, glue or cement. Such installation shall be by tackless strip or double-
faced tape only;
(s) in addition to all other liabilities, rights and remedies for
breach of any covenant of this Section 6, the Tenant shall pay to the Landlord
all damages caused by such breach and shall also pay to the Landlord as
additional rent an amount equal to any increase in insurance premium or premiums
caused by such breach. Any violation of this Section 6 may be restrained by
injunction. The Tenant shall be liable to the Landlord for all damages resulting
from violation of any of the provisions of this Section 6. The Landlord shall
have the right to make and Tenant shall observe, such reasonable rules and
regulations as the Landlord or its agent may from time to time adopt on such
reasonable notice to be given as the Landlord may elect, Nothing in this Lease
shall be construed to impose upon the Landlord any duty or obligation to enforce
provisions of this Section 6 or any rules and regulations hereafter adopted, or
the terms, covenants or conditions of any other lease as against any other
tenant, and the Landlord shall not be liable to the Tenant for violation of the
same by any other tenant, its servants, employees, agents, visitors or
licensees. Landlord shall provide written notice of any change
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of rules. Landlord agrees that all rules and regulations heretofore or hereafter
issued by the Landlord will be applied and enforced as to Tenant and other
occupants of the Building, except where the circumstances reasonably require
distinction, in a non-discriminatory manner.
7. CARE AND MAINTENANCE. Subject to the provisions of Section 10, the
Tenant shall, at the Tenant's own expense, keep the demised premises in good
order, condition and repair and shall pay for the repair of any damages,
ordinary wear and tear excepted, caused by Tenant, its agents, employees or
invitees during the term. The Tenant shall pay the Landlord for overtime and for
any other expense incurred in the event repairs, alterations, decorating or
other work in the demised premises are not made during ordinary business hours
at the Tenant's request.
8. ALTERATIONS. The Tenant shall not do any painting or decorating, or
erect any partitions, make any non-structural alterations in or additions to the
demised premises or do any nailing, boring or screwing into the ceilings, walls
or floors, without the Landlord's prior written consent in each and every
instance, which consent shall not unreasonably be withheld, unless the cost of
such work is less than $10,000.00, in which case consent shall not be required.
Tenants shall not perform any structural repairs or alterations regardless of
the cost. Unless otherwise agreed by Landlord and Tenant in writing, all such
work shall be performed either by or under the direction of Landlord, but at the
cost of Tenant. The Landlord's decision to refuse such consent shall be
conclusive. If the Landlord's consent to such alterations or additions is
required, the Tenant shall furnish the Landlord for approval:
(a) plans and specifications;
(b) names and addresses of contractors;
(c) copies of contracts;
(d) necessary permits;
(e) indemnification in form and amount satisfactory to Landlord and
certificates of insurance from all contractors performing labor or furnishing
materials, insuring against any and
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all claims, costs, damages, liabilities and expenses which may arise in
connection with the alterations or additions.
Landlord may withhold approval of any alterations or additions if the plans
or specifications therefor are not acceptable to the Landlord or Landlord's
architect or engineer (if any). In connection with any request for approval of
any alterations or additions by Tenant, Landlord may retain the services of an
outside architect and/or engineer and the reasonable fees of such architect
and/or engineer to Landlord shall be reimbursed to Landlord by Tenant.
Landlord's approval of any plans or specifications shall not be construed to be
an agreement or representation on Landlord's part as to the adequacy or
suitability of the Tenant's alterations or additions.
In the event Landlord permits the alterations or additions to be completed
by Tenant's contractor, Landlord reserves the right to require that Tenant shall
terminate its contract with any such contractor in the event said contractor
shall be engaged in a labor dispute which disrupts said contractor's work.
Landlord shall also have the right to order any contractor of Tenant who
violates any of Landlord's requirements or standards of work to cease work and
to remove himself, his equipment and his employees from the Building. Tenant
agrees that its contractors shall not conduct their work in such a manner so as
to interfere with or cause any interruption of either (i) Landlord's
construction, (ii) another tenant's occupancy or construction, or (iii) other
phases of Landlord's operation of the Building.
Whether the Tenant furnishes the Landlord the foregoing or not, the Tenant
hereby agrees to hold the Landlord its beneficiaries, Owner and Owner's partners
and their respective agents and employees harmless from any and all liabilities
of every kind and description which may arise out of or be connected in any way
with said alterations or additions. Any mechanic's lien filed against the
demised premises, or the Building of which the same form a part, for work
claimed to have been furnished to the Tenant shall be discharged of record by
the Tenant within ten (10) days thereafter, at the Tenant's expense. Upon
completing any alterations or additions whether Landlord's approval is required
or not, the Tenant shall furnish the Landlord with contractors' affidavits and
full and final waivers of lien and receipted bills covering all labor and
materials expended and used and a final set
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of as-built drawings, plans and specifications. All alterations and additions
shall comply with all insurance requirements and with all ordinances,
regulations, laws and other requirements of any pertinent governmental
authority. All alterations and additions shall be constructed in a good and
workmanlike manner and good grades of materials shall be used.
All additions, decorations, fixtures, hardware, non-trade fixtures and all
improvements, temporary or permanent, in or upon the demised premises, whether
placed there by the Tenant or by the Landlord, shall, unless the Landlord
identifies the need for their removal at the time of installation, become the
Landlord's property and shall remain upon the demised premises at the
termination of this Lease by lapse of time or otherwise without compensation or
allowance of credit to the Tenant. If, upon the Landlord's request, the Tenant
does not remove said additions, decorations, fixtures, hardware, non-trade
fixtures and improvements earlier identified by Landlord, the Landlord may
remove the same and the Tenant shall pay the cost of such removal to the
Landlord upon demand. Any damage caused by the removal of additions,
decorations, fixtures, hardware, non-trade fixtures and improvements may be
repaired by the Landlord at Tenant's expense.
9. ACCESS TO PREMISES. The Tenant shall permit the Landlord to erect,
use and maintain pipes, ducts, wiring and conduits in and through the Premises.
The Landlord or Landlord's agents shall have the right upon twenty-four (24)
hours prior notice (except for janitorial services or in case of an emergency in
which case Landlord shall notify Tenant as promptly as possible) to enter upon
the premises, to inspect the same, to perform janitorial and cleaning services
and to make such repairs, alterations, improvements or additions to the premises
or the Building as the Landlord may deem necessary or desirable, and the
Landlord shall be allowed to take all material into and upon said demised
premises that may be required therefor without the same constituting an eviction
of the Tenant in whole or in part and the rent reserved shall in no wise abate
(except as provided in Section 10) while said repairs, alterations,
improvements, or additions are being made, by reason of loss or interruption of
business of the Tenant, or otherwise. If the Tenant shall not be personally
present to open and permit an entry into said demised premises, at any time,
when for any reason an entry therein shall be necessary or permissible, the
Landlord or Landlord's agents may enter the same
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by a master key, or use reasonable force commensurate with the circumstances to
enter the Premises, without rendering the Landlord or such agents liable
therefor (if during such entry Landlord or Landlord's agents shall accord
reasonable care to Tenant's property), and without in any manner affecting the
obligations and covenants of this Lease. Nothing herein contained, however,
shall be deemed or construed to impose upon the Landlord any obligations,
responsibility or liability whatsoever, for the care, supervision or repair of
the Building or any part thereof, in the exercise of the rights herein provided.
The Landlord shall also have the right at any time without the same constituting
an actual or constructive eviction and without incurring any liability to the
Tenant therefor, to change the arrangement and/or location of entrances or
passages, doors and doorways, and corridors, elevators, stairs, toilets or
public parts of the Building, and to close entrances, doors, corridors,
elevators or other facilities. The Landlord shall not be liable to the Tenant
for any expense, injury, loss or damage resulting from work done in or upon, or
the use of, any adjacent or nearby building, land, street or alley.
Tenant shall permit Landlord and its agents, upon request, to enter and/or
pass through the premises or any part thereof, at reasonable times during normal
business hours to show the premises to holders of encumbrances on the interest
of Landlord, or prospective purchasers, mortgagees, lessors or tenants of the
Building or any portion thereof. Landlord shall also have the right to enter
and/or pass through the premises, or any part thereof, at such times as such
entry shall be required by circumstances of emergency affecting the premises or
any other portion of the Building.
10. UNTENANTABILITY. If a substantial portion of the demised premises or
the Building is made untenantable by fire or other casualty, Landlord may elect:
(a) to terminate this Lease as of the date of the fire or casualty by
notice to the Tenant within ninety (90) days after that date, or
(b) proceed with all due diligence to repair, restore or rehabilitate
the Building or the demised Premises, other than leasehold improvements paid for
by Tenant, at Landlord's expense, in which event this Lease shall not terminate.
In the event
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Landlord proceeds to repair or restore the Building and Premises but is unable
to complete the repairs or restoration to the Building and Premises within 180
days after such damage has occurred, then Tenant shall have the right to
terminate this Lease by written notice to Landlord which notice must be provided
to Landlord no later than 10 days after the expiration of the 180 day period.
Landlord shall not be deemed in default with respect to repair or restoration of
the Building or the Premises, if the failure to timely perform is due in whole
or in part to any strike, labor trouble (whether legal or illegal), civil
disorder, failure of power, restrictive governmental laws and regulations,
riots, insurrections, war, shortages, accidents, casualties, Acts of God, acts,
omissions or delays of or caused by Tenant or any other cause beyond the
reasonable control of the Landlord. In such event Tenants right to terminate the
Lease shall be extended, by the number of days repair or restoration has been
delayed by such act or events.
In the event the Lease is not terminated pursuant to these provisions, Base
Rent shall abate on a per diem basis during the period of untenantability. In
the event of the termination of this Lease pursuant to this section, Base Rent
shall be apportioned on a per diem basis and paid to the date of the fire or
other casualty. In the event that the Building or the demised premises is
partially damaged by fire or other casualty but an insubstantial portion of the
Building or the demised premises is made untenantable, then Landlord shall,
except during the last year of the term hereof, proceed with all due diligence
to repair and restore the demised premises or the Building and the Base Rent
shall abate in proportion to the non-usability of the demised premises during
the period of untenantability. If an insubstantial portion of the demised
premises is made untenantable as aforesaid during the last year of the term
hereof, Landlord shall have the right to terminate this Lease as of the date of
the fire or other casualty by giving written notice thereof to Tenant within
thirty (30) days after the date of fire or other casualty, in which event the
Base' Rent shall be apportioned on a per diem basis and paid to the date of such
fire or other casualty. Substantial as referred to in this Section 10 shall be
more than thirty (30%) percent. No damage, compensation or claim shall be
payable by Landlord for inconvenience, loss of business or annoyance arising
from any repair or restoration of any portion of the demised premises or other
portion of the Building except as herein set forth.
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11. INSURANCE. Tenant shall carry:
(a) Comprehensive public liability insurance during the entire term
hereof covering both Tenant and Landlord as insureds to afford protection to the
limits of not less than $2,000,000 for combined single limit bodily injury and
property damage liability.
(b) Insurance against fire, sprinkler leakage, vandalism, and the
extended coverage perils for the full replacement value of all additions,
improvements and alterations to the premises, and of all office furniture, trade
fixtures, office equipment, merchandise and all other items of Tenant's property
on the premises.
All insurance required to be maintained by Tenant shall be on terms and
with companies satisfactory to Landlord. Tenant shall, prior to the commencement
of the term, and during the term, 30 days prior to the expiration of the
policies of insurance, furnish to Landlord certificates evidencing such
coverage, which certificates shall state that such insurance coverage may not be
changed or cancelled without at least thirty (30) days' prior written notice to
Landlord or Tenant.
12. SUBROGATION. The parties hereto agree to have any and all fire,
extended coverage or any and all material damage insurance which may be carried
endorsed with the following subrogation clause: "This insurance shall not be
invalidated should the insured waive prior to a loss any or all right of
recovery against any party for loss occurring to the property described herein";
and each party hereto hereby waives all claims for recovery from the other party
for any loss or damage to any of its property insured under valid and
collectible insurance policies to the extent of any recovery collectible under
such insurance.
13. EMINENT DOMAIN. If a substantial part of the Building, or a
substantial part of the demised premises, shall be lawfully taken or condemned
for any public or quasi-public use or purpose, or conveyed under threat of such
condemnation, the term of this Lease shall end upon, and not before, the date of
the taking of possession by the condemning authority, and without apportionment
of the award. Tenant hereby assigns to the Landlord Tenant's
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interest in such award, if any. Current rent shall be apportioned as of the date
of such termination.
If any part of the Building shall be so taken or condemned, or if the grade
of any street or alley adjacent to the Building is changed by any competent
authority and such taking or change of grade makes it necessary or desirable to
demolish, substantially remodel, or restore the Building, the Landlord shall
have the right to cancel this Lease upon not less than thirty (30) days' notice
prior to the date of cancellation designated in the notice. No money or other
consideration shall be payable by the Landlord to the Tenant for the right of
cancellation, and the Tenant shall have no right to share in the condemnation
award or in any judgment for damages caused by the change of grade.
If any insubstantial portion of the premises shall be lawfully taken or
condemned or conveyed under threat of condemnation so that the premises can be
used by Tenant for the purposes set forth in Section 6, and this Lease is not
terminated by Landlord, Landlord shall repair the premises, and the Lease shall
be amended to reduce the Tenant's Proportion and Base Rent in the proportion of
the amount taken. No temporary taking of the premises and/or Tenant's rights
therein shall terminate this Lease. Any award made by reason of any such
temporary taking shall belong entirely to Landlord and Tenant shall not be
entitled to share therein.
14. ASSIGNMENT-SUBLETTING. Tenant shall not, without Landlord's prior
written consent which consent shall not be unreasonably withheld:
(a) Assign, hypothecate, mortgage, encumber, or convey this Lease or
any interest under it;
(b) Allow any transfer thereof or any lien upon Tenant's interest by
operation of law;
(c) Sublet the demised premises in whole or in part; or
(d) Permit the use or occupancy of the premises by any party other
than Tenant, it agents, employees, guests, invitees and licensees.
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The following special provisions relate to cancellation of the Lease upon
assignment or subletting:
(1) If Tenant desires at any time to assign this Lease or to
sublet the premises or any portion thereof, it shall first notify Landlord in
writing of its desire to do so not less than forty-five (45) days prior to the
proposed effective date of such assignment or subletting, such notice to include
(a) the name of the proposed subtenant or assignee; (b) the nature of the
proposed subtenant or assignee's business to be carried on in the premises; (c)
the terms and provisions of the proposed sublease or assignment; (d) such
financial information as Landlord may reasonably request concerning the proposed
subtenant or assignee; and (e) an executed copy of the instrument of assignment
or sublease. At any time within ten (10) working days after Landlord's receipt
of the notice and the above required information in a form and content
satisfactory to Landlord, Landlord shall notify the Tenant that:
(i) it consents to the sublease or assignment; or
(ii) it refuses to consent to the sublease or assignment;
or
(iii) with respect to the proposed assignment or sublease of
the entire premises that it cancels the Lease effective as of the beginning of
the sublease term or assignment; or
(iv) with respect to the proposed sublease of part of the
premises that, effective as of the beginning of the sublease term, it amends the
Lease to reduce the premises by the portion of the premises proposed to be
sublet and further appropriately amends the Lease because of the reduction of
the premises.
(2) The use for which the premises may he sublet shall be only
for lawful office use in keeping with the general character of the Building.
(3) If Tenant shall sublet or assign the demised premises at a
rental in excess of the Base Rent and any additional
23
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rent herein provided, any profit generated after reduction of Tenant's expenses
related to such sublet, amortized over the remaining term of the Lease, shall be
divided equally between Landlord and Tenant. Tenant expenses shall be limited to
reasonable legal fees, commissions, Tenants improvements paid for by Tenant and
moving allowance paid by Tenant to the Sublessee.
Any assignment or subletting shall not release Tenant of liability under
this Lease or permit any subsequent prohibited act, unless specifically provided
in such consent. Tenant agrees to pay to Landlord, on demand, all reasonable
costs incurred by Landlord in connection with any request by Tenant of Landlord
in connection with any consent to any assignment or subletting by Tenant not to
exceed $1,000.00. No assignment shall be binding on Landlord unless such
assignee or Tenant shall deliver to Landlord a counterpart of such assignment
and an instrument which contains a covenant of assumption by the assignee
satisfactory in substance and form to Landlord.
(4) Tenant shall have the right to assign or transfer any interest in
this Lease without Landlord's consent to a "Related Transferee," which term
shall mean any of the following: Tenant's parent or any subsidiary or affiliate
of Tenant, or a successor to Tenant by way of merger, consolidation, corporate
reorganization, or the purchase of all or substantially all of Tenant's assets.
Any transfer, sale, pledge or other disposition and/or power to vote the
outstanding shares of corporate stock of Tenant shall not be deemed an
assignment.
15. WAIVER OF CLAIMS AND INDEMNITY. To the extent permitted by law, the
Tenant releases the Landlord, its beneficiaries, partners and their respective
agents and servants from, and waives all claims for, damage to person or
property sustained by the Tenant or any occupant of the Building or premises
resulting from the Building or premises or any part of either or any equipment
or appurtenance becoming out of repair, or resulting from any accident in or
about the Building, or resulting directly or indirectly from any act or neglect
of any tenant or occupant of the Building or any other person, including
Landlord's agents and servants. This Section 15 shall apply especially, but not
exclusively, to the flooding of basements or other subsurface areas, and to
damage caused by refrigerators, sprinkling devices, air-conditioning apparatus,
water, snow, frost, steam, excessive heat or cold,
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falling plaster, broken glass, sewage, gas, odors or noise, or the bursting or
leaking of pipes or plumbing fixtures, and shall apply equally whether any such
damage results from the act or neglect of the Landlord or of other tenants,
occupants or servants in the Building or of any other person, and whether such
damage be caused or result from any thing or circumstances above mentioned or
referred to, or any other thing or circumstances whether of a like nature or of
a wholly different nature. If any such damage, whether to the demised premises
or to the Building or any part thereof, or whether to the Landlord or to other
tenants in the Building, results from any act or neglect of the Tenant, its
employees, agents, invitees, and customers, the Tenant shall be liable therefor
and the Landlord may, at the Landlord's option, repair such damage and the
Tenant shall, upon demand by Landlord, reimburse the Landlord forthwith for the
total cost of such repairs. The Tenant shall not be liable for any damage caused
by its act or neglect if the Landlord or a tenant has recovered the full amount
of the damage from insurance and the insurance company has waived its right of
subrogation against the Tenant. All property belonging to the Tenant or any
occupant of the premises that is in the Building or the premises shall be there
at the risk of the Tenant or other person only, and the Landlord shall not be
liable for damages thereto or theft or misappropriation thereof.
Tenant agrees to indemnify and save the Landlord, its beneficiaries,
partners and their respective agents and employees harmless against any and all
claims, demands, costs and expenses, including reasonable attorneys' fees for
the defense thereof, arising from Tenant's occupation of the demised premises.
In case of any action or proceeding brought against Landlord, its beneficiaries,
Owner and Owner's partners or their respective agents or employees by reason of
any such claim, upon notice from Landlord, Tenant covenants to defend such
action or proceeding by counsel reasonably satisfactory to Landlord.
16. MORTGAGE-GROUND LEASE. Landlord may execute and deliver a mortgage or
trust deed in the nature of a mortgage, both sometimes hereinafter referred to
as "mortgage" against the Building, the Real Property or any interest thereon,
and may sell and lease back the underlying land on which the Building is
situated. If the mortgagee or trustee named in any mortgage or trust deed
hereafter made shall agree that, if it becomes the owner of the Building by
foreclosure or deed in lieu of foreclosure, it
25
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will recognize the rights and interest of Tenant under the Lease and not disturb
Tenant's use and occupancy of the Premises if and so long as Tenant is not in
default under the Lease, then this Lease and the rights of Tenant hereunder
shall thereafter be expressly subject and subordinate at all times to any such
Mortgage and/or ground lease, and all amendments, modifications and renewals
thereof and extensions, consolidations or replacements thereof, and to all
advances made or hereafter to be made upon the security thereof. Tenant agrees
to execute and deliver such further instruments in confirmation of the
subordination of this Lease to said Mortgage or ground lease as may be requested
in writing by Landlord from time to time. Tenant hereby appoints Landlord as
attorney-in-fact for Tenant with full power and authority to execute and deliver
in the name of the Tenant any such instrument in the event Tenant fails to do
so.
Should any Mortgage affecting the Building or the Real Property be
foreclosed or if any ground or underlying lease be terminated:
(a) The liability of the mortgagee, trustee or purchaser at such
foreclosure sale or the liability of a subsequent owner designated as Landlord
under this Lease shall exist only so long as such trustee, mortgagee, purchase
or owner is the owner of the Building or Real Property and such liability shall
not continue or survive after further transfer of ownership.
(b) Upon request of the mortgagee or trustee, Tenant will attorn, as
Tenant under this Lease, to the purchaser at any foreclosure sale thereunder, or
if any ground or underlying lease be terminated for any reason, Tenant will
attorn as tenant under this Lease to the ground Lessor under the ground lease
and will execute such instruments as may be necessary or appropriate to evidence
such attornment.
(c) Notwithstanding anything to the contrary contained herein,
Mortgagee by notice in writing to Tenant may subordinate its Mortgage to this
Lease.
17. CERTAIN RIGHTS RESERVED TO THE LANDLORD. The Landlord reserves and
may exercise the following rights without affecting Tenant's obligations
hereunder:
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(a) to change the name or street address of the Building;
(b) to install and maintain a sign or signs on the interior or
exterior of the Building;
(c) to have access for the Landlord and the other tenants of the
Building to any mail chutes located on the demised premises according to the
rules of the United States Post Office;
(d) to designate all sources furnishing sign painting and lettering,
ice, drinking water, towels, coffee cart service and toilet supplies, lamps and
bulbs used on the demised premises;
(e) to decorate, remodel, repair, alter or otherwise prepare the
demised premises for reoccupancy if Tenant vacates the demised premises prior to
the expiration of the term, and is in default of any provision of this Lease;
(f) to retain at all times pass keys to the demised premises;
(g) to grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building;
(h) to exhibit the demised premises to others and to display "For
Rent" signs on the demised premises;
(i) to close the Building after regular working hours and on legal
holidays subject, however, to Tenant's right to admittance, under such
reasonable regulations as Landlord may prescribe from time to time, which may
include by way of example but not of limitation, that persons entering or
leaving the Building identify themselves to a watchman by registration or
otherwise and that said persons establish their right to enter or leave the
Building;
(j) to approve the weight, size and location of safes or other heavy
equipment or articles, which articles may be moved in, about, or out of the
Building or premises only at such times and in
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such manner as Landlord shall direct and in all events, however, at Tenant's
sole risk and responsibility;
(k) to designate and/or approve, prior to installation, all types of
window shades, blinds, drapes, awnings, window ventilators and other similar
equipment, and to control all internal lighting that may be visible from the
exterior of the building.
(l) to take any and all measures, including inspections, repairs,
alterations, decorations, additions and improvements to the premises or to the
Building, as may be necessary or desirable for the safety, protection or
preservation of the premises or the Building or the Landlord's interests, or as
may be necessary or desirable in the operation of the Building.
The Landlord may enter upon the demised premises and may exercise any or
all of the foregoing rights reserved without being deemed guilty of an eviction
or disturbance of the Tenant's use or possession and without being liable in any
manner to the Tenant and without abatement of rent or affecting any of the
Tenant's obligations hereunder.
18. HOLDING OVER. If the Tenant retains possession of the demised
premises or any part thereof after the termination of the term or any extension
thereof, by lapse of time or otherwise, the Tenant shall pay the Landlord the
monthly rent, (including Rent Adjustment which Landlord may reasonably
estimate) at double the rate payable for the month immediately preceding said
holding over, computed on a per-month basis, for each month or part thereof that
the Tenant thus remains in possession, and in addition thereto, Tenant shall pay
the Landlord all damages, consequential as well as direct, sustained by reason
of the Tenant's retention of possession, provided, however, that Tenant shall
not be responsible for consequential damages incurred during the first thirty
(30) days of any such holdover. Such tenancy shall be subject to every other
term, covenant and agreement contained herein. The provisions of this paragraph
do not exclude the Landlord's rights of re-entry or any other right here-under.
19. LANDLORD'S REMEDIES. All rights and remedies of the Landlord herein
enumerated shall be cumulative, and none shall exclude any other right or remedy
allowed by law.
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intentionally omitted
(a) If the Tenant defaults in the payment of rent, and the Tenant
does not cure the default within ten (10) days after demand for payment of such
rent or if the Tenant defaults in the prompt and full performance of any other
provisions of this Lease, and the Tenant does not cure the default within thirty
(30) days after written demand by the landlord that the default be cured (unless
the default involves a hazardous condition, which shall be cured forthwith) or
if the leasehold interest of the Tenant be levied upon under execution or be
attached by process of law or if the Tenant makes an assignment for the benefit
of creditors or admits its inability to pay its debts or if a receiver he
appointed for any property of the Tenant, or if Tenant abandons the premises and
is in default of any provision of this Lease, then and in any such event the
Landlord may, if the Landlord so elects but not otherwise, and with or without
notice of such election, and with or without any demand whatsoever, either
forthwith terminate this Lease and the Tenant's right to possession of the
premises or, without terminating this Lease, forthwith terminate the Tenant's
right to possession of the premises.
(b) Upon any termination of this Lease, whether by lapse of time or
otherwise, or upon any termination of the Tenant's right to possession without
termination of the Lease, the Tenant shall surrender possession and vacate the
premises immediately, and deliver possession thereof to the Landlord, and hereby
grants to the Landlord full and free license to enter into and upon the premises
in such event with or without process of law and to repossess the Landlord of
the premises as of the Landlord's former estate and to expel or remove the
Tenant and any' others who may be occupying or be within the premises and to
remove any and all property therefrom, using such force as may be necessary,
without being deemed in any manner guilty of trespass, eviction or forcible
entry or detainer, and without relinquishing the Landlord's rights to rent or
any other right given to the Landlord hereunder or by operation of law.
(c) Upon termination of the Lease, Landlord shall be entitled to
recover as damages a sum of money equal to the present value, on the date of
termination, of the Rent provided herein to be paid by Tenant to Landlord for
the remainder of the Lease term
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plus all rent accrued and unpaid up to and including the termination date.
(d) In the event Landlord elects to terminate Tenant's right to
possession without terminating the Lease the Landlord shall take reasonable
measures to relet all or any part of the Premises for such rent and upon such
terms as shall be satisfactory to Landlord (including the right to relet the
Premises for a term greater or lesser than that remaining under the Lease Term,
and the right to relet the Premises as part of a larger area, and the right to
change the character or use made of the Premises). For the purpose of such
reletting, Landlord may decorate or make any repairs, changes, alterations or
additions in or to the Premises that may be necessary or convenient. If Landlord
is unable to relet the Premises, Tenant shall pay to Landlord on demand the
present value, at the time of default, of the Rent herein to be paid by Tenant
for the remainder of the Lease Term, plus all rent accrued and unpaid at the
time of default. If the Premises are relet and a sufficient sum shall not be
realized from such reletting after paying all of the expenses of such
decoration, repairs, changes, alterations, additions, the expenses of such
reletting and the collection of the rent accruing therefrom (including but not
by of limitation, reasonable attorney's fees and brokers' commissions), to
satisfy the Rent herein provided to be paid for the remainder of the Lease Term,
Tenant shall pay to Landlord on demand any deficiency. Landlord shall not be
deemed to have failed to use reasonable measures to relet the Premises by reason
of the fact that Landlord has leased or sought to lease other vacant premises in
the building in preference to reletting the Premises, or by reason of the fact
that Landlord has sought to relet the Premises at a rental rate higher than that
payable by Tenant under the Lease (but not in excess of the then current market
rental rate).
(e) Any and all property which may be removed from the premises by
the Landlord pursuant to the authority of the Lease or of law, to which the
Tenant is or may be entitled, may be handled, removed or stored by the Landlord
at the risk, cost and expense of the Tenant, and the Landlord shall in no event
be responsible for the value, preservation or safekeeping thereof. The Tenant
shall pay to the Landlord, upon demand, any and all expenses incurred in such
removal and all storage charges against such property so long as the same shall
be in the Landlord's possession or under the
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Landlord's control. Any such property of the Tenant not retaken from storage by
the Tenant within thirty (30) days after the end of the term, however
terminated, shall be conclusively presumed to have been conveyed by the Tenant
to the Landlord under this Lease as a bill of sale without further payment or
credit by the Landlord to the Tenant.
(f) Tenant hereby grants to Landlord a first lien upon the interest
of Tenant under this Lease to secure the payment of moneys due under this Lease,
which lien may be enforced in equity; and Landlord shall be entitled as a matter
of right to have a receiver appointed to take possession of the demised premises
and relet the same under order of court.
(g) The Tenant shall pay upon demand all the Landlord's costs,
charges and expenses, including the fees of counsel, agents and others retained
by the Landlord, incurred in performing or in enforcing the Tenant's obligations
hereunder or incurred by the Landlord in any litigation, negotiation or
transaction in which the Tenant causes the Landlord, without the Landlord's
fault, to become involved or concerned.
(h) The obligation of Tenant to pay the Rent reserved during the
balance of the Term, or during any extension, or any holdover tenancy created by
acts of the parties shall not be deemed to be waived, released or terminated, by
the service of any five-day notice, other notice to collect, demand for
possession, or notice that the tenancy hereby created will be terminated on the
date therein named, the institution of any action of forcible detainer or
ejectment or any judgment for possession that may be rendered in such action, or
any other act or acts resulting in the termination of the Lease of Tenant's
right to possession of the Premises.
(i) Tenant agrees that Landlord may file suit to recover any sums due
to Landlord under this Lease from time to time and that such suit or recovery of
any amount due Landlord hereunder shall not be any defense to any subsequent
action brought for any amount not theretofore reduced to judgment in favor of
Landlord.
(j) A discount rate equal to the lesser 10% per annum or the
equivalent yield of U.S. Treasury Bonds having the same maturity as the
remainder of the lease term as published in the
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Wall Street Journal shall be used for the purpose of calculating present value
in paragraphs 19 (c) and (d).
20. DEFAULT UNDER OTHER LEASE. If the term of any lease, other than this
Lease, made by the Tenant for any other demised premises in the Building shall
be terminated or terminable after the making of this Lease because of any
default by the Tenant under such other lease, such fact shall empower the
Landlord, at the Landlord's sole option, to terminate this Lease by notice to
the Tenant.
21. SURRENDER OF POSSESSION. Upon the expiration or other termination of
the term of this Lease, Tenant shall quit and surrender to Landlord the
premises, broom clean, in good order and condition, ordinary wear excepted, and
Tenant shall remove all of its property except as otherwise provided in Section
8.
If the Tenant does not remove its property of every kind and description
from the demised premises prior to the end of the term, however ended, and
Landlord shall not have requested the removal of same by Tenant pursuant to
Section 8 hereof, the Tenant shall be conclusively presumed to have conveyed the
same to the Landlord under this Lease as a bill of sale without further payment
or credit by the Landlord to the Tenant and the Landlord may remove the same and
the Tenant shall pay the cost of such removal to the Landlord upon demand.
Tenant's obligations to observe or perform this covenant shall survive the
expiration or other termination of the term of this Lease.
22. NOTICES. Notices and demands required to be given shall be in writing
by personal delivery or certified mail return receipt requested.
(a) Notices shall be served by upon Tenant at the premises.
(b) Notice shall be effectively served by Tenant upon Landlord when
addressed to Landlord at the Building, to Landlord in care of PROPERTY FACILITY
MANAGEMENT GROUP L.L.C., 20 North Michigan Avenue, Suite 400, Chicago, Illinois
60602, or if notified of another address by Landlord, at such latter address.
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(c) Notice by delivery is effective upon delivery. Notice by
certified mail is effective two (2) business days after mailing.
23. INTENTIONALLY OMITTED
24. SECURITY DEPOSIT. Tenant agrees to deposit with Landlord, upon the
execution of this Lease, the sum of $22,295.59 as security for the full and
faithful performance by Tenant of each and every term, provision, covenant and
condition of this Lease. If Tenant defaults in respect to any of the terms,
provisions, covenants and conditions of this Lease including, but not limited
to, payment of the Base Rent and Rent Adjustments, Landlord may use, apply or
retain the whole or any part of the security so deposited for the payment of any
such rent in default, or for any other sum which the Landlord may expend or be
required to expend by reason of Tenant's default including, without limitation,
any damages or deficiencies in the reletting of the demised premises, whether
such damages or deficiency shall have accrued before or after any re-entry by
Landlord. If any of the security shall be so used, applied or retained by
Landlord at any time or from time to time, Tenant shall promptly, in each such
instance, on written demand therefor by Landlord, pay to Landlord such
additional sum as may be necessary to restore the security to the original
amount set forth in the first sentence of this paragraph. If Tenant shall fully
and faithfully comply with all the terms, provisions, covenants and conditions
of this Lease, the security, or any balance thereof, shall be returned to Tenant
after the following:
(a) the time fixed as the expiration of the term of this Lease;
(b) the removal of Tenant and its property from the demised premises;
(c) the surrender of the demised premises by Tenant to Landlord in
accordance with this Lease; and
(d) the time required for the Rent Adjustment due pursuant to the
Lease to have been computed by Landlord and paid by Tenant.
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Except as otherwise required by law, Tenant shall not be entitled to any
interest on the aforesaid security. In the absence of evidence satisfactory to
Landlord of an assignment of the right to receive the security or the remaining
balance thereof, Landlord may return the security to the original Tenant,
regardless of one or more assignments of this Lease. Upon the transfer of
Landlord's interest under this Lease, Landlord's obligation to Tenant with
respect to the security deposit shall terminate upon assumption of such
obligation by the transferee.
25. COVENANT AGAINST LIENS. Tenant has no authority or power to cause or
permit any lien or encumbrance of any kind whatsoever, whether created by act of
Tenant, operation of law or otherwise, to attach to or be placed upon Landlord's
title or interest in the Real Property and any and all liens and encumbrances
created by Tenant shall attach to Tenant's interest only. Tenant covenants and
agrees not to suffer or permit any lien of mechanics or materialmen or others to
be placed against the Land, Building or the premises with respect to work or
services claimed to have been performed for or materials claimed to have been
furnished to Tenant or the premises, and in case of any such lien attaching,
Tenant covenants and agrees immediately to cause it to be released and removed
of record.
26. RENEWAL OPTION.
(a) Tenant shall have one option to renew (the "Renewal Option") the
Lease for one (1) additional five (5) year term to commence June 1, 2002 and
terminate May 31, 2007 (the "Renewal Term") upon notifying Landlord in writing
of the election to renew the Lease, not less than one hundred eighty (180) days
prior to the Expiration Date (the "Option Notice").
(b) Annual Base Rent for the Renewal Term shall be the greater of 95%
of the current market rental rate ("Market Rent") prevailing at the time of the
Option Notice or $309,401.34. Landlord shall advise Tenant in writing regarding
Landlord's proposed Market Rent within ten (10) business days of Landlord's
receipt of the Option Notice.
(c) For purposes of the Lease "Market Rent" shall mean the annual
rate of rent per square foot of rentable area, including concessions, if any,
and building standard tenant improvement
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allowance for leases with comparable term commencing on or about the same time
such rate is to be determined for comparable space in similar buildings within
the same geographic area for the same term in arm's length transactions between
a landlord and a willing and informed tenant.
(d) If Tenant disagrees with Landlord's determination of "Market
Rent", the parties shall meet and attempt to resolve their disagreement within
fifteen (15) business days after Landlord's notice to Tenant designating the
"Market Rent". If Landlord and Tenant fail to reach agreement, then the
following procedure shall be followed: within five (5) business days after the
expiration of the fifteen (15) day period described above, Landlord shall
promptly select an MAI appraiser or other real estate professional and Tenant
shall promptly select an MAI appraiser or other real estate professional (said
two appraisers or professionals are herein the "Initial Appraisers"). Each
appraiser shall be independent, familiar with office buildings and rents in the
north suburban Chicago area and with a minimum of ten (10) years experience in
evaluating office rents. If either Landlord or Tenant fails to designate its
Initial Appraiser within the five (5) business days described above, then the
Initial Appraiser that has been duly designated by the other party shall
determine the "Market Rent". The cost of each Initial Appraiser shall be paid
by the party selecting such appraiser. Each appraiser shall submit to Landlord
and Tenant, within fifteen (15) business days after both appointments, its
written appraisal of the "Market Rent" with respect to the space to be leased
based on a five (5) year term beginning as of the date of the Option Notice. If
the appraisals of the "Market Rent" determined by the Initial Appraisers are
less than ten percent (10%) apart (i.e., the higher appraisal is less than one
----
hundred ten percent (110%) of the lower appraisal), the "Market Rent" shall be
determined by taking the average of the two (2) appraisals. In the event the
appraisals of the "Market Rent" determined by the Initial Appraisers are ten
percent (10%) or more apart (i.e., the higher appraisal is one hundred ten
----
percent (110%) or more of the lower appraisal), the Initial Appraisers shall,
within five (5) business days thereafter, select a third appraiser with the same
qualifications or who meets the same criteria as required of the Initial
Appraisers ("Third Appraiser"). The Third Appraiser shall submit to Landlord
and Tenant, within fifteen (15) business days after its appointment, its written
appraisal of the "Market Rent" with respect to the space to be leased as of the
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Option Notice. The cost of the Third Appraiser shall be borne equally by
Landlord and Tenant. If the appraisal of the Third Appraiser is ten percent
(10%) or less at variance from the point that is equidistant between the
appraisals of the Initial Appraisers, the average of the three (3) appraisals
shall determine the "Market Rent". If the appraisal of the Third Appraiser is
more than ten percent (10%) at variance from the point that is equidistant
between the appraisals of the Initial Appraisers, the "Market Rent" shall be
determined by taking the average of the two (2) closest appraisals.
(e) In the event Tenant exercises the Renewal Option, Landlord and
Tenant shall, within ten (10) days of the determination of the "Market Rent",
execute an amendment to the Lease to include the new Monthly Base Rent and
Annual Base Rent.
(f) The Renewal Option shall automatically terminate upon the
earliest to occur of: (i) the expiration or termination of the Lease; (ii) the
termination of Tenant's right to possession of the Premises; (iii) the failure
of Tenant to timely or properly exercise the Renewal Option; (iv) Tenant's
default in the performance of its obligations under the Lease which have not
been cured within the applicable grace period, if any; or (v) Tenant's
assignment or sublease of its interest under the Lease.
27. MISCELLANEOUS.
(a) No receipt of money by the Landlord from the Tenant after the
termination of this Lease or after the service of any notice or after the
commencement of any suit, or after final judgment for possession of the demised
premises shall reinstate, continue to extend the term of this Lease or affect
any such notice, demand or suit.
(b) No waiver of any default of the Tenant hereunder shall be implied
from any omission by the Landlord to take any action on account of such default
if such default persists or be repeated, and no express waiver shall affect any
default other than the default specified in the express waver and then only for
the time and to the extent therein stated.
(c) The words "Landlord" and "Tenant" wherever used in the Lease
shall be construed to mean plural where necessary, and
36
<PAGE>
the necessary grammatical changes required to make the provisions hereof apply
either to corporations or individuals, men or women, shall in all cases be
assumed as though in each case fully expressed.
(d) Each provision hereof shall extend to and shall, as the case may
require, bind and inure to the benefit of the Landlord and the Tenant and their
respective heirs, legal representatives, successors and assigns in the event
this Lease has been assigned by Landlord or by Tenant with the express written
consent of the Landlord.
(e) Submission of this instrument for examination does not constitute
a reservation of or option for the premises. The instrument does not become
effective as a lease or otherwise until executed and delivered by both Landlord
and Tenant.
(f) All amounts (unless otherwise provided herein, and other than the
Base Rent and Rent Adjustment which shall be due as hereinbefore provided) owed
by the Tenant to the Landlord hereunder shall be deemed additional rent and be
paid within ten (10) days from the date the Landlord renders statements of
account therefor. All such amounts (including Base Rent and Rent Adjustment)
shall bear interest from the date due until the date paid at the rate of 2%
above the announced Corporate Base rate of interest in effect at The First
National Bank of Chicago on the date of payment or at the maximum legal rate of
interest, allowed by law, if such maximum legal rate is applicable and lower.
Whenever rent is referred to in this Lease, it shall include Base Rent, Rent
Adjustment and Additional Rent.
(g) All riders attached to this Lease and initialed by the Landlord
and the Tenant are hereby made a part of this Lease as though inserted in this
Lease.
(h) The headings of sections are for convenience only and do not
limit or construe the contents of the sections.
(i) If the Tenant shall occupy the premises prior to the beginning of
the term of this Lease with the Landlord's consent, all the provisions of this
Lease shall be in full force and effect as soon as the Tenant occupies the
premises.
37
<PAGE>
(j) INTENTIONALLY OMITTED
(k) Landlord and Tenant represent that they have dealt directly with
and only with LaSalle Partners and U.S. Equities as broker in connection with
this Lease, and that insofar as the Landlord and Tenant know no other broker
negotiated this Lease or is entitled to any commission in connection therewith.
Landlord and Tenant each indemnifies and holds the other and its beneficiaries,
partners and their respective agents and employees harmless from all claims of
any other broker or brokers in connection with this Lease. Landlord shall not
be obligated to pay any brokers' commissions or other fees to any persons or
brokers for (i) the Expansion Space if Tenant exercises the First Termination
Option or the Second Termination Option or (ii) the Initial Space for the
remaining term of the Lease for the Initial Space if and after the Tenant
exercises the First or Second Termination Option.
(l) The Tenant agrees that from time to time upon not less than ten
(10) business days' prior request by the Landlord, the Tenant will deliver to
the Landlord a statement in writing certifying (a) that this Lease is unmodified
and in full force and effect (or if there have been modifications that the same
is in full force and effect as modified and identifying the modifications), (b)
the dates to which the rent and other charges have been paid, and (c) that so
far as the person making the certificate knows, the Landlord is not in default
under any provision of this Lease.
The Landlord's title is and always shall be paramount to the
title of the Tenant, and nothing herein contained shall empower the Tenant to do
any act which can, shall or may encumber such title.
(n) The laws of the State of Illinois shall govern the validity,
performance and enforcement of this Lease.
(o) If any term, covenant or condition of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term, covenant or condition to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby and
each term,
38
<PAGE>
covenant or condition of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
(p) Landlord has no obligation pursuant to this Lease except as
expressly provided for herein. Landlord's or Owner's liability hereunder shall
cease upon the transfer of Landlord's or Owner's interest in this Lease.
(q) This Lease and Tenant Work Agreement, if any, set forth all the
covenants, promises, agreements, conditions and understandings between Landlord
and Tenant, concerning the demised premises and there are no covenants,
promises, agreements, conditions or understandings, either oral or written,
between them other than are herein set forth. Except as herein otherwise
provided, no subsequent alteration, amendment, change or addition to this Lease
shall be binding upon Landlord or Tenant unless reduced to writing and signed by
them.
(r) The undersigned signators warrant that they have full power and
authority to execute this Lease on behalf of the respective parties hereto.
28. RESERVATION OF RIGHTS. Notwithstanding any provision of Section 6(b)
or Section 15 or the Lease to the contrary, no agreement of Tenant in Section
6(b) or 15 shall be deemed to exempt Landlord from liability for damage or
injury to persons or damage to property caused by or resulting from the
negligence or willful conduct of Landlord, its agents, servants, or employees in
the operation or maintenance of the Premises or the Building.
29. EXCULPATORY CLAUSE. This Lease is executed by LaSalle National Trust,
N.A. as Successor Trustee to LaSalle National Bank, not personally, but solely
as Trustee under a Trust Agreement dated October 8, 1982 and known as Trust No.
105454, in the exercise of the power and authority conferred upon and vested in
it as such Trustee, and under the express direction of the beneficiaries of a
certain Trust Agreement dated October 8, 1982 and known as Trust No. 105454. It
is expressly understood and agreed that nothing in the Lease contained shall be
construed as creating any liability whatsoever against said Trustee personally
or said beneficiaries or their agents, and in particular, without limiting the
generality of the foregoing, there shall be no personal liability to pay any
indebtedness accruing hereunder or to perform any covenants, either
39
<PAGE>
express or implied, herein contained, to keep, preserve or sequester the
beneficiaries and has no authority to bind the beneficiaries to perform any
covenant or agreement herein, and that all personal liability of said Trustee
(and said beneficiaries and their agents, to the extent permitted by law) of
every sort, if any, is hereby expressly waived by Tenant, and every person now
or hereafter claiming any right or security hereunder; and that so far as the
parties hereto are concerned the owner of any indebtedness of liability accruing
hereunder shall look solely to the trust estate from time to time subject to the
provisions of said Trust Agreement for payment thereof. It is further understood
and agreed that the said trustee has no agents or employees and merely holds
naked legal title to the property herein described and has no knowledge
respecting rentals, leases or other factual matter with respect to said
Premises, except as represented to it by the beneficiaries of said Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the date first
above written.
LANDLORD: LaSALLE NATIONAL TRUST,N.A., as Successor Trustee
to LaSalle National Bank, not personally but
solely as Trustee under Trust Agreement dated
October 8, 1982 and known as Trust No. 105454.
By:________________________________
Title:_____________________________
TENANT: OPTION CARE, INC., a Delaware corporation
ATTEST:
By:________________________________
_________________________ Title:_____________________________
40
<PAGE>
EXHIBIT C
---------
RENT SCHEDULE FOR INITIAL SPACE
PRIOR TO THE EXPANSION SPACE COMMENCEMENT DATE
----------------------------------------------
<TABLE>
<CAPTION>
ANNUAL MONTHLY
---------- ----------
<S> <C> <C>
11/1/96 - 10/31/97 $187,756.20 $15,646.35
11/1/97 - 10/31/98 193,389.00 16,115.75
11/1/98 - 10/31/99 199,190.64 16,599.22
11/1/99 - 10/31/00 205,166.28 17,097.19
11/1/00 - 10/31/01 211,321.32 17,610.11
11/1/01 - 05/31/02 217,660.92 18,138.41
</TABLE>
41
<PAGE>
EXHIBIT D
---------
RENT SCHEDULE FOR THE PREMISES ON AND AFTER EXPANSION SPACE COMMENCEMENT DATE:
<TABLE>
<CAPTION>
ANNUAL MONTHLY
---------- ----------
<S> <C> <C>
06/1/97 - 10/31/97 $259,118.76 $21,593.23
11/1/97 - 10/31/98 266,892.36 22,241.03
11/1/98 - 10/31/99 274,899.12 22,908.26
11/1/99 - 10/31/00 283,146.00 23,595.50
11/1/00 - 10/31/01 291,640.44 24,303.37
11/1/01 - 05/31/02 300,389.64 25,032.47
</TABLE>
42
<PAGE>
EXHIBIT 10.8
$30,000,000 REVOLVING CREDIT FACILITY
CREDIT AGREEMENT
by and among
OPTION CARE, INC.
OPTION CARE, INC.
OPTION CARE ENTERPRISES, INC.
PHARMACARE OF SOUTHWEST FLORIDA, INC.
PHARMACY I. V. ASSOCIATES, INC.
HOME CARE OF COLUMBIA, INC.
YOUNG'S I. V. THERAPY, INC.
HOME INFUSION THERAPY OF BULLHEAD CITY, INC.
WHATCOM PHARMACEUTICAL SERVICES, INC.
CORDESYS HEALTHCARE MANAGEMENT, INC.
INFUSION THERAPY OF ONTARIO, INC.
OPTION CARE HOSPICE, INC.
OPTION CARE HOME HEALTH, INC.
MANAGEMENT BY INFORMATION, INC.
OPTION CARE OF OKLAHOMA, INC.
and
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION, As Agent
Dated as of December 23, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. CERTAIN DEFINITIONS......................................................................... 1
1.1 Certain Definitions................................................................. 1
1.2 Construction....................................................................... 17
1.2.1 Number; Inclusion........................................................ 17
1.2.2 Determination............................................................ 17
1.2.3 Agent's Discretion and Consent........................................... 17
1.2.4 Documents Taken as a Whole............................................... 17
1.2.5 Headings................................................................. 17
1.2.6 Implied References to this Agreement..................................... 18
1.2.7 Persons.................................................................. 18
1.2.8 Modifications to Documents............................................... 18
1.3 Accounting Principles.............................................................. 18
2. REVOLVING CREDIT FACILITY.................................................................. 19
2.1 Revolving Credit Commitments....................................................... 19
2.2 Nature of Banks' Obligations with Respect to Revolving Credit Loans................ 19
2.3 Commitment Fees.................................................................... 19
2.4 Closing Fee........................................................................ 19
2.5 Loan Requests...................................................................... 20
2.6 Making Loans....................................................................... 20
2.7 Revolving Credit Notes............................................................. 21
2.8 Use of Proceeds.................................................................... 21
2.9 Letter of Credit Subfacility....................................................... 21
2.9.1 Issuance of Letters of Credit............................................ 21
2.9.2 Letter of Credit Fees.................................................... 21
2.9.3 Disbursements, Reimbursement............................................. 22
2.9.4 Repayment of Participation Advances...................................... 23
2.9.5 Documentation............................................................ 23
2.9.6 Determinations to Honor Drawing Requests................................. 23
2.9.7 Nature of Participation and Reimbursement Obligations.................... 24
2.9.8 Indemnity................................................................ 25
2.9.9 Liability for Acts and Omissions......................................... 25
2.10 Extension by Banks of the Expiration Date......................................... 26
2.10.1 Requests; Approval by All Banks......................................... 26
2.10.2 Approval by Required Banks.............................................. 26
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
3. INTEREST RATES............................................................................. 27
3.1 Interest Rate Options.............................................................. 27
3.1.1 Revolving Credit Interest Rate Options................................... 27
3.1.2 Rate Quotations.......................................................... 27
3.2 Interest Periods................................................................... 28
3.2.1 Ending Date and Business Day............................................. 28
3.2.2 Amount of Borrowing Tranche.............................................. 28
3.2.3 Termination Before Expiration Date....................................... 28
3.2.4 Renewals................................................................. 28
3.3 Interest After Default............................................................. 28
3.3.1 Letter of Credit Fees, Interest Rate..................................... 28
3.3.2 Other Obligations........................................................ 29
3.3.3 Acknowledgment........................................................... 29
3.4 Euro-Rate Unascertainable.......................................................... 29
3.4.1 Unascertainable.......................................................... 29
3.4.2 Illegality; Increased Costs; Deposits Not Available...................... 29
3.4.3 Agent's and Bank's Rights................................................ 30
3.5 Selection of Interest Rate Options................................................. 30
4. PAYMENTS................................................................................... 30
4.1 Payments........................................................................... 30
4.2 Pro Rata Treatment of Banks........................................................ 31
4.3 Interest Payment Dates............................................................. 31
4.4 Prepayments........................................................................ 31
4.4.1 Right to Prepay.......................................................... 31
4.4.2 Mandatory Prepayment and Reduction of Revolving Credit Commitment........ 32
4.4.3 Replacement of a Bank.................................................... 33
4.4.4 Change of Lending Office................................................. 33
4.5 Additional Compensation in Certain Circumstances................................... 34
4.5.1 Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital
Adequacy Requirements, Expenses, Etc................................. 34
4.5.2 Indemnity and Compensation............................................... 35
4.5.3 Obligations Joint and Several............................................ 35
5. REPRESENTATIONS AND WARRANTIES............................................................. 35
5.1 Representations and Warranties..................................................... 35
5.1.1 Organization and Qualification........................................... 36
5.1.2 Capitalization and Ownership............................................. 36
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
5.1.3 Subsidiaries............................................................. 36
5.1.4 Power and Authority...................................................... 36
5.1.5 Validity and Binding Effect.............................................. 37
5.1.6 No Conflict.............................................................. 37
5.1.7 Litigation............................................................... 37
5.1.8 Title to Properties...................................................... 37
5.1.9 Financial Statements..................................................... 38
5.1.10 Use of Proceeds; Margin Stock........................................... 38
5.1.11 Full Disclosure......................................................... 39
5.1.12 Taxes................................................................... 39
5.1.13 Consents and Approvals.................................................. 39
5.1.14 No Event of Default; Compliance with Instruments........................ 39
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.......................... 40
5.1.16 Security Interests...................................................... 40
5.1.17 Status of the Pledged Collateral........................................ 40
5.1.18 Insurance............................................................... 41
5.1.19 Compliance with Laws.................................................... 41
5.1.20 Material Contracts; Burdensome Restrictions............................. 41
5.1.21 Investment Companies; Regulated Entities................................ 42
5.1.22 Plans and Benefit Arrangements.......................................... 42
5.1.23 Employment Matters...................................................... 43
5.1.24 Environmental Matters................................................... 43
5.1.25 Senior Debt Status...................................................... 44
5.1.26 Medicare/Medicaid....................................................... 45
5.1.27 Billing Investigation................................................... 45
5.1.28 Franchise Agreements.................................................... 45
5.2 Updates to Schedules............................................................... 45
6. CONDITIONS OF LENDING...................................................................... 45
6.1 First Loans........................................................................ 46
6.1.1 Officer's Certificate.................................................... 46
6.1.2 Secretary's Certificate.................................................. 46
6.1.3 Delivery of Loan Documents............................................... 47
6.1.4 Opinion of Counsel....................................................... 47
6.1.5 Legal Details............................................................ 47
6.1.6 Payment of Fees.......................................................... 47
6.1.7 Consents................................................................. 47
6.1.8 Officer's Certificate Regarding MACs..................................... 47
6.1.9 No Violation of Laws..................................................... 48
6.1.10 No Actions or Proceedings............................................... 48
6.1.11 Insurance Policies; Certificates of Insurance; Endorsements............. 48
6.1.12 Landlord's Waiver....................................................... 48
</TABLE>
-iii-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
6.2 Each Additional Loan............................................................... 48
7. COVENANTS.................................................................................. 49
7.1 Affirmative Covenants.............................................................. 49
7.1.1 Preservation of Existence, Etc........................................... 49
7.1.2 Payment of Liabilities, Including Taxes, Etc............................. 49
7.1.3 Maintenance of Insurance................................................. 50
7.1.4 Maintenance of Properties and Leases..................................... 50
7.1.5 Maintenance of Patents, Trademarks, Etc.................................. 51
7.1.6 Visitation Rights........................................................ 51
7.1.7 Keeping of Records and Books of Account.................................. 51
7.1.8 Plans and Benefit Arrangements........................................... 51
7.1.9 Compliance with Laws..................................................... 52
7.1.10 Use of Proceeds......................................................... 52
7.1.11 Further Assurances...................................................... 52
7.1.12 Subordination of Intercompany Loans..................................... 53
7.1.13 Interest Rate Protection................................................ 53
7.1.14 Material Agreements..................................................... 53
7.1.15 Licenses, Permits, etc.................................................. 53
7.1.16 Franchise Agreements.................................................... 53
7.1.17 Subsidiary Joinder...................................................... 53
7.1.18 Notices to Payors....................................................... 54
7.2 Negative Covenants................................................................. 54
7.2.1 Indebtedness............................................................. 54
7.2.2 Liens; Negative Pledge................................................... 55
7.2.3 Guaranties............................................................... 55
7.2.4 Loans and Investments.................................................... 55
7.2.5 Dividends and Related Distributions...................................... 56
7.2.6 Liquidations and Permitted Business Combinations......................... 56
7.2.7 Dispositions of Assets or Subsidiaries................................... 58
7.2.8 Affiliate Transactions................................................... 58
7.2.9 Subsidiaries, Partnerships and Joint Ventures............................ 59
7.2.10 Continuation of or Change in Business................................... 59
7.2.11 Plans and Benefit Arrangements.......................................... 59
7.2.12 Fiscal Year............................................................. 60
7.2.13 Issuance of Stock....................................................... 60
7.2.14 Changes in Organizational Documents..................................... 60
7.2.15 Leases.................................................................. 61
7.2.16 Maximum Leverage Ratio.................................................. 61
7.2.17 Minimum Interest Coverage Ratio......................................... 61
7.2.18 Minimum Net Worth....................................................... 61
7.2.19 Minimum Capitalization.................................................. 61
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
7.3 Reporting Requirements............................................................. 61
7.3.1 Monthly Financial Statements............................................. 62
7.3.2 Quarterly Financial Statements........................................... 62
7.3.3 Annual Financial Statements.............................................. 62
7.3.4 Certificate of Option Care, Inc.......................................... 62
7.3.5 Notice of Default........................................................ 62
7.3.6 Notice of Litigation..................................................... 63
7.3.7 Certain Events........................................................... 63
7.3.8 Budgets, Forecasts, Other Reports and Information........................ 63
7.3.9 Notices Regarding Plans and Benefit Arrangements......................... 64
8. DEFAULT.................................................................................... 65
8.1 Events of Default.................................................................. 65
8.1.1 Payments Under Loan Documents............................................ 65
8.1.2 Breach of Warranty....................................................... 66
8.1.3 Breach of Negative Covenants or Visitation Rights........................ 66
8.1.4 Breach of Other Covenants................................................ 66
8.1.5 Defaults in Other Agreements or Indebtedness............................. 66
8.1.6 Final Judgments or Orders................................................ 66
8.1.7 Loan Document Unenforceable.............................................. 67
8.1.8 Uninsured Losses; Proceedings Against Assets............................. 67
8.1.9 Notice of Lien or Assessment............................................. 67
8.1.10 Insolvency.............................................................. 67
8.1.11 Events Relating to Plans and Benefit Arrangements....................... 67
8.1.12 Cessation of Business................................................... 68
8.1.13 Change of Control....................................................... 68
8.1.14 Change of Management.................................................... 68
8.1.15 Involuntary Proceedings................................................. 68
8.1.16 Voluntary Proceedings................................................... 69
8.2 Consequences of Event of Default................................................... 69
8.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization
Proceedings.......................................................... 69
8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings69
8.2.3 Set-off.................................................................. 70
8.2.4 Suits, Actions, Proceedings.............................................. 70
8.2.5 Application of Proceeds.................................................. 70
8.2.6 Other Rights and Remedies................................................ 71
8.3 Notice of Sale..................................................................... 71
8.4 Receivables Account................................................................ 71
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
9. THE AGENT.................................................................................. 72
9.1 Appointment........................................................................ 72
9.2 Delegation of Duties............................................................... 72
9.3 Nature of Duties; Independent Credit Investigation................................. 72
9.4 Actions in Discretion of Agent; Instructions from the Banks........................ 73
9.5 Reimbursement and Indemnification of Agent by the Borrower......................... 73
9.6 Exculpatory Provisions; Limitation of Liability.................................... 74
9.7 Reimbursement and Indemnification of Agent by Banks................................ 74
9.8 Reliance by Agent.................................................................. 75
9.9 Notice of Default.................................................................. 75
9.10 Notices........................................................................... 75
9.11 Banks in Their Individual Capacities.............................................. 76
9.12 Holders of Notes.................................................................. 76
9.13 Equalization of Banks............................................................. 76
9.14 Successor Agent................................................................... 77
9.15 Agent's Fee....................................................................... 77
9.16 Availability of Funds............................................................. 77
9.17 Calculations...................................................................... 78
9.18 Beneficiaries..................................................................... 78
10. MISCELLANEOUS............................................................................. 78
10.1 Modifications, Amendments or Waivers.............................................. 78
10.1.1 Increase of Revolving Credit Commitment; Extension or Expiration Date... 78
10.1.2 Extension of Payment; Reduction of Principal Interest or Fees;
Modification of Terms of Payment..................................... 79
10.1.3 Release of Collateral or Guarantor...................................... 79
10.1.4 Miscellaneous........................................................... 79
10.2 No Implied Waivers; Cumulative Remedies; Writing Required......................... 79
10.3 Reimbursement and Indemnification of Banks by the Borrower; Taxes................. 80
10.4 Holidays.......................................................................... 80
10.5 Funding by Branch, Subsidiary or Affiliate........................................ 81
10.5.1 Notional Funding........................................................ 81
</TABLE>
-vi-
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
10.5.2 Actual Funding.......................................................... 81
10.6 Notices........................................................................... 81
10.7 Severability...................................................................... 82
10.8 Governing Law..................................................................... 82
10.9 Prior Understanding............................................................... 82
10.10 Duration; Survival............................................................... 82
10.11 Successors and Assigns........................................................... 83
10.12 Confidentiality.................................................................. 84
10.13 Counterparts..................................................................... 84
10.14 Agent's or Bank's Consent........................................................ 84
10.15 Exceptions....................................................................... 85
10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL........................................... 85
10.17 Tax Withholding Clause........................................................... 85
10.18 Joinder of Borrowers and Guarantors.............................................. 86
</TABLE>
-vii-
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
SCHEDULE
<S> <C>
SCHEDULE 1.1(B) - REVOLVING CREDIT COMMITMENTS OF BANKS AND ADDRESSES
FOR NOTICES
SCHEDULE 1.1(P) - PERMITTED LIENS
SCHEDULE 5.1.1 - QUALIFICATIONS TO DO BUSINESS
SCHEDULE 5.1.2 - CAPITALIZATION
SCHEDULE 5.1.3 - SUBSIDIARIES
SCHEDULE 5.1.8 - OWNED AND LEASED REAL PROPERTY
SCHEDULE 5.1.13 - CONSENTS AND APPROVALS
SCHEDULE 5.1.15 - PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC.
SCHEDULE 5.1.17 - PARTNERSHIP AGREEMENTS; LLC AGREEMENTS
SCHEDULE 5.1.18 - INSURANCE POLICIES
SCHEDULE 5.1.20 - MATERIAL CONTRACTS
SCHEDULE 5.1.22 - EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 5.1.24 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 7.2.1 - PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(C) - COLLATERAL ASSIGNMENT
EXHIBIT 1.1(G)(1) - GUARANTOR JOINDER
EXHIBIT 1.1(G)(2) - GUARANTY AGREEMENT
EXHIBIT 1.1(I)(1) - INDEMNITY
EXHIBIT 1.1(I)(2) - INTERCOMPANY SUBORDINATION AGREEMENT
EXHIBIT 1.1(M) - MORTGAGE
EXHIBIT 1.1(P)(1) - PATENT, TRADEMARK AND COPYRIGHT ASSIGNMENT
EXHIBIT 1.1(P)(2) - PLEDGE AGREEMENT
EXHIBIT 1.1(R) - REVOLVING CREDIT NOTE
EXHIBIT 1.1(S) - SECURITY AGREEMENT
EXHIBIT 1.1(T) - TERM NOTE
EXHIBIT 2.5 - LOAN REQUEST
EXHIBIT 6.1.4 - OPINION OF COUNSEL
EXHIBIT 6.1.12 - LANDLORD'S WAIVER
EXHIBIT 7.2.6 - ACQUISITION COMPLIANCE CERTIFICATE
EXHIBIT 7.3.4 - QUARTERLY COMPLIANCE CERTIFICATE
EXHIBIT - REIMBURSEMENT AGREEMENT
</TABLE>
-viii-
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of December __, 1996, and is made by
and among OPTION CARE, INC., a Delaware corporation, ("Option Care, Inc.");
OPTION CARE, INC., a California corporation; OPTION CARE ENTERPRISES, INC., a
California corporation; PHARMACARE OF SOUTHWEST FLORIDA, INC., a Florida
corporation; PHARMACY I. V. ASSOCIATES, INC., A Missouri corporation; HOME CARE
OF COLUMBIA, INC., a Missouri corporation; YOUNG'S I. V. THERAPY, INC., a
Pennsylvania corporation; HOME INFUSION THERAPY OF BULLHEAD CITY, INC., a
Delaware corporation; WHATCOM PHARMACEUTICAL SERVICES, INC., a Washington
corporation; CORDESYS HEALTHCARE MANAGEMENT, INC., a Delaware corporation;
INFUSION THERAPY OF ONTARIO, INC., a California corporation; OPTION CARE
HOSPICE, INC., a Missouri corporation; OPTION CARE HOME HEALTH, INC., an Ohio
corporation; MANAGEMENT BY INFORMATION, INC., a Delaware corporation; and OPTION
CARE OF OKLAHOMA, INC., a Delaware corporation, (collectively and jointly and
severally, the "Borrowers"), each of the Guarantors (as hereinafter defined),
the BANKS (as hereinafter defined), and PNC BANK, NATIONAL ASSOCIATION, in its
capacity as agent for the Banks under this Agreement (hereinafter referred to in
such capacity as the "Agent").
WITNESSETH:
WHEREAS, the Borrowers have requested the Banks to provide a revolving
credit facility to the Borrowers in an aggregate principal amount not to exceed
($30,000,000); and
WHEREAS, the revolving credit facility shall be used to finance the
acquisition and facilities of home health care related businesses and for
general corporate purposes; and
WHEREAS, the Banks are willing to provide such credit upon the terms
and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
-------------------
1.1 Certain Definitions.
-------------------
In addition to words and terms defined elsewhere in this Agreement,
the following words and terms shall have the following meanings, respectively,
unless the context hereof clearly requires otherwise:
<PAGE>
Affiliate as to any Person shall mean any other Person (i) which
---------
directly or indirectly controls, is controlled by, or is under common control
with such Person, (ii) which beneficially owns or holds 5% or more of any class
of the voting or other equity interests of such Person, or (iii) 5% or more of
any class of voting interests or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person. Control, as used in this
definition, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, including
the power to elect a majority of the directors or trustees of a corporation or
trust, as the case may be.
Agent shall mean PNC Bank, National Association, and its successors
-----
and assigns.
Agent's Fee shall have the meaning assigned to that term in Section
-----------
9.15.
Agent's Letter shall have the meaning assigned to that term in Section
--------------
9.15.
Agreement shall mean this Credit Agreement, as the same may be
---------
supplemented or amended from time to time, including all schedules and exhibits.
Annual Statements shall have the meaning assigned to that term in
-----------------
Section 5.1.9(i).
Applicable Margin shall mean the percentage determined with reference
-----------------
in any fiscal quarter to the Ratio of Total Funded Debt to Cash Flow From
Operations from the prior fiscal quarter ending as set forth below:
<TABLE>
<CAPTION>
Base Rate Euro-Rate
Ratio Applicable Margin Applicable Margin
- ----- ----------------- -----------------
<S> <C> <C>
Greater than 2:50:1 3/4% 2 1/4%
Greater than 2:00:1 and 1/2% 2%
less than or equal to
2:50:1
Greater than 1:50:1 1/4% 1 3/4%
and less than or equal
to 2:00:1
Less than or equal to 1:50:1 0% 1 1/2%
</TABLE>
-2-
<PAGE>
Assignee Bank shall have the meaning assigned to such term in Section
-------------
2.10.2.
Assignment and Assumption Agreement shall mean an Assignment and
-----------------------------------
Assumption Agreement by and among a Purchasing Bank, a Transferor Bank and the
Agent, as Agent and on behalf of the remaining Banks, substantially in the form
of Exhibit 1.1(A).
--------------
Authorized Officer shall mean those individuals, designated by written
------------------
notice to the Agent from the Borrowers, authorized to execute notices, reports
and other documents on behalf of the Loan Parties required hereunder. The
Borrowers may amend such list of individuals from time to time by giving written
notice of such amendment to the Agent.
Availability shall exist if, after giving effect to any Borrower's
------------
request for a Loan, the ratio of Consolidated Total Funded Debt to Consolidated
Cash Flow From Operations for the previous rolling four quarter period adjusted
--------
to include (i) debt incurred from the end of the most recent quarter, (ii) and,
in the case of a Loan requested as part of the acquisition of a Permitted
Business Combination, (a) debt to be incurred as part of a Permitted Business
Combination, and (b) cash flow realized during the rolling twelve month period
by the Person that is the object of the Permitted Business Combination shall not
exceed 3.0:1; provided, however, that if a Borrower will own less than 100% of
the ownership interest, the adjustments in subsection (ii) will be limited to a
percentage equal to the percentage ownership interest of such Borrower in the
Permitted Business Combination.
Bank to be Replaced shall have the meaning assigned to such term in
-------------------
Section 2.10.2.
Banks shall mean the financial institutions named on Schedule 1.1(B)
----- ---------------
and their respective successors and assigns as permitted hereunder, each of
which is referred to herein as a Bank.
Base Rate shall mean the greater of (i) the interest rate per annum
---------
announced from time to time by the Agent at its Principal Office as its then
prime rate, which rate may not be the lowest rate then being charged commercial
borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus 1/2% per
annum.
Base Rate Option shall mean the option of the Borrowers to have
----------------
Revolving Credit Loans bear interest at the rate and under the terms and
conditions set forth in Section 3.1.1(i).
Benefit Arrangement shall mean at any time an "employee benefit plan,"
-------------------
within the meaning of Section 3(3) of ERISA, which is neither a Plan nor a
Multiemployer Plan and which is maintained, sponsored or otherwise contributed
to by any member of the ERISA Group.
-3-
<PAGE>
Borrower Joinder shall mean a joinder by a Person as a Borrower under
----------------
this Agreement and the other Loan Documents in the form of Exhibit 1.1(B)
Borrowers shall have the meaning given in the recitals to this
---------
Agreement.
Borrowing Date shall mean, with respect to any Loan, the date for the
--------------
making thereof or the renewal or conversion thereof at or to the same or a
different Interest Rate Option, which shall be a Business Day.
Borrowing Tranche shall mean specified portions of Loans outstanding
-----------------
as follows: (i) any Loans to which a Euro-Rate Option applies which become
subject to the same Interest Rate Option under the same Loan Request by the
Borrowers and which have the same Interest Period shall constitute one Borrowing
Tranche, and (ii) all Loans to which a Base Rate Option applies shall constitute
one Borrowing Tranche.
Business Day shall mean any day other than a Saturday or Sunday or a
------------
legal holiday on which commercial banks are authorized or required to be closed
for business in Pittsburgh, Pennsylvania and, if the applicable Business Day
relates to any Loan to which the Euro-Rate Option applies, such day must also be
a day on which dealings in dollar deposits are carried on in the London
interbank market.
Closing Date shall mean the Business Day on which the first Loan shall
------------
be made, which shall be December 18, 1996, or such other time and place as the
parties agree.
Closing Fee shall mean the fee referenced in Section 2.4.
-----------
Collateral shall mean the Pledged Collateral, the UCC Collateral and
----------
the Intellectual Property Collateral.
Commitment Fee shall have the meaning assigned to that term in
--------------
Section 2.3.
Consideration shall mean with respect to any Permitted Acquisition,
-------------
the aggregate of (i) the net present value paid by any of the Borrowers,
directly or indirectly, to the seller in connection therewith, (ii) the
Indebtedness incurred or assumed by any of the Borrowers, whether in favor of
the seller or otherwise and whether fixed or contingent, (iii) any Guaranty
given or incurred by any Borrower in connection therewith, (iv) 50% of the value
of stock transferred, and (v) the net present value of any other consideration
given or obligation incurred by any of the Borrowers in connection therewith.
Consolidated Cash Flow From Operations shall mean the sum of net
--------------------------------------
income, depreciation, amortization, other non-cash charges to net income,
interest expense and tax expense (other than property taxes and local business
taxes) minus non-cash credits to net income, all measured on a rolling four
quarters basis in each case of the Borrowers and their Subsidiaries and
consolidated in accordance with GAAP. The calculation of Consolidated Cash
-4-
<PAGE>
Flow From Operations shall not include (i) items attributable to Persons not
Borrowers or Guarantors and (ii) with respect to a Person that is not owned 100%
by a Borrower or Guarantor, the percentage portion of any item that corresponds
to the percentage portion of ownership and voting control that a Borrower or
Subsidiary does not have.
----
Consolidated Net Worth shall mean as of any date of determination
----------------------
total stockholders' equity of the Borrowers and their Subsidiaries as of such
date determined and consolidated in accordance with GAAP.
Consolidated Total Funded Debt shall mean all indebtedness for
------------------------------
borrowed money, both short and long term, including guarantees relating to
borrowed money of third parties, reimbursement obligations under standby letters
of credit and capitalized leases, consolidating joint obligations.
Designated Officers shall mean the Chief Financial Officer,
-------------------
Controller, Assistant Controller and Corporate Secretary, any one of whom can
authorize a request for a Loan.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful money
----------------------------- -
of the United States of America.
Drawing Date shall have the meaning assigned to that term in
------------
Section 29.3.2.
Environmental Complaint shall mean any written complaint setting forth
-----------------------
a cause of action for personal or property damage or natural resource damage or
equitable relief, order, notice of violation, citation, request for information
issued pursuant to any Environmental Laws by an Official Body, subpoena or other
written notice of any type relating to, arising out of, or issued pursuant to,
any of the Environmental Laws or any Environmental Conditions, as the case may
be.
Environmental Conditions shall mean any conditions of the environment,
------------------------
including the workplace, the ocean, natural resources (including flora or
fauna), soil, surface water, groundwater, any actual or potential drinking water
supply sources, substrata or the ambient air, relating to or arising out of, or
caused by, the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, emptying, discharging,
injecting, escaping, leaching, disposal, dumping, threatened release or other
management or mismanagement of Regulated Substances resulting from the use of,
or operations on, any Property.
Environmental Laws shall mean all federal, state, local and foreign
------------------
Laws and regulations, including permits, licenses, authorizations, bonds,
orders, judgments, and consent decrees issued, or entered into, pursuant
thereto, relating to pollution or protection of human health or the environment
or employee safety in the workplace.
-5-
<PAGE>
ERISA shall mean the Employee Retirement Income Security Act of 1974,
-----
as the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
ERISA Group shall mean, at any time, the Borrowers and all members of
-----------
a controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control and all other entities which, together with
the Borrowers, are treated as a single employer under Section 414 of the
Internal Revenue Code.
Euro-Rate shall mean with respect to the Loans comprising any
---------
Borrowing Tranche to which the Euro-Rate Option applies for any Interest Period,
the interest rate per annum determined by the Agent by dividing (the resulting
quotient rounded upward to the nearest 1/100th of 1% per annum) (i) the rate of
interest determined by the Agent in accordance with its usual procedures (which
determination shall be conclusive and binding upon the Borrowers, absent
manifest error on the part of the Agent) to be equal to the offered rates for
deposits in Dollars for the applicable Euro-Rate Interest Period which appears
on Page 3750 of the TELERATE rate reporting system or other similar system as
of approximately 11:00 a.m. Greenwich Mean Time, two (2) Business Days prior to
the first day of such Euro-Rate Interest Period for an amount comparable to such
Loan and having a borrowing date and a maturity comparable to such Interest
Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage.
The Euro-Rate may also be expressed by the following formula:
Euro Rate = Offered rate on TELERATE Page 3750
----------------------------------
1.00 - Euro-Rate Reserve Percentage
If more than one offered rate appears on Page 3750 of the TELERATE reporting
system or similar system, the rate will be the arithmetic mean of such offered
rates. The Euro-Rate shall be adjusted with respect to any Euro-Rate Option
outstanding on the effective date of any change in the Euro-Rate Reserve
Percentage as of such effective date. The Agent shall give prompt notice to the
Borrowers of the Euro-Rate as determined or adjusted in accordance herewith,
which determination shall be conclusive absent manifest error.
Euro-Rate Option shall mean the option of the Borrowers to have
----------------
Revolving Credit Loans bear interest at the rate and under the terms and
conditions set forth in Section 3.1.1(ii).
Euro-Rate Reserve Percentage shall mean the maximum percentage
----------------------------
(expressed as a decimal rounded upward to the nearest 1/100 of 1%) as determined
by the Agent which is in effect during any relevant period, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the reserve requirements (including supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency Liabilities") of a member bank in such System.
-6-
<PAGE>
Event of Default shall mean any of the events described in Section 8.1
----------------
and referred to therein as an "Event of Default."
Expiration Date shall mean December 23, 1998; provided, however, that
---------------
the Expiration Date may be extended pursuant to Section 2.10.1.
Extending Bank shall have the meaning assigned to such term in
--------------
Section 2.10.2.
Federal Funds Effective Rate for any day shall mean the rate per annum
----------------------------
(based on a year of 360 days and actual days elapsed and rounded upward to the
nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, if such Federal
--------
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
Financial Projections shall have the meaning assigned to that term in
---------------------
Section 5.1.9(ii).
GAAP shall mean generally accepted accounting principles as are in
----
effect from time to time, subject to the provisions of Section 1.3, and applied
on a consistent basis both as to classification of items and amounts.
Governmental Acts shall have the meaning assigned to that term in
-----------------
Section 2.9.8.
Guarantor shall mean each of the Borrowers and each other Person which
---------
joins this Agreement as a Guarantor after the date hereof pursuant to Section
10.18.
Guarantor Joinder shall mean a joinder by a Person as a Guarantor
-----------------
under this Agreement, the Guaranty Agreement and the other Loan Documents in the
form of Exhibit 1.1(G)(1).
------------------
Guaranty of any Person shall mean any obligation of such Person
--------
guaranteeing or in effect guaranteeing any liability or obligation of any other
Person in any manner, whether directly or indirectly, including any performance
bond or other suretyship arrangement and any other form of assurance against
loss, except endorsement of negotiable or other instruments for deposit or
collection in the ordinary course of business and indemnities.
-7-
<PAGE>
Guaranty Agreement shall mean the Guaranty and Suretyship Agreement in
------------------
substantially the form of Exhibit 1.1(G)(2) executed and delivered by each of
-----------------
the Guarantors to the Agent for the benefit of the Banks.
Historical Statements shall have the meaning assigned to that term in
---------------------
Section 5.1.9(i).
Indebtedness shall mean, as to any Person at any time, any and all
------------
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations (contingent or
otherwise) under any letter of credit, currency swap agreement, interest rate
swap, cap, collar or floor agreement or other interest rate management device,
(iv) any other transaction (including forward sale or purchase agreements,
capitalized leases and conditional sales agreements) having the commercial
effect of a borrowing of money entered into by such Person to finance its
operations or capital requirements (but not including trade payables and accrued
expenses incurred in the ordinary course of business which are not represented
by a promissory note or other evidence of indebtedness and which are not more
than thirty (30) days past due), or (v) any Guaranty of Indebtedness for
borrowed money.
Ineligible Security shall mean any security which may not be
-------------------
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
Insolvency Proceeding shall mean, with respect to any Person, (a)
---------------------
case, action or proceeding with respect to such Person (i) before any court or
any other Official Body under any bankruptcy, insolvency, reorganization or
other similar Law now or hereafter in effect, or (ii) for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or similar official) of any Loan Party or otherwise relating to liquidation,
dissolution, winding-up or relief of such Person, or (b) any general assignment
for the benefit of creditors, composition, marshaling of assets for creditors,
or other, similar arrangement in respect of such Person's creditors generally or
any substantial portion of its creditors; undertaken under any Law.
Intellectual Property Collateral shall mean all of the property
--------------------------------
described in the Patent, Trademark and Copyright Assignment.
Intercompany Subordination Agreement shall mean a Subordination
------------------------------------
Agreement among the Loan Parties in the form attached hereto as Exhibit
-------
1.1(I)(2).
- ---------
Interest Period shall have the meaning assigned to such term in
---------------
Section 3.2.
-8-
<PAGE>
Interest Rate Option shall mean any Euro-Rate Option or Base Rate
--------------------
Option.
Interim Statements shall have the meaning assigned to that term in
------------------
Section 5.1.9(i).
Internal Revenue Code shall mean the Internal Revenue Code of 1986, as
---------------------
the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
Labor Contracts shall mean all employment agreements, employment
---------------
contracts, collective bargaining agreements and other agreements among any Loan
Party or Subsidiary of a Loan Party and its employees.
Law shall mean any law (including common law), constitution, statute,
---
treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
Letter of Credit shall have the meaning assigned to that
----------------
term in Section 2.9.1.
