<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from ___________ to___________
Commission file number 0-7416
SHARED MEDICAL SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-1704148
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
51 Valley Stream Parkway
Malvern, Pennsylvania 19355
(Address of principal executive offices) (Zip Code)
(610) 219-6300
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
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
--- ---
On July 30, 1999, there were 26,710,939 shares of Common Stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEET
------------------------------------
(Amounts in thousands)
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments.................... $ 54,922 $ 40,070
Accounts receivable, net........................... 354,207 337,669
Prepaid expenses and other current assets.......... 36,533 33,466
----------- -----------
Total Current Assets............................. 445,662 411,205
Property and Equipment, net......................... 147,159 137,521
Computer Software, net.............................. 85,240 75,709
Other Assets........................................ 178,169 184,013
----------- -----------
$856,230 $808,448
=========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Notes payable...................................... $ 38,148 $158,808
Current portion of long-term debt and
capital leases.................................... 1,944 3,437
Dividends payable.................................. 5,606 5,589
Accounts payable................................... 29,095 42,029
Accrued expenses................................... 73,668 86,499
Current deferred revenues.......................... 42,082 40,206
Accrued and current deferred income taxes.......... 31,715 30,390
----------- -----------
Total Current Liabilities........................ 222,258 366,958
----------- -----------
Deferred Revenues................................... 5,786 6,908
----------- -----------
Long-Term Debt and Capital Leases................... 178,621 14,386
----------- -----------
Deferred Income Taxes............................... 23,846 20,846
----------- -----------
Commitments
Stockholders' Investment:
Preferred stock, par value $.10;
authorized 1,000,000 shares; none issued......... - -
Common stock, par value $.01; authorized
120,000,000 shares; 30,725,824 shares issued in
1999 and 30,635,512 in 1998...................... 307 306
Paid-in capital................................... 83,242 79,773
Retained earnings................................. 412,085 385,401
Common stock in treasury, at cost, 4,030,485
shares in 1999 and 4,029,773 in 1998............. (55,522) (55,497)
Cumulative translation adjustment................. (14,393) (10,633)
----------- -----------
Total Stockholders' Investment................... 425,719 399,350
----------- -----------
$856,230 $808,448
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
2
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
-----------------------------------
(Amounts in thousands except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------- -----------------------
1999 1998 1999 1998
----------------------- -----------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Service and system fees.................. $271,177 $220,665 $530,986 $434,396
Hardware sales........................... 33,262 36,327 60,522 78,062
---------- ---------- ---------- ----------
304,439 256,992 591,508 512,458
---------- ---------- ---------- ----------
Cost and Expenses:
Operating and development................ 127,360 104,018 248,847 207,386
Marketing and installation............... 96,057 75,368 188,933 142,383
General and administrative............... 18,615 17,126 38,718 36,641
Cost of hardware sales................... 27,719 29,165 48,737 64,578
Interest................................. 3,128 2,112 5,177 3,524
---------- ---------- ---------- ----------
272,879 227,789 530,412 454,512
---------- ---------- ---------- ----------
Income Before Income Taxes................ 31,560 29,203 61,096 57,946
Provision for Income Taxes................ 11,995 11,102 23,218 22,024
---------- ---------- ---------- ----------
Net Income................................ $ 19,565 $ 18,101 $ 37,878 $ 35,922
========== ========== ========== ==========
Net Income Per Common Share:
Basic................................... $.73 $.69 $1.42 $1.37
========== ========== ========== ==========
Diluted................................. $.72 $.67 $1.40 $1.33
========== ========== ========== ==========
Number of shares used to
compute per share amounts:
Basic................................... 26,620 26,314 26,597 26,257
========== ========== ========== ==========
Diluted................................. 27,263 27,107 27,148 27,037
========== ========== ========== ==========
Dividends Declared
Per Common Share......................... $.21 $.21 $.42 $.42
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------
1999 1998
-------- --------
(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income...................................... $ 37,878 $ 35,922
Adjustments to reconcile net income to
cash flows from operating activities -
Depreciation and amortization................ 23,554 21,336
Asset (increase) decrease -
Accounts receivable........................ (16,538) (17,285)
Prepaid expenses and other current assets.. (3,067) (639)
Other assets............................... 3,642 (19,658)
Liability increase (decrease) -
Accounts payable and accrued expenses...... (25,765) (42,341)
Accrued and current deferred income taxes.. 1,325 5,776
Deferred revenues.......................... 754 (6,983)
Deferred income taxes...................... 3,000 2,000
Other........................................ (2,209) (3,809)
-------- --------
Net cash provided by (used for) operating
activities................................ 22,574 (25,681)
-------- --------
Cash Flows from Investing Activities:
Property and equipment additions................ (24,630) (18,616)
Computer software additions..................... (16,419) (12,561)
Equipment dispositions.......................... 18 363
Businesses acquired............................. - (25,101)
-------- --------
Net cash used for investing activities..... (41,031) (55,915)
-------- --------
Cash Flows from Financing Activities:
Dividends paid.................................. (11,181) (10,789)
Exercise of stock options....................... 3,470 4,844
(Decrease) increase in notes payable............ (120,660) 81,697
Proceeds from long-term debt.................... 175,000 -
Payments of long-term debt and capital
lease obligations.............................. (13,295) (1,351)
Change in treasury stock........................ (25) (2)
-------- --------
Net cash provided by financing activities.. 33,309 74,399
-------- --------
Net Increase (Decrease) in Cash and Short-Term
Investments..................................... 14,852 (7,197)
Cash and Short-Term Investments, Beginning
of Period....................................... 40,070 30,692
-------- --------
Cash and Short-Term Investments, End of Period... $ 54,922 $ 23,495
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Notes to Consolidated Financial Statements - June 30, 1999 (unaudited):
1. Basis of Presentation:
The information furnished in this Form 10-Q reflects all normal and
recurring adjustments which are, in the opinion of management, necessary
for a fair presentation of the financial statements contained herein.
2. Accounts Receivable:
At June 30, 1999 and December 31, 1998, the Company's trade accounts
receivable were reduced by allowances for doubtful accounts of $12,870,000
and $13,369,000, respectively.
3. Property and Equipment:
The major classes of property and equipment at June 30, 1999 and
December 31, 1998 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
----------- -----------
<S> <C> <C>
(unaudited)
Land and land improvements............... $ 11,579 $ 11,616
Buildings................................ 99,923 92,193
Equipment................................ 221,806 212,481
----------- -----------
333,308 316,290
Less accumulated depreciation
and amortization..................... 186,149 178,769
----------- -----------
$147,159 $137,521
=========== ===========
</TABLE>
4. Computer Software:
The accumulated amortization for capitalized internally produced computer
software and purchased software at June 30, 1999 and December 31, 1998 was
$88,835,000 and $80,357,000, respectively.