Letter of Credit Borrowing shall mean an extension of credit resulting
--------------------------
from a drawing under any Letter of Credit which shall not have been reimbursed
on the date when made and shall not have been converted into a Revolving Credit
Loan under Section 2.9.3.2.
Letter of Credit Fee shall have the meaning assigned to that term in
--------------------
Section 2.9.2.
Letters of Credit Outstanding shall mean at any time the sum of (i)
-----------------------------
the aggregate undrawn face amount of outstanding Letters of Credit and (ii) the
aggregate amount of all unpaid and outstanding Reimbursement Obligations.
Lien shall mean any mortgage, deed of trust, pledge, lien, security
----
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
LLC Interests shall have the meaning given to such term in
-------------
Section 5.1.3.
Loan Documents shall mean this Agreement, the Agent's Letter, the
--------------
Guaranty Agreement, the Intercompany Subordination Agreement, the Notes, the
Patent, Trademark and Copyright Assignment, the Pledge Agreement, the Security
Agreement, , and any other instruments, certificates or documents delivered or
contemplated to be delivered hereunder
-9-
<PAGE>
or thereunder or in connection herewith or therewith, as the same may be
supplemented or amended from time to time in accordance herewith or therewith,
and Loan Document shall mean any of the Loan Documents.
-------------
Loan Parties shall mean the Borrowers and the Guarantors.
------------
Loan Request shall mean a request for Revolving Credit Loans made in
------------
accordance with Section 2.5 or a request to select, convert to or renew a Euro-
Rate Option in accordance with Section 4.2.
Loans shall mean collectively and Loan shall mean separately all
----- ----
Revolving Credit Loans and any Revolving Credit Loan.
Material Adverse Change shall mean any set of circumstances or events
-----------------------
which (a) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of this Agreement or any
other Loan Document, (b) is or could reasonably be expected to be material and
adverse to the business, properties, assets, financial condition, results of
operations of the Loan Parties taken as a whole, (c) impairs materially or could
reasonably be expected to impair materially the ability of the Loan Parties
taken as a whole to duly and punctually pay or perform their Indebtedness, or
(d) impairs materially or could reasonably be expected to impair materially the
ability of the Agent or any of the Banks, to the extent permitted, to enforce
their legal remedies pursuant to this Agreement or any other Loan Document.
Material Agreements, shall mean franchise agreements, material supply
-------------------
contracts, material managed care contracts, material licenses, material permits
and acquisition agreements.
Month, with respect to an Interest Period under the Euro-Rate Option,
-----
shall mean the interval between the days in consecutive calendar months
numerically corresponding to the first day of such Interest Period. If any
Euro-Rate Interest Period begins on a day of a calendar month for which there is
no numerically corresponding day in the month in which such Interest Period is
to end, the final month of such Interest Period shall be deemed to end on the
last Business Day of such final month.
Multiemployer Plan shall mean any employee benefit plan which is a
------------------
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which any Borrower or any member of the ERISA Group is then making or accruing
an obligation to make contributions or, within the preceding five Plan years,
has made or had an obligation to make such contributions.
Multiple Employer Plan shall mean a Plan which has two or more
----------------------
contributing sponsors (including any Borrower or any member of the ERISA Group)
at least two
-10-
<PAGE>
of whom are not under common control, as such a plan is described in Sections
4063 and 4064 of ERISA.
Notes shall mean separately all the Notes of the Borrowers in the form
-----
of Exhibit 1.1(R) evidencing the Revolving Credit Loans together with all
--------------
amendments, extensions, renewals, replacements, refinancings or refundings
thereof in whole or in part.
Notices shall have the meaning assigned to that term in Section 10.6.
-------
Obligation shall mean any obligation or liability of any of the Loan
----------
Parties to the Agent or any of the Banks, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, under or in connection with this Agreement,
the Notes, the Letters of Credit, the Agent's Letter or any other Loan
Document.
Official Body shall mean any national, federal, state, local or other
-------------
government or political subdivision or any agency, authority, bureau, central
bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
Participation Advance shall mean, with respect to any Bank, such
---------------------
Bank's payment in respect of its participation in a Letter of Credit Borrowing
according to its Ratable Share pursuant to Section 2.9.4.
Partnership Interests shall have the meaning given to such term in
---------------------
Section 5.1.3.
Patent, Trademark and Copyright Assignment shall mean the Patent,
------------------------------------------
Trademark and Copyright Collateral Assignment in substantially the form of
Exhibit 1.1(P)(1) executed and delivered by each of the Loan Parties to the
- -----------------
Agent for the benefit of the Banks.
PBGC shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA or any successor.
Permitted Business Combinations shall have the meaning assigned to
-------------------------------
such term in Section 7.2.6.
Permitted Investments shall mean:
---------------------
(i) direct obligations of the United States of America or
any agency or instrumentality thereof or obligations backed by the full faith
and credit of the United States of America maturing in twelve (12) months or
less from the date of acquisition;
-11-
<PAGE>
(ii) commercial paper maturing in 180 days or less rated
not lower than A-1, by Standard & Poor's or P-1 by Moody's Investors Service,
Inc. on the date of acquisition;
(iii) demand deposits, time deposits or certificates of
deposit maturing within one year in commercial banks whose obligations are rated
A-1, A or the equivalent or better by Standard & Poor's on the date of
acquisition; and
(iv) Investments shown on Schedule 1.1(P).
Permitted Liens shall mean:
---------------
(i) Liens, security interests and mortgages in favor of
the Agent for the benefit of the Banks party to this Agreement;
(ii) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business and which are not yet due and
payable;
(iii) Pledges or deposits made in the ordinary course of
business to secure payment of workmen's compensation, or to participate in any
fund in connection with workmen's compensation, unemployment insurance, old-age
pensions or other social security programs;
(iv) Liens of mechanics, materialmen, warehousemen,
carriers, or other like Liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable and Liens of landlords
securing obligations to pay lease payments that are not yet due and payable or
in default;
(v) Good-faith pledges or deposits made in the ordinary
course of business to secure performance of bids, tenders, contracts (other than
for the repayment of borrowed money) or leases, not in excess of the aggregate
amount due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business;
(vi) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of real property, none of which
materially impairs the use of such property or the value thereof, and none of
which is violated in any material respect by existing or proposed structures or
land use;
(vii) Liens on property leased by any Loan Party or
Subsidiary of a Loan Party under capital and operating leases permitted in
Section 7.2.15 securing obligations of such Loan Party or Subsidiary to the
lessor under such leases;
(viii) Any Lien existing on the date of this Agreement and
described on Schedule 1.1(P), as the debt underlying such Lien may be
---------------
refinanced or replaced (but
-12-
<PAGE>
the principal amount secured thereby is not hereafter increased, and no
additional assets become subject to such Lien) and a replacement Lien placed
thereon;
(ix) Purchase Money Security Interests, provided that the
--------
aggregate amount of loans and deferred payments secured by such Purchase Money
Security Interests shall not exceed $3,000,000 and any replacement or renewal
thereof as long as the principal amount secured thereby is not increased and no
additional assets become subject to such Lien (excluding for the purpose of this
computation any loans or deferred payments secured by Liens described on
Schedule 1.1(P));
- ---------------
(x) The following, (A) if the validity or amount thereof
is being contested in good faith by appropriate and lawful proceedings
diligently conducted so long as levy and execution thereon have been stayed and
continue to be stayed or (B) if a final judgment is entered and such judgment is
discharged within thirty (30) days of entry, and in either case they do not
materially affect the Collateral or, in the aggregate, materially impair the
ability of any Loan Party to perform its Obligations hereunder or under the
other Loan Documents:
(1) Claims or Liens for taxes, assessments or charges due and
payable and subject to interest or penalty, provided that the
--------
applicable Loan Party maintains such reserves or other appropriate
provisions as shall be required by GAAP and pays all such taxes,
assessments or charges forthwith upon the commencement of proceedings
to foreclose any such Lien;
(2) Claims, Liens or encumbrances upon, and defects of title
to, real or personal property other than the Collateral, including any
attachment of personal or real property or other legal process prior
to adjudication of a dispute on the merits; or
(3) Claims or Liens of mechanics, materialmen, warehousemen,
carriers, or other statutory nonconsensual Liens.
(4) Liens resulting from final judgments or orders described
in Section 8.1.6; and
(xi) Liens on equipment acquired pursuant to Permitted Business
Combinations that existed at the time of the Permitted Business Combination and
as the debt underlying such Liens may be refinanaced or replaced (but the
principal amount shall not increased and no additional assets shall become
subject to such Lien) and a replacement Lien placed thereon;
Person shall mean any individual, corporation, partnership,
------
limited liability company, association, joint-stock company, trust,
unincorporated organization, joint venture, government or political subdivision
or agency thereof, or any other entity.
-13-
<PAGE>
Plan shall mean at any time an employee pension benefit plan
----
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is maintained by
any member of the ERISA Group for employees of any member of the ERISA Group or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the ERISA Group for employees of any
entity which was at such time a member of the ERISA Group.
Pledge Agreement shall mean the Pledge Agreement in substantially the
----------------
form of Exhibit 1.1(P)(2) executed and delivered by each Borrower having one or
-----------------
more Subsidiaries to the Agent for the benefit of the Banks.
Pledged Collateral shall mean the property of the Loan Parties in
------------------
which security interests are to be granted under the Pledge Agreement or the
Collateral Assignment.
PNC Bank shall mean PNC Bank, National Association, its successors and
--------
assigns.
Potential Default shall mean any event or condition which with notice,
-----------------
passage of time or a determination by the Agent or the Required Banks, or any
combination of the foregoing, would constitute an Event of Default.
Principal Office shall mean the main banking office of the Agent in
----------------
Pittsburgh, Pennsylvania.
Prior Security Interest shall mean a valid and enforceable perfected
-----------------------
first-priority security interest under the Uniform Commercial Code in the UCC
Collateral and the Pledged Collateral which is subject only to Liens for taxes
not yet due and payable to the extent such prospective tax payments are given
priority by statute or Permitted Liens except as described for motor vehicles in
Section 5.1.16.
Prohibited Transaction shall mean any prohibited transaction as
----------------------
defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for
which neither an individual nor a class exemption has been issued by the United
States Department of Labor.
Property shall mean all real property, both owned and leased, of any
--------
Loan Party or Subsidiary of a Loan Party.
Purchase Money Security Interest shall mean Liens upon tangible
--------------------------------
property securing loans to any Loan Party or Subsidiary of a Loan Party or
deferred payments by such Loan Party or Subsidiary for the purchase of such
tangible property.
Purchasing Bank shall mean a Bank which becomes a party to this
---------------
Agreement by executing an Assignment and Assumption Agreement.
-14-
<PAGE>
Ratable Share shall mean the proportion that a Bank's Revolving Credit
-------------
Commitment bears to the Revolving Credit Commitments of all of the Banks.
Regulated Substances shall mean any substance, including any solid,
--------------------
liquid, semisolid, gaseous, thermal, thoriated or radioactive material, refuse,
garbage, wastes, chemicals, petroleum products, by-products, coproducts,
impurities, dust, scrap, heavy metals, defined as a "hazardous substance,"
"pollutant," "pollution," "contaminant," "hazardous or toxic substance,"
"extremely hazardous substance," "toxic chemical," "toxic waste," "hazardous
waste," "industrial waste," "residual waste," "solid waste," "municipal waste,"
"mixed waste," "infectious waste," "chemotherapeutic waste," "medical waste," or
"regulated substance" or any related materials, substances or wastes as now or
hereafter defined pursuant to any Environmental Laws, ordinances, rules,
regulations or other directives of any Official Body, the generation,
manufacture, extraction, processing, distribution, treatment, storage, disposal,
transport, recycling, reclamation, use, reuse, spilling, leaking, dumping,
injection, pumping, leaching, emptying, discharge, escape, release or other
management or mismanagement of which is regulated by the Environmental Laws.
Regulation U shall mean Regulation U, T, G or X as promulgated by the
------------
Board of Governors of the Federal Reserve System, as amended from time to time.
Reimbursement Obligation shall have the meaning assigned to such term
------------------------
in Section 2.9.3.2.
Reportable Event shall mean a reportable event described in Section
----------------
4043 of ERISA and regulations thereunder with respect to a Plan or Multiemployer
Plan.
Required Banks shall mean
--------------
(i) if there are no Loans, Reimbursement Obligations or Letter
of Credit Borrowings outstanding, Banks whose Revolving Credit Commitments
aggregate at least 66 2/3% of the Revolving Credit Commitments of all of the
Banks, or
(ii) if there are Loans, Reimbursement Obligations, or Letter
of Credit Borrowings outstanding, any Bank or group of Banks if the sum of the
Loans , Reimbursement Obligations and Letter of Credit Borrowings of such Banks
then outstanding aggregates at least 66 2/3 % of the total principal amount of
all of the Loans, Reimbursement Obligations and Letter of Credit Borrowings then
outstanding. Reimbursement Obligations and Letter of Credit Borrowings shall be
deemed, for purposes of this definition, to be in favor of the Agent and not a
participating Bank if such Bank has not made its Participation Advance in
respect thereof and shall be deemed to be in favor of such Bank to the extent of
its Participation Advance if it has made its Participation Advance in respect
thereof.
Revolving Credit Commitment shall mean, as to any Bank at any time,
---------------------------
the amount initially set forth opposite its name on Schedule 1.1(B) in the
---------------
column labeled "Amount of
-15-
<PAGE>
Revolving Credit Commitment for Loans," and thereafter on Schedule I to the most
recent Assignment and Assumption Agreement, and Revolving Credit Commitments
----------------------------
shall mean the aggregate Revolving Credit Commitments of all of the Banks.
Revolving Facility Usage shall mean at any time the sum of the Loans
------------------------
outstanding and the Letters of Credit Outstanding.
Section 20 Subsidiary shall mean the Subsidiary of the bank holding
---------------------
company controlling any Bank, which Subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.
Security Agreement shall mean the Security Agreement in substantially
------------------
the form of Exhibit 1.1(S) executed and delivered by each of the Loan Parties to
--------------
the Agent for the benefit of the Banks.
Shares shall have the meaning assigned to that term in Section 5.1.2.
------
Standard & Poor's shall mean Standard & Poor's Ratings Services.
-----------------
Standby Letter of Credit shall mean a Letter of Credit issued to
------------------------
support obligations of one or more of the Loan Parties, contingent or otherwise,
which finance the working capital and business needs of the Loan Parties
incurred in the ordinary course of business.
Subsidiary of any Borrower at any time shall mean (i) any corporation
----------
or trust of which more than 50% (by number of shares or number of votes) of the
outstanding capital stock or shares of beneficial interest normally entitled to
vote for the election of one or more directors or trustees (regardless of any
contingency which does or may suspend or dilute the voting rights) is at such
time owned directly or indirectly by such Borrower or one or more of such
Borrower's Subsidiaries, (ii) any partnership of which such Borrower is a
general partner or of which more than 50% or more of the partnership interests
is at the time directly or indirectly owned by such Borrower or one or more of
such Borrower's Subsidiaries, (iii) any limited liability company of which such
Borrower is a member or of which more than 50% of the limited liability company
interests is at the time directly or indirectly owned by such Borrower or one or
more of such Borrower's Subsidiaries or (iv) any corporation, trust,
partnership, limited liability company or other entity which is controlled or
capable of being controlled by such Person or one or more of such Borrower's
Subsidiaries.
Subsidiary Shares shall have the meaning assigned to that term in
-----------------
Section 5.1.3.
Syndication Period shall mean the period between the Closing Date and
------------------
the earlier of the following dates: (a) the date on which the Revolving Credit
Commitment of PNC Bank, National Association has been reduced to $10,000,000, or
(b) the date which is ninety (90) days after the Closing Date.
-16-
<PAGE>
Transferor Bank shall mean the selling Bank pursuant to an Assignment
---------------
and Assumption Agreement.
UCC Collateral shall mean the property of the Loan Parties in which
--------------
security interests are to be granted under the Security Agreement.
Uniform Commercial Code shall have the meaning assigned to that term
-----------------------
in Section 5.1.16.
1.2 Construction.
------------
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
1.2.1 Number; Inclusion.
-----------------
references to the plural include the singular, the plural, the part
and the whole; "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation";
1.2.2 Determination.
-------------
references to "determination" of or by the Agent or the Banks shall be
deemed to include good-faith estimates by the Agent or the Banks (in the case of
quantitative determinations) and good-faith beliefs by the Agent or the Banks
(in the case of qualitative determinations) and such determination shall be
conclusive absent manifest error;
1.2.3 Agent's Discretion and Consent.
------------------------------
whenever the Agent or the Banks are granted the right herein to act in
its or their sole discretion or to grant or withhold consent such right shall be
exercised reasonably and in good faith;
1.2.4 Documents Taken as a Whole.
--------------------------
the words "hereof," "herein," "hereunder," "hereto" and similar terms
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document as a whole and not to any particular provision of this
Agreement or such other Loan Document;
1.2.5 Headings.
--------
the section and other headings contained in this Agreement or such
other Loan Document and the Table of Contents (if any), preceding this Agreement
or such other Loan
-17-
<PAGE>
Document are for reference purposes only and shall not control or affect the
construction of this Agreement or such other Loan Document or the interpretation
thereof in any respect;
1.2.6 Implied References to this Agreement.
------------------------------------
article, section, subsection, clause, schedule and exhibit references
are to this Agreement or other Loan Document, as the case may be, unless
otherwise specified;
1.2.7 Persons.
-------
reference to any Person includes such Person's successors and assigns
but, if applicable, only if such successors and assigns are permitted by this
Agreement or such other Loan Document, as the case may be, and reference to a
Person in a particular capacity excludes such Person in any other capacity; and
1.2.8 Modifications to Documents.
--------------------------
reference to any agreement (including this Agreement and any other
Loan Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated.
1.3 Accounting Principles.
---------------------
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP; provided, however, that all accounting terms
-------- -------
used in Section 7.2 (and all defined terms used in the definition of any
accounting term used in Section 7.2 shall have the meaning given to such terms
(and defined terms) under GAAP as in effect on the date hereof applied on a
basis consistent with those used in preparing the Annual Statements referred to
in Section 5.1.9(i). In the event of any change after the date hereof in GAAP,
and if such change would result in the inability to determine compliance with
the financial covenants set forth in Section 7.2 based upon the Borrowers'
regularly prepared financial statements by reason of the preceding sentence,
then the parties hereto agree to endeavor, in good faith, to agree upon an
amendment to this Agreement that would adjust such financial covenants in a
manner that would not affect the substance thereof, but would allow compliance
therewith to be determined in accordance with the Borrowers' financial
statements at that time. In any determination of net income for purposes of
this Agreement, Borrowers shall treat all development costs and other intangible
items as items of expense rather than capitalizing such development costs and
other intangible items; provided, however, that if permitted by GAAP, the
Borrowers may capitalize up to $1,000,000 of such development costs and other
intangible items over any twelve month period.
-18-
<PAGE>
2. REVOLVING CREDIT FACILITY
-------------------------
2.1 Revolving Credit Commitments.
----------------------------
Subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, and subject to Availability,
each Bank severally agrees to make Loans to the Borrowers at any time or from
time to time on or after the date hereof to the Expiration Date provided that
after giving effect to such Loan the aggregate amount of Loans from such Bank
shall not exceed such Bank's Revolving Credit Commitment minus such Bank's
Ratable Share of the Letters of Credit Outstanding. Within such limits of time
and amount and subject to the other provisions of this Agreement, the Borrowers
may borrow, repay and reborrow pursuant to this Section 2.1.
2.2 Nature of Banks' Obligations with Respect to Revolving Credit Loans.
-------------------------------------------------------------------
Each Bank shall be obligated to participate in each request for
Revolving Credit Loans pursuant to Section 2.5 in accordance with its Ratable
Share. The aggregate of each Bank's Loans outstanding hereunder to the
Borrowers at any time shall never exceed its Revolving Credit Commitment minus
its Ratable Share of the Letter of Credit Outstandings. The obligations of each
Bank hereunder are several. The failure of any Bank to perform its obligations
hereunder shall not affect the Obligations of the Borrowers to any other party
nor shall any other party be liable for the failure of such Bank to perform its
obligations hereunder. The Banks shall have no obligation to make Loans
hereunder on or after the Expiration Date.
2.3 Commitment Fees.
---------------
Accruing from the date hereof until the Expiration Date, the Borrowers
agree to pay to the Agent for the account of each Bank, as consideration for
such Bank's Revolving Credit Commitment hereunder, a nonrefundable commitment
fee (the "Commitment Fee") equal to 3/8% per annum (computed on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed) on the
average daily difference between the amount of (i) such Bank's Revolving Credit
Commitment as the same may be constituted from time to time and the (ii) the
principal amount of the Revolving Credit Loans outstanding and such Bank's
Ratable Share of Letters of Credit Outstanding . All Commitment Fees shall be
payable in arrears on the first Business Day of each January, April, July and
September after the date hereof and on the Expiration Date or upon acceleration
of the Notes.
2.4 Closing Fee.
------------
The Borrowers agree jointly and severally to pay to the Agent for the
account of each Bank, as consideration for such Bank's Revolving Credit
Commitment, a nonrefundable Closing fee equal to 3/8% of such Bank's Revolving
Credit Commitment, payable on the Closing Date.
-19-
<PAGE>
2.5 Loan Requests.
-------------
Except as otherwise provided herein, each Borrower may from time to
time prior to the Expiration Date request the Banks to make Loans, or renew or
convert the Interest Rate Option applicable to existing Loans pursuant to
Section 3.2, by delivering to the Agent, not later than 1:00 p.m., Eastern time,
(i) three (3) Business Days prior to the proposed Borrowing Date with respect to
the making of Loans to which the Euro-Rate Option applies or the conversion to
or the renewal of the Euro-Rate Option for any Loans; and (ii) the same day as
the Borrowing Date with respect to the making of a Loan to which the Base Rate
Option applies or the last day of the preceding Interest Period with respect to
the conversion to the Base Rate Option for any Loan, of a duly completed request
therefor substantially in the form of Exhibit 2.5 or a request by telephone
-----------
immediately confirmed in writing by letter, facsimile or telex in such form
(each, a "Loan Request"), it being understood that the Agent may rely on the
authority of any individual making such a telephonic request without the
necessity of receipt of such written confirmation. Each Loan Request shall be
irrevocable and shall specify (i) the proposed Borrowing Date; (ii) the
aggregate amount of the proposed Revolving Credit Loans comprising each
Borrowing Tranche, which, for Loans to which the Euro-Rate Option applies shall
be not less than $1,000,000 for each Borrowing Tranche and in integral multiples
of $100,000 and for Borrowing Tranches to which the Base Rate Option applies not
less than the lesser of $100,000 or the maximum amount available; (iii) whether
the Euro-Rate Option or Base Rate Option shall apply to the proposed Revolving
Credit Loans comprising the applicable Borrowing Tranche; and (iv) in the case
of a Borrowing Tranche to which the Euro-Rate Option applies, an appropriate
Interest Period for the proposed Loans comprising such Borrowing Tranche. The
Borrowers may have no more than five Borrowing Tranches at any time including
the Base Rate Tranche.
2.6 Making Loans.
------------
The Agent shall, promptly after receipt by it of a Loan Request pursuant to
Section 2.5, notify the Banks of its receipt of such Loan Request specifying:
(i) the proposed Borrowing Date and the time and method of disbursement of the
Loans requested thereby; (ii) the amount and type of each such Loan and the
applicable Interest Period (if any); and (iii) the apportionment among the Banks
of such Loans as determined by the Agent in accordance with Section 2.2. Each
Bank shall remit the principal amount of each Loan to the Agent such that the
Agent is able to, and the Agent shall, to the extent the Banks have made funds
available to it for such purpose and subject to Section 6.2, fund such Revolving
Credit Loans to the Borrowers in U.S. Dollars and immediately available funds at
the Principal Office prior to 2:00 p.m., Pittsburgh time, on the applicable
Borrowing Date, provided that if any Bank fails to remit such funds to the Agent
in a timely manner, the Agent may elect in its sole discretion to fund with its
own funds the Revolving Credit Loans of such Bank on such Borrowing Date, and
such Bank shall be subject to the repayment obligation in Section 9.16.
-20-
<PAGE>
2.7 Revolving Credit Notes.
----------------------
The Obligation of the Borrowers to repay the aggregate unpaid
principal amount of the Revolving Credit Loans made by each Bank, together with
interest thereon, shall be joint and several and shall be evidenced by a Note
dated the Closing Date payable to the order of such Bank in a face amount equal
to the Revolving Credit Commitment of such Bank.
2.8 Use of Proceeds.
---------------
The proceeds of the Revolving Credit Loans shall be used to finance
Permitted Business Combinations and for general corporate purposes.
2.9 Letter of Credit Subfacility.
----------------------------
2.9.1 Issuance of Letters of Credit.
-----------------------------
Any Borrower may request the issuance of a letter of credit (each
a "Letter of Credit") on behalf of itself or another Loan Party by delivering to
the Agent a completed application and agreement for standby letters of credit in
such form as the Agent may specify from time to time by no later than 10:00
a.m., Pittsburgh time, at least three (3) Business Days, or such shorter period
as may be agreed to by the Agent, in advance of the proposed date of issuance.
Subject to the terms and conditions hereof and in reliance on the agreements of
the other Banks set forth in this Section 2.9, the Agent will issue a Letter of
Credit provided that each Letter of Credit shall (A) have a maximum maturity of
twelve (12) months from the date of issuance, and (B) in no event expire later
than one Business Day prior to the Expiration Date and providing that in no
event shall (i) the Letters of Credit Outstanding exceed, at any one time, Two
Million Dollars ($2,000,000) or (ii) the Revolving Facility Usage exceed, at any
one time, the Revolving Credit Commitments. If the Expiration Date is extended
pursuant to Section 2.10, the Borrowers may request renewals of Letters of
Credit.
2.9.2 Letter of Credit Fees.
---------------------
The Borrowers shall pay (i) to the Agent for the ratable account
of the Banks a fee (the "Letter of Credit Fee") equal to the Applicable Margin
per annum for Euro-Rate Loans and (ii) to the Agent for its own account a
fronting fee equal to 1/8% per annum, which fees shall be computed on the daily
average Letters of Credit Outstanding and shall be payable quarterly in arrears
commencing with the first Business Day of each January, April, July and October
following issuance of each Letter of Credit and on the Expiration Date. The
Borrowers shall also pay to the Agent for the Agent's sole account the Agent's
then in effect customary fees and administrative expenses payable with respect
to the Letters of Credit as the Agent may generally charge or incur from time to
time in connection with the issuance, maintenance, modification (if any),
assignment or transfer (if any), negotiation, and administration of Letters of
Credit.
-21-
<PAGE>
2.9.3 Disbursements, Reimbursement.
----------------------------
2.9.3.1 Immediately upon the Issuance of each Letter of
Credit, each Bank shall be deemed to, and hereby irrevocably and unconditionally
agrees to, purchase from the Agent a participation in such Letter of Credit and
each drawing thereunder in an amount equal to such Bank's Ratable Share of the
maximum amount available to be drawn under such Letter of Credit and the amount
of such drawing, respectively.
2.9.3.2 In the event of any request for a drawing under a
Letter of Credit by the beneficiary or transferee thereof, the Agent will
promptly notify the Borrowers. Provided that they shall have received such
notice, the Borrowers shall reimburse (such obligation to reimburse the Agent
shall sometimes be referred to as a "Reimbursement Obligation") the Agent prior
to 12:00 noon, Pittsburgh time on each date that an amount is paid by the Agent
under any Letter of Credit (each such date, an "Drawing Date") in an amount
equal to the amount so paid by the Agent. In the event the Borrowers fail to
reimburse the Agent for the full amount of any drawing under any Letter of
Credit by 11:00 a.m., Pittsburgh time, on the Drawing Date, the Agent will
promptly notify each Bank thereof, and the Borrowers shall be deemed to have
requested that Loans be made by the Banks under the Base Rate Option to be
disbursed on the Drawing Date under such Letter of Credit, subject to the amount
of the unutilized portion of the Revolving Credit Commitment and subject to the
conditions set forth in Section 6.2 other than any notice requirements. Any
notice given by the Agent pursuant to this Section 2.9.3.2 may be oral if
immediately confirmed in writing; provided that the lack of such an immediate
confirmation shall not affect the conclusiveness or binding effect of such
notice.
2.9.3.3 Each Bank shall upon any notice pursuant to
Section 2.9.3.2 make available to the Agent an amount in immediately available
funds equal to its Ratable Share of the amount of the drawing, whereupon the
participating Banks shall (subject to Section 2.9.3.4) each be deemed to have
made a Loan under the Base Rate Option to the Borrowers in that amount. If any
Bank so notified fails to make available to the Agent for the account of the
Agent the amount of such Bank's Ratable Share of such amount by no later than
2:00 p.m., Pittsburgh time on the Drawing Date, then interest shall accrue on
such Bank's obligation to make such payment, from the Drawing Date to the date
on which such Bank makes such payment, at a rate per annum equal to the Federal
Funds Effective Rate in effect from time to time during such period. The Agent
will promptly give notice of the occurrence of the Drawing Date, but failure of
the Agent to give any such notice on the Drawing Date or in sufficient time to
enable any Bank to effect such payment on such date shall not relieve such Bank
from its obligation under this Section 2.9.3.3.
2.9.3.4 With respect to any unreimbursed drawing that is
not converted into Loans under the Base Rate Option to the Borrowers in whole or
in part as contemplated by Section 2.9.3.2, because of the Borrowers' failure to
satisfy the conditions set forth in Section 6.2 other than any notice
requirements or for any other reason, the Borrowers shall be deemed to have
incurred from the Agent a Letter of Credit Borrowing in the amount of such
drawing. Such Letter of Credit Borrowing shall be due and payable on demand
(together
-22-
<PAGE>
with interest) and shall bear interest at the rate per annum applicable to the
Revolving Credit Loans under the Base Rate Option. Each Bank's payment to the
Agent pursuant to Section 2.9.3.3 shall be deemed to be a payment in respect of
its participation in such Letter of Credit Borrowing and shall constitute a
Participation Advance from such Bank in satisfaction of its participation
obligation under this Section 2.9.3.
2.9.4 Repayment of Participation Advances.
-----------------------------------
2.9.4.1 Upon (and only upon) receipt by the Agent for its
account of immediately available funds from the Borrowers (i) in reimbursement
of any payment made by the Agent under the Letter of Credit with respect to
which any Bank has made a Participation Advance to the Agent, or (ii) in payment
of interest on such a payment made by the Agent under such a Letter of Credit,
the Agent will pay to each Bank, in the same funds as those received by the
Agent, the amount of such Bank's Ratable Share of such funds, except the Agent
shall retain the amount of the Ratable Share of such funds of any Bank that did
not make a Participation Advance in respect of such payment by Agent.
2.9.4.2 If the Agent is required at any time to return to
any Loan Party, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by any
Loan Party to the Agent pursuant to Section 2.9.4.1 in reimbursement of a
payment made under the Letter of Credit or interest or fee thereon, each Bank
shall, on demand of the Agent, forthwith return to the Agent the amount of its
Ratable Share of any amounts so returned by the Agent plus interest thereon from
the date such demand is made to the date such amounts are returned by such Bank
to the Agent, at a rate per annum equal to the Federal Funds Effective Rate in
effect from time to time.
2.9.5 Documentation.
-------------
Each Loan Party agrees to be bound by the terms of the Agent's
application and agreement for letters of credit. In the event of a conflict
between such application or agreement and this Agreement, this Agreement shall
govern. It is understood and agreed that, except in the case of gross negligence
or willful misconduct, the Agent shall not be liable for any error, negligence
and/or mistakes, whether of omission or commission, in following any Loan
Party's instructions or those contained in the Letters of Credit or any
modifications, amendments or supplements thereto.
2.9.6 Determinations to Honor Drawing Requests.
----------------------------------------
In determining whether to honor any request for drawing under any
Letter of Credit by the beneficiary thereof, the Agent shall be responsible only
to determine that the documents and certificates required to be delivered under
such Letter of Credit have been delivered and that they comply on their face
with the requirements of such Letter of Credit.
-23-
<PAGE>
2.9.7 Nature of Participation and Reimbursement Obligations.
-----------------------------------------------------
Each Bank's obligation in accordance with this Agreement to make
the Revolving Credit Loans or Participation Advances, as contemplated by Section
2.9.3, as a result of a drawing under a Letter of Credit, and the Obligations of
the Borrowers to reimburse the Agent upon a draw under a Letter of Credit, shall
be absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Section 2.9 under all circumstances, including
the following circumstances:
(i) any set-off, counterclaim, recoupment, defense
or other right which such Bank may have against the Agent, the Borrowers or any
other Person for any reason whatsoever;
(ii) the failure of any Loan Party or any other
Person to comply with the conditions set forth in Section 2.1, 2.5, 2.6 or 6.2
or as otherwise set forth in this Agreement for the making of a Loan, it being
acknowledged that such conditions are not required for the making of a Loan
under Section 2.9.3;
(iii) any lack of validity or enforceability of any
Letter of Credit;
(iv) the existence of any claim, set-off, defense or
other right which any Loan Party or any Bank may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons for whom
any such transferee may be acting), the Agent or any Bank or any other Person
or, whether in connection with this Agreement, the transactions contemplated
herein or any unrelated transaction (including any underlying transaction
between any Loan Party or Subsidiaries of a Loan Party and the beneficiary for
which any Letter of Credit was procured);
(v) any draft, demand, certificate or other
document presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect even if the Agent has been notified thereof;
(vi) payment by the Agent under any Letter of Credit
against presentation of a demand, draft or certificate or other document which
does not comply with the terms of such Letter of Credit;
(vii) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of any Loan
Party or Subsidiaries of a Loan Party;
(viii) any breach of this Agreement or any other Loan
Document by any party thereto;
-24-
<PAGE>
(ix) the occurrence or continuance of an Insolvency
Proceeding with respect to any Loan Party;
(x) the fact that an Event of Default or a
Potential Default shall have occurred and be continuing;
(xi) the fact that the Expiration Date shall have
passed or this Agreement or the Revolving Credit Commitments hereunder shall
have been terminated; and
(xii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing;
provided that each Bank's obligation to make Loans under Section 2.9.3.3 is
- --------
subject to the conditions set forth in Section 6.2.
2.9.8 Indemnity.
---------
In addition to amounts payable as provided in Section 9.5, the
Borrowers hereby agree jointly and severally to protect, indemnify, pay and save
harmless the Agent from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable fees,
expenses and disbursements of counsel which the Agent may incur or be subject to
as a consequence, direct or indirect, of (i) the issuance of any Letter of
Credit, other than as a result of (A) the gross negligence or willful misconduct
of the Agent as determined by a final judgment of a court of competent
jurisdiction or (B) subject to the following clause (ii), the wrongful dishonor
by the Agent of a proper demand for payment made under any Letter of Credit, or
(ii) the failure of the Agent to honor a drawing under any such Letter of Credit
as a result of any act or omission, whether rightful or wrongful, of any present
or future de jure or de facto government or governmental authority (all such
acts or omissions herein called "Governmental Acts").
2.9.9 Liability for Acts and Omissions.
--------------------------------
As between any Loan Party and the Agent, such Loan Party assumes
all risks of the acts and omissions of, or misuse of the Letters of Credit by,
the respective beneficiaries of such Letters of Credit. In furtherance and not
in limitation of the foregoing, the Agent shall, absent gross negligence or
willful misconduct, not be responsible for: (i) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for an issuance of any such Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged (even if the Agent shall have
been notified thereof); (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) the
failure of the beneficiary of any such Letter of Credit, or any other party to
which such Letter of Credit may be transferred, to comply fully with any
conditions
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<PAGE>
required in order to draw upon such Letter of Credit or any other claim of any
Loan Party against any beneficiary of such Letter of Credit, or any such
transferee, or any dispute between or among any Loan Party and any beneficiary
of any Letter of Credit or any such transferee; (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (v)
errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of the Agent, including any Governmental Acts,
and none of the above shall affect or impair, or prevent the vesting of, any of
the Agent's rights or powers hereunder.
In furtherance and extension and not in limitation of the
specific provisions set forth above, any action taken or omitted by the Agent
under or in connection with the Letters of Credit issued by it or any documents
and certificates delivered thereunder, if taken or omitted in good faith, shall
not put the Agent under any resulting liability to any Borrower or any Bank.
2.10 Extension by Banks of the Expiration Date.
-----------------------------------------
2.10.1 Requests; Approval by All Banks.
-------------------------------
Upon or promptly after delivery by Option Care, Inc. of the
annual financial statements to be provided under Section 7.3.3 for the fiscal
year ending December 31, 1997, the Borrowers may request a single one-year
extension of the Expiration Date by written notice to the Banks, and the Banks
agree to respond to the Borrower's request for an extension by June 30, 1998;
provided, however, that the failure of any Bank to respond within such time
period shall not in any manner constitute an agreement by such Bank to extend
the Expiration Date. If all Banks elect to extend, the Expiration Date shall be
extended for a period of one year. If one or more Banks decline to extend or do
not respond to Borrowers' request, the provisions of Section 2.10.2 shall apply.
2.10.2 Approval by Required Banks.
--------------------------
In the event that one or more Banks do not agree to extend the
Expiration Date or do not respond to Borrowers' request for an extension within
the time required under Section 2.10.1 (each a "Bank to be Replaced"), but the
Required Banks agree to such extension within such time then the Banks which
have agreed to such extension within the time required under Section 2.10.1
(each an "Extending Bank") may, with the prior written approval of the Borrowers
and the Agent, arrange to have one or more other banks (each an "Assignee Bank")
purchase all of the outstanding Loans, if any, of the Bank to be Replaced and
succeed to and assume the Revolving Credit Commitments and all other rights,
interests and obligations of the Bank to be Replaced under this Agreement and
the other Loan Documents. Any such purchase and assumption shall be (1) pursuant
to an Assignment and Assumption Agreement, (2) subject to and in accordance with
Section 10.11, and (3) effective on the last day of the Interest Period if
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any Loans are outstanding under the Euro-Rate Option. The Borrowers shall pay
all amounts due and payable to the Bank to be Replaced on the effective date of
such Assignment and Assumption Agreement. In the event that the Agent shall
become a Bank to be Replaced, the provisions of this Section 2.10 shall be
subject to Section 10.14.
3. INTEREST RATES
--------------
3.1 Interest Rate Options.
---------------------
The Borrowers shall pay interest in respect of the outstanding unpaid
principal amount of the Loans as selected by it from the Base Rate Option or
Euro-Rate Option set forth below applicable to the Loans, it being understood
that, subject to the provisions of this Agreement, the Borrowers may select
different Interest Rate Options and different Interest Periods to apply
simultaneously to the Loans comprising different Borrowing Tranches and may
convert to or renew one or more Interest Rate Options with respect to all or any
portion of the Loans comprising any Borrowing Tranche, provided that there shall
--------
not be at any one time outstanding more than four (4) Borrowing Tranches in the
aggregate among all of the Loans accruing interest at a Euro-Rate Option. If at
any time the designated rate applicable to any Loan made by any Bank exceeds
such Bank's highest lawful rate, the rate of interest on such Bank's Loan shall
be limited to such Bank's highest lawful rate.
3.1.1 Revolving Credit Interest Rate Options.
--------------------------------------
The Borrowers shall have the right to select from the following
Interest Rate Options applicable to the Revolving Credit Loans:
(i) Base Rate Option: A fluctuating rate per
----------------
annum (computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed) equal to the Base Rate plus the Applicable Margin, such
interest rate to change automatically from time to time effective as of the
effective date of each change in the Base Rate; or
(ii) Euro-Rate Option: A rate per annum (computed
----------------
on the basis of a year of 360 days and actual days elapsed) equal to the Euro-
Rate plus the Applicable Margin.
3.1.2 Rate Quotations.
---------------
The Borrowers may call the Agent on or before the date on which a
Loan Request is to be delivered to receive an indication of the rates then in
effect, but it is acknowledged that such projection shall not be binding on the
Agent or the Banks nor affect the rate of interest which thereafter is actually
in effect when the election is made.
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<PAGE>
3.2 Interest Periods.
----------------
At any time when any Borrower shall select, convert to or renew a
Euro-Rate Option, that Borrower shall notify the Agent thereof at least three
(3) Business Days prior to the effective date of such Euro-Rate Option by
delivering a Loan Request. The notice shall specify an interest period (the
"Interest Period") during which such Interest Rate Option shall apply, such
Interest Period to be (i) one Month if Borrowers select the Euro-Rate Option
during the Syndication Period and (ii) one, two, three or six Months in the
event Borrowers select the Euro-Rate Option after the Syndication Period has
ended. Notwithstanding the preceding sentence, the following provisions shall
apply to any selection of, renewal of, or conversion to a Euro-Rate Option:
3.2.1 Ending Date and Business Day.
----------------------------
any Interest Period which would otherwise end on a date which is
not a Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day;
3.2.2 Amount of Borrowing Tranche.
---------------------------
each Borrowing Tranche of Euro-Rate Loans shall be in the minimum
amount of $1,000,000 and in integral multiples of $100,000;
3.2.3 Termination Before Expiration Date.
----------------------------------
the Borrowers shall not select, convert to or renew an Interest
Period for any portion of the Loans that would end after the Expiration Date;
and
3.2.4 Renewals.
--------
in the case of the renewal of a Euro-Rate Option at the end of an
Interest Period, the first day of the new Interest Period shall be the last day
of the preceding Interest Period, without duplication in payment of interest for
such day.
3.3 Interest After Default.
----------------------
To the extent permitted by Law, upon the occurrence of an Event of
Default and until such time such Event of Default shall have been cured or
waived:
3.3.1 Letter of Credit Fees, Interest Rate.
------------------------------------
the Letter of Credit Fees and the rate of interest for each Loan
otherwise applicable pursuant to Section 2.9.2 or Section 3.1, respectively,
shall be increased by 2.0% per annum; and
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<PAGE>
3.3.2 Other Obligations.
-----------------
each other Obligation hereunder if not paid when due shall bear
interest at a rate per annum equal to the sum of the rate of interest applicable
under the Revolving Credit Base Rate Option plus an additional 2% per annum from
the time such Obligation becomes due and payable and until it is paid in full.
3.3.3 Acknowledgment.
--------------
The Borrowers acknowledge that the increase in rates referred to
in this Section 3.3 reflects, among other things, the fact that such Loans or
other amounts have become a substantially greater risk given their default
status and that the Banks are entitled to additional compensation for such risk;
and all such interest shall be payable by Borrowers upon demand by Agent.
3.4 Euro-Rate Unascertainable.
-------------------------
3.4.1 Unascertainable.
---------------
If on any date on which a Euro-Rate would otherwise be
determined, the Agent shall have determined that:
(i) adequate and reasonable means do not exist for
ascertaining such Euro-Rate, or
(ii) a contingency has occurred which materially and
adversely affects the secondary market for negotiable certificates of deposit
maintained by dealers of recognized standing relating to the London interbank
eurodollar market relating to the Euro-Rate, the Agent shall have the rights
specified in Section 3.4.3.
3.4.2 Illegality; Increased Costs; Deposits Not Available.
---------------------------------------------------
If at any time any Bank shall have determined that:
(i) the making, maintenance or funding of any Loan
to which a Euro-Rate Option applies has been made impracticable or unlawful by
compliance by such Bank in good faith with any Law or any interpretation or
application thereof by any Official Body or with any request or directive of any
such Official Body (whether or not having the force of Law), or
(ii) after making all reasonable efforts, deposits
of the relevant amount in Dollars for the relevant Interest Period for a Loan to
which a Euro-Rate Option applies, respectively, are not available to such Bank
at the effective cost of funding a proposed Loan in the London interbank market,
then the Agent shall have the rights specified in Section 3.4.3.
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<PAGE>
3.4.3 Agent's and Bank's Rights.
-------------------------
In the case of any event specified in Section 3.4.1 above, the
Agent shall promptly so notify the Banks and the Borrowers thereof, and in the
case of an event specified in Section 3.4.2 above, such Bank shall promptly so
notify the Agent and endorse a certificate to such notice as to the specific
circumstances of such notice, and the Agent shall promptly send copies of such
notice and certificate to the other Banks and the Borrowers. Upon such date as
shall be specified in such notice (which shall not be earlier than the date such
notice is given), the obligation of (A) the Banks, in the case of such notice
given by the Agent, or (B) such Bank, in the case of such notice given by such
Bank, to allow the Borrowers to select, convert to or renew a Euro-Rate Option
shall be suspended until the Agent shall have later notified the Borrowers, or
such Bank shall have later notified the Agent, of the Agent's or such Bank's, as
the case may be, determination that the circumstances giving rise to such
previous determination no longer exist which notice shall be sent within two
Business Days after such determination. If at any time the Agent makes a
determination under Section 3.4.1 and a Borrower has previously notified the
Agent of its selection of, conversion to or renewal of a Euro-Rate Option and
such Interest Rate Option has not yet gone into effect, such notification shall
be deemed to provide for selection of, conversion to or renewal of the Base Rate
Option otherwise available with respect to such Loans. If any Bank notifies the
Agent of a determination under Section 3.4.2, the Borrowers shall, subject to
the Borrowers' indemnification Obligations under Section 4.5.2, as to any Loan
of the Bank to which a Euro-Rate Option applies, on the date specified in such
notice either convert such Loan to the Base Rate Option otherwise available with
respect to such Loan or prepay such Loan in accordance with Section 4.4. Absent
due notice from the Borrowers of conversion or prepayment, such Loan shall
automatically be converted to the Base Rate Option otherwise available with
respect to such Loan upon such specified date.
3.5 Selection of Interest Rate Options.
----------------------------------
If the Borrowers fail to select a new Interest Period to apply to any
Borrowing Tranche of Loans under the Euro-Rate Option at the expiration of an
existing Interest Period applicable to such Borrowing Tranche in accordance with
the provisions of Section 3.2, the Borrowers shall be deemed to have converted
such Borrowing Tranche to the Revolving Credit Base Rate Option commencing upon
the last day of the existing Interest Period.
4. PAYMENTS
--------
4.1 Payments.
--------
All payments and prepayments to be made in respect of principal,
interest, Commitment Fees, Facility Fees, Letter of Credit Fees, Agent's Fee or
other fees or amounts due from the Borrowers hereunder shall be payable prior to
1:00 p.m., Pittsburgh time, on the date when due without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by the
Borrowers, and without set-off, counterclaim or other deduction of any
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<PAGE>
nature, and an action therefor shall immediately accrue. Such payments shall be
made to the Agent at the Principal Office for the ratable accounts of the Banks
with respect to the Loans in U.S. Dollars and in immediately available funds,
and the Agent shall promptly distribute such amounts to the Banks in immediately
available funds, provided that in the event payments are received by 1:00 p.m.,
--------
Pittsburgh time, by the Agent with respect to the Loans and such payments are
not distributed to the Banks on the same day received by the Agent, the Agent
shall pay the Banks the Federal Funds Effective Rate with respect to the amount
of such payments for each day held by the Agent and not distributed to the
Banks. The Agent's and each Bank's statement of account, ledger or other
relevant record shall, in the absence of manifest error, be conclusive as the
statement of the amount of principal of and interest on the Loans and other
amounts owing under this Agreement and shall be deemed an "account stated."
4.2 Pro Rata Treatment of Banks.
---------------------------
Each borrowing shall be allocated to each Bank according to its
Ratable Share, and each selection of, conversion to or renewal of any Interest
Rate Option and each payment or prepayment by the Borrowers with respect to
principal, interest, Commitment Fees, Facility Fees, Letter of Credit Fees, or
other fees (except for the Agent's Fee) or amounts due from the Borrowers
hereunder to the Banks with respect to the Loans, shall (except as provided in
Section 3.4.3 (Illegality; Deposits not Available) in the case of an event
specified in Section 3.4 (Euro-Rate Unascertainable), 4.4.3 (Voluntary
Prepayments) or 4.4 (Additional Compensation in Certain Circumstances)) be made
in proportion to the applicable Loans outstanding from each Bank and, if no such
Loans are then outstanding, in proportion to the Ratable Share of each Bank.
4.3 Interest Payment Dates.
----------------------
Interest on Loans to which the Base Rate Option applies shall be due
and payable in arrears on the first Business Day of each January, April, July
and September after the date hereof and on the Expiration Date or upon
acceleration of the Notes. Interest on Loans to which the Euro-Rate Option
applies shall be due and payable on the last day of each Interest Period for
those Loans and, if such Interest Period is longer than three (3) Months, also
on the 90th day of such Interest Period. Interest on the principal amount of
each Loan or other monetary Obligation shall be due and payable on demand after
such principal amount or other monetary Obligation becomes due and payable
(whether on the stated maturity date, upon acceleration or otherwise).
4.4 Prepayments.
-----------
4.4.1 Right to Prepay.
---------------
The Borrowers shall have the right at their option from time to
time to prepay the Loans in whole or part without premium or penalty (except as
provided in Section 4.4.3 below or in Section 4.5):
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<PAGE>
(i) at any time with respect to any Loan to which
the Base Rate Option applies,
(ii) on the last day of the applicable Interest
Period with respect to Loans to which a Euro-Rate Option applies,
(iii) on the date specified in a notice by any Bank
pursuant to Section 3.4 (Euro-Rate Unascertainable) with respect to any Loan to
which a Euro-Rate Option applies.
Whenever the Borrowers desire to prepay any part of the Loans,
they shall provide a prepayment notice to the Agent at least one (1) Business
Day prior to the date of prepayment of Loans setting forth the following
information:
(x) the date, which shall be a Business Day, on which the
proposed prepayment is to be made;
(y) a statement indicating the application of the prepayment
among Borrowing Tranches; and
(z) the total principal amount of such prepayment, which shall
not be less than $100,000.
All prepayment notices shall be irrevocable. The principal amount
of the Loans for which a prepayment notice is given, together with interest on
such principal amount except with respect to Loans to which the Base Rate Option
applies, shall be due and payable on the date specified in such prepayment
notice as the date on which the proposed prepayment is to be made. Except as
provided in Section 3.4.3, if the Borrowers prepay a Loan but fail to specify
the applicable Borrowing Tranche which the Borrowers are prepaying, the
prepayment shall be applied first to Loans to which the Base Rate Option applies
and then to Loans to which the Euro-Rate Option applies. Any prepayment
hereunder shall be subject to the Borrowers' Obligation to indemnify and
compensate the Banks under Section 4.5.2.
The Borrowers may direct the Banks at any time to permanently
reduce their Revolving Credit Commitments; provided that no reduction shall
--------
bring the Revolving Credit Commitment below the sum of Loans outstanding and the
face amount of all Letters of Credit outstanding.
4.4.2 Mandatory Prepayment and Reduction of Revolving Credit
------------------------------------------------------
Commitment.
- ----------
Within five (5) Business Days of any sale of assets with book
value of more than $500,000 authorized by Section 7.2.7, the Borrowers shall
make a mandatory prepayment of the Loans equal to the proceeds of such sale net
of costs of sale. All prepayments pursuant to this Section 4.4.2 shall
permanently reduce the Revolving Credit Commitment with the exception of
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prepayments resulting from sales (i) which are of assets with book values in the
aggregate less than $500,000 or (ii) if within six months of such sales the Loan
Parties have invested or reinvested an amount equivalent to the proceeds of sale
in assets of at least comparable value. In no event will assets be sold for
after-tax proceeds exceeding $3,000,000 in the aggregate.
4.4.3 Replacement of a Bank.
---------------------
In the event any Bank (i) gives notice under Section 3.4 or
Section 4.5.1, (ii) does not fund Revolving Credit Loans because the making of
such Loans would contravene any Law applicable to such Bank, or (iii) becomes
subject to the control of an Official Body (other than normal and customary
supervision), then the Borrowers shall have the right at their option, with the
consent of the Agent, which shall not be unreasonably withheld, to prepay the
Loans of such Bank in whole, together with all interest accrued thereon, and
terminate such Bank's Revolving Credit Commitment within ninety (90) days after
(w) receipt of such Bank's notice under Section 3.4 or 4.5.1, (x) the date such
Bank has failed to fund Revolving Credit Loans because the making of such Loans
would contravene Law applicable to such Bank, (y) the date of obtaining the
consent which such Bank has not approved, or (z) the date such Bank became
subject to the control of an Official Body, as applicable; provided that the
--------
Borrowers shall also pay to such Bank at the time of such prepayment any amounts
required under Section 4.5 and any accrued interest due on such amount and any
related fees; provided, however, that the Revolving Credit Commitment of such
--------
Bank shall be provided by one or more of the remaining Banks or a replacement
bank acceptable to the Agent; provided, further, the remaining Banks shall have
--------
no obligation hereunder to increase their Revolving Credit Commitments.
Notwithstanding the foregoing, the Agent may only be replaced subject to the
requirements of Section 9.1.4 and provided that all Letters of Credit have
--------
expired or been terminated or replaced.
4.4.4 Change of Lending Office
------------------------
Each Bank agrees that upon the occurrence of any event giving
rise to increased costs or other special payments under Section 3.4.2
(Illegality, etc.) or 4.5.1 (Increased Costs, etc.) with respect to such Bank,
it will if requested by the Borrowers use reasonable efforts (subject to overall
policy considerations of such Bank) to designate another lending office for any
Loans or Letters of Credit affected by such event, provided that such
--------
designation is made on such terms that such Bank and its lending office suffer
no economic, legal or regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of such Section. Nothing
is this Section 4.4.3 shall affect or postpone any of the Obligations of the
Borrowers or any other Loan Party or the rights of the Agent or any Bank
provided in this Agreement.
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4.5 Additional Compensation in Certain Circumstances.
------------------------------------------------
4.5.1 Increased Costs or Reduced Return Resulting From Taxes,
-------------------------------------------------------
Reserves, Capital Adequacy Requirements, Expenses, Etc.
- ------------------------------------------------------
If any Law, guideline or interpretation or application thereof by
any Official Body charged with the interpretation or administration thereof
enacted or made after the date of this Agreement or compliance with any request
or directive (whether or not having the force of Law) of any central bank or
other Official Body made after the date of this Agreement:
(i) subjects any Bank to any tax or changes the
basis of taxation with respect to this Agreement, the Notes, the Loans or
payments by the Borrowers of principal, interest, Commitment Fees, or other
amounts due from the Borrowers hereunder or under the Notes (except for taxes on
the overall net income or gross receipts of such Bank),
(ii) imposes, modifies or deems applicable any
reserve, special deposit or similar requirement against credits or commitments
to extend credit extended by, or assets (funded or contingent) of, deposits with
or for the account of, or other acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems applicable any
capital adequacy or similar requirement (A) against assets (funded or
contingent) of, or letters of credit, other credits or commitments to extend
credit extended by, any Bank, or (B) otherwise applicable to the obligations of
any Bank under this Agreement, and the result of any of the foregoing is to
increase the cost to, reduce the income receivable by, or impose any expense
(including loss of margin) upon any Bank with respect to this Agreement, the
Notes or the making, maintenance or funding of any part of the Loans (or, in the
case of any capital adequacy or similar requirement, to have the effect of
reducing the rate of return on any Bank's capital, taking into consideration
such Bank's customary policies with respect to capital adequacy) by an amount
which such Bank in its sole discretion deems to be material, such Bank shall
from time to time notify the Borrowers and the Agent of the amount determined in
good faith (using any averaging and attribution methods employed in good faith
including allocation to the Borrowers of pro rated amounts ) by such Bank to be
necessary to compensate such Bank for such increase in cost, reduction of
income, additional expense or reduced rate of return. The Banks will use
reasonable efforts to avoid such increase in costs, reduction of income,
additional expense or reduced rate of return . Notice shall set forth in
reasonable detail the basis for such determination. Such amount shall be due and
payable by the Borrower to such Bank thirty (30) Business Days after such notice
is given. If any amounts paid by the Loan Parties pursuant to this Section 4.5.1
are later refunded to a Bank, the Bank will remit the refund to the Loan
Parties.
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<PAGE>
4.5.2 Indemnity and Compensation.
--------------------------
In addition to the compensation required by Section 4.5.1, the
Borrowers shall jointly and severally indemnify and compensate each Bank against
all liabilities, losses or expenses (including loss of margin, any loss or
expense incurred in liquidating or employing deposits from third parties and any
loss or expense incurred in connection with funds acquired by a Bank to fund or
maintain Loans subject to a Euro-Rate Option) which such Bank sustains or incurs
as a consequence of any
(i) payment, prepayment, conversion or renewal of
any Loan to which a Euro-Rate Option applies on a day other than the last day of
the corresponding Interest Period (whether or not such payment or prepayment is
mandatory, voluntary or automatic and whether or not such payment or prepayment
is then due),
(ii) attempt by any Borrower to revoke (expressly,
by later inconsistent notices or otherwise) in whole or part any Loan Requests
under Section 2.5 or Section 3.2 or notice relating to prepayments under Section
4.4, or
(iii) default by any Borrower in the performance or
observance of any covenant or condition contained in this Agreement or any other
Loan Document, including any failure of the Borrower to pay when due (by
acceleration or otherwise) any principal, interest, Commitment Fee or any other
amount due hereunder.
If any Bank sustains or incurs any such loss or expense, it shall from time to
time notify the Borrowers of the amount determined in good faith by such Bank
(which determination may include such assumptions, allocations of costs and
expenses and averaging or attribution methods as such Bank shall deem
reasonable) to be necessary to indemnify and compensate such Bank for such loss
or expense. Such notice shall set forth in reasonable detail the basis for such
determination and shall be binding absent manifest error. Such amount shall be
due and payable by the Borrowers to such Bank ten (10) Business Days after such
notice is given.
4.5.3 Obligations Joint and Several.
-----------------------------
All obligations of Borrowers under this Agreement, the Notes, the
Guaranty and all other Loan Documents are joint and several.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Representations and Warranties.
------------------------------
The Loan Parties, jointly and severally, represent and warrant to the
Agent and each of the Banks on the date of this Agreement to the best of their
knowledge as follows:
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5.1.1 Organization and Qualification.
------------------------------
Each Loan Party and each Subsidiary of each Loan Party is a
corporation, partnership or limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each Loan Party and each Subsidiary of each Loan Party has the
lawful power to own or lease its properties and to engage in the business it
presently conducts or proposes to conduct. Each Loan Party and each Subsidiary
of each Loan Party is duly licensed or qualified and in good standing in each
jurisdiction listed on Schedule 5.1.1 and in all other jurisdictions where the
--------------
property owned or leased by it or the nature of the business transacted by it or
both makes such licensing or qualification necessary and in which the failure to
do so is not material.
5.1.2 Capitalization and Ownership.
----------------------------
The authorized capital stock of the Option Care, Inc. is publicly
traded. All of the shares of capital stock of Option Care, Inc. have been
validly issued and are fully paid and nonassessable. There are no options,
warrants or other rights outstanding to purchase any such shares except as
indicated on Schedule 5.1.2.
--------------
5.1.3 Subsidiaries.
------------
Schedule 5.1.3 (which may be delivered sixty (60) days after the
--------------
date of this Agreement) states the name of each of the other Loan Parties and
each of their respective Subsidiaries, their respective jurisdictions of
incorporation, authorized capital stock, the issued and outstanding shares
(referred to herein as the "Subsidiary Shares") and the owners thereof if it is
a corporation, outstanding partnership interests (the "Partnership Interests")
if a partnership and outstanding limited liability company interests, interests
assigned to managers thereof and the voting rights associated therewith (the
"LLC Interests") if a limited liability company. The Option Care, Inc. and each
Subsidiary of Option Care, Inc. has good and marketable title to all of the
Subsidiary Shares, Partnership Interests and LLC Interests it purports to own,
free and clear in each case of any Lien. All Subsidiary Shares, Partnership
Interests and LLC Interests have been validly issued, and all Subsidiary Shares
are fully paid and nonassessable. All capital contributions and other
consideration required to be made or paid in connection with the issuance of the
Partnership Interests and LLC Interests have been made or paid, as the case may
be. There are no options, warrants or other rights outstanding to purchase any
such Subsidiary Shares, Partnership Interests or LLC Interests except as
indicated on Schedule 5.1.3.
--------------
5.1.4 Power and Authority.
-------------------
Each Loan Party has full power to enter into, execute, deliver
and carry out this Agreement and the other Loan Documents to which it is a
party, to incur the Indebtedness contemplated by the Loan Documents and to
perform its Obligations under the Loan Documents to which it is a party, and all
such actions have been duly authorized by all necessary proceedings on its part.
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5.1.5 Validity and Binding Effect.
---------------------------
This Agreement has been duly and validly executed and delivered
by each Loan Party, and each other Loan Document which any Loan Party is
required to execute and deliver on or after the date hereof will have been duly
executed and delivered by such Loan Party on the required date of delivery of
such Loan Document. This Agreement and each other Loan Document constitutes, or
will constitute, legal, valid and binding obligations of each Loan Party which
is or will be a party thereto on and after its date of delivery thereof,
enforceable against such Loan Party in accordance with its terms, except to the
extent that enforceability of any of such Loan Document may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors' rights generally or general equitable
principles.
5.1.6 No Conflict.
-----------
Neither the execution and delivery of this Agreement or the other
Loan Documents by any Loan Party nor the consummation of the transactions herein
or therein contemplated or compliance with the terms and provisions hereof or
thereof by any of them will conflict with, constitute a default under or result
in any breach of (i) the terms and conditions of the certificate of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, certificate of formation, limited liability company agreement or
other organizational documents of any Loan Party or (ii) any Law or any material
agreement or instrument or order, writ, judgment, injunction or decree to which
any Loan Party or any of its Subsidiaries is a party or by which it or any of
its Subsidiaries is bound or to which it is subject, or result in the creation
or enforcement of any Lien, charge or encumbrance whatsoever upon any property
(now or hereafter acquired) of any Loan Party or any of its Subsidiaries (other
than Liens granted under the Loan Documents).
5.1.7 Litigation.
----------
Except as shown on Schedule 5.1.7, there are no actions, suits,
proceedings or investigations pending or, to the knowledge of any Loan Party,
threatened against such Loan Party or any Subsidiary of such Loan Party at law
or equity before any Official Body which individually or in the aggregate are
reasonably likely to result in an adverse judgment of more than $500,000 or in
an adverse judgment having a financial consequence to any Loan party of more
than $500,000. None of the Loan Parties or any Subsidiaries of any Loan Party is
in material violation of any order, writ, injunction or any decree of any
Official Body.
5.1.8 Title to Properties.
-------------------
The real property owned or leased by each Loan Party and each
Subsidiary of each Loan Party is described on Schedule 5.1.8. Each Loan Party
--------------
and each Subsidiary of each Loan Party has good and marketable title to or valid
leasehold interest in all properties, assets and other rights which it purports
to own or lease or which are reflected as owned or leased on its books and
records, free and clear of all Liens and encumbrances except Permitted Liens,
and
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<PAGE>
subject to the terms and conditions of the applicable leases. All leases of
property are in full force and effect without the necessity for any consent
which has not previously been obtained upon consummation of the transactions
contemplated hereby.
5.1.9 Financial Statements.
--------------------
(i) Historical Statements. Option Care, Inc. has
---------------------
delivered to the Agent copies of its audited consolidated year-end financial
statements for and as of the end of the three fiscal years ended December 31,
1995 (the "Annual Statements"). In addition, the Option Care, Inc. has delivered
to the Agent copies of its unaudited consolidated interim financial statements
for the fiscal year to date and as of the end of the fiscal quarter ended
September 30, 1996 (the "Interim Statements") (the Annual and Interim Statements
being collectively referred to as the "Historical Statements"). The Historical
Statements were compiled from the books and records maintained by the Option
Care, Inc.'s management, are correct and complete in all material respects and
fairly represent the consolidated financial condition of the Option Care, Inc.
and its Subsidiaries as of their dates and the results of operations for the
fiscal periods then ended and have been prepared in accordance with GAAP
consistently applied, subject (in the case of the Interim Statements) to normal
year-end audit adjustments.
(ii) Financial Projections. Option Care, Inc. has
---------------------
delivered to the Agent financial projections of Option Care, Inc. and its
Subsidiaries for the period through December 31, 2000 derived from various
assumptions of the Option Care, Inc.'s management (the "Financial Projections").
The Financial Projections represent a reasonable range of possible results in
light of the history of the business, present and foreseeable conditions and the
intentions of the Option Care, Inc.'s management.
(iii) Accuracy of Financial Statements. Neither
--------------------------------
Option Care, Inc. nor any Subsidiary of Option Care, Inc. has any material
liabilities, contingent or otherwise, or forward or long-term commitments that
are not disclosed in the Historical Statements or in the notes thereto and which
under GAAP were required to be disclosed therein, and except as disclosed
therein there are no unrealized or anticipated losses from any commitments of
Option Care, Inc. or any Subsidiary of Option Care, Inc. which are reasonably
likely to cause a Material Adverse Change. Since December 31, 1995, no Material
Adverse Change has occurred.
5.1.10 Use of Proceeds; Margin Stock.
-----------------------------
The Loan Parties intend to use the proceeds of the Loans in
accordance with Sections 2.8, and 7.1.10. None of the Loan Parties or any
Subsidiaries of any Loan Party engages or intends to engage principally, or as
one of its important activities, in the business of extending credit for the
purpose, immediately, incidentally or ultimately, of purchasing or carrying
margin stock (within the meaning of Regulation U). No part of the proceeds of
any Loan has been or will be used, immediately, incidentally or ultimately, to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock or to refund Indebtedness originally
incurred for such purpose, or for any purpose which entails a
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<PAGE>
violation of or which is inconsistent with the provisions of the regulations of
the Board of Governors of the Federal Reserve System. None of the Loan Parties
or any Subsidiary of any Loan Party holds or intends to hold margin stock in
such amounts that more than 25% of the reasonable value of the assets of any
Loan Party or Subsidiary of any Loan Party are or will be represented by margin
stock.
5.1.11 Full Disclosure.
---------------
Neither this Agreement nor any other Loan Document, nor any
certificate, statement, agreement or other documents furnished to the Agent or
any Bank in connection herewith or therewith, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which they were made, not misleading.
5.1.12 Taxes.
-----
All federal, state, local and other tax returns required to have
been filed with respect to each Loan Party and each Subsidiary of each Loan
Party have been filed, and payment or adequate provision has been made for the
payment of all taxes, fees, assessments and other governmental charges which
have or may become due pursuant to said returns or to assessments received,
except to the extent that such taxes, fees, assessments and other charges are
not material and are being contested in good faith by appropriate proceedings
diligently conducted and for which such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall have been made. There are
no agreements or waivers extending the statutory period of limitations
applicable to any federal income tax return of any Loan Party or Subsidiary of
any Loan Party for any period.
5.1.13 Consents and Approvals.
----------------------
Except for the filing of financing statements in the state and
county filing offices, no consent, approval, exemption, order or authorization
of, or a registration or filing with, any Official Body or any other Person is
required by any Law or any agreement in connection with the execution, delivery
and carrying out of this Agreement and the other Loan Documents by any Loan
Party, except as listed on Schedule 5.1.13, all of which shall have been
---------------
obtained by the Loan Parties or made on or prior to the Closing Date except as
otherwise indicated on Schedule 5.1.13.
---------------
5.1.14 No Event of Default; Compliance with Instruments.
------------------------------------------------
No event has occurred and is continuing and no condition exists
or will exist after giving effect to the borrowings or other extensions of
credit to be made on the Closing Date under or pursuant to the Loan Documents
which constitutes an Event of Default or Potential Default. None of the Loan
Parties or any Subsidiaries of any Loan Party is in material violation of (i)
any term of its certificate of incorporation, bylaws, certificate of limited
partnership,
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<PAGE>
partnership agreement, certificate of formation, limited liability company
agreement or other organizational documents or (ii) any material agreement or
instrument to which it is a party or by which it or any of its properties may be
subject or bound.
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.
----------------------------------------------
Each Loan Party and each Subsidiary of each Loan Party owns or
possesses all the material patents, trademarks, service marks, trade names,
copyrights, licenses, registrations, franchises, permits and rights necessary to
own and operate its properties and to carry on its business as presently
conducted and planned to be conducted by such Loan Party or Subsidiary, without
known possible, alleged or actual conflict with the rights of others. All
registered patents, trademarks, service marks, trade names, copyrights, and all
pharmacy, drug enforcement administration and nursing licenses of each Loan
Party and each Subsidiary of each Loan Party are listed and described on
Schedule 5.1.15 (which may be delivered sixty (60) days after the date of this
- ---------------
Agreement).
5.1.16 Security Interests.
------------------
The Liens and security interests granted to the Agent for the
benefit of the Banks pursuant to the Collateral Assignment, the Patent,
Trademark and Copyright Assignment, the Pledge Agreement and the Security
Agreement in the Collateral (other than the Real Property) constitute and will
continue to constitute Prior Security Interests under the Uniform Commercial
Code as in effect in each applicable jurisdiction (the "Uniform Commercial
Code") or other applicable Law entitled to all the rights, benefits and
priorities provided by the Uniform Commercial Code or such Law. Upon the filing
of financing statements relating to said security interests in each office and
in each jurisdiction where required in order to perfect the security interests
described above, taking possession of any stock certificates or other
certificates evidencing the Pledged Collateral and recordation of the Patent,
Trademark and Copyright Assignment in the United States Patent and Trademark
Office and United States Copyright Office, as applicable, all such action as is
necessary or advisable to establish such rights of the Agent will have been
taken, and there will be upon execution and delivery of the Patent, Trademark
and Copyright Assignment, the Pledge Agreement and the Security Agreement, such
filings and such taking of possession, no necessity for any further action in
order to preserve, protect and continue such rights, except (i) the filing of
continuation statements with respect to such financing statements within six
months prior to each five-year anniversary of the filing of such financing
statements , (ii) perfection of interests in titled vehicles and (iii) filing
additional financing statements if, as provided in the Security Agreement,
additional locations or names are used. All filing fees and other expenses in
connection with each such action have been or will be paid by the Borrower.
5.1.17 Status of the Pledged Collateral.
--------------------------------
All the shares of capital stock, Partnership Interests or LLC
Interests included in the Pledged Collateral to be pledged pursuant to the
Pledge Agreement or the
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<PAGE>
Collateral Assignment are or will be upon issuance validly issued and
nonassessable and owned beneficially and of record by the pledgor free and clear
of any Lien or restriction on transfer, except as otherwise provided by the
Pledge Agreement or the Collateral Assignment and except as the right of the
Banks to dispose of the Shares, Partnership Interests or LLC Interests may be
limited by the Securities Act of 1933, as amended, and the regulations
promulgated by the Securities and Exchange Commission thereunder and by
applicable state securities laws. There are no shareholder, partnership, limited
liability company or other agreements or understandings with respect to the
shares of capital stock, Partnership Interests or LLC Interests included in the
Pledged Collateral except for the shareholder agreements, partnership agreements
and limited liability company agreements described on Schedule 5.1.17. The Loan
---------------
Parties have delivered true and correct copies of such partnership agreements
and limited liability company agreements to the Agent.
5.1.18 Insurance.
---------
Schedule 5.1.18 lists all insurance policies and other bonds to
---------------
which any Loan Party or Subsidiary of any Loan Party is a party, all of which
are valid and in full force and effect. No notice has been given or claim made
and no grounds exist to cancel or avoid any of such policies or bonds or to
reduce the coverage provided thereby. Such policies and bonds provide adequate
coverage from reputable and financially sound insurers in amounts sufficient to
insure the assets and risks of each Loan Party and each Subsidiary of each Loan
Party in accordance with prudent business practice in the industry of the Loan
Parties and their Subsidiaries.
5.1.19 Compliance with Laws.
--------------------
The Loan Parties and their Subsidiaries are in compliance in all
material respects with all applicable Laws (other than Environmental Laws which
are specifically addressed in Section 5.1.24) in all jurisdictions in which any
Loan Party or Subsidiary of any Loan Party is presently or will be doing
business.
5.1.20 Material Contracts; Burdensome Restrictions.
-------------------------------------------
Schedule 5.1.20 (which may be delivered sixty (60) days after the
---------------
date of this Agreement) lists all Material Agreements relating to the business
operations of each Loan Party and each Subsidiary of any Loan Party, including
all employee benefit plans and Labor Contracts. All such Material Agreements are
valid, binding and enforceable upon such Loan Party or Subsidiary and each of
the other parties thereto in accordance with their respective terms, and there
is no default thereunder, to the Loan Parties' knowledge, with respect to
parties other than such Loan Party or Subsidiary. None of the Loan Parties or
their Subsidiaries is bound by any contractual obligation, or subject to any
restriction in any organization document, or any requirement of Law which is
reasonably likely to result in a Material Adverse Change.
-41-
<PAGE>
5.1.21 Investment Companies; Regulated Entities.
----------------------------------------
None of the Loan Parties or any Subsidiaries of any Loan Party is
an "investment company" registered or required to be registered under the
Investment Company Act of 1940 or under the "control" of an "investment company"
as such terms are defined in the Investment Company Act of 1940 and shall not
become such an "investment company" or under such "control." None of the Loan
Parties or any Subsidiaries of any Loan Party is subject to any other Federal or
state statute or regulation limiting its ability to incur Indebtedness for
borrowed money.
5.1.22 Plans and Benefit Arrangements.
------------------------------
Except as set forth on Schedule 5.1.22:
---------------
(i) Each Borrower and each other member of the
ERISA Group are in compliance in all material respects with any applicable
provisions of ERISA with respect to all Benefit Arrangements, Plans and
Multiemployer Plans. There has been no Prohibited Transaction with respect to
any Benefit Arrangement or any Plan or, to the best knowledge of the Borrower,
with respect to any Multiemployer Plan or Multiple Employer Plan, which is
material. Each Borrower and all other members of the ERISA Group have made when
due any and all payments required to be made under any agreement relating to a
Multiemployer Plan or a Multiple Employer Plan or any Law pertaining thereto.
With respect to each Plan and Multiemployer Plan, each Borrower and each other
member of the ERISA Group (i) have fulfilled in all material respects their
obligations under the minimum funding standards of ERISA, (ii) have not incurred
any liability to the PBGC, and (iii) have not had asserted against them any
penalty for failure to fulfill the minimum funding requirements of ERISA.
(ii) To the best of each Borrower's knowledge, each
Multiemployer Plan and Multiple Employer Plan is able to pay benefits thereunder
when due.
(iii) No Borrower or any other member of the ERISA
Group has instituted or intends to institute proceedings to terminate any Plan.
(iv) No event requiring notice to the PBGC under
Section 302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur
with respect to any Plan, and no amendment with respect to which security is
required under Section 307 of ERISA has been made or is reasonably expected to
be made to any Plan.
(v) The aggregate actuarial present value of all
benefit liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in, and as of the date of, the most recent
actuarial report for such Plan, does not exceed the aggregate fair market value
of the assets of such Plan.
(vi) No Borrower or any other member of the ERISA
Group has incurred or reasonably expects to incur any material withdrawal
liability under ERISA to any
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<PAGE>
Multiemployer Plan or Multiple Employer Plan. No Borrower or any other member of
the ERISA Group has been notified by any Multiemployer Plan or Multiple Employer
Plan that such Multiemployer Plan or Multiple Employer Plan has been terminated
within the meaning of Title IV of ERISA and, to the best knowledge of the
Borrower, no Multiemployer Plan or Multiple Employer Plan is reasonably expected
to be reorganized or terminated, within the meaning of Title IV of ERISA.
(vii) To the extent that any Benefit Arrangement is
insured, the Borrowers and all other members of the ERISA Group have paid when
due all premiums required to be paid for all periods through the Closing Date.
To the extent that any Benefit Arrangement is funded other than with insurance,
the Borrowers and all other members of the ERISA Group have made when due all
contributions required to be paid for all periods through the Closing Date.
(viii) All Plans, Benefit Arrangements and
Multiemployer Plans have been administered in accordance with their terms and
applicable Law.
5.1.23 Employment Matters.
------------------
Each of the Loan Parties and each of their Subsidiaries is in
compliance with the Labor Contracts and all applicable federal, state and local
labor and employment Laws including those related to equal employment
opportunity and affirmative action, labor relations, minimum wage, overtime,
child labor, medical insurance continuation, worker adjustment and relocation
notices, immigration controls and worker and unemployment compensation, where
the failure to comply would constitute a Material Adverse Change. There are no
outstanding grievances, arbitration awards or appeals therefrom arising out of
the Labor Contracts or current or threatened strikes, picketing, handbilling or
other work stoppages or slowdowns at facilities of any of the Loan Parties or
any of their Subsidiaries which in any case would constitute a Material Adverse
Change. The Borrowers have delivered to the Agent true and correct copies of
each of the Labor Contracts.
5.1.24 Environmental Matters.
---------------------
Except as disclosed on Schedule 5.1.24:
---------------
(i) None of the Loan Parties or any Subsidiaries of
any Loan Party has received any material Environmental Complaint from any
Official Body or private Person alleging that such Loan Party or Subsidiary or
any prior or subsequent owner of any of the Property is a potentially
responsible party under the Comprehensive Environmental Response, Cleanup and
Liability Act, 42 U.S.C. (S) 9601, et seq., and none of the Loan Parties has any
-- ---
reason to believe that such an Environmental Complaint might be received. There
are no pending or, to any Loan Party's knowledge, threatened Environmental
Complaints relating to any Loan Party or Subsidiary of any Loan Party or, to any
Loan Party's knowledge, any prior or subsequent owner of any of the Property
pertaining to, or arising out of, any material Environmental Conditions.
-43-
<PAGE>
(ii) There are no circumstances at, on or under any
of the Property that constitute a breach of or non-compliance with any of the
Environmental Laws, and there are no past or present Environmental Conditions
at, on or under any of the Property or, to any Loan Party's knowledge, at, on or
under adjacent property, that prevent compliance with the Environmental Laws at
any of the Property.
(iii) Neither any of the Property nor any structures,
improvements, equipment, fixtures, activities or facilities thereon or
thereunder contain or use Regulated Substances except in substantial compliance
with Environmental Laws. There are no processes, facilities, operations,
equipment or other activities at, on or under any of the Property, or, to any
Loan Party's knowledge, at, on or under adjacent property, that currently result
in the release or threatened release of Regulated Substances onto any of the
Property, except to the extent that such releases or threatened releases are not
a substantial breach of or otherwise not a violation of the Environmental Laws.
(iv) There are no aboveground storage tanks,
underground storage tanks or underground piping associated with such tanks, used
for the management of Regulated Substances at, on or under any of the Property
that (a) do not have, to the extent required by Environmental Laws, a full
operational secondary containment system in place, and (b) are not otherwise in
compliance with all Environmental Laws. There are no abandoned underground
storage tanks or underground piping associated with such tanks, previously used
for the management of Regulated Substances at, on or under any of the Property
that have not either been closed in place in accordance with Environmental Laws
or removed in compliance with all applicable Environmental Laws and no
contamination associated with the use of such tanks exists on any of the
Property that is not in compliance with Environmental Laws.
(v) Each Loan Party and each Subsidiary of any Loan
Party has all material permits, licenses, authorizations, plans and approvals
necessary under the Environmental Laws for the conduct of the business of such
Loan Party or Subsidiary as presently conducted. Each Loan Party and each
Subsidiary of any Loan Party has submitted all material notices, reports and
other filings required by the Environmental Laws to be submitted to an Official
Body which pertain to past and current operations on any of the Property.
(vi) All past and present on-site generation,
storage, processing, treatment, recycling, reclamation, disposal or other use or
management of Regulated Substances at, on, or under any of the Property and all
off-site transportation, storage, processing, treatment, recycling, reclamation,
disposal or other use or management of Regulated Substances have been done
materially in accordance with the Environmental Laws.
5.1.25 Senior Debt Status.
------------------
(i) The Obligations of each Loan Party under this
Agreement, the Notes, the Guaranty Agreement and each of the other Loan
Documents to which it is a party do rank and will rank at least pari passu in
---- -----
priority of payment with all other
-44-
<PAGE>
Indebtedness of such Loan Party except Indebtedness of such Loan Party to the
extent secured by Permitted Liens. There is no Lien upon or with respect to any
of the properties or income of any Loan Party or Subsidiary of any Loan Party
which secures indebtedness or other obligations of any Person except for
Permitted Liens.
5.1.26 Medicare/Medicaid.
-----------------
(i) The Borrowers that are approved providers or
suppliers for the Medicare and Medicaid programs are listed on Schedule 5.1.26.
Those Borrowers have not been notified by any federal or state regulator or any
fiscal intermediary or carrier of any material denial, material claimback,
material setoff or other material adverse adjustment to a receivable.
5.1.27 Billing Investigation.
---------------------
(i) None of the Borrowers, to the best of their
knowledge, is under investigation for, in settlement negotiations with or
settling any claim under the Medicare or Medicaid program or with any third
party payor relating to allegations of erroneous or fraudulent billing. Any
settlements of claims of erroneous or fraudulent billing, if any, made within
the last five years have been disclosed in writing to the Banks.
5.1.28 Franchise Agreements.
--------------------
None of the franchise agreements to which any Borrower is a
franchisor prohibits the assignment by a Person acting through the franchisor.
5.2 Updates to Schedules.
--------------------
Should any of the information or disclosures provided on any of
the Schedules attached hereto become outdated or incorrect in any material
respect, the Borrowers shall provide the Agent by the later of January 15, 1997
or as otherwise provided in this Agreement and, thereafter, at the time that
annual financial statements are provided, in writing with such revisions or
updates to such Schedule as may be necessary or appropriate to update or correct
same; provided, however, that no Schedule shall be deemed to have been amended,
--------
modified or superseded by any such correction or update, nor shall any breach of
warranty or representation resulting from the inaccuracy or incompleteness of
any such Schedule be deemed to have been cured thereby, unless and until the
Required Banks, in their reasonable discretion, shall have accepted in writing
such revisions or updates to such Schedule.
6. CONDITIONS OF LENDING
---------------------
The obligation of each Bank to make Loans and of the Agent to issue
Letters of Credit hereunder is subject to the performance by each of the Loan
Parties of its Obligations to be
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<PAGE>
performed hereunder at or prior to the making of any such Loans or issuance of
such Letters of Credit and to the satisfaction of the following further
conditions:
6.1 First Loans.
-----------
On the Closing Date:
6.1.1 Officer's Certificate.
---------------------
The representations and warranties of each of the Loan Parties
contained in Section 5 and in each of the other Loan Documents shall be true and
accurate on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein and except changes in
representations and warranties that, in the determination of the Required Banks
are reasonably likely to result in a Material Adverse Change), and each of the
Loan Parties shall have performed and complied with all covenants and conditions
hereof and thereof, no Event of Default or Potential Default shall have occurred
and be continuing or shall exist; and there shall be delivered to the Agent for
the benefit of each Bank a certificate of each of the Loan Parties, dated the
Closing Date to each such effect and signed by two of the following officers:
the Chief Executive Officer, President, Chief Financial Officer, Secretary or
Assistant Secretary of each of the Loan Parties.
6.1.2 Secretary's Certificate.
-----------------------
There shall be delivered to the Agent for the benefit of each
Bank a certificate dated the Closing Date and signed by the Secretary or an
Assistant Secretary of each of the Loan Parties, certifying as appropriate as
to:
(i) all action taken by each Loan Party in
connection with this Agreement and the other Loan Documents;
(ii) the names of the officer or officers authorized
to sign this Agreement and the other Loan Documents and the true signatures of
such officer or officers and specifying the Authorized Officers permitted to act
on behalf of each Loan Party for purposes of this Agreement and the true
signatures of such officers, on which the Agent and each Bank may conclusively
rely; and
(iii) copies of its organizational documents,
including its certificate of incorporation, bylaws, certificate of limited
partnership, partnership agreement, certificate of formation, and limited
liability company agreement as in effect on the Closing Date certified by the
appropriate state official where such documents are filed in a state office
together with certificates from the appropriate state officials as to the
continued existence and good standing (or subsistence) of each Loan Party in
each state where organized or qualified to do business and a bring-down
certificate by facsimile dated the Closing Date.
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<PAGE>
6.1.3 Delivery of Loan Documents.
--------------------------
The Guaranty Agreement, Notes, Patent, Trademark and Copyright
Assignment, Pledge Agreement, Intercompany Subordination Agreement and Security
Agreement shall have been duly executed and delivered to the Agent for the
benefit of the Banks, together with all appropriate financing statements and
appropriate stock powers and certificates evidencing the Shares, the Partnership
Interests and the LLC Interests.
6.1.4 Opinion of Counsel.
------------------
(i) There shall be delivered to the Agent for the
benefit of each Bank a written opinion of Wolf, Block, Schorr and Solis-Cohen,
counsel for the Loan Parties (who may rely on the opinions of such other counsel
as may be acceptable to the Agent), dated the Closing Date and in form and
substance satisfactory to the Agent and its counsel as to such other matters
incident to the transactions contemplated herein as the Agent may reasonably
request.
6.1.5 Legal Details.
-------------
All legal details and proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be in form and substance satisfactory to the Agent and counsel for the Agent,
and the Agent shall have received all such other counterpart originals or
certified or other copies of such documents and proceedings in connection with
such transactions, in form and substance satisfactory to the Agent and said
counsel, as the Agent or said counsel may reasonably request.
6.1.6 Payment of Fees.
---------------
The Borrowers shall have paid or caused to be paid to the Agent
for itself and for the account of the Banks to the extent not previously paid
the Closing Fee, the Arrangement Fee, a fee of $42,000 to Ernst & Young LLP for
conducting an Agreed Upon Procedures Engagement, counsel fees, all other
commitment and other fees accrued through the Closing Date and the costs and
expenses for which the Agent and the Banks are entitled to be reimbursed.
6.1.7 Consents.
--------
All material consents required to effectuate the transactions
contemplated hereby as set forth on Schedule 5.1.13 shall have been obtained.
---------------
6.1.8 Officer's Certificate Regarding MACs.
------------------------------------
Since December 31, 1995, no Material Adverse Change shall have
occurred; prior to the Closing Date, there shall have been no material change in
the management of any Loan Party or Subsidiary of any Loan Party; and there
shall have been delivered to the
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<PAGE>
Agent for the benefit of each Bank a certificate of the Loan Parties dated the
Closing Date and signed on behalf of the Loan Parties by any two of the Chief
Executive Officer, President, Chief Financial Officer, Secretary or Assistant
Secretary of each Loan Party to each such effect.
6.1.9 No Violation of Laws.
--------------------
The making of the Loans and the issuance of the Letters of Credit
shall not contravene any Law applicable to any Loan Party or any of the Banks.
6.1.10 No Actions or Proceedings.
-------------------------
No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, this Agreement, the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby or which, in the
Agent's reasonable judgment, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan Documents.
6.1.11 Insurance Policies; Certificates of Insurance;
----------------------------------------------
Endorsements.
- ------------
The Loan Parties shall have delivered evidence acceptable to the
Agent that adequate insurance in compliance with Section 7.1.3 is in full force
and effect and that all premiums then due thereon have been paid, together with
a certified copy of each Loan Party's casualty insurance policy or policies
evidencing coverage satisfactory to the Agent, with additional insured,
mortgagee and lender loss payable special endorsements attached thereto in form
and substance satisfactory to the Agent and its counsel naming the Agent as
additional insured, mortgagee and lender loss payee.
6.1.12 Landlord's Waiver.
-----------------
(i) The Loan Parties shall have delivered an
executed Landlord's Waiver from the lessor for each leased location where
Collateral valued in excess of $500,000 is located with the exception of the
lessor of a property in Oklahoma City, Oklahoma.
6.2 Each Additional Loan.
--------------------
At the time of making any Loans or issuing any Letters of Credit other
than Loans made or Letters of Credit issued on the Closing Date and after giving
effect to the proposed extensions of credit: the representations and warranties
of the Loan Parties contained in Section 5 and in the other Loan Documents shall
be true on and as of the date of such additional Loan or Letter of Credit with
the same effect as though such representations and warranties had been made on
and as of such date (except representations and warranties which expressly
relate solely to an earlier date or time, which representations and warranties
shall be true and correct on and as of the specific dates or times referred to
therein and except changes to representations and warranties that, in the good
faith determination of the Required Banks, would not constitute a
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Material Adverse Change) and the Loan Parties shall have performed and complied
with all covenants and conditions hereof; no Event of Default or Potential
Default shall have occurred and be continuing or shall exist; the making of the
Loans or issuance of such Letter of Credit shall not contravene any Law
applicable to any Loan Party or Subsidiary of any Loan Party or any of the
Banks; the Borrowers shall have delivered to the Agent a duly executed and
completed Loan Request or application for a Letter of Credit as the case may be;
and the Borrowers shall have delivered to the Agent a certificate showing
Availability for the Loan.
7. COVENANTS
---------
7.1 Affirmative Covenants.
---------------------
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Loans, Reimbursement Obligations and Letter of Credit
Borrowings, and interest thereon, expiration or termination of all Letters of
Credit, satisfaction of all of the Loan Parties' other Obligations under the
Loan Documents and termination of the Revolving Credit Commitments, the Loan
Parties shall comply at all times with the following affirmative covenants:
7.1.1 Preservation of Existence, Etc.
------------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to, maintain its legal existence as a corporation, limited partnership or
limited liability company and its license or qualification and good standing in
each jurisdiction in which its ownership or lease of property or the nature of
its business makes such license or qualification necessary, except as otherwise
expressly permitted in Section 7.2.6.
7.1.2 Payment of Liabilities, Including Taxes, Etc.
--------------------------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to, duly pay and discharge all liabilities to which it is subject or which are
asserted against it, promptly as and when the same shall become due and payable,
including all taxes, assessments and governmental charges upon it or any of its
properties, assets, income or profits, prior to the date on which penalties
attach thereto, except to the extent that such liabilities, including taxes,
assessments or charges, are being contested in good faith and by appropriate and
lawful proceedings diligently conducted and for which such reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made, but only to the extent that failure to discharge any such liabilities
would not result in any additional liability which would adversely affect to a
material extent the financial condition of any Loan Party or Subsidiary of any
Loan Party or which would affect the Collateral, provided that the Loan Parties
--------
and their Subsidiaries will pay all such liabilities forthwith upon the
commencement of proceedings to foreclose any Lien which may have attached as
security therefor.
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7.1.3 Maintenance of Insurance.
------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to, insure its properties and assets against loss or damage by fire and such
other insurable hazards as such assets are commonly insured (including fire,
extended coverage, property damage, workers' compensation, public liability and
business interruption insurance) and against other risks (including errors and
omissions) in such amounts as similar properties and assets are insured by
prudent companies in similar circumstances carrying on similar businesses, and
with reputable and financially sound insurers, including self-insurance to the
extent customary, all as reasonably determined by the Agent. At the request of
the Agent, the Loan Parties shall deliver to the Agent and each of the Banks (x)
on the Closing Date and annually thereafter an original certificate of insurance
signed by the Loan Parties' independent insurance broker describing and
certifying as to the existence of the insurance on the Collateral required to be
maintained by this Agreement and the other Loan Documents, together with a copy
of the endorsement described in the next sentence attached to such certificate
and (y) from time to time a summary schedule indicating all insurance then in
force with respect to each of the Loan Parties. Such policies of insurance shall
contain special endorsements, in form and substance acceptable to the Agent,
which shall (i) specify the Agent as an additional insured, mortgagee and lender
loss payee as its interests may appear, with the understanding that any
obligation imposed upon the insured (including the liability to pay premiums)
shall be the sole obligation of the applicable Loan Parties and not that of the
insured, (ii) provide that no cancellation of such policies for any reason
(including non-payment of premium) nor any change therein shall be effective
until at least thirty (30) days after receipt by the Agent of written notice of
such cancellation or change, (iii) be primary without right of contribution of
any other insurance carried by or on behalf of any additional insureds with
respect to their respective interests in the Collateral, and (iv) provide that
inasmuch as the policy covers more than one insured, all terms, conditions,
insuring agreements and endorsements (except limits of liability) shall operate
as if there were a separate policy covering each insured. If a Loan Party
notifies its insurance agent or carrier of a claim in excess of $500,000 for any
incident, the Loan Party will at the same time notify the Agent of the claim.
Any moneys received by the Agent constituting insurance proceeds in excess of
$500,000 for any incident may, at the option of the Agent, (i) be applied by the
Agent to the payment of the Loans in such manner as the Agent may reasonably
determine, or (ii) be disbursed to the applicable Loan Parties on such terms as
are deemed appropriate by the Agent for the repair, restoration and/or
replacement of property in respect of which such proceeds were received.
7.1.4 Maintenance of Properties and Leases.
------------------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to, maintain in good repair, working order and condition (ordinary wear and tear
excepted) in accordance with the general practice of other businesses of similar
character and size, all of those properties useful or necessary to its business,
and from time to time, such Loan Party will make or cause to be made all
appropriate repairs, renewals or replacements thereof.
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7.1.5 Maintenance of Patents, Trademarks, Etc.
---------------------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to, maintain in full force and effect all patents, trademarks, service marks,
trade names, copyrights, licenses, franchises, permits and other authorizations
necessary for the ownership and operation of its properties and business if the
failure so to maintain the same would constitute a Material Adverse Change.
7.1.6 Visitation Rights.
-----------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to, permit any of the officers or authorized employees or representatives of the
Agent or any of the Banks to visit and inspect any of its properties and to
examine and make excerpts from its books and records and discuss its business
affairs, finances and accounts with its officers, all in such detail and at such
times and as often as any of the Banks may reasonably request, provided that
--------
each Bank shall provide the Borrowers and the Agent with reasonable notice prior
to any visit or inspection and provided further that if no Potential Default or
-------- -------
Event of Default exists, visits and inspections will occur no more frequently
than twice a year and during normal business hours. In the event any Bank
desires to conduct an audit of any Loan Party, such Bank shall make a reasonable
effort to conduct such audit contemporaneously with any audit to be performed by
the Agent. Unless a Potential Default or Event of Default exists, Bank audits
will be at the expense of the Bank conducting the audit.
7.1.7 Keeping of Records and Books of Account.
---------------------------------------
The Borrowers shall, and shall cause each Subsidiary of the
Borrowers to, maintain and keep proper books of record and account which enable
the Borrowers and their Subsidiaries to issue financial statements in accordance
with GAAP and as otherwise required by applicable Laws of any Official Body
having jurisdiction over the Borrowers or any Subsidiary of any of the
Borrowers, and in which full, true and correct entries shall be made in all
material respects of all its dealings and business and financial affairs.
7.1.8 Plans and Benefit Arrangements.
------------------------------
The Borrowers shall, and shall cause each member of the ERISA
Group to, comply with ERISA, the Internal Revenue Code and other applicable Laws
applicable to Plans and Benefit Arrangements except where any such failure would
not result in a Material Adverse Change. Without limiting the generality of the
foregoing, the Borrowers shall cause all of their respective Plans and all Plans
maintained by any member of the ERISA Group to be funded in accordance with the
minimum funding requirements of ERISA and shall make, and cause each member of
the ERISA Group to make, in a timely manner, all contributions due to Plans,
Benefit Arrangements and Multiemployer Plans except where such failure would not
result in a Material Adverse Change.
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7.1.6 Compliance with Laws.
--------------------
Each Loan Party shall, and shall cause each of its Subsidiaries
to, comply with all applicable Laws, including all Environmental Laws, in all
respects, provided that it shall not be deemed to be a violation of this Section
--------
7.1.9 if any failure to comply with any Law would not result in fines,
penalties, remediation costs, other similar liabilities or injunctive relief any
of which would constitute a Material Adverse Change.
7.1.10 Use of Proceeds.
---------------
7.1.10.1 General
-------
The Loan Parties will use the Letters of Credit and the proceeds
of the Loans only for (i) general corporate purposes and for working capital,
(ii) to finance Permitted Business Combinations, or (iii) to repay and terminate
Indebtedness outstanding under a Credit Agreement by and among Option Care,
Inc., Option Care, Inc. (California), Option Care Enterprises, Inc., Option Care
Capital Services, Inc., Women's Health, Cordesys Healthcare Management, Inc.,
The Northern Trust Company and NBD Bank dated June 10, 1993, as amended. The
Loan Parties shall not use Letters of Credit and the proceeds of the Loans for
any purposes which contravenes any applicable Law or any provision hereof.
7.1.10.2 Margin Stock.
------------
The Loan Parties shall not use the proceeds of the Loans to
purchase or carry margin stock as more fully provided in Section 5.1.10.
7.1.10.3 Section 20 Subsidiaries.
-----------------------
The Loan Parties will not, directly or indirectly, use any
portion of the proceeds of the Loans (i) knowingly to purchase any Ineligible
Securities from a Section 20 Subsidiary during any period in which such Section
20 Subsidiary makes a market in such Ineligible Securities, (ii) knowingly to
purchase during the underwriting or placement period Ineligible Securities being
underwritten or privately placed by a Section 20 Subsidiary, or (iii) to make
payments of principal or interest on Ineligible Securities underwritten or
privately placed by as Section 20 Subsidiary and issued by or for the benefit of
any Loan Party or any Affiliate of any Loan Party.
7.1.11 Further Assurances.
------------------
Each Loan Party shall, from time to time, at its expense,
faithfully preserve and protect the Agent's Lien on and Prior Security Interest
in the Collateral as a continuing first priority perfected Lien, subject only to
Permitted Liens, and shall do such other acts and things as the Agent in its
sole discretion may deem necessary or advisable from time to time in order to
preserve, perfect and protect the Liens granted under the Loan Documents and to
exercise and enforce its rights and remedies thereunder with respect to the
Collateral.
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7.1.12 Subordination of Intercompany Loans.
-----------------------------------
(i) Each Loan Party shall cause any intercompany
Indebtedness, loans or advances owed by any Loan Party to any other Loan Party
to be subordinated pursuant to the terms of the Intercompany Subordination
Agreement.
7.1.13 Interest Rate Protection.
------------------------
(i) Borrowers may obtain and maintain interest rate
protection in forms and amounts, using the International Swap Dealers
Association, Inc. standard form of agreement, reasonably satisfactory to the
Agent and the Agent will advise the Banks of the existence of such protection.
If a Bank provides interest rate protection to the Borrowers, the obligations of
the Borrowers to the Bank will be secured by a security interest in the
Collateral pari passu with the obligations to the Banks under this Agreement. If
---- -----
the Borrowers obtain interest rate protection from a Person other than a Bank,
the provider of the interest rate protection may have a security interest in the
Collateral, but its right of payment will be subordinate to that of the Agent
and the Banks.
7.1.14 Material Agreements.
-------------------
(i) The Borrowers will maintain all Material
Agreements unless the failure to maintain one or more Material Agreements is not
likely to result in a Material Adverse Change.
7.1.15 Licenses, Permits, etc.
-----------------------
(i) The Borrowers will obtain and take all action
necessary to maintain all material licenses, permits and other approvals
necessary to the operations of their businesses.
7.1.16 Franchise Agreements.
---------------------
All of the franchise agreements entered into on or after the date
of this Agreement by a Borrower as franchisor shall permit assignments by a
Person acting through the franchisor.
7.1.17 Subsidiary Joinder.
------------------
The Borrowers shall cause any Subsidiary (other than an Excluded
Joint Venture) of any Borrower that has assets of $500,000 more to execute and
deliver to Agent a Borrower Joinder and a Guarantor Joinder.
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7.1.18 Notices to Payors.
-----------------
Within sixty (60) days of the date of this Agreement and promptly
thereafter as any Borrower becomes entitled to receive payments from a third
party payor, the Borrowers will send a notice to each third party payor except
payors acting through the Medicare and Medicaid programs with which a Borrower
does business describing this Agreement and the security interest granted to the
Agent in the Borrowers' Accounts. The notice will be in a form satisfactory to
the Borrowers and the Agent.
7.2 Negative Covenants.
------------------
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Loans, Reimbursement Obligations and Letter of Credit
Borrowings and interest thereon, expiration or termination of all Letters of
Credit, satisfaction of all of the Loan Parties' other Obligations hereunder and
termination of the Revolving Credit Commitments, the Loan Parties shall comply
with the following negative covenants:
7.2.1 Indebtedness.
------------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, at any time create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Existing Indebtedness as set forth on Schedule
--------
7.2.1.A (including any extensions, renewals or refinancings thereof), provided
- ------- --------
there is no increase in the amount thereof or other significant change in the
terms thereof unless otherwise specified on Schedule 7.2.1 and provided,
--------------
further, that any Indebtedness to sellers (other than earn-out provisions) shall
be subordinated to Indebtedness to the Banks on terms substantially similar to
those contained in Exhibit __;
(iii) Capitalized and operating leases as and to the
extent permitted under Section 7.2.15;
(iv) Indebtedness secured by Purchase Money Security
Interests not exceeding $3,000,000; and
(v) Indebtedness of a Loan Party to another Loan
Party which is subordinated in accordance with the provisions of Section 7.1.12;
(vi) Indebtedness to sellers in conjunction with
Permitted Business Combinations aggregating less than $5,000,000 and
subordinated to Indebtedness to the Banks on terms substantially similar to
those contained in Exhibit 7.2.1; and
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(vii) Existing Indebtedness to sellers which is
identified on Schedule 7.2.1.B.
7.2.2 Liens; Negative Pledge.
----------------------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, at any time (i) create, incur, assume or suffer to exist
any Lien on any of its property or assets, tangible or intangible, now owned or
hereafter acquired, or agree or become liable to do so, except Permitted Liens
and any lien inadvertently created, securing an amount less than $75,000 which
shall be terminated within thirty (30) days of its discovery by any Loan Party;
or (ii) agree with any other Person that it will not create, incur, assume or
suffer to exist any Lien on any of its property or assists, tangible or
intangible, now owned or hereafter acquired.
7.2.3 Guaranties.
----------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, at any time, directly or indirectly, become or be liable in
respect of any Guaranty, or assume, guarantee, become surety for, endorse or
otherwise agree, become or remain directly or contingently liable upon or with
respect to any obligation or liability of any other Person, except for (i)
Guaranties of Indebtedness of the Loan Parties permitted hereunder and (ii)
inter-Loan Party Guaranties.
7.2.4 Loans and Investments.
---------------------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, at any time make or suffer to remain outstanding any loan
or advance to, or purchase, acquire or own any stock, bonds, notes or securities
of, or any partnership interest (whether general or limited) or limited
liability company interest in, or any other investment or interest in, or make
any capital contribution to, any other Person, or agree, become or remain liable
to do any of the foregoing, except:
(i) trade credit extended on usual and customary
terms in the ordinary course of business;
(ii) advances to employees to meet expenses incurred
by such employees in the ordinary course of business;
(iii) Permitted Investments;
(iv) Permitted Business Combinations;
(v) Investments permitted by Section 7.2.7;
(vi) Investments permitted by Section 7.2.9; and
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(vii) loans, advances and investments in other Loan
Parties.
7.2.5 Dividends and Related Distributions.
-----------------------------------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, make or pay, or agree to become or remain liable to make or
pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock, partnership interests or limited liability company interests on
account of the purchase, redemption, retirement or acquisition of its shares of
capital stock (or warrants, options or rights therefor), partnership interests
or limited liability company interests, except dividends or other distributions
payable to another Loan Party.
7.2.6 Liquidations and Permitted Business Combinations.
------------------------------------------------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a
party to any merger or consolidation, or acquire by purchase, lease or otherwise
all or substantially all of the assets or capital stock of any other Person,
provided that
- --------
(1) any Loan Party other than Option Care, Inc. may consolidate
or merge into another Loan Party which is wholly-owned by one or more of the
other Loan Parties, and
(2) any Loan Party may acquire, whether by purchase or by
merger, (A) more than 50% of the ownership interests and voting rights of
another Person or (B) substantially all of assets of another Person or of a
business or division of another Person (each an "Permitted Acquisition"),
provided that each of the following requirements is met:
- --------
(i) such Person shall be a corporation, limited liability
company or other entity with respect to applicable state law provided that the
owners of all stock or other ownership interests in such entity shall not be
liable for any obligations of such entity or for the claims of any creditors
thereof,
(ii) if Loan Party is acquiring the ownership interests in
such Person, such Person shall execute a Guarantor Joinder and join this
Agreement as a Borrower and a Guarantor pursuant to Section 10.18 and such
Person and its owners shall grant Liens in the assets and stock or other
ownership interests in such Person and otherwise comply with Section 10.18 on or
before the date of such Permitted Acquisition,
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(iii) in an asset acquisition, the board of directors or
other equivalent governing body of such Person shall have approved such
Permitted Acquisition and the Loan Parties shall have delivered to the Banks
written evidence of such approval prior to such Permitted Acquisition and in a
tender offer, the board of directors or other equivalent governing body of such
Person does not oppose such Permitted Acquisition,
(iv) the business acquired, or the business conducted by
the Person whose ownership interests are being acquired, as applicable, shall be
substantially the same as one or more line or lines of business conducted by the
Loan Parties and shall comply with Section 7.2.10,
(v) immediately prior to and after giving effect to such
Permitted Acquisition, (A) no payment default exists, (B) no violation of
Section 7.1.6 or Section 7.2 exists, (C) the Agent has not sent a notice of a
violation of Section 7.1 which has not been cured and (D) no Event of Default
exits,
(vi) the Borrowers shall demonstrate on a pro forma basis
that they shall be in compliance with all the covenants contained in this
Agreement after giving effect to such Permitted Acquisition by delivering at
least five (5) Business Days prior to such Permitted Acquisition a certificate
evidencing such compliance,
(vii) the Person shall have delivered an executed Security
Agreement, and any other security documents deemed necessary or desirable by the
Agent, and, at least fifteen (15) days after the later of the closing or
transmission to the Agent of the information, financing statements,
(viii) if the Loan Party is acquiring less than 100% of the
ownership interests and voting rights of another Person, the Loan Party shall
have delivered to the Agent a certificate from each minority investor in the
Person acknowledging that the Person will execute a Borrower Joinder and a
Guarantor Joinder, and
(ix) the Consideration paid by the Loan Parties for such
Acquisition shall not exceed $2,500,000 without the prior approval of the
Required Banks which shall not be unreasonably withheld (a decision to be made
in ten (10) Business Days after receipt of complete information) and after
giving effect to such Permitted Acquisition, the Consideration paid by the Loan
Parties for all Permitted Acquisitions made during the current fiscal year of
the Loan Parties shall not exceed $10,000,000 without the prior approval of the
Required Banks which shall not be unreasonably withheld (a decision to be made
in ten (10) Business Days after receipt of complete information).
If the ownership interest in the Permitted Acquisition of a Loan Party is less
than 80%, only a portion (the "Portion") of the revenues and expenses of that
entity will be included in performing calculations required by the Loan
Documents. The Portion will be a percentage equal to the percentage ownership
interest acquired by the Loan Party.
Subject to the above limitations, Permitted Acquisitions may include any merger
or acquisition, whether accounted for under GAAP as a purchase or a pooling of
interests and regardless of whether the value of the Consideration paid or
received is comprised of cash, common stock, preferred stock, assets or
partnership interests, estimated value of earn-outs or other means.
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7.2.7 Dispositions of Assets or Subsidiaries.
--------------------------------------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, sell, convey, assign, sell and leaseback, abandon or
otherwise transfer or dispose of, voluntarily or involuntarily, any of its
properties or assets, tangible or intangible (including sale, assignment,
discount or other disposition of accounts, contract rights, chattel paper,
equipment or general intangibles with or without recourse or of capital stock,
shares of beneficial interest, partnership interests or limited liability
company interests of a Subsidiary of such Loan Party), except, subject to
Section 4.4.2:
(i) transactions involving the sale of inventory in
the ordinary course of business;
(ii) any sale, transfer or lease of assets in the
ordinary course of business which are no longer necessary or required in the
conduct of such Loan Party's or such Subsidiary's business;
(iii) any sale, transfer or lease of assets by any
Subsidiary of such Loan Party to another Loan Party;
(iv) any sale, refranchise, transfer or lease of
assets in the ordinary course of business which are replaced by substitute
assets acquired or leased within the parameters of Section 7.2.15, provided such
--------
substitute assets are subject to the Banks' Prior Security Interest;
(v) any sale, transfer or sale/leaseback of net
tangible assets valued at less than $500,000; or
(vi) any sales resulting in a refranchise agreement
as long as such sales (A) do not convey tangible assets with aggregate book
values exceeding $2,000,000 and (B) do not result in the creating of additional
goodwill for the Loan Parties of more than $2,000,000;
(vii) any sale, transfer or sale/leaseback of assets,
other than those specifically excepted pursuant to clauses (i) through (vi)
above, which is approved by the Required Banks so long as the proceeds, net of
transaction costs and taxes at statutory tax rates, are applied as a mandatory
prepayment of the Loans and permanent reductions of the commitment.
7.2.8 Affiliate Transactions.
----------------------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, enter into or carry out any transaction (including
purchasing property or services from or selling property or services to any
Affiliate of any Loan Party or other Person) unless such transaction is not
otherwise prohibited by this Agreement, is entered into in the ordinary
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course of business upon fair and reasonable arm's-length terms and conditions
which are fully disclosed to the Agent and is in accordance with all applicable
Law; provided, however, that the Loan Parties may engage in transactions with
--------
Dr. John N. Kapoor and his Affiliates aggregating not more than $250,000 in any
fiscal year and provided, further, that Indebtedness incurred subject to the
--------
Intercompany Subordination Agreement is permitted.
7.2.9 Subsidiaries, Partnerships and Joint Ventures.
---------------------------------------------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, own or create directly or indirectly any Affiliates or
engage in joint ventures other than (i) Excluded Joint Ventures; (ii) any
Affiliate which has joined this Agreement as a Borrower and Guarantor on the
Closing Date; and (iii) any Affiliate formed after the Closing Date which joins
this Agreement as a Guarantor pursuant to Section 10.18, provided that such
Affiliate shall grant and cause to be perfected first priority Liens to the
Agent for the benefit of the Banks in the assets held by, and stock of or other
ownership interests in, such Affiliate. Excluded Joint Ventures shall mean (i)
loans to franchisees ("Franchisee Loans") aggregating, at any time, $300,000 or
less and (ii) affiliates or joint venture subsidiaries of a Loan Party for which
the Loan Parties have no more than a 74% interest (and as long as financial
statements of the Excluded Joint Venture are not consolidated with any
Borrower's) and for which the Loan Parties have paid Consideration aggregating
no more than $1,000,000 less the amount of Franchisee Loans outstanding.
7.2.10 Continuation of or Change in Business.
-------------------------------------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, engage in any business other than the delivery, management
and coordination of home health care services, substantially as conducted and
operated by such Loan Party or Subsidiary during the present fiscal year, and
such Loan Party or Subsidiary shall not permit any material change in such
business.
7.2.11 Plans and Benefit Arrangements.
------------------------------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to:
(i) fail to satisfy the minimum funding
requirements of ERISA and the Internal Revenue Code with respect to any Plan
where such failure is likely to result in a Material Adverse Change;
(ii) request a minimum funding waiver from the
Internal Revenue Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with any
Plan, Benefit Arrangement or Multiemployer Plan which would constitute a
Material Adverse Change;
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(iv) permit the aggregate actuarial present value of
all benefit liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in the most recent actuarial report
completed with respect to such Plan, to exceed, as of any actuarial valuation
date, the fair market value of the assets of such Plan;
(v) fail to make when due any contribution to any
Multiemployer Plan that any Borrower or any member of the ERISA Group may be
required to make under any agreement relating to such Multiemployer Plan, or any
Law pertaining thereto, where such failure is likely to result in a Material
Adverse Change;
(vi) withdraw (completely or partially) from any
Multiemployer Plan or withdraw (or be deemed under Section 4062(e) of ERISA to
withdraw) from any Multiple Employer Plan, where any such withdrawal is likely
to result in a Material Adverse Change.
(vii) terminate, or institute proceedings to
terminate, any Plan, where such termination is likely to result in a Material
Adverse Change;
(viii) make any amendment to any Plan with respect to
which security is required under Section 307 of ERISA; or
(ix) fail to give any and all notices and make all
disclosures and governmental filings required under ERISA or the Internal
Revenue Code, where such failure is likely to result in a Material Adverse
Change.
7.2.12 Fiscal Year.
-----------
The Borrowers shall not, and shall not permit any Subsidiary of
any Borrower to, change its fiscal year from the twelve-month period beginning
January 1 and ending December 31.
7.2.13 Issuance of Stock.
-----------------
Each of the Loan Parties other than Option Care, Inc. (DE) shall
not, and shall not permit any of its Subsidiaries to, issue any additional
shares of its capital stock or any options, warrants or other rights in respect
thereof unless the issuance is to another Loan Party and stock or other rights
are pledged to the Agent for the benefit of the Banks pursuant to Pledge
Agreements.
7.2.14 Changes in Organizational Documents.
-----------------------------------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, amend in any respect its certificate of incorporation
(including any provisions or resolutions relating to capital stock), by-laws,
certificate of limited partnership, partnership agreement, certificate of
formation, limited liability company agreement or other organizational
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documents in the event such change would be adverse to the Banks as determined
by the Agent in its sole discretion, without obtaining the prior written consent
of the Required Banks. The Loan Parties will provide true and correct copies of
all amendments to organizational documents to the Agent at the time annual
financial statements are delivered.
7.2.15 Leases.
------
Each of the Loan Parties shall not, and shall not permit any of
its Subsidiaries to, make any payments exceeding $5,000,000 in the aggregate in
any fiscal year on account of the rental or lease of real or personal property
of any other Person and all such leases shall be made under usual and customary
terms and in the ordinary course of business.
7.2.16 Maximum Leverage Ratio.
----------------------
The Loan Parties shall not at any time permit the ratio of
Consolidated Total Funded Debt to Consolidated Cash Flow From Operations to
exceed 3.0:1.0.
7.2.17 Minimum Interest Coverage Ratio.
-------------------------------
The Loan Parties shall not permit the ratio of the sum of net
income plus interest plus taxes of the Loan Parties to consolidated interest
expense of the Loan Parties, calculated as of the end of each fiscal quarter for
the four fiscal quarters then ended, to be less than 3.0:1.0.
7.2.18 Minimum Net Worth.
-----------------
The Borrowers shall not at any time permit Consolidated Net Worth
to be less than 95% of Consolidated Net Worth on the Closing Date plus 50% of
positive net income thereafter plus 100% of all increases in capital stock and
additional paid in capital from issuances of equity securities and other equity
capital investments, less costs of issuance.
7.2.19 Minimum Capitalization.
----------------------
The Loan Parties shall not at any time permit the ratio of
Consolidated Total Funded Debt to the sum of Consolidated Total Funded Debt plus
Consolidated Net Worth to exceed 0.45:1.
7.3 Reporting Requirements.
----------------------
The Loan Parties, jointly and severally, covenant and agree that
until payment in full of the Loans, Reimbursement Obligations and Letter of
Credit Borrowings and interest thereon, expiration or termination of all Letters
of Credit, satisfaction of all of the Loan Parties' other Obligations hereunder
and under the other Loan Documents and termination of the Revolving Credit
Commitments, the Loan Parties will furnish or cause to be furnished to the Agent
and each of the Banks:
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7.3.1 Monthly Financial Statements.
----------------------------
Within forty-five (45) calendar days after the end of each
calendar month, Option Care, Inc.'s consolidated financial statement of
operations.
7.3.2 Quarterly Financial Statements.
------------------------------
Within forty-five (45) calendar days after the end of each of
the first three fiscal quarters in each fiscal year, financial statements of
Option Care, Inc., consisting of a consolidated and consolidating balance sheet
as of the end of such fiscal quarter and related consolidated and consolidating
statements of income, stockholders' equity and cash flows for the fiscal quarter
then ended and the fiscal year through that date, all in reasonable detail and
certified (subject to normal year-end audit adjustments) by the Chief Executive
Officer, President or Chief Financial Officer of Option Care, Inc. as having
been prepared in accordance with GAAP, consistently applied, and setting forth
in comparative form the respective financial statements for the corresponding
date and period in the previous fiscal year.
7.3.3 Annual Financial Statements.
---------------------------
Within ninety (90) days after the end of each fiscal year of
Option Care, Inc., financial statements of Option Care, Inc. consisting of a
consolidated and consolidating balance sheet as of the end of such fiscal year,
and related consolidated and consolidating statements of income, stockholders'
equity and cash flows for the fiscal year then ended, all in reasonable detail
and setting forth in comparative form the financial statements as of the end of
and for the preceding fiscal year, and certified by independent certified public
accountants of nationally recognized standing. The certificate or report of
accountants shall be free of qualifications (other than any consistency
qualification that may result from a change in the method used to prepare the
financial statements as to which such accountants concur).
7.3.4 Certificate of Option Care, Inc.
-------------------------------
Concurrently with the financial statements of Option Care, Inc.
furnished to the Agent and to the Banks pursuant to Sections 7.3.2 and 7.3.3, a
certificate of Option Care, Inc. signed by the Chief Executive Officer,
President or Chief Financial Officer of Option Care, Inc., in the form of
Exhibit 8.3.4, to the effect that, except as described pursuant to Section
- -------------
7.3.5, (i) no Event of Default or Potential Default exists and is continuing on
the date of such certificate and (ii) containing calculations in sufficient
detail to demonstrate compliance as of the date of such financial statements
with all financial covenants contained in Section 7.2.
7.3.5 Notice of Default.
-----------------
Promptly after any executive officer of Option Care, Inc. has
learned of the occurrence of an Event of Default or Potential Default, a
certificate signed on behalf of the Loan parties by an executive officer of
Option Care, Inc. setting forth the details of such Event of
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Default or Potential Default and the action which the such Loan Party proposes
to take with respect thereto.
7.3.6 Notice of Litigation.
--------------------
Promptly after the commencement thereof, notice of all actions,
suits, proceedings or investigations before or by any Official Body or any other
Person against any Loan Party or Subsidiary of any Loan Party which relate to
the Collateral, involve a claim or series of claims in excess of $1,000,000 or
which if adversely determined would constitute a Material Adverse Change.
7.3.7 Certain Events.
--------------
Written notice to the Agent:
(i) at least ten (10) calendar days after closing,
with respect to any proposed sale or transfer of assets pursuant to Section
7.2.7(iv) or (vi), and
(ii) at least ten (10) calendar days prior thereto,
with respect to any change in any Loan Party's locations from the locations set
forth in Schedule A to the Security Agreement.
7.3.8 Budgets, Forecasts, Other Reports and Information.
-------------------------------------------------
Promptly upon their becoming available to Option Care, Inc.:
(i) the annual budget of Option Care, Inc., to be
supplied not later than February 28 of the fiscal year to which any of the
foregoing may be applicable,
(ii) any reports including management letters
submitted to Option Care, Inc. by independent accountants in connection with any
annual, interim or special audit (but not in connection with consulting), which
the Agent and the Banks may use for informational purposes but not for reliance
purposes,
(iii) any reports, notices or proxy statements
generally distributed by Option Care, Inc. to its stockholders on a date no
later than the date supplied to such stockholders,
(iv) regular or periodic reports, including Forms
10-K, 10-Q and 8-K, registration statements and prospectuses, filed by Option
Care, Inc. with the Securities and Exchange Commission,
(v) upon the Agent's reasonable request, a copy of
any order in any proceeding to which Option Care, Inc. or any of its
Subsidiaries is a party issued by any Official Body,
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(vi) the annual listing of Material Contracts at
the time of the delivery of annual financial statements, and
(vii) such other reports and information as any of
the Banks may from time to time reasonably request. Option Care, Inc. shall also
notify the Banks promptly of the enactment or adoption of any Law which may
result in a Material Adverse Change.
7.3.9 Notices Regarding Plans and Benefit Arrangements.
------------------------------------------------
7.3.9.1 Certain Events.
--------------
Promptly upon becoming aware of the occurrence thereof,
notice (including the nature of the event and, when known, any action taken or
threatened by the Internal Revenue Service or the PBGC with respect thereto) of:
(i) any Reportable Event with respect to Option
Care, Inc. or any other member of the ERISA Group (regardless of whether the
obligation to report said Reportable Event to the PBGC has been waived),
(ii) any Prohibited Transaction which could subject
Option Care, Inc. or any other member of the ERISA Group to a civil penalty
assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of
the Internal Revenue Code in connection with any Plan, any Benefit Arrangement
or any trust created thereunder where such civil penalty or tax is likely to
result in a Material Adverse Change,
(iii) any assertion of material withdrawal liability
with respect to any Multiemployer Plan,
(iv) any partial or complete withdrawal from a
Multiemployer Plan by any Borrower or any other member of the ERISA Group under
Title IV of ERISA (or assertion thereof), where such withdrawal is likely to
result in material withdrawal liability,
(v) any cessation of operations (by Option Care,
Inc. or any other member of the ERISA Group) at a facility in the circumstances
described in Section 4062(e) of ERISA,
(vi) withdrawal by Option Care, Inc. or any other
member of the ERISA Group from a Multiple Employer Plan,
(vii) a failure by Option Care, Inc. or any other
member of the ERISA Group to make a payment to a Plan required to avoid
imposition of a Lien under Section 302(f) of ERISA,
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(viii) the adoption of an amendment to a Plan
requiring the provision of security to such Plan pursuant to Section 307 of
ERISA, or
(ix) any change in the actuarial assumptions or
funding methods used for any Plan, where the effect of such change is to
materially increase or materially reduce the unfunded benefit liability or
obligation to make periodic contributions.
7.3.9.2 Notices of Involuntary Termination and Annual
---------------------------------------------
Reports.
- -------
Promptly after receipt thereof, copies of (a) all notices
received by Option Care, Inc. or any other member of the ERISA Group of the
PBGC's intent to terminate any Plan administered or maintained by Option Care,
Inc. or any member of the ERISA Group, or to have a trustee appointed to
administer any such Plan; and (b) at the request of the Agent or any Bank each
annual report (IRS Form 5500 series) and all accompanying schedules, the most
recent actuarial reports, the most recent financial information concerning the
financial status of each Plan administered or maintained by Option Care, Inc. or
any other member of the ERISA Group, and schedules showing the amounts
contributed to each such Plan by or on behalf of any Borrower or any other
member of the ERISA Group in which any of their personnel participate or from
which such personnel may derive a benefit, and each Schedule B (Actuarial
Information) to the annual report filed by Option Care, Inc. or any other member
of the ERISA Group with the Internal Revenue Service with respect to each such
Plan.
7.3.9.3 Notice of Voluntary Termination.
-------------------------------
Promptly upon the filing thereof, copies of any Form 5310,
or any successor or equivalent form to Form 5310, filed with the PBGC in
connection with the termination of any Plan.
8. DEFAULT
-------
8.1 Events of Default.
-----------------
An Event of Default shall mean the occurrence or existence of any one
or more of the following events or conditions (whatever the reason therefor and
whether voluntary, involuntary or effected by operation of Law):
8.1.1 Payments Under Loan Documents.
-----------------------------
The Borrowers shall fail to pay any principal of any Loan
(including scheduled installments, mandatory prepayments or the payment due at
maturity), Reimbursement Obligation or Letter of Credit Borrowing or shall fail
to pay any interest on any Loan , Reimbursement Obligation or Letter of Credit
Borrowing after such principal or interest becomes due in accordance with the
terms hereof or thereof, or the Borrowers fail to pay any other amount
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owing hereunder or under the other Loan Documents after the date provided in an
invoice or other notice of payment due;
8.1.2 Breach of Warranty.
------------------
Any representation or warranty made at any time by any of the
Loan Parties herein or by any of the Loan Parties in any other Loan Document, or
in any certificate, other instrument or statement furnished pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading in
any material respect as of the time it was made or furnished;
8.1.3 Breach of Negative Covenants or Visitation Rights.
-------------------------------------------------
Any of the Loan Parties shall default in the observance or
performance of any covenant contained in Section 7.1.6 or Section 7.2;
8.1.4 Breach of Other Covenants.
-------------------------
Any of the Loan Parties shall default in the observance or
performance of any other covenant, condition or provision hereof or of any other
Loan Document and such default shall continue unremedied for a period of thirty
(30) Business Days after the Chief Executive Officer, President, Chief Financial
Officer or Corporate Secretary of any Loan Party becomes aware of the occurrence
thereof (such grace period to be applicable only in the event such default can
be remedied by corrective action of the Loan Parties as determined by the Agent
in its sole discretion);
8.1.5 Defaults in Other Agreements or Indebtedness.
--------------------------------------------
A default or event of default shall occur at any time under the
terms of any other agreement involving borrowed money or the extension of credit
or any other Indebtedness under which any Loan Party or Subsidiary of any Loan
Party may be obligated as a borrower or guarantor in excess of $500,000 in the
aggregate, and such breach, default or event of default consists of the failure
to pay (beyond any period of grace permitted with respect thereto, whether
waived or not) any indebtedness when due (whether at stated maturity, by
acceleration or otherwise) or if such breach or default permits (because of
nonpayment) or causes the acceleration of any indebtedness (whether or not such
right shall have been waived) or the termination of any commitment to lend;
8.1.6 Final Judgments or Orders.
-------------------------
Any final judgments or orders for the payment of money in excess
of $1,000,000 in the aggregate shall be entered against any Loan Party by a
court having jurisdiction in the premises, which judgment is not discharged,
vacated, bonded or stayed pending appeal within a period of sixty (60) days from
the date of entry;
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8.1.7 Loan Document Unenforceable.
---------------------------
Any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against the party executing the same or such
party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with its terms) or become or be declared ineffective or
inoperative or shall in any way be challenged or contested or cease to give or
provide the respective Liens, security interests, rights, titles, interests,
remedies, powers or privileges intended to be created thereby;
8.1.8 Uninsured Losses; Proceedings Against Assets.
--------------------------------------------
There shall occur any material uninsured damage to or loss,
theft or destruction of any of the Collateral in excess of $500,000 or the
Collateral or any other of the Loan Parties' or any of their Subsidiaries'
assets are attached, seized, levied upon or subjected to a writ or distress
warrant; or such come within the possession of any receiver, trustee, custodian
or assignee for the benefit of creditors and the same is not cured within thirty
(30) days thereafter;
8.1.9 Notice of Lien or Assessment.
----------------------------
A notice of Lien or assessment which is not a Permitted Lien is
filed of record with respect to all or any part of any of the Loan Parties' or
any of their Subsidiaries' assets by the United States, or any department,
agency or instrumentality thereof, or by any state, county, municipal or other
governmental agency, including the PBGC, or any taxes or debts owing at any time
or times hereafter to any one of these becomes payable and the same is not paid
within thirty (30) days after the same becomes payable;
8.1.10 Insolvency.
----------
Any Loan Party or any Subsidiary of a Loan Party ceases to be
solvent or admits in writing its inability to pay its debts as they mature;
8.1.11 Events Relating to Plans and Benefit Arrangements.
-------------------------------------------------
Any of the following occurs: (i) any Reportable Event, which the
Agent determines in good faith constitutes grounds for the termination of any
Plan by the PBGC or the appointment of a trustee to administer or liquidate any
Plan, shall have occurred and be continuing; (ii) non-Loan Party initiated
proceedings shall have been instituted or other action taken to terminate any
Plan, or a termination notice shall have been filed with respect to any Plan;
(iii) a trustee shall be appointed to administer or liquidate any Plan; (iv) the
PBGC shall give notice of its intent to institute proceedings to terminate any
Plan or Plans or to appoint a trustee to administer or liquidate any Plan; and,
in the case of the occurrence of (i), (ii), (iii) or (iv) above, the Agent
determines in good faith that the amount of the Borrower's liability is likely
to exceed 10% of its Consolidated Net Worth; (v) any Borrower or any member of
the ERISA Group shall fail to make any contributions when due to a Plan or a
Multiemployer Plan; (vi) any Borrower or
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any other member of the ERISA Group shall make any amendment to a Plan with
respect to which security is required under Section 307 of ERISA; (vii) any
Borrower or any other member of the ERISA Group shall withdraw completely or
partially from a Multiemployer Plan; (viii) any Borrower or any other member of
the ERISA Group shall withdraw (or shall be deemed under Section 4062(e) of
ERISA to withdraw) from a Multiple Employer Plan; or (ix) any applicable Law is
adopted, changed or interpreted by any Official Body with respect to or
otherwise affecting one or more Plans, Multiemployer Plans or Benefit
Arrangements and, with respect to any of the events specified in (v), (vi),
(vii), (viii) or (ix), the Agent determines in good faith that any such
occurrence would be reasonably likely to materially and adversely affect the
total enterprise represented by the Borrowers and the other members of the ERISA
Group;
8.1.12 Cessation of Business.
---------------------
Any Loan Party or Subsidiary of a Loan Party ceases to conduct
its business as contemplated, except as expressly permitted under Section 7.2.6
or 7.2.7, or any Loan Party or Subsidiary of a Loan Party is enjoined,
restrained or in any way prevented by court order from conducting all or any
material part of its business and such injunction, restraint or other preventive
order is not dismissed within thirty (30) days after the entry thereof;
8.1.13 Change of Control.
-----------------
(i) Any person or group of persons (within the meaning of
Sections 13(a) or 14(a) of the Securities Exchange Act of 1934, as amended)
other than Dr. John N. Kapoor and his beneficiaries shall have acquired
beneficial ownership of (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) 50% or more of the voting
capital stock of Option Care, Inc.; or (ii) within a period of twelve (12)
consecutive calendar months, (A) four individuals who were directors of Option
Care, Inc. on the first day of such period shall cease to be members of the
board of directors of Option Care, Inc. (B) if Dr. John N. Kapoor is no longer a
director of Option Care, Inc., any other director ceases to serve in that
capacity;
8.1.14 Change of Management.
--------------------
Any executive officer of Option Care, Inc. shall cease to
operate in that capacity and a replacement whom the Banks had the opportunity to
interview at least five (5) Business Days before an offer of employment was made
shall not be in place at Option Care, Inc. within one year;
8.1.15 Involuntary Proceedings.
-----------------------
A proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
any Loan Party or Subsidiary of a Loan Party in an involuntary case under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, or for the appointment of a receiver, liquidator, assignee,
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custodian, trustee, sequestrator, conservator (or similar official) of any Loan
Party or Subsidiary of a Loan Party for any substantial part of its property, or
for the winding-up or liquidation of its affairs, and such proceeding shall
remain undismissed or unstayed and in effect for a period of sixty (60)
consecutive days or such court shall enter a decree or order granting any of the
relief sought in such proceeding; or
8.1.16 Voluntary Proceedings.
---------------------
Any Loan Party or Subsidiary of a Loan Party shall commence a
voluntary case under any applicable bankruptcy, insolvency, reorganization or
other similar law now or hereafter in effect, shall consent to the entry of an
order for relief in an involuntary case under any such law, or shall consent to
the appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or other similar official) of
itself or for any substantial part of its property or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any action in furtherance of any of the
foregoing.
8.2 Consequences of Event of Default.
--------------------------------
8.2.1 Events of Default Other Than Bankruptcy, Insolvency or
------------------------------------------------------
Reorganization Proceedings.
- --------------------------
If an Event of Default specified under Sections 8.1.1 through
8.1.14 shall occur and be continuing, the Banks and the Agent shall be, if
determined by the Required Banks, under no further obligation to make Loans or
issue Letters of Credit, as the case may be, and the Agent may, and upon the
request of the Required Banks, shall (i) by written notice to the Borrowers,
declare the unpaid principal amount of the Notes then outstanding and all
interest accrued thereon, any unpaid fees and all other Indebtedness of the
Borrowers to the Banks hereunder and thereunder to be forthwith due and payable,
and the same shall thereupon become and be immediately due and payable to the
Agent for the benefit of each Bank without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived, and (ii)
require the Borrowers to, and the Borrowers shall thereupon, deposit in a non-
interest bearing account with the Agent, as cash collateral for its Obligations
under the Loan Documents, an amount equal to the maximum amount currently or at
any time thereafter available to be drawn on all outstanding Letters of Credit,
and the Borrowers hereby pledge to the Agent and the Banks, and grant to the
Agent and the Banks a security interest in, all such cash as security for such
Obligations. Upon the curing of all existing Events of Default to the
satisfaction of the Required Banks, the Agent shall return such cash collateral
to the Borrower; and
8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings.
----------------------------------------------------
If an Event of Default specified under Section 8.1.15 or 8.1.16
shall occur, the Banks shall be under no further obligations to make Loans
hereunder and the unpaid principal amount of the Notes then outstanding and all
interest accrued thereon, any unpaid fees and all
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other Indebtedness of the Borrowers to the Banks hereunder and thereunder shall
be immediately due and payable, without presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived; and
8.2.3 Set-off.
-------
If an Event of Default shall occur and be continuing, any Bank
to whom any Obligation is owed by any Loan Party hereunder or under any other
Loan Document or any participant of such Bank which has agreed in writing to be
bound by the provisions of Section 9.13 and any branch, Subsidiary or Affiliate
of such Bank or participant anywhere in the world shall have the right, in
addition to all other rights and remedies available to it, without notice to
such Loan Party, to set-off against and apply to the then unpaid balance of all
the Loans and all other Obligations of the Loan Parties hereunder or under any
other Loan Document any debt owing to, and any other funds held in any manner
for the account of, the Loan Party by such Bank or participant or by such
branch, Subsidiary or Affiliate, including all funds in all deposit accounts
(whether time or demand, general or special, provisionally credited or finally
credited, or otherwise) now or hereafter maintained by the Loan Party for their
own respective account (but not including funds held in custodian or trust
accounts) with such Bank or participant or such branch, Subsidiary or Affiliate.
Such right shall exist whether or not any Bank or the Agent shall have made any
demand under this Agreement or any other Loan Document, whether or not such debt
owing to or funds held for the account of such Loan Party is or are matured or
unmatured and regardless of the existence or adequacy of any Collateral,
Guaranty or any other security, right or remedy available to any Bank or the
Agent; and
8.2.4 Suits, Actions, Proceedings.
---------------------------
If an Event of Default shall occur and be continuing, and if the
Required Bank have elected to accelerate the maturity of Loans pursuant to any
of the foregoing provisions of this Section 8.2, the Agent or any Bank, if owed
any amount with respect to the Notes, may proceed to protect and enforce its
rights by suit in equity, action at law and/or other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
this Agreement or the Notes, including as permitted by applicable Law the
obtaining of the ex parte appointment of a receiver, and, if such amount shall
-- -----
have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right of the Agent or such Bank; and
8.2.5 Application of Proceeds.
-----------------------
From and after the date on which the Agent has taken any action
pursuant to this Section 8.2 and until all Obligations of the Loan Parties have
been paid in full, any and all proceeds received by the Agent from any sale or
other disposition of the Collateral, or any part thereof, or the exercise of any
other remedy by the Agent, shall be applied as follows:
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(i) first, to reimburse the Agent and the Banks
for out-of-pocket costs, expenses and disbursements, including reasonable
attorneys' and paralegals' fees and legal expenses, incurred by the Agent or the
Banks in connection with realizing on the Collateral or collection of any
Obligations of any of the Loan Parties under any of the Loan Documents,
including advances made by the Banks or any one of them or the Agent for the
reasonable maintenance, preservation, protection or enforcement of, or
realization upon, the Collateral, including advances for taxes, insurance,
repairs and the like and reasonable expenses incurred to sell or otherwise
realize on, or prepare for sale or other realization on, any of the Collateral;
(ii) second, to the repayment of all Indebtedness
then due and unpaid of the Loan Parties to the Banks incurred under this
Agreement or any of the other Loan Documents, whether of principal, interest,
fees, expenses or otherwise, in such manner as the Agent may determine in its
discretion; and
(iii) the balance, if any, as required by Law.
8.2.6 Other Rights and Remedies.
-------------------------
In addition to all of the rights and remedies contained in this
Agreement or in any of the other Loan Documents, the Agent shall have all of the
rights and remedies of a secured party under the Uniform Commercial Code or
other applicable Law, all of which rights and remedies shall be cumulative and
non-exclusive, to the extent permitted by Law. The Agent may, and upon the
request of the Required Banks shall, exercise all post-default rights granted to
the Agent and the Banks under the Loan Documents or applicable Law.
8.3 Notice of Sale.
--------------
Any notice required to be given by the Agent of a sale, lease,
or other disposition of the Collateral or any other intended action by the
Agent, if given ten (10) days prior to such proposed action, shall constitute
commercially reasonable and fair notice thereof to the Borrower.
8.4 Receivables Account.
-------------------
The Borrowers agree that, immediately upon the occurrence of an Event
of Default, they will cause to be opened at PNC Bank, National Association an
account (the "Account"). The Borrowers will immediately notify all account
debtors to make payment directly to the Account. The Agent, upon the vote of
the Required Banks, may allow the Borrowers to withdraw funds from the Account.
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9. THE AGENT
---------
9.1 Appointment.
-----------
Each Bank hereby irrevocably designates, appoints and authorizes PNC
Bank to act as Agent for such Bank under this Agreement and to execute and
deliver or accept on behalf of each of the Banks the other Loan Documents. Each
Bank hereby irrevocably authorizes, and each holder of any Note by the
acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take
such action on its behalf under the provisions of this Agreement and the other
Loan Documents and any other instruments and agreements referred to herein, and
to exercise such powers and to perform such duties hereunder as are specifically
delegated to or required of the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. PNC Bank agrees to act as the
Agent on behalf of the Banks to the extent provided in this Agreement.
9.2 Delegation of Duties.
--------------------
The Agent may perform any of its duties hereunder by or through agents
or employees (provided such delegation does not constitute a relinquishment of
--------
its duties as Agent) and, subject to Sections 9.5 and 9.6, shall be entitled to
engage and pay for the advice or services of any attorneys, accountants or other
experts concerning all matters pertaining to its duties hereunder and to rely
upon any advice so obtained.
9.3 Nature of Duties; Independent Credit Investigation.
--------------------------------------------------
The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities shall be read into this
Agreement or otherwise exist. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement a
fiduciary or trust relationship in respect of any Bank; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement except as
expressly set forth herein. Without limiting the generality of the foregoing,
the use of the term "agent" in this Agreement with reference to the Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable Law. Instead, such term is used
merely as a matter of market custom, and is intended to create or reflect only
an administrative relationship between independent contracting parties. Each
Bank expressly acknowledges (i) that the Agent has not made any representations
or warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of any of the Loan Parties, shall be deemed to constitute
any representation or warranty by the Agent to any Bank; (ii) that it has made
and will continue to make, without reliance upon the Agent, its own independent
investigation of the financial condition and affairs and its own appraisal of
the creditworthiness of each of the Loan Parties in connection with this
Agreement and the making and continuance of the Loans hereunder; and (iii)
except as expressly provided herein, that the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Bank
with any credit or other information with respect thereto,
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whether coming into its possession before the making of any Loan or at any time
or times thereafter.
9.4 Actions in Discretion of Agent; Instructions from the Banks.
-----------------------------------------------------------
The Agent agrees, upon the written request of the Required Banks, to
take or refrain from taking any action of the type specified as being within the
Agent's rights, powers or discretion herein, provided that the Agent shall not
--------
be required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or any other Loan Document or applicable
Law. In the absence of a request by the Required Banks, the Agent shall have
authority, in its sole discretion, to take or not to take any such action,
unless this Agreement specifically requires the consent of the Required Banks or
all of the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject to Section
9.6. Subject to the provisions of Section 9.6, no Bank shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Required Banks, or in the absence of such instructions, in the absolute
discretion of the Agent.
9.5 Reimbursement and Indemnification of Agent by the Borrower.
----------------------------------------------------------
The Borrowers jointly and severally and unconditionally agree to pay
or reimburse the Agent and hold the Agent harmless against (a) liability for the
payment of all reasonable out-of-pocket costs, expenses and disbursements,
including fees and expenses of counsel (including the allocated costs of staff
counsel), appraisers and environmental consultants, incurred by the Agent (i) in
connection with the development, negotiation, preparation, printing, execution,
syndication, interpretation and performance of this Agreement and the other Loan
Documents, (ii) relating to any requested amendments, waivers or consents
pursuant to the provisions hereof, (iii) in connection with the enforcement of
this Agreement or any other Loan Document or collection of amounts due hereunder
or thereunder or the proof and allowability of any claim arising under this
Agreement or any other Loan Document, whether in bankruptcy or receivership
proceedings or otherwise, and (iv) in any workout or restructuring or in
connection with the protection, preservation, exercise or enforcement of any of
the terms hereof or of any rights hereunder or under any other Loan Document or
in connection with any foreclosure, collection or bankruptcy proceedings, and
(b) all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent,
in its capacity as such, in any way relating to or arising out of this Agreement
or any other Loan Documents or any action taken or omitted by the Agent
hereunder or thereunder, provided that the Borrowers shall not be liable for any
--------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements if the same results from the
Agent's gross negligence or willful misconduct, or if the Borrowers were not
given notice of the subject claim and the opportunity to participate in the
defense thereof, at its expense (except that the Borrowers shall remain liable
to the extent such failure to give notice does not result in a loss to the
Borrowers), or if the same results from a compromise or settlement agreement
entered into without the consent of the
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Borrowers, which shall not be unreasonably withheld. At a Loan Party's
reasonable request, an officer of the Loan Party may discuss initial budgets
developed by counsel for the Agent (as long as such counsel determines that no
privilege will be waived as a result of such discussions). Nothing in this
Section 9.5 prevents a Borrower from obtaining its own counsel and controlling
its own defense in any action.
9.6 Exculpatory Provisions; Limitation of Liability.
-----------------------------------------------
Neither the Agent nor any of its directors, officers, employees,
agents, attorneys or Affiliates shall (a) be liable to any Bank for any action
taken or omitted to be taken by it or them hereunder, or in connection herewith
including pursuant to any Loan Document, unless caused by its or their own gross
negligence or willful misconduct, (b) be responsible in any manner to any of the
Banks for the effectiveness, enforceability, genuineness, validity or the due
execution of this Agreement or any other Loan Documents or for any recital,
representation, warranty, document, certificate, report or statement herein or
made or furnished under or in connection with this Agreement or any other Loan
Documents, or (c) be under any obligation to any of the Banks to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions hereof or thereof on the part of the Loan Parties, or the financial
condition of the Loan Parties, or the existence or possible existence of any
Event of Default or Potential Default. No claim may be made by any of the Loan
Parties, any Bank, the Agent or any of their respective Subsidiaries against the
Agent, any Bank or any of their respective directors, officers, employees,
agents, attorneys or Affiliates, or any of them, for any special, indirect or
consequential damages or, to the fullest extent permitted by Law, for any
punitive damages in respect of any claim or cause of action (whether based on
contract, tort, statutory liability, or any other ground) based on, arising out
of or related to any Loan Document or the transactions contemplated hereby or
any act, omission or event occurring in connection therewith, including the
negotiation, documentation, administration or collection of the Loans, and each
of the Loan Parties, (for itself and on behalf of each of its Subsidiaries), the
Agent and each Bank hereby waive, releases and agree never to sue upon any claim
for any such damages, whether such claim now exists or hereafter arises and
whether or not it is now known or suspected to exist in its favor. Each Bank
agrees that, except for notices, reports and other documents expressly required
to be furnished to the Banks by the Agent hereunder or given to the Agent for
the account of or with copies for the Banks, the Agent and each of its
directors, officers, employees, agents, attorneys or Affiliates shall not have
any duty or responsibility to provide any Bank with an credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Loan Parties which may come
into the possession of the Agent or any of its directors, officers, employees,
agents, attorneys or Affiliates.
9.7 Reimbursement and Indemnification of Agent by Banks.
---------------------------------------------------
Each Bank agrees to reimburse and indemnify the Agent (to the extent
not reimbursed by the Borrowers and without limiting the Obligation of the
Borrowers to do so) in proportion to its Ratable Share from and against all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements, including attorneys' fees and
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disbursements (including the allocated costs of staff counsel), and costs of
appraisers and environmental consultants, of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Agent, in its capacity as
such, in any way relating to or arising out of this Agreement or any other Loan
Documents or any action taken or omitted by the Agent hereunder or thereunder,
provided that no Bank shall be liable for any portion of such liabilities,
- --------
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements (a) if the same results from the Agent's gross
negligence or willful misconduct, or (b) if such Bank was not given notice of
the subject claim and the opportunity to participate in the defense thereof, at
its expense (except that such Bank shall remain liable to the extent such
failure to give notice does not result in a loss to the Bank), or (c) if the
same results from a compromise and settlement agreement entered into without the
consent of such Bank, which shall not be unreasonably withheld. In addition,
each Bank agrees promptly upon demand to reimburse the Agent (to the extent not
reimbursed by the Borrowers and without limiting the Obligation of the Borrowers
to do so) in proportion to its Ratable Share for all amounts due and payable by
the Borrowers to the Agent in connection with the Agent's periodic audit of the
Loan Parties' books, records and business properties.
9.8 Reliance by Agent.
-----------------
The Agent shall be entitled to rely upon any writing, telegram, telex
or teletype message, resolution, notice, consent, certificate, letter,
cablegram, statement, order or other document or conversation by telephone or
otherwise believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons, and upon the advice and opinions of
counsel and other professional advisers selected by the Agent. The Agent shall
be fully justified in failing or refusing to take any action hereunder unless it
shall first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
9.9 Notice of Default.
-----------------
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Potential Default or Event of Default unless the Agent has
received written notice from a Bank or the Borrowers referring to this
Agreement, describing such Potential Default or Event of Default and stating
that such notice is a "notice of default."
9.10 Notices.
-------
The Agent shall promptly send to each Bank a copy of all notices
received from the Borrowers pursuant to the provisions of this Agreement or the
other Loan Documents promptly upon receipt thereof. The Agent shall promptly
notify the Borrowers and the other Banks of each change in the Base Rate and the
effective date thereof.
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9.11 Banks in Their Individual Capacities.
------------------------------------
With respect to its Revolving Credit Commitment, the Loans made by it,
and any other rights and powers given to it as a Bank hereunder or under any of
the other Loan Documents, the Agent shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not the
Agent, and the term "Banks" shall, unless the context otherwise indicates,
include the Agent in its individual capacity. PNC Bank and its Affiliates and
each of the Banks and their respective Affiliates may, without liability to
account, except as prohibited herein, make loans to, accept deposits from,
discount drafts for, act as trustee under indentures of, and generally engage in
any kind of banking or trust business with, the Loan Parties and their
Affiliates, in the case of the Agent, as though it were not acting as Agent
hereunder and in the case of each Bank, as though such Bank were not a Bank
hereunder. The Banks acknowledge that, pursuant to such activities, the Agent
or its Affiliates may (i) receive information regarding the Loan Parties
(including information that may be subject to confidentiality obligations in
favor of the Loan Parties) and acknowledge that the Agent shall be under no
obligation to provide such information to them, and (ii) accept fees and other
consideration from the Loan Parties for services in connection with this
Agreement and otherwise without having to account for the same to the Banks.
9.12 Holders of Notes.
----------------
The Agent may deem and treat any payee of any Note as the owner
thereof for all purposes hereof unless and until written notice of the
assignment or transfer thereof shall have been filed with the Agent. Any
request, authority or consent of any Person who at the time of making such
request or giving such authority or consent is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
9.13 Equalization of Banks.
---------------------
The Banks and the holders of any participations in any Notes agree
among themselves that, with respect to all amounts received by any Bank or any
such holder for application on any Obligation hereunder or under any Note or
under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of set-off or banker's
lien, by counterclaim or by any other non-pro rata source, equitable adjustment
will be made in the manner stated in the following sentence so that, in effect,
all such excess amounts will be shared ratably among the Banks and such holders
in proportion to their interests in payments under the Notes, except as
otherwise provided in Section 3.4.3, 4.4.3 or 4.5. The Banks or any such holder
receiving any such amount shall purchase for cash from each of the other Banks
an interest in such Bank's Loans in such amount as shall result in a ratable
participation by the Banks and each such holder in the aggregate unpaid amount
under the Notes, provided that if all or any portion of such excess amount is
--------
thereafter recovered from the Bank or the holder making such purchase, such
purchase shall be rescinded and the purchase price
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<PAGE>
restored to the extent of such recovery, together with interest or other
amounts, if any, required by law (including court order) to be paid by the Bank
or the holder making such purchase.
9.14 Successor Agent.
---------------
The Agent (i) may resign as Agent or (ii) shall resign if such
resignation is requested by the Required Banks (if the Agent is a Bank, the
Agent's Loans and its Revolving Credit Commitment shall be considered in
determining whether the Required Banks have requested such resignation) or
required by Section 4.4.3, in either case of (i) or (ii) by giving not less than
thirty (30) days' prior written notice to the Borrowers. If the Agent shall
resign under this Agreement, then either (a) the Required Banks shall appoint
from among the Banks a successor agent for the Banks, subject to the consent of
the Borrowers, such consent not to be unreasonably withheld, or (b) if a
successor agent shall not be so appointed and approved within the thirty (30)
day period following the Agent's notice to the Banks of its resignation, then
the Agent shall appoint, with the consent of the Borrowers, such consent not to
be unreasonably withheld, a successor agent who shall serve as Agent until such
time as the Required Banks appoint and the Borrowers consent to the appointment
of a successor agent. Upon its appointment pursuant to either clause (a) or (b)
above, such successor agent shall succeed to the rights, powers and duties of
the Agent, and the term "Agent" shall mean such successor agent, effective upon
its appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated without any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement. After the resignation of
any Agent hereunder, the provisions of this Section 9 shall inure to the
benefit of such former Agent and such former Agent shall not by reason of such
resignation be deemed to be released from liability for any actions taken or not
taken by it while it was an Agent under this Agreement.
9.15 Agent's Fee.
-----------
The Borrowers shall pay to the Agent a nonrefundable fee (the "Agent's
Fee") under the terms of a letter (the "Agent's Letter") between Option Care,
Inc. and Agent, as amended from time to time.
9.16 Availability of Funds.
---------------------
The Agent may assume that each Bank has made or will make the proceeds
of a Loan available to the Agent unless the Agent shall have been notified by
such Bank on or before the later of (1) the close of Business on the Business
Day preceding the Borrowing Date with respect to such Loan or (2) five hours
before the time on which the Agent actually funds the proceeds of such Loan to
the Borrowers (whether using its own funds pursuant to this Section 9.16 or
using proceeds deposited with the Agent by the Banks and whether such funding
occurs before or after the time on which Banks are required to deposit the
proceeds of such Loan with the Agent). The Agent may, in reliance upon such
assumption (but shall not be required to), make available to the Borrowers a
corresponding amount. If such corresponding amount is not in fact made
available to the Agent by such Bank, the Agent shall be entitled to recover such
amount
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<PAGE>
on demand from such Bank (or, if such Bank fails to pay such amount forthwith
upon such demand from the Borrower) together with interest thereon, in respect
of each day during the period commencing on the date such amount was made
available to the Borrowers and ending on the date the Agent recovers such
amount, at a rate per annum equal to the Federal Funds Rate.
9.17 Calculations.
------------
In the absence of gross negligence or willful misconduct, the Agent
shall not be liable for any error in computing the amount payable to any Bank
whether in respect of the Loans, fees or any other amounts due to the Banks
under this Agreement. In the event an error in computing any amount payable to
any Bank is made, the Agent, the Borrowers and each affected Bank shall,
forthwith upon discovery of such error, make such adjustments as shall be
required to correct such error, and any compensation therefor will be calculated
at the Federal Funds Effective Rate.
9.18 Beneficiaries.
-------------
Except as expressly provided herein, the provisions of this Section 9
are solely for the benefit of the Agent and the Banks, and the Loan Parties
shall not have any rights to rely on or enforce any of the provisions hereof.
In performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for any
of the Loan Parties.
10. MISCELLANEOUS
-------------
10.1 Modifications, Amendments or Waivers.
------------------------------------
With the written consent of the Required Banks, the Agent, acting on
behalf of all the Banks, and the Borrowers, on behalf of the Loan Parties, may
from time to time enter into written agreements amending or changing any
provision of this Agreement or any other Loan Document or the rights of the
Banks or the Loan Parties hereunder or thereunder, or may grant written waivers
or consents to a departure from the due performance of the Obligations of the
Loan Parties hereunder or thereunder. Any such agreement, waiver or consent
made with such written consent shall be effective to bind all the Banks and the
Loan Parties; provided, that, without the written consent of all the Banks, no
--------
such agreement, waiver or consent may be made which will:
10.1.1 Increase of Revolving Credit Commitment; Extension or
-----------------------------------------------------
Expiration Date.
- ---------------
Increase the amount of the Revolving Credit Commitment or of any
Bank hereunder or extend the Expiration Date;
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10.1.2 Extension of Payment; Reduction of Principal Interest
-----------------------------------------------------
or Fees; Modification of Terms of Payment.
- -----------------------------------------
Whether or not any Loans are outstanding, extend the time for
payment of principal or interest of any Loan, the Commitment Fee or any other
fee payable to any Bank, or reduce the principal amount of or the rate of
interest borne by any Loan or reduce the Commitment Fee or any other fee payable
to any Bank, or otherwise affect the terms of payment of the principal of or
interest of any Loan, the Commitment Fee or any other fee payable to any Bank;
10.1.3 Release of Collateral or Guarantor.
----------------------------------
Except for sales of assets permitted by Section 7.2.7, release
any Collateral, any Guarantor from its Obligations under the Guaranty Agreement
or any other security for any of the Loan Parties' Obligations; or
10.1.4 Miscellaneous
-------------
Amend Section 4.2 (Pro Rata Treatment of Banks), 9.6
(Exculpatory Provisions, etc.) or 9.13 (Equalization of Banks) or this Section
10.1, alter any provision regarding the pro rata treatment of the Banks, change
the definition of Required Banks, or change any requirement providing for the
Banks or the Required Banks to authorize the taking of any action hereunder;
provided, further, that no agreement, waiver or consent which would modify the
- --------
interests, rights or obligations of the Agent in its capacity as Agent or as the
issuer of Letters of Credit shall be effective without the written consent of
the Agent.
10.2 No Implied Waivers; Cumulative Remedies; Writing Required.
---------------------------------------------------------
No course of dealing and no delay or failure of the Agent or any Bank
or any Loan Party in exercising any right, power, remedy or privilege under this
Agreement or any other Loan Document shall affect any other or future exercise
thereof or operate as a waiver thereof, nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such a right,
power, remedy or privilege preclude any further exercise thereof or of any other
right, power, remedy or privilege. The rights and remedies of the Agent and the
Banks under this Agreement and any other Loan Documents are cumulative and not
exclusive of any rights or remedies which they would otherwise have. Any
waiver, permit, consent or approval of any kind or character on the part of any
Bank of any breach or default under this Agreement or any such waiver of any
provision or condition of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing.
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10.3 Reimbursement and Indemnification of Banks by the Borrower;
-----------------------------------------------------------
Taxes.
- -----
The Borrowers agree within thirty (30) calendar days after demand to
pay or reimburse to each Bank (other than the Agent, as to which the Borrowers'
Obligations are set forth in Section 9.5) and to save such Bank harmless against
(i) liability for the payment of all reasonable out-of-pocket costs, expenses
and disbursements (including fees and expenses of counsel for each Bank except
with respect to (a) and (b) below), incurred by such Bank (a) in connection with
the interpretation of this Agreement, and other instruments and documents to be
delivered hereunder, (b) relating to any amendments, waivers or consents
pursuant to the provisions hereof, (c) in connection with the enforcement of
this Agreement or any other Loan Document, or collection of amounts due
hereunder or thereunder or the proof and allowability of any claim arising under
this Agreement or any other Loan Document, whether in bankruptcy or receivership
proceedings or otherwise, and (d) in any workout or restructuring or in
connection with the protection, preservation, exercise or enforcement of any of
the terms hereof or of any rights hereunder or under any other Loan Document or
in connection with any foreclosure, collection or bankruptcy proceedings, or
(ii) all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against such Bank,
in its capacity as such, in any way relating to or arising out of this Agreement
or any other Loan Documents or any action taken or omitted by such Bank
hereunder or thereunder, provided that the Borrowers shall not be liable for any
--------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (A) if the same results from
such Bank's gross negligence or willful misconduct, or (B) if the Borrowers were
not given notice of the subject claim and the opportunity to participate in the
defense thereof, at its expense (except that the Borrowers shall remain liable
to the extent such failure to give notice does not result in a loss to the
Borrowers), or (C) if the same results from a compromise or settlement agreement
entered into without the consent of the Borrowers, which shall not be
unreasonably withheld. The Banks will attempt to minimize the fees and expenses
of legal counsel for the Banks which are subject to reimbursement by the
Borrowers hereunder by considering the usage of one law firm to represent the
Banks and the Agent if appropriate under the circumstances. The Borrowers agree
unconditionally to pay all stamp, document, transfer, recording or filing taxes
or fees and similar impositions now or hereafter determined by the Agent or any
Bank to be payable in connection with this Agreement or any other Loan Document,
and the Borrowers agree unconditionally to save the Agent and the Banks harmless
from and against any and all present or future claims, liabilities or losses
with respect to or resulting from any omission to pay or delay in paying any
such taxes, fees or impositions.
10.4 Holidays.
--------
Whenever payment of a Loan to be made or taken hereunder shall be due
on a day which is not a Business Day such payment shall be due on the next
Business Day and such extension of time shall be included in computing interest
and fee, except that the Loans shall be due on the Business Day preceding the
Expiration Date if the Expiration Date is not a Business Day. Whenever any
payment or action to be made or taken hereunder (other than payment of the
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Loans) shall be stated to be due on a day which is not a Business Day, such
payment or action shall be made or taken on the next following Business Day
(except as provided in Section 3.2 with respect to Interest Periods under the
Euro-Rate Option), and such extension of time shall not be included in computing
interest or fees, if any, in connection with such payment or action.
10.5 Funding by Branch, Subsidiary or Affiliate.
------------------------------------------
10.5.1 Notional Funding.
----------------
Each Bank shall have the right from time to time, without notice
to the Borrowers, to deem any branch, Subsidiary or Affiliate (which for the
purposes of this Section 10.5 shall mean any corporation or association which is
directly or indirectly controlled by or is under direct or indirect common
control with any corporation or association which directly or indirectly
controls such Bank) of such Bank to have made, maintained or funded any Loan to
which the Euro-Rate Option applies at any time, provided that immediately
--------
following (on the assumption that a payment were then due from the Borrowers to
such other office), and as a result of such change, the Borrowers would not be
under any greater financial obligation pursuant to Section 4.5 than it would
have been in the absence of such change. Notional funding offices may be
selected by each Bank without regard to such Bank's actual methods of making,
maintaining or funding the Loans or any sources of funding actually used by or
available to such Bank.
10.5.2 Actual Funding.
--------------
Each Bank shall have the right from time to time to make or
maintain any Loan by arranging for a branch, Subsidiary or Affiliate of such
Bank to make or maintain such Loan subject to the last sentence of this Section
10.5.2. If any Bank causes a branch, Subsidiary or Affiliate to make or maintain
any part of the Loans hereunder, all terms and conditions of this Agreement
shall, except where the context clearly requires otherwise, be applicable to
such part of the Loans to the same extent as if such Loans were made or
maintained by such Bank, but in no event shall any Bank's use of such a branch,
Subsidiary or Affiliate to make or maintain any part of the Loans hereunder
cause such Bank or such branch, Subsidiary or Affiliate to incur any cost or
expenses payable by the Borrowers hereunder or require the Borrowers to pay any
other compensation to any Bank (including any expenses incurred or payable
pursuant to Section 4.5) which would otherwise not be incurred.