5. Long-Term Debt and Lines of Credit:
On April 29, 1999, the Company completed a private placement of
$175,000,000 of long-term unsecured notes to reduce current notes payable,
fund the cost to complete a corporate office building addition, and
supplement working capital requirements. These notes consisted of the
following as of June 30, 1999 (amounts in thousands):
<TABLE>
<CAPTION>
June 30
1999
--------
<S> <C>
6.58% Series A Senior Notes Due 2006................................. $ 15,000
6.58% Series B Senior Notes Due in installments through 2009......... 74,000
6.75% Series C Senior Notes Due 2009................................. 61,000
6.75% Series D Senior Notes Due in installments through 2011......... 25,000
--------
$175,000
========
</TABLE>
These senior notes contain limitations on the Company's ability to incur
additional indebtedness and liens, to merge or consolidate with any other
company, and to dispose of assets or ownership in a subsidiary. Covenants
also require the Company to maintain a fixed charge coverage ratio, as
defined, of not less than 1.75 to 1.00 and a minimum level of consolidated
net worth.
5
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
At June 30, 1999, the Company had lines of credit with banks, which are
primarily based on LIBOR, totaling $115,707,000, of which $77,559,000 of
these lines of credit were unused.
6. Comprehensive Income:
The Company's comprehensive income for the quarter and six months ended
June 30 was (amounts in thousands):
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
------------------- -------------------
1999 1998 1999 1998
------- ------- ------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income...................................... $19,565 $18,101 $37,878 $35,922
Other comprehensive income:
Foreign currency translation
adjustments................................... (1,687) 869 (3,760) (2,059)
------- ------- ------- -------
Comprehensive income............................ $17,878 $18,970 $34,118 $33,863
======= ======= ======= =======
</TABLE>
7. Business Segment Information:
Business segment information for the Company for the quarter and six months
ended June 30 was as follows (amounts in thousands):
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
North America............................. $265,318 $227,740 $512,409 $451,725
International............................. 39,121 29,252 79,099 60,733
-------- -------- -------- --------
$304,439 $256,992 $591,508 $512,458
======== ======== ======== ========
Pretax income/(loss):
North America............................. $32,671 $31,615 $64,377 $61,900
International............................. (1,111) (2,412) (3,281) (3,954)
-------- -------- -------- --------
$31,560 $29,203 $61,096 $57,946
======== ======== ======== ========
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Material Changes in Financial Condition
- ---------------------------------------
The Company's financial condition remained strong through June 30, 1999.
Management is not aware of any potential material impairments to, or material
changes in, the Company's current financial position.
The most significant requirements for funds now anticipated are for purchases of
equipment and payment of cash dividends. The Company plans to fund its
anticipated expenditures primarily from operations, supplemented from time to
time by short-term bank borrowings.
At June 30, 1999, the Company had lines of credit with banks, which are
primarily based on LIBOR, totaling $115.7 million, of which approximately $77.6
million of these lines of credit were unused.
6
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Material Changes in Results of Operations
- -----------------------------------------
Three Months Ended June 30, 1999 Compared to the Three Months Ended
June 30, 1998.
Revenues
--------
Service and system fees revenues were $271.2 million, an increase of 22.9%
compared to the second quarter of 1998. North American revenues increased
primarily due to higher levels of professional services, generally
attributable to consulting, system installation, and facilities management
fees.
International revenues increased primarily due to the effect of companies
acquired in 1998, and higher levels of software fees, which were
attributable to sales and installations to new and existing customers.
Hardware revenues decreased to $33.3 million for the second quarter of 1999
from $36.3 million in the second quarter of 1998, primarily due to changes
in the timing and product mix of systems installed. Contributing to this
decrease were lower levels of mainframe system upgrades to customers that
process the Company's INVISION (R) product at their sites.
Cost and Expenses
-----------------
Operating and development expenses decreased to 47.0% of service and system
fees revenues in the second quarter of 1999 from 47.1% for the second
quarter of 1998. This change was principally due to a lower rate of growth,
as compared to the growth in service and system fees revenues, for
personnel and related costs, partially offset by a higher rate of growth
for third-party software costs.
Marketing and installation expenses increased to 35.4% of service and
system fees revenues in the second quarter of 1999 from 34.2% in the second
quarter of 1998, primarily due to a higher rate of growth, as compared to
the growth in service and system fees revenues, for customer implementation
costs including costs incurred for external consultants, partially offset
by a lower rate of growth for personnel and related costs.
General and administrative expenses, as a percentage of service and systems
fees revenues, decreased to 6.9% in the second quarter of 1999 from 7.8% in
the second quarter of 1998, primarily due to a lower rate of growth for
personnel and related costs as part of the Company's continuing efforts to
leverage administrative costs over an increasing revenue base.
Cost of hardware sales increased to 83.3% of hardware sales revenues in the
second quarter of 1999 from 80.3% in the second quarter of 1998. This
change was primarily due to the different product mixes of systems
installed in each quarter.
7
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Interest expense was $3.1 million in the quarter ended June 30, 1999
compared to $2.1 million in the same period in 1998. This change was
generally attributable to a higher level of average outstanding borrowings
during the current period.
Provision for Income Taxes
--------------------------
Income taxes increased $.9 million in the quarter ended June 30, 1999 when
compared to the same period in 1998. This change was primarily due to an
increase of $2.4 million in income before income taxes. The Company's
effective tax rate for federal, state, and foreign income taxes was 38.0%
in the second quarter of 1999 and 1998.
Net Income
----------
Net income was $19.6 million in the quarter ended June 30, 1999 compared to
$18.1 million in the quarter ended June 30, 1998 for the reasons discussed
above.
Six Months Ended June 30, 1999 Compared to the Six Months Ended June 30, 1998.
Revenues
--------
Service and system fees revenues were $531.0 million, an increase of 22.2%
compared to the same period in 1998. North American revenues increased
primarily due to higher levels of professional services and software and
related service fees. The higher level of professional services was
generally attributable to consulting, system installation, and facilities
management fees. The increase in software and related fees was primarily
associated with growth in support and service revenues from new and
existing customer installations.
International revenues increased primarily due to the effect of companies
acquired in 1998, and higher levels of software and related service fees
and professional services. The increase in software and related fees was
generally attributable to higher levels of sales and installations to new
and existing customers.
Hardware revenues decreased to $60.5 million for the six months ended June
30, 1999 from $78.1 million for the same period in 1998, primarily due to
changes in the timing and product mix of systems installed. Contributing to
this decrease were lower levels of mainframe system upgrades to customers
that process the Company's INVISION (R) product at their sites, partially
offset by increased sales of networking equipment.
Cost and Expenses
-----------------
Operating and development expenses decreased to 46.9% of service and system
fees revenues for the six months ended June 30, 1999 from 47.7% in the
comparable period of 1998. This change was principally due to a lower rate
of growth, as compared to the growth in service and system fees revenues,
for personnel and related costs, partially offset by a higher rate of
growth for third-party software costs.
Marketing and installation expenses increased to 35.6% of service and
system fees revenues for the six months ended June 30, 1999 from 32.8% in
the comparable period of 1998, primarily due to a higher rate of growth, as
compared to the growth in service and system fees revenues, for customer
implementation costs including costs incurred for external consultants,
partially offset by a lower rate of growth for personnel and related costs.