10.6 Notices.
-------
All notices, requests, demands, directions and other communications
(as used in this Section 10.6, collectively referred to as "notices") given to
or made upon any party hereto under the provisions of this Agreement shall be by
telephone or in writing (including telex or facsimile communication) unless
otherwise expressly permitted hereunder and shall be delivered or sent by telex
or facsimile to the respective parties at the addresses and numbers set forth
under their respective names on Schedule 1.1(B) hereof or in accordance with any
---------------
subsequent
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unrevoked written direction from any party to the others. All notices shall,
except as otherwise expressly herein provided, be effective (a) in the case of
telex or facsimile, when received, (b) in the case of hand-delivered notice,
when hand-delivered, (c) in the case of telephone, when telephoned, provided,
--------
however, that in order to be effective, telephonic notices must be confirmed in
writing no later than the next day by letter, facsimile or telex, (d) if given
by mail, four (4) days after such communication is deposited in the mail with
first-class postage prepaid, return receipt requested, and (e) if given by any
other means (including by air courier), when delivered; provided, that notices
--------
to the Agent shall not be effective until received and provided, further, that
--------
any notices of a Potential Default or an Event of Default shall be sent by
facsimile or overnight delivery service. Any Bank giving any notice to any Loan
Party shall simultaneously send a copy thereof to the Agent, and the Agent shall
promptly notify the other Banks of the receipt by it of any such notice.
10.7 Severability.
------------
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
10.8 Governing Law.
-------------
Each Letter of Credit and Section 2.9 shall be subject to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, as the same may be revised or amended
from time to time, and to the extent not inconsistent therewith, the internal
laws of the Commonwealth of Pennsylvania without regard to its conflict of laws
principles and the balance of this Agreement shall be deemed to be a contract
under the Laws of the Commonwealth of Pennsylvania and for all purposes shall be
governed by and construed and enforced in accordance with the internal laws of
the Commonwealth of Pennsylvania without regard to its conflict of laws
principles.
10.9 Prior Understanding.
-------------------
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.
10.10 Duration; Survival.
------------------
All representations and warranties of the Loan Parties contained
herein or made in connection herewith shall survive the making of Loans and
issuance of Letters of Credit and shall not be waived by the execution and
delivery of this Agreement, any investigation by the Agent or
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the Banks, the making of Loans, issuance of Letters of Credit, or payment in
full of the Loans. All covenants and agreements of the Loan Parties contained in
Sections 7.1, 7.2 and 7.3 herein shall continue in full force and effect from
and after the date hereof so long as the Borrowers may borrow or request Letters
of Credit hereunder and until termination of the Revolving Credit Commitments
and payment in full of the Loans and expiration or termination of all Letters of
Credit. All covenants and agreements of the Borrowers contained herein relating
to the payment of principal, interest, premiums, additional compensation or
expenses and indemnification, including those set forth in the Notes, Section 4
and Sections 9.5, 9.7 and 10.3, shall survive payment in full of the Loans,
expiration or termination of the Letters of Credit and termination of the
Revolving Credit Commitments.
10.11 Successors and Assigns.
----------------------
(i) This Agreement shall be binding upon and shall inure
to the benefit of the Banks, the Agent, the Loan Parties and their respective
successors and assigns, except that none of the Loan Parties may assign or
transfer any of its rights and Obligations hereunder or any interest herein.
Each Bank may, at its own cost, make assignments of or sell participations in
all or any part of its Revolving Credit Commitment and the Loans made by it to
one or more banks or other entities, subject to the consent of Option Care, Inc.
on behalf of the Borrowers and the Agent with respect to any assignee, such
consent not to be unreasonably withheld. In the case of an assignment, upon
receipt by the Agent of the Assignment and Assumption Agreement, the assignee
shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights, benefits and obligations as it would have if it had
been a signatory Bank hereunder, the Revolving Credit Commitments shall be
adjusted accordingly, and upon surrender of any Note subject to such assignment,
Option Care, Inc. on behalf of the Borrowers shall execute and deliver a new
Note to the assignee in an amount equal to the amount of the Revolving Credit
Commitment assumed by it and a new Revolving Credit Note to the assigning Bank
in an amount equal to the Revolving Credit Commitment retained by it hereunder.
Each assignment will be in the minimum principal amount of $5,000,000. The
assigning Bank shall pay to the Agent a service fee in the amount of $3,500 for
each assignment. In the case of a participation, the participant shall only have
the rights specified in Section 8.2.3 (the participant's rights against such
Bank in respect of such participation to be those set forth in the agreement
executed by such Bank in favor of the participant relating thereto and not to
include any voting rights except with respect to changes of the type referenced
in Sections 10.1.1, 10.1.2, or 10.1.3, all of such Bank's obligations under this
Agreement or any other Loan Document shall remain unchanged, and all amounts
payable by any Loan Party hereunder or thereunder shall be determined as if such
Bank had not sold such participation.
(ii) Any assignee or participant which is not
incorporated under the Laws of the United States of America or a state thereof
shall deliver to Option Care, Inc. on behalf of the Borrowers and to the Agent
the form of certificate described in Section 10.17 relating to federal income
tax withholding. Each Bank may furnish any publicly available information
concerning any Loan Party or its Subsidiaries and any other information
concerning any Loan Party or its Subsidiaries in the possession of such Bank
from time to time to assignees
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<PAGE>
and participants (including prospective assignees or participants), provided
--------
that such assignees and participants agree to be bound by the provisions of
Section 10.12.
(iii) Notwithstanding any other provision in this
Agreement, any Bank may at any time pledge or grant a security interest in all
or any portion of its rights under this Agreement, its Note and the other Loan
Documents to any Federal Reserve Bank in accordance with Regulation A of the FRB
or U.S. Treasury Regulation 31 CFR Section 203.14 without notice to or consent
of the Borrowers or the Agent. No such pledge or grant of a security interest
shall release the transferor Bank of its obligations hereunder or under any
other Loan Document.
10.12 Confidentiality.
---------------
The Agent and the Banks each agree to keep confidential all
information obtained from any Loan Party or its Subsidiaries which is nonpublic
and confidential or proprietary in nature (including any information the
Borrowers specifically designate as confidential), except as provided below, and
to use such information only in connection with their respective capacities
under this Agreement and for the purposes contemplated hereby. The Agent and
the Banks shall be permitted to disclose such information (i) to outside legal
counsel, accountants and other professional advisors who need to know such
information in connection with the administration and enforcement of this
Agreement, subject to agreement of such Persons to maintain the confidentiality,
(ii) to assignees and participants as contemplated by Section 10.11 provided
--------
that they shall execute an agreement in favor of the Loan Parties covering the
matters set forth in this Section 10.12, (iii) to the extent requested by any
bank regulatory authority or, with notice to the Borrower, as otherwise required
by applicable Law or by any subpoena or similar legal process, or in connection
with any investigation or proceeding arising out of the transactions
contemplated by this Agreement, (iv) if it becomes publicly available other than
as a result of a breach of this Agreement or becomes available from a source not
bound by confidentiality restrictions, or (v) if the Borrowers shall have
consented to such disclosure.
10.13 Counterparts.
------------
This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one
and the same instrument.
10.14 Agent's or Bank's Consent.
-------------------------
Except as otherwise provided in the Loan Documents, whenever the
Agent's or any Bank's consent is required to be obtained under this Agreement or
any of the other Loan Documents as a condition to any action, inaction,
condition or event, the Agent and each Bank shall be authorized to give or
withhold such consent in its reasonable discretion.
-84-
<PAGE>
10.15 Exceptions.
----------
The representations, warranties and covenants contained herein shall
be independent of each other, and no exception to any representation, warranty
or covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.
10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
--------------------------------------
EACH LOAN PARTY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY AND THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN
PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION 10.6 AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. EACH LOAN PARTY, THE AGENT AND THE BANKS HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.
10.17 Tax Withholding Clause.
----------------------
Each Bank or assignee or participant of a Bank that is not
incorporated under the Laws of the United States of America or a state thereof
agrees that it will deliver to Option Care, Inc. on behalf of the Borrowers and
to the Agent two (2) duly completed copies of the following: (i) Internal
Revenue Service Form W-9, 4224 or 1001, or other applicable form prescribed by
the Internal Revenue Service, certifying that such Bank, assignee or participant
is entitled to receive payments under this Agreement and the other Loan
Documents without deduction or withholding of any United States federal income
taxes, or is subject to such tax at a reduced rate under an applicable tax
treaty, or (ii) Internal Revenue Service Form W-8 or other applicable form or a
certificate of such Bank, assignee or participant indicating that no such
exemption or reduced rate is allowable with respect to such payments. Each
Bank, assignee or participant required to deliver to Option Care, Inc. on behalf
of the Borrowers and to the Agent a form or certificate pursuant to the
preceding sentence shall deliver such form or certificate as follows: (A) each
Bank which is a party hereto on the Closing Date shall deliver such form or
certificate at least five (5) Business Days prior to the first date on which any
interest or fees are payable by the Borrowers hereunder for the account of such
Bank; (B) each assignee or participant shall deliver such form or
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<PAGE>
certificate at least five (5) Business Days before the effective date of such
assignment or participation (unless the Agent in its sole discretion shall
permit such assignee or participant to deliver such form or certificate less
than five (5) Business Days before such date in which case it shall be due on
the date specified by the Agent). Each Bank, assignee or participant which so
delivers a Form W-8, W-9, 4224 or 1001 further undertakes to deliver to Option
Care, Inc. on behalf of Borrowers and to the Agent two (2) additional copies of
such form (or a successor form) on or before the date that such form expires or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent form so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by the Borrowers or the
Agent, either certifying that such Bank, assignee or participant is entitled to
receive payments under this Agreement and the other Loan Documents without
deduction or withholding of any United States federal income taxes or is subject
to such tax at a reduced rate under an applicable tax treaty or stating that no
such exemption or reduced rate is allowable. The Agent shall be entitled to
withhold United States federal income taxes at the full withholding rate unless
the Bank, assignee or participant establishes an exemption or that it is subject
to a reduced rate as established pursuant to the above provisions.
10.18 Joinder of Borrowers and Guarantors.
-----------------------------------
Any Subsidiary of any of the Borrowers which is required to join this
Agreement as a Borrower and a Guarantor pursuant to Section 7.2.9 shall execute
and deliver to the Agent (i) a Borrower Joinder and a Guarantor Joinder in
substantially the form attached hereto as Exhibit 1.1(G)(1) pursuant to which it
-----------------
shall join as a Borrower and a Guarantor each of the documents to which the
Borrowers and Guarantors are parties; (ii) documents in the forms described in
Section 6.1 (First Loans) modified as appropriate to relate to such Subsidiary;
and (iii) documents necessary to grant and perfect Prior Security Interests to
the Agent for the benefit of the Banks in all Collateral held by such
Subsidiary. The Loan Parties shall deliver such Borrower Joinder and Guarantor
Joinder and related documents to the Agent within five (5) Business Days after
the date of the filing of such Subsidiary's articles of incorporation if the
Subsidiary is a corporation, the date of the filing of its certificate of
limited partnership if it is a limited partnership or the date of its
organization if it is an entity other than a limited partnership or corporation.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
ATTEST: OPTION CARE, INC.,
a Delaware corporation
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
ATTEST: OPTION CARE, INC.,
a California corporation
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
ATTEST: OPTION CARE ENTERPRISES, INC.
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
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<PAGE>
ATTEST: PHARMACARE OF SOUTHWEST
FLORIDA, INC.,
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
ATTEST: PHARMACY I.V. ASSOCIATES, INC.,
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
ATTEST: HOME CARE OF COLUMBIA, INC.,
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
ATTEST: YOUNG'S I.V. THERAPY, INC.,
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
ATTEST: HOME INFUSION THERAPY OF
BULLHEAD CITY, INC.,
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
-87-
<PAGE>
ATTEST: WHATCOM PHARMACEUTICAL
SERVICES, INC.,
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
ATTEST: CORDESYS HEALTHCARE
MANAGEMENT, INC.,
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
ATTEST: INFUSION THERAPY OF ONTARIO, INC.,
/s/ Doreen Wiman By: /s/ Dan W. Bramuchi
- ---------------------- -----------------------
Title: Secretary
---------------------
[Seal]
ATTEST: OPTION CARE HOSPICE, INC.,
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
-88-
<PAGE>
ATTEST: OPTION CARE HOME HEALTH, INC.,
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
ATTEST: MANAGEMENT BY INFORMATION, INC.,
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ---------------------- -----------------------
Title: CFO
---------------------
[Seal]
ATTEST: OPTION CARE OF OKLAHOMA, INC.,
/s/ Doreen Wiman By: /s/ Dan W. Bramuchi
- ---------------------- -----------------------
Title: President
---------------------
[Seal]
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<PAGE>
[GUARANTORS]
_________________________________ By:____________________________
Title:_________________________
ATTEST: PNC BANK, NATIONAL ASSOCIATION,
individually and as Agent
_________________________________ By:____________________________
Title:_________________________
ATTEST: THE NORTHERN TRUST COMPANY
_________________________________ By: /s/ Brian D. Beitz
---------------------------
Title: Vice President
------------------------
ATTEST: HARRIS TRUST AND SAVINGS BANK
_________________________________ By: /s/ Carolin S. Woolsey
---------------------------
Title: Vice President
------------------------
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<PAGE>
PNC BANK, NATIONAL ASSOCIATION,
individually and as Agent
By: /s/ Edward Weisto
---------------------------
Title: AVP
-------------------------
THE NORTHERN TRUST COMPANY
By:____________________________
Title:_________________________
HARRIS TRUST AND SAVINGS BANK
By:____________________________
Title:_________________________
-91-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by OPTION CARE, INC., a
Delaware corporation ("GUARANTOR") in favor of PNC BANK, NATIONAL ASSOCIATION,
as agent for the Banks (the "AGENT"), with an address at One PNC Plaza, 249 5th
Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or otherwise, of any and all existing and future
indebtedness, obligations or liabilities of the Borrowers arising under or in
connection with the Loan Documents, as the same may be amended, modified,
extended, restated, replaced, renewed, refunded or supplemented. "GUARANTEED
INDEBTEDNESS" shall mean any and all indebtedness, obligations or liabilities
described in the previous sentence, whether in whole or in part, and shall
include, but not be
<PAGE>
limited to, (i) all principal amounts due, together with any interest accruing
thereon and any and all fees and expenses (including attorneys' fees and
expenses) incurred in connection therewith, and (ii) all amounts that would be
due if effect were not given to the bankruptcy, insolvency or other similar laws
of general application relating to the enforcement of creditors' rights or to
general principles of equity; plus all interest, costs and expenses (including
attorneys' fees) which may accrue or be incurred on account of any liability of
any of the Borrowers to Agent, or in attempting to collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection with the enforcement of the Banks' rights hereunder or
which would otherwise not have been incurred but for the Guaranteed
Indebtedness.
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect to any of the Guaranteed Indebtedness; (b)
presentment for payment, notice of non-payment or non-performance, demand,
protest, notice of protest and notice of dishonor or default to anyone; (c)
defenses to pay or perform based upon any of the Guaranteed Indebtedness not
-2-
<PAGE>
being a valid and binding obligation of the Borrowers enforceable in accordance
with its terms for any reason whatsoever; (d) all other notices to which the
Guarantor may be entitled but which may legally be waived; (e) any disability of
the Borrowers (other than payment in full) including absence or cessation of
liability for any reason whatsoever; (f) any defense or circumstance which might
otherwise constitute a legal or equitable discharge of a guarantor or surety;
and (g) all rights under any state or federal statute dealing with or affecting
the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity is or was necessary to the valid execution and
delivery of this Guaranty or the Guarantor's performance of its agreements
and obligations hereunder.
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to
-3-
<PAGE>
the Agent from time to time is, or will be at the time such information is
furnished, true, correct and complete in all material respects; the
Guarantor has good and marketable title to all properties, assets and other
rights which the Guarantor purports to own or which are reflected as owned
in the Guarantor's books and records, free and clear of all liens except as
previously disclosed in writing to the Agent pursuant to the Credit
Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is not intended to be exhaustive and the exercise by the
Agent and the Banks of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement between the parties or which may now or hereafter exist at law or in
equity or by suit or otherwise. No delay on the part of the Agent or any Bank
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial
-4-
<PAGE>
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any default. No course of dealing between any of
the Borrowers, the Guarantor, the Agent or the Banks or any of the Banks' agents
or employees shall be effective to change, modify or discharge any provision of
this Guaranty or to constitute a waiver of any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated; provided, however, that this Guaranty shall be
reinstated (as the case may be) if at any time any payment of any of the
Guaranteed Indebtedness made by the Borrowers or the Guarantor or the proceeds
of any enforcement of any security interest of Agent or any allocation by the
Agent and the Banks of payments received is subsequently invalidated, declared
to be fraudulent or preferential, set aside, recovered from, disgorged by or is
required to be repaid or otherwise restored to the Borrowers, the Guarantor, a
trustee, an estate receiver or any other person under any law, including without
limitation any bankruptcy law, state or federal law, common law or equity, all
as though such payment, enforcement or allocation had not
-5-
<PAGE>
been made, and all as determined by the Agent and the Banks. Nothing set forth
in this paragraph is intended to expand on or increase the definition of
Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to the Guarantor at the addresses
provided for in Section 10.6 of the Credit Agreement and service so made shall
be deemed to be completed upon actual receipt thereof. The Guarantor waives any
objection to jurisdiction and venue of any action instituted against him as
provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue.
-6-
<PAGE>
Witness the due execution hereof, as of the day first written above.
ATTEST: OPTION CARE, INC., a Delaware
corporation
By:/s/ Pam Colin By:/s/ J. Jeffery Fox
----------------------- --------------------------
Title:____________________ Title: CFO
-----------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by OPTION CARE, INC., a
California corporation ("GUARANTOR") in favor of PNC BANK, NATIONAL ASSOCIATION,
as agent for the Banks (the "AGENT"), with an address at One PNC Plaza, 249 5th
Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or otherwise, of any and all existing and future
indebtedness, obligations or liabilities of the Borrowers arising under or in
connection with the Loan Documents, as the same may be amended, modified,
extended, restated, replaced, renewed, refunded or supplemented. "GUARANTEED
INDEBTEDNESS" shall mean any and all indebtedness, obligations or liabilities
described in the previous sentence, whether in whole or in part, and shall
include, but not be
<PAGE>
limited to, (i) all principal amounts due, together with any interest accruing
thereon and any and all fees and expenses (including attorneys' fees and
expenses) incurred in connection therewith, and (ii) all amounts that would be
due if effect were not given to the bankruptcy, insolvency or other similar laws
of general application relating to the enforcement of creditors' rights or to
general principles of equity; plus all interest, costs and expenses (including
attorneys' fees) which may accrue or be incurred on account of any liability of
any of the Borrowers to Agent, or in attempting to collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection with the enforcement of the Banks' rights hereunder or
which would otherwise not have been incurred but for the Guaranteed
Indebtedness.
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect to any of the Guaranteed Indebtedness; (b)
presentment for payment, notice of non-payment or non-performance, demand,
protest, notice of protest and notice of dishonor or default to anyone; (c)
defenses to pay or perform based upon any of the Guaranteed Indebtedness not
-2-
<PAGE>
being a valid and binding obligation of the Borrowers enforceable in accordance
with its terms for any reason whatsoever; (d) all other notices to which the
Guarantor may be entitled but which may legally be waived; (e) any disability of
the Borrowers (other than payment in full) including absence or cessation of
liability for any reason whatsoever; (f) any defense or circumstance which might
otherwise constitute a legal or equitable discharge of a guarantor or surety;
and (g) all rights under any state or federal statute dealing with or affecting
the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity is or was necessary to the valid execution and
delivery of this Guaranty or the Guarantor's performance of its agreements
and obligations hereunder.
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to
-3-
<PAGE>
the Agent from time to time is, or will be at the time such information is
furnished, true, correct and complete in all material respects; the
Guarantor has good and marketable title to all properties, assets and other
rights which the Guarantor purports to own or which are reflected as owned
in the Guarantor's books and records, free and clear of all liens except as
previously disclosed in writing to the Agent pursuant to the Credit
Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is not intended to be exhaustive and the exercise by the
Agent and the Banks of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement between the parties or which may now or hereafter exist at law or in
equity or by suit or otherwise. No delay on the part of the Agent or any Bank
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial
-4-
<PAGE>
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any default. No course of dealing between any of
the Borrowers, the Guarantor, the Agent or the Banks or any of the Banks' agents
or employees shall be effective to change, modify or discharge any provision of
this Guaranty or to constitute a waiver of any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated; provided, however, that this Guaranty shall be
reinstated (as the case may be) if at any time any payment of any of the
Guaranteed Indebtedness made by the Borrowers or the Guarantor or the proceeds
of any enforcement of any security interest of Agent or any allocation by the
Agent and the Banks of payments received is subsequently invalidated, declared
to be fraudulent or preferential, set aside, recovered from, disgorged by or is
required to be repaid or otherwise restored to the Borrowers, the Guarantor, a
trustee, an estate receiver or any other person under any law, including without
limitation any bankruptcy law, state or federal law, common law or equity, all
as though such payment, enforcement or allocation had not
-5-
<PAGE>
been made, and all as determined by the Agent and the Banks. Nothing set forth
in this paragraph is intended to expand on or increase the definition of
Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to the Guarantor at the addresses
provided for in Section 10.6 of the Credit Agreement and service so made shall
be deemed to be completed upon actual receipt thereof. The Guarantor waives any
objection to jurisdiction and venue of any action instituted against him as
provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue.
-6-
<PAGE>
Witness the due execution hereof, as of the day first written above.
ATTEST: OPTION CARE, INC., a California
corporation
By:/s/ Pam Colin By:/s/ J. Jeffery Fox
----------------------- -------------------------
Title:____________________ Title: CFO
----------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by OPTION CARE ENTERPRISES, a
California corporation ("GUARANTOR") in favor of PNC BANK, NATIONAL ASSOCIATION,
as agent for the Banks (the "AGENT"), with an address at One PNC Plaza, 249 5th
Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or otherwise, of any and all existing and future
indebtedness, obligations or liabilities of the Borrowers arising under or in
connection with the Loan Documents, as the same may be amended, modified,
extended, restated, replaced, renewed, refunded or supplemented. "GUARANTEED
INDEBTEDNESS" shall mean any and all indebtedness, obligations or liabilities
described in the previous sentence, whether in whole or in part, and shall
include, but not be
<PAGE>
limited to, (i) all principal amounts due, together with any interest accruing
thereon and any and all fees and expenses (including attorneys' fees and
expenses) incurred in connection therewith, and (ii) all amounts that would be
due if effect were not given to the bankruptcy, insolvency or other similar laws
of general application relating to the enforcement of creditors' rights or to
general principles of equity; plus all interest, costs and expenses (including
attorneys' fees) which may accrue or be incurred on account of any liability of
any of the Borrowers to Agent, or in attempting to collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection with the enforcement of the Banks' rights hereunder or
which would otherwise not have been incurred but for the Guaranteed
Indebtedness.
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect to any of the Guaranteed Indebtedness; (b)
presentment for payment, notice of non-payment or non-performance, demand,
protest, notice of protest and notice of dishonor or default to anyone; (c)
defenses to pay or perform based upon any of the Guaranteed Indebtedness not
-2-
<PAGE>
being a valid and binding obligation of the Borrowers enforceable in accordance
with its terms for any reason whatsoever; (d) all other notices to which the
Guarantor may be entitled but which may legally be waived; (e) any disability of
the Borrowers (other than payment in full) including absence or cessation of
liability for any reason whatsoever; (f) any defense or circumstance which might
otherwise constitute a legal or equitable discharge of a guarantor or surety;
and (g) all rights under any state or federal statute dealing with or affecting
the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity is or was necessary to the valid execution and
delivery of this Guaranty or the Guarantor's performance of its agreements
and obligations hereunder.
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to
-3-
<PAGE>
the Agent from time to time is, or will be at the time such information is
furnished, true, correct and complete in all material respects; the
Guarantor has good and marketable title to all properties, assets and other
rights which the Guarantor purports to own or which are reflected as owned
in the Guarantor's books and records, free and clear of all liens except as
previously disclosed in writing to the Agent pursuant to the Credit
Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is not intended to be exhaustive and the exercise by the
Agent and the Banks of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement between the parties or which may now or hereafter exist at law or in
equity or by suit or otherwise. No delay on the part of the Agent or any Bank
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial
-4-
<PAGE>
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any default. No course of dealing between any of
the Borrowers, the Guarantor, the Agent or the Banks or any of the Banks' agents
or employees shall be effective to change, modify or discharge any provision of
this Guaranty or to constitute a waiver of any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated; provided, however, that this Guaranty shall be
reinstated (as the case may be) if at any time any payment of any of the
Guaranteed Indebtedness made by the Borrowers or the Guarantor or the proceeds
of any enforcement of any security interest of Agent or any allocation by the
Agent and the Banks of payments received is subsequently invalidated, declared
to be fraudulent or preferential, set aside, recovered from, disgorged by or is
required to be repaid or otherwise restored to the Borrowers, the Guarantor, a
trustee, an estate receiver or any other person under any law, including without
limitation any bankruptcy law, state or federal law, common law or equity, all
as though such payment, enforcement or allocation had not
-5-
<PAGE>
been made, and all as determined by the Agent and the Banks. Nothing set forth
in this paragraph is intended to expand on or increase the definition of
Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to the Guarantor at the addresses
provided for in Section 10.6 of the Credit Agreement and service so made shall
be deemed to be completed upon actual receipt thereof. The Guarantor waives any
objection to jurisdiction and venue of any action instituted against him as
provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue.
-6-
<PAGE>
Witness the due execution hereof, as of the day first written above.
ATTEST: OPTION CARE ENTERPRISES, INC.
By:/s/ Pam Colin By:/s/ J. Jeffrey Fox
----------------------- -------------------------
Title:____________________ Title: CFO
----------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by PHARMACARE OF SOUTHWEST
FLORIDA, INC., a Florida corporation ("GUARANTOR") in favor of PNC BANK,
NATIONAL ASSOCIATION, as agent for the Banks (the "AGENT"), with an address at
One PNC Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or otherwise, of any and all existing and future
indebtedness, obligations or liabilities of the Borrowers arising under or in
connection with the Loan Documents, as the same may be amended, modified,
extended, restated, replaced, renewed, refunded or supplemented. "GUARANTEED
INDEBTEDNESS" shall mean any and all indebtedness, obligations or liabilities
<PAGE>
described in the previous sentence, whether in whole or in part, and shall
include, but not be limited to, (i) all principal amounts due, together with
any interest accruing thereon and any and all fees and expenses (including
attorneys' fees and expenses) incurred in connection therewith, and (ii) all
amounts that would be due if effect were not given to the bankruptcy, insolvency
or other similar laws of general application relating to the enforcement of
creditors' rights or to general principles of equity; plus all interest, costs
and expenses (including attorneys' fees) which may accrue or be incurred on
account of any liability of any of the Borrowers to Agent, or in attempting to
collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection with the enforcement of the Banks' rights hereunder or
which would otherwise not have been incurred but for the Guaranteed
Indebtedness.
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect to any of the Guaranteed Indebtedness; (b)
presentment for payment, notice of non-payment or non-performance, demand,
protest, notice of protest and notice of dishonor or default to
-2-
<PAGE>
anyone; (c) defenses to pay or perform based upon any of the Guaranteed
Indebtedness not being a valid and binding obligation of the Borrowers
enforceable in accordance with its terms for any reason whatsoever; (d) all
other notices to which the Guarantor may be entitled but which may legally be
waived; (e) any disability of the Borrowers (other than payment in full)
including absence or cessation of liability for any reason whatsoever; (f) any
defense or circumstance which might otherwise constitute a legal or equitable
discharge of a guarantor or surety; and (g) all rights under any state or
federal statute dealing with or affecting the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity is or was necessary to the valid execution and
delivery of this Guaranty or the Guarantor's performance of its agreements
and obligations hereunder.
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
-3-
<PAGE>
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to the Agent from time to time is, or will be at the time
such information is furnished, true, correct and complete in all material
respects; the Guarantor has good and marketable title to all properties,
assets and other rights which the Guarantor purports to own or which are
reflected as owned in the Guarantor's books and records, free and clear of
all liens except as previously disclosed in writing to the Agent pursuant
to the Credit Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is not intended to be exhaustive and the exercise by the
Agent and the Banks of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement between the parties or which may now or hereafter exist at law or in
-4-
<PAGE>
equity or by suit or otherwise. No delay on the part of the Agent or any Bank
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any default. No
course of dealing between any of the Borrowers, the Guarantor, the Agent or the
Banks or any of the Banks' agents or employees shall be effective to change,
modify or discharge any provision of this Guaranty or to constitute a waiver of
any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated; provided, however, that this Guaranty shall be
reinstated (as the case may be) if at any time any payment of any of the
Guaranteed Indebtedness made by the Borrowers or the Guarantor or the proceeds
of any enforcement of any security interest of Agent or any allocation by the
Agent and the Banks of payments received is subsequently invalidated, declared
to be fraudulent or preferential, set aside, recovered from, disgorged by or is
required to be repaid or otherwise restored to the Borrowers, the Guarantor, a
trustee, an estate receiver or any
-5-
<PAGE>
other person under any law, including without limitation any bankruptcy law,
state or federal law, common law or equity, all as though such payment,
enforcement or allocation had not been made, and all as determined by the Agent
and the Banks. Nothing set forth in this paragraph is intended to expand on or
increase the definition of Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to the Guarantor at the addresses
provided for in Section 10.6 of the Credit Agreement and service so made shall
be deemed to be completed upon actual receipt thereof. The Guarantor waives any
objection to jurisdiction and venue of any action instituted against him as
provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue.
-6-
<PAGE>
Witness the due execution hereof, as of the day first written above.
ATTEST: PHARMACARE OF SOUTHWEST
FLORIDA, INC.
By:/s/ Pam Colin By:/s/ J. Jeffrey Fox
----------------------- -------------------------
Title:____________________ Title: CFO
----------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by PHARMACY I.V. ASSOCIATES,
INC., a Missouri corporation ("GUARANTOR") in favor of PNC BANK, NATIONAL
ASSOCIATION, as agent for the Banks (the "AGENT"), with an address at One PNC
Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or otherwise, of any and all existing and future
indebtedness, obligations or liabilities of the Borrowers arising under or in
connection with the Loan Documents, as the same may be amended, modified,
extended, restated, replaced, renewed, refunded or supplemented.
<PAGE>
"GUARANTEED INDEBTEDNESS" shall mean any and all indebtedness, obligations or
liabilities described in the previous sentence, whether in whole or in part, and
shall include, but not be limited to, (i) all principal amounts due, together
with any interest accruing thereon and any and all fees and expenses (including
attorneys' fees and expenses) incurred in connection therewith, and (ii) all
amounts that would be due if effect were not given to the bankruptcy, insolvency
or other similar laws of general application relating to the enforcement of
creditors' rights or to general principles of equity; plus all interest, costs
and expenses (including attorneys' fees) which may accrue or be incurred on
account of any liability of any of the Borrowers to Agent, or in attempting to
collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection with the enforcement of the Banks' rights hereunder or
which would otherwise not have been incurred but for the Guaranteed
Indebtedness.
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect to any of the Guaranteed Indebtedness; (b)
presentment for payment, notice of non-payment
-2-
<PAGE>
or non-performance, demand, protest, notice of protest and notice of dishonor or
default to anyone; (c) defenses to pay or perform based upon any of the
Guaranteed Indebtedness not being a valid and binding obligation of the
Borrowers enforceable in accordance with its terms for any reason whatsoever;
(d) all other notices to which the Guarantor may be entitled but which may
legally be waived; (e) any disability of the Borrowers (other than payment in
full) including absence or cessation of liability for any reason whatsoever; (f)
any defense or circumstance which might otherwise constitute a legal or
equitable discharge of a guarantor or surety; and (g) all rights under any state
or federal statute dealing with or affecting the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity is or was necessary to the valid execution and
delivery of this Guaranty or the Guarantor's performance of its agreements
and obligations hereunder.
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
-3-
<PAGE>
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to the Agent from time to time is, or will be at the time
such information is furnished, true, correct and complete in all material
respects; the Guarantor has good and marketable title to all properties,
assets and other rights which the Guarantor purports to own or which are
reflected as owned in the Guarantor's books and records, free and clear of
all liens except as previously disclosed in writing to the Agent pursuant
to the Credit Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is not intended to be exhaustive and the exercise by the
Agent and the Banks of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement between the parties or which may now or hereafter exist at law or in
-4-
<PAGE>
equity or by suit or otherwise. No delay on the part of the Agent or any Bank
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any default. No
course of dealing between any of the Borrowers, the Guarantor, the Agent or the
Banks or any of the Banks' agents or employees shall be effective to change,
modify or discharge any provision of this Guaranty or to constitute a waiver of
any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated; provided, however, that this Guaranty shall be
reinstated (as the case may be) if at any time any payment of any of the
Guaranteed Indebtedness made by the Borrowers or the Guarantor or the proceeds
of any enforcement of any security interest of Agent or any allocation by the
Agent and the Banks of payments received is subsequently invalidated, declared
to be fraudulent or preferential, set aside, recovered from, disgorged by or is
required to be repaid or otherwise restored to the Borrowers, the Guarantor, a
trustee, an estate receiver or any
-5-
<PAGE>
other person under any law, including without limitation any bankruptcy law,
state or federal law, common law or equity, all as though such payment,
enforcement or allocation had not been made, and all as determined by the Agent
and the Banks. Nothing set forth in this paragraph is intended to expand on or
increase the definition of Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to the Guarantor at the addresses
provided for in Section 10.6 of the Credit Agreement and service so made shall
be deemed to be completed upon actual receipt thereof. The Guarantor waives any
objection to jurisdiction and venue of any action instituted against him as
provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue.
-6-
<PAGE>
Witness the due execution hereof, as of the day first written above.
ATTEST: PHARMACY I.V. ASSOCIATES, INC.
By:/s/ Pam Colin By:/s/ J. Jeffery Fox
----------------------- -------------------------
Title:____________________ Title: CFO
----------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by HOME CARE OF COLUMBIA,
INC., a Missouri corporation ("GUARANTOR") in favor of PNC BANK, NATIONAL
ASSOCIATION, as agent for the Banks (the "AGENT"), with an address at One PNC
Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or otherwise, of any and all existing and future
indebtedness, obligations or liabilities of the Borrowers arising under or in
connection with the Loan Documents, as the same may be
<PAGE>
amended, modified, extended, restated, replaced, renewed, refunded or
supplemented. "GUARANTEED INDEBTEDNESS" shall mean any and all indebtedness,
obligations or liabilities described in the previous sentence, whether in whole
or in part, and shall include, but not be limited to, (i) all principal amounts
due, together with any interest accruing thereon and any and all fees and
expenses (including attorneys' fees and expenses) incurred in connection
therewith, and (ii) all amounts that would be due if effect were not given to
the bankruptcy, insolvency or other similar laws of general application relating
to the enforcement of creditors' rights or to general principles of equity; plus
all interest, costs and expenses (including attorneys' fees) which may accrue or
be incurred on account of any liability of any of the Borrowers to Agent, or in
attempting to collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection with the enforcement of the Banks' rights hereunder or
which would otherwise not have been incurred but for the Guaranteed
Indebtedness.
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect
-2-
<PAGE>
to any of the Guaranteed Indebtedness; (b) presentment for payment, notice of
non-payment or non-performance, demand, protest, notice of protest and notice of
dishonor or default to anyone; (c) defenses to pay or perform based upon any of
the Guaranteed Indebtedness not being a valid and binding obligation of the
Borrowers enforceable in accordance with its terms for any reason whatsoever;
(d) all other notices to which the Guarantor may be entitled but which may
legally be waived; (e) any disability of the Borrowers (other than payment in
full) including absence or cessation of liability for any reason whatsoever; (f)
any defense or circumstance which might otherwise constitute a legal or
equitable discharge of a guarantor or surety; and (g) all rights under any state
or federal statute dealing with or affecting the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity is or was necessary to the valid execution and
delivery of this Guaranty or the Guarantor's performance of its agreements
and obligations hereunder.
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
-3-
<PAGE>
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to the Agent from time to time is, or will be at the time
such information is furnished, true, correct and complete in all material
respects; the Guarantor has good and marketable title to all properties,
assets and other rights which the Guarantor purports to own or which are
reflected as owned in the Guarantor's books and records, free and clear of
all liens except as previously disclosed in writing to the Agent pursuant
to the Credit Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is not intended to be exhaustive and the exercise by the
Agent and the Banks of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement between the parties or which may now or hereafter exist at law or in
-4-
<PAGE>
equity or by suit or otherwise. No delay on the part of the Agent or any Bank
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any default. No
course of dealing between any of the Borrowers, the Guarantor, the Agent or the
Banks or any of the Banks' agents or employees shall be effective to change,
modify or discharge any provision of this Guaranty or to constitute a waiver of
any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated; provided, however, that this Guaranty shall be
reinstated (as the case may be) if at any time any payment of any of the
Guaranteed Indebtedness made by the Borrowers or the Guarantor or the proceeds
of any enforcement of any security interest of Agent or any allocation by the
Agent and the Banks of payments received is subsequently invalidated, declared
to be fraudulent or preferential, set aside, recovered from, disgorged by or is
required to be repaid or otherwise restored to the Borrowers, the Guarantor, a
trustee, an estate receiver or any
-5-
<PAGE>
other person under any law, including without limitation any bankruptcy law,
state or federal law, common law or equity, all as though such payment,
enforcement or allocation had not been made, and all as determined by the Agent
and the Banks. Nothing set forth in this paragraph is intended to expand on or
increase the definition of Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to the Guarantor at the addresses
provided for in Section 10.6 of the Credit Agreement and service so made shall
be deemed to be completed upon actual receipt thereof. The Guarantor waives any
objection to jurisdiction and venue of any action instituted against him as
provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue.
-6-
<PAGE>
Witness the due execution hereof, as of the day first written above.
ATTEST: HOME CARE OF COLUMBIA, INC.
By:/s/ Pam Colin By:/s/ J. Jeffrey Fox
----------------------- -------------------------
Title:____________________ Title: CFO
----------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by YOUNG'S I.V. THERAPY,
INC., a Pennsylvania corporation ("GUARANTOR") in favor of PNC BANK, NATIONAL
ASSOCIATION, as agent for the Banks (the "AGENT"), with an address at One PNC
Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or otherwise, of any and all existing and future
indebtedness, obligations or liabilities of the Borrowers arising under or in
connection with the Loan Documents, as the same may be
<PAGE>
amended, modified, extended, restated, replaced, renewed, refunded or
supplemented. "GUARANTEED INDEBTEDNESS" shall mean any and all indebtedness,
obligations or liabilities described in the previous sentence, whether in whole
or in part, and shall include, but not be limited to, (i) all principal amounts
due, together with any interest accruing thereon and any and all fees and
expenses (including attorneys' fees and expenses) incurred in connection
therewith, and (ii) all amounts that would be due if effect were not given to
the bankruptcy, insolvency or other similar laws of general application relating
to the enforcement of creditors' rights or to general principles of equity; plus
all interest, costs and expenses (including attorneys' fees) which may accrue or
be incurred on account of any liability of any of the Borrowers to Agent, or in
attempting to collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection with the enforcement of the Banks' rights hereunder or
which would otherwise not have been incurred but for the Guaranteed
Indebtedness.
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect
-2-
<PAGE>
to any of the Guaranteed Indebtedness; (b) presentment for payment, notice of
non-payment or non-performance, demand, protest, notice of protest and notice of
dishonor or default to anyone; (c) defenses to pay or perform based upon any of
the Guaranteed Indebtedness not being a valid and binding obligation of the
Borrowers enforceable in accordance with its terms for any reason whatsoever;
(d) all other notices to which the Guarantor may be entitled but which may
legally be waived; (e) any disability of the Borrowers (other than payment in
full) including absence or cessation of liability for any reason whatsoever; (f)
any defense or circumstance which might otherwise constitute a legal or
equitable discharge of a guarantor or surety; and (g) all rights under any state
or federal statute dealing with or affecting the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity is or was necessary to the valid execution and
delivery of this Guaranty or the Guarantor's performance of its agreements
and obligations hereunder.
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
-3-
<PAGE>
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to the Agent from time to time is, or will be at the time
such information is furnished, true, correct and complete in all material
respects; the Guarantor has good and marketable title to all properties,
assets and other rights which the Guarantor purports to own or which are
reflected as owned in the Guarantor's books and records, free and clear of
all liens except as previously disclosed in writing to the Agent pursuant
to the Credit Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is not intended to be exhaustive and the exercise by the
Agent and the Banks of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement between the parties or which may now or hereafter exist at law or in
-4-
<PAGE>
equity or by suit or otherwise. No delay on the part of the Agent or any Bank in
exercising any right, power or privilege shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any default. No
course of dealing between any of the Borrowers, the Guarantor, the Agent or the
Banks or any of the Banks' agents or employees shall be effective to change,
modify or discharge any provision of this Guaranty or to constitute a waiver of
any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated; provided, however, that this Guaranty shall be
reinstated (as the case may be) if at any time any payment of any of the
Guaranteed Indebtedness made by the Borrowers or the Guarantor or the proceeds
of any enforcement of any security interest of Agent or any allocation by the
Agent and the Banks of payments received is subsequently invalidated, declared
to be fraudulent or preferential, set aside, recovered from, disgorged by or is
required to be repaid or otherwise restored to the Borrowers, the Guarantor, a
trustee, an estate receiver or any
-5-
<PAGE>
other person under any law, including without limitation any bankruptcy law,
state or federal law, common law or equity, all as though such payment,
enforcement or allocation had not been made, and all as determined by the Agent
and the Banks. Nothing set forth in this paragraph is intended to expand on or
increase the definition of Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to the Guarantor at the addresses
provided for in Section 10.6 of the Credit Agreement and service so made shall
be deemed to be completed upon actual receipt thereof. The Guarantor waives any
objection to jurisdiction and venue of any action instituted against him as
provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue.
-6-
<PAGE>
Witness the due execution hereof, as of the day first written above.
ATTEST: YOUNG'S I.V. THERAPY, INC.
By: /s/ Pam Colin By: /s/ J. Jeffrey Fox
----------------------- -------------------------
Title:____________________ Title: CFO
----------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by HOME INFUSION THERAPY OF
BULLHEAD CITY, INC., a Delaware corporation ("GUARANTOR") in favor of PNC BANK,
NATIONAL ASSOCIATION, as agent for the Banks (the "AGENT"), with an address at
One PNC Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or otherwise, of any and all existing and future
indebtedness, obligations or liabilities of the
<PAGE>
Borrowers arising under or in connection with the Loan Documents, as the same
may be amended, modified, extended, restated, replaced, renewed, refunded or
supplemented. "GUARANTEED INDEBTEDNESS" shall mean any and all indebtedness,
obligations or liabilities described in the previous sentence, whether in whole
or in part, and shall include, but not be limited to, (i) all principal amounts
due, together with any interest accruing thereon and any and all fees and
expenses (including attorneys' fees and expenses) incurred in connection
therewith, and (ii) all amounts that would be due if effect were not given to
the bankruptcy, insolvency or other similar laws of general application relating
to the enforcement of creditors' rights or to general principles of equity; plus
all interest, costs and expenses (including attorneys' fees) which may accrue or
be incurred on account of any liability of any of the Borrowers to Agent, or in
attempting to collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection with the enforcement of the Banks' rights hereunder or
which would otherwise not have been incurred but for the Guaranteed
Indebtedness.
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice
-2-
<PAGE>
regarding the performance or non-performance of the Borrowers or any of them
with respect to any of the Guaranteed Indebtedness; (b) presentment for payment,
notice of non-payment or non-performance, demand, protest, notice of protest and
notice of dishonor or default to anyone; (c) defenses to pay or perform based
upon any of the Guaranteed Indebtedness not being a valid and binding obligation
of the Borrowers enforceable in accordance with its terms for any reason
whatsoever; (d) all other notices to which the Guarantor may be entitled but
which may legally be waived; (e) any disability of the Borrowers (other than
payment in full) including absence or cessation of liability for any reason
whatsoever; (f) any defense or circumstance which might otherwise constitute a
legal or equitable discharge of a guarantor or surety; and (g) all rights under
any state or federal statute dealing with or affecting the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity is or was necessary to the valid execution and
delivery of this Guaranty or the Guarantor's performance of its agreements
and obligations hereunder.
-3-
<PAGE>
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to the Agent from time to time is, or will be at the time
such information is furnished, true, correct and complete in all material
respects; the Guarantor has good and marketable title to all properties,
assets and other rights which the Guarantor purports to own or which are
reflected as owned in the Guarantor's books and records, free and clear of
all liens except as previously disclosed in writing to the Agent pursuant
to the Credit Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is
-4-
<PAGE>
not intended to be exhaustive and the exercise by the Agent and the Banks of any
right or remedy shall not preclude the exercise of any other rights or remedies,
all of which shall be cumulative and shall be in addition to any other right or
remedy given hereunder or under any other agreement between the parties or which
may now or hereafter exist at law or in equity or by suit or otherwise. No
delay on the part of the Agent or any Bank in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any default. No course of dealing between any of
the Borrowers, the Guarantor, the Agent or the Banks or any of the Banks' agents
or employees shall be effective to change, modify or discharge any provision of
this Guaranty or to constitute a waiver of any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated; provided, however, that this Guaranty shall be
reinstated (as the case may be) if at any time any payment of any of the
Guaranteed Indebtedness made by the Borrowers or the Guarantor
-5-
<PAGE>
or the proceeds of any enforcement of any security interest of Agent or any
allocation by the Agent and the Banks of payments received is subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or is required to be repaid or otherwise restored to the
Borrowers, the Guarantor, a trustee, an estate receiver or any other person
under any law, including without limitation any bankruptcy law, state or federal
law, common law or equity, all as though such payment, enforcement or allocation
had not been made, and all as determined by the Agent and the Banks. Nothing
set forth in this paragraph is intended to expand on or increase the definition
of Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
_______
INITIAL
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to the Guarantor at the addresses
provided for in Section 10.6 of the Credit Agreement and service so made shall
be deemed to be completed upon actual receipt thereof. The Guarantor
-6-
<PAGE>
waives any objection to jurisdiction and venue of any action instituted against
him as provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue.
Witness the due execution hereof, as of the day first written above.
ATTEST: HOME INFUSION THERAPY OF
BULLHEAD CITY, INC.
By: /s/ Pam Colin By: /s/ J. Jeffrey Fox
----------------------- --------------------------
Title:____________________ Title: CFO
------------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by WHATCOM PHARMACEUTICAL
SERVICES, INC., a Washington corporation ("GUARANTOR") in favor of PNC BANK,
NATIONAL ASSOCIATION, as agent for the Banks (the "AGENT"), with an address at
One PNC Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or
<PAGE>
otherwise, of any and all existing and future indebtedness, obligations or
liabilities of the Borrowers arising under or in connection with the Loan
Documents, as the same may be amended, modified, extended, restated, replaced,
renewed, refunded or supplemented. "GUARANTEED INDEBTEDNESS" shall mean any and
all indebtedness, obligations or liabilities described in the previous sentence,
whether in whole or in part, and shall include, but not be limited to, (i) all
principal amounts due, together with any interest accruing thereon and any and
all fees and expenses (including attorneys' fees and expenses) incurred in
connection therewith, and (ii) all amounts that would be due if effect were not
given to the bankruptcy, insolvency or other similar laws of general application
relating to the enforcement of creditors' rights or to general principles of
equity; plus all interest, costs and expenses (including attorneys' fees) which
may accrue or be incurred on account of any liability of any of the Borrowers to
Agent, or in attempting to collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection with the enforcement of the Banks' rights hereunder or
which would otherwise not have been incurred but for the Guaranteed
Indebtedness.
-2-
<PAGE>
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect to any of the Guaranteed Indebtedness; (b)
presentment for payment, notice of non-payment or non-performance, demand,
protest, notice of protest and notice of dishonor or default to anyone; (c)
defenses to pay or perform based upon any of the Guaranteed Indebtedness not
being a valid and binding obligation of the Borrowers enforceable in accordance
with its terms for any reason whatsoever; (d) all other notices to which the
Guarantor may be entitled but which may legally be waived; (e) any disability of
the Borrowers (other than payment in full) including absence or cessation of
liability for any reason whatsoever; (f) any defense or circumstance which might
otherwise constitute a legal or equitable discharge of a guarantor or surety;
and (g) all rights under any state or federal statute dealing with or affecting
the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity is or was necessary to the valid execution and
delivery of this Guaranty or the Guarantor's performance of its agreements
and obligations hereunder.
-3-
<PAGE>
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to the Agent from time to time is, or will be at the time
such information is furnished, true, correct and complete in all material
respects; the Guarantor has good and marketable title to all properties,
assets and other rights which the Guarantor purports to own or which are
reflected as owned in the Guarantor's books and records, free and clear of
all liens except as previously disclosed in writing to the Agent pursuant
to the Credit Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is
-4-
<PAGE>
not intended to be exhaustive and the exercise by the Agent and the Banks of any
right or remedy shall not preclude the exercise of any other rights or remedies,
all of which shall be cumulative and shall be in addition to any other right or
remedy given hereunder or under any other agreement between the parties or which
may now or hereafter exist at law or in equity or by suit or otherwise. No delay
on the part of the Agent or any Bank in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude other or further exercise thereof or
the exercise of any other right, power or privilege or shall be construed to be
a waiver of any default. No course of dealing between any of the Borrowers, the
Guarantor, the Agent or the Banks or any of the Banks' agents or employees shall
be effective to change, modify or discharge any provision of this Guaranty or to
constitute a waiver of any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated; provided, however, that this Guaranty shall be
reinstated (as the case may be) if at any time any payment of any of the
Guaranteed Indebtedness made by the Borrowers or the Guarantor
-5-
<PAGE>
or the proceeds of any enforcement of any security interest of Agent or any
allocation by the Agent and the Banks of payments received is subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or is required to be repaid or otherwise restored to the
Borrowers, the Guarantor, a trustee, an estate receiver or any other person
under any law, including without limitation any bankruptcy law, state or federal
law, common law or equity, all as though such payment, enforcement or allocation
had not been made, and all as determined by the Agent and the Banks. Nothing set
forth in this paragraph is intended to expand on or increase the definition of
Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to the Guarantor at the addresses
provided for in Section 10.6 of the Credit Agreement and service so made shall
be deemed to be completed upon actual receipt thereof. The Guarantor
-6-
<PAGE>
waives any objection to jurisdiction and venue of any action instituted against
him as provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue.
Witness the due execution hereof, as of the day first written above.
ATTEST: WHATCOM PHARMACEUTICAL
SERVICES, INC.
By:/s/ Pam Colin By:/s/ J. Jeffrey Fox
----------------------- -----------------------
Title:____________________ Title: CFO
---------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by CORDESYS HEALTHCARE
MANAGEMENT, INC., a Delaware corporation ("GUARANTOR") in favor of PNC BANK,
NATIONAL ASSOCIATION, as agent for the Banks (the "AGENT"), with an address at
One PNC Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or
<PAGE>
otherwise, of any and all existing and future indebtedness, obligations or
liabilities of the Borrowers arising under or in connection with the Loan
Documents, as the same may be amended, modified, extended, restated, replaced,
renewed, refunded or supplemented. "GUARANTEED INDEBTEDNESS" shall mean any and
all indebtedness, obligations or liabilities described in the previous sentence,
whether in whole or in part, and shall include, but not be limited to, (i) all
principal amounts due, together with any interest accruing thereon and any and
all fees and expenses (including attorneys' fees and expenses) incurred in
connection therewith, and (ii) all amounts that would be due if effect were not
given to the bankruptcy, insolvency or other similar laws of general application
relating to the enforcement of creditors' rights or to general principles of
equity; plus all interest, costs and expenses (including attorneys' fees) which
may accrue or be incurred on account of any liability of any of the Borrowers to
Agent, or in attempting to collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection with the enforcement of the Banks' rights hereunder or
which would otherwise not have been incurred but for the Guaranteed
Indebtedness.
-2-
<PAGE>
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect to any of the Guaranteed Indebtedness; (b)
presentment for payment, notice of non-payment or non-performance, demand,
protest, notice of protest and notice of dishonor or default to anyone; (c)
defenses to pay or perform based upon any of the Guaranteed Indebtedness not
being a valid and binding obligation of the Borrowers enforceable in accordance
with its terms for any reason whatsoever; (d) all other notices to which the
Guarantor may be entitled but which may legally be waived; (e) any disability of
the Borrowers (other than payment in full) including absence or cessation of
liability for any reason whatsoever; (f) any defense or circumstance which might
otherwise constitute a legal or equitable discharge of a guarantor or surety;
and (g) all rights under any state or federal statute dealing with or affecting
the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity is or was necessary to the valid execution and
delivery of this Guaranty or the Guarantor's performance of its agreements
and obligations hereunder.
-3-
<PAGE>
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to the Agent from time to time is, or will be at the time
such information is furnished, true, correct and complete in all material
respects; the Guarantor has good and marketable title to all properties,
assets and other rights which the Guarantor purports to own or which are
reflected as owned in the Guarantor's books and records, free and clear of
all liens except as previously disclosed in writing to the Agent pursuant
to the Credit Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is
-4-
<PAGE>
not intended to be exhaustive and the exercise by the Agent and the Banks of any
right or remedy shall not preclude the exercise of any other rights or remedies,
all of which shall be cumulative and shall be in addition to any other right or
remedy given hereunder or under any other agreement between the parties or which
may now or hereafter exist at law or in equity or by suit or otherwise. No
delay on the part of the Agent or any Bank in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any default. No course of dealing between any of
the Borrowers, the Guarantor, the Agent or the Banks or any of the Banks' agents
or employees shall be effective to change, modify or discharge any provision of
this Guaranty or to constitute a waiver of any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated; provided, however, that this Guaranty shall be
reinstated (as the case may be) if at any time any payment of any of the
Guaranteed Indebtedness made by the Borrowers or the Guarantor
-5-
<PAGE>
or the proceeds of any enforcement of any security interest of Agent or any
allocation by the Agent and the Banks of payments received is subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or is required to be repaid or otherwise restored to the
Borrowers, the Guarantor, a trustee, an estate receiver or any other person
under any law, including without limitation any bankruptcy law, state or federal
law, common law or equity, all as though such payment, enforcement or allocation
had not been made, and all as determined by the Agent and the Banks. Nothing
set forth in this paragraph is intended to expand on or increase the definition
of Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to the Guarantor at the addresses
provided for in Section 10.6 of the Credit Agreement and service so made shall
be deemed to be completed upon actual receipt thereof. The Guarantor
-6-
<PAGE>
waives any objection to jurisdiction and venue of any action instituted against
him as provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue.
Witness the due execution hereof, as of the day first written above.
ATTEST: CORDESYS HEALTHCARE
MANAGEMENT, INC.
By: /s/ Pam Colin By: /s/ J. Jeffrey Fox
---------------------- ----------------------------
Title:___________________ Title: CFO
-------------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by INFUSION THERAPY OF
ONTARIO, INC., a California corporation ("GUARANTOR") in favor of PNC BANK,
NATIONAL ASSOCIATION, as agent for the Banks (the "AGENT"), with an address at
One PNC Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full,
<PAGE>
prompt and punctual payment, as and when due, whether at maturity, by
acceleration or otherwise, of any and all existing and future indebtedness,
obligations or liabilities of the Borrowers arising under or in connection with
the Loan Documents, as the same may be amended, modified, extended, restated,
replaced, renewed, refunded or supplemented. "GUARANTEED INDEBTEDNESS" shall
mean any and all indebtedness, obligations or liabilities described in the
previous sentence, whether in whole or in part, and shall include, but not be
limited to, (i) all principal amounts due, together with any interest accruing
thereon and any and all fees and expenses (including attorneys' fees and
expenses) incurred in connection therewith, and (ii) all amounts that would be
due if effect were not given to the bankruptcy, insolvency or other similar laws
of general application relating to the enforcement of creditors' rights or to
general principles of equity; plus all interest, costs and expenses (including
attorneys' fees) which may accrue or be incurred on account of any liability of
any of the Borrowers to Agent, or in attempting to collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection with the enforcement of the Banks' rights hereunder or
which would otherwise not have been incurred but for the Guaranteed
Indebtedness.
-2-
<PAGE>
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect to any of the Guaranteed Indebtedness; (b)
presentment for payment, notice of non-payment or non-performance, demand,
protest, notice of protest and notice of dishonor or default to anyone; (c)
defenses to pay or perform based upon any of the Guaranteed Indebtedness not
being a valid and binding obligation of the Borrowers enforceable in accordance
with its terms for any reason whatsoever; (d) all other notices to which the
Guarantor may be entitled but which may legally be waived; (e) any disability of
the Borrowers (other than payment in full) including absence or cessation of
liability for any reason whatsoever; (f) any defense or circumstance which might
otherwise constitute a legal or equitable discharge of a guarantor or surety;
and (g) all rights under any state or federal statute dealing with or affecting
the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity is or was necessary to the valid execution and
delivery of this Guaranty or the Guarantor's performance of its agreements
and obligations hereunder.
-3-
<PAGE>
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to the Agent from time to time is, or will be at the time
such information is furnished, true, correct and complete in all material
respects; the Guarantor has good and marketable title to all properties,
assets and other rights which the Guarantor purports to own or which are
reflected as owned in the Guarantor's books and records, free and clear of
all liens except as previously disclosed in writing to the Agent pursuant
to the Credit Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is
-4-
<PAGE>
not intended to be exhaustive and the exercise by the Agent and the Banks of any
right or remedy shall not preclude the exercise of any other rights or remedies,
all of which shall be cumulative and shall be in addition to any other right or
remedy given hereunder or under any other agreement between the parties or which
may now or hereafter exist at law or in equity or by suit or otherwise. No
delay on the part of the Agent or any Bank in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any default. No course of dealing between any of
the Borrowers, the Guarantor, the Agent or the Banks or any of the Banks' agents
or employees shall be effective to change, modify or discharge any provision of
this Guaranty or to constitute a waiver of any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated; provided, however, that this Guaranty shall be
reinstated (as the case may be) if at any time any payment of any of the
Guaranteed Indebtedness made by the Borrowers or the Guarantor
-5-
<PAGE>
or the proceeds of any enforcement of any security interest of Agent or any
allocation by the Agent and the Banks of payments received is subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or is required to be repaid or otherwise restored to the
Borrowers, the Guarantor, a trustee, an estate receiver or any other person
under any law, including without limitation any bankruptcy law, state or federal
law, common law or equity, all as though such payment, enforcement or allocation
had not been made, and all as determined by the Agent and the Banks. Nothing
set forth in this paragraph is intended to expand on or increase the definition
of Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to the Guarantor at the addresses
provided for in Section 10.6 of the Credit Agreement and service so made shall
be deemed to be completed upon actual receipt thereof. The Guarantor
-6-
<PAGE>
waives any objection to jurisdiction and venue of any action instituted against
him as provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue.
Witness the due execution hereof, as of the day first written above.
ATTEST: INFUSION THERAPY OF
ONTARIO, INC.
By: /s/ Pam Colin By: /s/ Dan W. Bramuchi
---------------------- -------------------------
Title:____________________ Title: Secretary
------------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by OPTION CARE HOSPICE, INC.,
a Missouri corporation ("GUARANTOR") in favor of PNC BANK, NATIONAL ASSOCIATION,
as agent for the Banks (the "AGENT"), with an address at One PNC Plaza, 249 5th
Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
<PAGE>
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or otherwise, of any and all existing and future
indebtedness, obligations or liabilities of the Borrowers arising under or in
connection with the Loan Documents, as the same may be amended, modified,
extended, restated, replaced, renewed, refunded or supplemented. "GUARANTEED
INDEBTEDNESS" shall mean any and all indebtedness, obligations or liabilities
described in the previous sentence, whether in whole or in part, and shall
include, but not be limited to, (i) all principal amounts due, together with
any interest accruing thereon and any and all fees and expenses (including
attorneys' fees and expenses) incurred in connection therewith, and (ii) all
amounts that would be due if effect were not given to the bankruptcy, insolvency
or other similar laws of general application relating to the enforcement of
creditors' rights or to general principles of equity; plus all interest, costs
and expenses (including attorneys' fees) which may accrue or be incurred on
account of any liability of any of the Borrowers to Agent, or in attempting to
collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection
-2-
<PAGE>
with the enforcement of the Banks' rights hereunder or which would otherwise not
have been incurred but for the Guaranteed Indebtedness.
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect to any of the Guaranteed Indebtedness; (b)
presentment for payment, notice of non-payment or non-performance, demand,
protest, notice of protest and notice of dishonor or default to anyone; (c)
defenses to pay or perform based upon any of the Guaranteed Indebtedness not
being a valid and binding obligation of the Borrowers enforceable in accordance
with its terms for any reason whatsoever; (d) all other notices to which the
Guarantor may be entitled but which may legally be waived; (e) any disability of
the Borrowers (other than payment in full) including absence or cessation of
liability for any reason whatsoever; (f) any defense or circumstance which might
otherwise constitute a legal or equitable discharge of a guarantor or surety;
and (g) all rights under any state or federal statute dealing with or affecting
the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity
-3-
<PAGE>
is or was necessary to the valid execution and delivery of this Guaranty or
the Guarantor's performance of its agreements and obligations hereunder.
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to the Agent from time to time is, or will be at the time
such information is furnished, true, correct and complete in all material
respects; the Guarantor has good and marketable title to all properties,
assets and other rights which the Guarantor purports to own or which are
reflected as owned in the Guarantor's books and records, free and clear of
all liens except as previously disclosed in writing to the Agent pursuant
to the Credit Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
-4-
<PAGE>
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is not intended to be exhaustive and the exercise by the
Agent and the Banks of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement between the parties or which may now or hereafter exist at law or in
equity or by suit or otherwise. No delay on the part of the Agent or any Bank
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any default. No
course of dealing between any of the Borrowers, the Guarantor, the Agent or the
Banks or any of the Banks' agents or employees shall be effective to change,
modify or discharge any provision of this Guaranty or to constitute a waiver of
any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated;
-5-
<PAGE>
provided, however, that this Guaranty shall be reinstated (as the case may be)
if at any time any payment of any of the Guaranteed Indebtedness made by the
Borrowers or the Guarantor or the proceeds of any enforcement of any security
interest of Agent or any allocation by the Agent and the Banks of payments
received is subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or is required to be repaid or otherwise
restored to the Borrowers, the Guarantor, a trustee, an estate receiver or any
other person under any law, including without limitation any bankruptcy law,
state or federal law, common law or equity, all as though such payment,
enforcement or allocation had not been made, and all as determined by the Agent
and the Banks. Nothing set forth in this paragraph is intended to expand on or
increase the definition of Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to
-6-
<PAGE>
the Guarantor at the addresses provided for in Section 10.6 of the Credit
Agreement and service so made shall be deemed to be completed upon actual
receipt thereof. The Guarantor waives any objection to jurisdiction and venue
of any action instituted against him as provided herein and agrees not to assert
any defense based on lack of jurisdiction or venue.
Witness the due execution hereof, as of the day first written above.
ATTEST: OPTION CARE HOSPICE, INC.
By: /s/ Pam Colin By: /s/ J. Jeffrey Fox
----------------------- -------------------------
Title:____________________ Title: CFO
----------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by OPTION CARE HOME HEALTH,
INC., an Ohio corporation ("GUARANTOR") in favor of PNC BANK, NATIONAL
ASSOCIATION, as agent for the Banks (the "AGENT"), with an address at One PNC
Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
<PAGE>
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or otherwise, of any and all existing and future
indebtedness, obligations or liabilities of the Borrowers arising under or in
connection with the Loan Documents, as the same may be amended, modified,
extended, restated, replaced, renewed, refunded or supplemented. "GUARANTEED
INDEBTEDNESS" shall mean any and all indebtedness, obligations or liabilities
described in the previous sentence, whether in whole or in part, and shall
include, but not be limited to, (i) all principal amounts due, together with
any interest accruing thereon and any and all fees and expenses (including
attorneys' fees and expenses) incurred in connection therewith, and (ii) all
amounts that would be due if effect were not given to the bankruptcy, insolvency
or other similar laws of general application relating to the enforcement of
creditors' rights or to general principles of equity; plus all interest, costs
and expenses (including attorneys' fees) which may accrue or be incurred on
account of any liability of any of the Borrowers to Agent, or in attempting to
collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection
-2-
<PAGE>
with the enforcement of the Banks' rights hereunder or which would otherwise not
have been incurred but for the Guaranteed Indebtedness.
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect to any of the Guaranteed Indebtedness; (b)
presentment for payment, notice of non-payment or non-performance, demand,
protest, notice of protest and notice of dishonor or default to anyone; (c)
defenses to pay or perform based upon any of the Guaranteed Indebtedness not
being a valid and binding obligation of the Borrowers enforceable in accordance
with its terms for any reason whatsoever; (d) all other notices to which the
Guarantor may be entitled but which may legally be waived; (e) any disability of
the Borrowers (other than payment in full) including absence or cessation of
liability for any reason whatsoever; (f) any defense or circumstance which might
otherwise constitute a legal or equitable discharge of a guarantor or surety;
and (g) all rights under any state or federal statute dealing with or affecting
the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity
-3-
<PAGE>
is or was necessary to the valid execution and delivery of this Guaranty or
the Guarantor's performance of its agreements and obligations hereunder.
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to the Agent from time to time is, or will be at the time
such information is furnished, true, correct and complete in all material
respects; the Guarantor has good and marketable title to all properties,
assets and other rights which the Guarantor purports to own or which are
reflected as owned in the Guarantor's books and records, free and clear of
all liens except as previously disclosed in writing to the Agent pursuant
to the Credit Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
-4-
<PAGE>
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is not intended to be exhaustive and the exercise by the
Agent and the Banks of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement between the parties or which may now or hereafter exist at law or in
equity or by suit or otherwise. No delay on the part of the Agent or any Bank
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any default. No
course of dealing between any of the Borrowers, the Guarantor, the Agent or the
Banks or any of the Banks' agents or employees shall be effective to change,
modify or discharge any provision of this Guaranty or to constitute a waiver of
any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated;
-5-
<PAGE>
provided, however, that this Guaranty shall be reinstated (as the case may be)
if at any time any payment of any of the Guaranteed Indebtedness made by the
Borrowers or the Guarantor or the proceeds of any enforcement of any security
interest of Agent or any allocation by the Agent and the Banks of payments
received is subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or is required to be repaid or otherwise
restored to the Borrowers, the Guarantor, a trustee, an estate receiver or any
other person under any law, including without limitation any bankruptcy law,
state or federal law, common law or equity, all as though such payment,
enforcement or allocation had not been made, and all as determined by the Agent
and the Banks. Nothing set forth in this paragraph is intended to expand on or
increase the definition of Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to
-6-
<PAGE>
the Guarantor at the addresses provided for in Section 10.6 of the Credit
Agreement and service so made shall be deemed to be completed upon actual
receipt thereof. The Guarantor waives any objection to jurisdiction and venue
of any action instituted against him as provided herein and agrees not to assert
any defense based on lack of jurisdiction or venue.
Witness the due execution hereof, as of the day first written above.
ATTEST: OPTION CARE HOME
HEALTH, INC.
By: /s/ Pam Colin By: /s/ J. Jeffrey Fox
-------------------------- -------------------------
Title:_______________________ Title: CFO
---------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by MANAGEMENT BY INFORMATION,
INC., a Delaware corporation ("GUARANTOR") in favor of PNC BANK, NATIONAL
ASSOCIATION, as agent for the Banks (the "AGENT"), with an address at One PNC
Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
<PAGE>
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or otherwise, of any and all existing and future
indebtedness, obligations or liabilities of the Borrowers arising under or in
connection with the Loan Documents, as the same may be amended, modified,
extended, restated, replaced, renewed, refunded or supplemented. "GUARANTEED
INDEBTEDNESS" shall mean any and all indebtedness, obligations or liabilities
described in the previous sentence, whether in whole or in part, and shall
include, but not be limited to, (i) all principal amounts due, together with
any interest accruing thereon and any and all fees and expenses (including
attorneys' fees and expenses) incurred in connection therewith, and (ii) all
amounts that would be due if effect were not given to the bankruptcy, insolvency
or other similar laws of general application relating to the enforcement of
creditors' rights or to general principles of equity; plus all interest, costs
and expenses (including attorneys' fees) which may accrue or be incurred on
account of any liability of any of the Borrowers to Agent, or in attempting to
collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection
-2-
<PAGE>
with the enforcement of the Banks' rights hereunder or which would otherwise not
have been incurred but for the Guaranteed Indebtedness.
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect to any of the Guaranteed Indebtedness; (b)
presentment for payment, notice of non-payment or non-performance, demand,
protest, notice of protest and notice of dishonor or default to anyone; (c)
defenses to pay or perform based upon any of the Guaranteed Indebtedness not
being a valid and binding obligation of the Borrowers enforceable in accordance
with its terms for any reason whatsoever; (d) all other notices to which the
Guarantor may be entitled but which may legally be waived; (e) any disability of
the Borrowers (other than payment in full) including absence or cessation of
liability for any reason whatsoever; (f) any defense or circumstance which might
otherwise constitute a legal or equitable discharge of a guarantor or surety;
and (g) all rights under any state or federal statute dealing with or affecting
the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity
-3-
<PAGE>
is or was necessary to the valid execution and delivery of this Guaranty or
the Guarantor's performance of its agreements and obligations hereunder.
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to the Agent from time to time is, or will be at the time
such information is furnished, true, correct and complete in all material
respects; the Guarantor has good and marketable title to all properties,
assets and other rights which the Guarantor purports to own or which are
reflected as owned in the Guarantor's books and records, free and clear of
all liens except as previously disclosed in writing to the Agent pursuant
to the Credit Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Upon any such
default, the Banks shall have and may exercise all the rights and remedies as
may be provided hereunder, by law or otherwise.
-4-
<PAGE>
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is not intended to be exhaustive and the exercise by the
Agent and the Banks of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement between the parties or which may now or hereafter exist at law or in
equity or by suit or otherwise. No delay on the part of the Agent or any Bank
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any default. No
course of dealing between any of the Borrowers, the Guarantor, the Agent or the
Banks or any of the Banks' agents or employees shall be effective to change,
modify or discharge any provision of this Guaranty or to constitute a waiver of
any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated;
-5-
<PAGE>
provided, however, that this Guaranty shall be reinstated (as the case may be)
if at any time any payment of any of the Guaranteed Indebtedness made by the
Borrowers or the Guarantor or the proceeds of any enforcement of any security
interest of Agent or any allocation by the Agent and the Banks of payments
received is subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or is required to be repaid or otherwise
restored to the Borrowers, the Guarantor, a trustee, an estate receiver or any
other person under any law, including without limitation any bankruptcy law,
state or federal law, common law or equity, all as though such payment,
enforcement or allocation had not been made, and all as determined by the Agent
and the Banks. Nothing set forth in this paragraph is intended to expand on or
increase the definition of Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western District of Pennsylvania, and waives personal service of
any and all process upon him and consents that all such services of process be
made by certified or registered mail directed to
-6-
<PAGE>
the Guarantor at the addresses provided for in Section 10.6 of the Credit
Agreement and service so made shall be deemed to be completed upon actual
receipt thereof. The Guarantor waives any objection to jurisdiction and venue
of any action instituted against him as provided herein and agrees not to assert
any defense based on lack of jurisdiction or venue.
Witness the due execution hereof, as of the day first written above.
ATTEST: MANAGEMENT BY INFORMATION,
INC.
By: /s/ Pam Colin By: /s/ J. Jeffrey Fox
----------------------- -------------------------
Title:____________________ Title: CFO
----------------------
-7-
<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT ("GUARANTY") is made and
entered into as of the 23rd day of December, 1996, by OPTION CARE OF OKLAHOMA,
INC., a Delaware corporation ("GUARANTOR") in favor of PNC BANK, NATIONAL
ASSOCIATION, as agent for the Banks (the "AGENT"), with an address at One PNC
Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
WITNESSETH THAT:
WHEREAS, the Guarantor and certain of its affiliates, as Borrowers,
the Agent and the other Banks party thereto have entered into that certain
Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant
to which the Banks agreed to make certain Loans to the Borrowers for the purpose
of, among other things, funding the working capital requirements of the
Borrowers;
WHEREAS, it is a condition to the Loans that each of the co-Borrowers
guaranty all obligations arising under the Loan Documents (as that term is
defined in the Credit Agreement); and
WHEREAS, the Guarantor will benefit directly by the execution of the
Credit Agreement;
NOW THEREFORE, in order to induce the Banks to enter into the Credit
Agreement, and intending to be legally bound hereby, the Guarantor hereby agrees
as follows:
<PAGE>
1. Defined terms used in this Guaranty shall have the same meaning
ascribed thereto in the Credit Agreement unless the context clearly indicates
otherwise.
2. The Guarantor hereby guaranties, absolutely and unconditionally,
and does hereby become surety for, the due performance including, but not
limited to, the full, prompt and punctual payment, as and when due, whether at
maturity, by acceleration or otherwise, of any and all existing and future
indebtedness, obligations or liabilities of the Borrowers arising under or in
connection with the Loan Documents, as the same may be amended, modified,
extended, restated, replaced, renewed, refunded or supplemented. "GUARANTEED
INDEBTEDNESS" shall mean any and all indebtedness, obligations or liabilities
described in the previous sentence, whether in whole or in part, and shall
include, but not be limited to, (i) all principal amounts due, together with
any interest accruing thereon and any and all fees and expenses (including
attorneys' fees and expenses) incurred in connection therewith, and (ii) all
amounts that would be due if effect were not given to the bankruptcy, insolvency
or other similar laws of general application relating to the enforcement of
creditors' rights or to general principles of equity; plus all interest, costs
and expenses (including attorneys' fees) which may accrue or be incurred on
account of any liability of any of the Borrowers to Agent, or in attempting to
collect the same.
3. The Guarantor hereby agrees and acknowledges that its obligations
and liabilities to the Agent hereunder are part of the Guaranteed Indebtedness
and that its obligations and liabilities are secured by the Loan Documents to
which the Guarantor is a party.
4. The Guarantor hereby agrees that this Guaranty is continuing in
nature and shall survive and continue in full force notwithstanding the
dissolution or liquidation of, or the insolvency or bankruptcy of, merger or any
other corporate change or other occurrence whatsoever affecting the obligations
and liabilities of the Borrowers, regardless of when any indebtedness to the
Banks may accrue or be deemed to accrue.
5. The Guarantor agrees that its obligations under this Guaranty are
absolute and unconditional and shall not be affected in any way by any event or
occurrence, including, but not limited to (a) any failure or delay to exercise
any right, power or privilege hereunder; (b) any single or partial exercise of
any right, power or privilege hereunder; and (c) any failure to insist upon
strict performance hereunder.
6. The Guarantor agrees that this is a guaranty of performance and
payment and not merely of collection; that in the event of any default or the
occurrence or existence of a default under the Loan Documents or failure of the
Borrowers to perform any of their respective obligations, whether of payment or
otherwise, under or with respect to any of the Guaranteed Indebtedness, the
Guarantor will perform said obligations without offset of any kind and without
any requirement that any rights or remedies which may have been pursued against
the Borrowers and regardless of the existence or adequacy of rights or remedies
against the Borrowers; and that in any right of action accruing to the Agent or
the Banks, the Agent or the Banks may elect to proceed against the Guarantor,
with or without joining or proceeding against the Borrowers.
-2-
<PAGE>
7. The Guarantor hereby agrees to reimburse the Agent and the Banks
for all costs and expenses, including reasonable attorneys' fees and expenses
incurred in connection with the enforcement of the Banks' rights hereunder or
which would otherwise not have been incurred but for the Guaranteed
Indebtedness.
8. The Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by applicable law: (a) notice of acceptance of this
Guaranty and any notice regarding the performance or non-performance of the
Borrowers or any of them with respect to any of the Guaranteed Indebtedness; (b)
presentment for payment, notice of non-payment or non-performance, demand,
protest, notice of protest and notice of dishonor or default to anyone; (c)
defenses to pay or perform based upon any of the Guaranteed Indebtedness not
being a valid and binding obligation of the Borrowers enforceable in accordance
with its terms for any reason whatsoever; (d) all other notices to which the
Guarantor may be entitled but which may legally be waived; (e) any disability of
the Borrowers (other than payment in full) including absence or cessation of
liability for any reason whatsoever; (f) any defense or circumstance which might
otherwise constitute a legal or equitable discharge of a guarantor or surety;
and (g) all rights under any state or federal statute dealing with or affecting
the rights of creditors.
9. The Guarantor hereby agrees that the Agent or the Banks without
notice to the Guarantor, may deal with the Guaranteed Indebtedness and any
collateral security therefor in such manner the Agent or the Banks may deem
advisable and may renew, extend or increase the Guaranteed Indebtedness or any
part thereof; accept partial payment, or settle, release, compound, or
compromise the same; demand additional collateral security therefor, and
substitute or release the same; and may compromise or settle with or release and
discharge from liability any other guarantor or any other person totally or
partially liable to the Agent or the Banks for the obligations, debts and
liabilities of the Borrowers to the Agent and the Banks, all without impairing
the liability of the Guarantor hereunder.
10. Until the Guaranteed Indebtedness is indefeasibly paid in full,
the Guaranteed Indebtedness will be subordinated pursuant to the Intercompany
Subordination Agreement.
11. The Guarantor hereby represents, warrants and covenants to Agent
as follows:
(a) The Guarantor has all necessary power and authority to execute,
deliver and perform in accordance with this Guaranty; the Guarantor has all
requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance of this Guaranty are not
in contravention of any law, order, judgment, decree or any indenture or
agreement to which the Guarantor is a party or by which Guarantor or the
Guarantor's property is bound; the Guaranty has been duly executed and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
-3-
<PAGE>
(c) No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with,
any person or entity is or was necessary to the valid execution and
delivery of this Guaranty or the Guarantor's performance of its agreements
and obligations hereunder.
(d) The Guarantor will promptly furnish to the Agent such information
and documents relating to the Guarantor's financial condition, assets or
liabilities, at such times and in such form and detail as Agent may
reasonably request.
(e) To the best knowledge of the Guarantor, all information set forth
in the financial statements and other documents and reports furnished by
the Guarantor to the Agent from time to time is, or will be at the time
such information is furnished, true, correct and complete in all material
respects; the Guarantor has good and marketable title to all properties,
assets and other rights which the Guarantor purports to own or which are
reflected as owned in the Guarantor's books and records, free and clear of
all liens except as previously disclosed in writing to the Agent pursuant
to the Credit Agreement, and except for Permitted Liens.
(f) The Guarantor will promptly notify Agent of any default under
this Guaranty or under the Loan Documents to which the Guarantor is a
party.
(g) Except as disclosed in Schedule 5.1.7 to the Credit Agreement,
there are no actions, suits, proceedings, or investigations pending or
threatened against or affecting the Guarantor, or the business or any asset
owned by the Guarantor, before any court or governmental department, agency
or instrumentality which are reasonably likely to have a material adverse
effect on the financial condition of the Guarantor.