8
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
General and administrative expenses, as a percentage of service and system
fees revenues, decreased to 7.3% for the six months ended June 30, 1999
from 8.4% in the comparable period of 1998, primarily due to the Company's
continuing efforts to leverage administrative costs over an increasing
revenue base.
Cost of hardware sales decreased to 80.5% of hardware sales revenues for
the six months ended June 30, 1999 from 82.7% in the comparable period of
1998. This change was primarily due to the different product mixes of
systems installed between periods.
Interest expense was $5.2 million for the six months ended June 30, 1999
compared to $3.5 million in the same period in 1998. This change was
generally attributable to a higher level of average outstanding borrowings
during the current period.
Provision for Income Taxes
--------------------------
Income taxes increased $1.2 million in the first two quarters of 1999 when
compared to the same period in 1998. This change was primarily due to an
increase of $3.2 million in income before income taxes. The Company's
effective tax rate for federal, state, and foreign income taxes was 38.0%
for the six months ended June 30, 1999 and 1998.
Net Income
----------
Net income was $37.9 million in the first two quarters of 1999 compared to
$35.9 million in the first two quarters of 1998 for the reasons discussed
above.
Year 2000
- ---------
Computer systems that are designed to accept only two digits in the date field
identifying the year may fail or malfunction when attempting to process dates
after December 31, 1999. In 1995, the Company established a task force
consisting of representatives from affected areas of the Company to oversee a
Company-wide effort to deal with this "Year 2000" issue. This project team
established a plan to coordinate the software changes necessary for the
Company's products, the migration of Company customers to Year 2000 compliant
versions of Company products, and the assessment and remediation, if necessary,
of the Company's internal systems.
The Company has completed development of Year-2000 ready versions for
substantially all of its applications. The Company's primary efforts are now to
assist its customers in migrating to the Year-2000 compliant versions of the
Company's products. The Company is continuing to conduct an extensive customer
education, training and communications program, which began in 1996, to provide
information to customers regarding the necessary steps to be taken to achieve
Year 2000 readiness of their Company systems.
The Company believes that approximately 85% of the required upgrades of Company
products in the North American customer base, and 75% of the required upgrades
of Company products in the International customer base, have been completed.
The ability of the Company to assist the remaining customers in installing Year
2000 compliant versions of its products will be dependent on the availability of
Company and external resources, and the readiness and ability of customers to
participate in such installations.
9
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
The Company is continually assessing and informing customers of the Year 2000
compliance status of third-party products that customers use in connection with
their Company products. In many cases, customers have been or will be required
to upgrade to newer software and or hardware products offered by such third-
party vendors to achieve Year 2000 compliance of their information systems.
While the Company is experiencing a continued demand for its products and
services, it is possible that the Year 2000 issue may cause a decline in
decisions to purchase new products and services by healthcare providers in the
second half of 1999.
Although the Company believes that it has taken adequate protective steps, it is
possible that claims will be made against the Company should its customers
experience Year 2000 problems. Among other matters such claims could relate to
(i) malfunctions in Company products, which have not been upgraded, whether
because an enhancement has not been provided by the Company or because the
Company-provided enhancement has not been installed by the customer, (ii)
difficulties resulting from Year 2000 problems in third-party hardware or
software used in connection with the operation of Company products, or (iii)
consulting services provided by the Company to its customers concerning Year
2000 issues. The Company anticipates that claims may be made even in cases
where the Company is not ultimately responsible.
Costs incurred modifying products sold to customers have been recorded in
accordance with the Company's policies for internally produced software. The
majority of the Company's Year 2000 software development work has been
integrated into the Company's operations in the normal course of business. The
costs for such work have not been separately tracked and are therefore not
practicably estimable.
The Company continues to assess, test (where possible) and or seek assurance
from third party vendors regarding Year 2000 compliance of the Company's
critical internal information technology and non-information technology systems
such as utilities, including telecommunications used internally and at the
Company's Information Services Center. Based on these efforts, the Company
believes that most of its critical internal systems are now Year 2000 compliant.
The Company is currently pursuing the remediation or replacement of its
remaining non-compliant internal systems. Any failure in a critical internal
system relating to Year 2000 problems, whether in a system maintained by the
Company or by a third-party vendor, could have a material adverse effect on the
Company's business operations. The costs to the Company of addressing the Year
2000 issue with respect to its internal systems have not been material and have
been expensed as incurred. The Company does not expect the remaining costs of
remediation with respect to such systems to be material.
The Company continues to develop contingency plans to deal with issues that may
arise later in 1999 and in 2000, such as expected increases in customer upgrade
and support activities, problems caused by customer delays in implementing
Company or third-party upgrades, and possible disruptions in the Company's
external support systems and internal systems. The Company expects that this
contingency planning process will continue through 1999. In addition to the
alternate power and fuel source contingency systems already in place for the
Company's Information Services Center, these plans include supplementing the
organization with additional technical resources from other areas of the Company
during the critical period from Friday, December 31, 1999 through Monday,
January 3, 2000, and forming auxiliary support centers in the Company's field
organization.
10
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Euro Conversion
- ---------------
On January 1, 2002, the participating countries of the European Union (EU) will
issue new euro-denominated bills and coins for use in cash transactions. All
legacy currencies are to be withdrawn from circulation by July 1, 2002.
The Company's European businesses have historically been conducted directly in
each European country in which the Company has customers and there are currently
no significant cross border transactions among the Company's various European
operating entities. Accordingly, the Company does not anticipate that the euro
conversion will have a material impact on its business operations.
The Company continues to assess the need to modify or replace its internal
systems to be euro-compliant and does not expect the costs of such remediation
to be material. The Company's European products have been developed for
specific country requirements. These existing products are in the process of
being modified to be euro-compliant. The Company also believes that its new
client/server platform, which is intended to be marketed throughout Europe, is
euro-compliant.
While the Company believes that the measures it has taken in preparation for the
euro conversion are adequate, certain risk factors could have a material adverse
impact on the Company's European business operations including: (i) more intense
competition in certain countries as a result of the new common currency, and
(ii) malfunctions in critical information systems.
Cautionary Note Regarding Forward-Looking Statements
- ----------------------------------------------------
This Form 10-Q contains forward-looking statements. Such statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those reflected in such statements. Among such factors are
changes in length and composition of sales cycles; non-renewals of customer
contracts; inability to keep pace with competitive, technological and market
developments; failure to protect proprietary software; delays in product
development; undetected errors in software products; customer reductions caused
by health industry consolidation; difficulties in product installation;
dependence on suppliers; interruption of availability of resources necessary to
provide products and services; difficulties encountered by the Company,
customers, or others in dealing with the Year 2000 and euro conversion issues;
inability to successfully integrate acquired business operations; changes in
economic, political and regulatory conditions on the health industry; regulation
of additional products as medical devices by the US federal Food and Drug
Administration; and fluctuations in the value of foreign currencies relative to
the US dollar, interest rates, and taxes.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
11
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of stockholders of the Company was held on May 13, 1999. At
the meeting, the Company's stockholders were requested to vote on the following
matters:
a) To elect seven directors for one-year terms. The following is a summary of
the votes for elected directors:
<TABLE>
<CAPTION>
Votes Broker
Nominee Votes For Withheld Non-Votes
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
R. James Macaleer................................ 24,055,590 336,632 0
Raymond K. Denworth, Jr.......................... 24,062,166 330,056 0
Frederick W. DeTurk.............................. 24,052,242 339,980 0
Josh S. Weston................................... 24,036,463 355,759 0
Jeffrey S. Rubin................................. 24,039,728 352,494 0
Marvin S. Cadwell................................ 24,259,490 132,732 0
Gail R. Wilensky, Ph.D........................... 24,038,295 353,927 0
- ------------------------------------------------------------------------------------------------------
</TABLE>
There are no other persons whose term as director continued after the annual
stockholders meeting.
b) To approve the 1999 Stock Option Plan. The following is a summary of the
voting on the adoption of the Company's 1999 Stock Option Plan:
<TABLE>
<CAPTION>
Votes Broker
Votes For Against Abstentions Non-Votes
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11,906,964 9,161,262 98,014 3,225,982
</TABLE>
Item 5. Other Information.
Raymond K. Denworth, Jr., a Director of the Company since 1976, passed away on
August 3, 1999. Mr. Denworth was Chairman of the Management and Compensation
Committee of the Board of Directors.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are included in this report:
No. Description
--- ----------------------------------------------------------------
(10) Material Contracts -
Note Purchase Agreement
Performance bonus plan - 1999:
Marvin S. Cadwell
(27) Financial Data Schedule
For the Six Months Ended June 30, 1999
(b) No reports on Form 8-K were filed during the three-month period ended
June 30, 1999.
12
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Registrant
August 16, 1999 /S/Terrence W. Kyle
- --------------- -----------------------------------
Date Terrence W. Kyle
Senior Vice President, Treasurer,
and Assistant Secretary,
Principal Financial Officer and
Duly Authorized Officer
13
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Exhibit Index
No. Description
--- ------------------------------------------------------------
(10) Material Contracts -
Note Purchase Agreement
Performance bonus plan - 1999:
Marvin S. Cadwell
(27) Financial Data Schedule
For the Six Months Ended June 30, 1999
14
<PAGE>
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Exhibit (10)
SHARED MEDICAL SYSTEMS CORPORATION
$175,000,000
6.58% Series A Senior Notes due 2006
6.58% Series B Senior Notes due 2009
6.75% Series C Senior Notes due 2009
6.75% Series D Senior Notes due 2011
NOTE PURCHASE AGREEMENT
Dated as of April 29, 1999
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TABLE OF CONTENTS
Page
1. AUTHORIZATION OF NOTES....................................... 1
2. SALE AND PURCHASE OF NOTES................................... 1
3. CLOSING...................................................... 2
4. CONDITIONS TO CLOSING........................................ 2
4.1 Representations and Warranties......................... 2
4.2 Performance; No Default................................ 2
4.3 Compliance Certificates................................ 2
4.4 Opinions of Counsel.................................... 3
4.5 Purchase Permitted By Applicable Law, etc.............. 3
4.6 Sale of Other Notes.................................... 3
4.7 Payment of Special Counsel Fees........................ 3
4.8 Private Placement Number............................... 3
4.9 Changes in Corporate Structure......................... 4
4.10 Proceedings and Documents.............................. 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 4
5.1 Organization; Power and Authority...................... 4
5.2 Authorization, etc..................................... 4
5.3 Disclosure............................................. 4
5.4 Organization and Ownership of Shares of Subsidiaries... 5
5.5 Financial Statements................................... 5
5.6 Compliance with Laws, Other Instruments, etc........... 5
5.7 Governmental Authorizations, etc....................... 6
5.8 Litigation; Observance of Statutes and Orders.......... 6
5.9 Taxes.................................................. 6
5.10 Title to Property; Leases.............................. 7
5.11 Licenses, Permits, etc................................. 7
5.12 Compliance with ERISA.................................. 7
5.13 Private Offering by the Company........................ 8
5.14 Use of Proceeds; Margin Regulations.................... 8
5.15 Existing Indebtedness.................................. 8
5.16 Foreign Assets Control Regulations, etc................ 9
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TABLE OF CONTENTS
(continued)
Page
5.17 Status under Certain Statutes.......................... 9
6. REPRESENTATIONS OF THE PURCHASER............................. 9
6.1 Purchase for Investment................................. 9
6.2 Source of Funds......................................... 9
7. INFORMATION AS TO COMPANY.................................... 11
7.1 Financial and Business Information...................... 11
7.2 Officer's Certificate................................... 13
7.3 Inspection.............................................. 13
8. PREPAYMENT OF THE NOTES...................................... 14
8.1 Required Prepayments.................................... 14
8.2 Optional Prepayments with Make-Whole Amount............. 14
8.3 Allocation of Partial Prepayments....................... 15
8.4 Offer to Prepay Resulting from Asset Disposition........ 15
8.5 Maturity; Surrender, etc................................ 16
8.6 Purchase of Notes....................................... 16
8.7 Make-Whole Amount....................................... 17
9. AFFIRMATIVE COVENANTS........................................ 18
9.1 Compliance with Law..................................... 18
9.2 Insurance............................................... 18
9.3 Maintenance of Properties............................... 18
9.4 Payment of Taxes........................................ 19
9.5 Corporate Existence, etc................................ 19
10. NEGATIVE COVENANTS........................................... 19
10.1 Transactions with Affiliates........................... 19
10.2 Merger, Consolidation, etc............................. 20
10.3 Incurrence of Funded Debt.............................. 20
10.4 Priority Debt.......................................... 21
10.5 Consolidated Net Worth................................. 21
10.6 Fixed Charge Ratio..................................... 21
10.7 Sale of Assets......................................... 21
10.8 Liens.................................................. 23
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TABLE OF CONTENTS
(continued)
Page
10.9 Disposal of Ownership of a Subsidiary.................. 25
11. EVENTS OF DEFAULT............................................ 25
12. REMEDIES ON DEFAULT, ETC..................................... 27
12.1 Acceleration........................................... 27
12.2 Other Remedies......................................... 28
12.3 Rescission............................................. 28
12.4 No Waivers or Election of Remedies, Expenses, etc...... 28
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES................ 29
13.1 Registration of Notes.................................. 29
13.2 Transfer and Exchange of Notes......................... 29
13.3 Replacement of Notes................................... 29
14. PAYMENTS ON NOTES............................................ 30
14.1 Place of Payment....................................... 30
14.2 Home Office Payment.................................... 30
15. EXPENSES, ETC................................................ 30
15.1 Transaction Expenses................................... 30
15.2 Survival............................................... 31
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. 31
17. AMENDMENT AND WAIVER......................................... 31
17.1 Requirements........................................... 31
17.2 Solicitation of Holders of Notes....................... 32
17.3 Binding Effect, etc.................................... 32
17.4 Notes Held by Company, etc............................. 32
18. NOTICES...................................................... 33
19. REPRODUCTION OF DOCUMENTS.................................... 33
20. CONFIDENTIAL INFORMATION..................................... 33
21. SUBSTITUTION OF PURCHASER.................................... 34
22. MISCELLANEOUS................................................ 35
22.1 Successors and Assigns................................. 35
22.2 Payments Due on Non-Business Days...................... 35
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TABLE OF CONTENTS
(continued)
Page
22.3 Severability.......................................... 35
22.4 Construction.......................................... 35
22.5 Counterparts.......................................... 35
22.6 Governing Law......................................... 35
SCHEDULE A INFORMATION RELATING TO PURCHASERS
SCHEDULE B DEFINED TERMS
SCHEDULE 4.9 CHANGES IN CORPORATE STRUCTURE
SCHEDULE 5.3 DISCLOSURE MATERIALS
SCHEDULE 5.4 SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY STOCK
SCHEDULE 5.5 FINANCIAL STATEMENTS
SCHEDULE 5.8 CERTAIN LITIGATION
SCHEDULE 5.11 PATENTS, ETC.