(h) Except for guaranties of the obligations of the Borrowers, and
except as disclosed in the Credit Agreement, the Guarantor is not liable in
respect of any guaranties except this Guaranty. Except as permitted by the
Credit Agreement, the Guarantor agrees not to become liable in respect to
any other agreements guarantying obligations or indebtedness without the
prior written consent of the Agent.
(i) The Guarantor shall take all necessary action, at its own cost
and expense, to observe and perform its agreements and covenants, and keep
the representations and warranties true, correct and complete under this
Guaranty.
(j) The Guarantor's agreements, covenants, representations and
warranties under this Guaranty are continuing ones, shall at all times
remain true, correct and complete and shall at all times be observed and
performed.
12. The Guarantor hereby agrees that if there is an Event of Default
under the Credit Agreement, then the Guarantor shall be in default hereunder and
the Banks shall have the right to declare all or any part of the Guaranteed
Indebtedness to be due and payable. Except as expressly provided in the Loan
Documents, such declaration may be made without presentment, demand, protest or
notice of any kind, all of which are hereby expressly
-4-
<PAGE>
waived. Upon any such default, the Banks shall have and may exercise all the
rights and remedies as may be provided hereunder, by law or otherwise.
13. The enumeration of the Agent's and the Banks' rights and remedies
set forth in this Guaranty and in the other Loan Documents to which the
Guarantor is a party is not intended to be exhaustive and the exercise by the
Agent and the Banks of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement between the parties or which may now or hereafter exist at law or in
equity or by suit or otherwise. No delay on the part of the Agent or any Bank
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any default. No
course of dealing between any of the Borrowers, the Guarantor, the Agent or the
Banks or any of the Banks' agents or employees shall be effective to change,
modify or discharge any provision of this Guaranty or to constitute a waiver of
any default.
14. All notices, and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made in accordance with Section 10.6 of the Credit Agreement. Any party
hereto may change the address to which notice to it, or copies thereof, shall be
addressed, by giving notice thereof to the other parties hereto in conformity
with the foregoing.
15. Any deposits or other sums at any time credited by or due from
any office of the Agent or the Banks to the Guarantor (regardless of the
currency thereof and whether general or special, contingent or unmatured), and
any securities or other property of the Guarantor at any time in the possession
of any office of the Agent or the Banks, may at all times be treated as
collateral for the payment of this Guaranty. Regardless of the adequacy of
collateral, the Agent and the Banks may apply or set-off such deposits or other
sums against such liabilities, without notice or demand, at any time after any
default by the Borrowers in payment of the Guaranteed Indebtedness. Every right
of set-off and lien shall continue in full force and effect until full, final
and complete satisfaction of the Indebtedness.
16. This Guaranty is fully assignable and transferable by the Agent
to any permitted assignee under the Credit Agreement; however, the duties and
obligations of the Guarantor may not be delegated or transferred by the
Guarantor without the prior written consent of the Agent. The rights and
privileges of Agent hereunder shall inure to the benefit of the its successors
and assigns and the duties and obligations of the Guarantor shall bind the
Guarantor's legal representatives, heirs and permitted assigns.
17. This Guaranty shall in all respects be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of law doctrines.
18. The obligations of the Guarantor hereunder are joint and several
with the obligations of any other guarantor of all or any portion of the
Guaranteed Indebtedness.
-5-
<PAGE>
19. This Guaranty shall terminate only when the Guaranteed
Indebtedness is paid in full and the obligations of the Banks to lend to the
Borrowers have terminated; provided, however, that this Guaranty shall be
reinstated (as the case may be) if at any time any payment of any of the
Guaranteed Indebtedness made by the Borrowers or the Guarantor or the proceeds
of any enforcement of any security interest of Agent or any allocation by the
Agent and the Banks of payments received is subsequently invalidated, declared
to be fraudulent or preferential, set aside, recovered from, disgorged by or is
required to be repaid or otherwise restored to the Borrowers, the Guarantor, a
trustee, an estate receiver or any other person under any law, including without
limitation any bankruptcy law, state or federal law, common law or equity, all
as though such payment, enforcement or allocation had not been made, and all as
determined by the Agent and the Banks. Nothing set forth in this paragraph is
intended to expand on or increase the definition of Guaranteed Indebtedness.
20. If any provision of this Guaranty is held invalid or
unenforceable to any extent or in any application, the remainder of this
Guaranty, shall not be affected thereby.
21. Unless the context of this Guaranty otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or".
22. The Agent and the Guarantor may from time to time enter into
agreements amending, supplementing or modifying this Guaranty; provided,
however, that any such amendment, supplement or modification must be in a
writing, signed by the Agent and the Guarantor.
23. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY,
THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT OR INSTRUMENT NOW OR HEREAFTER EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THIS GUARANTY AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT NOW OR HEREAFTER EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER
OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
_______
INITIAL
25. The Guarantor hereby irrevocably consents to the jurisdiction of
the Court of Common Pleas of Allegheny County and the United States District
Court for the Western
-6-
<PAGE>
District of Pennsylvania, and waives personal service of any and all process
upon him and consents that all such services of process be made by certified or
registered mail directed to the Guarantor at the addresses provided for in
Section 10.6 of the Credit Agreement and service so made shall be deemed to be
completed upon actual receipt thereof. The Guarantor waives any objection to
jurisdiction and venue of any action instituted against him as provided herein
and agrees not to assert any defense based on lack of jurisdiction or venue.
Witness the due execution hereof, as of the day first written above.
ATTEST: OPTION CARE OF OKLAHOMA,
INC.
By: /s/ Pam Colin By: /s/ Dan W. Bramuchi
----------------------- -------------------------
Title:____________________ Title: PRESIDENT
----------------------
-7-
<PAGE>
REVOLVING CREDIT NOTE
$5,000,000.00 Pittsburgh, Pennsylvania
December 23, 1996
FOR VALUE RECEIVED, the undersigned, OPTION CARE, INC., a Delaware
corporation; OPTION CARE, INC., a California corporation; OPTION CARE
ENTERPRISES, INC., a California corporation; PHARMACARE OF SOUTHWEST FLORIDA,
INC., a Florida corporation; PHARMACY I.V. ASSOCIATES, INC., a Missouri
corporation; HOME CARE OF COLUMBIA, INC., a Missouri corporation; YOUNG'S I.V.
THERAPY, INC., a Pennsylvania corporation; HOME INFUSION THERAPY OF BULLHEAD
CITY, INC., a Delaware corporation; WHATCOM PHARMACEUTICAL SERVICES, INC., a
Washington corporation; CORDESYS HEALTHCARE MANAGEMENT, INC., a Delaware
corporation; INFUSION THERAPY OF ONTARIO, INC., a California corporation; OPTION
CARE HOSPICE, INC., a Missouri corporation; OPTION CARE HOME HEALTH, INC., an
Ohio corporation; MANAGEMENT BY INFORMATION, INC., a Delaware corporation; and
OPTION CARE OF OKLAHOMA, INC., a Delaware corporation (collectively and jointly
and severally, the "BORROWERS"), hereby promise to pay to the order of PNC BANK,
NATIONAL ASSOCIATION as agent (the "AGENT") for THE NORTHERN TRUST COMPANY the
lesser of (i) the principal sum of Five Million Dollars (U.S. $5,000,000.00), or
(ii) its Ratable Share of the aggregate unpaid principal balance of all Loans
made by the Banks (as that term is defined in the Credit Agreement, defined
herein) to the Borrower pursuant to Section 2.01 of the Credit Agreement dated
as of December 23, 1996 between the Borrowers, the Agent, and the Banks (the
"CREDIT AGREEMENT"), whichever is less, payable on the Expiration Date. All
terms capitalized but not otherwise defined shall have the meanings ascribed to
such terms in the Credit Agreement, unless the context otherwise requires.
The Borrower shall pay interest on the unpaid principal balance hereof
from time to time outstanding from the date hereof at the rate or rates per
annum specified by the Borrower pursuant to Section 3.1 of, or as otherwise
provided in, the Credit Agreement. Interest payments shall be made at the times
specified in Section 4.3 of, or as otherwise provided in, the Credit Agreement.
Upon the occurrence and during the continuation of an Event of
Default, the Borrower shall pay interest on the entire principal amount of the
then outstanding Loans evidenced by this Revolving Credit Note (the "NOTE") at a
rate per annum equal to two hundred basis points (2% per annum) above the rate
of interest otherwise applicable with respect to such Loans. Such interest rate
will accrue before and after any judgment has been entered.
Interest not paid when due shall be added to principal and accrue
interest accordingly.
<PAGE>
If any payment or action to be made or taken hereunder shall be stated
to be or become due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.
Subject to the provisions of the Credit Agreement, payments of
principal, interest, Commitment Fees, Facility Fee, Letter of Credit Fees,
Agent's Fee or other fees or amounts due from the Borrowers shall be made
without setoff, counterclaim or other deduction of any nature at the office of
the Agent located in Pittsburgh, Pennsylvania, prior to 1:00 p.m., Pittsburgh
time, on the date when due and in lawful money of the United States of America
in immediately available funds.
This Note is a Note referred to in, and is entitled to the benefits
of, the Credit Agreement and other Loan Documents, including the
representations, warranties, covenants, conditions, security interests or Liens
contained or granted therein. The Credit Agreement among other things contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayment, in certain circumstances, on account of
principal hereof prior to maturity upon the terms and conditions therein
specified.
Except as otherwise provided in the Credit Agreement, the Borrowers
waive presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Credit Agreement.
This Note shall bind the Borrowers and its successors and assigns, and
the benefits hereof shall inure to the benefit of the Bank and its successors
and assigns. All references herein to the "BORROWERS" and the "BANK" shall be
deemed to apply to the Borrowers and the Bank, respectively, and their
respective successors and assigns.
This Note and any other documents delivered in connection herewith and
the rights and obligations of the parties hereto and thereto shall for all
purposes be governed by and construed and enforced in accordance with the
internal laws of the Commonwealth of Pennsylvania without giving effect to its
conflicts of law principles.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Note by their
duly authorized officers with the intention that it constitute a sealed
instrument.
ATTEST: OPTION CARE, INC., a Delaware
corporation
/s/ Pam Colin By: /s/ J. Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
ATTEST: OPTION CARE, INC., a California
corporation
/s/ Pam Colin By: /s/ J. Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
ATTEST: OPTION CARE ENTERPRISES, INC.
/s/ Pam Colin By: /s/ J. Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
ATTEST: PHARMACARE OF SOUTHWEST FLORIDA, INC.
/s/ Pam Colin By: /s/ J. Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
ATTEST: PHARMACY I.V. ASSOCIATES, INC.
/s/ Pam Colin By: /s/ J. Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
ATTEST: HOME CARE OF COLUMBIA, INC.
/s/ Pam Colin By: /s/ J. Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
-3-
<PAGE>
ATTEST: YOUNG'S I.V. THERAPY, INC.
/s/ Pam Colin By: /s/ J. Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
ATTEST: HOME INFUSION THERAPY OF BULLHEAD CITY,
INC.
/s/ Pam Colin By: /s/ J. Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
ATTEST: WHATCOM PHARMACEUTICAL SERVICES, INC.
/s/ Pam Colin By: /s/ J. Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
ATTEST: CORDESYS HEALTHCARE MANAGEMENT, INC.
/s/ Pam Colin By: /s/ J. Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
ATTEST: INFUSION THERAPY OF ONTARIO, INC.
/s/ Pam Colin By: /s/ Dan W. Bramuchi
- --------------------------- ----------------------------
Title: Title: SECRETARY
[Seal]
-4-
<PAGE>
ATTEST: OPTION CARE HOSPICE, INC.
/s/ Pam Colin By: /s/ Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
ATTEST: OPTION CARE HOME HEALTH, INC.
/s/ Pam Colin By: /s/ Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
ATTEST: MANAGEMENT BY INFORMATION, INC.
/s/ Pam Colin By: /s/ Jeffrey Fox
- --------------------------- ----------------------------
Title: Title: CFO
[Seal]
ATTEST: OPTION CARE OF OKLAHOMA, INC.
/s/ Pam Colin By: /s/ Dan W. Bramuchi
- --------------------------- ----------------------------
Title: Title: PRESIDENT
[Seal]
-5-
<PAGE>
REVOLVING CREDIT NOTE
$15,000,000.00 Pittsburgh, Pennsylvania
December 23, 1996
FOR VALUE RECEIVED, the undersigned, OPTION CARE, INC., a Delaware
corporation; OPTION CARE, INC., a California corporation; OPTION CARE
ENTERPRISES, INC., a California corporation; PHARMACARE OF SOUTHWEST FLORIDA,
INC., a Florida corporation; PHARMACY I.V. ASSOCIATES, INC., a Missouri
corporation; HOME CARE OF COLUMBIA, INC., a Missouri corporation; YOUNG'S I.V.
THERAPY, INC., a Pennsylvania corporation; HOME INFUSION THERAPY OF BULLHEAD
CITY, INC., a Delaware corporation; WHATCOM PHARMACEUTICAL SERVICES, INC., a
Washington corporation; CORDESYS HEALTHCARE MANAGEMENT, INC., a Delaware
corporation; INFUSION THERAPY OF ONTARIO, INC., a California corporation; OPTION
CARE HOSPICE, INC., a Missouri corporation; OPTION CARE HOME HEALTH, INC., an
Ohio corporation; MANAGEMENT BY INFORMATION, INC., a Delaware corporation; and
OPTION CARE OF OKLAHOMA, INC., a Delaware corporation (collectively and jointly
and severally, the "BORROWERS"), hereby promise to pay to the order of PNC BANK,
NATIONAL ASSOCIATION as agent (the "AGENT") for PNC BANK, NATIONAL ASSOCIATION
the lesser of (i) the principal sum of Fifteen Million Dollars (U.S.
$15,000,000.00), or (ii) its Ratable Share of the aggregate unpaid principal
balance of all Loans made by the Banks (as that term is defined in the Credit
Agreement, defined herein) to the Borrower pursuant to Section 2.01 of the
Credit Agreement dated as of December 23, 1996 between the Borrowers, the Agent,
and the Banks (the "CREDIT AGREEMENT"), whichever is less, payable on the
Expiration Date. All terms capitalized but not otherwise defined shall have the
meanings ascribed to such terms in the Credit Agreement, unless the context
otherwise requires.
The Borrower shall pay interest on the unpaid principal balance hereof
from time to time outstanding from the date hereof at the rate or rates per
annum specified by the Borrower pursuant to Section 3.1 of, or as otherwise
provided in, the Credit Agreement. Interest payments shall be made at the times
specified in Section 4.3 of, or as otherwise provided in, the Credit Agreement.
Upon the occurrence and during the continuation of an Event of
Default, the Borrower shall pay interest on the entire principal amount of the
then outstanding Loans evidenced by this Revolving Credit Note (the "NOTE") at a
rate per annum equal to two hundred basis points (2% per annum) above the rate
of interest otherwise applicable with respect to such Loans. Such interest rate
will accrue before and after any judgment has been entered.
Interest not paid when due shall be added to principal and accrue
interest accordingly.
<PAGE>
If any payment or action to be made or taken hereunder shall be stated
to be or become due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.
Subject to the provisions of the Credit Agreement, payments of
principal, interest, Commitment Fees, Facility Fee, Letter of Credit Fees,
Agent's Fee or other fees or amounts due from the Borrowers shall be made
without setoff, counterclaim or other deduction of any nature at the office of
the Agent located in Pittsburgh, Pennsylvania, prior to 1:00 p.m., Pittsburgh
time, on the date when due and in lawful money of the United States of America
in immediately available funds.
This Note is a Note referred to in, and is entitled to the benefits
of, the Credit Agreement and other Loan Documents, including the
representations, warranties, covenants, conditions, security interests or Liens
contained or granted therein. The Credit Agreement among other things contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayment, in certain circumstances, on account of
principal hereof prior to maturity upon the terms and conditions therein
specified.
Except as otherwise provided in the Credit Agreement, the Borrowers
waive presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Credit Agreement.
This Note shall bind the Borrowers and its successors and assigns, and
the benefits hereof shall inure to the benefit of the Bank and its successors
and assigns. All references herein to the "BORROWERS" and the "BANK" shall be
deemed to apply to the Borrowers and the Bank, respectively, and their
respective successors and assigns.
This Note and any other documents delivered in connection herewith and
the rights and obligations of the parties hereto and thereto shall for all
purposes be governed by and construed and enforced in accordance with the
internal laws of the Commonwealth of Pennsylvania without giving effect to its
conflicts of law principles.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Note by their
duly authorized officers with the intention that it constitute a sealed
instrument.
ATTEST: OPTION CARE, INC.,
a Delaware corporation
/s/ Pam Colin By:/s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Title: Title: CFO
[Seal]
ATTEST: OPTION CARE, INC.,
a California corporation
/s/ Pam Colin By:/s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Title: Title:CFO
[Seal]
ATTEST: OPTION CARE ENTERPRISES, INC.
/s/ Pam Colin By:/s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Title: Title: CFO
[Seal]
ATTEST: PHARMACARE OF SOUTHWEST
FLORIDA, INC.
/s/ Pam Colin By:/s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Title: Title: CFO
[Seal]
ATTEST: PHARMACY I.V. ASSOCIATES, INC.
/s/ Pam Colin By:/s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Title: Title: CFO
[Seal]
ATTEST: HOME CARE OF COLUMBIA, INC.
/s/ Pam Colin By:/s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Title: Title: CFO
[Seal]
-3-
<PAGE>
ATTEST: YOUNG'S I.V. THERAPY, INC.
/s/ Pam Colin By:/s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Title: Title: CFO
[Seal]
ATTEST: HOME INFUSION THERAPY OF
BULLHEAD CITY, INC.
/s/ Pam Colin By:/s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Title: Title: CFO
[Seal]
ATTEST: WHATCOM PHARMACEUTICAL
SERVICES, INC.
/s/ Pam Colin By:/s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Title: Title: CFO
[Seal]
ATTEST: CORDESYS HEALTHCARE
MANAGEMENT, INC.
/s/ Pam Colin By:/s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Title: Title: CFO
[Seal]
ATTEST: INFUSION THERAPY OF ONTARIO,
INC.
/s/ Pam Colin By: /s/ Dan W. Bramuchi
- ------------------------- ------------------------------
Title: Title: CFO
[Seal]
-4-
<PAGE>
ATTEST: OPTION CARE HOSPICE, INC.
/s/ Pam Colin By:/s/ J. Jeffery Fox
- ------------------------- ------------------------------
Title: Title:
[Seal]
ATTEST: OPTION CARE HOME HEALTH,
INC.
/s/ Pam Colin By:/s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Title: Title:
[Seal]
ATTEST: MANAGEMENT BY INFORMATION,
INC.
/s/ Pam Colin By:/s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Title: Title:
[Seal]
ATTEST: OPTION CARE OF OKLAHOMA,
INC.
/s/ Pam Colin By:/s/ Dan W. Bramuchi
- ------------------------- ------------------------------
Title: Title:
[Seal]
-5-
<PAGE>
REVOLVING CREDIT NOTE
$10,000,000.00 Pittsburgh, Pennsylvania
December 23, 1996
FOR VALUE RECEIVED, the undersigned, OPTION CARE, INC., a Delaware
corporation; OPTION CARE, INC., a California corporation; OPTION CARE
ENTERPRISES, INC., a California corporation; PHARMACARE OF SOUTHWEST FLORIDA,
INC., a Florida corporation; PHARMACY I.V. ASSOCIATES, INC., a Missouri
corporation; HOME CARE OF COLUMBIA, INC., a Missouri corporation; YOUNG'S I.V.
THERAPY, INC., a Pennsylvania corporation; HOME INFUSION THERAPY OF BULLHEAD
CITY, INC., a Delaware corporation; WHATCOM PHARMACEUTICAL SERVICES, INC., a
Washington corporation; CORDESYS HEALTHCARE MANAGEMENT, INC., a Delaware
corporation; INFUSION THERAPY OF ONTARIO, INC., a California corporation; OPTION
CARE HOSPICE, INC., a Missouri corporation; OPTION CARE HOME HEALTH, INC., an
Ohio corporation; MANAGEMENT BY INFORMATION, INC., a Delaware corporation; and
OPTION CARE OF OKLAHOMA, INC., a Delaware corporation (collectively and jointly
and severally, the "BORROWERS"), hereby promise to pay to the order of PNC BANK,
NATIONAL ASSOCIATION as agent (the "AGENT") for HARRIS TRUST AND SAVINGS BANK
the lesser of (i) the principal sum of Ten Million Dollars (U.S.
$10,000,000.00), or (ii) its Ratable Share of the aggregate unpaid principal
balance of all Loans made by the Banks (as that term is defined in the Credit
Agreement, defined herein) to the Borrower pursuant to Section 2.01 of the
Credit Agreement dated as of December 23, 1996 between the Borrowers, the Agent,
and the Banks (the "CREDIT AGREEMENT"), whichever is less, payable on the
Expiration Date. All terms capitalized but not otherwise defined shall have the
meanings ascribed to such terms in the Credit Agreement, unless the context
otherwise requires.
The Borrower shall pay interest on the unpaid principal balance hereof
from time to time outstanding from the date hereof at the rate or rates per
annum specified by the Borrower pursuant to Section 3.1 of, or as otherwise
provided in, the Credit Agreement. Interest payments shall be made at the times
specified in Section 4.3 of, or as otherwise provided in, the Credit Agreement.
Upon the occurrence and during the continuation of an Event of
Default, the Borrower shall pay interest on the entire principal amount of the
then outstanding Loans evidenced by this Revolving Credit Note (the "NOTE") at a
rate per annum equal to two hundred basis points (2% per annum) above the rate
of interest otherwise applicable with respect to such Loans. Such interest rate
will accrue before and after any judgment has been entered.
<PAGE>
Interest not paid when due shall be added to principal and accrue
interest accordingly.
If any payment or action to be made or taken hereunder shall be stated
to be or become due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.
Subject to the provisions of the Credit Agreement, payments of
principal, interest, Commitment Fees, Facility Fee, Letter of Credit Fees,
Agent's Fee or other fees or amounts due from the Borrowers shall be made
without setoff, counterclaim or other deduction of any nature at the office of
the Agent located in Pittsburgh, Pennsylvania, prior to 1:00 p.m., Pittsburgh
time, on the date when due and in lawful money of the United States of America
in immediately available funds.
This Note is a Note referred to in, and is entitled to the benefits
of, the Credit Agreement and other Loan Documents, including the
representations, warranties, covenants, conditions, security interests or Liens
contained or granted therein. The Credit Agreement among other things contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayment, in certain circumstances, on account of
principal hereof prior to maturity upon the terms and conditions therein
specified.
Except as otherwise provided in the Credit Agreement, the Borrowers
waive presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Credit Agreement.
This Note shall bind the Borrowers and its successors and assigns, and
the benefits hereof shall inure to the benefit of the Bank and its successors
and assigns. All references herein to the "BORROWERS" and the "BANK" shall be
deemed to apply to the Borrowers and the Bank, respectively, and their
respective successors and assigns.
This Note and any other documents delivered in connection herewith and
the rights and obligations of the parties hereto and thereto shall for all
purposes be governed by and construed and enforced in accordance with the
internal laws of the Commonwealth of Pennsylvania without giving effect to its
conflicts of law principles.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Note by their
duly authorized officers with the intention that it constitute a sealed
instrument.
ATTEST: OPTION CARE, INC.,
a Delaware corporation
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
ATTEST: OPTION CARE, INC.,
a California corporation
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
ATTEST: OPTION CARE ENTERPRISES, INC.
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
ATTEST: PHARMACARE OF SOUTHWEST
FLORIDA, INC.
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
ATTEST: PHARMACY I.V. ASSOCIATES, INC.
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
ATTEST: HOME CARE OF COLUMBIA, INC.
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
-3-
<PAGE>
ATTEST: YOUNG'S I.V. THERAPY, INC.
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
ATTEST: HOME INFUSION THERAPY OF
BULLHEAD CITY, INC.
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
ATTEST: WHATCOM PHARMACEUTICAL
SERVICES, INC.
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
ATTEST: CORDESYS HEALTHCARE
MANAGEMENT, INC.
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
ATTEST: INFUSION THERAPY OF ONTARIO,
INC.
/s/ Pam Colin /s/ Dan W. Bramuchi
- --------------------------- By: ---------------------------
Title: Title: Secretary
[Seal]
-4-
<PAGE>
ATTEST: OPTION CARE HOSPICE, INC.
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
ATTEST: OPTION CARE HOME HEALTH,
INC.
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
ATTEST: MANAGEMENT BY INFORMATION,
INC.
/s/ Pam Colin /s/ J. Jeffery Fox
- --------------------------- By: ---------------------------
Title: Title: CFO
[Seal]
ATTEST: OPTION CARE OF OKLAHOMA,
INC.
/s/ Pam Colin /s/ Dan W. Bramuchi
- --------------------------- By: ---------------------------
Title: Title: President
[Seal]
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "AGREEMENT") is entered into this 23rd day
of December, 1996, by and between OPTION CARE, INC., a Delaware corporation (the
"COMPANY"), and PNC BANK, NATIONAL ASSOCIATION, as agent for the Banks (the
"AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709.
WHEREAS, the Company, Option Care, Inc., the Subsidiaries of Option
Care, Inc., the Agent and the Banks have entered into that certain Credit
Agreement, dated as of even date herewith (as the same may be amended, restated
or otherwise modified from time to time, the "CREDIT AGREEMENT"), pursuant to
which the Banks have agreed to extend to the Borrowers, upon the terms and
subject to the conditions set forth therein, a revolving credit facility in an
aggregate principal amount not to exceed $30,000,000.
WHEREAS, the Company has executed a Guaranty and Suretyship Agreement
of even date herewith (the "GUARANTY") guarantying the obligations of Option
Care, Inc. and its subsidiaries under the Credit Agreement;
WHEREAS, in order to induce the Agent and the Banks to enter into the
Credit Agreement, the Company has agreed to enter into this Agreement for the
purpose of granting to the Agent, for the benefit of the Banks, a first priority
perfected lien on 100 percent of the shares of common stock of Option Care,
Inc., a California corporation, a first priority perfected lien on 100 percent
of the shares of common stock of Option Care Enterprises, Inc., a first priority
perfected lien on 100 percent of the shares of common stock of Cordesys
Healthcare Management, Inc., a first priority perfected lien on 100 percent of
the shares of common stock of Management By Information, Inc., a first priority
perfected lien on 100 percent of the shares of common stock of Option Care of
Oklahoma, Inc., and the shares of any Borrower who joins the Credit Agreement
after the date of this Agreement (collectively, the "PLEDGED SHARES"), described
in further detail on Schedule A attached hereto.
NOW, THEREFORE, in consideration of the Obligation (as that term is
defined in the Credit Agreement) and the Guaranteed Indebtedness (as that term
is defined in the Guaranty) and other good and valuable consideration, the
receipt of which is hereby acknowledged, and in order to induce the Agent and
the Banks to enter into the Credit Agreement, the parties hereto, intending to
be legally bound, agree as follows:
1. CERTAIN DEFINITIONS. Capitalized words and terms not otherwise
-------------------
defined herein which are defined in the Credit Agreement have the meanings
ascribed to such words and terms in the Credit Agreement. In addition to other
words and terms defined elsewhere in this Agreement, words and terms which are
defined in the Uniform Commercial Code are used
<PAGE>
herein as defined in the Uniform Commercial Code except where the context
otherwise requires, and the following words and terms shall have the following
meanings, respectively:
(a) "COLLATERAL" means (i) the Pledged Shares and all rights and
privileges pertaining thereto, including, without limitation, the shares of
capital stock, all securities and additional securities receivable in respect of
or in exchange for such shares or such securities, all rights to subscribe for
securities incident to or arising from ownership of such shares or such
securities, all cash, stock and other dividends or distributions paid or payable
on such shares or such securities, and all books and records pertaining to the
foregoing, (ii) all proceeds from sales, transfers or other dispositions, and
(iii) whatever is received when any of the foregoing is sold, exchanged or
otherwise disposed of, including any proceeds.
(b) "PRIOR SECURITY INTEREST" means an enforceable, perfected
security interest under the Uniform Commercial Code which is prior to all Liens,
except Liens for taxes not yet due and payable to the extent given priority by
statute and Permitted Liens.
2. GRANT OF SECURITY INTEREST. As security for the due and punctual
--------------------------
payment and performance of the Indebtedness and the Guaranteed Indebtedness in
accordance with the respective terms thereof, the Company, as debtor, hereby
delivers, pledges and grants to the Agent, as secured party, for the benefit of
the Banks, a security interest under the Uniform Commercial Code in and to any
and all of the Collateral.
3. STOCK CERTIFICATES AND STOCK POWERS. Upon the execution and
-----------------------------------
delivery of this Agreement, the Company has caused to be delivered to and
deposited with the Agent or its nominee or nominees, in pledge, stock
certificates and any other instruments evidencing the Collateral, together with
undated stock powers signed in blank by the Company.
4. VOTING RIGHTS. Notwithstanding the security interest in the
-------------
Collateral granted to and created in favor of the Agent for the benefit of the
Banks, the Company shall have the right, until the Agent forecloses upon the
Collateral, to exercise all voting and other shareholders' rights with respect
to the Collateral, subject to Section 5 hereof.
5. RIGHTS OF AGENT TO COLLATERAL. The Agent may at its option and
-----------------------------
at any time and from time to time (except as provided in subsections (c) and
(d)), without notice to or consent of the Company, whether or not an Event of
Default (as hereinafter defined) has occurred or exists, do any or all of the
following:
(a) Take such action as the Agent deems appropriate to maintain,
protect and insure the Collateral, to attach, perfect, continue, preserve and
protect the Agent's Prior Security Interest in the Collateral, to perform, keep,
observe and render true and correct any and all covenants, agreements,
representations and warranties of the Company hereunder, and to add all
liabilities, obligations, costs and expenses incurred in connection with the
foregoing to the Secured Obligations;
(b) Verify the status of the Collateral;
-2-
<PAGE>
(c) After an Event of Default has occurred and is continuing, cause
to be opened and maintained an interest bearing deposit account ("CASH
COLLATERAL ACCOUNT") and deposit, and require the Company to deposit, therein
all cash proceeds of the Collateral and cash dividends received in respect of
the Collateral. The Agent shall have sole dominion and control over all items
and funds in the Cash Collateral Account and such items and funds may be
withdrawn only by the Agent, it being the intention of the parties hereto that
the Company shall have no control over or withdrawal rights in respect of the
Cash Collateral Account. The Agent, upon the vote of all the Banks and upon the
written request by the Company to the Agent, may release to the Company at any
time after 2:00 o'clock p.m., Pittsburgh time on the first business day
following the date of such vote and request, all or any part of the collected
funds deposited in the Cash Collateral Account for application to the
outstanding principal balance of the Indebtedness and the Guaranteed
Indebtedness. Notwithstanding any such request, the Agent shall have the right
at any time and from time to time to apply all or any part of the collected
funds on deposit in the Cash Collateral Account to the payment of the
Indebtedness and the Guaranteed Indebtedness in order of application as set
forth in Section 11 hereof, whether on account of principal or interest or
otherwise as the Agent in its discretion may elect, until the Secured
Obligations are fully paid; and
(d) After an Event of Default has occurred and is continuing, have
any part or all of the Collateral registered in the name of the Agent or that of
its nominee, and the Company covenants that, upon the Agent's request, the
Company will cause the issuer, transfer agent or registrar of such Collateral to
effect such registration.
The Agent may by written notice to the Company relinquish, either partially or
completely in accordance with any terms or conditions the Agent may set forth in
such notice, any or all rights the Agent may acquire pursuant hereto; provided,
--------
however, that the powers conferred on the Agent for the benefit of the Banks by
- -------
this Section 5 are solely to protect the interests of the Agent for the benefit
of the Banks in the Collateral and shall not impose on the Agent any duty to
exercise such powers.
6. REPRESENTATIONS AND WARRANTIES.
------------------------------
(a) The Company has and will have at all times good and marketable
title to the Collateral, free and clear of all liens, except for Permitted
Liens, and will defend such title against the claims and demands of all persons
whomsoever, except liens in favor of the Agent. The Company assumes full
responsibility for taking any and all steps to preserve rights with respect to
the Collateral against all prior parties.
(b) The Pledged Shares and any other shares of capital stock included
in the Collateral have been duly authorized and validly issued, are fully paid
and nonassessable and are owned beneficially and of record by the Company. The
Pledged Shares constitute all of the issued and outstanding capital stock of the
issuer thereof; provided, if the Pledged Shares include shares acquired after
--------
the date of this Agreement pursuant to Permitted Business Combinations, the
shares may not constitute 100% of the outstanding capital stock of the issuer
thereof.
(c) Except as disclosed on Schedule 6, there are no shareholder,
partnership or other agreements or understandings with respect to the Pledged
Shares or any other securities
-3-
<PAGE>
included in the Collateral; provided, if the Pledged Shares include shares
--------
acquired after the date of this Agreement pursuant to Permitted Business
Combinations, the Company may ask the Agent to accept additional agreements or
understandings. The Agent, after consulting with the Banks, will not withhold
its consent unreasonably.
(d) Except as described on Schedule 6 and except to the extent
contained in Agreements consented to by the Banks pursuant to Section 6(c), the
Pledged Shares and any other securities included in the Collateral are free and
clear of any lien, option or right of others or restriction on transfer except
for the security interest granted to and created in favor of the Agent for the
benefit of the Banks hereunder and except to the extent that the transfer by the
Agent of such Collateral may be restricted by the Federal Securities Act of
1933, as amended, and applicable state securities laws.
(e) The Company will not take any action, or vote or omit to vote the
Pledged Shares or any other securities included in the Collateral in a manner
which would permit the issuer thereof to take or omit to take any action, the
taking or the omission of which might result in an alteration or impairment of
the Collateral or of this Agreement;
(f) The Company will not vote or omit to vote the Pledged Shares or
any other securities included in the Collateral in a manner inconsistent with
Section 7.2.14 of the Credit Agreement.
(g) There are no actions, suits, proceedings or investigations
pending or, to the knowledge of the Company, threatened which affect the
Collateral.
(h) The security interest granted to the Agent for the benefit of the
Banks pursuant to this Agreement constitutes and will continue to constitute a
Prior Security Interest under the Uniform Commercial Code as in effect in each
applicable jurisdiction or other applicable law, entitled to all the rights,
benefits and priorities provided by the Uniform Commercial Code or such law.
Upon the taking possession of the stock certificates or other certificates
evidencing all or part of the Collateral, all such action as is necessary or
advisable to establish such rights of the Agent will have been taken, and there
will be upon execution and delivery of this Agreement and such taking of
possession, no necessity for any further action in order to preserve, protect
and continue such rights. All expenses in connection with such action has been
or will be paid by the Company.
7. TAXES AND CHARGES. The Company will pay and discharge all taxes,
-----------------
levies and other impositions levied on any portion of the Collateral (except to
the extent only that such taxes, levies and other impositions shall not then be
due or shall be contested in good faith by appropriate proceedings diligently
conducted, provided that such reserves and other provisions as may be required
by GAAP have been duly made and recorded). If the Company shall fail to do so,
the Agent may (but shall not be obligated to) pay such taxes, levies or
impositions for the account of the Company and may add the amount thereof to the
Indebtedness and the Guaranteed Indebtedness.
8. PRESERVATION AND PROTECTION OF SECURITY INTEREST. The Company
------------------------------------------------
will faithfully preserve and protect the Agent's security interest in the
Collateral as a Prior Security
-4-
<PAGE>
Interest and will, at its own cost and expense, cause such security interest in
the Collateral to be perfected and continue perfected so long as the
Indebtedness and the Guaranteed Indebtedness or any portion thereof are
outstanding and unpaid. For such purposes the Company will from time to time at
the request of the Agent (a) turn over physical possession to the Agent for the
benefit of the Banks of all Collateral which requires the Agent to have
possession thereof in order to perfect the Agent's security interest therein for
the benefit of the Banks and (b) file or record, or cause to be filed or
recorded, such instruments, documents and notices, including without limitation
financing statements and continuation statements, all as the Agent may deem
necessary or advisable from time to time in order to perfect and continue
perfected said security interests as Prior Security Interests.
The Company will do all such other acts and things and will execute
and deliver all such other instruments and documents, including without
limitation further security agreements, pledges, endorsements, assignments and
notices, as the Agent may deem necessary or advisable from time to time in order
to perfect and preserve the priority of said security interest as a Prior
Security Interest in the Collateral. The Agent, and its officers, employees and
authorized agents, or any of them, are hereby irrevocably appointed the
attorneys-in-fact of the Company (without requiring any of them to act as such),
such appointment being coupled with an interest, to do, at the Company's
expense, all acts and things which the Agent may deem necessary or advisable to
preserve, perfect and continue perfected the Agent's security interest in the
Collateral as a Prior Security Interest, including without limitation the
signing of financing, continuation or other similar statements and notices on
behalf of the Company. In addition to the foregoing but not in limitation
thereof, the Company agrees that a carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof.
The Agent shall be deemed to have exercised reasonable care in the
preservation and custody of such of the Collateral as may be in the Agent's
possession if the Agent takes such action for that purpose as the Company shall
request in writing, provided that such requested action shall not in the
exclusive judgment of the Agent impair the Agent's Prior Security Interest in
such Collateral or its rights in or the value of such Collateral, and provided
further that such written request is received by the Agent in sufficient time to
permit the Agent to take the requested action.
9. EVENTS OF DEFAULT. The Company shall, at the option of the
-----------------
Agent, be in default under this Agreement upon the happening of any of the
following events or conditions (each, an "EVENT OF DEFAULT"):
(a) an Event of Default as defined in the Credit Agreement or any
other Loan Document;
(b) the failure of the Agent to have a Prior Security Interest in any
portion of the Collateral; or
(c) any indication or evidence received by the Agent that the Company
may have directly or indirectly been engaged in any type of activity which, in
the Agent's discretion,
-5-
<PAGE>
might result in the forfeiture of any property of the Company to any
governmental entity, federal, state or local.
10. REMEDIES ON DEFAULT. If any one or more of the Events of Default
-------------------
shall occur and be continuing or exist, the Agent for the benefit of the Banks
shall have the immediate right to take control of all or any part of the
Collateral and the proceeds thereof, with or without judicial process, and,
without demand of performance or notice (and if notice is required by Law, after
ten (10) days' prior written notice, which the Company agrees is a reasonable
time and manner for notice), or demand whosoever to the Company, all of which
are hereby expressly waived, and without advertisement, may proceed to exercise
one or more of the rights and remedies accorded a secured party by the Uniform
Commercial Code and otherwise by Law or by the terms of the Credit Agreement or
this Agreement or any other Loan Document.
The Agent's rights and remedies shall include without limitation the
power for the benefit of the Banks to (i) transfer into the Agent's name or into
the name of its nominee or nominees all or any portion of the Pledged Shares or
other securities constituting part or all of the Collateral and thereafter
receive directly all cash and other dividends, distributions and payments made
on account of said stock or securities, vote the same, give all consents,
waivers and ratifications in respect thereof, and otherwise act with respect
thereto as though it were the absolute owner thereof, and (ii) sell all or any
portion of the Collateral at public or private sale at such place and time and
on such terms as the Agent may see fit.
The Company recognizes that the Agent may be compelled to resort to
one or more private sales of any of the Pledged Shares or other securities
constituting part or all of the Collateral to a restricted group of purchasers
who will be obliged to agree, among other things, to acquire such securities for
their own account for investment and not with a view to the distribution or
resale thereof. The Company acknowledges and agrees that any such private sale
(such sale or any public sale to be conducted in a commercially reasonable
manner) may result in prices and other terms less favorable to the seller than
if such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall not, for such reason alone, be deemed to have
been made in a commercially unreasonable manner. The Agent shall not be under
any obligation to delay a sale of any such shares or securities for the period
of time necessary to permit the issuer of such securities to register such
securities for public sale under the Federal Securities Act of 1933, as amended,
or under applicable state securities Laws, even if the issuer would agree to do
so. At any sale or other disposition, the Agent may, to the extent permissible
under applicable Laws, purchase all any part of the Collateral, free from any
right of redemption on the part of the Company, which right is hereby waived and
released.
11. APPLICATION OF PROCEEDS. Any Collateral or proceeds of the
-----------------------
Collateral held or realized upon at any time by the Agent or any of the Banks
and any debt (including all deposit accounts) in which the Agent or any of the
Banks has been granted a security interest pursuant to any of the Loan Documents
and which has been set off or applied by the Agent pursuant to any such Loan
Document, shall be applied in satisfaction of the Indebtedness and the
Guaranteed Indebtedness, in such order of application as the Agent shall
determine in its discretion if there has been an Event of Default and, if there
has not been an Event of Default, as determined by the Borrower and the Agent,
until the Indebtedness and the Guaranteed Indebtedness are fully paid, and
thereafter any balance shall be distributed as required by
-6-
<PAGE>
applicable Law. If the proceeds of the Collateral together with the proceeds of
any other collateral granted to the Agent by the Company for the benefit of the
Banks, and of any sales or dispositions thereof, shall be insufficient to pay
the amounts secured hereby, the Company shall be liable for the deficiency.
12. CHANGES IN WRITING. No modification, amendment or waiver of any
------------------
provision of this Agreement nor consent to any departure by the Company
therefrom, will in any event be effective unless the same is in writing and
signed by the Agent, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given.
13. PRESERVATION OF RIGHTS. No delay or omission on the part of the
----------------------
Agent to exercise any right or power arising hereunder will impair any such
right or power or be considered a waiver of any such right or power or any
acquiescence therein, nor will the action or inaction of the Agent impair any
right or power arising hereunder. The Agent's rights and remedies hereunder are
cumulative and not exclusive of any other rights or remedies which the Agent
otherwise would have, whether under the Credit Agreement or any other Loan
Document, the Uniform Commercial Code, applicable Law or otherwise.
14. TAXES. The Company agrees to pay upon demand any and all stamp,
-----
document, transfer or recording taxes, and similar impositions payable or
hereafter determined to be payable in connection with this Agreement and agrees
to save the Agent and the Banks harmless from and against any and all present or
future claims or liabilities with respect to, or resulting from any delay in
paying or omission to pay, any such taxes or similar impositions.
15. PAYMENT OF EXPENSES. At its option, the Agent may discharge
-------------------
taxes, liens, security interests or such other encumbrances as may attach to the
Collateral, may pay for required insurance on the Collateral and may pay for the
maintenance, appraisal or reappraisal, and preservation of the Collateral, as
determined by the Agent to be necessary. The Company will reimburse the Agent
on demand for any payment so made or any expense incurred by the Agent pursuant
to the foregoing authorization, and the Collateral also will secure any advances
or payments so made or expenses so incurred by the Agent.
16. NOTICES. All notices, demands, requests, consents, approvals and
-------
other communications required or permitted hereunder must be in writing and will
be effective if made in conformity with Section 10.6 of the Credit Agreement.
17. SURVIVAL. All representations, warranties, covenants and
--------
agreements of the Company contained herein or made in connection herewith shall
survive the execution and delivery of this Agreement and shall continue in full
force and effect so long as any of the Credit Agreement and the other Loan
Documents is in effect, or any Indebtedness or the Guaranteed Indebtedness is
outstanding and until payment in full of all Indebtedness and the Guaranteed
Indebtedness hereunder and under the Credit Agreement and the other Loan
Documents. The indemnity agreement contained in Section 21 of this Agreement
shall survive the termination of this Agreement.
18. GOVERNING LAW; VENUE. The Uniform Commercial Code shall govern
--------------------
the attachment, perfection and the effect of attachment and perfection of the
Agent's security
-7-
<PAGE>
interest in the Collateral, and the rights, duties and obligations of the Agent
and the Company with respect thereto. Except as provided by the immediately
preceding sentence, this Agreement shall be deemed to be a contract under the
laws of the Commonwealth of Pennsylvania and the execution and delivery thereof
and the terms and provisions shall be governed by and construed in accordance
with the laws of said Commonwealth. The Company irrevocably consents to the
nonexclusive jurisdiction of the Court of Common Pleas of Allegheny County and
the United States District Court for the Western District of Pennsylvania, and
waives personal service of any and all process upon it and consents that all
such service of process be made by certified or registered mail directed to it
at the address provided for in the Guaranty and service so made shall be deemed
to be completed upon actual receipt thereof. The Company waives any objection
to jurisdiction and venue of any action instituted against it as provided herein
and agrees not to assert any defense based on lack of jurisdiction or venue.
19. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
----------------------
inure to the benefit of the Company and the Agent for the benefit of the Banks
and their respective heirs, executors, administrators, successors and assigns;
provided, however, that the Company may not assign this Agreement in whole or in
- -------- -------
part without the prior written consent of the Agent, and the Agent at any time
may assign this Agreement in whole or in part.
20. SEVERABILITY. If any term, provision, or restriction of this
------------
Agreement is held to be invalid, void or unenforceable in any way in any
jurisdiction, the remainder of the terms, provisions, covenants and restrictions
of this Agreement shall remain in full force and effect in such jurisdiction and
shall in no way be affected, impaired or invalidated, and such invalidity,
voidness or unenforceability shall not affect the validity and enforceability of
such provision, covenant, or restriction in any other jurisdiction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such which may be hereafter declared invalid, void or
unenforceable.
21. INDEMNITY. The Company agrees to indemnify each of the Agent and
---------
the Banks, their directors, officers and employees and each legal entity, if
any, who controls the Agent or the Banks (the "INDEMNIFIED PARTIES") and to hold
each Indemnified Party harmless from and against any and all claims, damages,
losses, liabilities and expenses (including, without limitation, all fees of
counsel with whom any Indemnified Party may consult and all expenses of
litigation or preparation therefor) which any Indemnified Party may incur or
which may be asserted against any Indemnified Party as a result of the execution
of or performance under this Agreement; provided, however, that the foregoing
-------- -------
indemnity agreement shall not apply to claims, damages, losses, liabilities and
expenses attributable to an Indemnified Party's gross negligence or willful
misconduct. The indemnity agreement contained in this Section shall survive the
termination of this Agreement. The Company may participate at its expense in
the defense of any such claim.
22. MARSHALLING; PAYMENTS SET ASIDE. The Agent shall not be under
-------------------------------
any obligation to marshall any assets in favor of the Company or any other
person or against or in payment of any or all of the Indebtedness or the
Guaranteed Indebtedness. To the extent that the Company makes a payment or
payments to the Agent, or the Agent enforces its security interests, or the
Agent exercises its rights of setoff, and such payment or payments or the
-8-
<PAGE>
proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law, including
without limitation any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of any such restoration, the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
23. ENTIRE AGREEMENT. This Agreement (including the documents and
----------------
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
24. CONTINUING VALIDITY OF GUARANTEED INDEBTEDNESS. The agreements
----------------------------------------------
and obligations of the Company hereunder are continuing agreements and
obligations, and are absolute and unconditional irrespective of the genuineness,
validity or enforceability of any note or other instrument or instruments now or
hereafter evidencing the Indebtedness or the Guaranteed Indebtedness or any part
thereof or of the Credit Agreement, the Guaranty, this Agreement or other Loan
Document or any other agreement or agreements now or hereafter entered into by
the Agent for the benefit of the Banks or the Company pursuant to which the
Indebtedness or the Guaranteed Indebtedness or any part thereof is issued or of
any other circumstance which might otherwise constitute a legal or equitable
discharge of such agreements and obligations; without limitation upon the
foregoing, such agreements and obligations shall continue in full force and
effect as long as the Indebtedness or the Guaranteed Indebtedness or any part
thereof remains outstanding and unpaid and shall remain in full force and effect
without regard to and shall not be released, discharged or in any way affected
by (i) any renewal, refinancing or refunding of the Indebtedness or the
Guaranteed Indebtedness in whole or in part, (ii) any extension of the time of
any payment due under any note or instrument or instruments now or hereafter
evidencing the Indebtedness or the Guaranteed Indebtedness or any part thereof,
(iii) any compromise or settlement with respect to the Indebtedness or the
Guaranteed Indebtedness or any part thereof, or any forbearance or indulgence
extended to the Company, (iv) any amendment to or modification of the terms of
any instrument or instruments now or hereafter evidencing the Indebtedness or
the Guaranteed Indebtedness or any part thereof or any other agreement or
agreements now or hereafter entered into by the Agent and the Company pursuant
to which the Indebtedness or the Guaranteed Indebtedness or any part thereof is
issued or secured, (v) any substitution, exchange or release of, or failure to
preserve, perfect or protect, or other dealing in respect of, any property or
any security for the payment of the Indebtedness or the Guaranteed Indebtedness
or any part thereof, (vi) any bankruptcy, insolvency, arrangement, composition,
assignment for the benefit of creditors or similar proceeding commenced by or
against the Company, or (vii) any other matter or thing whatsoever whereby the
agreements and obligations of the Company hereunder or under the Credit
Agreement or any other Loan Document would or might otherwise be released or
discharged.
25. DEFEASANCE. This Agreement shall terminate and be of no further
----------
force and effect, and the Agent shall return to the Company any Collateral in
the Agent's possession, upon satisfaction in full of the Indebtedness and the
Guaranteed Indebtedness, the expiration of
-9-0
<PAGE>
the Letters of Credit without a draw having been made, and the termination of
the Banks' commitment to lend. Notwithstanding the foregoing provisions of this
Section 25, the indemnity agreement contained in Section 21 of this Agreement
shall survive the termination of this Agreement.
26. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
27. CONSTRUCTION. Unless the context of this Agreement otherwise
------------
clearly requires, references to the plural include the singular, the singular
the plural and the part the whole and "or" has the inclusive meaning represented
by the phrase "and/or." The words "hereof," "herein," "hereunder" and similar
terms in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. The section and other headings
contained in this Agreement are for reference purposes only and shall not
control or affect the construction of this Agreement or the interpretation
thereof in any respect. Section and subsection references are references to
this Agreement unless otherwise specified.
28. WAIVER OF RIGHT TO TRIAL BY JURY AND CONSEQUENTIAL DAMAGES.
----------------------------------------------------------
THE COMPANY HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR ANY
OTHER DOCUMENT OR INSTRUMENT ATTACHED HERETO, REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH, OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE COMPANY WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
DOCUMENT OR INSTRUMENT ATTACHED HERETO, REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND THE COMPANY HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY OFFICIAL BODY AS
WRITTEN EVIDENCE OF THE CONSENT OF THE COMPANY HERETO TO THE WAIVER OF ITS RIGHT
TO TRIAL BY JURY. NEITHER THE AGENT NOR THE BANKS NOR ANY AGENT OR ATTORNEY OF
THE AGENT OR THE BANKS SHALL BE LIABLE TO THE COMPANY FOR CONSEQUENTIAL DAMAGES
ARISING FROM ANY BREACH OF CONTRACT, TORT OR OTHER WRONG RELATING TO THE
ESTABLISHMENT, ADMINISTRATION OR COLLECTION OF THE OBLIGATIONS RELATING IN ANY
WAY TO THIS AGREEMENT OR THE ACTION OR INACTION OF THE COMPANY HEREUNDER.
-10-
<PAGE>
29. BREACH OF COVENANT. The Company acknowledges and agrees that the
------------------
failure to perform or observe any covenants set forth in this Agreement shall
constitute a breach of this Agreement and may give rise to an Event of Default
notwithstanding the fact that the failure to perform or observe such covenant
may be attributable to the requirements of any Official Body.
WITNESS the due execution hereof as a document under seal, as of the
date first written above.
ATTEST: OPTION CARE, INC.,
a Delaware corporation
/s/ Pam Colin By: /s/ J. Jeffrey Fox
- ------------------------- ------------------------------
Name: Pam Colin Name:____________________________
-------------------- Title: CFO
---------------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ___________________________
Name: _________________________
Title: __________________________
-11-
<PAGE>
PLEDGE AGREEMENT
SCHEDULE A
AUTHORIZED AND ISSUED CAPITAL STOCK
PLEDGED BY
OPTION CARE, INC.
a Delaware corporation
________________________________________________________________________________
See Schedule 5.1.3 of the Credit Agreement
regarding authorized and issued shares of capital stock
<PAGE>
PLEDGE AGREEMENT
SCHEDULE 6
SHAREHOLDER AND PARTNERSHIP AGREEMENTS
WITH RESPECT TO THE PLEDGED SHARES OF
OPTION CARE, INC.
a Delaware corporation
________________________________________________________________________________
See Schedule 5.1.17 of the Credit Agreement
regarding shareholder and partnership agreements
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "AGREEMENT") is entered into this 23rd day
of December, 1996, by and between OPTION CARE ENTERPRISES, INC., a California
corporation (the "COMPANY"), and PNC BANK, NATIONAL ASSOCIATION, as agent for
the Banks (the "AGENT"), with an address at One PNC Plaza, 249 5th Avenue,
Pittsburgh, Pennsylvania 15222-2709.
WHEREAS, the Company, Option Care, Inc., the Subsidiaries of Option
Care, Inc., the Agent and the Banks have entered into that certain Credit
Agreement, dated as of even date herewith (as the same may be amended, restated
or otherwise modified from time to time, the "CREDIT AGREEMENT"), pursuant to
which the Banks have agreed to extend to the Borrowers, upon the terms and
subject to the conditions set forth therein, a revolving credit facility in an
aggregate principal amount not to exceed $30,000,000.
WHEREAS, the Company has executed a Guaranty and Suretyship Agreement
of even date herewith (the "GUARANTY") guarantying the obligations of Option
Care, Inc. and its subsidiaries under the Credit Agreement;
WHEREAS, in order to induce the Agent and the Banks to enter into the
Credit Agreement, the Company has agreed to enter into this Agreement for the
purpose of granting to the Agent, for the benefit of the Banks, first priority
perfected lien on 100 percent of the shares of common stock of PharmaCare of
Southwest Florida, Inc., a first priority perfected lien on 100 percent of the
shares of common stock of Pharmacy I.V. Associates, Inc., a first priority
perfected lien on 100 percent of the shares of common stock of Home Care of
Columbia, Inc., a first priority perfected lien on 80 percent of the shares of
common stock of Young's I.V. Therapy, Inc., a first priority perfected lien on
100 percent of the shares of common stock of Home Infusion Therapy of Bullhead
City, Inc., a first priority perfected lien on 100 percent of the shares of
common stock of Whatcom Pharmaceutical Services, Inc., a first priority
perfected lien on 100 percent of the shares of common stock of Option Care
Hospice, Inc., a first priority perfected lien on 100 percent of the shares of
common stock of a Option Care Home Health, Inc., and the shares of any Borrower
who joins the Credit Agreement after the date of this Agreement (collectively,
the "PLEDGED SHARES"), described in further detail on Schedule A attached
hereto.
NOW, THEREFORE, in consideration of the Obligation (as that term is
defined in the Credit Agreement) and the Guaranteed Indebtedness (as that term
is defined in the Guaranty) and other good and valuable consideration, the
receipt of which is hereby
<PAGE>
acknowledged, and in order to induce the Agent and the Banks to enter into the
Credit Agreement, the parties hereto, intending to be legally bound, agree as
follows:
1. CERTAIN DEFINITIONS. Capitalized words and terms not otherwise
-------------------
defined herein which are defined in the Credit Agreement have the meanings
ascribed to such words and terms in the Credit Agreement. In addition to other
words and terms defined elsewhere in this Agreement, words and terms which are
defined in the Uniform Commercial Code are used herein as defined in the Uniform
Commercial Code except where the context otherwise requires, and the following
words and terms shall have the following meanings, respectively:
(a) "COLLATERAL" means (i) the Pledged Shares and all rights and
privileges pertaining thereto, including, without limitation, the shares of
capital stock, all securities and additional securities receivable in respect of
or in exchange for such shares or such securities, all rights to subscribe for
securities incident to or arising from ownership of such shares or such
securities, all cash, stock and other dividends or distributions paid or payable
on such shares or such securities, and all books and records pertaining to the
foregoing, (ii) all proceeds from sales, transfers or other dispositions, and
(iii) whatever is received when any of the foregoing is sold, exchanged or
otherwise disposed of, including any proceeds.
(b) "PRIOR SECURITY INTEREST" means an enforceable, perfected
security interest under the Uniform Commercial Code which is prior to all Liens,
except Liens for taxes not yet due and payable to the extent given priority by
statute and Permitted Liens.
2. GRANT OF SECURITY INTEREST. As security for the due and punctual
--------------------------
payment and performance of the Indebtedness and the Guaranteed Indebtedness in
accordance with the respective terms thereof, the Company, as debtor, hereby
delivers, pledges and grants to the Agent, as secured party, for the benefit of
the Banks, a security interest under the Uniform Commercial Code in and to any
and all of the Collateral.
3. STOCK CERTIFICATES AND STOCK POWERS. Upon the execution and
-----------------------------------
delivery of this Agreement, the Company has caused to be delivered to and
deposited with the Agent or its nominee or nominees, in pledge, stock
certificates and any other instruments evidencing the Collateral, together with
undated stock powers signed in blank by the Company.
4. VOTING RIGHTS. Notwithstanding the security interest in the
-------------
Collateral granted to and created in favor of the Agent for the benefit of the
Banks, the Company shall have the right, until the Agent forecloses upon the
Collateral, to exercise all voting and other shareholders' rights with respect
to the Collateral, subject to Section 5 hereof.
5. RIGHTS OF AGENT TO COLLATERAL. The Agent may at its option and
-----------------------------
at any time and from time to time (except as provided in subsections (c) and
(d)), without notice to or consent of the Company, whether or not an Event of
Default (as hereinafter defined) has occurred or exists, do any or all of the
following:
(a) Take such action as the Agent deems appropriate to maintain,
protect and insure the Collateral, to attach, perfect, continue, preserve and
protect the Agent's Prior Security Interest in the Collateral, to perform, keep,
observe and render true and correct any and all
-2-
<PAGE>
covenants, agreements, representations and warranties of the Company hereunder,
and to add all liabilities, obligations, costs and expenses incurred in
connection with the foregoing to the Secured Obligations;
(b) Verify the status of the Collateral;
(c) After an Event of Default has occurred and is continuing, cause
to be opened and maintained an interest bearing deposit account ("CASH
COLLATERAL ACCOUNT") and deposit, and require the Company to deposit, therein
all cash proceeds of the Collateral and cash dividends received in respect of
the Collateral. The Agent shall have sole dominion and control over all items
and funds in the Cash Collateral Account and such items and funds may be
withdrawn only by the Agent, it being the intention of the parties hereto that
the Company shall have no control over or withdrawal rights in respect of the
Cash Collateral Account. The Agent, upon the vote of all the Banks and upon the
written request by the Company to the Agent, may release to the Company at any
time after 2:00 o'clock p.m., Pittsburgh time on the first business day
following the date of such vote and request, all or any part of the collected
funds deposited in the Cash Collateral Account for application to the
outstanding principal balance of the Indebtedness and the Guaranteed
Indebtedness. Notwithstanding any such request, the Agent shall have the right
at any time and from time to time to apply all or any part of the collected
funds on deposit in the Cash Collateral Account to the payment of the
Indebtedness and the Guaranteed Indebtedness in order of application as set
forth in Section 11 hereof, whether on account of principal or interest or
otherwise as the Agent in its discretion may elect, until the Secured
Obligations are fully paid; and
(d) After an Event of Default has occurred and is continuing, have
any part or all of the Collateral registered in the name of the Agent or that of
its nominee, and the Company covenants that, upon the Agent's request, the
Company will cause the issuer, transfer agent or registrar of such Collateral to
effect such registration.
The Agent may by written notice to the Company relinquish, either partially or
completely in accordance with any terms or conditions the Agent may set forth in
such notice, any or all rights the Agent may acquire pursuant hereto; provided,
--------
however, that the powers conferred on the Agent for the benefit of the Banks by
- -------
this Section 5 are solely to protect the interests of the Agent for the benefit
of the Banks in the Collateral and shall not impose on the Agent any duty to
exercise such powers.
6. REPRESENTATIONS AND WARRANTIES.
------------------------------
(a) The Company has and will have at all times good and marketable
title to the Collateral, free and clear of all liens, except for Permitted
Liens, and will defend such title against the claims and demands of all persons
whomsoever, except liens in favor of the Agent. The Company assumes full
responsibility for taking any and all steps to preserve rights with respect to
the Collateral against all prior parties.
(b) The Pledged Shares and any other shares of capital stock included
in the Collateral have been duly authorized and validly issued, are fully paid
and nonassessable and are owned beneficially and of record by the Company. With
the exception of the shares of Young's
-3-
<PAGE>
I.V. Therapy, Inc. which constitute 80% of the issued and outstanding capital
stock thereof, the Pledged Shares constitute all of the issued and outstanding
capital stock of the issuer thereof; provided, if the Pledged Shares include
--------
shares acquired after the date of this Agreement pursuant to Permitted Business
Combinations, the shares may not constitute 100% of the outstanding capital
stock of the issuer thereof.
(c) Except as disclosed on Schedule 6, there are no shareholder,
partnership or other agreements or understandings with respect to the Pledged
Shares or any other securities included in the Collateral; provided, if the
--------
Pledged Shares include shares acquired after the date of this Agreement pursuant
to Permitted Business Combinations, the Company may ask the Agent to accept
additional agreements or understandings. The Agent, after consulting with the
Banks, will not withhold its consent unreasonably.
(d) Except as disclosed on Schedule 6 and except to the extent
contained in Agreements consented to by the Banks pursuant to Section 6(c), the
Pledged Shares and any other securities included in the Collateral are free and
clear of any lien, option or right of others or restriction on transfer except
for the security interest granted to and created in favor of the Agent for the
benefit of the Banks hereunder and except to the extent that the transfer by the
Agent of such Collateral may be restricted by the Federal Securities Act of
1933, as amended, and applicable state securities laws.
(e) The Company will not take any action, or vote or omit to vote the
Pledged Shares or any other securities included in the Collateral in a manner
which would permit the issuer thereof to take or omit to take any action, the
taking or the omission of which might result in an alteration or impairment of
the Collateral or of this Agreement;
(f) The Company will not vote or omit to vote the Pledged Shares or
any other securities included in the Collateral in a manner inconsistent with
Section 7.2.14 of the Credit Agreement.
(g) There are no actions, suits, proceedings or investigations
pending or, to the knowledge of the Company, threatened which affect the
Collateral.
(h) The security interest granted to the Agent for the benefit of the
Banks pursuant to this Agreement constitutes and will continue to constitute a
Prior Security Interest under the Uniform Commercial Code as in effect in each
applicable jurisdiction or other applicable law, entitled to all the rights,
benefits and priorities provided by the Uniform Commercial Code or such law.
Upon the taking possession of the stock certificates or other certificates
evidencing all or part of the Collateral, all such action as is necessary or
advisable to establish such rights of the Agent will have been taken, and there
will be upon execution and delivery of this Agreement and such taking of
possession, no necessity for any further action in order to preserve, protect
and continue such rights. All expenses in connection with such action has been
or will be paid by the Company.
7. TAXES AND CHARGES. The Company will pay and discharge all taxes,
-----------------
levies and other impositions levied on any portion of the Collateral (except to
the extent only that such taxes, levies and other impositions shall not then be
due or shall be contested in good faith
-4-
<PAGE>
by appropriate proceedings diligently conducted, provided that such reserves and
other provisions as may be required by GAAP have been duly made and recorded).
If the Company shall fail to do so, the Agent may (but shall not be obligated
to) pay such taxes, levies or impositions for the account of the Company and may
add the amount thereof to the Indebtedness and the Guaranteed Indebtedness.
8. PRESERVATION AND PROTECTION OF SECURITY INTEREST. The Company
------------------------------------------------
will faithfully preserve and protect the Agent's security interest in the
Collateral as a Prior Security Interest and will, at its own cost and expense,
cause such security interest in the Collateral to be perfected and continue
perfected so long as the Indebtedness and the Guaranteed Indebtedness or any
portion thereof are outstanding and unpaid. For such purposes the Company will
from time to time at the request of the Agent (a) turn over physical possession
to the Agent for the benefit of the Banks of all Collateral which requires the
Agent to have possession thereof in order to perfect the Agent's security
interest therein for the benefit of the Banks and (b) file or record, or cause
to be filed or recorded, such instruments, documents and notices, including
without limitation financing statements and continuation statements, all as the
Agent may deem necessary or advisable from time to time in order to perfect and
continue perfected said security interests as Prior Security Interests.
The Company will do all such other acts and things and will execute
and deliver all such other instruments and documents, including without
limitation further security agreements, pledges, endorsements, assignments and
notices, as the Agent may deem necessary or advisable from time to time in order
to perfect and preserve the priority of said security interest as a Prior
Security Interest in the Collateral. The Agent, and its officers, employees and
authorized agents, or any of them, are hereby irrevocably appointed the
attorneys-in-fact of the Company (without requiring any of them to act as such),
such appointment being coupled with an interest, to do, at the Company's
expense, all acts and things which the Agent may deem necessary or advisable to
preserve, perfect and continue perfected the Agent's security interest in the
Collateral as a Prior Security Interest, including without limitation the
signing of financing, continuation or other similar statements and notices on
behalf of the Company. In addition to the foregoing but not in limitation
thereof, the Company agrees that a carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof.
The Agent shall be deemed to have exercised reasonable care in the
preservation and custody of such of the Collateral as may be in the Agent's
possession if the Agent takes such action for that purpose as the Company shall
request in writing, provided that such requested action shall not in the
exclusive judgment of the Agent impair the Agent's Prior Security Interest in
such Collateral or its rights in or the value of such Collateral, and provided
further that such written request is received by the Agent in sufficient time to
permit the Agent to take the requested action.
9. EVENTS OF DEFAULT. The Company shall, at the option of the
-----------------
Agent, be in default under this Agreement upon the happening of any of the
following events or conditions (each, an "EVENT OF DEFAULT"):
-5-
<PAGE>
(a) an Event of Default as defined in the Credit Agreement or any
other Loan Document;
(b) the failure of the Agent to have a Prior Security Interest in any
portion of the Collateral; or
(c) any indication or evidence received by the Agent that the Company
may have directly or indirectly been engaged in any type of activity which, in
the Agent's discretion, might result in the forfeiture of any property of the
Company to any governmental entity, federal, state or local.
10. REMEDIES ON DEFAULT. If any one or more of the Events of Default
-------------------
shall occur and be continuing or exist, the Agent for the benefit of the Banks
shall have the immediate right to take control of all or any part of the
Collateral and the proceeds thereof, with or without judicial process, and,
without demand of performance or notice (and if notice is required by Law, after
ten (10) days' prior written notice, which the Company agrees is a reasonable
time and manner for notice), or demand whosoever to the Company, all of which
are hereby expressly waived, and without advertisement, may proceed to exercise
one or more of the rights and remedies accorded a secured party by the Uniform
Commercial Code and otherwise by Law or by the terms of the Credit Agreement or
this Agreement or any other Loan Document.
The Agent's rights and remedies shall include without limitation the
power for the benefit of the Banks to (i) transfer into the Agent's name or into
the name of its nominee or nominees all or any portion of the Pledged Shares or
other securities constituting part or all of the Collateral and thereafter
receive directly all cash and other dividends, distributions and payments made
on account of said stock or securities, vote the same, give all consents,
waivers and ratifications in respect thereof, and otherwise act with respect
thereto as though it were the absolute owner thereof, and (ii) sell all or any
portion of the Collateral at public or private sale at such place and time and
on such terms as the Agent may see fit.
The Company recognizes that the Agent may be compelled to resort to
one or more private sales of any of the Pledged Shares or other securities
constituting part or all of the Collateral to a restricted group of purchasers
who will be obliged to agree, among other things, to acquire such securities for
their own account for investment and not with a view to the distribution or
resale thereof. The Company acknowledges and agrees that any such private sale
(such sale or any public sale to be conducted in a commercially reasonable
manner) may result in prices and other terms less favorable to the seller than
if such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall not, for such reason alone, be deemed to have
been made in a commercially unreasonable manner. The Agent shall not be under
any obligation to delay a sale of any such shares or securities for the period
of time necessary to permit the issuer of such securities to register such
securities for public sale under the Federal Securities Act of 1933, as amended,
or under applicable state securities Laws, even if the issuer would agree to do
so. At any sale or other disposition, the Agent may, to the extent permissible
under applicable Laws, purchase all any part of the Collateral, free from any
right of redemption on the part of the Company, which right is hereby waived and
released.
-6-
<PAGE>
11. APPLICATION OF PROCEEDS. Any Collateral or proceeds of the
-----------------------
Collateral held or realized upon at any time by the Agent or any of the Banks
and any debt (including all deposit accounts) in which the Agent or any of the
Banks has been granted a security interest pursuant to any of the Loan Documents
and which has been set off or applied by the Agent pursuant to any such Loan
Document, shall be applied in satisfaction of the Indebtedness and the
Guaranteed Indebtedness, in such order of application as the Agent shall
determine in its discretion if there has been an Event of Default and, if there
has not been an Event of Default, as determined by the Borrower and the Agent,
until the Indebtedness and the Guaranteed Indebtedness are fully paid, and
thereafter any balance shall be distributed as required by applicable Law. If
the proceeds of the Collateral together with the proceeds of any other
collateral granted to the Agent by the Company for the benefit of the Banks, and
of any sales or dispositions thereof, shall be insufficient to pay the amounts
secured hereby, the Company shall be liable for the deficiency.
12. CHANGES IN WRITING. No modification, amendment or waiver of any
------------------
provision of this Agreement nor consent to any departure by the Company
therefrom, will in any event be effective unless the same is in writing and
signed by the Agent, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given.
13. PRESERVATION OF RIGHTS. No delay or omission on the part of the
----------------------
Agent to exercise any right or power arising hereunder will impair any such
right or power or be considered a waiver of any such right or power or any
acquiescence therein, nor will the action or inaction of the Agent impair any
right or power arising hereunder. The Agent's rights and remedies hereunder are
cumulative and not exclusive of any other rights or remedies which the Agent
otherwise would have, whether under the Credit Agreement or any other Loan
Document, the Uniform Commercial Code, applicable Law or otherwise.
14. TAXES. The Company agrees to pay upon demand any and all stamp,
-----
document, transfer or recording taxes, and similar impositions payable or
hereafter determined to be payable in connection with this Agreement and agrees
to save the Agent and the Banks harmless from and against any and all present or
future claims or liabilities with respect to, or resulting from any delay in
paying or omission to pay, any such taxes or similar impositions.
15. PAYMENT OF EXPENSES. At its option, the Agent may discharge
-------------------
taxes, liens, security interests or such other encumbrances as may attach to the
Collateral, may pay for required insurance on the Collateral and may pay for the
maintenance, appraisal or reappraisal, and preservation of the Collateral, as
determined by the Agent to be necessary. The Company will reimburse the Agent
on demand for any payment so made or any expense incurred by the Agent pursuant
to the foregoing authorization, and the Collateral also will secure any advances
or payments so made or expenses so incurred by the Agent.
16. NOTICES. All notices, demands, requests, consents, approvals and
-------
other communications required or permitted hereunder must be in writing and will
be effective if made in conformity with Section 10.6 of the Credit Agreement.
17. SURVIVAL. All representations, warranties, covenants and
--------
agreements of the Company contained herein or made in connection herewith shall
survive the execution and
-7-
<PAGE>
delivery of this Agreement and shall continue in full force and effect so long
as any of the Credit Agreement and the other Loan Documents is in effect, or any
Indebtedness or the Guaranteed Indebtedness is outstanding and until payment in
full of all Indebtedness and the Guaranteed Indebtedness hereunder and under the
Credit Agreement and the other Loan Documents. The indemnity agreement
contained in Section 21 of this Agreement shall survive the termination of this
Agreement.
18. GOVERNING LAW; VENUE. The Uniform Commercial Code shall govern
--------------------
the attachment, perfection and the effect of attachment and perfection of the
Agent's security interest in the Collateral, and the rights, duties and
obligations of the Agent and the Company with respect thereto. Except as
provided by the immediately preceding sentence, this Agreement shall be deemed
to be a contract under the laws of the Commonwealth of Pennsylvania and the
execution and delivery thereof and the terms and provisions shall be governed by
and construed in accordance with the laws of said Commonwealth. The Company
irrevocably consents to the nonexclusive jurisdiction of the Court of Common
Pleas of Allegheny County and the United States District Court for the Western
District of Pennsylvania, and waives personal service of any and all process
upon it and consents that all such service of process be made by certified or
registered mail directed to it at the address provided for in the Guaranty and
service so made shall be deemed to be completed upon actual receipt thereof.
The Company waives any objection to jurisdiction and venue of any action
instituted against it as provided herein and agrees not to assert any defense
based on lack of jurisdiction or venue.
19. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
----------------------
inure to the benefit of the Company and the Agent for the benefit of the Banks
and their respective heirs, executors, administrators, successors and assigns;
provided, however, that the Company may not assign this Agreement in whole or in
- -------- -------
part without the prior written consent of the Agent, and the Agent at any time
may assign this Agreement in whole or in part.
20. SEVERABILITY. If any term, provision, or restriction of this
------------
Agreement is held to be invalid, void or unenforceable in any way in any
jurisdiction, the remainder of the terms, provisions, covenants and restrictions
of this Agreement shall remain in full force and effect in such jurisdiction and
shall in no way be affected, impaired or invalidated, and such invalidity,
voidness or unenforceability shall not affect the validity and enforceability of
such provision, covenant, or restriction in any other jurisdiction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such which may be hereafter declared invalid, void or
unenforceable.
21. INDEMNITY. The Company agrees to indemnify each of the Agent and
---------
the Banks, their directors, officers and employees and each legal entity, if
any, who controls the Agent or the Banks (the "INDEMNIFIED PARTIES") and to hold
each Indemnified Party harmless from and against any and all claims, damages,
losses, liabilities and expenses (including, without limitation, all fees of
counsel with whom any Indemnified Party may consult and all expenses of
litigation or preparation therefor) which any Indemnified Party may incur or
which may be asserted against any Indemnified Party as a result of the execution
of or performance under this Agreement; provided, however, that the foregoing
-------- -------
indemnity agreement shall not apply to claims, damages, losses, liabilities and
expenses attributable to an Indemnified Party's gross
-8-
<PAGE>
negligence or willful misconduct. The indemnity agreement contained in this
Section shall survive the termination of this Agreement. The Company may
participate at its expense in the defense of any such claim.
22. MARSHALLING; PAYMENTS SET ASIDE. The Agent shall not be under
-------------------------------
any obligation to marshall any assets in favor of the Company or any other
person or against or in payment of any or all of the Indebtedness or the
Guaranteed Indebtedness. To the extent that the Company makes a payment or
payments to the Agent, or the Agent enforces its security interests, or the
Agent exercises its rights of setoff, and such payment or payments or the
proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law, including
without limitation any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of any such restoration, the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
23. ENTIRE AGREEMENT. This Agreement (including the documents and
----------------
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
24. CONTINUING VALIDITY OF GUARANTEED INDEBTEDNESS. The agreements
----------------------------------------------
and obligations of the Company hereunder are continuing agreements and
obligations, and are absolute and unconditional irrespective of the genuineness,
validity or enforceability of any note or other instrument or instruments now or
hereafter evidencing the Indebtedness or the Guaranteed Indebtedness or any part
thereof or of the Credit Agreement, the Guaranty, this Agreement or other Loan
Document or any other agreement or agreements now or hereafter entered into by
the Agent for the benefit of the Banks or the Company pursuant to which the
Indebtedness or the Guaranteed Indebtedness or any part thereof is issued or of
any other circumstance which might otherwise constitute a legal or equitable
discharge of such agreements and obligations; without limitation upon the
foregoing, such agreements and obligations shall continue in full force and
effect as long as the Indebtedness or the Guaranteed Indebtedness or any part
thereof remains outstanding and unpaid and shall remain in full force and effect
without regard to and shall not be released, discharged or in any way affected
by (i) any renewal, refinancing or refunding of the Indebtedness or the
Guaranteed Indebtedness in whole or in part, (ii) any extension of the time of
any payment due under any note or instrument or instruments now or hereafter
evidencing the Indebtedness or the Guaranteed Indebtedness or any part thereof,
(iii) any compromise or settlement with respect to the Indebtedness or the
Guaranteed Indebtedness or any part thereof, or any forbearance or indulgence
extended to the Company, (iv) any amendment to or modification of the terms of
any instrument or instruments now or hereafter evidencing the Indebtedness or
the Guaranteed Indebtedness or any part thereof or any other agreement or
agreements now or hereafter entered into by the Agent and the Company pursuant
to which the Indebtedness or the Guaranteed Indebtedness or any part thereof is
issued or secured, (v) any substitution, exchange or release of, or failure to
preserve, perfect or protect, or other dealing in respect of, any property or
any security for the payment of the Indebtedness or the Guaranteed Indebtedness
or any part thereof, (vi) any bankruptcy,
-9-
<PAGE>
insolvency, arrangement, composition, assignment for the benefit of creditors or
similar proceeding commenced by or against the Company, or (vii) any other
matter or thing whatsoever whereby the agreements and obligations of the Company
hereunder or under the Credit Agreement or any other Loan Document would or
might otherwise be released or discharged.
25. DEFEASANCE. This Agreement shall terminate and be of no further
----------
force and effect, and the Agent shall return to the Company any Collateral in
the Agent's possession, upon satisfaction in full of the Indebtedness and the
Guaranteed Indebtedness, the expiration of the Letters of Credit without a draw
having been made, and the termination of the Banks' commitment to lend.
Notwithstanding the foregoing provisions of this Section 25, the indemnity
agreement contained in Section 21 of this Agreement shall survive the
termination of this Agreement.
26. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
27. CONSTRUCTION. Unless the context of this Agreement otherwise
------------
clearly requires, references to the plural include the singular, the singular
the plural and the part the whole and "or" has the inclusive meaning represented
by the phrase "and/or." The words "hereof," "herein," "hereunder" and similar
terms in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. The section and other headings
contained in this Agreement are for reference purposes only and shall not
control or affect the construction of this Agreement or the interpretation
thereof in any respect. Section and subsection references are references to
this Agreement unless otherwise specified.
28. WAIVER OF RIGHT TO TRIAL BY JURY AND CONSEQUENTIAL DAMAGES.
----------------------------------------------------------
THE COMPANY HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR ANY
OTHER DOCUMENT OR INSTRUMENT ATTACHED HERETO, REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH, OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE COMPANY WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
DOCUMENT OR INSTRUMENT ATTACHED HERETO, REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND THE COMPANY HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY OFFICIAL BODY AS
WRITTEN EVIDENCE OF THE CONSENT OF THE COMPANY HERETO TO THE WAIVER OF ITS RIGHT
TO TRIAL BY JURY. NEITHER THE AGENT NOR THE
-10-
<PAGE>
BANKS NOR ANY AGENT OR ATTORNEY OF THE AGENT OR THE BANKS SHALL BE LIABLE TO THE
COMPANY FOR CONSEQUENTIAL DAMAGES ARISING FROM ANY BREACH OF CONTRACT, TORT OR
OTHER WRONG RELATING TO THE ESTABLISHMENT, ADMINISTRATION OR COLLECTION OF THE
OBLIGATIONS RELATING IN ANY WAY TO THIS AGREEMENT OR THE ACTION OR INACTION OF
THE COMPANY HEREUNDER.
29. BREACH OF COVENANT. The Company acknowledges and agrees that the
------------------
failure to perform or observe any covenants set forth in this Agreement shall
constitute a breach of this Agreement and may give rise to an Event of Default
notwithstanding the fact that the failure to perform or observe such covenant
may be attributable to the requirements of any Official Body.
WITNESS the due execution hereof as a document under seal, as of the
date first written above.