SCHEDULE 5.14 USE OF PROCEEDS
SCHEDULE 5.15 EXISTING INDEBTEDNESS
EXHIBIT 1-A FORM OF SERIES A NOTE
EXHIBIT 1-B FORM OF SERIES B NOTE
EXHIBIT 1-C FORM OF SERIES C NOTE
EXHIBIT 1-D FORM OF SERIES D NOTE
EXHIBIT 4.4(a) FORM OF OPINION OF SPECIAL COUNSEL FOR THE COMPANY
EXHIBIT 4.4(b) FORM OF OPINION OF SPECIAL COUNSEL FOR THE
PURCHASERS
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SHARED MEDICAL SYSTEMS CORPORATION
51 Valley Stream Parkway
Malvern, Pennsylvania 19355
6.58% Series A Senior Notes due 2006
6.58% Series B Senior Notes due 2009
6.75% Series C Senior Notes due 2009
6.75% Series D Senior Notes due 2011
As of April 29, 1999
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
SHARED MEDICAL SYSTEMS CORPORATION, a Delaware corporation (the
"COMPANY"), agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $175,000,000
aggregate principal amount of its senior notes, of which $15,000,000 aggregate
principal amount shall be its 6.58% Series A Senior Notes due 2006 (the "SERIES
A NOTES"), $74,000,000 aggregate principal amount shall be its 6.58% Series B
Senior Notes due 2009 (the "SERIES B NOTES"), $61,000,000 aggregate principal
amount shall be its 6.75% Series C Senior Notes due 2009 (the "SERIES C NOTES")
and $25,000,000 aggregate principal amount shall be its 6.75% Series D Senior
Notes due 2011 (the "SERIES D NOTES"). As used herein, the term "Notes" shall
include all notes originally issued pursuant to this Agreement and any notes
issued in substitution therefor pursuant to Section 13 of this Agreement or the
Other Agreements (as hereinafter defined). The Series A Notes, the Series B
Notes, the Series C Notes and the Series D Notes shall be substantially in the
respective forms set out in Exhibits 1-A, 1-B, 1-C and 1-D, with such changes
therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at the
Closing provided for in Section 3, Notes in the principal amount specified
opposite your name in Schedule A at the purchase price of 100% of the principal
amount thereof. Contemporaneously with entering into this Agreement, the
Company is entering into separate Note Purchase Agreements (the "OTHER
AGREEMENTS") identical with this Agreement with each of the other purchasers
named in Schedule A (the "OTHER PURCHASERS"), providing for the sale at such
Closing to each of the Other Purchasers of Notes in the principal amount
specified opposite its name in Schedule A. Your obligation hereunder and the
obligations of the Other Purchasers under the Other Agreements are several and
not joint obligations and you shall have no obligation under any Other Agreement
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and no liability to any Person for the performance or non-performance by any
Other Purchaser thereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Orrick, Herrington & Sutcliffe
LLP, 666 Fifth Avenue, New York, New York 10103, at 10:00 a.m., New York time,
at a closing (the "CLOSING") on April 29, 1999 or on such other Business Day
thereafter on or prior to April 30, 1999 as may be agreed upon by the Company
and you and the Other Purchasers. At the Closing the Company will deliver to
you the Notes to be purchased by you in the form of a single Note (or such
greater number of Notes in denominations of at least $500,000 as you may
indicate on Schedule A or otherwise request) dated the date of the Closing and
registered in your name (or in the name of your nominee), against delivery by
you to the Company or its order of immediately available funds in the amount of
the purchase price therefor by wire transfer of immediately available funds for
the account of the Company to account number 85-110-564-75 at PNC Bank, N.A.,
ABA Number 031000053. If at the Closing the Company shall fail to tender such
Notes to you as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to your satisfaction, you
shall, at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights you may have by reason of such
failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
4.2 PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing.
4.3 COMPLIANCE CERTIFICATES.
(a) Officer's Certificate. The Company shall have delivered to you
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an Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.
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(b) Secretary's Certificate. The Company shall have delivered to you a
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certificate certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery of
the Notes and the Agreement.
4.4 OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing (a) from Drinker Biddle & Reath LLP, counsel
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for the Company, covering the matters set forth in Exhibit 4.4(a) and covering
such other matters incident to the transactions contemplated hereby as you or
your counsel may reasonably request (and the Company hereby instructs its
counsel to deliver such opinion to you) and (b) from Orrick, Herrington &
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Sutcliffe LLP, your special counsel in connection with such transactions,
substantially in the form set forth in Exhibit 4.4(b) and covering such other
matters incident to such transactions as you may reasonably request.
4.5 PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (i) be
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permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (ii) not
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violate any applicable law or regulation (including, without limitation,
Regulation T, U, or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you to any tax, penalty or liability under or pursuant to
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any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.6 SALE OF OTHER NOTES.
Contemporaneously with the Closing, the Company shall sell to the
Other Purchasers and the Other Purchasers shall purchase the Notes to be
purchased by them at the Closing as specified in Schedule A.
4.7 PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company shall
have paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a detailed
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.8 PRIVATE PLACEMENT NUMBER.
A Private Placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for each series
of Notes.
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4.9 CHANGES IN CORPORATE STRUCTURE.
Except as specified in Schedule 4.9, the Company shall not have
changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5.
4.10 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1 ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Other Agreements and the Notes and to perform the
provisions hereof and thereof.
5.2 AUTHORIZATION, ETC.
This Agreement and the Other Agreements and the Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
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reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
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whether such enforceability is considered in a proceeding in equity or at law).
5.3 DISCLOSURE.
The Company, through its agent, PNC Capital Markets, Inc., has
delivered to you and each Other Purchaser a copy of a Private Placement
Memorandum, dated March 1999 (the "MEMORANDUM"), relating to the transactions
contemplated hereby. Except as disclosed in Schedule 5.3, this Agreement, the
Memorandum, the documents, certificates or other writings
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identified in Schedule 5.3 and the financial statements listed in Schedule 5.5,
taken as a whole, do not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made. Except as
disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one
of the documents, certificates or other writings identified therein, or in the
financial statements listed in Schedule 5.5, since December 31, 1998, there has
been no change in the financial condition, operations, business or properties of
the Company or any of its Subsidiaries except changes that individually or in
the aggregate would not reasonably be expected to have a Material Adverse
Effect.
5.4 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES.
(a) Schedule 5.4 is (except as noted therein) a complete and correct
list of the Company's Subsidiaries, showing, as to each Subsidiary, the correct
name thereof, the jurisdiction of its organization, and the percentage of shares
of each class of its capital stock or similar equity interests outstanding owned
by the Company and each other Subsidiary.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries are duly authorized, have been validly issued, are fully
paid and nonassessable and are owned by the Company or another Subsidiary free
and clear of any Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
5.5 FINANCIAL STATEMENTS.
The Company has delivered to each Purchaser copies of the consolidated
financial statements of the Company and its Subsidiaries listed on Schedule 5.5.
All of said financial statements (including in each case the related schedules
and notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).
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5.6 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement and the Notes will not (i) contravene, result in any breach of, or
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constitute a default under, or result in the creation of any Lien in respect of
any property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other Material agreement or instrument to which the Company or
any Subsidiary is bound or by which the Company or any Subsidiary or any of
their respective properties may be bound or affected, (ii) conflict with or
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result in a breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental Authority
applicable to the Company or any Subsidiary or (iii) violate any provision of
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any statute or other rule or regulation of any Governmental Authority applicable
to the Company or any Subsidiary.
5.7 GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement or the
Notes, except for the filing of a Form D with the Securities and Exchange
Commission.
5.8 LITIGATION; OBSERVANCE OF STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 5.8, there are no actions, suits
or proceedings pending or, to the knowledge of the Company, threatened against
or affecting the Company or any Subsidiary or any property of the Company or any
Subsidiary in any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.9 TAXES.
The Company and its Subsidiaries have filed all income tax returns
that are required to have been filed in any jurisdiction, and have paid all
taxes shown to be due and payable on such returns and all other taxes and
assessments payable by them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, except for any
taxes and assessments (i) the amount of which is not individually or in the
-
aggregate Material or (ii) the amount, applicability or validity of which is
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currently being diligently contested in good faith by appropriate proceedings
and with respect to which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. The Federal income tax
liabilities of the Company and its Subsidiaries have been
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determined by the Internal Revenue Service and paid for all fiscal years up to
and including the fiscal year ended December 31, 1991.
5.10 TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title to
their respective Material properties, including all such properties reflected in
the most recent audited balance sheet referred to in Section 5.5 or purported to
have been acquired by the Company or any Subsidiary after said date (except as
sold or otherwise disposed of in the ordinary course of business), in each case
free and clear of Liens prohibited by this Agreement, except for those defects
in title and Liens that, individually or in the aggregate, would not have a
Material Adverse Effect. All Material leases are valid and subsisting and are
in full force and effect in all material respects.
5.11 LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others;
(b) to the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise, authorization,
patent, copyright, service mark, trademark, trade name or other right owned by
any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its Subsidiaries
with respect to any patent, copyright, service mark, trademark, trade name or
other right owned or used by the Company or any of its Subsidiaries.
5.12 COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), other than routine liabilities for
contributions and benefit payments under the Plans, and no event, transaction or
condition has occurred or exists that would reasonably be expected to result in
the incurrence of any such liability by the Company or any ERISA Affiliate, or
in the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
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(b) None of the Plans is a defined contribution plan (as defined in
Section 414(j) of the Code) or a multiemployer plan (as defined in Section 3(37)
of ERISA)).
(c) The expected postretirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Subsidiaries is not Material.
(d) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of Section 406 of ERISA or in connection with which a tax could
be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company in the first sentence of this Section 5.12(d) is made in reliance
upon and subject to (i) the accuracy of your representation in Section 6.2 as to
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the sources of the funds to be used to pay the purchase price of the Notes to be
purchased by you and (ii) the assumption, made solely for the purpose of making
--
such representation, that Department of Labor Interpretive Bulletin 75-2 with
respect to prohibited transactions, as in effect prior to July 1, 1996, remains
valid in the circumstances of the transactions contemplated herein.
5.13 PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
any person other than you, the Other Purchasers and not more than 65 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of Section 5 of the Securities Act.
5.14 USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes as set
forth in Schedule 5.14. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the U.S. Federal Reserve System (12 CFR 221), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). Margin stock does not constitute more than 5% of the value of the
consolidated assets of the Company and its Subsidiaries and the Company does not
have any present intention that margin stock will constitute more than 5% of the
value of such assets. As used in this Section, the terms "MARGIN STOCK" and
"PURPOSE OF BUYING OR CARRYING" shall have the meanings assigned to them in said
Regulation U.
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5.15 EXISTING INDEBTEDNESS.
Except as described therein, Schedule 5.15 sets forth a complete and
correct list of all outstanding Indebtedness of the Company and its Subsidiaries
as of March 31, 1999, since which date there has been no Material change in the
amounts, interest rates, sinking funds, installment payments or maturities of
the Indebtedness of the Company or its Subsidiaries. Neither the Company nor any
Subsidiary is in default and no waiver of default is currently in effect, in the
payment of any principal or interest on any Indebtedness of the Company or such
Subsidiary and no event or condition exists with respect to any Indebtedness of
the Company or any Subsidiary that would permit (or that with notice or the
lapse of time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or before its
regularly scheduled dates of payment.
5.16 FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17 STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 PURCHASE FOR INVESTMENT.