ATTEST: OPTION CARE ENTERPRISES, INC.
By:/s/ Pam Colin By:/s/ J. Jeffrey Fox
----------------------- -------------------------
Name: Pam Colin Name: J. Jeffrey Fox
--------------------- -----------------------
Title: CFO
----------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ___________________________
Name: _________________________
Title: __________________________
-11-
<PAGE>
PLEDGE AGREEMENT
SCHEDULE A
AUTHORIZED AND ISSUED CAPITAL STOCK
PLEDGED BY
OPTION CARE ENTERPRISES, INC.
a California corporation
________________________________________________________________________________
See Schedule 5.1.3 of the Credit Agreement
regarding authorized and issued shares of capital stock
<PAGE>
PLEDGE AGREEMENT
SCHEDULE 6
SHAREHOLDER AND PARTNERSHIP AGREEMENTS
WITH RESPECT TO THE PLEDGED SHARES OF
OPTION CARE ENTERPRISES, INC.
a California corporation
________________________________________________________________________________
See Schedule 5.1.17 of the Credit Agreement
regarding shareholder and partnership agreements
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "AGREEMENT") is entered into this 23rd day
of December, 1996, by and between REHAB OPTIONS, INC., a Missouri corporation
(the "COMPANY"), and PNC BANK, NATIONAL ASSOCIATION, as agent for the Banks (the
"AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709.
WHEREAS, Option Care, Inc., the Subsidiaries of Option Care, Inc., the
Agent and the Banks have entered into that certain Credit Agreement, dated as of
even date herewith (as the same may be amended, restated or otherwise modified
from time to time, the "CREDIT AGREEMENT"), pursuant to which the Banks have
agreed to extend to the Borrowers, upon the terms and subject to the conditions
set forth therein, a revolving credit facility in an aggregate principal amount
not to exceed $30,000,000.
WHEREAS, one of the Borrowers under the Credit Agreement is Infusion
Therapy of Ontario, Inc., a wholly owned subsidiary of the Company.
WHEREAS, the Company is directly and indirectly benefitted by the
extension of credit to its subsidiary pursuant to the Credit Agreement.
WHEREAS, in order to induce the Agent and the Banks to enter into the
Credit Agreement, the Company has agreed to enter into this Agreement for the
purpose of granting to the Agent, for the benefit of the Banks, a first priority
perfected lien on 100 percent of the shares of common stock of Infusion Therapy
of Ontario, Inc. and the shares of any Borrower who joins the Credit Agreement
after the date of this Agreement (collectively, the "PLEDGED SHARES"), described
in further detail on Schedule A attached hereto.
NOW, THEREFORE, in consideration of the Obligation (as that term is
defined in the Credit Agreement) and the Guaranteed Indebtedness (as that term
is defined in the Guaranty) and other good and valuable consideration, the
receipt of which is hereby acknowledged, and in order to induce the Agent and
the Banks to enter into the Credit Agreement, the parties hereto, intending to
be legally bound, agree as follows:
1. CERTAIN DEFINITIONS. Capitalized words and terms not otherwise
-------------------
defined herein which are defined in the Credit Agreement have the meanings
ascribed to such words and terms in the Credit Agreement. In addition to other
words and terms defined elsewhere in this Agreement, words and terms which are
defined in the Uniform Commercial Code are used herein as defined in the Uniform
Commercial Code except where the context otherwise requires, and the following
words and terms shall have the following meanings, respectively:
<PAGE>
(a) "COLLATERAL" means (i) the Pledged Shares and all rights and
privileges pertaining thereto, including, without limitation, the shares of
capital stock, all securities and additional securities receivable in respect of
or in exchange for such shares or such securities, all rights to subscribe for
securities incident to or arising from ownership of such shares or such
securities, all cash, stock and other dividends or distributions paid or payable
on such shares or such securities, and all books and records pertaining to the
foregoing, (ii) all proceeds from sales, transfers or other dispositions, and
(iii) whatever is received when any of the foregoing is sold, exchanged or
otherwise disposed of, including any proceeds.
(b) "PRIOR SECURITY INTEREST" means an enforceable, perfected
security interest under the Uniform Commercial Code which is prior to all Liens,
except Liens for taxes not yet due and payable to the extent given priority by
statute and Permitted Liens.
2. GRANT OF SECURITY INTEREST. As security for the due and punctual
--------------------------
payment and performance of the Indebtedness and the Guaranteed Indebtedness in
accordance with the respective terms thereof, the Company hereby delivers,
pledges and grants to the Agent, as secured party, for the benefit of the Banks,
a security interest under the Uniform Commercial Code in and to any and all of
the Collateral.
3. STOCK CERTIFICATES AND STOCK POWERS. Upon the execution and
-----------------------------------
delivery of this Agreement, the Company has caused to be delivered to and
deposited with the Agent or its nominee or nominees, in pledge, stock
certificates and any other instruments evidencing the Collateral, together with
undated stock powers signed in blank by the Company.
4. VOTING RIGHTS. Notwithstanding the security interest in the
-------------
Collateral granted to and created in favor of the Agent for the benefit of the
Banks, the Company shall have the right, until the Agent forecloses upon the
Collateral, to exercise all voting and other shareholders' rights with respect
to the Collateral, subject to Section 5 hereof.
5. RIGHTS OF AGENT TO COLLATERAL. The Agent may at its option and
-----------------------------
at any time and from time to time (except as provided in subsections (c) and
(d)), without notice to or consent of the Company, whether or not an Event of
Default (as hereinafter defined) has occurred or exists, do any or all of the
following:
(a) Take such action as the Agent deems appropriate to maintain,
protect and insure the Collateral, to attach, perfect, continue, preserve and
protect the Agent's Prior Security Interest in the Collateral, to perform, keep,
observe and render true and correct any and all covenants, agreements,
representations and warranties of the Company hereunder, and to add all
liabilities, obligations, costs and expenses incurred in connection with the
foregoing to the Secured Obligations;
(b) Verify the status of the Collateral;
(c) After an Event of Default has occurred and is continuing, cause
to be opened and maintained an interest bearing deposit account ("CASH
COLLATERAL ACCOUNT") and deposit, and require the Company to deposit, therein
all cash proceeds of the Collateral and cash dividends received in respect of
the Collateral. The Agent shall have sole dominion and control
-2-
<PAGE>
over all items and funds in the Cash Collateral Account and such items and funds
may be withdrawn only by the Agent, it being the intention of the parties hereto
that the Company shall have no control over or withdrawal rights in respect of
the Cash Collateral Account. The Agent, upon the vote of all the Banks and upon
the written request by the Company to the Agent, may release to the Company at
any time after 2:00 o'clock p.m., Pittsburgh time on the first business day
following the date of such vote and request, all or any part of the collected
funds deposited in the Cash Collateral Account for application to the
outstanding principal balance of the Indebtedness and the Guaranteed
Indebtedness. Notwithstanding any such request, the Agent shall have the right
at any time and from time to time to apply all or any part of the collected
funds on deposit in the Cash Collateral Account to the payment of the
Indebtedness and the Guaranteed Indebtedness in order of application as set
forth in Section 11 hereof, whether on account of principal or interest or
otherwise as the Agent in its discretion may elect, until the Secured
Obligations are fully paid; and
(d) After an Event of Default has occurred and is continuing, have
any part or all of the Collateral registered in the name of the Agent or that of
its nominee, and the Company covenants that, upon the Agent's request, the
Company will cause the issuer, transfer agent or registrar of such Collateral to
effect such registration.
The Agent may by written notice to the Company relinquish, either partially or
completely in accordance with any terms or conditions the Agent may set forth in
such notice, any or all rights the Agent may acquire pursuant hereto; provided,
--------
however, that the powers conferred on the Agent for the benefit of the Banks by
- -------
this Section 5 are solely to protect the interests of the Agent for the benefit
of the Banks in the Collateral and shall not impose on the Agent any duty to
exercise such powers.
6. REPRESENTATIONS AND WARRANTIES.
------------------------------
(a) The Company has and will have at all times good and marketable
title to the Collateral, free and clear of all liens, except for Permitted
Liens, and will defend such title against the claims and demands of all persons
whomsoever, except liens in favor of the Agent. The Company assumes full
responsibility for taking any and all steps to preserve rights with respect to
the Collateral against all prior parties.
(b) The Pledged Shares and any other shares of capital stock included
in the Collateral have been duly authorized and validly issued, are fully paid
and nonassessable and are owned beneficially and of record by the Company. The
Pledged Shares constitute all of the issued and outstanding capital stock of the
issuer thereof; provided, if the Pledged Shares include shares acquired after
--------
the date of this Agreement pursuant to Permitted Business Combinations, the
shares may not constitute 100% of the outstanding capital stock of the issuer
thereof.
(c) Except as disclosed on Schedule 6, there are no shareholder,
partnership or other agreements or understandings with respect to the Pledged
Shares or any other securities included in the Collateral; provided, if the
--------
Pledged Shares include shares acquired after the date of this Agreement pursuant
to Permitted Business Combinations, the Company may ask the Agent to accept
additional agreements or understandings. The Agent, after consulting with the
Banks, will not withhold its consent unreasonably.
-3-
<PAGE>
(d) Except as disclosed on Schedule 6 and except to the extent
contained in Agreements consented to by the Banks pursuant to Section 6(c), the
Pledged Shares and any other securities included in the Collateral are free and
clear of any lien, option or right of others or restriction on transfer except
for the security interest granted to and created in favor of the Agent for the
benefit of the Banks hereunder and except to the extent that the transfer by the
Agent of such Collateral may be restricted by the Federal Securities Act of
1933, as amended, and applicable state securities laws.
(e) The Company will not take any action, or vote or omit to vote the
Pledged Shares or any other securities included in the Collateral in a manner
which would permit the issuer thereof to take or omit to take any action, the
taking or the omission of which might result in an alteration or impairment of
the Collateral or of this Agreement;
(f) The Company will not vote or omit to vote the Pledged Shares or
any other securities included in the Collateral in a manner inconsistent with
Section 7.2.14 of the Credit Agreement.
(g) There are no actions, suits, proceedings or investigations
pending or, to the knowledge of the Company, threatened which affect the
Collateral.
(h) The security interest granted to the Agent for the benefit of the
Banks pursuant to this Agreement constitutes and will continue to constitute a
Prior Security Interest under the Uniform Commercial Code as in effect in each
applicable jurisdiction or other applicable law, entitled to all the rights,
benefits and priorities provided by the Uniform Commercial Code or such law.
Upon the taking possession of the stock certificates or other certificates
evidencing all or part of the Collateral, all such action as is necessary or
advisable to establish such rights of the Agent will have been taken, and there
will be upon execution and delivery of this Agreement and such taking of
possession, no necessity for any further action in order to preserve, protect
and continue such rights. All expenses in connection with such action has been
or will be paid by the Company.
7. TAXES AND CHARGES. The Company will pay and discharge all taxes,
-----------------
levies and other impositions levied on any portion of the Collateral (except to
the extent only that such taxes, levies and other impositions shall not then be
due or shall be contested in good faith by appropriate proceedings diligently
conducted, provided that such reserves and other provisions as may be required
by GAAP have been duly made and recorded). If the Company shall fail to do so,
the Agent may (but shall not be obligated to) pay such taxes, levies or
impositions for the account of the Company and may add the amount thereof to the
Indebtedness and the Guaranteed Indebtedness.
8. PRESERVATION AND PROTECTION OF SECURITY INTEREST. The Company
------------------------------------------------
will faithfully preserve and protect the Agent's security interest in the
Collateral as a Prior Security Interest and will, at its own cost and expense,
cause such security interest in the Collateral to be perfected and continue
perfected so long as the Indebtedness and the Guaranteed Indebtedness or any
portion thereof are outstanding and unpaid. For such purposes the Company will
from time to time at the request of the Agent (a) turn over physical possession
to the Agent for the benefit of the Banks of all Collateral which requires the
Agent to have possession thereof in
-4-
<PAGE>
order to perfect the Agent's security interest therein for the benefit of the
Banks and (b) file or record, or cause to be filed or recorded, such
instruments, documents and notices, including without limitation financing
statements and continuation statements, all as the Agent may deem necessary or
advisable from time to time in order to perfect and continue perfected said
security interests as Prior Security Interests.
The Company will do all such other acts and things and will execute
and deliver all such other instruments and documents, including without
limitation further security agreements, pledges, endorsements, assignments and
notices, as the Agent may deem necessary or advisable from time to time in order
to perfect and preserve the priority of said security interest as a Prior
Security Interest in the Collateral. The Agent, and its officers, employees and
authorized agents, or any of them, are hereby irrevocably appointed the
attorneys-in-fact of the Company (without requiring any of them to act as such),
such appointment being coupled with an interest, to do, at the Company's
expense, all acts and things which the Agent may deem necessary or advisable to
preserve, perfect and continue perfected the Agent's security interest in the
Collateral as a Prior Security Interest, including without limitation the
signing of financing, continuation or other similar statements and notices on
behalf of the Company. In addition to the foregoing but not in limitation
thereof, the Company agrees that a carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof.
The Agent shall be deemed to have exercised reasonable care in the
preservation and custody of such of the Collateral as may be in the Agent's
possession if the Agent takes such action for that purpose as the Company shall
request in writing, provided that such requested action shall not in the
exclusive judgment of the Agent impair the Agent's Prior Security Interest in
such Collateral or its rights in or the value of such Collateral, and provided
further that such written request is received by the Agent in sufficient time to
permit the Agent to take the requested action.
9. EVENTS OF DEFAULT. The Company shall, at the option of the
-----------------
Agent, be in default under this Agreement upon the happening of any of the
following events or conditions (each, an "EVENT OF DEFAULT"):
(a) an Event of Default as defined in the Credit Agreement or
any other Loan Document;
(b) the failure of the Agent to have a Prior Security Interest
in any portion of the Collateral; or
(c) any indication or evidence received by the Agent that the
Company may have directly or indirectly been engaged in any type of activity
which, in the Agent's discretion, might result in the forfeiture of any property
of the Company to any governmental entity, federal, state or local.
10. REMEDIES ON DEFAULT. If any one or more of the Events of Default
-------------------
shall occur and be continuing or exist, the Agent for the benefit of the Banks
shall have the immediate right to take control of all or any part of the
Collateral and the proceeds thereof, with or without
-5-
<PAGE>
judicial process, and, without demand of performance or notice (and if notice is
required by Law, after ten (10) days' prior written notice, which the Company
agrees is a reasonable time and manner for notice), or demand whosoever to the
Company, all of which are hereby expressly waived, and without advertisement,
may proceed to exercise one or more of the rights and remedies accorded a
secured party by the Uniform Commercial Code and otherwise by Law or by the
terms of the Credit Agreement or this Agreement or any other Loan Document.
The Agent's rights and remedies shall include without limitation the
power for the benefit of the Banks to (i) transfer into the Agent's name or into
the name of its nominee or nominees all or any portion of the Pledged Shares or
other securities constituting part or all of the Collateral and thereafter
receive directly all cash and other dividends, distributions and payments made
on account of said stock or securities, vote the same, give all consents,
waivers and ratifications in respect thereof, and otherwise act with respect
thereto as though it were the absolute owner thereof, and (ii) sell all or any
portion of the Collateral at public or private sale at such place and time and
on such terms as the Agent may see fit.
The Company recognizes that the Agent may be compelled to resort to
one or more private sales of any of the Pledged Shares or other securities
constituting part or all of the Collateral to a restricted group of purchasers
who will be obliged to agree, among other things, to acquire such securities for
their own account for investment and not with a view to the distribution or
resale thereof. The Company acknowledges and agrees that any such private sale
(such sale or any public sale to be conducted in a commercially reasonable
manner) may result in prices and other terms less favorable to the seller than
if such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall not, for such reason alone, be deemed to have
been made in a commercially unreasonable manner. The Agent shall not be under
any obligation to delay a sale of any such shares or securities for the period
of time necessary to permit the issuer of such securities to register such
securities for public sale under the Federal Securities Act of 1933, as amended,
or under applicable state securities Laws, even if the issuer would agree to do
so. At any sale or other disposition, the Agent may, to the extent permissible
under applicable Laws, purchase all any part of the Collateral, free from any
right of redemption on the part of the Company, which right is hereby waived and
released.
11. APPLICATION OF PROCEEDS. Any Collateral or proceeds of the
-----------------------
Collateral held or realized upon at any time by the Agent or any of the Banks
and any debt (including all deposit accounts) in which the Agent or any of the
Banks has been granted a security interest pursuant to any of the Loan Documents
and which has been set off or applied by the Agent pursuant to any such Loan
Document, shall be applied in satisfaction of the Indebtedness and the
Guaranteed Indebtedness, in such order of application as the Agent shall
determine in its discretion if there has been an Event of Default and, if there
has not been an Event of Default, as determined by the Borrower and the Agent,
until the Indebtedness and the Guaranteed Indebtedness are fully paid, and
thereafter any balance shall be distributed as required by applicable Law. If
the proceeds of the Collateral together with the proceeds of any other
collateral granted to the Agent by the Company for the benefit of the Banks, and
of any sales or dispositions thereof, shall be insufficient to pay the amounts
secured hereby, the Company shall be liable for the deficiency.
-6-
<PAGE>
12. CHANGES IN WRITING. No modification, amendment or waiver of any
------------------
provision of this Agreement nor consent to any departure by the Company
therefrom, will in any event be effective unless the same is in writing and
signed by the Agent, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given.
13. PRESERVATION OF RIGHTS. No delay or omission on the part of the
----------------------
Agent to exercise any right or power arising hereunder will impair any such
right or power or be considered a waiver of any such right or power or any
acquiescence therein, nor will the action or inaction of the Agent impair any
right or power arising hereunder. The Agent's rights and remedies hereunder are
cumulative and not exclusive of any other rights or remedies which the Agent
otherwise would have, whether under the Credit Agreement or any other Loan
Document, the Uniform Commercial Code, applicable Law or otherwise.
14. TAXES. The Company agrees to pay upon demand any and all stamp,
-----
document, transfer or recording taxes, and similar impositions payable or
hereafter determined to be payable in connection with this Agreement and agrees
to save the Agent and the Banks harmless from and against any and all present or
future claims or liabilities with respect to, or resulting from any delay in
paying or omission to pay, any such taxes or similar impositions.
15. PAYMENT OF EXPENSES. At its option, the Agent may discharge
-------------------
taxes, liens, security interests or such other encumbrances as may attach to the
Collateral, may pay for required insurance on the Collateral and may pay for the
maintenance, appraisal or reappraisal, and preservation of the Collateral, as
determined by the Agent to be necessary. The Company will reimburse the Agent
on demand for any payment so made or any expense incurred by the Agent pursuant
to the foregoing authorization, and the Collateral also will secure any advances
or payments so made or expenses so incurred by the Agent.
16. NOTICES. All notices, demands, requests, consents, approvals and
-------
other communications required or permitted hereunder must be in writing and will
be effective if made in conformity with Section 10.6 of the Credit Agreement.
If to the Company, such notice shall be addressed as follows:
Rehab Options, Inc.
c/o Option Care, Inc.
100 Corporate North, Suite 212
Bannockburn, Illinois 60015
Attention: General Counsel
17. SURVIVAL. All representations, warranties, covenants and
--------
agreements of the Company contained herein or made in connection herewith shall
survive the execution and delivery of this Agreement and shall continue in full
force and effect so long as any of the Credit Agreement and the other Loan
Documents is in effect, or any Indebtedness or the Guaranteed Indebtedness is
outstanding and until payment in full of all Indebtedness and the Guaranteed
Indebtedness hereunder and under the Credit Agreement and the other Loan
Documents. The indemnity agreement contained in Section 21 of this Agreement
shall survive the termination of this Agreement.
-7-
<PAGE>
18. GOVERNING LAW; VENUE. The Uniform Commercial Code shall govern
--------------------
the attachment, perfection and the effect of attachment and perfection of the
Agent's security interest in the Collateral, and the rights, duties and
obligations of the Agent and the Company with respect thereto. Except as
provided by the immediately preceding sentence, this Agreement shall be deemed
to be a contract under the laws of the Commonwealth of Pennsylvania and the
execution and delivery thereof and the terms and provisions shall be governed by
and construed in accordance with the laws of said Commonwealth. The Company
irrevocably consents to the nonexclusive jurisdiction of the Court of Common
Pleas of Allegheny County and the United States District Court for the Western
District of Pennsylvania, and waives personal service of any and all process
upon it and consents that all such service of process be made by certified or
registered mail directed to it at the address provided for in the Guaranty and
service so made shall be deemed to be completed upon actual receipt thereof.
The Company waives any objection to jurisdiction and venue of any action
instituted against it as provided herein and agrees not to assert any defense
based on lack of jurisdiction or venue.
19. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
----------------------
inure to the benefit of the Company and the Agent for the benefit of the Banks
and their respective heirs, executors, administrators, successors and assigns;
provided, however, that the Company may not assign this Agreement in whole or in
- -------- -------
part without the prior written consent of the Agent, and the Agent at any time
may assign this Agreement in whole or in part.
20. SEVERABILITY. If any term, provision, or restriction of this
------------
Agreement is held to be invalid, void or unenforceable in any way in any
jurisdiction, the remainder of the terms, provisions, covenants and restrictions
of this Agreement shall remain in full force and effect in such jurisdiction and
shall in no way be affected, impaired or invalidated, and such invalidity,
voidness or unenforceability shall not affect the validity and enforceability of
such provision, covenant, or restriction in any other jurisdiction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such which may be hereafter declared invalid, void or
unenforceable.
21. INDEMNITY. The Company agrees to indemnify each of the Agent and
---------
the Banks, their directors, officers and employees and each legal entity, if
any, who controls the Agent or the Banks (the "INDEMNIFIED PARTIES") and to hold
each Indemnified Party harmless from and against any and all claims, damages,
losses, liabilities and expenses (including, without limitation, all fees of
counsel with whom any Indemnified Party may consult and all expenses of
litigation or preparation therefor) which any Indemnified Party may incur or
which may be asserted against any Indemnified Party as a result of the execution
of or performance under this Agreement; provided, however, that the foregoing
-------- -------
indemnity agreement shall not apply to claims, damages, losses, liabilities and
expenses attributable to an Indemnified Party's gross negligence or willful
misconduct. The indemnity agreement contained in this Section shall survive the
termination of this Agreement. The Company may participate at its expense in
the defense of any such claim.
22. MARSHALLING; PAYMENTS SET ASIDE. The Agent shall not be under
-------------------------------
any obligation to marshall any assets in favor of the Company or any other
person or against or in payment of any or all of the Indebtedness or the
Guaranteed Indebtedness. To the extent that
-8-
<PAGE>
the Company makes a payment or payments to the Agent, or the Agent enforces its
security interests, or the Agent exercises its rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law, including without limitation any bankruptcy law, state or federal
law, common law or equitable cause, then to the extent of any such restoration,
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
23. ENTIRE AGREEMENT. This Agreement (including the documents and
----------------
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
24. CONTINUING VALIDITY OF GUARANTEED INDEBTEDNESS. The agreements
----------------------------------------------
and obligations of the Company hereunder are continuing agreements and
obligations, and are absolute and unconditional irrespective of the genuineness,
validity or enforceability of any note or other instrument or instruments now or
hereafter evidencing the Indebtedness or the Guaranteed Indebtedness or any part
thereof or of the Credit Agreement, the Guaranty, this Agreement or other Loan
Document or any other agreement or agreements now or hereafter entered into by
the Agent for the benefit of the Banks or the Company pursuant to which the
Indebtedness or the Guaranteed Indebtedness or any part thereof is issued or of
any other circumstance which might otherwise constitute a legal or equitable
discharge of such agreements and obligations; without limitation upon the
foregoing, such agreements and obligations shall continue in full force and
effect as long as the Indebtedness or the Guaranteed Indebtedness or any part
thereof remains outstanding and unpaid and shall remain in full force and effect
without regard to and shall not be released, discharged or in any way affected
by (i) any renewal, refinancing or refunding of the Indebtedness or the
Guaranteed Indebtedness in whole or in part, (ii) any extension of the time of
any payment due under any note or instrument or instruments now or hereafter
evidencing the Indebtedness or the Guaranteed Indebtedness or any part thereof,
(iii) any compromise or settlement with respect to the Indebtedness or the
Guaranteed Indebtedness or any part thereof, or any forbearance or indulgence
extended to the Company, (iv) any amendment to or modification of the terms of
any instrument or instruments now or hereafter evidencing the Indebtedness or
the Guaranteed Indebtedness or any part thereof or any other agreement or
agreements now or hereafter entered into by the Agent and the Company pursuant
to which the Indebtedness or the Guaranteed Indebtedness or any part thereof is
issued or secured, (v) any substitution, exchange or release of, or failure to
preserve, perfect or protect, or other dealing in respect of, any property or
any security for the payment of the Indebtedness or the Guaranteed Indebtedness
or any part thereof, (vi) any bankruptcy, insolvency, arrangement, composition,
assignment for the benefit of creditors or similar proceeding commenced by or
against the Company, or (vii) any other matter or thing whatsoever whereby the
agreements and obligations of the Company hereunder or under the Credit
Agreement or any other Loan Document would or might otherwise be released or
discharged.
-9-
<PAGE>
25. DEFEASANCE. This Agreement shall terminate and be of no further
----------
force and effect, and the Agent shall return to the Company any Collateral in
the Agent's possession, upon satisfaction in full of the Indebtedness and the
Guaranteed Indebtedness, the expiration of the Letters of Credit without a draw
having been made, and the termination of the Banks' commitment to lend.
Notwithstanding the foregoing provisions of this Section 25, the indemnity
agreement contained in Section 21 of this Agreement shall survive the
termination of this Agreement.
26. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
27. CONSTRUCTION. Unless the context of this Agreement otherwise
------------
clearly requires, references to the plural include the singular, the singular
the plural and the part the whole and "or" has the inclusive meaning represented
by the phrase "and/or." The words "hereof," "herein," "hereunder" and similar
terms in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. The section and other headings
contained in this Agreement are for reference purposes only and shall not
control or affect the construction of this Agreement or the interpretation
thereof in any respect. Section and subsection references are references to
this Agreement unless otherwise specified.
28. WAIVER OF RIGHT TO TRIAL BY JURY AND CONSEQUENTIAL DAMAGES.
----------------------------------------------------------
THE COMPANY HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR ANY
OTHER DOCUMENT OR INSTRUMENT ATTACHED HERETO, REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH, OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE COMPANY WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
DOCUMENT OR INSTRUMENT ATTACHED HERETO, REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND THE COMPANY HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY OFFICIAL BODY AS
WRITTEN EVIDENCE OF THE CONSENT OF THE COMPANY HERETO TO THE WAIVER OF ITS RIGHT
TO TRIAL BY JURY. NEITHER THE AGENT NOR THE BANKS NOR ANY AGENT OR ATTORNEY OF
THE AGENT OR THE BANKS SHALL BE LIABLE TO THE COMPANY FOR CONSEQUENTIAL DAMAGES
ARISING FROM ANY BREACH OF CONTRACT, TORT OR OTHER WRONG RELATING TO THE
ESTABLISHMENT, ADMINISTRATION OR COLLECTION OF THE OBLIGATIONS RELATING IN ANY
WAY TO THIS AGREEMENT OR THE ACTION OR INACTION OF THE COMPANY HEREUNDER.
-10-
<PAGE>
29. BREACH OF COVENANT. The Company acknowledges and agrees that the
------------------
failure to perform or observe any covenants set forth in this Agreement shall
constitute a breach of this Agreement and may give rise to an Event of Default
notwithstanding the fact that the failure to perform or observe such covenant
may be attributable to the requirements of any Official Body.
WITNESS the due execution hereof as a document under seal, as of the
date first written above.
ATTEST: REHAB OPTIONS, INC.
By:/s/ Pam Colin By:/s/ J. Jeffrey Fox
----------------------- -------------------------
Name: Pam Colin Name: J. Jeffre
y Fox
--------------------- -----------------------
Title: CFO
----------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ___________________________
Name: _________________________
Title: __________________________
<PAGE>
PLEDGE AGREEMENT
SCHEDULE 6
SHAREHOLDER AND PARTNERSHIP AGREEMENTS
WITH RESPECT TO THE PLEDGED SHARES OF
REHAB OPTIONS, INC.
a Missouri corporation
________________________________________________________________________________
See Schedule 5.1.17 of the Credit Agreement
regarding shareholder and partnership agreements
<PAGE>
PLEDGE AGREEMENT
SCHEDULE A
AUTHORIZED AND ISSUED CAPITAL STOCK
PLEDGED BY
REHAB OPTIONS, INC.
a Missouri corporation
________________________________________________________________________________
See Schedule 5.1.3 of the Credit Agreement
regarding authorized and issued shares of capital stock
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between OPTION CARE, INC., a Delaware corporation (the
"ASSIGNOR"), with an address at 100 Corporate North, Suite 212, Bannockburn,
Illinois 60015, and PNC BANK, NATIONAL ASSOCIATION, as agent for the Banks (as
defined in the hereinafter defined Credit Agreement) (the "AGENT"), with an
address at One PNC Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
All terms capitalized but not otherwise defined herein shall have the meanings
ascribed to such terms in the Credit Agreement (as hereinafter defined), unless
the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver
this Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The time
and frequency of such inspections shall be consistent with those in Section 7.1
of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: OPTION CARE, INC., a Delaware
corporation
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- --------------------------- ----------------------------
Name: Doreen Wiman Name: J. Jeffrey Fox
---------------------- --------------------------
Title: CFO
-------------------------
PNC BANK, NATIONAL ASSOCIATION,
AS AGENT
By: ___________________________
Name: _________________________
Title: ________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
OPTION CARE, INC.
a Delaware corporation
________________________________________________________________________________
NONE
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between OPTION CARE, INC., a California corporation
(the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as agent for the Banks (as
defined in the hereinafter defined Credit Agreement) (the "AGENT"), with an
address at One PNC Plaza, 249 5th Avenue, Pittsburgh, Pennsylvania 15222-2709.
All terms capitalized but not otherwise defined herein shall have the meanings
ascribed to such terms in the Credit Agreement (as hereinafter defined), unless
the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The time
and frequency of such inspections shall be consistent with those in Section 7.1
of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: OPTION CARE, INC., a California
corporation
By: /s/ Pam Colin By: /s/ J. Jeffrey Fox
----------------------- -------------------------
Name: Pam Colin Name: J. Jeffrey Fox
--------------------- -----------------------
Title: CFO
----------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ___________________________
Name: _________________________
Title: ________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
OPTION CARE, INC.
a California corporation
____________________________________________________________________________
SEE SCHEDULES 5.1.5
OF THE CREDIT AGREEMENT
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between OPTION ENTERPRISES, INC., a California
corporation (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as agent for
the Banks (as defined in the hereinafter defined Credit Agreement) (the
"AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
hereinafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The
time and frequency of such inspections shall be consistent with those in Section
7.1 of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: OPTION CARE ENTERPRISES, INC.
/s/ Pam Colin.
- ------------------------- By: /s/ J. Jeffrey Fox
----------------------------
Name: Pam Colin. Name: J. Jeffrey Fox
------------------- --------------------------
Title: CFO
-------------------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ___________________________
Name: _________________________
Title: ________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
OPTION CARE ENTERPRISES, INC.
____________________________________________________________________________
NONE
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between PHARMACARE OF SOUTHWEST FLORIDA, INC., a
Florida corporation (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as
agent for the Banks (as defined in the hereinafter defined Credit Agreement)
(the "AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
hereinafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The time
and frequency of such inspections shall be consistent with those in Section 7.1
of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: PHARMACARE OF SOUTHWEST
FLORIDA, INC.
/s/ Pam Colin By: /s/ J. Jeffrey Fox
- ------------------------- ------------------------
Name: Pam Colin Name: J. Jeffrey Fox
-------------------- ----------------------
Title: CFO
---------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: _______________________
Name: _____________________
Title: ____________________
-4-
<PAGE>
Schedule A
----------
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
PHARMACARE OF SOUTHWEST FLORIDA, INC.
____________________________________________________________________________
NONE
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between PHARMACY I.V. ASSOCIATES, INC., a Missouri
corporation (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as agent for
the Banks (as defined in the hereinafter defined Credit Agreement) (the
"AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
hereinafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The time
and frequency of such inspections shall be consistent with those in Section 7.1
of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: PHARMACY I.V. ASSOCIATES, INC.
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- --------------------- -------------------------
Name: Doreen Wiman Name: J. Jeffrey Fox
------------------------
Title: CFO
-----------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ___________________________
Name: _________________________
Title: ________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
PHARMACY LV. ASSOCIATES, INC.
____________________________________________________________________________
NONE
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between HOME CARE OF COLUMBIA, INC., a Missouri
corporation (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as agent for
the Banks (as defined in the hereinafter defined Credit Agreement) (the
"AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
hereinafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and
intending to be legally bound hereby, Assignor and Agent, on behalf of the
Banks, hereby agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the Agent
----------------
and its employees and agents to visit Assignor's plants and facilities where
products sold or services provided under any of the Marks are manufactured,
inspected, stored, or provided, and to inspect and review the products and
quality control records relating thereto at reasonable times. Assignor confirms
its commitment to do any and all acts required by the Agent to ensure
maintenance of quality standards for such products and services. The time and
frequency of such inspections shall be consistent with those in Section 7.1 of
the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: HOME CARE OF COLUMBIA, INC.
By:/s/ Doreen Wiman By:/s/ J. Jeffrey Fox
----------------------- -------------------------
Name: Doreen Wiman Name: J. Jeffrey Fox
--------------------- -----------------------
Title: CFO
----------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ___________________________
Name: _________________________
Title: ________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
HOME CARE OF COLUMBIA, INC.
____________________________________________________________________________
NONE
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between YOUNG'S I.V. THERAPY, INC., a Pennsylvania
corporation (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as agent for
the Banks (as defined in the hereinafter defined Credit Agreement) (the
"AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
hereinafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The time
and frequency of such inspections shall be consistent with those in Section 7.1
of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: YOUNG'S I.V. THERAPY, INC.
/s/ Doreen Wiman
- --------------------------- By: /s/ J. Jeffrey Fox
Name: Doreen Wiman -----------------------------
---------------------- J. Jeffrey Fox
Name ---------------------------
Title: CFO
-------------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ____________________________
Name: __________________________
Title: _________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
YOUNG'S LV. THERAPY, INC.
____________________________________________________________________________
NONE
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between HOME INFUSION THERAPY OF BULLHEAD CITY, INC., a
Delaware corporation; (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as
agent for the Banks (as defined in the hereinafter defined Credit Agreement)
(the "AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
herei nafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The time
and frequency of such inspections shall be consistent with those in Section 7.1
of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: HOME INFUSION THERAPY OF
BULLHEAD CITY, INC.
/s/ Doreen Wiman /s/ J. Jeffrey Fox
- ------------------------- By: ----------------------------
Name: Doreen Wiman Name: /s/ J. Jeffrey Fox
------------------- --------------------------
CFO
Title: -------------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ____________________________
Name:___________________________
Title:__________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
HOME INFUSION THERAPY OF BULLHEAD CITY, INC.
____________________________________________________________________________
NONE
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between WHATCOM PHARMACEUTICAL SERVICES, INC., a
Washington corporation (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as
agent for the Banks (as defined in the hereinafter defined Credit Agreement)
(the "AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
hereinafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest
in, to and under the intellectual property rights as set forth on the attached
Schedule A.
WHEREAS, the Agent and the Assignor have entered into a Security
Agreement of even date herewith (as such agreement may be amended from time to
time hereafter, the "Security Agreement"), pursuant to which the Assignor
granted to the Agent a security interest in certain Collateral (as defined in
the Security Agreement) of Assignor, including but not limited to Assignor's
General Intangibles (as defined in the Security Agreement) which include, but
are not limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver
this Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and
intending to be legally bound hereby, Assignor and Agent, on behalf of the
Banks, hereby agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The time
and frequency of such inspections shall be consistent with those in Section 7.1
of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: WHATCOM PHARMACEUTICAL
SERVICES, INC.
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ------------------------- ---------------------------------
Name: Doreen Wiman Name: J. Jeffrey Fox
-------------------- -------------------------------
Title: CFO
------------------------------
PNC BANK, NATIONAL ASSOCIATION,
AS AGENT
By: ________________________________
Name: ______________________________
Title: _____________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
WHATCOM PHARMACEUTICAL SERVICES, INC.
____________________________________________________________________________
NONE
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between CORDESYS HEALTHCARE MANAGEMENT, INC., a
Delaware corporation (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as
agent for the Banks (as defined in the hereinafter defined Credit Agreement)
(the "AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
hereinafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the security
--------------------------------
interest granted by Assignor under the Security Agreement to secure the complete
and timely satisfaction of all Secured Obligations, Assignor hereby ratifies the
creation and grant of the security interest in, and further, to secure the
complete and timely satisfaction of all Secured Obligations, Assignor does
hereby hypothecate (subject to paragraph 6 hereof), as collateral security, to
the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the Agent
----------------
and its employees and agents to visit Assignor's plants and facilities where
products sold or services provided under any of the Marks are manufactured,
inspected, stored, or provided, and to inspect and review the products and
quality control records relating thereto at reasonable times. Assignor confirms
its commitment to do any and all acts required by the Agent to ensure
maintenance of quality standards for such products and services. The time and
frequency of such inspections shall be consistent with those in Section 7.1 of
the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: CORDESYS HEALTHCARE
MANAGEMENT, INC.
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ------------------------- ----------------------------
Name: Doreen Wiman Name: J. Jeffrey Fox
-------------------- --------------------------
Title: CFO
------------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ___________________________
Name: _________________________
Title: ________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
CORDESYS HEALTHCARE MANAGEMENT, INC.
____________________________________________________________________________
SEE SCHEDULES 5.1.5
OF THE CREDIT AGREEMENT
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between INFUSION THERAPY OF ONTARIO, INC., a California
corporation (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as agent for
the Banks (as defined in the hereinafter defined Credit Agreement) (the
"AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
hereinafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The time
and frequency of such inspections shall be consistent with those in Section 7.1
of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: INFUSION THERAPY OF
ONTARIO, INC.
/s/ Doreen Wiman /s/ Dan W. Bramuchi
- ------------------------- By: -----------------------------
Doreen Wiman Dan W. Bramuchi
Name: ------------------- Name: ---------------------------
Secretary
Title: --------------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ___________________________
Name: _________________________
Title: ________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
INFUSION THERAPY OF ONTARIO, INC.
____________________________________________________________________________
NONE
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between OPTION CARE HOME HEALTH, INC., an Ohio
corporation, (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as agent for
the Banks (as defined in the hereinafter defined Credit Agreement) (the
"AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
hereinafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The time
and frequency of such inspections shall be consistent with those in Section 7.1
of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: OPTION CARE HOME HEALTH,
INC.
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ------------------------ -------------------------
Name: Doreen Wiman Name: J. Jeffrey Fox
------------------- -----------------------
Title: CFO
----------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ________________________
Name: ______________________
Title: _____________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
OPTION CARE HOSPICE, INC.
____________________________________________________________________________
NONE
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between OPTION CARE HOME HEALTH, INC., an Ohio
corporation, (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as agent for
the Banks (as defined in the hereinafter defined Credit Agreement) (the
"AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
hereinafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The
time and frequency of such inspections shall be consistent with those in Section
7.1 of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: OPTION CARE HOME HEALTH,
INC.
/s/ Doreen Wiman By: /s/ J. Jeffrey Fox
- ------------------------- ----------------------------
Name: Doreen Wiman Name: J. Jeffrey Fox
-------------------- --------------------------
Title: CFO
-------------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ___________________________
Name: _________________________
Title: ________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
OPTION CARE HOME HEALTH, INC.
____________________________________________________________________________
NONE
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between MANAGEMENT BY INFORMATION, INC., a Delaware
corporation, (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as agent for
the Banks (as defined in the hereinafter defined Credit Agreement) (the
"AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
hereinafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The time
and frequency of such inspections shall be consistent with those in Section 7.1
of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: MANAGEMENT BY INFORMATION,
INC.
/s/ Doreen Wiman By:/s/ J. Jeffrey Fox
- -------------------------- -------------------------------
J. Jeffrey Fox
Name : ---------------------------
Name: Doreen Wiman
- -------------------------- Title: CFO
---------------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ______________________________
Name: ____________________________
Title: ___________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
MANAGEMENT BY INFORMATION, INC.
____________________________________________________________________________
SEE SCHEDULES 5.1.5
OF THE CREDIT AGREEMENT
<PAGE>
COLLATERAL ASSIGNMENT OF AND RATIFICATION OF
SECURITY INTEREST IN INTELLECTUAL PROPERTY RIGHTS
THIS COLLATERAL ASSIGNMENT OF AND RATIFICATION OF SECURITY INTEREST IN
INTELLECTUAL PROPERTY RIGHTS (this "INSTRUMENT") is entered into this 23rd day
of December, 1996 by and between OPTION CARE OF OKLAHOMA, INC., a Delaware
corporation, (the "ASSIGNOR"), and PNC BANK, NATIONAL ASSOCIATION, as agent for
the Banks (as defined in the hereinafter defined Credit Agreement) (the
"AGENT"), with an address at One PNC Plaza, 249 5th Avenue, Pittsburgh,
Pennsylvania 15222-2709. All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
hereinafter defined), unless the context otherwise requires.
WHEREAS, the Assignor, its subsidiaries, the Agent and the Banks have
entered into that certain Credit Agreement of even date herewith (as the same
may be amended, modified, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Banks have agreed to extend to the
Company, upon the terms and subject to the conditions set forth therein, a
revolving credit facility in an aggregate principal amount not to exceed
$30,000,000.
WHEREAS, the Assignor is the owner of all right, title and interest in, to
and under the intellectual property rights as set forth on the attached Schedule
A.
WHEREAS, the Agent and the Assignor have entered into a Security Agreement
of even date herewith (as such agreement may be amended from time to time
hereafter, the "Security Agreement"), pursuant to which the Assignor granted to
the Agent a security interest in certain Collateral (as defined in the Security
Agreement) of Assignor, including but not limited to Assignor's General
Intangibles (as defined in the Security Agreement) which include, but are not
limited to, the intellectual property set forth on Schedule A hereto, as
security for the payment or performance of Assignor's Secured Obligations (as
defined in the Security Agreement), and pursuant to which the Assignor therein
agreed to execute and cause to be filed all such further instruments and
documents as Agent may request for preserving the security interest.
WHEREAS, the Agent has requested that the Assignor execute and deliver this
Instrument for the purpose of collaterally assigning its interests in, and
placing in the public record of the United States Patent and Trademark Office
the collateral assignment granted pursuant hereto to the Agent in, certain of
the Assignor's Collateral for the benefit of the Banks.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and intending
to be legally bound hereby, Assignor and Agent, on behalf of the Banks, hereby
agree as follows:
1. Definition of Terms Used Herein. All capitalized terms not
-------------------------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Assignment and Security Interest. As confirmation of the
--------------------------------
security interest granted by Assignor under the Security Agreement to secure the
complete and timely satisfaction of all Secured Obligations, Assignor hereby
ratifies the creation and grant of the security interest in, and further, to
secure the complete and timely satisfaction of all Secured Obligations, Assignor
does hereby hypothecate (subject to paragraph 6 hereof), as collateral security,
to the Agent: (i) the United States patent and patent applications owned by
Assignor, all reissue, divisional, continuation, or continuation-in-part patent
applications and patents related thereto, and all renewals and extensions
thereof and reexamination certificates relating thereto; including, without
limitation, all proceeds (such as license royalties or proceeds of infringements
suits), and all rights to sue for past, present, and future infringements
(collectively called the "Patents"); and (ii) all of Assignor's trademark
applications, trademarks (whether registered, unregistered or for which an
application to register has been filed), service mark applications, service
marks (whether registered, unregistered or for which an application to register
has been filed) and tradenames, together with the goodwill of the business
related thereto; including without limitation all renewals thereof and all
proceeds (such as license royalties or proceeds of infringement suits), and all
rights to sue for past, present and future infringements (collectively called
the "Marks"). All registered Patents and Marks are and shall be listed on
Schedule A.
3. Right to Inspect. Assignor hereby confirms the right of the
----------------
Agent and its employees and agents to visit Assignor's plants and facilities
where products sold or services provided under any of the Marks are
manufactured, inspected, stored, or provided, and to inspect and review the
products and quality control records relating thereto at reasonable times.
Assignor confirms its commitment to do any and all acts required by the Agent to
ensure maintenance of quality standards for such products and services. The
time and frequency of such inspections shall be consistent with those in Section
7.1 of the Credit Agreement.
4. Future Intellectual Property. If, before the Secured Obligations
----------------------------
shall have been satisfied in full, Assignor shall either obtain rights to any
invention or become entitled to any rights under or the benefit of any United
States or foreign patent application or patent, including any reissue,
divisional, continuation, or continuation-in-part patent applications or
reexamination certificates related to any of the Patents or to any improvement
on any of the Patents, or shall obtain rights in any United States or foreign
trademark, service mark or tradename or any registrations or applications for
registration thereof, the provisions of paragraph 2 (except for the Schedule
which will contain only registered Patents and Marks) shall automatically apply
thereto and Assignor shall give to the Agent prompt notice thereof in writing.
-2-
<PAGE>
5. Modification by Agent. Assignor authorizes the Agent to modify
---------------------
this Instrument by amending Schedule A to include all federally registered
Patents and Marks which hereafter fall within the scope of paragraph 2 or
paragraph 4 hereof.
6. Retention of Rights. Unless and until there shall have occurred
-------------------
and be continuing an Event of Default, as defined in the Credit Agreement, the
Assignor shall retain the legal and equitable title to the Patents and the Marks
and shall have the right to use the Patents and the Marks in the ordinary course
of its business. Assignor agrees, except as provided in the Credit Agreement,
not to sell or assign its interest in, or grant any license under the Patents or
Marks without the prior written consent of the Agent; provided, however that
nothing herein contained shall prohibit the Assignor from failing to continue
the prosecution of, maintain, renew or otherwise abandoning any item included in
the Marks or the Patents, if in the Assignor's reasonable judgment, the
retention of such items is not material to the proper conduct of Assignor's
business.
7. Agents Rights and Obligations As Secured Party. If any Event of
----------------------------------------------
Default shall have occurred and be continuing under either the Credit Agreement
or the Security Agreement, the Agent shall have all those rights and remedies
given it under the Security Agreement and those allowed by law.
8. Release of Interest. At such time as Assignor shall completely
-------------------
satisfy all of the Secured Obligations, Agent shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to release its interests in and to the Patents and Marks subject to any
disposition thereof which may have been made by the Agent pursuant to the
Security Agreement or hereto.
9. Cumulative Rights; Confirmation of Rights and Obligations Under
---------------------------------------------------------------
Security Agreement. All of the Agent's rights and remedies with respect to the
- ------------------
Patents and Marks, whether established hereby, the Security Agreement or by law
shall be cumulative and may be exercised singularly or concurrently. The
Assignor hereby ratifies and confirms all of its obligations contained in the
Security Agreement and confirms in the Agent for the benefit of the Banks all of
the rights granted to the Agent thereunder by the Assignor.
10. Binding Instrument; Assignments. This Instrument, and the terms,
-------------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Assignor shall not be permitted to assign this Instrument or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Instrument, except
as contemplated by the Security Agreement or the Credit Agreement.
11. Governing Law. This Instrument shall be construed in accordance
-------------
with and governed by the laws of the Commonwealth of Pennsylvania, exclusive of
its rules on choice of law.
-3-
<PAGE>
12. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 10.6 of the Credit Agreement in the
case of the Assignor or the Agent.
13. Severability. In case any one or more of the provisions
------------
contained in this Instrument should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
14. Section Headings. Section headings used herein are for
----------------
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Instrument.
15. Counterparts. This Instrument may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
WITNESS, the execution hereof as of December 23, 1996.
ATTEST: OPTION CARE OF OKLAHOMA,
INC.
/s/ Doreen Wiman By: /s/ Dan W. Bramuchi
- ------------------------- ---------------------------
Name: Doreen Wiman Name: Dan W. Bramuchi
-------------------- --------------------------
Title: President
-------------------------
PNC BANK, NATIONAL
ASSOCIATION, AS AGENT
By: ___________________________
Name: _________________________
Title: ________________________
-4-
<PAGE>
EXHIBIT A
REGISTERED PATENTS AND MARKS OF
OPTION CARE OF OKLAHOMA, INC.
____________________________________________________________________________
NONE
<PAGE>
EXHIBIT 10.9
STOCK REDEMPTION AGREEMENT
THIS STOCK REDEMPTION AGREEMENT, dated as of December 31, 1996, by and
between OPTION CARE CAMILLA, INC (the "Company"), OPTION CARE ENTERPRISES, INC.,
a California corporation ("OCE"), and OPTION CARE, INC., a California
corporation ("OCI").
WITNESSETH:
WHEREAS, OCE owns Eight Hundred (800) shares and OCI owns Fifty (50) shares
of the common stock of Option Care Camilla, Inc., a Georgia corporation
(collectively, the "Subject Shares");
WHEREAS, the Company deems it to be in its best interest to redeem all of
the Subject Shares from OCE and OCI on the terms and conditions set forth below;
and
WHEREAS, OCE and OCI desire the Company to redeem the Subject Shares.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, it is hereby agreed between the Company and OCE and OCI
as follows:
1. Redemption. The Company hereby agrees to redeem all, but not less
-----------
than all, of the Subject Shares from OCE and OCI on the terms and subject to the
conditions contained herein, and OCE and OCI agree to such redemption.
2. Consideration. In consideration of the redemption of the Subject
--------------
Shares from OCE and OCI, the Company shall enter into a Franchise Agreement with
OCI. This Franchise Agreement shall be in the form of attached Exhibit B (the
"Franchise Agreement") and the Company shall deliver to OCI all royalties, as
determined pursuant to the Franchise Agreement, over the course of the Franchise
Agreement (the "Royalty Stream"), which Royalty Stream is estimated to total at
least One Million One Hundred Thousand Dollars ($1,100,000).
3. Payment and Delivery.
---------------------
(a) This redemption shall take place by facsimile with subsequent exchange
of stock powers transferring the subject shares to the Company and executed
originals on or before December 31, 1996 (the "Closing Date"). The Company
shall evidence its redemption of the Subject Shares by delivering to OCE and
OCI on the Closing Date a fully executed copy of this Stock Redemption
Agreement and the Franchise Agreement.
(b) On the Closing Date, OCE and OCI shall deliver to the Company or the
Company's representative stock certificates representing the Subject Shares
along with stock powers executed in blank directing transfer of the Subject
Shares on the books of Option Care Camilla, Inc. to the Company.
<PAGE>
4. Representations of OCE. OCE and OCI represent and warrant to the
-----------------------
Company as follows:
(a) Authority. OCE and OCI each has full power and authority, without the
---------
consent or approval of any court, agency or other third party, to enter into
this Agreement and to perform its obligations hereunder.
(b) Title to the Shares. OCE and OCI each now has, and on the Closing
-------------------
Date will have, valid and marketable title to its Subject Shares, free and clear
of any claims, liens, encumbrances or other restrictions on sale or transfer.
(c) No Default or Violation. The execution, delivery and performance of
------------------------
this Agreement by OCE and OCI will not result in a breach of or constitute a
default under or a violation of any agreement, judgment, decree, order or other
instrument to which either is a party or by which either is bound.
5. Representations of the Company. The Company represents and warrants
------------------------------
to OCE and OCI as follows:
(a) Authority. The Company has full power and authority to enter
---------
into this Agreement and to perform its obligations hereunder.
(b) No Default or Violation. The execution, delivery and performance
-----------------------
of this Agreement by the Company will not result in a breach of or constitute a
default under or a violation of any agreement, judgment, decree, order or other
instrument to which it is a party or by which it is bound.
6. Liabilities. OCE and OCI shall be responsible for and shall timely
-----------
pay all liabilities identified on the December 31, 1996 balance sheet of Option
Care Camilla, Inc. and for all other accrued and contingent liabilities of the
Company as of and including December 31, 1996, provided that such liabilities
were incurred for use by Option Care Camilla, Inc. in the ordinary course of
business in quantities normal and customary for the business. OCE and OCI shall
be liable for and shall timely pay all federal, state, local, sales and income
taxes of OCC for 1996 and all previous years from November 15, 1991 forward,
including interest, penalty, etc. and shall indemnify and hold harmless the
Company therefrom.
7. OCE's and OCI Indemnity. OCE and OCI agree to jointly and severally
-----------------------
indemnify and hold the Company and its officers, employees, directors,
shareholders, affiliates, successors and assigns harmless from and against any
and all losses, liabilities, costs, obligations, damages, deficiencies and
expenses (including reasonable attorneys' fees and related costs) of whatsoever
kind, description or nature which may be sustained, incurred or suffered by it
or them as a result of or relating to:
2
<PAGE>
(a) a breach by OCE or OCI of any representation, warranty, covenant
or agreement made by OCE or OCI in this Agreement;
(b) the operation of the business of Option Care Camilla, Inc. (the
"Business") by OCE, the filing, reporting or failure to file or report by OCE or
the Business of any information or documents with third party payors relating to
the Business or OCE on or before the Closing Date;
(c) any failure of OCE or OCI to timely pay or otherwise discharge or
satisfy any of their liabilities retained under Section 6 hereof; and
(d) any other liabilities, obligations or claim of or with respect to
the Business involving or arising from any act, omission or occurrence during
any period prior to the Closing Date, including the conduct of the Business.
8. Miscellaneous.
-------------
(a) Expenses. Each of the parties hereto shall bear its own expenses in
--------
connection with this Agreement and the transactions contemplated herein,
including fees and expenses of its attorneys.
(b) Entire Agreement; No Oral Change. This Agreement embodies the entire
--------------------------------
agreement and understanding between OCI, OCE and the Company and supersedes any
and all prior agreements and understandings relating to the subject matter
hereof and may not be changed orally but only by an agreement in writing signed
by both parties.
(c) Benefits. All the terms and provisions of this Agreement shall be
--------
binding upon and inure to the benefit of the parties and their respective
successors and assigns.
(d) Survival of Representations and Warranties. All representations and
------------------------------------------
warranties made herein shall survive the Closing Date.
(e) Assignment. None of the parties shall assign this Agreement or any
----------
rights or obligations hereunder without the prior written consent of the other
parties.
(f) Controlling Law. This Agreement shall be construed and enforced in
---------------
accordance with the laws of the State of Illinois.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement on one or more counterparts hereof, of
which shall be read and construed as but one and the same document, as of the
date first written above.
OPTION CARE CAMILLA, INC.,
By: /s/ Harris Morgan
--------------------------------
Name: Harris Morgan
------------------------------
Its: President
-------------------------------
OPTION CARE ENTERPRISES, INC.,
a California corporation
By: /s/ Cathy Bellehumeur
--------------------------------
Name: Cathy Bellehumeur
------------------------------
Its: Secretary
-------------------------------
By: /s/ Cathy Bellehumeur
--------------------------------
Name: Cathy Bellehumeur
------------------------------
Its: Vice President
-------------------------------
4
<PAGE>
STOCK POWER AND ASSIGNMENT
FOR VALUE RECEIVED, Option Care Enterprises, Inc. does hereby sell, assign
and transfer unto Option Care Camilla, Inc. 800 shares of common stock of
--------
Option Care Camilla, Inc., and does hereby irrevocably constitute and appoint
the Secretary of such corporation as its attorney to transfer said stock on the
books of the within-named corporation with full power of substitution in the
premises.
Dated as of: December 31 , 1996
-----------
OPTION CARE ENTERPRISES, INC.,
a California corporation
By: /s/ Cathy Bellehumeur
-------------------------------
Name: Cathy Bellehumeur
-----------------------------
Its: Secretary
------------------------------
OPTION CARE, INC.,
a California corporation
By: /s/ Cathy Bellehumeur
-------------------------------
Name: Cathy Bellehumeur
-----------------------------
Its: Vice President
------------------------------
In the presence of:
/s/ Gale Holtz
- ----------------------------------
5
<PAGE>
OPTION CARE, INC.
FRANCHISE AGREEMENT
This Franchise Agreement ("Agreement") between Option Care, Inc., a
California corporation, with its principal place of business at Bannockburn,
Illinois ("Franchisor") and Option Care Camilla, Inc., a Georgia corporation,
("Franchise Owner"), is made and entered into effective the date signed by
Franchisor on the signature page hereof (the "Effective Date").
RECITALS
A. Franchisor has developed and owns a proprietary business method and
concept (the "System") relating to the operation of an outpatient health care
business that compounds pharmaceuticals, dispenses and administers
pharmaceuticals and physician prescribed biologicals, nutrients, medications and
solutions via parenteral and enteral routes in the home and in, subacute,
extended care, and other outpatient settings, furnishes clinical, pharmaceutical
and nursing services necessary to the provision of such therapies, sells related
products and supplies and sells or leases related equipment. For purposes of
this Agreement, "parenteral" shall mean any administration route other than by
way of the intestines (e.g., without limitation, inhalation, transdermal and
intravenous).
B. The therapies under the System (the "Therapies") are set forth in the
Confidential Franchise Operations Manual (the "Manual") and include "Core
Therapies" and "Permitted Therapies", both as defined in the Manual.
C. The distinguishing characteristics of the System are set forth in the
Manual, which contains, without limitation, policies and procedures for the
Therapies; uniform standards, specifications and procedures for operation of the
business under the System, including the nature and manner of products and
services offered; procedures for quality improvement; training requirements;
group purchasing availability; and management, operational, and marketing
methods, techniques, materials, assistance and programs.
D. Pursuant to a license from Franchisor, each of Franchisor's franchise
owners does business under the name and mark "Option Care," and such other names
and marks as Franchisor may designate for use by each franchise owner under the
System (collectively, the "Proprietary Marks").
E. Franchise Owner wishes to obtain a franchise in order to operate a
business utilizing the System and the Proprietary Marks, as well as to receive
the Manual, the training and other assistance provided by Franchisor in
connection with the System pursuant to this Agreement.
6
<PAGE>
F. The business to be conducted by Franchise Owner pursuant to and under
the license granted by this Agreement is sometimes referred to herein as the
"Franchised Business".
G. Franchise Owner understands and acknowledges the importance of
Franchisor's high and uniform standards of quality and service and the necessity
of operating the Franchised Business in conformity with Franchisor's standards
and specifications, including the Manual.
H. Franchise Owner acknowledges that it has received a copy of this
Agreement, and the related exhibits and agreements, at least five (5) business
days prior to the date on which this Agreement was executed by Franchise Owner.
Franchise Owner further acknowledges that it has received the disclosure
document required by the Trade Regulation Rule of the Federal Trade Commission,
entitled "Offering Circular for Prospective Franchise Owners," at least ten (10)
business days prior to the date on which this Agreement was executed.
NOW, THEREFORE, Franchisor and Franchise Owner, in consideration of the
undertakings and commitments of each party to the other party set forth herein
and the recitals set forth above, which are incorporated into and made a part
of this Agreement, mutually agree as follows:
1. GRANT
1.1 Grant of Franchise. Franchisor hereby grants to Franchise Owner, on
-------------------
the terms and conditions contained in this Agreement, the right and franchise,
and Franchise Owner undertakes the obligation, to operate the Franchised
Business and to use solely in connection with the Franchised Business the System
and the Proprietary Marks.
1.2 Deliveries on Grant. Contemporaneous with Franchise Owner delivering
-------------------
this executed Agreement to Franchisor, it shall also deliver to Franchisor the
following:
(a) A check in the amount specified in Section 5.1 hereof;
(b) A copy of the fronts and backs of its issued stock certificates,
the backs of which shall contain the following legend: "The transfer of this
stock is subject to the terms and conditions of a Franchise Agreement with
Option Care, Inc. dated _____________________, 1996";
(c) An executed "Site Selection Addendum; and
(d) A fully executed "Guarantee".
7
<PAGE>
2. TERRITORY
2.1 Territory Defined. Franchisor hereby grants to Franchise Owner the
-----------------
right to operate the Franchised Business during the term of this Agreement
within the defined area (the "Territory") described on attached Exhibit A, which
Exhibit is incorporated herein by reference thereto. Franchise Owner
acknowledges and agrees that this Agreement affords it no right, title or
interest in or to additional franchises or any right to acquire additional
franchises or territory, nor does it obligate Franchisor in any way to grant or
sell any additional franchises or territory to Franchise Owner.
2.2 Patient Freedom of Choice. Notwithstanding the grant of the Territory,
-------------------------
Franchise Owner acknowledges and agrees that (i) patients residing within the
Territory are entitled to the freedom to choose their health care provider and
may seek health care services of the type provided by Franchise Owner from
others, including another franchise owner of Franchisor; and (ii) health care
referral sources may refer patients residing within the Territory to health care
providers of their choosing, including to another franchise owner of Franchisor.
2.3 Marketing Efforts in Territory. Franchise Owner agrees to devote its
------------------------------
best efforts to serving patients that reside within the Territory. Except as
otherwise permitted herein or as approved in advance and in writing by
Franchisor, Franchise Owner's marketing and promotional activities shall be
directed only toward obtaining patients who reside within the Territory.
Franchise Owner acknowledges and agrees that Franchisor, as part of its business
strategy, may advertise or market on behalf of the System in the Territory and
may maintain itself, or through its affiliates, a presence in the Territory for
the purpose of providing a managed care program offering services of the type
provided by the Franchised Business. Franchise Owner agrees to abide by
Franchisor's then current policies on marketing outside of the Territory, and on
cooperating with neighboring Option Care franchisees, as the same may be set
forth from time to time in the Manual.
2.4 Presence in Territory. Franchise Owner shall maintain such manner and
---------------------
degree of presence in the Territory as from time to time required by the Manual.
Such presence requires Franchise Owner to maintain an I.V. pharmacy within the
Territory unless Franchise Owner has the prior written approval of Franchisor to
utilize the I.V. pharmacy services of another Option Care Franchise and utilize
such services on the basis approved by Franchisor. Even if Franchise Owner is
not required to itself maintain an I.V. pharmacy in the Territory, it must
maintain a physical presence in the Territory consistent with Franchisor's
requirements therefor as then set forth in the current Manual. The initial
pharmacy and/or office site must be selected by Franchise Owner and disclosed to
Franchisor at the time of filing the application for a franchise, but not later
than sixty (60) days after execution of the Franchise Agreement. A location
shall be selected by Franchise Owner in accordance with the then-current Site
Selection Addendum. The Franchise Owner's presence within the Territory shall
at all times comply with Franchisor's reasonable standards and conditions and
any relocations of a physical pharmacy or office or change in the manner or
degree of presence must be approved in advance in writing by Franchisor.
Franchise Owner shall not relocate any part of
8
<PAGE>
the Franchised Business without the prior written consent of Franchisor.
Franchise Owner agrees that disapproval of a location will not be unreasonable
if the proposed location does not meet Franchisor's reasonable standards,
including spacing between franchised offices.
2.5 Servicing Unowned Territory. Franchise Owner acknowledges that while
---------------------------
it is granted the right hereunder only to the Territory, Franchise Owner may
provide goods and services to patients in unowned areas until such time as those
areas are granted by Franchisor to a party. Franchise Owner acknowledges and
agrees that it is obligated to pay royalties to Franchisor, in accordance with
Section 5 hereof, on all Gross Receipts (as hereafter defined), whether from
patients residing within or outside the Territory. Franchise Owner further
acknowledges and agrees that neither the ability to service nor the grant of our
permission to service patients residing outside the Territory affords it any
right, title or interest in or to such area whatsoever (including any right to
acquire such area or any right of first refusal as to such area).
3. TERM ; RENEWAL; CONSEQUENCES OF EXPIRATION (NON-RENEWAL)
3.1 Term. Unless sooner terminated as hereinafter provided, this Agreement
----
shall expire twenty (20) years from the Effective Date of this Agreement. If
this Agreement reaches the end of its term and is not renewed, it will be said
to have "expired" and the "consequences of expiration" set forth at Section 3.3,
below, shall apply.
3.2 Renewal. If Franchise Owner, in Franchisor's sole interpretation,
-------
meets all of the requirements described in this Section 3.2, then Franchise
Owner shall have the right to extend the right to operate the Franchised
Business for one (1) consecutive additional period of ten (10) years. To
exercise the right to extend, Franchise Owner shall send to Franchisor, at least
one six (6) months, but not more than twelve (12) months, prior to the
expiration date of this Agreement a written notice of intention to extend. At
the time of the notice and at the time of the execution of the renewal franchise
agreement, Franchise Owner must satisfy the following conditions:
3.2.1 Franchise Owner shall not be in default of any provision of
this Agreement and shall have substantially complied with all the terms and
conditions of this Agreement, as amended, throughout its term;
3.2.2 Franchise Owner shall have satisfied all of its monetary
obligations to Franchisor and Franchisor's affiliates and shall have met those
obligations in a timely manner throughout the term of this Agreement;
3.2.3 Franchise Owner shall execute Franchisor's then-current form of
renewal franchise agreement for the renewal term, which franchise agreement may
have terms different from the terms of this Agreement, and such other ancillary
agreements as Franchisor may require for the Franchised Business. The Territory
described in this Agreement shall remain the same;
9
<PAGE>
3.2.4 Franchise Owner shall pay, in lieu of an initial fee, a renewal
fee not to exceed the conversion fee that would then be charged a conversion
candidate for this Territory;
3.2.5 Franchise Owner shall execute a general release, in a form
prescribed by Franchisor, of any and all claims against Franchisor and
Franchisor's affiliates, and their respective shareholders, partners, directors,
officers, employees and agents, in this capacity and in their individual
capacities, to the fullest extent permitted by law; and
3.2.6 Franchise Owner shall comply with Franchisor's then-current
qualification and training requirements.
3.3 Consequences of Expiration. If either Franchise Owner or Franchisor
--------------------------
elects not to renew this Agreement, then, upon expiration of its term, all
rights granted Franchisor Owner by this Agreement shall terminate, and Franchise
Owner shall immediately:
3.3.1 Cease to operate the Franchised Business and not, directly or
indirectly, represent itself as a franchise owner of Franchisor;
3.3.2 Permanently cease to use, in any manner whatsoever, any
Confidential Information associated with the System, as well as the Proprietary
Marks and all signs, equipment, marketing materials, stationery, forms and other
items which display the Proprietary Marks;
3.3.3 Pay all liquidated or ascertainable sums owing from Franchise
Owner to Franchisor, without set-off or other reduction on account of
unliquidated claims, including, without limitation, any fees accruing after the
expiration of the term on Gross Receipts attributable to accounts receivable
from goods or services furnished during the term of this Agreement;
3.3.4 Deliver to Franchisor via U.P.S. or comparable carrier, via
first class service, the Manual, all patient file lists and business records
(other than prescriptions, patient records, tax returns and bank statements),
files and brochures, and any and all other materials relating to the operation
of the Franchised Business, all of which are acknowledged to be Franchisor's
property, and shall retain no copy or record of any of the foregoing, except
Franchise Owner's copy of this Agreement and any other agreements with
Franchisor or any affiliate, copies of any correspondence between the parties,
and any copies of other documents which Franchise Owner reasonably needs for
compliance with any provision of law; and
3.3.5 Comply with the applicable covenants contained in Section 9 of
this Agreement, which covenants shall survive the expiration of this Agreement.
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4. DUTIES OF FRANCHISOR
4.1 Provide the Manual. Franchisor shall provide to Franchise Owner one
------------------
copy of the Manual for Franchise Owner's use during the term of this Agreement.
Franchisor shall also provide Franchise Owner with updates to the Manual. The
Manual, updates and all copies thereof shall be promptly returned to Franchisor
upon expiration or termination of this Agreement, unless this Agreement is
renewed. The Manual is proprietary to the Franchisor, and is provided for use
exclusively by Franchise Owner and its employees in the operation of the
Franchised Business and is subject to the provisions of Sections 8.1-8.5 below.
4.2 Policies and Procedures. Franchisor shall include within the Manual
-----------------------
policies and procedures on Therapies and Services encompassed within the System.
Franchisor shall make available such clinical consultative support services for
the System as Franchisor deems appropriate.
4.3 Training Opportunities. Franchisor shall provide such training and
----------------------
educational opportunities including training on newly designated core and
permitted therapies, and initial franchise training as deemed necessary by
Franchisor.
4.4 Install Program. Franchisor shall provide to Franchise Owner guidance
---------------
in, and a specific program for, the opening and start-up of the Franchised
Business (the "Install Program"), as currently described in the Manual.
4.5 Accreditation Assistance. Franchisor shall counsel and assist
------------------------
Franchise Owner in complying with the certification or accreditation or standard
requirements of those organizations whose accreditation is deemed necessary by
Franchisor to the operation of the Franchised Business.
4.6 Management Advice. Franchisor shall provide consultation and
-----------------
assistance to Franchise Owner on a continuing basis on such terms and conditions
as Franchisor deems advisable, concerning the management and operation of the
Franchised Business.
4.7 Referral Opportunity. Franchisor shall provide Franchise Owner with an
--------------------
opportunity to participate in such referral arrangements as are established by
Franchisor from time to time which are applicable to the Franchised Business.
4.8 Sales, Marketing Advice. Franchisor shall provide, on such terms and
-----------------------
conditions as Franchisor deems advisable, advice and consultation to Franchise
Owner in the preparation of sales, marketing and promotional campaigns and
materials.
4.9 Group Purchasing Opportunity. Franchisor shall provide Franchise Owner
----------------------------
with an opportunity to participate in such group purchasing plans as Franchisor
may provide from time to time.
5. FEES; ROYALTY; PAYMENT
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5.1 Initial Fee. Franchise Owner shall pay an initial fee of
-----------
_____________________________________________________________________ Dollars ($
__________________) for the grant of this franchise. Upon execution of this
Agreement, Franchise Owner shall deliver the initial fee to Franchisor in cash
or other immediately available funds or, if permitted by Franchisor, execute and
deliver to Franchisor a promissory note in form and substance satisfactory to
Franchisor. The initial fee, whether financed or not, is fully earned by
Franchisor upon execution and delivery of this Agreement by Franchisor and is
not refundable under any circumstances.
5.2 Continuing Royalty. In addition to the initial fee, during the initial
------------------
term of this Agreement, and for so long thereafter as Franchise Owner realizes
Gross Receipts (as defined in Section 5.7), Franchise Owner agrees to pay to
Franchisor a continuing monthly royalty fee (the "Continuing Monthly Royalty
Fee") in the amount equal to nine percent (9%) of the first $1,000,000 of Gross
Receipts during each calendar year, seven percent (7%) of the next $1,000,000 of
Gross Receipts during each calendar year, and five percent (5%) of all Gross
Receipts in excess of $2,000,000 during each calendar year. The dollar amounts
subject to the 9%, 7% and 5% royalty percentage rates ("Dollar Amounts") shall
be subject to annual revision as provided herein. On each January 1st, the
Dollar Amounts shall be multiplied by a fraction (the "Fraction") determined as
follows: The numerator shall be equal to the Consumer Price Index for all Urban
Consumers, Medical Care Component ("index"), published for the preceding October
by the United States Bureau of Labor Statistics. The denominator shall be the
index published for the month one (1) year prior to the month used in
calculating the numerator. The Dollar Amounts shall be replaced with the
product resulting from multiplying each Dollar Amount by such Fraction rounded
down to the nearest One Dollar ($1.00), but not less than the then-existing
Dollar Amounts. All royalty payments due Franchisor during the calendar year of
the adjustment shall be calculated based on the replacement Dollar Amounts. If
the index is changed such that the base year differs for the two months used in
determining the Fraction, the index shall be converted in accordance with the
conversion factor published by the United States Department of Labor, Bureau of
Labor Statistics. If the index is discontinued or revised during the term of
this Agreement, such other governmental index or computation with which it is
replaced shall be used to obtain substantially the same result as would be
obtained if the index had not been discontinued or revised.
5.3 Minimum Royalty. If the total of the Continuing Monthly Royalty Fees
---------------
owed Franchisor for any period during the term of this Agreement is less than
the minimum royalty fee (the "Minimum Royalty Fee") applicable to that period,
Franchise Owner also agrees to pay to Franchisor the difference between the
Minimum Royalty Fee applicable to that period and the total Continuing Monthly
Royalty Fees owed for that period. The Minimum Royalty Fee is the following
amounts:
5.3.1 During the period commencing with the first full month
following Franchisor's execution of the Agreement and continuing through
December 31st of the second calendar year of this Agreement, the Minimum Royalty
Fee shall be Two Hundred Dollars ($200.00) per month. For example, if the
Agreement is signed by Franchisor on April 15,
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1996, then the $200.00 monthly Minimum Royalty Fee shall commence May 1, 1996
and continue through December 31, 1997;
5.3.2 For the third calendar year, the Minimum Royalty Fee shall be a
sum equal to the population of the Territory multiplied by three cents;
5.3.3 For the fourth calendar year, the Minimum Royalty Fee shall be
a sum equal to the population of the Territory multiplied by six cents;
5.3.4 For the fifth calendar year, the Minimum Royalty Fee shall be a
sum equal to the population of the Territory multiplied by nine cents; and
5.3.5 For the sixth and subsequent calendar years, the Minimum
Royalty Fee shall be a sum equal to the population of the Territory multiplied
by twelve cents.
5.3.6 For purposes of this Section 5.3 and Section 5.4, below,
"calendar year" means the period from January 1-December 31, and any partial
year. For example, if you sign this Agreement on March 1, 1996, the first
calendar ends December 31, 1996 and your second calendar year ends December 31,
1997.
5.3.7 For purposes of this Agreement, the population of the Territory
shall be _______________ persons.
5.4 National Fund Contribution. Subject to Section 10.3, below, Franchise
--------------------------
Owner agrees to pay to Franchisor for the National Advertising and Educational
Fund (the "National Fund") a monthly contribution in the amount equal to one and
one-half percent (1.5%) of the Gross Receipts, but not more than a maximum
contribution of $10,000 per calendar year. The National Fund shall be
administered as provided in Section 10.3.
5.5 Due Date. The Continuing Monthly Royalty Fee and the National Fund
--------
contribution due Franchisor on Gross Receipts received in a particular month are
both due and payable on or before the fifteenth (15th) day of the following
month, or on such other day as Franchisor may reasonably specify. The Minimum
Royalty Fee during calendar years 1 and 2 shall be due and payable and on or
before the fifteenth (15th) day of the month. The Minimum Royalty Fee during
calendar year 3 and subsequent calendar years shall be due and payable on the
January 15th which next follows the close of that calendar year. Each payment
shall be accompanied by the reports or statements required by this Agreement or
otherwise reasonably required by Franchisor from time to time.
5.6 INTEREST. FRANCHISE OWNER AGREES TO PAY INTEREST TO FRANCHISOR (OR ITS
--------
DESIGNATED AFFILIATE) ON ALL PAYMENTS REQUIRED HEREUNDER THAT ARE OVERDUE.
INTEREST SHALL ACCRUE AT THE RATE OF TWO PERCENT (2%) PER MONTH OR AT THE
MAXIMUM RATE PERMITTED BY LAW, WHICHEVER IS LESS, STARTING THE DAY FOLLOWING THE
DUE DATE AND CONTINUING UNTIL THE OVERDUE AMOUNT IS PAID. ENTITLEMENT TO SUCH
INTEREST SHALL BE IN ADDITION TO ANY OTHER REMEDIES FRANCHISOR MAY HAVE.
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5.7 Gross Receipts Defined. As used in this Agreement, "Gross Receipts"
----------------------
shall include all amounts received by Franchise Owner in connection with the
operation of the Franchised Business other than amounts collected from
compounding services rendered for other franchise owners of Franchisor. "Gross
Receipts" includes, without limitation, amounts collected for Core Therapies and
Permitted Therapies, even if such Therapies are added to the System subsequent
to the execution of this Agreement. "Gross Receipts" also include, without
limitation, all amounts collected, regardless of whether the patient to whom
goods or services were provided resided within or outside of the Territory.
"Gross Receipts" shall also include, without limitation, all payments to
Franchise Owner under any business interruption insurance or similar insurance
policy, and income of every kind and nature related to the Franchised Business.
"Gross Receipts" shall not, however, include any taxes collected by Franchise
Owner for transmittal to appropriate taxing authorities.
6. DUTIES OF FRANCHISE OWNER
6.1 Preserve Integrity of System. Franchise Owner understands and
----------------------------
acknowledges that every detail of the Franchised Business is important to
Franchise Owner, Franchisor, and other franchise owners in order to maintain
high and uniform operating standards, to increase the demand for the services
offered as part of the System, and to protect the name, reputation and goodwill
of the System and Franchisor.
6.2 Commence and Operate Franchised Business. Franchise Owner agrees that
----------------------------------------
time is of the essence both as to its completion of the Install Program and its
commencement of operation of the Franchised Business. Franchise Owner shall
complete the "Foundation Phase" of the Install Program (as described in the
Manual) within four (4) months of signing an initial Franchise Agreement and
within two (2) months of signing a conversion or re-sale Franchise Agreement.
Franchise Owner shall complete the "Building for Success Phase" of the Install
Program (as described in the Manual) within six (6) months of signing an initial
Franchise Agreement and within three (3) months of signing a conversion or re-
sale Franchise Agreement. Franchise Owner acknowledges and agrees that it may
accept patients only after receiving a certificate of completion from Franchisor
stating that Franchise Owner successfully completed the Foundation Phase of the
Install Program and Franchisor's Operations Review (as described in the Manual).
Franchise Owner also agrees to operate the Franchised Business continuously
throughout the term of this Agreement.
6.3 Manager. Franchise Owner agrees, throughout the term of this
-------
Agreement, to designate and retain a full-time Manager for the Franchised
Business. The Manager shall be designated in writing to Franchisor and approved
by Franchisor, which approval will not be unreasonably withheld. Franchise
Owner agrees to ensure that the Manager devotes full time and effort to the
active management and operation of the Franchised Business, and the Manager
shall be granted and have full authority to act on behalf of Franchise Owner in
all dealings with Franchisor.
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6.4 Personnel Trained. Franchise Owner acknowledges that properly trained
-----------------
personnel are essential to the maintenance of the highest degree of quality and
service and agrees to comply with Franchisor's reasonable training requirements.
Franchise Owner agrees that:
6.4.1 Franchise Owner, prior to commencing business under the System,
shall retain core service supervisory staff (manager, pharmacist, nurse, sales,
reimbursement) prior to completion of the Foundation Phase of the Install
Program. The core service supervisory staff then required by Franchisor shall
attend and complete, to Franchisor's reasonable satisfaction, the first
available basic franchise training program offered by Franchisor subsequent to
their hire date. The core supervisors of Franchise Owner shall assume
responsibility for training their respective staff members and future personnel
of the Franchise Owner; all training shall follow the then current guidelines of
Franchisor.
6.4.2 Personnel reasonably specified by Franchisor shall attend such
additional or supplemental training programs and seminars offered by Franchisor
as Franchisor may designate.
6.4.3 Franchise Owner agrees to be responsible for all costs and
expenses required for its personnel to attend both the basic franchise training
program and all other training programs and seminars. With the exception of the
basic franchise training program attended by Franchise Owner's initial
personnel, Franchisor may charge a fee for attending programs and seminars.
6.5 Provide Therapies. Franchise Owner shall provide all Therapies
-----------------
identified in the Manual as "Core Therapies". Franchise Owner may provide all
Therapies identified in the Manual as "Permitted Therapies". Franchise Owner
may also provide such other therapies as are approved in writing by Franchisor
from time to time, even if such therapies are not incorporated into the Manual.