You represent that you are an "accredited investor" as defined in Rule
501 under the Securities Act and that you are purchasing the Notes for your own
account or for one or more separate accounts maintained by you or for the
account of one or more pension or trust funds and not with a view to the
distribution thereof, provided that the disposition of your or their property
shall at all times be within your or their control, provided, further, that your
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right to sell or otherwise dispose of all or any part of the Notes purchased or
acquired by you pursuant to an effective registration statement under the
Securities Act or under an exemption from registration available under the
Securities Act shall not be prejudiced. You understand that the Notes have not
been registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
9
<PAGE>
6.2 SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account" as defined in
Department of Labor Prohibited Transaction Class Exemption ("PTCE") 95-60 (60 FR
35925, July 12, 1995) and in respect thereof you represent that there is no
"employee benefit plan" (as defined in Section 3(3) of ERISA and Section
4975(e)(1) of the Code, treating as a single plan all plans maintained by the
same employer or employee organization or affiliate thereof) with respect to
which the amount of the general account reserves and liabilities of all
contracts held by or on behalf of such plan (before reduction for credits on
account of any reinsurance ceded on a coinsurance basis) exceed 10% of the total
reserves and liabilities of such general account (exclusive of separate account
liabilities) plus surplus, as set forth in the NAIC Annual Statement filed with
your state of domicile; or
(b) the Source is either (i) an insurance company pooled separate
-
account, within the meaning of PTCE 90-1 (55 FR 2891, January 29, 1990), or (ii)
--
a bank collective investment fund, within the meaning of the PTCE 91-38 (56 FR
31966, July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (b), no employee benefit plan or group of
plans maintained by the same employer or employee organization beneficially owns
more than 10% of all assets allocated to such pooled separate account or
collective investment fund; or
(c) the Source constitutes assets of an "investment fund" (as defined
in Part V of the QPAM Exemption) managed by a "qualified professional asset
manager" or "QPAM" (as defined in Part V of the QPAM Exemption), no employee
benefit plan's assets that are included in such investment fund, when combined
with the assets of all other employee benefit plans established or maintained by
the same employer or by an affiliate (within the meaning of Part V(c)(1) of the
QPAM Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by such
QPAM: the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied;
neither the QPAM nor a person controlling or controlled by the QPAM (applying
the definition of "control" in Part V(e) of the QPAM Exemption) owns a 5% or
more interest in the Company; and (i) the identity of such QPAM and (ii) the
- --
names of all employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this paragraph
(c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each of
which plans has been identified to the Company in writing pursuant to this
paragraph (e); or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA and from Section 4975 of the
Code.
10
<PAGE>
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) Quarterly Statements -- within 60 days after the end of each
--------------------
quarterly fiscal period in each fiscal year of the Company (other than the last
quarterly fiscal period of each such fiscal year), duplicate copies of, (i) a
-
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such quarter, and (ii) consolidated statements of income, changes in
--
shareholders' equity and cash flows of the Company and its Subsidiaries, for
such quarter and (in the case of the second and third quarters) for the portion
of the fiscal year ending with such quarter, setting forth in each case in
comparative form the figures for the corresponding periods in the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP
applicable to quarterly financial statements generally, and certified by a
Senior Financial Officer as fairly presenting, in all material respects, the
financial position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified above of
--------
copies of the Company's Quarterly Report on Form 10-Q prepared in compliance
with the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section 7.1(a);
(b) Annual Statements -- within 120 days after the end of each fiscal
-----------------
year of the Company, duplicate copies of, (i) a consolidated balance sheet of
-
the Company and its Subsidiaries, as at the end of such year, and (ii)
--
consolidated statements of income, changes in shareholders' equity and cash
flows of the Company and its Subsidiaries, for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP, and accompanied by an
opinion thereon of independent certified public accountants of recognized
national standing, which opinion shall state that such financial statements
present fairly, in all material respects, the financial position of the
companies being reported upon and their results of operations and cash flows and
have been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances, provided that
--------
the delivery within the time period specified above of the Company's Annual
Report on Form 10-K for such fiscal year (together with the Company's annual
report to shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act) prepared in accordance with the requirements therefor and filed
with the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming available,
---------------------
and in any event within five days, one copy of (i) each financial statement,
-
report, notice or proxy
11
<PAGE>
statement sent by the Company or any Subsidiary to public securities holders
generally, and (ii) each regular or periodic report, each registration statement
--
that shall have become effective (without exhibits except as expressly requested
by such holder), and each final prospectus and all amendments thereto filed by
the Company or any Subsidiary with the Securities and Exchange Commission;
(d) Notice of Default or Event of Default -- promptly, and in any
-------------------------------------
event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default, a written notice specifying the
nature and period of existence thereof and what action the Company is taking or
proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five days after
-------------
a Responsible Officer becoming aware of any of the following, a written notice
setting forth the nature thereof and the action, if any, that the Company or an
ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined in
Section 4043(b) of ERISA and the regulations thereunder, for which notice
thereof has not been waived pursuant to such regulations as in effect on the
date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, other than routine liabilities for
contributions and benefit payments under such plans, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any other such
liabilities or Liens then existing, would reasonably be expected to have a
Material Adverse Effect; and
(f) Requested Information -- with reasonable promptness, such other
---------------------
data and information relating to the business, operations, affairs, financial
condition, assets or properties of the Company or any of its Subsidiaries or
relating to the ability of the Company to perform its obligations hereunder and
under the Notes as from time to time may be reasonably requested by any such
holder of Notes, including, (i) with the Company's approval, any management
-
letter of the accountants of the Company and a certificate of the accountants of
the Company stating that they have reviewed this Agreement and stating further
whether, in preparing their audit pursuant to Section 7.1(b), they have become
aware of any condition or event that then constitutes a Default or an Event of
Default, and, if any such condition or event exists, the nature and period of
such condition or event and (ii) unless the Company is at the time subject to
--
the reporting requirements of Section 13 or 15(d) of the Exchange Act, promptly
upon the written request of any holder of a Note, such information as shall then
be required to permit a resale of Notes by
12
<PAGE>
such holder of Notes pursuant to Rule 144A under the Securities Act (or any
superseding rule providing an exemption from registration under the Securities
Act for resales to qualified institutional buyers); provided, however, that if
-------- -------
such request shall so indicate, the statement and financial statements or other
information shall be delivered to any named prospective purchaser of a Note as
well as to the requesting holder of Notes, so long as the request states that
such holder of Notes believes such prospective purchaser to be a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
(or under any such superseding rule) and any such prospective purchaser shall
have agreed in writing with the Company to be bound by the provisions of Section
20 as to any such information that is Confidential Information.
7.2 OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
-------------------
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.2 through Section 10.9 hereof,
inclusive, during the quarterly or annual period covered by the statements then
being furnished (including with respect to each such Section, where applicable,
the calculations of the maximum or minimum amount, ratio or percentage, as the
case may be, permissible under the terms of such Sections, and the calculation
of the amount, ratio or percentage then in existence); and
(b) Event of Default -- a statement that such officer has reviewed the
----------------
relevant terms hereof and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions of the Company and its
Subsidiaries from the beginning of the quarterly or annual period covered by the
statements then being furnished to the date of the certificate and that such
review shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default or, if any
such condition or event existed or exists (including, without limitation, any
such event or condition resulting from the failure of the Company or any
Subsidiary to comply with any Environmental Law), specifying the nature and
period of existence thereof and what action the Company shall have taken or
proposes to take with respect thereto.
7.3 INSPECTION.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at
----------
the expense of such holder and upon reasonable prior notice to the Company, to
visit the principal executive office of the Company, to discuss the affairs,
prospects, finances and accounts of the Company and its Subsidiaries with the
Company's officers, and, with the consent of the Company (which consent will not
be unreasonably withheld) to visit the other offices and properties of the
Company and each Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing; and
13
<PAGE>
(b) Default -- if a Default or Event of Default then exists, at the
-------
expense of the Company to visit and inspect any of the offices or properties of
the Company or any Subsidiary, to examine all their respective books of account,
records, reports and other papers, to make copies and extracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
officers and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts of the
Company and its Subsidiaries), all at such times and as often as may be
requested.