6.6 Joint Commission on Accreditation of Health Care Organizations (JCAHO).
-------------------------------------------------------------- ------
Franchise Owner agrees to obtain, within such reasonable times as may be
specified by Franchisor, accreditation by those organizations specified by
Franchisor. Franchise Owner agrees to maintain required accreditation(s) during
the entire term of this Agreement. Franchise Owner must apply for and obtain
JCAHO accreditation at the earliest possible time. Time is of the essence. All
costs of obtaining and maintaining accreditation(s) shall be borne and paid by
Franchise Owner.
6.7 Provide Quality Service. Franchise Owner agrees at all times to insure
-----------------------
that the highest degree of quality and service is maintained.
6.7.1 To offer all Core Therapies and sell all types of supplies,
equipment and services related thereto; to refrain from any deviation from
Franchisor's then existing standards and specifications, as set forth in the
Manual, without Franchisor's prior written
15
<PAGE>
consent; and to discontinue offering such therapies as Franchisor may disapprove
in writing at any time;
6.7.2 To operate the Franchised Business in strict conformity with
all lawful and reasonable methods, standards and specifications as Franchisor
may prescribe from time to time. In particular, Franchise Owner agrees to comply
with such policies and procedures as are reasonably specified by Franchisor in
the Manual from time to time for the compounding, delivery and administration of
pharmaceuticals, and for the teaching, monitoring and care of patients;
6.7.3 To maintain an inventory of (or demonstrate immediate access to
a compounding center approved by Franchisor) pharmaceuticals, supplies and
equipment adequate to fulfill the demand in the Territory for Core Therapies and
any other therapies provided by Franchise Owner; and
6.7.4 To purchase all pharmaceuticals, supplies, equipment and
services for use in the Franchised Business solely from suppliers who
demonstrate, to the continuing reasonable satisfaction of Franchisor, the
ability to meet Franchisor's then-current standards and specifications for such
items; who possess adequate quality controls; and who have been approved in
writing by Franchisor and not thereafter disapproved. If Franchise Owner desires
to purchase any pharmaceuticals, supplies, equipment or services from an
unapproved supplier, Franchise Owner shall submit to Franchisor a written
request for approval, or shall request the supplier itself to do so. Franchisor
shall have the right to require that Franchisor's representatives be permitted
to inspect the supplier's facilities, and that samples from the supplier (where
a good is at issue) be delivered for evaluation and testing either to Franchisor
or to an independent testing facility designated by Franchisor. A charge not to
exceed the reasonable cost of the evaluation and testing shall be paid by
Franchise Owner or the supplier. Franchisor reserves the right, at its option,
to re-inspect the facilities and pharmaceuticals, supplies, equipment or
services of any such approved supplier and to revoke its approval upon the
supplier's failure to continue to meet any of Franchisor's then-current
criteria.
6.8 Presence in Territory. Prior to commencing business under the System
---------------------
and during the entire term of this Agreement, Franchise Owner agrees to maintain
a presence in the Territory, at Franchise Owner's expense, in accordance with
Section 2.4 hereof and the then applicable provisions of the Manual.
6.9 Appropriate Personnel. Franchise Owner agrees to maintain a competent,
---------------------
conscientious, trained staff. Franchise Owner shall be solely responsible for
all employment decisions and functions. Franchise Owner shall employ and
maintain in full-time employment throughout the term of this Agreement such
number and types of pharmacists, nurses, reimbursement specialists, marketing
representatives and other employees as may be reasonably specified by
Franchisor. Franchise Owner agrees to require all employees to comply with all
federal, state and local laws that apply to the Franchised Business.
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<PAGE>
6.10 Hours of Operation. Franchise Owner agrees to provide 24-hour-per-day,
------------------
7-day-per-week patient care service availability. Franchise Owner agrees to
staff any office for such minimum hours per day and days per year as Franchisor
may then specify in the Manual.
6.11 Telephone. Franchise Owner agrees to maintain a telephone line and
---------
number which shall be used exclusively in the conduct of the Franchised
Business. Incoming calls on this line shall be answered by a reference to the
name "Option Care" only, unless Franchisor, in Franchisor's sole discretion,
approves otherwise in advance. This line shall be answered by an employee of
Franchise Owner, and not by an answering service, during such hours as
Franchisor may specify in the Manual.
6.12 Use of Proprietary Marks. Franchise Owner agrees to display the
------------------------
Proprietary Marks in the form and manner prescribed by Franchisor on all
business, promotional, sales and marketing materials of every kind and nature.
Franchise Owner agrees to disclose, in the manner specified by Franchisor, that
the Franchised Business is independently owned and operated by Franchise Owner
pursuant to a franchise from Franchisor.
6.13 Inspection and Audit Rights. Franchise Owner agrees to permit
---------------------------
Franchisor and its employees or agents to inspect the Franchised Business and
its books and records at any reasonable time during the term of this Agreement,
and for two (2) years following the expiration or termination of this Agreement.
Franchise Owner agrees to cooperate fully with Franchisor's representatives in
such inspections by rendering such assistance as they may reasonably request,
and, upon written notice from Franchisor or its employees or agents, and without
limiting Franchisor's other rights under this Agreement, shall immediately take
such steps as may be necessary to correct any deficiencies detected during such
inspections. Franchise Owner shall allow Franchisor to inspect and copy the
records, prescriptions and charts of Franchise Owner's patients. Franchise
Owner agrees to solicit the consent of its patients to Franchisor's inspection
and copying of their prescriptions and medical records.
6.14 Compliance with Laws. Franchise Owner agrees to comply with all
--------------------
applicable federal, state and local laws, rules and regulations. Franchise
Owner shall timely obtain, and keep or require to be kept in force at all times
during the term of this Agreement, all permits, certificates and licenses
necessary for the full and proper conduct of the Franchised Business, including,
without limitation, the necessary pharmacy permits, professional pharmacy and
nursing licenses, licenses to do business, fictitious name registrations and
sales tax permits. Franchise Owner shall, at Franchisor's request, provide
Franchisor with copies of any professional and other licenses and permits
required to conduct the Franchised Business.
6.15 Discoveries and Ideas. Franchise Owner agrees to disclose promptly to
---------------------
Franchisor all discoveries made or ideas conceived by Franchise Owner or a
person affiliated with Franchise Owner that pertain to the System. Franchise
Owner hereby grants to Franchisor all right, title and interest to such
discoveries and ideas, and agrees to cooperate with Franchisor in securing
Franchisor's rights to such discoveries and ideas. "Discoveries" and "ideas"
shall be interpreted broadly and shall not be limited to those discoveries or
ideas
17
<PAGE>
which are potentially patentable or copyrightable. Franchisor shall not be
obligated to compensate Franchise Owner for any such discoveries or ideas.
6.16 Comply with Agreement. Franchise Owner agrees to comply with all other
---------------------
requirements set forth in this Agreement and with all agreements with Franchisor
and any affiliate of Franchisor.
6.17 Audit Rights, Etc. If Franchise Owner conducts business other then the
-----------------
Franchised Business, then Franchise Owner shall permit Franchisor to audit the
books pertaining to all business conducted by Franchise Owner. If Franchise
Owner is affiliated with another entity which possesses a pharmacy license and
Franchisee is unable to obtain a pharmacy license owing to such affiliation,
Franchise Owner shall enter into, and provide Franchisor with copies of, written
agreements, in a form approved by Franchisor, with the affiliated licensed
pharmacy to fill the prescriptions of Franchise Owner's patients.
6.18 Disclose Owners. Franchise Owner shall maintain a current list of all
---------------
of its general, managing, and limited partners and shareholders and owners in
addition to the profit interest of each such person, and shall furnish a copy of
these lists to Franchisor. Franchise Owner shall promptly furnish a revised
copy of these lists to Franchisor each time a change occurs to the information
on any list.
7. PROPRIETARY MARKS
7.1 Representations of Franchisor. Franchisor represents with respect to
-----------------------------
the Proprietary Marks that:
7.1.1 Franchisor is the owner of all rights, title and interest in
and to the Proprietary Marks in the United States; and
7.1.2 Franchisor has taken and will take steps reasonably necessary
to preserve and protect the ownership and validity of such Proprietary Marks in
the United States.
7.2 Franchise Owner's Use of Marks. With respect to Franchise Owner's
------------------------------
licensed use of the Proprietary Marks pursuant to this Agreement, Franchise
Owner agrees that:
7.2.1 Franchise Owner shall use only the mark "Option Care" and such
other Proprietary Marks as are designated from time to time in writing by
Franchisor for Franchise Owner's current use, and may use them only in the
manner authorized and permitted by Franchisor;
7.2.2 Franchise Owner shall use the Proprietary Marks only in
connection with the operation of the Franchised Business and only in the manner
specified by Franchisor. Unless otherwise approved by Franchisor, Franchise
Owner agrees to operate the Franchised
18
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Business under the name "Option Care" with such prefix or suffix as may be
approved from time to time by Franchisor;
7.2.3 Franchise Owner's right to use the Proprietary Marks is limited
to such uses as are authorized under this Agreement, and any unauthorized use
thereof shall constitute an infringement of Franchisor's rights;
7.2.4 Franchise Owner shall not use the Proprietary Marks to incur
any obligation or indebtedness on behalf of Franchisor;
7.2.5 Franchise Owner shall not use the Proprietary Marks as part of
its corporate or other legal name;
7.2.6 Franchise Owner shall file and maintain requisite fictitious or
assumed name registrations as required by laws applicable to the location of the
Territory;
7.2.7 Except as provided in Section 7.2.6, Franchise Owner agrees to
execute any documents deemed necessary by Franchisor to obtain protection for
the Proprietary Marks or to maintain their continued validity and
enforceability. Franchise Owner shall not register the Proprietary Marks at the
state, federal or international level; and
7.2.8 In the event that litigation involving the Proprietary Marks is
instituted or threatened against Franchise Owner, Franchise Owner agrees to
promptly notify Franchisor and to cooperate fully with Franchisor in defending
or settling such litigation.
7.3 Acknowledgement of Franchisor's Rights in Marks. Franchise Owner
-----------------------------------------------
expressly understands and acknowledges that:
7.3.1 Franchisor is the owner of all right, title and interest in and
to the Proprietary Marks and the goodwill associated with and symbolized by
them;
7.3.2 The Proprietary Marks are valid and serve to identify the
System and those who are franchised under the System;
7.3.3 Franchise Owner shall not directly or indirectly contest the
validity or the ownership of the Proprietary Marks;
7.3.4 Franchise Owner's use of the Proprietary Marks pursuant to this
Agreement does not give Franchise Owner any ownership interest or any other
interest in or to the Proprietary Marks, except the franchise granted herein;
7.3.5 Any and all goodwill arising from Franchise Owner's use of the
Proprietary Marks and the System shall inure solely and exclusively to
Franchisor's benefit, and upon termination of this Agreement and the franchise
herein granted, no monetary amount
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shall be assigned as attributable to any goodwill associated with Franchise
Owner's use of the Proprietary Marks or the System;
7.3.6 The right and license of the Proprietary Marks granted to
Franchise Owner is nonexclusive, and Franchisor thus has and retains the rights,
among others:
7.3.6.1 To use the Proprietary Marks itself in connection
with selling products and services;
7.3.6.2 To grant other licenses for the Proprietary Marks, in
addition to those licenses already granted to existing franchise owners;
7.3.6.3 To develop and establish other systems using the same
or similar Proprietary Marks, or any other proprietary marks, and to grant
licenses or franchises thereto without providing any rights therein to Franchise
Owner; and
7.3.7 Franchisor reserves the right to substitute different
Proprietary Marks for use in identifying the System and the businesses operating
under the System if Franchisor, in its sole discretion, determines that
substitution of different Proprietary Marks will be necessary or beneficial to
the System.
8. CONFIDENTIAL FRANCHISE OPERATIONS MANUAL
8.1 In General. In order to protect the reputation and goodwill of
----------
Franchisor and to maintain operating standards under the System and the
Proprietary Marks, Franchise Owner shall conduct the Franchised Business in
accordance with the terms of this Agreement and in compliance with the
provisions of the Manual, as updated from time to time (which may consist of
more than one volume, and which may include information provided by means of
audio, video, computer or other media). Franchise Owner acknowledges having
received one copy of the Manual on loan from Franchisor for so long as this
Agreement shall remain in effect.
8.2 Manual Confidential. Franchise Owner agrees to at all times treat the
-------------------
Manual and the information contained therein as confidential, and agrees to use
all reasonable efforts to maintain such information as secret and confidential.
Franchise Owner agrees not to copy, duplicate, record or otherwise reproduce the
foregoing materials, in whole or in part, nor otherwise make the same available
to any unauthorized person, except as such sharing may be permitted by the
Manual.
8.3 Property of Franchisor. The Manual, written directives, other manuals
----------------------
and any other confidential communications provided or approved by Franchisor,
and any copies thereof, shall at all times remain the sole property of
Franchisor, shall at all times be kept in a secure and convenient place and
shall be returned to Franchisor immediately upon termination of this Agreement.
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8.4 Revisions of Manual. Franchisor, at its discretion, may alter, modify
-------------------
or supplement the Manual from time to time. Changes to and additions of
Therapies and policies of an accreditation body shall be effective immediately
upon notification to Franchise Owner of the change or addition.
Notwithstanding the foregoing, other changes to the Manual shall be effective
ten (10) days following notification of the change to Franchise Owner. Any
change which results in adding a Core Therapy, while effective immediately upon
notice, need not be implemented as a Core Therapy until thirty (30) days
following notice of such change to Franchise Owner. Franchise Owner expressly
agrees to comply with each new or changed provision, standard, policy or
procedure. Revisions to the Manual shall not unreasonably affect Franchise
Owner's obligations, including economic requirements, under this Agreement.
8.5 Obligation to Maintain Manual. Franchise Owner shall at all times
-----------------------------
ensure that its copy of the Manual is kept current and up-to-date. In the event
of any dispute as to the contents of the Manual, the terms of the master copy of
the Manual maintained by Franchisor at Franchisor's home office shall be
controlling. All costs to bring an outdated copy of Franchise Owner's Manual up
to date shall be borne by Franchise Owner.
9. CONFIDENTIAL INFORMATION
9.1 Obligation of Confidentiality. Franchise Owner shall not, during the
-----------------------------
term of this Agreement or thereafter, communicate, divulge or use for the
benefit of any other person, partnership, association or corporation any
proprietary information, trade secrets, knowledge, techniques or know-how
concerning the methods of operation of the Franchised Business which may be
communicated to Franchise Owner or of which Franchise Owner may be apprised by
virtue of Franchise Owner's operation of the Franchised Business, including all
information conceived, originated, discovered or developed by Franchisor,
Franchise Owner or any other franchise owner which pertains to the Franchised
Business (the "Confidential Information"). Franchise Owner shall divulge the
Confidential Information only to such of its employees and contractors as must
have access to it in order to operate the Franchised Business. Any and all
information, knowledge, know-how and techniques which Franchisor designates as
confidential shall be deemed Confidential Information for purposes of this
Agreement, except information which Franchise Owner can demonstrate came to its
attention prior to disclosure thereof by Franchisor; or which, at or after the
time of disclosure by Franchisor to Franchise Owner, had become or later becomes
a part of the public domain, through lawful publication or communication by
others.
9.2 Employees Bound to Confidentiality. All employees and contractors
----------------------------------
having access to any Confidential Information from Franchisor shall execute such
covenants as Franchisor may require covenanting that they will maintain the
confidentiality of information they receive in connection with their association
with Franchise Owner. Such covenants shall be in a form satisfactory to
Franchisor, including, for example, specific identification of Franchisor as a
third party beneficiary of such covenants. The original of each executed
covenant shall be sent promptly to Franchisor.
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9.3 Irreparable Injury. Franchise Owner acknowledges that any failure to
------------------
comply with the requirements of this Section 9 will cause Franchisor irreparable
injury, and Franchise Owner agrees to pay all court costs and reasonable
attorneys' fees incurred by Franchisor in obtaining specific performance of, or
an injunction against violation of, the requirements of this Section 9.
10. MARKETING AND PROMOTION; NATIONAL FUND
Recognizing the value of marketing and promotion and the importance of the
standardization of marketing programs to the furtherance of the System, the
parties agree as follows:
10.1 Comply with Marketing Policies. Franchise Owner agrees to comply with
------------------------------
all reasonable marketing and promotion policies and procedures prescribed by
Franchisor. Such policies and procedures may include opening and ongoing
marketing and promotional campaigns; a direct mail campaign directed to a list
representative of Franchise Owner's local referral sources; and advertising
programs or campaigns in which Franchise Owner's participation shall be deemed
necessary by Franchisor.
10.2 Submit Marketing Plans. Franchise Owner agrees to submit to
----------------------
Franchisor, through the mail, return receipt requested, for its prior approval
(except with respect to prices to be charged), samples of all marketing and
promotional plans and materials that Franchise Owner desires to use and which
have not been prepared or previously approved by Franchisor within the prior
twelve month period. If written disapproval thereof is not received by
Franchise Owner from Franchisor within fifteen (15) days of receipt by
Franchisor of such samples or materials, Franchisor shall be deemed to have
given the required approval. Franchisor reserves the right to communicate, in
whole or in part, marketing and promotional plans and materials which it
receives from the Franchise Owner to other franchise owners for their use, or to
use the same in any marketing and promotion by Franchisor.
10.3 National Fund. Franchise Owner's monthly contribution to the National
-------------
Fund may be increased to exceed one and one-half percent (1.5%) of Gross
Receipts, and/or the maximum annual contribution may exceed $10,000, if two-
thirds (2/3) of all franchise owners who are obligated to contribute to the
National Fund vote for an increase in the contribution to the National Fund. In
connection with any vote to increase contributions to the National Fund,
Franchise Owner shall have one vote for each franchise agreement under which
Franchise Owner is required to become a member of the National Fund. The
National Fund shall be maintained and administered by Franchisor or its
designee, as follows:
10.3.1 The National Fund, all contributions thereto, and any earnings
thereon shall be used exclusively to meet any and all costs of preparing,
offering, distributing, obtaining, conducting and administering marketing, and
educational activities, and providing training opportunities for Option Care
franchisees;
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10.3.2 Franchisor shall direct all activities of the National Fund
with sole discretion over the concepts, materials, and media used and the
placement and allocation thereof. Franchise Owner agrees and acknowledges that
Franchisor undertakes no obligation in administering the National Fund to make
expenditures for Franchise Owner which are equivalent or proportionate to
Franchise Owner's contribution or to insure that any particular franchise owner
benefits directly or pro rata from expenditures by the National Fund;
10.3.3 Franchise Owner agrees to contribute to the National Fund by
separate check made payable to the National Fund. All sums paid by Franchise
Owner to the National Fund shall be maintained in an account separate from the
other monies of Franchisor and shall not be used to defray any of Franchisor's
expenses, except for such reasonable administrative costs and overhead, if any,
as Franchisor may incur in activities reasonably related to the conduct of
activities under and maintenance and administration of the National Fund. The
National Fund and its earnings shall not otherwise inure to the benefit of
Franchisor. Franchisor shall maintain separate bookkeeping accounts for the
National Fund, which shall not be an asset of Franchisor. A statement of the
operations of the National Fund as shown on the books of the National Fund shall
be prepared annually and shall be made available to Franchise Owner;
10.3.4 It is intended that contributions to, and earnings of, the
National Fund shall not be taxable income to Franchisor. Toward this end, it is
anticipated that all contributions to and earnings of the National Fund will be
expended for marketing, educational training and promotional purposes during the
taxable year of receipt. If, however, excess amounts remain in the National
Fund at the end of a taxable year, all expenditures in the following taxable
year(s) shall be made first out of accumulated earnings from previous years,
next out of earnings in the current year and finally from contributions; and
10.3.5 Although the National Fund is intended to be of perpetual
duration, Franchisor maintains the right to terminate the National Fund. The
National Fund shall not be terminated, however, until all monies in the National
Fund have been expended in accordance with the provisions of this Section 5.4
or returned to contributors on the basis of their respective contributions.
11. ACCOUNTING AND RECORDS
11.1 Preserve Records. Franchise Owner shall preserve, for at least five
----------------
(5) years from the dates of their preparation, full, complete and accurate
books, records and accounts for the Franchised Business in accordance with
generally accepted accounting principles and in the form and manner prescribed
by Franchisor from time to time in the Manual or otherwise in writing.
11.2 Provide Financial Statements. Franchise Owner shall, at its expense,
----------------------------
provide to Franchisor financial statements, including a balance sheet and income
statement, accompanied by a review report prepared by an independent certified
public accountant in a form satisfactory to Franchisor, within ninety (90) days
after the end of each fiscal year of the
23
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Franchised Business, showing the results of operations of the Franchised
Business during the fiscal year.
11.3 Provide Other Business Records. Franchise Owner shall also submit to
------------------------------
Franchisor, for review or auditing, such other forms, reports, records,
information and data as Franchisor may reasonably designate, including but not
limited to income tax returns, in the form and manner, and at the times and
places, as are reasonably specified by Franchisor.
11.4 Right to Inspect Business Records. Franchisor or its designated agents
---------------------------------
shall have the right at all reasonable times to inspect, audit and copy, at
Franchisor's expense, without notice, Franchise Owner's books, business tax
returns and other business records for the Franchised Business. Franchisor
shall also have the right, at any time, to have an independent audit made of the
books and records of the Franchised Business. If an inspection or audit should
reveal that any Gross Receipts have been understated in any report to
Franchisor, then Franchise Owner shall immediately pay to Franchisor, upon
demand, all royalties due on the amount understated, in addition to interest
from the date such royalties were due until paid, at the rate which is two
percent (2%) per month or the maximum rate permitted by law, whichever is less.
If an inspection or audit discloses an understatement of five percent (5%) or
more in any report of Gross Receipts, Franchise Owner shall, in addition,
reimburse Franchisor for any and all costs and expenses connected with the
inspection or audit (including, without limitation, travel, lodging and wage
expenses and reasonable accounting and legal costs). The foregoing remedies
shall be in addition to any other remedies Franchisor may have.
12. INSURANCE
12.1 Procure and Maintain Insurance. Franchise Owner agrees to procure,
------------------------------
prior to the commencement of business, and maintain in full force and effect
during the term of this Agreement, at Franchise Owner's expense, an insurance
policy or policies protecting Franchise Owner and Franchisor, and each of their
respective shareholders, partners, directors, employees and agents against any
loss, liability, personal injury, death, property damage or expense whatsoever
arising or occurring in connection with the establishment or operation of the
Franchised Business. All insurance required by this Agreement, with the
exception of worker's compensation insurance, shall name Franchisor as an
additional insured and shall expressly provide that any interests it may have in
the policies shall not be affected by any breach by Franchise Owner of any
policy provisions.
12.2 Types of Insurance. Each insurance policy shall be written by an
------------------
insurance company satisfactory to Franchisor in accordance with standards and
specifications prescribed by Franchisor from time to time, and shall include at
a minimum the following:
12.2.1 Comprehensive general liability insurance, expressly including
coverage for contractual liability; broad form property damage;
product/completed operations liability; and automobile liability and personal
injury coverage in the amount of One Million Dollars
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($1,000,000) per person, per occurrence and Three Million Dollars ($3,000,000)
in the aggregate;
12.2.2 Professional liability insurance in the amount of Three Million
Dollars ($3,000,000) in the aggregate, with a minimum limit of One Million
Dollars ($1,000,000) per occurrence. Coverage shall be on an occurrence basis,
and not on a claims made basis, unless otherwise approved in advance and in
writing by Franchisor;
12.2.3 Worker's compensation and employer's liability insurance, as
well as such other insurance, as may be required by statute or rule of the state
in which the Franchised Business is operated;
12.2.4 Such other policies or additional amounts of insurance as may
be required under the terms of any lease or sublease applicable to any office
maintained by the Franchised Business; and
12.2.5 Franchise Owner agrees that Franchisor may, upon adequate
notice, and for its reasonable business purposes, from time-to-time specify
additional types of coverage and higher policy limits than as described in this
Section 12.2.
12.3 No Limitation. Franchise Owner's obligations to obtain and maintain
-------------
the required policy or policies in the amounts specified shall not be limited in
any way by reason of any insurance which may be maintained by Franchisor, nor
shall Franchise Owner's performance of that obligation relieve it of liability
under the indemnity provisions set forth in Section 20 of this Agreement.
12.4 Evidence of Insurance. At least thirty (30) days prior to the time any
---------------------
insurance is first required to be carried by Franchise Owner, and thereafter
upon renewal or replacement of any such policy, Franchise Owner shall deliver to
Franchisor Certificates of Insurance evidencing the proper coverage with limits
not less than those required by this Agreement. All Certificates shall expressly
provide that no less than thirty (30) days' prior written notice shall be given
to Franchisor in the event of material alteration to, or cancellation or lapse
of, the coverages evidenced by such Certificates.
12.5 Franchisor's Right to Procure. Should Franchise Owner, for any reason,
-----------------------------
fail to procure or maintain the insurance required by this Agreement, Franchisor
shall have the right and authority (without, however, any obligation to do so)
to immediately procure such insurance and to charge the same to Franchise Owner.
The foregoing remedies shall be in addition to any other remedies Franchisor may
have.
12.6 Waiver of Subrogation. To the maximum extent permitted by insurance
---------------------
policies which may be owned by Franchisor and Franchise Owner, Franchise Owner
and Franchisor, for the benefit of each other, waive any and all rights of
subrogation which might otherwise exist.
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13. TRANSFER OF INTEREST
13.1 Transfer by Franchise Owner.
---------------------------
13.1.1 Franchise Owner understands and acknowledges that the rights
and duties set forth in this Agreement are personal to Franchise Owner, and that
Franchisor has granted this franchise in reliance on Franchise Owner's business
skill, financial capacity, personal character and professional reputation.
Accordingly:
13.1.1.1 Neither Franchise Owner nor any individual,
partnership, corporation or other legal entity which directly or indirectly owns
any interest in this Franchise (as defined below) shall sell, assign, transfer,
convey, give away, pledge, mortgage or otherwise encumber (all of which shall be
referred to as a "Transfer" for purposes of this Section only) any direct or
indirect interest in Franchise Owner, this Agreement, the Franchised Business or
all or a substantial portion of the stock or assets of the Franchise Owner or
the Franchised Business, including any portion of the Territory (all of which
shall be referred to as the "Franchise" for purposes of this Section 13 only)
without the prior written consent of Franchisor;
13.1.1.2 Franchisor's prior written consent shall not be
required for a transfer of less than a five percent interest in a publicly-held
corporation; and
13.1.1.3 Any purported assignment or transfer, by operation of
law or otherwise, not having the prior written consent of Franchisor shall be
null and void and shall constitute a material breach of this Agreement, for
which Franchisor may terminate without opportunity to cure pursuant to Section
14.1.6 of this Agreement;
13.1.2 Franchisor shall not unreasonably withhold its consent to a
Transfer of an interest in the Franchise, provided that Franchisor may require
any or all of the following of the Franchise Owner and its beneficial owners
(collectively referred to as "Transferor" for purposes of this Section) and the
transferee and its beneficial owners (collectively referred to as "Transferee"
for purposes of this Section) as conditions of its approval:
13.1.2.1 Each Transferee shall execute the form of personal
guarantee attached to this Agreement;
13.1.2.2 All of Transferor's accrued monetary obligations and
other outstanding obligations to Franchisor and its affiliates shall have been
satisfied;
13.1.2.3 Transferor is not in default of any provision of this
Agreement, any amendment to this Agreement, or any other agreement between
Transferor and Franchisor or its affiliates;
13.1.2.4 Transferor shall have executed a general release in a
form satisfactory to Franchisor of any and all claims against Franchisor and its
affiliates and
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their respective shareholders, partners, directors, officers, employees and
agents, in their corporate and individual capacities, to the fullest extent
permitted by law;
13.1.2.5 Each Transferee shall enter into a written assignment
in a form satisfactory to Franchisor, assuming and agreeing to discharge all of
Franchise Owner's obligations under this Agreement;
13.1.2.6 Each Transferee shall demonstrate to Franchisor's
satisfaction that such Transferee meets Franchisor's professional, educational,
managerial, financial and business standards, and possesses a good moral
character;
13.1.2.7 Any person who is to be substituted as Manager of the
Franchised Business shall have been approved by Franchisor and, unless waived in
writing by Franchisor, shall successfully complete the next available franchise
training and complete the Install Program training course then in effect;
13.1.2.8 Transferor shall pay to Franchisor a non-refundable
transfer fee to cover Franchisor's legal, accounting, record keeping and other
costs related to the Transfer in an amount not to exceed fifty percent (50%) of
the initial fee that then would be charged to new franchise owners under the
System for a comparable territory;
13.1.2.9 Transferor shall agree to remain liable for all of
the obligations to Franchisor in connection with the Franchised Business prior
to the effective date of the Transfer;
13.1.2.10 In the event that the proposed Transfer is to a
corporation formed by Franchise Owner for the convenience of ownership,
Transferor shall be the owner of all the voting stock of the corporation; and
13.1.2.11 In the event a Transfer, alone or together with other
Transfers, would have the effect of transferring a controlling interest in the
Franchise, the Transferee shall execute, for a term ending on the expiration
date of this Agreement, the standard form of franchise agreement then offered to
new franchise owners, which franchise agreement may have terms different from
the terms of this Agreement; provided, however, in lieu of any initial fee, the
Transferor shall pay the transfer fee described in Section 13.1.2.8 above, and
the royalty fee, the National Fund contribution limitation, and the Territory
shall remain the same. The Transferee shall also execute such other ancillary
agreements as Franchisor may require for the Franchised Business.
13.2 Offerings by Franchise Owner. Securities or partnership interests in
----------------------------
Franchise Owner may be sold, by public or private offering or otherwise, only
with the prior written consent of Franchisor (whether or not Franchisor's
consent is required under Section 13.1 hereof), which consent shall not be
unreasonably withheld. All materials required for such offering by federal or
state law shall be
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submitted to Franchisor for review prior to being filed with any government
agency; and any materials to be used in any exempt offering shall be submitted
to Franchisor for review prior to their use. Franchise Owner shall provide all
such materials to Franchisor at least thirty (30) days prior to the commencement
of any offering. No Franchise Owner offering shall imply (by use of the
Proprietary Marks or otherwise) that Franchisor is participating as an
underwriter, issuer or offeror of securities; and Franchisor's review of any
offering shall be limited solely to the subject of the relationship between
Franchise Owner and Franchisor. Franchise Owner and the other participants in
the offering must fully indemnify Franchisor in connection with the offering.
For each proposed offering, Franchise Owner shall pay to Franchisor a non-
refundable fee, not to exceed fifty percent (50%) of the initial fee that then
would be charged to new franchise owners under the System for a comparable
territory, to reimburse Franchisor for its reasonable costs and expenses
associated with reviewing the proposed offering.
13.3 Right of First Refusal.
----------------------
13.3.1 Any party holding any interest in the Franchise who desires to
accept any offer from a third party to purchase such interest shall notify
Franchisor in writing of the offer, and shall provide such information and
documentation relating to the offer as Franchisor may require.
13.3.2 Except for a Transfer among the original owners who were
granted the franchise hereunder or a Transfer from an original owner to that
owner's spouse or child(ren), Franchisor shall have the right and option,
exercisable within sixty (60) days after receipt of written notification and
receipt of any required information or documentation, to send written notice to
the seller that Franchisor intends to purchase the seller's interest on the same
terms and conditions contained in a bona fide offer from the third party, or the
---- ----
cash equivalent. In the event that Franchisor elects to purchase the seller's
interest, closing on such purchase must occur within sixty (60) days from the
date of notice to the seller of the election to purchase by Franchisor. In the
event that Franchisor does not elect to purchase the sellers' interest, closing
on such purchase shall occur within ninety (90) days after the expiration of
Franchisor's right to purchase. Failure to close the sale within said period or
any material change in the terms of the offer prior to closing shall constitute
a new offer subject to the same rights of first refusal by Franchisor described
in this Section 13.3.
13.3.3 Failure of Franchisor to exercise the option afforded by this
Section 13.3 shall not constitute a waiver of any other provision of this
Agreement, including all the requirements of this Section 13, with respect to a
proposed Transfer.
13.4 Transfer Upon Death or Mental Incapacity. Upon the death or finding
----------------------------------------
by a court of mental incapacity of any person with an interest in the Franchise,
the executor, administrator or personal representative of such person shall
transfer within six (6) months after such death or mental incapacity the
deceased or incompetent owner's interest to a third party approved by
Franchisor. Such transfers, including transfers by devise or inheritance, shall
be subject to the same conditions as any Transfer. However, in the case of
transfer by devise or inheritance, if the heirs or beneficiaries of any such
person are not approved by Franchisor, the personal representative of the
deceased shall have a reasonable time to dispose
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of the deceased's interest, which disposition shall be subject to all the terms
and conditions for Transfers contained in this Agreement. If the interest is not
disposed of within six (6) months, Franchisor may terminate this Agreement.
13.5 Non-Waiver of Claims. Franchisor's consent to a Transfer shall not
--------------------
constitute a waiver of any claims it may have against the Transferor, nor shall
it be deemed a waiver of Franchisor's right to demand exact compliance with any
of the terms of this Agreement by the Transferee.
13.6 Transfer by Franchisor. Franchisor shall have the right to transfer
----------------------
or assign all or any part of its rights or obligations herein to any person or
legal entity.
14. DEFAULT AND TERMINATION
14.1 Termination by Franchisor With Notice But Without Opportunity to Cure.
---------------------------------------------------------------------
Franchisor may, without providing an opportunity to cure, terminate this
Agreement by giving written notice to Franchise Owner stating the reasons for
and effective date of termination if:
14.1.1 Franchise Owner abandons the Franchised Business or otherwise
forfeits the right to transact business in the Territory. However, if such
abandonment results from the governmental exercise of the power of eminent
domain or is due to fire, flood, earthquake or other similar cause beyond
Franchise Owner's control, then in such event this Agreement shall not be
terminated for that reason for sixty (60) days thereafter, provided Franchise
Owner recommences operation of the Franchised Business within that time;
14.1.2 Franchise Owner engages in a pattern of material, willful and
repeated deception of patients concerning the source, nature or quality of
products sold or services rendered;
14.1.3 Franchise Owner fails to comply with the ethical standards
established in the state(s) where the professional services of the Franchised
Business are performed. Franchise Owner shall be deemed to have failed to comply
with those ethical standards whenever a state agency regulating the practice of
pharmacy or nursing initially determines that actions of Franchise Owner merit
the suspension or revocation of Franchise Owner's pharmacy permit or any nursing
license Franchise Owner may have obtained;
14.1.4 Franchise Owner fails, for a period of ten (10) days after
notification of noncompliance from any applicable agency, to comply with any
federal, state or local law applicable to the operation of the Franchised
Business;
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14.1.5 Franchise Owner is convicted of a felony or any other criminal
misconduct which is relevant to the operation of the Franchised Business or is
disbarred or suspended from participation in the Medicare or any Medicaid
programs;
14.1.6 Franchise Owner, or any partner or shareholder in Franchise
Owner, purports to transfer any rights or obligations under this Agreement to
any third party without Franchisor's prior written consent, contrary to the
terms of Section 13;
14.1.7 Franchise Owner fails to permit Franchisor or Franchisor's
agents or representatives to inspect the Franchised Business or the books or
records associated with the Franchised Business, at such times and places as
provided for under this Agreement;
14.1.8 Franchise Owner misuses or makes any unauthorized use of the
Proprietary Marks or other identifying characteristics of the System, or
otherwise materially impairs the goodwill associated with the System or
Franchisor's rights therein;
14.1.9 Franchise Owner knowingly maintains false books or records or
submits any false reports to Franchisor;
14.1.10 Franchise Owner is repeatedly or habitually in default under
Section 14.1 or in material default pursuant to any other agreement with
Franchisor or any affiliate of Franchisor, or, after curing any default
following notice pursuant to Section 14.3, commits the same default, whether or
not cured after notice;
14.1.11 Franchise Owner fails to comply with the in-term covenants in
Section 16 or fails to obtain execution of the covenants required under Section
9 or Section 16;
14.1.12 Franchise Owner discloses or divulges the contents of the
Manual or other Confidential Information contrary to the terms of this
Agreement;
14.1.13 Franchise Owner or any beneficial owner makes a material
misrepresentation or omits to disclose material information to Franchisor in
connection with the application to Franchisor for this Franchise Agreement;
14.1.14 Franchisor determines that continued operation of the
Franchised Business poses a material threat to public health or safety; or
14.1.15 The Franchised Business fails to obtain or maintain any
required accreditation.
14.2 Termination by Franchisor Without Notice or Opportunity to Cure.
---------------------------------------------------------------
Should any of the following events occur, Franchise Owner shall be deemed to be
in default under this Agreement, and this Agreement shall automatically
terminate without notice to Franchise Owner:
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14.2.1 Franchise Owner becomes insolvent, makes an assignment for the
benefit of its creditors of all or any part of the assets used in the Franchised
Business, or a petition of bankruptcy is filed by Franchise Owner or such a
petition is filed against and not opposed by Franchise Owner;
14.2.2 Franchise Owner is adjudicated a bankrupt or insolvent;
14.2.3 A bill in equity or other proceeding or the appointment of a
receiver of Franchise Owner or other custodian for Franchise Owner's business or
assets is filed and consented to by Franchise Owner, or a receiver or other
custodian (permanent or temporary) of Franchise Owner's business or assets, or
any part thereof, is appointed by any court of competent jurisdiction;
14.2.4 Proceedings for a composition with creditors under any state or
federal law is initiated by or against Franchise Owner;
14.2.5 A final judgment against Franchise Owner remains unsatisfied or
of record for thirty (30) days or longer (unless a supersedeas bond is filed),
execution is levied against Franchise Owner's business or assets, a suit to
foreclose any lien or mortgage against Franchise Owner is filed and not
dismissed within thirty (30) days, or the real or personal property of Franchise
Owner is sold after levy thereupon by any sheriff, marshal or constable; or
14.2.6 Franchise Owner is dissolved and if such dissolution is by
reason of failure to file a franchise tax return with the state, the corporation
is not re-instated in good standing within thirty (30) days following
dissolution.
14.3 Termination by Franchisor With Notice and Opportunity to Cure. Except
-------------------------------------------------------------
as provided in Section 14.1 and 14.2 of this Agreement, Franchisor may terminate
this Agreement only by giving written notice of termination to Franchise Owner
stating the nature of the default or breach at least thirty (30) days prior to
the effective date of termination or such longer period as applicable law may
require (the "Cure Period"); provided, however, that Franchise Owner may avoid
termination by immediately initiating a remedy to cure such default or breach
and curing it to Franchisor's satisfaction within the Cure Period. If any such
default is not cured within the Cure Period, this Agreement shall terminate
without further notice to Franchise Owner effective immediately upon the
expiration of the Cure Period.
15. OBLIGATIONS UPON TERMINATION
15.1 Post-Termination Obligations of Franchise Owner. Except as otherwise
-----------------------------------------------
provided in this Section 15, upon termination of this Agreement all rights
granted hereunder to Franchise Owner by this Agreement are terminated, and
Franchise Owner shall immediately:
15.1.1 Cease to operate the Franchised Business and not, directly or
indirectly, represent itself as a franchise owner of Franchisor;
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15.1.2 Permanently cease to use, in any manner whatsoever, any
Confidential Information associated with the System, and the Proprietary Marks
and all signs, equipment, marketing materials, stationery, forms and other items
which display the Proprietary Marks;
15.1.3 Cease utilizing, directly or indirectly, Franchise Owner's
telephone numbers, and complete all paperwork necessary to transfer immediately
Franchise Owner's telephone numbers to the party Franchisor designates
(Franchise Owner acknowledges and agrees that no additional consideration is due
Franchise Owner for this transfer);
15.1.4 Pay all liquidated or ascertainable sums owing from Franchise
Owner to Franchisor, without set-off or other reduction on account of
unliquidated claims, together with any fees accruing after the termination or
expiration on Gross Receipts attributable to accounts receivable from goods or
services furnished during the term of this Agreement;
15.1.5 Pay to Franchisor all damages, costs and expenses, including
reasonable attorneys' fees, incurred by Franchisor as a result of the
termination of this Agreement, including those incurred in obtaining injunctive
or other relief for the enforcement of any provisions of this Agreement, which
obligation shall give rise to and remain, until paid in full, a lien in favor of
Franchisor against any and all of the personal property, trade furnishings,
equipment, signs, fixtures and inventory owned by Franchise Owner and used in
connection with the Franchised Business;
15.1.6 Deliver to Franchisor via U.P.S. or comparable carrier, via
first class service, the Manual, all business records (other than
prescriptions, patient records, tax returns and bank statements), files, and
brochures, and any and all other materials relating to the operation of the
Franchised Business, all of which are acknowledged to be Franchisor's property,
and shall retain no copy or record of any of the foregoing, except Franchise
Owner's copy of this Agreement and any other agreements with Franchisor or any
affiliate, copies of any correspondence between the parties, and any copies of
other documents which Franchise Owner reasonably needs for compliance with any
provision of law;
15.1.7 Comply with the applicable covenants contained in Sections 9
and 16 of this Agreement, which covenants shall survive the termination of this
Agreement;
15.1.8 Offer Franchisor the first right of refusal to assume Franchise
Owner's existing lease for the premises of the Franchised Business; and
15.1.9 Offer Franchisor the first right of refusal to purchase
Franchise Owner's equipment, supplies, signs and marketing material used in
operation of the Franchised Business, on the terms described in Section 15.2,
hereof.
15.2 Post-Termination Right of Franchisor. Upon termination of this
------------------------------------
Agreement, Franchisor shall have the right (but not the duty) to assume
Franchise Owner's occupancy rights under any existing lease for any premises of
the Franchised Business. Franchisor also shall have the right (but not the
duty) to purchase any or all equipment, supplies, signs and
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<PAGE>
marketing materials used in operation of the Franchised Business, in addition to
any items bearing Franchisor's Proprietary Marks and Franchise Owner's Medicare
Part B Provider Number (collectively, the "Assets"). Franchisor may exercise
this right to purchase by giving notice of intent to do so within thirty (30)
days after termination of this Agreement. Franchisor shall pay Franchise Owner
the lower of Franchise Owner's cost or fair market value of the Assets. If the
parties cannot agree on fair market value of the Assets within a reasonable
time, an independent appraiser shall be designated by Franchisor and its
determination shall be binding.
16. COVENANTS
16.1 Confidentiality Covenant. Franchise Owner and, if Franchise Owner is a
------------------------
corporation, partnership or limited liability company, its shareholders,
partners or owners, as the case may be (collectively, the "Owners"), each
specifically acknowledge that Franchise Owner and its Owners will receive
valuable specialized training and Confidential Information by entering into this
Agreement. Franchise Owner and each of its Owners covenant that during the term
of this Agreement, except as otherwise approved in advance and in writing by
Franchisor, neither Franchise Owner nor any of its Owners shall, either directly
or indirectly, for itself, or through, on behalf of, or in conjunction with any
person, persons or legal entity, own, maintain, operate, engage in, be employed
by or have any interest in any business which provides health-care services
similar to, or the same as, those provided by Franchise Owner pursuant to this
Agreement.
16.2 Non-Competition Restriction. Franchise Owner and each of its Owners
---------------------------
covenant that, except as otherwise approved in advance and in writing by
Franchisor, neither Franchise Owner nor any of its Owners shall, for a
continuous uninterrupted period commencing upon the termination (but not the
expiration) of this Agreement (or if the termination of this Agreement is
contested by Franchise Owner or an Owner, upon the final resolution of any
dispute concerning the termination of this Agreement) regardless of the cause
for termination and continuing for two (2) years thereafter, either directly or
indirectly, for itself, or through, on behalf of, or in conjunction with any
person, persons or legal entity:
16.2.1 Own, maintain, operate, engage in, be employed by or have any
interest in any business which provides within the Territory health-care
services similar to, or the same as, those Franchise Owner could provide
pursuant to this Agreement;
16.2.2 Seek or accept referrals for the provision of health-care
services similar to, or the same as, those provided by Franchise Owner pursuant
to this Agreement from any referral source which referred patients to Franchise
Owner for goods or services of the Franchised Business at any time during the
two (2) years prior to the termination of this Agreement; or
16.2.3 Provide health-care services similar to, or the same as, those
provided by Franchise Owner pursuant to this Agreement to any patient to whom
Franchise Owner provided any health-care services under this Agreement at any
time during the two (2) years
33
<PAGE>
prior to the termination of this Agreement, provided, however, that Franchise
Owner shall be obligated to provide all current patients with notice to seek
alternate arrangements and shall assume that arrangements have been made for the
provision of such services.
16.3 Exceptions from Non-Competition Restrictions. Notwithstanding the
--------------------------------------------
foregoing, Section 16.2 shall not prohibit an Owner who is a licensed pharmacist
or nurse from: (a) engaging in activities which are unrelated to Therapies
provided under the System; (b) having an interest in any business (e.g., a
retail pharmacy, home health agency or durable medical equipment business) which
does not compound or dispense pharmaceuticals, or sell, rent or lease equipment,
associated with the Therapies provided under the System; or (c) being employed
in an acute-care facility solely to provide products or services to in-patients
of that facility. Section 16.2 also shall not apply to ownership by Franchise
Owner or any Owner of less than one percent (1%) beneficial interest in the
outstanding equity securities of any publicly-held corporation. Section 16.2
also shall not prohibit any person from owning an interest in other Option Care
franchises, or from being employed by any Option Care franchises.
16.4 Enforcement of Covenants. Franchise Owner and its Owners expressly
------------------------
agree that the existence of any claims they may have against Franchisor, whether
or not arising from this Agreement, shall not constitute a defense to the
enforcement by Franchisor of the covenants in this Section 16. Franchise Owner
and its Owners jointly and severally agree to pay all costs and expenses
(including reasonable attorneys' fees) incurred by Franchisor in connection with
the enforcement of this Section 16.
16.5 Irreparable Injury. Franchise Owner and its Owners acknowledge that
------------------
Franchise Owner's violation of the terms of this Section 16 would result in
irreparable injury to Franchisor for which no adequate remedy at law may be
available, and Franchise Owner and its Owners accordingly agree that Franchisor
may seek an injunction prohibiting any conduct by Franchise Owner and its Owners
in violation of the terms of this Section 16.
16.6 Employee Covenants. At Franchisor's request, Franchise Owner agrees to
------------------
obtain execution of covenants similar to those set forth in this Section 16,
including covenants that are operative upon the termination of a person's
relationship with Franchise Owner, from supervisory personnel, officers and
directors, and other persons reasonably determined by Franchisor to be in a
position to use information gained from their association with Franchise Owner
to compete with the Franchise Owner and the System. Every covenant required by
this Section 16.6 shall be in a form satisfactory to Franchisor, including,
without limitation, specific identification of Franchisor as a third party
beneficiary of such covenants with the independent right to enforce them.
17. CORPORATE AND PARTNERSHIP FRANCHISE OWNERS
34
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17.1 Evidence of Legal Entity. If Franchise Owner is a corporation, limited
------------------------
liability company or a partnership, Franchise Owner agrees that the entity will
confine its activities to the operation of the Franchised Business throughout
the term of this Agreement. Franchise Owner agrees to have a written
partnership agreement, unit ownership agreement or buy-sell agreement in effect
during the entire term of this Agreement. Franchise Owner agrees to provide to
Franchisor information about Franchise Owner's organization and management,
including copies of documents, as may be reasonably specified by Franchisor from
time-to-time. The requested information may include the following items as
applicable:
17.1.1 Copies of Franchise Owner's Articles of Incorporation or
Partnership Agreement, or Unit Ownership Agreement, Bylaws, and any other
governing documents, and any amendments to any of these documents.
17.1.2 A current list of the name and title of each officer and
director or managing partner, and a list of each owner of record or beneficial
owner of Franchise Owner showing the number of shares of each class of stock in
Franchise Owner owned by each shareholder, or the capital and profit interests
of each partner. Franchise Owner also agrees to furnish a revised copy of these
lists to Franchisor each time a change occurs to the information.
17.1.3 Franchise Owner shall maintain stop transfer instructions
against the transfer on its records of any equity securities. If Franchise
Owner is a corporation, Franchise Owner shall legibly and conspicuously maintain
on the face of all the securities the following legend:
The transfer of this stock is subject to the terms and conditions of a
Franchise Agreement with Option Care, Inc. dated _________19_____.
17.1.4 If Franchise Owner is a partnership, or limited liability
company, the Partnership Agreement or Unit Ownership Agreement (as the case may
be) shall contain a reference to the terms and conditions of this Agreement.
18. TAXES AND INDEBTEDNESS
18.1 Franchise Owner agrees to promptly pay when due all taxes, accounts and
other indebtedness of every kind levied or assessed against, or incurred by,
Franchise Owner. Franchise Owner agrees to pay to Franchisor an amount equal to
any sales, gross receipts or similar tax (other than income tax) imposed on
Franchisor with respect to any payments to Franchisor required under this
Agreement, unless the tax is credited against income tax otherwise payable by
Franchisor.
18.2 In the event of any bona fide dispute as to Franchise Owner's liability
for taxes, accounts, or other indebtedness, Franchise Owner may contest the
validity or the amount of the tax, account or indebtedness in accordance with
procedures of the taxing authority or
35
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applicable law; however, in no event shall Franchise Owner permit a tax sale or
seizure by levy of execution or similar writ or warrant, or attachment by a
creditor, to occur against the Franchised Business, any office, any improvements
to any office, or any other asset of Franchise Owner.
18.3 Franchise Owner shall notify Franchisor in writing within five (5) days
of the commencement of any action, suit or proceeding, and of the issuance of
any order, writ, injunction, award or decree of any court, agency or other
governmental instrumentality, which may adversely affect the operation or
financial condition of the Franchised Business.
19. INDEPENDENT CONTRACTOR; AUTHORITY
It is understood and agreed by the parties hereto that this Agreement does
not create a fiduciary relationship between them; that Franchise Owner shall be
an independent contractor and shall hold itself out to the public as an
independent contractor including in such manner as Franchisor may reasonably
specify; and that nothing in this Agreement is intended to constitute either
party an agent, legal representative, subsidiary, joint venturer, partner,
employee or servant of the other for any purpose whatsoever.
It is understood and agreed that nothing in this Agreement authorizes
Franchise Owner to make any contract, agreement, warranty or representation on
Franchisor's behalf, or to incur any debt or other obligation in Franchisor's
name, and that Franchisor shall in no event assume liability for, or be deemed
liable under this Agreement as a result of, any such action or by reason of any
act or omission of Franchise Owner in its conduct of the Franchised Business, or
any claim or judgment arising therefrom against Franchisor.
20. INDEMNIFICATION
20.1 Franchise Owner assumes sole responsibility for losses arising out of
the operation of the Franchised Business, and the acts or omissions of Franchise
Owner and its agents, servants and contractors. Franchise Owner shall
indemnify, defend and hold Franchisor and its shareholders, partners, directors,
officers, employees and agents harmless against and to reimburse them for all
losses arising out of or in any way connected with the operation of the
Franchised Business or the acts or omissions of Franchise Owner or its agents,
servants or contractors. These indemnities shall continue in full force and
effect subsequent to and notwithstanding the expiration or termination of this
Agreement. "Losses", as used in this Section 20.1, shall include all
liabilities, penalties, costs, losses, damages, expenses, causes of action,
claims or judgments, including reasonable attorneys' fees and costs.
20.2 Under no circumstances shall any person entitled to indemnity under
this Agreement be required or obligated to seek recovery from third parties or
otherwise mitigate their losses in order to maintain a claim against the
indemnifying party, nor shall a failure to seek such recovery or mitigate losses
in any way reduce the amounts recoverable from the indemnifying party.
36
<PAGE>
21. APPROVALS AND WAIVERS
Whenever this Agreement requires the prior approval or consent of
Franchisor, Franchise Owner shall make a timely written request to Franchisor,
and such approval or consent shall be obtained in writing signed by the
President or any Vice President of Franchisor. No other communication from any
officer, employee or agent of Franchisor, whether oral or in writing, shall
constitute a valid approval or consent of Franchisor pursuant to this Section
21.
Franchisor makes no warranties or guarantees upon which Franchise Owner may
rely, and assumes no liability or obligation to Franchise Owner, by providing
any waiver, approval, consent or suggestion to Franchise Owner in connection
with this Agreement, or by reason of any neglect, delay, or denial of any
request therefor.
No delay, waiver, omission or forbearance on the part of Franchisor to
exercise any right, option, duty or power arising out of any breach or default
by Franchise Owner under any of the terms, provisions, covenants or conditions
hereof, shall constitute a waiver by Franchisor to enforce any such right,
option, duty or power as against Franchise Owner, or as to any subsequent breach
or default by Franchise Owner.
22. NOTICES
Any and all notices required or permitted under this Agreement shall be in
writing and shall be personally delivered or mailed by certified mail, return
receipt requested, postage prepaid, to the respective parties at the following
addresses unless and until a different address has been designated by written
notice duly given in accordance with this section to the other party:
Notices to Franchisor: General Counsel
Option Care, Inc.
100 Corporate North, Suite 212
Bannockburn, IL 60015
Notices to Franchise Owner: Manager
J. Harris Morgan, Jr.
159 East Broad Street, Box 394
Camilla, GA 31730
Notices Post-Termination to ________________________________________
Franchise Owner: ________________________________________
37
<PAGE>
________________________________________
Any notice by certified mail shall be deemed to have been given at the earlier
of (i) three (3) days after the date and time of mailing, or (ii) the date and
time of actual receipt.
23. ENTIRE AGREEMENT
This Agreement and the Exhibits attached hereto constitute the entire, full
and complete Agreement between Franchisor and Franchise Owner concerning the
subject matter hereof, and supersede all prior agreements, no other
representations having induced Franchise Owner to execute this Agreement. No
representations, inducements, promises or agreements, oral or otherwise, not
embodied herein or attached hereto (unless of subsequent date) were made by
either party, and none shall be of any force or effect with reference to this
Agreement or otherwise, except for purposes of Section 14.1.13. Franchisor is
nonetheless permitted, in its sole discretion, to reduce the scope of any
covenant or portion thereof set forth in Section 16, without Franchise Owner's
consent, effective immediately upon receipt by Franchise Owner of written
notice, and Franchise Owner agrees that it shall comply with the modified
covenant which shall be fully enforceable. Except for those permitted to be
made by Franchisor hereunder, no amendment, change, or variance from this
Agreement shall be binding on either party unless mutually agreed to by the
parties and executed by their authorized officers or agents in writing.
24. SEVERABILITY AND CONSTRUCTION
Except as expressly provided to the contrary in this Agreement, nothing in
this Agreement is intended, nor shall be deemed, to confer any rights or
remedies under or by reason of this Agreement upon any person or legal entity
other than Franchise Owner, Franchisor, Franchisor's officers, directors and
employees, and such of Franchise Owner's and Franchisor's respective successors
and assigns as may be contemplated and permitted by Section 13 hereof.
Franchise Owner agrees that each promise or covenant of this Agreement that
may result from striking any portion or portions which a court may hold to be
unreasonable and unenforceable in a final decision to which Franchisor is a
party, or from reducing the scope of any promise or covenant to the extent
required to comply with such a court order, is separately enforceable to the
maximum extent permitted by law.
All captions in this Agreement are intended solely for the convenience of
the parties, and none shall be deemed to affect the meaning or construction of
any provision hereof.
All references herein to the masculine, neuter, singular or plural shall be
construed to include the masculine, feminine, neuter, singular or plural, where
applicable; and all acknowledgments, promises, covenants, agreements and
obligations herein made or undertaken
38
<PAGE>
by Franchise Owner shall be deemed jointly and severally undertaken by all those
executing this Agreement on behalf of Franchise Owner.
This Agreement may be executed in several counterparts and each copy so
executed shall be deemed one and the same document.
25. APPLICABLE LAW
This Agreement takes effect upon its acceptance and execution by Franchisor
in Illinois, and shall be interpreted and construed under the laws of Illinois,
which laws shall prevail in the event of any conflict of law; provided, however,
that if any of the provisions of this Agreement would not be enforceable under
the laws of Illinois, then such provisions shall be interpreted and construed
under the laws of the state in which the Franchised Business is located.
The parties agree that any action brought by either party against the other
in any court, whether federal or state, shall be brought within the State of
Illinois in the Cook County judicial district and do hereby waive all questions
of personal jurisdiction or venue for the purpose of carrying out this
provision.
No right or remedy conferred upon or reserved to Franchisor or
Franchise Owner by this Agreement is intended to be, nor shall be deemed,
exclusive of any other right or remedy herein or permitted by law or equity, but
each shall be cumulative of every other right or remedy.
Nothing herein contained shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
26. ACKNOWLEDGMENTS
Franchise Owner acknowledges that it has conducted an independent
investigation of the Franchised Business, and recognizes that the business
venture contemplated by this Agreement involves business risks and that the
success of the Franchised Business will be largely dependent upon the ability of
Franchise Owner as an independent businessperson. Franchisor expressly disclaims
the making of, and Franchise Owner acknowledges that it has not received, any
warranty or guarantee, express or implied, as to the potential volume, profits
or success of the business venture contemplated by this Agreement.
Franchise Owner acknowledges that it has received, read and understood
this Agreement, including all related exhibits and agreements, and that
Franchisor has accorded Franchise Owner ample time and opportunity to consult
with advisors of its own choosing about the potential benefits and risks of
entering into this Agreement.
39
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Franchise Owner acknowledges that this Agreement shall not become
effective until signed by Franchisor's President or any Vice President of
Franchisor.
IN WITNESS WHEREOF, each party hereto has signed and delivered or has
caused its duly authorized representative to sign and deliver this Agreement on
the date first above written.
FRANCHISOR:
OWNERS OPTION CARE, INC.,
(as to Section 16 only) a California corporation
/s/ Harris Morgan, Jr. Date: 12-20-96
- ------------------------------- ----------------------------
J. Harris Morgan, Jr. By: /s/ Cathy Bellhumeur
- ------------------------------- ------------------------------
Print Name
Name: Cathy Bellehumeur
_______________________________ ----------------------------
Title: Secretary
_______________________________ ---------------------------
FRANCHISE OWNER:
OPTION CARE CAMILLA, INC.,
a Georgia corporation
_______________________________
Print Name
Date: 12/31/96
----------------------------
By: /s/ Harris Morgan
------------------------------
Name: Harris Morgan
----------------------------
Title: President
---------------------------
40
<PAGE>
GUARANTEE
As an inducement to Option Care, Inc. ("Franchisor") to execute the
Franchise Agreement dated ______12-31_______________, 1996 including any
amendments thereto whenever made (the "Agreement"), the undersigned, jointly and
severally, hereby agree to be individually bound by all the terms and conditions
of the Agreement, copies of which the undersigned acknowledge reading. The
undersigned, jointly and severally, also hereby unconditionally guarantee to
Franchisor and its successors and assigns that all of Franchise Owner's
obligations under the Agreement will be punctually paid and performed.
Upon default by Franchise Owner or notice from Franchisor, the undersigned
will immediately make each payment and perform each obligation required of
Franchise Owner under this Agreement. Without affecting the obligations of the
undersigned under this Guarantee, Franchisor may without notice to the
undersigned extend, modify, or release any indebtedness or obligation of
Franchise Owner, or settle, adjust or compromise any claims against Franchise
Owner. The undersigned waive notice of demand for payment or performance by
Franchise Owner.
Upon the death of an individual guarantor, the estate of such guarantor will
be bound by this Guarantee but only for defaults and obligations hereunder
existing at the time of transfer of the interest of the individual guarantor as
required by the Agreement and the obligations of the other guarantors will
continue in full force and effect.
IN WITNESS WHEREOF, each of the undersigned has signed this Guarantee as of
the date of the above Agreement.
GUARANTOR(S)
/S/ HARRIS MORGAN
----------------------------------
J. Harris Morgan, Jr.
__________________________________
__________________________________
41
<PAGE>
ADDENDUM TO
OPTION CARE, INC.
FRANCHISE AGREEMENT
This Addendum ("Addendum") is made and entered into this 31st day of
December, 1996, by and between Option Care, Inc., a California corporation
("Franchisor"), and Option Care Camilla, Inc., a Georgia corporation ("Franchise
Owner").
RECITALS
A. Of even date herewith, Franchisor and Franchise Owner entered into a
Franchise Agreement for the operation of an Option Care franchised business (the
"Franchised Business").
B. Franchisor and Franchise Owner desire to amend the Franchise Agreement
as set forth herein.
NOW, THEREFORE, Franchisor and Franchise Owner, in consideration of the
undertakings and commitments of each party to the other party set forth herein,
agree as follows:
1. DISCOUNT ON ROYALTIES
Until the termination of this Addendum, Sections 5.2 and 5.3 of the
Franchise Agreement shall be deleted in their entirety and replaced by the
following provisions:
"5.2. Commencing upon execution of the Franchise Agreement, and for
so long thereafter as Franchise Owner realizes Gross Receipts (as defined in
Section 5.7), Franchise Owner agrees to pay to Franchisor a continuing monthly
royalty fee (the "Continuing Monthly Royalty Fee") as follows:
5.2.1 The Continuing Monthly Royalty Fee shall be in an amount equal
to nine percent (9%) of Gross Receipts during each calendar year; provided,
--------
however, that but the Continuing Monthly Royalty Fee together with the National
- -------
Fund Payment under Section 5.4 shall, in the aggregate, not exceed One Hundred
Thousand Dollars ($100,000) in any given year."
"5.3. There shall be no minimum annual royalty fee owed by Franchise Owner
to Franchisor during the term of this Addendum."
2. TERMINATION OF THE FRANCHISE AGREEMENT BY THE FRANCHISE OWNER
The following Section 14.4 shall be added to the Franchise Agreement:
"14.4 Termination by Franchise Owner.
------------------------------
42
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14.4.1 Franchise Owner may not terminate this Agreement within the
first five (5) years of the Franchise Agreement.
14.4.2 Following the first five (5) years of the Franchise
Agreement, the Franchise Owner may buy out the Franchise Agreement for a sum
equal to the dollar amount of Franchise Owner's last full calendar year's
Continuing Monthly Royalty Fee, determined in accordance with Section 5.2 of the
Franchise Agreement multiplied by the number of years left on the term of the
Franchise Agreement, which sum shall be adjusted for net present value."
3. TERM AND TERMINATION OF THIS ADDENDUM
This Addendum shall become effective on the Effective Date of the Franchise
Agreement and shall continue, unless terminated earlier, until the expiration
date of the Franchise Agreement. This Addendum shall earlier terminate upon the
occurrence of any of the following:
3.1. The termination of the Franchise Agreement.
3.2. Any transfer described in Section 13 of the Franchise Agreement which,
alone or together with other previous, simultaneous or proposed transfers, would
have the effect of transferring a controlling interest in Franchise Owner, the
Franchise Agreement, the Franchised Business or all or a substantial portion of
the assets of the Franchise Owner or the Franchised Business.
Upon termination or expiration of this Addendum, Sections 5.2 and 5.3 of the
Franchise Agreement, as originally stated in the Franchise Agreement, shall
become applicable for so long as the Franchise Agreement remains in full force
and effect.
4. USE OF OPTION CARE NAME
Notwithstanding the provisions of the Franchise Agreement to the contrary,
the Franchise Owner may utilize "Option Care Camilla, Inc." as its corporate
name.
5. REMAINDER OF FRANCHISE AGREEMENT
Except as expressly provided for herein, all of the terms and conditions of
the Franchise Agreement shall remain in full force and effect.
6. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, each party hereto has caused its duly authorized
representative to duly execute and deliver this Addendum on the date first above
written.
43
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FRANCHISE OWNER: FRANCHISOR:
OPTION CARE CAMILLA, INC. OPTION CARE, INC.
By: /s/ Harris Morgan By: /s/ Cathy Bellehumeur
---------------------------------- -------------------------------
Name: Harris Morgan Name: CATHY BELLEHUMEUR
-------------------------------- -----------------------------
Title: President Title: Vice President
------------------------------- ----------------------------
Date: 12/31/96 Date: 12/20/96
-------------------------------- -----------------------------
44
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EXHIBIT 10.10
$623,023.41 November 15, 1996
PROMISSORY NOTE
---------------
FOR VALUE RECEIVED, including the cancellation of those certain Promissory Notes
between Convention Drug Center, Inc., a Nevada corporation ("Maker") and Option
Care, Inc., a California corporation ("Holder") dated, respectively, September
16, 1992, in the principal amount of $300,000 and November 29, 1994, in the
principal amount of $802,860.88, Maker promises to pay to the order of Holder,
or to the registered holder, in the manner set forth below, the principal sum of
Six Hundred Twenty-Three Thousand Twenty-Three Dollars and Forty-One Cents
($623,023.41) plus interest accrued from and after November 15, 1996 on the
balance of the principal amount of this Note remaining from time to time unpaid
at a rate of interest equal to ten percent (10%) per annum, compounded annually.
The Principal amount of this Note together with all interest accrued thereon
shall be due and payable in forty-eight (48) equal consecutive monthly
installments in the amount of Fifteen Thousand Eight Hundred Forty-One Dollars
and Three Cents ($15,841.03), with the first installment due and payable on
December 15, 1996, and each of the next forty-seven (47) installments due and
payable on the fifteenth day of each month thereafter, with the last such
installment due and payable on November 15, 2000.
Occurrence of one or more of the following events shall constitute an "Event of
Default:"
A. Failure of the Maker to pay any installment due under this Note where such
failure has continued for a period of ten (10) days after its due date;
B. At any time, (i) commencement by the Maker of a voluntary case under the
federal bankruptcy laws, as now or hereafter constituted or any other applicable
federal or state bankruptcy, insolvency or other similar law, (ii) consent by
the Maker to the appointment of a receiver, trustee, custodian, sequestrator or
other similar official for the Maker or any substantial part of its property, or
to the taking possession by any such official of any substantial part of the
property of the Maker, or (iii) making by the Maker of any assignment for the
benefit of creditors generally;
C. Termination of the Maker's Franchise Agreement, as amended, with Option
Care, Inc.;
D. Failure of Maker to pay for product ordered pursuant to Option Care, Inc.'s
product contracts within 45 days of invoice; or
E. Failure to timely submit royalty reports and/or pay royalties by the date
prescribed in the Franchise Agreement from and after November 15, 1996.
Upon the occurrence of an Event of Default hereunder, the Holder may, at its
option, declare the entire unpaid Principal balance of the Note and all accrued
interest thereon to be due and payable. Upon the occurrence of an Event of
Default hereunder, the Holder may, at its option, escalate the interest rate to
eighteen percent (18%) for the remaining term of the Note.
If, at any time, the applicable interest rate hereunder is deemed by any
competent court of law, governmental agency, board, commission or tribunal, to
exceed the maximum rate of interest
<PAGE>
permitted by applicable law, then, for such time as the applicable interest rate
hereunder would be deemed excessive, such interest rate shall be suspended and
this Note shall bear interest at the maximum rate permissible under such
applicable law, but thereafter, the former applicable interest rate hereunder
shall be reinstated.
All payments of Principal and interest hereunder shall be payable in lawful
money of the United States of America at the offices of Holder located in the
State of Illinois or at such other place as the Holder hereof may designate in
writing to the Maker. If any payment of principal or interest hereunder shall
become due on a Saturday, Sunday or business holiday under the laws of the State
of Illinois or the United States of America, such payment shall be made on the
next succeeding business day and such extension shall be included in computing
any interest in respect of payment.
This Note may be prepaid in whole or in part at any time or from time to time
without premium or penalty. All payments hereunder shall be applied first to
interest on the unpaid balance hereunder at the rate herein specified and then
to installments of principal in the inverse order of the maturity thereof.
The Maker agrees to pay, promptly and on demand by the Holder, all costs of
collection and all reasonable attorneys' fees paid or incurred by the Holder in
enforcing any of the Holder's rights hereunder. The maker waives presentment,
demand, notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note, asserts
to any extension or postponement of the time of any payment or any indulgence to
any substitution, exchange or release of collateral and to the addition or
release of any other party or person primarily or secondary liable.
In the event that Maker enters into a financing arrangement for the purpose of
repaying all indebtedness of Maker to the Bank of America and Golden State
Finance (collectively Bank of America and Golden State Finance shall be referred
to as "Secured Creditors") as well as terminating the financing statements of
the Secured Creditors, and does indeed effectively terminate any and all
financing statements of the Secured Creditors with the proper filing of Uniform
Commercial Code Form 3's, Holder will be willing to subordinate its current
position to one, but not more than one, primary lender as to an amount not in
excess of Six Hundred Thousand Dollars ($600,000).
This Note shall be governed by, and construed and enforced in accordance with,
the internal laws of the State of Illinois.
The Holder's failure to assert or any delay in asserting any right or remedy
provided herein shall not operate as a waiver of such right or remedy, nor shall
any partial exercise preclude full exercise of any such right or remedy.
This Note shall be binding upon the legal representatives, successors and
assigns of Maker and shall inure to the benefit of the legal representatives,
successors, heirs and assigns of the Holder.
ATTEST: Convention Drug Center, Inc.
__/s/ Gregg Weins_____________ By: /s/ Ronald A. Memo
----------------------------------
Name: Ronald A. Memo
-------------------------------
Its: President
---------------------------------
-2-
<PAGE>
EXHIBIT 10.11
SECURITY AGREEMENT
This 15th day of November, 1996, Convention Center Drug, Inc. (hereinafter
called "DEBTOR"), for valuable consideration, receipt whereof is hereby
acknowledged, hereby grants to OPTION CARE, INC., 100 Corporate North, Suite
212, Bannockburn, Illinois 60015 (hereinafter called "SECURED PARTY"), a
security interest in accounts receivable, contract rights, equipment, furniture,
fixtures, general intangibles, insurance proceeds, inventory, prescription
files, merchandise (including all drugs, prescription stock, proprietaries)
apparatus of every kind, nature and description, together with all accessories
thereto, now in the DEBTOR'S possession or control or hereafter to be acquired
by the DEBTOR, whether or not sold by or acquired from SECURED PARTY, all
additions and accessions thereto, substitutions therefor, as well as all
proceeds from the sale and proceeds of insurance thereon (hereinafter called
"Collateral") to secure the payment of liability and indebtedness of DEBTOR to
SECURED PARTY. This agreement shall apply to all indebtedness, obligations or
liability of DEBTOR to SECURED PARTY reflected in that certain promissory note
entered into between DEBTOR and SECURED PARTY on even date herewith plus
interest accrued at the rate of ten (10%) percent on the unpaid balance until
paid in full (all hereinafter called the "Obligations").
DEBTOR hereby warrants and covenants:
1. That except for the security interest granted hereby to DEBTOR, and
any security interest which has previously been granted to the Bank of America
and Golden State Finance (Bank of America and Golden State Finance shall
hereinafter collectively be referred to as "Other Creditors"), or in the event
that DEBTOR enters into a financing arrangement with a single replacement
creditor ("Replacement Creditor") for the purpose of repaying all indebtedness
of DEBTOR to the Other Creditors as well as terminating the financing statements
of the Other Creditors, and does indeed effectively terminate any and all
financing statements of the Other Creditors with the proper filing of Uniform
Commercial Code Form 3's, then except for that security interest granted to
Replacement Creditor in an amount not to exceed Six Hundred Thousand Dollars
($600,000) of the Collateral, DEBTOR is or will be the owner of the Collateral
free from any secured adverse lien, security interest or encumbrance; and that
DEBTOR will defend the Collateral against all claims and demands of all persons
at any time claiming the same or any interest therein;
2. In the event that the indebtedness of DEBTOR to the Replacement
Creditor or any Other Creditor exceeds $600,000 then SECURED PARTY'S interest in
the Collateral shall be deemed to be in pari passu with the interest in the
collateral of the Creditor most preferred under the law;
3. That the Collateral is not used or bought primarily for personal,
family or household purposes;
<PAGE>
4. That the Collateral will be kept at the DEBTOR'S offices located at
3900 W. Charleston Blvd., Suite Y, Las Vegas, Nevada 89102, 2851 North Tenaya,
Las Vegas, Nevada 89128, and 921 South Highway, Suite 406, Pahrump, Nevada 89048
and that there are no other places of business of DEBTOR;
5. That at the request of SECURED PARTY, DEBTOR will join with SECURED
PARTY in executing one or more Financing Statements pursuant to the Uniform
Commercial Code
in form satisfactory to SECURED PARTY and will file the same in all public
offices wherever filing is deemed by SECURED PARTY to be necessary or desirable;
6. That DEBTOR will not sell or offer to sell in bulk or otherwise
transfer the Collateral in bulk or any interest therein without the written
consent of SECURED PARTY provided, however, that DEBTOR shall be entitled to
sell the Collateral in the ordinary and usual course of business;
7. That DEBTOR will, at all times, maintain in full force and effect
insurance with respect to the Collateral against risks encompassed within the
standard policy of fire insurance with extended coverage endorsement, theft and
other risks as SECURED PARTY may require, and written by such company or
companies as may be satisfactory to SECURED PARTY, such insurance to be payable
to SECURED PARTY and DEBTOR as their interests may appear. All such policies of
insurance shall provide for not less than ten (10) days written notice of
cancellations to SECURED PARTY and, at the request of SECURED PARTY, shall be
delivered to and held by it. SECURED PARTY may act as attorney-in-fact for
DEBTOR in obtaining, adjusting, settling and cancelling such insurance and
endorsing any drafts;
8. That DEBTOR will keep the Collateral free from any adverse lien,
security interest or encumbrance and in good order and repair and will not waste
or destroy the Collateral or any part thereof; that DEBTOR will not use the
Collateral in violation of any statute or ordinance; and that SECURED PARTY may
examine and inspect the Collateral at any time, wherever located;
9. This security interest covers all property of the same character as
that covered by this agreement which the DEBTOR may hereafter acquire at any
time until termination of this security agreement;
10. (a) DEBTOR shall pay for all product ordered within thirty (30) days
following the invoice therefor from SECURED PARTY.;
(b) DEBTOR shall submit all royalty reports when due;
(c) DEBTOR shall pay each month's current royalties and
continuing/national education payments when due;
(d) Franchise Owner shall deliver to Option Care no later than
November 15, 1996 two signed UCC-1s, securing the accounts
receivable, equipment and other assets of Franchise Owner; and
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<PAGE>
(e) Franchise Owner covenants and agrees not to increase its
indebtedness (i) to any third party other than a shareholder of
the DEBTOR, (ii) other than to the Replacement Creditor and (iii)
other than normal payables or expenses accrued in the ordinary
course of business without first obtaining the written consent of
SECURED PARTY; and
11. That DEBTOR will pay promptly when due all taxes and assessments upon
the collateral or for its use or operation or upon this agreement or upon any
note or notes evidencing the Obligations.
At its option, SECURED PARTY may discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on the Collateral,
may pay for insurance on the Collateral and may pay for the maintenance and
preservation of the Collateral. DEBTOR agrees to reimburse SECURED PARTY on
demand for any payment made, or expense incurred by SECURED PARTY pursuant to
the foregoing authorization.
Until default, DEBTOR may have possession of the Collateral and use it in
any lawful manner not inconsistent with this agreement and not inconsistent with
any policy of insurance thereon.
DEBTOR shall be in default under this Agreement upon the happening of any of the
following events or conditions without opportunity to cure or notice of the
default:
(a) default in the payment or performance of any obligation, covenant or
liability contained or referred to herein or in any note evidencing the same;
(b) any warranty, representation or statement made or furnished to SECURED
PARTY by or on behalf of DEBTOR proves to have been false in any material
respect when made or furnished;
(c) any event which results in the acceleration of the maturity of the
indebtedness of DEBTOR to others under any indenture, agreement or undertaking;
(d) loss, theft, damage, destruction, unauthorized sale or encumbrance to
or of any of the Collateral, or the making of any levy, seizure or attachment
thereof or thereon; or
(e) death, dissolution, termination of existence, insolvency, business
failure, appointment of a receiver of any part of the property of, assignment
for the benefit of creditors by, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against DEBTOR.
Upon such default and at any time thereafter SECURED PARTY may declare all
Obligations secured hereby immediately due and payable and shall have all the
remedies of a secured party under the Uniform Commercial Code of the applicable
state. SECURED PARTY may require DEBTOR
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to assemble the Collateral and make it available to SECURED PARTY at a place to
be designated by SECURED PARTY which is reasonably convenient to both parties.
Unless the Collateral is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, SECURED PARTY will give
DEBTOR reasonable notice of the time and place of any public sale thereof or of
the time after which any private sale or any other intended disposition thereof
is to be made.
The requirements of reasonable notice shall be met if such notice is
mailed, postage prepaid, to the address of DEBTOR shown at the beginning of this
agreement at least ten (10) days before the time of the declaration of default
or sale of Collateral.
No waiver by SECURED PARTY of any default shall operate as a waiver of any
other default or of the same default on a future occasion.
All rights of SECURED PARTY hereunder shall inure to the benefit of its
successors and assigns, and all obligations of DEBTOR shall bind its successors
or assigns.
This agreement shall become effective when it is signed by DEBTOR.
CONVENTION CENTER DRUG, INC.
By: /s/ Ronald Memo
---------------------------------
Its: President
-------------------------------
OPTION CARE, INC.
By: /s/ Cathy Bellehumeur
---------------------------------
Cathy Bellehumeur
Its: Vice President
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EXHIBIT 10.16
EXECUTIVE SEVERANCE AGREEMENT
-----------------------------
This Executive Severance Agreement (the "Agreement") is made and entered
into as of this _28_ day of June, 1996, by and between Option Care, Inc., a
Delaware corporation (the "Company") and Erick E. Hanson, an individual residing
in the State of Illinois (the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board"), recognizes
that the possibility of a Change in Control (as hereinafter defined in Section
1.1), exists and that the possibility of or the occurrence of a Change in
Control may result in significant distractions of its key management personnel
because of the uncertainties inherent in such a situation; and
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its shareholders that the Company be able to receive
and rely upon Executive's advice without concern that the Executive might be
distracted by the personal uncertainties and risks associated with a Change in
Control; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of the occurrence of a Change in Control, and
for other good and valuable consideration, the Company and the Executive desire
to enter into this Agreement; and
WHEREAS, the Company and Executive each hereby acknowledge that this
Agreement is not intended to be, and shall not be construed as, an express or
implied contract of employment between the Company and the Executive;
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
<PAGE>
SECTION 1
DEFINITIONS
1.1 Definitions. In addition to terms which may be defined within
-----------
specific Sections of this Agreement, the following terms shall have the
following meanings when used herein with initial capital letters:
(a) "AFFILIATE" shall mean, as to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person, within the
meaning of such terms as used in Rule 405 under the Securities Act of 1933, as
amended, or any successor rule.
(b) "APPLICABLE ANNUAL EARNINGS" shall mean the sum of the Executive's
Base Salary, plus 100% of the Executive's Bonus for personal services on behalf
of the Company for the calendar year in which the Termination occurs (except
that if Executive is subject to a Constructive Termination for Good Reason
because his Base Salary or Bonus is reduced, then the current annual Base Salary
and Bonus used to determine Applicable Annual Earnings shall be the annual Base
Salary in effect or Bonus, as applicable, immediately prior to such Constructive
Termination for Good Reason). Applicable Annual Earnings shall include
Executive's current annual Base Salary and Bonus whether or not paid on a
deferred basis, including, without limitation, amounts contributed by or on
behalf of Executive under a Company sponsored plan, such as (i) a plan described
in Section 125 or 401(k) of the Internal Revenue Code of 1986, as amended, or
(ii) any "excess benefit plan" as defined in the Employee Retirement Income
Security Act of 1974, as amended. Notwithstanding the preceding provisions of
this paragraph, Applicable Annual Earnings do not include any income
attributable to stock options, stock appreciation rights, performance awards,
dividend credits, and restricted stock granted under, and dividends on shares
acquired pursuant to, any stock option plan, restricted stock plan or
performance unit plan.
(c) "BASE SALARY" shall mean the sum of the Executive's current annual
base salary, including, if applicable, any car allowance, club dues or other
payments paid to or on behalf of the Executive by the Company determined, in
each case, using the highest rate in effect up to and including the Termination
Date and whether or not actually paid.
<PAGE>
(d) "BONUS" means an amount paid to Executive on an annual basis which is
equal to forty percent (40%) of the Executive's then current Base Salary.
(e) "CAUSE" shall mean that a majority of the Company's Board of Directors
(the "Board") shall have determined that the Executive (i) willfully and
continually failed to substantially perform his duties with the Company (other
than a failure resulting from Executive's incapacity due to illness, physical or
mental disability or other incapacity) and such failure continues for a period
of thirty (30) days after the Board has given written notice to Executive
providing a reasonable description of the basis for the determination that
Executive has failed to perform his duties, (ii) has been convicted of a felony,
(iii) engaged in conduct constituting willful malfeasance in connection with his
employment which is materially and demonstrably injurious to the Company and its
subsidiaries taken as a whole. No act, or failure to act, on Executive's part,
shall be considered "willful" for purposes of (i) or (iii) above unless he has
acted or failed to act with an absence of good faith and without a reasonable
belief that his action or failure to act was in the best interests of the
Company. Notwithstanding anything contained in this Agreement to the contrary,
no failure to perform by Executive after Notice of Termination (as herein
defined) is given by Executive shall constitute Cause for purposes of this
Agreement. No determination of Cause shall be final until the Executive and his
legal advisors are given an opportunity to meet with the Board, contest the
basis for termination, and demonstrate that Executive's continued employment is
in the best interests of the Company.
(f) "CONSTRUCTIVE TERMINATION FOR GOOD REASON" shall mean a termination of
employment with the Company by the Executive pursuant to the provisions of
Section 2.2.
(g) CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred as of the date that one or more of the
following occurs:
(i) Individuals who, as of the date hereof, constitute the entire
Board of Directors of the Company ("Incumbent Directors") cease for any
reason to constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date hereof whose
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<PAGE>
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the then Incumbent Directors
shall be considered as though such individual was an Incumbent Director,
but excluding, for this purpose any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest, as such terms are used in Rule 14a-11 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or other
actual or threatened solicitation of proxies or consents by or on behalf of
any Person other than the Board; provided, further, that in the event
Kapoor (as herein defined) at any time determines to achieve representation
on the Company's Board of Directors approximately equal to his then
ownership percentage of the Company's common stock, his implementation of
such determination through the election of Kapoor Affiliates as directors
of the Company shall not be deemed to be a Change in Control and such
Kapoor Affiliates shall constitute Incumbent Directors;
(ii) The stockholders of the Company shall approve (A) any merger,
consolidation or recapitalization of the Company (or, if the capital stock
of the Company is affected, any subsidiary of the Company), or any sale,
lease, or other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all or
substantially all of the assets of the Company (each of the foregoing being
an "Acquisition Transaction") where (1) the stockholders of the Company
immediately prior to such Acquisition Transaction would not immediately
after such Acquisition Transaction beneficially own, directly or
indirectly, shares or other ownership interests representing in the
aggregate eighty percent (80%) or more of (a) the then outstanding common
stock or other equity interests of the corporation or other entity
surviving or resulting from such merger, consolidation or recapitalization
or acquiring such assets of the Company, as the case may be (the "Surviving
Entity") (or of its ultimate parent corporation or other entity, if any),
and (b) the Combined Voting Power (as herein defined) of the then
outstanding Voting Securities (as herein defined) of the Surviving Entity
(or of its ultimate parent corporation or other entity, if any) or (2) the
Incumbent Directors at the time of the initial approval of such Acquisition
Transaction would not immediately after such
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<PAGE>
Acquisition Transaction constitute a majority of the Board of Directors, or
similar managing group, of the Surviving Entity (or of its ultimate parent
corporation or other entity, if any), or (B) any plan or proposal for the
liquidation or dissolution of the Company; or
(iii) Any Person, other than Kapoor, shall be or become the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of securities of the Company representing in
the aggregate more than fifty percent (50%) of either (A) the then
outstanding shares of common stock of the Company ("Common Shares") or (B)
the Combined Voting Power of all then outstanding Voting Securities of the
Company.
(h) "COMBINED VOTING POWER" shall mean the aggregate votes entitled to be
cast generally in the election of the Board of Directors, or similar managing
group, of a corporation or other entity by holders of then outstanding Voting
Securities of such corporation or other entity.
(i) "DISABILITY" shall mean (i) the inability of Executive for a period of
six consecutive months to perform his duties, because of illness, physical or
mental disability or other incapacity, or (ii) at such earlier time as Executive
submits satisfactory medical evidence that he has an illness, physical or mental
disability or other incapacity which is expected to prevent him from returning
to the performance of his work duties for six months or longer.
(j) "EMPLOYEE BENEFITS" means the perquisites, benefits and service credit
for benefits as provided under any and all employee retirement income and
welfare benefit policies, plans, programs or arrangements in which the Executive
is entitled to participate which provide group or other life, health,
medical/hospital, or other insurance (whether funded by actual insurance or
self-insured by the Company), disability, salary continuation, expense
reimbursement, and other similar employee benefit policies, plans, programs or
arrangements that may now exist or any equivalent successor policies, plans,
programs or arrangements that may be adopted hereafter by the Company, providing
perquisites, benefits and service credit for benefits at least as great in the
aggregate as are payable thereunder prior to a Change in Control; provided,
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<PAGE>
however, that the term "Employee Benefits" shall not include any stock option,
stock purchase, stock appreciation, savings, pension, supplemental executive
retirement or other retirement income or welfare benefit, deferred compensation,
incentive compensation, or similar plans.
(k) "KAPOOR" shall mean John N. Kapoor, a resident of the State of
Illinois or any Person who or which is an Affiliate of Kapoor.
(l) "NOTICE OF TERMINATION" shall mean a notice which indicates the
specific termination provisions in this Agreement relied upon as a basis for
Termination. For purposes of this Agreement, no purported Termination of
employment shall be effective without such Notice of Termination.
(m) "PERSON" shall mean any individual, entity (including, without
limitation, any corporation, partnership, Company, joint venture, association or
governmental body) or group (as defined in Sections 14(d)(3) or 15(d)(2) of the
Exchange Act and the rules and regulations thereunder); provided, however, that
Person shall not include the Company, any of its subsidiaries, any employee
benefit plan of the Company or any of its majority-owned subsidiaries or any
entity organized, appointed or established by the Company or such subsidiaries
for or pursuant to the terms of any such plan.
(n) "SEVERANCE BENEFITS" shall mean the compensation and other benefits
set forth in Sections 3 and 5, as applicable.
(o) "SEVERANCE PERIOD" shall mean a period of twelve (12) months
commencing with the date of consummation of a Change in Control, or, if
applicable, the period prior to a Change of Control as provided in Section 7.2.
(p) "TERMINATION" shall have the meaning provided in Section 3.1.
(q) "TERMINATION DATE" shall mean, in the case of the Executive's death,
his date of death, in the case of the Executive voluntarily terminating his
employment with the Company other than for Constructive Termination for Good
Reason, his last day of employment with the Company, and in all other cases, the
date specified in the Notice of Termination subject to the following:
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<PAGE>
(i) If the Executive's employment is terminated by the Company, the
date specified in the Notice of Termination shall be at least thirty (30)
days after the date the Notice of Termination is given to the Executive,
provided, however, that in the case of Disability, the Executive shall not
-------- -------
have returned to the full-time performance of his duties during such period
of at least thirty (30) days; or
(ii) If the Executive's employment is terminated for Constructive
Discharge for Good Reason, the date specified in the Notice of Termination
shall not be more than sixty (60) days after the date the Notice of
Termination is given to the Company.
(r) "VOTING SECURITIES" shall mean all securities of a corporation or
other entity having the right under ordinary circumstances to vote in an
election of the Board of Directors, or similar managing group, of such
corporation or other entity.
SECTION 2
TERMINATION FOLLOWING A CHANGE IN CONTROL
2.1. Termination by the Company. On or after the occurrence of a Change in
--------------------------
Control, if the Executive's employment is terminated by the Company during the
Severance Period for any reason other than (i) the Executive's death or (ii) for
Cause, the Executive shall be entitled to the Severance Benefits as provided by
Sections 3 and 5, as applicable.
2.2 Constructive Termination for Good Reason. Upon the occurrence during
----------------------------------------
the Severance Period of one or more of the following events (regardless of
whether any other reason, other than Cause, for termination exists or has
occurred, including, without limitation, the Executive's acceptance and/or
commencement of other employment), the Executive may, within ninety (90) days
after the occurrence of any of the following events, terminate his employment
with the Company and become entitled to the Severance Benefits as provided by
Sections 3 and 5, as applicable (the election of the Executive to terminate his
employment under this Section 2.2 shall constitute "Constructive Termination for
Good Reason"):
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<PAGE>
(a) failure to maintain the Executive in the office or the position,
or a substantially equivalent office or position (other than the office of
director of the Company), of or with the Company which the Executive held
immediately prior to a Change in Control;
(b) a significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the
position with the Company which the Executive held immediately prior to the
Change in Control (other than service as a director), a reduction in the
aggregate of the Executive's Base Salary and Bonus received from the
Company, or the termination or denial of the Executive's rights to Employee
Benefits or a reduction in the scope or value thereof, except for any such
termination or denial, or reduction in the scope or value, of any Employee
Benefits applicable generally to all recipients of or participants in such
Employee Benefits;
(c) the determination by the Executive (which determination will be
conclusive and binding upon the parties hereto provided it has been made in
good faith and in all events will be presumed to have been made in good
faith unless otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred following a Change in
Control, including without limitation a change in the scope of the business
or other activities for which the Executive was responsible immediately
prior to the Change in Control, which has rendered the Executive
substantially unable to carry out, or has caused the Executive to suffer a
substantial reduction in, any of the authorities, powers, functions,
responsibilities, or duties attached to the position held by the Executive
immediately prior to the Change in Control (other than as a director of the
Company), which situation is not remedied within five (5) calendar days
after written notice to the Company from the Executive of such
determination;
(d) the liquidation, dissolution, merger, consolidation, or
reorganization of the Company or transfer of all or substantially all of
its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or otherwise)
to which
8
<PAGE>
all or substantially all of the Company's business and/or assets have been
transferred (directly or by operation of law) assumes all duties and
obligations of the Company under this Agreement;
(e) The Company relocates its principal executive offices, or
requires the Executive to have the Executive's principal location of work
changed, to any location which is in excess of 25 miles from the location
thereof immediately prior to the Change in Control, or requires the
Executive to travel away from the Executive's office in the course of
discharging the Executive's responsibilities or duties hereunder at least
20% more (in terms of aggregate days in any calendar year or in any
calendar quarter when annualized for purposes of comparison to any prior
year) than was required of the Executive in any of the two full years, or
such shorter period of time as the Executive may have held his position
with the Company, immediately prior to the Change in Control without, in
either case, the Executive's prior written consent; and/or
(f) without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the Company or any successor thereto.
2.3. Executive's Other Rights. A termination by the Company pursuant to
------------------------
Section 2.1 or by the Executive pursuant to Section 2.2 will not affect any
rights which the Executive may have pursuant to any other agreement, policy,
plan, program or arrangement of the Company providing Employee Benefits or any
rights attributable to stock options, stock appreciation rights, performance
awards, dividend credits and restricted stock, if any, granted to the Executive
under, and dividends on shares acquired pursuant to, any stock option plan,
restricted stock plan, performance unit plan, or other similar plan, which
rights will be governed by the terms of such plans.
SECTION 3
RIGHTS AND BENEFITS UPON TERMINATION
3.1. Termination Payments. In the event Executive shall become entitled to
--------------------
receive the rights and benefits described in
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this Section as a result of the termination by the Company under Section 2.1 or
a Constructive Termination for Good Reason under Section 2.2 within the
Severance Period (hereinafter collectively referred to as a "Termination"), the
Company agrees to provide or cause to be provided to Executive the following
rights and benefits:
(a) The Company shall pay to the Executive in a lump sum, by certified
check, within ten (10) "business days" (which for purposes of this Agreement
shall mean any day other than Saturday, Sunday, or public holiday under the laws
of the State of Illinois) after the Termination Date, or, at the election of
Executive, in twelve (12) equal monthly installments, an amount equal to the
aggregate of the following:
i. The sum of:
(i) The Executive's proportionate amount of the Base Salary
through the Termination Date, to the extent not theretofore paid; plus
(ii) Any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid.
ii. An amount equal to two hundred percent (200%) of the Executive's
Applicable Annual Earnings.
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(b) For the balance of the Severance Period, but in no event for less than
one year, the Company will arrange to provide the Executive with all Employee
Benefits substantially similar to those which the Executive was receiving or
entitled to receive immediately prior to the Termination Date, except that the
level of any such Employee Benefits to be provided to the Executive may be
reduced in the event of a corresponding reduction applicable generally to all
recipients of or participants in such Employee Benefits, and the Severance
Period will be considered service with the Company for the purpose of
determining service credits and benefits due and payable to the Executive under
the Company's retirement income, supplemental executive retirement, and other
benefit plans of the Company applicable to the Executive, the Executive's
dependents, or the Executive's beneficiaries immediately prior to the
Termination Date. If and to the extent that any benefit described in the
immediately preceding sentence is not or cannot be paid or provided under any
policy, plan program or arrangement of the Company, then the Company will itself
pay or provide for the payment of such Employee Benefits to the Executive, and,
if applicable, the Executive's dependents and Beneficiaries.
3.2 Bonus Payment. In the event (a) of a Change of Control shall be
-------------
consummated during calendar year 1996, or (b) a Termination in 1996 during the
Severance Period or in 1997 but prior to payment of the Bonus for calendar year
1996, then, within thirty (30) days of any such event, the Company shall pay to
Executive one hundred percent (100%) of the Bonus which would be payable to
Executive for 1996, which Bonus the Company and Executive agree shall be equal
to $90,000.
SECTION 4
MITIGATION
4.1 No Duty to Mitigate. In no event shall the Executive be obligated to
-------------------
seek other employment or take any other action by way of mitigation of the
amount payable to the Executive under any of the provisions of this agreement
and such amounts shall not be reduced whether or not the Executive obtains other
employment.
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SECTION 5
ADDITIONAL PAYMENTS
In addition to the amounts payable to the Executive pursuant to Section 3,
the Company shall make the following payments to the Executive to the extent
applicable:
5.1. Change of Control Bonus. In the event a Change of Control is
-----------------------
consummated while this Agreement is in effect (the "Transaction"), the Company
agrees to pay to Executive within thirty (30) days of the consummation of the
Transaction, the sum of One Hundred Fifty Thousand Dollars ($150,000) in partial
recognition of the Executive's efforts to bring about the Transaction and of the
value added to the Company during the Executive's tenure with the Company.
5.2. Excise Tax Payment.
------------------
(a) Notwithstanding anything contained in this Agreement to the
contrary, in the event that any payment or distribution to or for the benefit of
the Executive, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise in connection with, or arising out
of, his employment with the Company (a "Payment" or "Payments"), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any interest and penalties, are collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a "Gross-
Up Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) a determination shall be made as to whether and when a Gross-Up
Payment is required pursuant to this Section 5.2(b) and the amount of such Gross
Up Payment, such determination to be made within fifteen (15) business days of
the Termination Date, or such other time as requested by the Company or by the
Executive (provided the Executive reasonably believes that any of the Payments
may be subject to the Excise Tax). Such determination
12
<PAGE>
shall be made by a national independent accounting firm selected by the
Executive (the "Accounting Firm"). All fees, costs and expenses (including, but
not limited to, the cost of retaining experts) of the Accounting Firm shall be
borne by the Company and the Company shall pay such fees, costs and expenses as
they become due. The Accounting Firm shall provide detailed supporting
calculations, acceptable to the Executive, both to the Company and the
Executive. The Gross-Up Payment, if any, as determined pursuant to this Section
5.2 shall be paid by the Company to the Executive within five (5) business days
of the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive with respect to a
Payment or Payments, it shall furnish the Executive with an unqualified opinion
that no Excise Tax will be imposed with respect to any such Payment or Payments.
Any such initial determination by the Accounting Firm of the Gross-Up Payment
shall be binding upon the Company and the Executive subject to the application
of Section 5.2(c).
(c) As a result of the uncertainty on the application of Sections 4999 and
280G of the Code, it is possible that a Gross-Up Payment (or a portion thereof)
will be paid which should not have been paid (an "Overpayment") or a Gross-Up
Payment (or a portion thereof) which should have been paid will not have been
paid (an "Underpayment"). An Underpayment shall be deemed to have occurred upon
notice (formal or informal) to the Executive from any governmental taxing
authority that the tax liability of the Executive (whether in respect of the
then current taxable year of the Executive or in respect of any prior taxable
year of the Executive) may be increased by reason of the imposition of the
Excise Tax on a Payment or Payments with respect to which the Company has failed
to make a sufficient Gross-Up Payment. An Overpayment shall be deemed to have
occurred upon a "Final Determination" (as hereinafter defined) that the Excise
Tax should not be imposed upon a Payment or Payments with respect to which the
Executive has previously received a Gross-Up Payment. A Final Determination
shall be deemed to have occurred when the Executive has received from the
applicable governmental taxing authority a refund of taxes or other reduction in
his tax liability by reason of the Overpayment and upon either (i) the date of
determination as made by, or an agreement is entered into with, the governmental
taxing authority which finally and conclusively binds that Executive and such
taxing authority, or in the event that a claim
13
<PAGE>
is brought before a court of competent jurisdiction, the date upon which a final
determination has been made by such court and either all appeals have been taken
and finally resolved or the time for all appeals has expired or (ii) the
expiration of the statute of limitations with respect to the Executive's
applicable tax return. If an Underpayment occurs, the Executive shall promptly
notify the Company and the Company shall pay to the Executive at least five (5)
business days prior to the date on which the applicable governmental taxing
authority has requested payment, an additional Gross-up Payment equal to the
amount of the Underpayment plus any interest and penalties imposed on the
Underpayment. If an Overpayment occurs, the amount of the Overpayment shall be
treated as a loan by the Company to the Executive and the Executive shall,
within ten (10) business days of the occurrence of such Overpayment, pay to the
Company the amount of the Overpayment plus interest at an annual rate equal to
the rate provided for in Section 1274(b)(2)(B) of the Code from the date the
Gross-Up Payment (to which the Overpayment relates) was paid to the Executive.
(d) Notwithstanding anything contained in this Agreement to the contrary,
in the event it is determined that an Excise Tax will be imposed on any Payment
or Payments, the Company shall pay to the applicable governmental taxing
authorities as Excise Tax withholding, the amount of the Excise Tax that the
Company has actually withhold from the Payment or Payments.
SECTION 6
LEGAL FEES AND EXPENSES
6.1. Retention of Counsel. It is the intent of the Company that the
--------------------
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of the Executive's
rights to compensation upon a Termination by litigation or otherwise because the
cost and expense thereof would substantially detract from the benefits intended
to be extended to the Executive hereunder. Accordingly, if it should appear to
the Executive that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
or threatens to take any action to declare the Agreement to pay Executive
compensation upon a Termination void or unenforceable, or institutes any
litigation
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<PAGE>
or other action or proceeding designed to deny, or to recover from, the
Executive the benefits provided or intended to be provided to the Executive
hereunder, the Company irrevocably authorizes the Executive from time to time to
retain counsel of the Executive's choice, at the expense of the Company as
hereinafter provided, to advise and represent the Executive in connection with
any such interpretation, enforcement or defense, including without limitation
the initiation or defense of any litigation or other legal action, whether by or
against the Company or any Company director, officer, stockholder, or other
person affiliated with the Company, in any jurisdiction.
6.2. Waiver of Conflict. Notwithstanding any existing or prior attorney-
------------------
client relationship between the Company and such counsel, the Company
irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship will exist between the
Executive and such counsel.
6.3. Reimbursement of Expenses of Counsel. Without regard to whether the
------------------------------------
Executive prevails in whole or in part, in connection with any of the foregoing,
the Company will pay and be solely financially responsible for any and all
attorneys' and related fees and expenses incurred by the Executive in connection
with any of the matters set forth in this Section 6.
SECTION 7
EMPLOYMENT RIGHTS;
TERMINATION PRIOR TO CHANGE IN CONTROL
7.1. No Right to Employment. Nothing expressed or implied in this
----------------------
Agreement will create any right or duty on the part of the Company or the
Executive to have the Executive remain in the employ of the Company prior to or
following any Change in Control, it being acknowledged and agreed by and between
the Company and the Executive that the Executive's employment with the Company
is and shall continue to be terminable "at will" by either party.
7.2. Termination Prior to Change in Control. Any termination by the
--------------------------------------
Company of the employment of the Executive, other than for death or Cause, or
the removal of the Executive from any office or
15
<PAGE>
position in the Company, other than for Cause, following the commencement of any
discussion with a third person that results in a Change in Control within 90
calendar days after such termination or removal shall be deemed to be a
Termination of the Executive's employment after a Change in Control for purposes
of this Agreement.
SECTION 8
TERM
8.1. Term. The term of this Agreement shall be deemed to commence and be
----
effective as of the date of this Agreement and shall, subject to Section 8.2,
continue to and including July 1, 1997. At any time within sixty (60) days of
the end of such term or any renewal terms, the parties hereto may renew this
Agreement in writing for additional terms of one year, or such other period as
the parties may agree.
8.2. Termination for Death, Disability or Outside of the Severance Period.
--------------------------------------------------------------------
Except with respect to the provisions of this Agreement that provide for
payments to be made to Executive after a Termination, or that impose obligations
upon the Company or grant rights that may be exercised by Executive after a
Termination, this Agreement shall terminate automatically without further action
by either of the parties hereto upon the death or Disability of Executive or the
termination of Executive's employment with the Company for any reason or no
reason that do not occur in the Severance Period, in accordance with Executive's
status as an employee at will.
SECTION 9
MISCELLANEOUS
9.1. Representation by Executive. Executive hereby represents and warrants
---------------------------
to the Company that there are no agreements or understandings that would make
unlawful his execution or delivery of this Agreement.
9.2. Notices. All notices, renewals and other communications required or
-------
permitted under this Agreement must be in writing and shall be deemed to have
been given if delivered or mailed, by certified mail, first class postage
prepaid, to the parties at the
16
<PAGE>
addresses set forth beneath their respective signatures to this Agreement, as
the same may be changed in writing form time to time.
9.3. Entire Agreement. The parties expressly agree that this Agreement is
----------------
contractual in nature and not a mere recital, and that it contains all the terms
and conditions of the agreement between the parties with respect to the matters
set forth herein. All prior negotiations, agreements, arrangements,
understandings and statements between the parties relating to the matters set
forth herein that have occurred at any time or contemporaneously with the
execution of this Agreement are superseded and merged into this completely
integrated Agreement. The Recitals set forth above shall be deemed to be part of
this Agreement.
9.4. Governing Law. This Agreement was negotiated and is performable in
-------------
Lake County, Illinois and shall be governed by the laws of the State of Illinois
without giving effect to principles of conflicts of law.
9.5. Severability. If any provision of the Agreement is held to be
------------
illegal, invalid or unenforceable under any present or future law, such
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom, and in lieu of
such provision, there shall be added automatically as a part of this Agreement,
a legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible, and the Company and
Executive hereby request the court or any arbitrator to Company and Executive
hereby request the court or any arbitrator to whom disputes relating to this
Agreement are submitted to reform the otherwise unenforceable covenant in
accordance with the proceeding provision.
9.6. Counterparts. This Agreement may be executed in multiple identical
------------
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute but one and the same instrument. In making proof of
this Agreement, it shall be necessary to produce or account for more than one
counterpart executed by the party sought to be charged with performance
hereunder.
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<PAGE>
9.7. Assignment and Delegation. All rights, covenants and agreements of
-------------------------
the Company set forth in this Agreement shall unless otherwise provided herein,
be binding upon and inure to the benefit of the Company's respective successors
and assigns. All rights, covenants and agreements of Executive set forth in this
Agreement shall, unless otherwise provided herein, not be assignable by
Executive, and shall be considered personal to Executive for all purposes.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first set forth above.
OPTION CARE, INC.
By: /s/ John Kapoor
-------------------------------
Title: Chairman of the Board
----------------------------
Notice Address:
100 Corporate North
Suite 212
Bannockburn, Illinois 60015
/s/ Erick E. Hanson
----------------------------------
ERICK E. HANSON
Notice Address:
1330 St. William Drive
Libertyville, Illinois 60048
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<PAGE>
EXHIBIT 10.17
EXECUTIVE SEVERANCE AGREEMENT
-----------------------------
This Executive Severance Agreement (the "Agreement") is made and entered
into as of this 28 day of June, 1996, by and between Option Care, Inc., a
Delaware corporation (the "Company") and ___J. Jeffery Fox__________________, an
individual residing in the State of Illinois (the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board"), recognizes
that the possibility of a Change in Control (as hereinafter defined in Section
1.1), exists and that the possibility of or the occurrence of a Change in
Control may result in significant distractions of its key management personnel
because of the uncertainties inherent in such a situation; and
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its shareholders that the Company be able to receive
and rely upon Executive's advice without concern that the Executive might be
distracted by the personal uncertainties and risks associated with a Change in
Control; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of the occurrence of a Change in Control, and
for other good and valuable consideration, the Company and the Executive desire
to enter into this Agreement; and
WHEREAS, the Company and Executive each hereby acknowledge that this
Agreement is not intended to be, and shall not be construed as, an express or
implied contract of employment between the Company and the Executive;
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
<PAGE>
SECTION 1
DEFINITIONS
1.1 Definitions. In addition to terms which may be defined within
-----------
specific Sections of this Agreement, the following terms shall have the
following meanings when used herein with initial capital letters:
(a) "AFFILIATE" shall mean, as to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person, within the
meaning of such terms as used in Rule 405 under the Securities Act of 1933, as
amended, or any successor rule.
(b) "BASE SALARY" shall mean the sum of the Executive's current annual
base salary, including, if applicable, any car allowance, club dues or other
payments paid to or on behalf of the Executive by the Company determined, in
each case, using the highest rate in effect up to and including the Termination
Date and whether or not actually paid.
(c) "BONUS" means an amount paid to Executive on an annual basis which is
equal to thirty percent (30%) of the Executive's then current Base Salary.
(d) "CAUSE" shall mean that a majority of the Company's Board of Directors
(the "Board") shall have determined that the Executive (i) willfully and
continually failed to substantially perform his duties with the Company (other
than a failure resulting from Executive's incapacity due to illness, physical or
mental disability or other incapacity) and such failure continues for a period
of thirty (30) days after the Board has given written notice to Executive
providing a reasonable description of the basis for the determination that
Executive has failed to perform his duties, (ii) has been convicted of a felony,
(iii) engaged in conduct constituting willful malfeasance in connection with his
employment which is materially and demonstrably injurious to the Company and its
subsidiaries taken as a whole. No act, or failure to act, on Executive's part,
shall be considered "willful" for purposes of (i) or (iii) above unless he has
acted or failed to act with an absence of good faith and without a reasonable
belief that his action or failure to act was in the best interests of the
Company. Notwithstanding anything contained in this Agreement to the contrary,
no failure to perform by Executive after Notice of
<PAGE>
Termination (as herein defined) is given by Executive shall constitute Cause for
purposes of this Agreement. No determination of Cause shall be final until the
Executive and his legal advisors are given an opportunity to meet with the
Board, contest the basis for termination, and demonstrate that Executive's
continued employment is in the best interests of the Company.
(e) "CONSTRUCTIVE TERMINATION FOR GOOD REASON" shall mean a termination of
employment with the Company by the Executive pursuant to the provisions of
Section 2.2.
(f) CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred as of the date that one or more of the
following occurs:
(i) Individuals who, as of the date hereof, constitute the entire
Board of Directors of the Company ("Incumbent Directors") cease for any
reason to constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the then Incumbent Directors
shall be considered as though such individual was an Incumbent Director,
but excluding, for this purpose any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest, as such terms are used in Rule 14a-11 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or other
actual or threatened solicitation of proxies or consents by or on behalf of
any Person other than the Board; provided, further, that in the event
Kapoor (as herein defined) at any time determines to achieve representation
on the Company's Board of Directors approximately equal to his then
ownership percentage of the Company's common stock, his implementation of
such determination through the election of Kapoor Affiliates as directors
of the Company shall not be deemed to be a Change in Control and such
Kapoor Affiliates shall constitute Incumbent Directors;
(ii) The stockholders of the Company shall approve (A) any merger,
consolidation or recapitalization of the Company (or, if the capital stock
of the Company is affected, any subsidiary of the Company), or any sale,
lease, or other
3
<PAGE>
transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company (each of the foregoing being an "Acquisition
Transaction") where (1) the stockholders of the Company immediately prior
to such Acquisition Transaction would not immediately after such
Acquisition Transaction beneficially own, directly or indirectly, shares or
other ownership interests representing in the aggregate eighty percent
(80%) or more of (a) the then outstanding common stock or other equity
interests of the corporation or other entity surviving or resulting from
such merger, consolidation or recapitalization or acquiring such assets of
the Company, as the case may be (the "Surviving Entity") (or of its
ultimate parent corporation or other entity, if any), and (b) the Combined
Voting Power (as herein defined) of the then outstanding Voting Securities
(as herein defined) of the Surviving Entity (or of its ultimate parent
corporation or other entity, if any) or (2) the Incumbent Directors at the
time of the initial approval of such Acquisition Transaction would not
immediately after such Acquisition Transaction constitute a majority of the
Board of Directors, or similar managing group, of the Surviving Entity (or
of its ultimate parent corporation or other entity, if any), or (B) any
plan or proposal for the liquidation or dissolution of the Company; or
(iii) Any Person, other than Kapoor, shall be or become the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of securities of the Company representing in
the aggregate more than fifty percent (50%) of either (A) the then
outstanding shares of common stock of the Company ("Common Shares") or (B)
the Combined Voting Power of all then outstanding Voting Securities of the
Company.
(g) "COMBINED VOTING POWER" shall mean the aggregate votes entitled to be
cast generally in the election of the Board of Directors, or similar managing
group, of a corporation or other entity by holders of then outstanding Voting
Securities of such corporation or other entity.
(h) "DISABILITY" shall mean (i) the inability of Executive for a period of
six consecutive months to perform his duties,
4
<PAGE>
because of illness, physical or mental disability or other incapacity, or (ii)
at such earlier time as Executive submits satisfactory medical evidence that he
has an illness, physical or mental disability or other incapacity which is
expected to prevent him from returning to the performance of his work duties for
six months or longer.
(i) "EMPLOYEE BENEFITS" means the perquisites, benefits and service credit
for benefits as provided under any and all employee retirement income and
welfare benefit policies, plans, programs or arrangements in which the Executive
is entitled to participate which provide group or other life, health,
medical/hospital, or other insurance (whether funded by actual insurance or
self-insured by the Company), disability, salary continuation, expense
reimbursement, and other similar employee benefit policies, plans, programs or
arrangements that may now exist or any equivalent successor policies, plans,
programs or arrangements that may be adopted hereafter by the Company, providing
perquisites, benefits and service credit for benefits at least as great in the
aggregate as are payable thereunder prior to a Change in Control; provided,
however, that the term "Employee Benefits" shall not include any stock option,
stock purchase, stock appreciation, savings, pension, supplemental executive
retirement or other retirement income or welfare benefit, deferred compensation,
incentive compensation, or similar plans.
(j) "KAPOOR" shall mean John N. Kapoor, a resident of the State of
Illinois or any Person who or which is an Affiliate of Kapoor.
(k) "NOTICE OF TERMINATION" shall mean a notice which indicates the
specific termination provisions in this Agreement relied upon as a basis for
Termination. For purposes of this Agreement, no purported Termination of
employment shall be effective without such Notice of Termination.
(l) "PERSON" shall mean any individual, entity (including, without
limitation, any corporation, partnership, Company, joint venture, association or
governmental body) or group (as defined in Sections 14(d)(3) or 15(d)(2) of the
Exchange Act and the rules and regulations thereunder); provided, however, that
Person shall not include the Company, any of its subsidiaries, any employee
benefit plan of the Company or any of its majority-owned subsidiaries or
5
<PAGE>
any entity organized, appointed or established by the Company or such
subsidiaries for or pursuant to the terms of any such plan.
(m) "SEVERANCE BENEFITS" shall mean the compensation and other benefits
set forth in Sections 3 and 5, as applicable.
(n) "SEVERANCE PERIOD" shall mean a period of twelve (12) months
commencing with the date of consummation of a Change in Control, or, if
applicable, the period prior to a Change of Control as provided in Section 7.2.
(0) "TERMINATION" shall have the meaning provided in Section 3.1.
(p) "TERMINATION DATE" shall mean, in the case of the Executive's death,
his date of death, in the case of the Executive voluntarily terminating his
employment with the Company other than for Constructive Termination for Good
Reason, his last day of employment with the Company, and in all other cases, the
date specified in the Notice of Termination subject to the following:
(i) If the Executive's employment is terminated by the Company, the
date specified in the Notice of Termination shall be at least thirty (30)
days after the date the Notice of Termination is given to the Executive,
provided, however, that in the case of Disability, the Executive shall not
-------- -------
have returned to the full-time performance of his duties during such period
of at least thirty (30) days; or
(ii) If the Executive's employment is terminated for Constructive
Discharge for Good Reason, the date specified in the Notice of Termination
shall not be more than sixty (60) days after the date the Notice of
Termination is given to the Company.
(q) "VOTING SECURITIES" shall mean all securities of a corporation or other
entity having the right under ordinary circumstances to vote in an election of
the Board of Directors, or similar managing group, of such corporation or other
entity.
6
<PAGE>
SECTION 2
TERMINATION FOLLOWING A CHANGE IN CONTROL
2.1. Termination by the Company. On or after the occurrence of a Change in
--------------------------
Control, if the Executive's employment is terminated by the Company during the
Severance Period for any reason other than (i) the Executive's death or (ii) for
Cause, the Executive shall be entitled to the Severance Benefits as provided by
Sections 3 and 5, as applicable.
2.2 Constructive Termination for Good Reason. Upon the occurrence during
----------------------------------------
the Severance Period of one or more of the following events (regardless of
whether any other reason, other than Cause, for termination exists or has
occurred, including, without limitation, the Executive's acceptance and/or
commencement of other employment), the Executive may, within ninety (90) days
after the occurrence of any of the following events, terminate his employment
with the Company and become entitled to the Severance Benefits as provided by
Sections 3 and 5, as applicable (the election of the Executive to terminate his
employment under this Section 2.2 shall constitute "Constructive Termination for
Good Reason"):
(a) failure to maintain the Executive in the office or the position,
or a substantially equivalent office or position, of or with the Company
which the Executive held immediately prior to a Change in Control;
(b) a significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the
position with the Company which the Executive held immediately prior to the
Change in Control, a reduction in the aggregate of the Executive's Base
Salary and Bonus received from the Company, or the termination or denial of
the Executive's rights to Employee Benefits or a reduction in the scope or
value thereof, except for any such termination or denial, or reduction in
the scope or value, of any Employee Benefits applicable generally to all
recipients of or participants in such Employee Benefits;
(c) the determination by the Executive (which determination will be
conclusive and binding upon the parties hereto provided it has been made in
good faith and in all
7
<PAGE>
events will be presumed to have been made in good faith unless otherwise
shown by the Company by clear and convincing evidence) that a change in
circumstances has occurred following a Change in Control, including without
limitation a change in the scope of the business or other activities for
which the Executive was responsible immediately prior to the Change in
Control, which has rendered the Executive substantially unable to carry
out, or has caused the Executive to suffer a substantial reduction in, any
of the authorities, powers, functions, responsibilities, or duties attached
to the position held by the Executive immediately prior to the Change in
Control, which situation is not remedied within five (5) calendar days
after written notice to the Company from the Executive of such
determination;
(d) the liquidation, dissolution, merger, consolidation, or
reorganization of the Company or transfer of all or substantially all of
its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or otherwise)
to which all or substantially all of the Company's business and/or assets
have been transferred (directly or by operation of law) assumes all duties
and obligations of the Company under this Agreement;
(e) The Company relocates its principal executive offices, or requires
the Executive to have the Executive's principal location of work changed,
to any location which is in excess of 25 miles from the location thereof
immediately prior to the Change in Control, or requires the Executive to
travel away from the Executive's office in the course of discharging the
Executive's responsibilities or duties hereunder at least 20% more (in
terms of aggregate days in any calendar year or in any calendar quarter
when annualized for purposes of comparison to any prior year) than was
required of the Executive in any of the two full years, or such shorter
period of time as the Executive may have held his position with the
Company, immediately prior to the Change in Control without, in either
case, the Executive's prior written consent; and/or
(f) without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the
8
<PAGE>
Company or any successor thereto.
2.3. Executive's Other Rights. A termination by the Company pursuant to
------------------------
Section 2.1 or by the Executive pursuant to Section 2.2 will not affect any
rights which the Executive may have pursuant to any other agreement, policy,
plan, program or arrangement of the Company providing Employee Benefits or any
rights attributable to stock options, stock appreciation rights, performance
awards, dividend credits and restricted stock, if any, granted to the Executive
under, and dividends on shares acquired pursuant to, any stock option plan,
restricted stock plan, performance unit plan, or other similar plan, which
rights will be governed by the terms of such plans.
SECTION 3
RIGHTS AND BENEFITS UPON TERMINATION
3.1. Termination Payments. In the event Executive shall become entitled to
--------------------
receive the rights and benefits described in this Section as a result of the
termination by the Company under Section 2.1 or a Constructive Termination for
Good Reason under Section 2.2 within the Severance Period (hereinafter
collectively referred to as a "Termination"), the Company agrees to provide or
cause to be provided to Executive the following rights and benefits:
(a) The Company shall pay to the Executive in a lump sum, by certified
check, within ten (10) "business days" (which for purposes of this Agreement
shall mean any day other than Saturday, Sunday or public holiday under the laws
of the State of Illinois) after the Termination Date, or, at the election of
Executive, in twelve (12) equal monthly installments, an amount equal to the
aggregate of the following:
i. The sum of:
(i) The Executive's proportionate amount of the Base Salary
through the Termination Date, to the extent not theretofore paid; plus
(ii) Any compensation previously deferred by the Executive
(together with any accrued interest or earnings
9
<PAGE>
thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid.
ii. An amount equal to one hundred percent (100%) of the Executive's
Base Salary.
(b) For the balance of the Severance Period, but in no event for less than
one year, the Company will arrange to provide the Executive with all Employee
Benefits substantially similar to those which the Executive was receiving or
entitled to receive immediately prior to the Termination Date, except that the
level of any such Employee Benefits to be provided to the Executive may be
reduced in the event of a corresponding reduction applicable generally to all
recipients of or participants in such Employee Benefits, and the Severance
Period will be considered service with the Company for the purpose of
determining service credits and benefits due and payable to the Executive under
the Company's retirement income, supplemental executive retirement, and other
benefit plans of the Company applicable to the Executive, the Executive's
dependents, or the Executive's beneficiaries immediately prior to the
Termination Date. If and to the extent that any benefit described in the
immediately preceding sentence is not or cannot be paid or provided under any
policy, plan program or arrangement of the Company, then the Company will itself
pay or provide for the payment of such Employee Benefits to the Executive, and,
if applicable, the Executive's dependents and Beneficiaries.
3.2 Bonus Payment. (a) In the event (i) a Change of Control shall be
-------------
consummated during calendar year 1996, or (ii) a Termination shall occur in 1996
during the Severance Period or in 1997, but prior to payment of the Bonus for
calendar year 1996, then, within thirty (30) days of any such event, the Company
shall pay to Executive one hundred percent (100%) of the Bonus which would
otherwise be payable to Executive for 1996.
(b) In the event of a Termination during the Severance Period, but after
January 1, 1997, then, in addition to the payments otherwise payable under
Section 3.1 and 3.2(a), the Executive shall be entitled to a payment equal to
the product of (i) thirty percent (30%) of Executive's Base Salary and (ii) a
fraction, the numerator of which is the number of days completed in 1997 through
the Termination Date, and the denominator of which is 365.
10
<PAGE>
SECTION 4
MITIGATION
4.1 No Duty to Mitigate. In no event shall the Executive be obligated to
-------------------
seek other employment or take any other action by way of mitigation of the
amount payable to the Executive under any of the provisions of this agreement
and such amounts shall not be reduced whether or not the Executive obtains other
employment.
SECTION 5
ADDITIONAL PAYMENTS
In addition to the amounts payable to the Executive pursuant to Section 3,
the Company shall make the following payments to the Executive to the extent
applicable:
5.1. Excise Tax Payment.
------------------
(a) Notwithstanding anything contained in this Agreement to the
contrary, in the event that any payment or distribution to or for the benefit of
the Executive, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise in connection with, or arising out
of, his employment with the Company (a "Payment" or "Payments"), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any interest and penalties, are collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a "Gross-
Up Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) A determination shall be made as to whether and when a Gross-Up Payment
is required pursuant to this Section 5.1(b) and the amount of such Gross Up
Payment, such determination to be made within fifteen (15) business days of the
Termination Date, or such other time as requested by the Company or by the
Executive
11
<PAGE>
(provided the Executive reasonably believes that any of the Payments may be
subject to the Excise Tax). Such determination shall be made by a national
independent accounting firm selected by the Executive (the "Accounting Firm").
All fees, costs and expenses (including, but not limited to, the cost of
retaining experts) of the Accounting Firm shall be borne by the Company and the
Company shall pay such fees, costs and expenses as they become due. The
Accounting Firm shall provide detailed supporting calculations, acceptable to
the Executive, both to the Company and the Executive. The Gross-Up Payment, if
any, as determined pursuant to this Section 5.1 shall be paid by the Company to
the Executive within five (5) business days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that no Excise Tax is
payable by the Executive with respect to a Payment or Payments, it shall furnish
the Executive with an unqualified opinion that no Excise Tax will be imposed
with respect to any such Payment or Payments. Any such initial determination by
the Accounting Firm of the Gross-Up Payment shall be binding upon the Company
and the Executive subject to the application of Section 5.1(c).
(c) As a result of the uncertainty on the application of Sections 4999 and
280G of the Code, it is possible that a Gross-Up Payment (or a portion thereof)
will be paid which should not have been paid (an "Overpayment") or a Gross-Up
Payment (or a portion thereof) which should have been paid will not have been
paid (an "Underpayment"). An Underpayment shall be deemed to have occurred upon
notice (formal or informal) to the Executive from any governmental taxing
authority that the tax liability of the Executive (whether in respect of the
then current taxable year of the Executive or in respect of any prior taxable
year of the Executive) may be increased by reason of the imposition of the
Excise Tax on a Payment or Payments with respect to which the Company has failed
to make a sufficient Gross-Up Payment. An Overpayment shall be deemed to have
occurred upon a "Final Determination" (as hereinafter defined) that the Excise
Tax should not be imposed upon a Payment or Payments with respect to which the
Executive has previously received a Gross-Up Payment. A Final Determination
shall be deemed to have occurred when the Executive has received from the
applicable governmental taxing authority a refund of taxes or other reduction in
his tax liability by reason of the Overpayment and upon either (i) the date of
determination as made by, or an agreement is entered into with, the governmental
12
<PAGE>
taxing authority which finally and conclusively binds that Executive and such
taxing authority, or in the event that a claim is brought before a court of
competent jurisdiction, the date upon which a final determination has been made
by such court and either all appeals have been taken and finally resolved or the
time for all appeals has expired or (ii) the expiration of the statute of
limitations with respect to the Executive's applicable tax return. If an
Underpayment occurs, the Executive shall promptly notify the Company and the
Company shall pay to the Executive at least five (5) business days prior to the
date on which the applicable governmental taxing authority has requested
payment, an additional Gross-up Payment equal to the amount of the Underpayment
plus any interest and penalties imposed on the Underpayment. If an Overpayment
occurs, the amount of the Overpayment shall be treated as a loan by the Company
to the Executive and the Executive shall, within ten (10) business days of the
occurrence of such Overpayment, pay to the Company the amount of the Overpayment
plus interest at an annual rate equal to the rate provided for in Section
1274(b)(2)(B) of the Code from the date the Gross-Up Payment (to which the
Overpayment relates) was paid to the Executive.
(d) Notwithstanding anything contained in this Agreement to the contrary,
in the event it is determined that an Excise Tax will be imposed on any Payment
or Payments, the Company shall pay to the applicable governmental taxing
authorities as Excise Tax withholding, the amount of the Excise Tax that the
Company has actually withhold from the Payment or Payments.
SECTION 6
LEGAL FEES AND EXPENSES
6.1. Retention of Counsel. It is the intent of the Company that the
--------------------
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of the Executive's
rights to compensation upon a Termination by litigation or otherwise because the
cost and expense thereof would substantially detract from the benefits intended
to be extended to the Executive hereunder. Accordingly, if it should appear to
the Executive that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
or threatens to take any
13
<PAGE>
action to declare the Agreement to pay Executive compensation upon a Termination
void or unenforceable, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, the Executive the benefits
provided or intended to be provided to the Executive hereunder, the Company
irrevocably authorizes the Executive from time to time to retain counsel of the
Executive's choice, at the expense of the Company as hereinafter provided, to
advise and represent the Executive in connection with any such interpretation,
enforcement or defense, including without limitation the initiation or defense
of any litigation or other legal action, whether by or against the Company or
any Company director, officer, stockholder, or other person affiliated with the
Company, in any jurisdiction.
6.2. Waiver of Conflict. Notwithstanding any existing or prior attorney-
------------------
client relationship between the Company and such counsel, the Company
irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship will exist between the
Executive and such counsel.
6.3. Reimbursement of Expenses of Counsel. Without regard to whether the
------------------------------------
Executive prevails in whole or in part, in connection with any of the foregoing,
the Company will pay and be solely financially responsible for any and all
attorneys' and related fees and expenses incurred by the Executive in connection
with any of the matters set forth in this Section 6.
SECTION 7
EMPLOYMENT RIGHTS;
TERMINATION PRIOR TO CHANGE IN CONTROL
7.1. No Right to Employment. Nothing expressed or implied in this
----------------------
Agreement will create any right or duty on the part of the Company or the
Executive to have the Executive remain in the employ of the Company prior to or
following any Change in Control, it being acknowledged and agreed by and between
the Company and the Executive that the Executive's employment with the Company
is and shall continue to be terminable "at will" by either party.
7.2. Termination Prior to Change in Control. Any termination
--------------------------------------
14
<PAGE>
by the Company of the employment of the Executive, other than for death or
Cause, or the removal of the Executive from any office or position in the
Company, other than for Cause, following the commencement of any discussion with
a third person that results in a Change in Control within 90 calendar days after
such termination or removal shall be deemed to be a Termination of the
Executive's employment after a Change in Control for purposes of this Agreement.
SECTION 8
TERM
8.1. Term. The term of this Agreement shall be deemed to commence and be
----
effective as of the date of this Agreement and shall, subject to Section 8.2,
continue to and including July 1, 1997. At any time within sixty (60) days of
the end of such term or any renewal terms, the parties hereto may renew this
Agreement in writing for additional terms of one year, or such other period as
the parties may agree.
8.2. Termination for Death, Disability or Outside of the Severance Period.
--------------------------------------------------------------------
Except with respect to the provisions of this Agreement that provide for
payments to be made to Executive after a Termination, or that impose obligations
upon the Company or grant rights that may be exercised by Executive after a
Termination, this Agreement shall terminate automatically without further action
by either of the parties hereto upon the death or Disability of Executive or the
termination of Executive's employment with the Company for any reason or no
reason that do not occur in the Severance Period, in accordance with Executive's
status as an employee at will.
SECTION 9
MISCELLANEOUS
9.1. Representation by Executive. Executive hereby represents and warrants
---------------------------
to the Company that there are no agreements or understandings that would make
unlawful his execution or delivery of this Agreement.
9.2. Notices. All notices, renewals and other communications
-------
15
<PAGE>
required or permitted under this Agreement must be in writing and shall be
deemed to have been given if delivered or mailed, by certified mail, first class
postage prepaid, to the parties at the addresses set forth beneath their
respective signatures to this Agreement, as the same may be changed in writing
form time to time.
9.3. Entire Agreement. The parties expressly agree that this Agreement is
----------------
contractual in nature and not a mere recital, and that it contains all the terms
and conditions of the agreement between the parties with respect to the matters
set forth herein. All prior negotiations, agreements, arrangements,
understandings and statements between the parties relating to the matters set
forth herein that have occurred at any time or contemporaneously with the
execution of this Agreement are superseded and merged into this completely
integrated Agreement. The initial Recitals set forth above shall be deemed to
be part of this Agreement.
9.4. Governing Law. This Agreement was negotiated and is performable in
-------------
Lake County, Illinois and shall be governed by the laws of the State of Illinois
without giving effect to principles of conflicts of law.
9.5. Severability. If any provision of the Agreement is held to be
------------
illegal, invalid or unenforceable under any present or future law, such
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom, and in lieu of
such provision, there shall be added automatically as a part of this Agreement,
a legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible, and the Company and
Executive hereby request the court or any arbitrator to Company and Executive
hereby request the court or any arbitrator to whom disputes relating to this
Agreement are submitted to reform the otherwise unenforceable covenant in
accordance with the proceeding provision.
9.6. Counterparts. This Agreement may be executed in multiple identical
------------
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute but one and the same instrument. In making proof of
this Agreement, it shall be
16
<PAGE>
necessary to produce or account for more than one counterpart executed by the
party sought to be charged with performance hereunder.
9.7. Assignment and Delegation. All rights, covenants and agreements of
-------------------------
the Company set forth in this Agreement shall unless otherwise provided herein,
be binding upon and inure to the benefit of the Company's respective successors
and assigns All rights, covenants and agreements of Executive set forth in this
Agreement shall, unless otherwise provided herein, not be assignable by
Executive, and shall be considered personal to Executive for all purposes.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first set forth above.
OPTION CARE, INC.
By: /s/ Erick E. Hanson
---------------------------
Title: CEO
------------------------
Notice Address:
100 Corporate North
Suite 212
Bannockburn, Illinois 60015
/s/ J. Jeffrey Fox
-------------------------------
Notice Address:
417 East Scranton Ave.
-------------------------------
Lake Bluff, IL 60044
-------------------------------
17
<PAGE>
EXHIBIT 10.18
EXECUTIVE SEVERANCE AGREEMENT
-----------------------------
This Executive Severance Agreement (the "Agreement") is made and entered
into as of this _28_ day of June, 1996, by and between Option Care, Inc., a
Delaware corporation (the "Company") and ___Cathy Bellehumeur_________, an
individual residing in the State of Illinois (the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board"), recognizes
that the possibility of a Change in Control (as hereinafter defined in Section
1.1), exists and that the possibility of or the occurrence of a Change in
Control may result in significant distractions of its key management personnel
because of the uncertainties inherent in such a situation; and
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its shareholders that the Company be able to receive
and rely upon Executive's advice without concern that the Executive might be
distracted by the personal uncertainties and risks associated with a Change in
Control; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of the occurrence of a Change in Control, and
for other good and valuable consideration, the Company and the Executive desire
to enter into this Agreement; and
WHEREAS, the Company and Executive each hereby acknowledge that this
Agreement is not intended to be, and shall not be construed as, an express or
implied contract of employment between the Company and the Executive;
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
<PAGE>
SECTION 1
DEFINITIONS
1.1 Definitions. In addition to terms which may be defined within
-----------
specific Sections of this Agreement, the following terms shall have the
following meanings when used herein with initial capital letters:
(a) "AFFILIATE" shall mean, as to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person, within the
meaning of such terms as used in Rule 405 under the Securities Act of 1933, as
amended, or any successor rule.
(b) "BASE SALARY" shall mean the sum of the Executive's current annual
base salary, including, if applicable, any car allowance, club dues or other
payments paid to or on behalf of the Executive by the Company determined, in
each case, using the highest rate in effect up to and including the Termination
Date and whether or not actually paid.
(c) "BONUS" means an amount paid to Executive on an annual basis which is
equal to thirty percent (30%) of the Executive's then current Base Salary.
(d) "CAUSE" shall mean that a majority of the Company's Board of Directors
(the "Board") shall have determined that the Executive (i) willfully and
continually failed to substantially perform his duties with the Company (other
than a failure resulting from Executive's incapacity due to illness, physical or
mental disability or other incapacity) and such failure continues for a period
of thirty (30) days after the Board has given written notice to Executive
providing a reasonable description of the basis for the determination that
Executive has failed to perform his duties, (ii) has been convicted of a felony,
(iii) engaged in conduct constituting willful malfeasance in connection with his
employment which is materially and demonstrably injurious to the Company and its
subsidiaries taken as a whole. No act, or failure to act, on Executive's part,
shall be considered "willful" for purposes of (i) or (iii) above unless he has
acted or failed to act with an absence of good faith and without a reasonable
belief that his action or failure to act was in the best interests of the
Company. Notwithstanding anything contained in this Agreement to the contrary,
no failure to perform by Executive after Notice of
<PAGE>
Termination (as herein defined) is given by Executive shall constitute Cause for
purposes of this Agreement. No determination of Cause shall be final until the
Executive and his legal advisors are given an opportunity to meet with the
Board, contest the basis for termination, and demonstrate that Executive's
continued employment is in the best interests of the Company.
(e) "CONSTRUCTIVE TERMINATION FOR GOOD REASON" shall mean a termination of
employment with the Company by the Executive pursuant to the provisions of
Section 2.2.
(f) CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred as of the date that one or more of the
following occurs:
(i) Individuals who, as of the date hereof, constitute the entire
Board of Directors of the Company ("Incumbent Directors") cease for any
reason to constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the then Incumbent Directors
shall be considered as though such individual was an Incumbent Director,
but excluding, for this purpose any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest, as such terms are used in Rule 14a-11 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or other
actual or threatened solicitation of proxies or consents by or on behalf of
any Person other than the Board; provided, further, that in the event
Kapoor (as herein defined) at any time determines to achieve representation
on the Company's Board of Directors approximately equal to his then
ownership percentage of the Company's common stock, his implementation of
such determination through the election of Kapoor Affiliates as directors
of the Company shall not be deemed to be a Change in Control and such
Kapoor Affiliates shall constitute Incumbent Directors;
(ii) The stockholders of the Company shall approve (A) any merger,
consolidation or recapitalization of the Company (or, if the capital stock
of the Company is affected, any subsidiary of the Company), or any sale,
lease, or other
3
<PAGE>
transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company (each of the foregoing being an "Acquisition
Transaction") where (1) the stockholders of the Company immediately prior
to such Acquisition Transaction would not immediately after such
Acquisition Transaction beneficially own, directly or indirectly, shares or
other ownership interests representing in the aggregate eighty percent
(80%) or more of (a) the then outstanding common stock or other equity
interests of the corporation or other entity surviving or resulting from
such merger, consolidation or recapitalization or acquiring such assets of
the Company, as the case may be (the "Surviving Entity") (or of its
ultimate parent corporation or other entity, if any), and (b) the Combined
Voting Power (as herein defined) of the then outstanding Voting Securities
(as herein defined) of the Surviving Entity (or of its ultimate parent
corporation or other entity, if any) or (2) the Incumbent Directors at the
time of the initial approval of such Acquisition Transaction would not
immediately after such Acquisition Transaction constitute a majority of the
Board of Directors, or similar managing group, of the Surviving Entity (or
of its ultimate parent corporation or other entity, if any), or (B) any
plan or proposal for the liquidation or dissolution of the Company; or
(iii) Any Person, other than Kapoor, shall be or become the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of securities of the Company representing in
the aggregate more than fifty percent (50%) of either (A) the then
outstanding shares of common stock of the Company ("Common Shares") or (B)
the Combined Voting Power of all then outstanding Voting Securities of the
Company.
(g) "COMBINED VOTING POWER" shall mean the aggregate votes entitled to be
cast generally in the election of the Board of Directors, or similar managing
group, of a corporation or other entity by holders of then outstanding Voting
Securities of such corporation or other entity.
(h) "DISABILITY" shall mean (i) the inability of Executive for a period of
six consecutive months to perform his duties,
4
<PAGE>
because of illness, physical or mental disability or other incapacity, or (ii)
at such earlier time as Executive submits satisfactory medical evidence that he
has an illness, physical or mental disability or other incapacity which is
expected to prevent him from returning to the performance of his work duties for
six months or longer.
(i) "EMPLOYEE BENEFITS" means the perquisites, benefits and service credit
for benefits as provided under any and all employee retirement income and
welfare benefit policies, plans, programs or arrangements in which the Executive
is entitled to participate which provide group or other life, health,
medical/hospital, or other insurance (whether funded by actual insurance or
self-insured by the Company), disability, salary continuation, expense
reimbursement, and other similar employee benefit policies, plans, programs or
arrangements that may now exist or any equivalent successor policies, plans,
programs or arrangements that may be adopted hereafter by the Company, providing
perquisites, benefits and service credit for benefits at least as great in the
aggregate as are payable thereunder prior to a Change in Control; provided,
however, that the term "Employee Benefits" shall not include any stock option,
stock purchase, stock appreciation, savings, pension, supplemental executive
retirement or other retirement income or welfare benefit, deferred compensation,
incentive compensation, or similar plans.
(j) "KAPOOR" shall mean John N. Kapoor, a resident of the State of
Illinois or any Person who or which is an Affiliate of Kapoor.
(k) "NOTICE OF TERMINATION" shall mean a notice which indicates the
specific termination provisions in this Agreement relied upon as a basis for
Termination. For purposes of this Agreement, no purported Termination of
employment shall be effective without such Notice of Termination.
(l) "PERSON" shall mean any individual, entity (including, without
limitation, any corporation, partnership, Company, joint venture, association or
governmental body) or group (as defined in Sections 14(d)(3) or 15(d)(2) of the
Exchange Act and the rules and regulations thereunder); provided, however, that
Person shall not include the Company, any of its subsidiaries, any employee
benefit plan of the Company or any of its majority-owned subsidiaries or
5
<PAGE>
any entity organized, appointed or established by the Company or such
subsidiaries for or pursuant to the terms of any such plan.
(m) "SEVERANCE BENEFITS" shall mean the compensation and other benefits
set forth in Sections 3 and 5, as applicable.
(n) "SEVERANCE PERIOD" shall mean a period of twelve (12) months
commencing with the date of consummation of a Change in Control, or, if
applicable, the period prior to a Change of Control as provided in Section 7.2.
(0) "TERMINATION" shall have the meaning provided in Section 3.1.
(p) "TERMINATION DATE" shall mean, in the case of the Executive's death,
his date of death, in the case of the Executive voluntarily terminating his
employment with the Company other than for Constructive Termination for Good
Reason, his last day of employment with the Company, and in all other cases, the
date specified in the Notice of Termination subject to the following:
(i) If the Executive's employment is terminated by the Company, the
date specified in the Notice of Termination shall be at least thirty (30)
days after the date the Notice of Termination is given to the Executive,
provided, however, that in the case of Disability, the Executive shall not
-------- -------
have returned to the full-time performance of his duties during such period
of at least thirty (30) days; or
(ii) If the Executive's employment is terminated for Constructive
Discharge for Good Reason, the date specified in the Notice of Termination
shall not be more than sixty (60) days after the date the Notice of
Termination is given to the Company.
(q) "VOTING SECURITIES" shall mean all securities of a corporation or
other entity having the right under ordinary circumstances to vote in an
election of the Board of Directors, or similar managing group, of such
corporation or other entity.
6
<PAGE>
SECTION 2
TERMINATION FOLLOWING A CHANGE IN CONTROL
2.1. Termination by the Company. On or after the occurrence of a Change in
--------------------------
Control, if the Executive's employment is terminated by the Company during the
Severance Period for any reason other than (i) the Executive's death or (ii) for
Cause, the Executive shall be entitled to the Severance Benefits as provided by
Sections 3 and 5, as applicable.
2.2 Constructive Termination for Good Reason. Upon the occurrence during
----------------------------------------
the Severance Period of one or more of the following events (regardless of
whether any other reason, other than Cause, for termination exists or has
occurred, including, without limitation, the Executive's acceptance and/or
commencement of other employment), the Executive may, within ninety (90) days
after the occurrence of any of the following events, terminate his employment
with the Company and become entitled to the Severance Benefits as provided by
Sections 3 and 5, as applicable (the election of the Executive to terminate his
employment under this Section 2.2 shall constitute "Constructive Termination for
Good Reason"):
(a) failure to maintain the Executive in the office or the position,
or a substantially equivalent office or position, of or with the Company
which the Executive held immediately prior to a Change in Control;
(b) a significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the
position with the Company which the Executive held immediately prior to the
Change in Control, a reduction in the aggregate of the Executive's Base
Salary and Bonus received from the Company, or the termination or denial of
the Executive's rights to Employee Benefits or a reduction in the scope or
value thereof, except for any such termination or denial, or reduction in
the scope or value, of any Employee Benefits applicable generally to all
recipients of or participants in such Employee Benefits;
(c) the determination by the Executive (which determination will be
conclusive and binding upon the parties hereto provided it has been made in
good faith and in all
7
<PAGE>
events will be presumed to have been made in good faith unless otherwise
shown by the Company by clear and convincing evidence) that a change in
circumstances has occurred following a Change in Control, including without
limitation a change in the scope of the business or other activities for
which the Executive was responsible immediately prior to the Change in
Control, which has rendered the Executive substantially unable to carry
out, or has caused the Executive to suffer a substantial reduction in, any
of the authorities, powers, functions, responsibilities, or duties attached
to the position held by the Executive immediately prior to the Change in
Control, which situation is not remedied within five (5) calendar days
after written notice to the Company from the Executive of such
determination;
(d) the liquidation, dissolution, merger, consolidation, or
reorganization of the Company or transfer of all or substantially all of
its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or otherwise)
to which all or substantially all of the Company's business and/or assets
have been transferred (directly or by operation of law) assumes all duties
and obligations of the Company under this Agreement;
(e) The Company relocates its principal executive offices, or
requires the Executive to have the Executive's principal location of work
changed, to any location which is in excess of 25 miles from the location
thereof immediately prior to the Change in Control, or requires the
Executive to travel away from the Executive's office in the course of
discharging the Executive's responsibilities or duties hereunder at least
20% more (in terms of aggregate days in any calendar year or in any
calendar quarter when annualized for purposes of comparison to any prior
year) than was required of the Executive in any of the two full years, or
such shorter period of time as the Executive may have held his position
with the Company, immediately prior to the Change in Control without, in
either case, the Executive's prior written consent; and/or
(f) without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the
8
<PAGE>
Company or any successor thereto.
2.3. Executive's Other Rights. A termination by the Company pursuant to
------------------------
Section 2.1 or by the Executive pursuant to Section 2.2 will not affect any
rights which the Executive may have pursuant to any other agreement, policy,
plan, program or arrangement of the Company providing Employee Benefits or any
rights attributable to stock options, stock appreciation rights, performance
awards, dividend credits and restricted stock, if any, granted to the Executive
under, and dividends on shares acquired pursuant to, any stock option plan,
restricted stock plan, performance unit plan, or other similar plan, which
rights will be governed by the terms of such plans.
SECTION 3
RIGHTS AND BENEFITS UPON TERMINATION
3.1. Termination Payments. In the event Executive shall become entitled to
--------------------
receive the rights and benefits described in this Section as a result of the
termination by the Company under Section 2.1 or a Constructive Termination for
Good Reason under Section 2.2 within the Severance Period (hereinafter
collectively referred to as a "Termination"), the Company agrees to provide or
cause to be provided to Executive the following rights and benefits:
(a) The Company shall pay to the Executive in a lump sum, by certified
check, within ten (10) "business days" (which for purposes of this Agreement
shall mean any day other than Saturday, Sunday or public holiday under the laws
of the State of Illinois) after the Termination Date, or, at the election of
Executive, in twelve (12) equal monthly installments, an amount equal to the
aggregate of the following:
i. The sum of:
(i) The Executive's proportionate amount of the Base Salary
through the Termination Date, to the extent not theretofore paid; plus
(ii) Any compensation previously deferred by the Executive
(together with any accrued interest or earnings
9
<PAGE>
thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid.
ii. An amount equal to one hundred percent (100%) of the Executive's
Base Salary.
(b) For the balance of the Severance Period, but in no event for less
than one year, the Company will arrange to provide the Executive with all
Employee Benefits substantially similar to those which the Executive was
receiving or entitled to receive immediately prior to the Termination Date,
except that the level of any such Employee Benefits to be provided to the
Executive may be reduced in the event of a corresponding reduction applicable
generally to all recipients of or participants in such Employee Benefits, and
the Severance Period will be considered service with the Company for the purpose
of determining service credits and benefits due and payable to the Executive
under the Company's retirement income, supplemental executive retirement, and
other benefit plans of the Company applicable to the Executive, the Executive's
dependents, or the Executive's beneficiaries immediately prior to the
Termination Date. If and to the extent that any benefit described in the
immediately preceding sentence is not or cannot be paid or provided under any
policy, plan program or arrangement of the Company, then the Company will itself
pay or provide for the payment of such Employee Benefits to the Executive, and,
if applicable, the Executive's dependents and Beneficiaries.
3.2 Bonus Payment. (a) In the event (i) a Change of Control shall be
-------------
consummated during calendar year 1996, or (ii) a Termination shall occur in 1996
during the Severance Period or in 1997, but prior to payment of the Bonus for
calendar year 1996, then, within thirty (30) days of any such event, the Company
shall pay to Executive one hundred percent (100%) of the Bonus which would
otherwise be payable to Executive for 1996.
(b) In the event of a Termination during the Severance Period, but after
January 1, 1997, then, in addition to the payments otherwise payable under
Section 3.1 and 3.2(a), the Executive shall be entitled to a payment equal to
the product of (i) thirty percent (30%) of Executive's Base Salary and (ii) a
fraction, the numerator of which is the number of days completed in 1997 through
the Termination Date, and the denominator of which is 365.
10
<PAGE>
SECTION 4
MITIGATION
4.1 No Duty to Mitigate. In no event shall the Executive be obligated to
-------------------
seek other employment or take any other action by way of mitigation of the
amount payable to the Executive under any of the provisions of this agreement
and such amounts shall not be reduced whether or not the Executive obtains other
employment.
SECTION 5
ADDITIONAL PAYMENTS
In addition to the amounts payable to the Executive pursuant to Section 3,
the Company shall make the following payments to the Executive to the extent
applicable:
5.1. Excise Tax Payment.
------------------
(a) Notwithstanding anything contained in this Agreement to the
contrary, in the event that any payment or distribution to or for the benefit of
the Executive, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise in connection with, or arising out
of, his employment with the Company (a "Payment" or "Payments"), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any interest and penalties, are collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a "Gross-
Up Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) A determination shall be made as to whether and when a Gross-Up
Payment is required pursuant to this Section 5.1(b) and the amount of such Gross
Up Payment, such determination to be made within fifteen (15) business days of
the Termination Date, or such other time as requested by the Company or by the
Executive
11
<PAGE>
(provided the Executive reasonably believes that any of the Payments may be
subject to the Excise Tax). Such determination shall be made by a national
independent accounting firm selected by the Executive (the "Accounting Firm").
All fees, costs and expenses (including, but not limited to, the cost of
retaining experts) of the Accounting Firm shall be borne by the Company and the
Company shall pay such fees, costs and expenses as they become due. The
Accounting Firm shall provide detailed supporting calculations, acceptable to
the Executive, both to the Company and the Executive. The Gross-Up Payment, if
any, as determined pursuant to this Section 5.1 shall be paid by the Company to
the Executive within five (5) business days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that no Excise Tax is
payable by the Executive with respect to a Payment or Payments, it shall furnish
the Executive with an unqualified opinion that no Excise Tax will be imposed
with respect to any such Payment or Payments. Any such initial determination by
the Accounting Firm of the Gross-Up Payment shall be binding upon the Company
and the Executive subject to the application of Section 5.1(c).
(c) As a result of the uncertainty on the application of Sections 4999
and 280G of the Code, it is possible that a Gross-Up Payment (or a portion
thereof) will be paid which should not have been paid (an "Overpayment") or a
Gross-Up Payment (or a portion thereof) which should have been paid will not
have been paid (an "Underpayment"). An Underpayment shall be deemed to have
occurred upon notice (formal or informal) to the Executive from any governmental
taxing authority that the tax liability of the Executive (whether in respect of
the then current taxable year of the Executive or in respect of any prior
taxable year of the Executive) may be increased by reason of the imposition of
the Excise Tax on a Payment or Payments with respect to which the Company has
failed to make a sufficient Gross-Up Payment. An Overpayment shall be deemed to
have occurred upon a "Final Determination" (as hereinafter defined) that the
Excise Tax should not be imposed upon a Payment or Payments with respect to
which the Executive has previously received a Gross-Up Payment. A Final
Determination shall be deemed to have occurred when the Executive has received
from the applicable governmental taxing authority a refund of taxes or other
reduction in his tax liability by reason of the Overpayment and upon either (i)
the date of determination as made by, or an agreement is entered into with, the
governmental
12
<PAGE>
taxing authority which finally and conclusively binds that Executive and such
taxing authority, or in the event that a claim is brought before a court of
competent jurisdiction, the date upon which a final determination has been made
by such court and either all appeals have been taken and finally resolved or the
time for all appeals has expired or (ii) the expiration of the statute of
limitations with respect to the Executive's applicable tax return. If an
Underpayment occurs, the Executive shall promptly notify the Company and the
Company shall pay to the Executive at least five (5) business days prior to the
date on which the applicable governmental taxing authority has requested
payment, an additional Gross-up Payment equal to the amount of the Underpayment
plus any interest and penalties imposed on the Underpayment. If an Overpayment
occurs, the amount of the Overpayment shall be treated as a loan by the Company
to the Executive and the Executive shall, within ten (10) business days of the
occurrence of such Overpayment, pay to the Company the amount of the Overpayment
plus interest at an annual rate equal to the rate provided for in Section
1274(b)(2)(B) of the Code from the date the Gross-Up Payment (to which the
Overpayment relates) was paid to the Executive.
(d) Notwithstanding anything contained in this Agreement to the
contrary, in the event it is determined that an Excise Tax will be imposed on
any Payment or Payments, the Company shall pay to the applicable governmental
taxing authorities as Excise Tax withholding, the amount of the Excise Tax that
the Company has actually withhold from the Payment or Payments.
SECTION 6
LEGAL FEES AND EXPENSES
6.1. Retention of Counsel. It is the intent of the Company that the
--------------------
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of the Executive's
rights to compensation upon a Termination by litigation or otherwise because the
cost and expense thereof would substantially detract from the benefits intended
to be extended to the Executive hereunder. Accordingly, if it should appear to
the Executive that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
or threatens to take any
13
<PAGE>
action to declare the Agreement to pay Executive compensation upon a Termination
void or unenforceable, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, the Executive the benefits
provided or intended to be provided to the Executive hereunder, the Company
irrevocably authorizes the Executive from time to time to retain counsel of the
Executive's choice, at the expense of the Company as hereinafter provided, to
advise and represent the Executive in connection with any such interpretation,
enforcement or defense, including without limitation the initiation or defense
of any litigation or other legal action, whether by or against the Company or
any Company director, officer, stockholder, or other person affiliated with the
Company, in any jurisdiction.
6.2. Waiver of Conflict. Notwithstanding any existing or prior attorney-
------------------
client relationship between the Company and such counsel, the Company
irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship will exist between the
Executive and such counsel.
6.3. Reimbursement of Expenses of Counsel. Without regard to whether the
------------------------------------
Executive prevails in whole or in part, in connection with any of the foregoing,
the Company will pay and be solely financially responsible for any and all
attorneys' and related fees and expenses incurred by the Executive in connection
with any of the matters set forth in this Section 6.
SECTION 7
EMPLOYMENT RIGHTS;
TERMINATION PRIOR TO CHANGE IN CONTROL
7.1. No Right to Employment. Nothing expressed or implied in this
----------------------
Agreement will create any right or duty on the part of the Company or the
Executive to have the Executive remain in the employ of the Company prior to or
following any Change in Control, it being acknowledged and agreed by and between
the Company and the Executive that the Executive's employment with the Company
is and shall continue to be terminable "at will" by either party.
7.2. Termination Prior to Change in Control. Any termination
--------------------------------------
14
<PAGE>
by the Company of the employment of the Executive, other than for death or
Cause, or the removal of the Executive from any office or position in the
Company, other than for Cause, following the commencement of any discussion with
a third person that results in a Change in Control within 90 calendar days after
such termination or removal shall be deemed to be a Termination of the
Executive's employment after a Change in Control for purposes of this Agreement.
SECTION 8
TERM
8.1. Term. The term of this Agreement shall be deemed to commence and be
----
effective as of the date of this Agreement and shall, subject to Section 8.2,
continue to and including July 1, 1997. At any time within sixty (60) days of
the end of such term or any renewal terms, the parties hereto may renew this
Agreement in writing for additional terms of one year, or such other period as
the parties may agree.
8.2. Termination for Death, Disability or Outside of the Severance Period.
--------------------------------------------------------------------
Except with respect to the provisions of this Agreement that provide for
payments to be made to Executive after a Termination, or that impose obligations
upon the Company or grant rights that may be exercised by Executive after a
Termination, this Agreement shall terminate automatically without further action
by either of the parties hereto upon the death or Disability of Executive or the
termination of Executive's employment with the Company for any reason or no
reason that do not occur in the Severance Period, in accordance with Executive's
status as an employee at will.
SECTION 9
MISCELLANEOUS
9.1. Representation by Executive. Executive hereby represents and warrants
---------------------------
to the Company that there are no agreements or understandings that would make
unlawful his execution or delivery of this Agreement.
9.2. Notices. All notices, renewals and other communications
-------
15
<PAGE>
required or permitted under this Agreement must be in writing and shall be
deemed to have been given if delivered or mailed, by certified mail, first class
postage prepaid, to the parties at the addresses set forth beneath their
respective signatures to this Agreement, as the same may be changed in writing
form time to time.
9.3. Entire Agreement. The parties expressly agree that this Agreement is
----------------
contractual in nature and not a mere recital, and that it contains all the terms
and conditions of the agreement between the parties with respect to the matters
set forth herein. All prior negotiations, agreements, arrangements,
understandings and statements between the parties relating to the matters set
forth herein that have occurred at any time or contemporaneously with the
execution of this Agreement are superseded and merged into this completely
integrated Agreement. The initial Recitals set forth above shall be deemed to be
part of this Agreement.
9.4. Governing Law. This Agreement was negotiated and is performable in
-------------
Lake County, Illinois and shall be governed by the laws of the State of Illinois
without giving effect to principles of conflicts of law.
9.5. Severability. If any provision of the Agreement is held to be
------------
illegal, invalid or unenforceable under any present or future law, such
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom, and in lieu of
such provision, there shall be added automatically as a part of this Agreement,
a legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible, and the Company and
Executive hereby request the court or any arbitrator to Company and Executive
hereby request the court or any arbitrator to whom disputes relating to this
Agreement are submitted to reform the otherwise unenforceable covenant in
accordance with the proceeding provision.
9.6. Counterparts. This Agreement may be executed in multiple identical
------------
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute but one and the same instrument. In making proof of
this Agreement, it shall be
16
<PAGE>
necessary to produce or account for more than one counterpart executed by the
party sought to be charged with performance hereunder.
9.7. Assignment and Delegation. All rights, covenants and agreements of
-------------------------
the Company set forth in this Agreement shall unless otherwise provided herein,
be binding upon and inure to the benefit of the Company's respective successors
and assigns All rights, covenants and agreements of Executive set forth in this
Agreement shall, unless otherwise provided herein, not be assignable by
Executive, and shall be considered personal to Executive for all purposes.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first set forth above.
OPTION CARE, INC.
By: /s/ Erick E. Hanson
--------------------------------
Title: CEO
-----------------------------
Notice Address:
100 Corporate North
Suite 212
Bannockburn, Illinois 60015
/s/ Cathy Bellehumeur
-----------------------------------
Notice Address:
2406 Lawndale Ave.
-----------------------------------
Evanston, IL 60601
-----------------------------------
17
<PAGE>
EXHIBIT 11
OPTION CARE, INC.
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net income (loss).................... $(20,256) $ 2,988 $ (1,978)
========= ========= =========
Shares issued and outstanding........ 10,415 10,436 10,430
Weighted average shares issued....... 79 9 5
Additional shares included assuming
exercise of stock options using
treasury stock method.............. --- 22 ---
Weighted average shares retired...... --- (14) ---
--------- --------- ---------
Weighted average common and
common equivalent shares........... 10,494 10,453 10,435
========= ========= =========
Net income (loss) per common and
common equivalent share............ $ (1.93) $ 0.29 $ (0.19)
========= ========= =========
</TABLE>
<PAGE>
EXHIBIT 21
OPTION CARE, INC.
EXHIBIT 21
LISTING OF SUBSIDIARIES OF THE REGISTRANT
Option Care, Inc. (Delaware corporation)
Option Care, Inc. (California corporation) (Franchising company)
Option Care Capital Services, Inc. (Delaware corporation) (Finance company)
Option Care Enterprises, Inc. (Delaware corporation)
Home Care of Columbia, Inc. (Missouri corporation)
Young's I.V. Therapy, Inc. (Pennsylvania corporation) (80% owned)
Rehab Options, Inc. (Missouri corporation)
North County Home I.V., Inc. (California corporation)
Option Care Hospice, Inc. (Missouri corporation)
Option Care Home Health, Inc. (Ohio corporation)
Management by Information, Inc. (Delaware corporation)
Cordesys Healthcare Management, Inc. (Delaware corporation)
Option Care of Oklahoma, Inc. (Delaware corporation)
Women's Health of Optioncare, Inc. (Delaware corporation)
Entities listed above are all wholly-owned subsidiaries, except as indicated.
<PAGE>
EXHIBIT 23
OPTION CARE, INC.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Option Care, Inc.:
We consent to incorporation by reference in the Registration Statements
Nos. 33-47436 and 33-98256 on Form S-8 of Option Care, Inc. of our reports dated
March 5, 1997, relating to the consolidated balance sheets of Option Care, Inc.
and subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows and related
schedule for each of the years in the three-year period ended December 31, 1996,
which reports appear in this December 31, 1996 annual report on Form 10-K of
Option Care, Inc.
KPMG Peat Marwick LLP
Chicago, Illinois
March 5, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,223,000
<SECURITIES> 0
<RECEIVABLES> 20,558,000
<ALLOWANCES> 1,738,000
<INVENTORY> 1,598,000
<CURRENT-ASSETS> 28,816,000
<PP&E> 9,352,000
<DEPRECIATION> 5,030,000
<TOTAL-ASSETS> 44,041,000
<CURRENT-LIABILITIES> 7,358,000
<BONDS> 0
0
0
<COMMON> 106,000
<OTHER-SE> 41,517,000
<TOTAL-LIABILITY-AND-EQUITY> 44,041,000
<SALES> 70,521,000
<TOTAL-REVENUES> 70,521,000
<CGS> 51,198,000
<TOTAL-COSTS> 88,859,000
<OTHER-EXPENSES> (380,000)
<LOSS-PROVISION> 1,861,000
<INTEREST-EXPENSE> 550,000
<INCOME-PRETAX> (17,958,000)
<INCOME-TAX> 2,298,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,256,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> (1.93)
</TABLE>