8. PREPAYMENT OF THE NOTES.
8.1 REQUIRED PREPAYMENTS.
(a) Series A Notes. There shall be no scheduled principal prepayments
--------------
on account of the Series A Notes.
(b) Series B Notes. On April 29, 2003 and on each April 29, thereafter
--------------
to and including April 29, 2008, the Company will prepay $10,571,429 principal
amount (or such lesser principal amount as shall then be outstanding) of such
Series B Notes at par and without payment of the Make-Whole Amount or any
premium, provided that, upon any partial prepayment of the Notes pursuant to
--------
Section 8.2 or 8.4 or purchase of the Notes permitted by Section 8.6, the
principal amount of each required prepayment of the Notes becoming due under
this Section 8.1(b) on and after the date of such prepayment or purchase shall
be reduced in the same proportion as the aggregate unpaid principal amount of
the Notes is reduced as a result of such prepayment or purchase.
(c) Series C Notes. There shall be no scheduled principal prepayments
--------------
on account of the Series C Notes.
(d) Series D Notes. On April 29, 2007 and on each April 29, thereafter
to and including April 29, 2010, the Company will prepay $5,000,000 principal
amount (or such lesser principal amount as shall then be outstanding) of such
Series D Notes at par and without payment of the Make-Whole Amount or any
premium, provided that, upon any partial prepayment of the Notes pursuant to
--------
Section 8.2 or 8.4 or purchase of the Notes permitted by Section 8.6, the
principal amount of each required prepayment of the Notes becoming due under
this Section 8.1(d) on and after the date of such prepayment or purchase shall
be reduced in the same proportion as the aggregate unpaid principal amount of
the Notes is reduced as a result of such prepayment or purchase.
8.2 OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below, prepay
at any time all, or from time to time any part of, the Notes, in an amount not
less than 10% of the aggregate principal amount of the Notes then outstanding in
the case of a partial prepayment, at 100% of the principal amount so prepaid,
plus the Make-Whole Amount determined for the prepayment date with respect to
such principal amount. The Company will give each holder of Notes written notice
of each optional prepayment under this Section 8.2 not less than 30 days and not
more than 60 days prior to the date fixed for such prepayment. Each such notice
shall specify such date, the aggregate principal amount of the Notes to be
prepaid on such date, the
14
<PAGE>
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.3), and the interest to be paid on the prepayment date
with respect to such principal amount being prepaid, and shall be accompanied by
a certificate of a Senior Financial Officer as to the estimated Make-Whole
Amount due in connection with such prepayment (calculated as if the date of such
notice were the date of the prepayment), setting forth the details of such
computation. Two Business Days prior to such prepayment, the Company shall
deliver to each holder of Notes a certificate of a Senior Financial Officer
specifying the calculation of such Make-Whole Amount as of the specified
prepayment date.
8.3 ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes, the principal
amount of the Notes to be prepaid shall be allocated among all of the Notes at
the time outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore called for prepayment.
8.4 OFFER TO PREPAY RESULTING FROM ASSET DISPOSITION.
(a) In the event the Company determines to offer to prepay Notes in
accordance with Section 10.7(a), the Company shall (i) deliver to each holder of
-
a Note a written notice of the occurrence of an Asset Disposition and the
election by the Company to offer to prepay Notes in accordance with Section 10.7
(a "NOTICE AND OFFER TO PREPAY") and (ii) if such holder elects to accept
--
prepayment by delivering an Acceptance (as hereinafter defined), prepay on the
Special Prepayment Date (as hereinafter defined) Notes held by such holder in a
principal amount equal to (i) the Allocated Excess Amount times (ii) a fraction,
- --
(A) the numerator of which shall be the principal amount of Notes then held by
-
such holder of Notes and (B) the denominator of which shall be the aggregate
-
principal amount of all Notes at the time outstanding; provided, however, that
-------- -------
if the amount so determined exceeds the principal amount of Notes held by such
holder of Notes, all Notes held by such holder of Notes shall be prepaid in
full. Any prepayment of Notes pursuant to this Section 8.4 shall be made at a
prepayment price equal to the principal amount of Notes to be prepaid, together
with accrued interest thereon to the date of prepayment, plus a premium on the
principal amount of Notes to be prepaid equal to the Make-Whole Amount.
(b) A Notice and Offer to Prepay shall state: (i) that such notice is
-
delivered pursuant to this Section 8.4; (ii) the Allocated Excess Amount with
--
respect to the Asset Disposition (showing in reasonable detail the calculation
thereof and accompanied by the information required to be provided by Section
10.7(c)); (iii) the date by which a holder of Notes must elect to receive
---
prepayment pursuant to Section 8.4(c); (iv) the date on which if such election
--
is made such holder will receive payment, which date shall be the first Business
Day occurring at least 45 days after the date of the Notice and Offer to Prepay
(the "SPECIAL PREPAYMENT DATE"); (v) the principal amount of Notes held by such
-
holder of Notes which is subject to prepayment; (vi) the aggregate amount of the
--
premium that the Company would be required to pay if such prepayment were made
on the date of the Notice and Offer to Prepay (including in detail all
calculations made to determine such amount, whether or not a premium is
determined to be due and payable); and (vii) the aggregate amount of Senior Debt
---
(other than the Notes) that is subject to prepayment, if any.
15
<PAGE>
(c) To elect prepayment pursuant to this Section 8.4, a holder of
Notes shall deliver to the Company, on or before the twenty-fifth day following
the date of receipt of the Notice and Offer to Prepay, written notice of such
holder of Notes' election to exercise its right to be prepaid pursuant to this
Section 8.4 (an "ACCEPTANCE"). The Acceptance shall set forth the name of such
holder (an "ACCEPTING HOLDER") and the statement that it elects to exercise its
right to be prepaid pursuant to this Section 8.4. Promptly, and in any event
within two Business Days after receipt of an Accepting Holder's Acceptance, the
Company shall by written notice (the "SECOND NOTICE") to such Accepting Holder
acknowledge receipt thereof. In the event that the aggregate amount to be
prepaid to the Accepting Holders pursuant to Section 8.4(a) is less than the
Allocated Excess Amount, the Company shall provide notice thereof to each
Accepting Holder (the "ADDITIONAL PAYMENT NOTICE") and shall make an additional
offer to prepay the Notes of each Accepting Holder in an amount (the "ADDITIONAL
PREPAYMENT AMOUNT") equal to the Allocated Excess Amount, less all prepayments
of the Notes to be made pursuant to this Section 8.4, times a fraction, the
numerator of which shall be the principal amount of the Notes then held by each
such Accepting Holder and the denominator of which shall be the aggregate
principal amount of all Notes held by the Accepting Holders. To elect
prepayment in the amount of such Additional Prepayment Amount, the Accepting
Holder shall deliver to the Company, on or before the tenth day after receipt of
the Additional Payment Notice, written notice of such Accepting Holder's
election hereunder (the "ADDITIONAL ACCEPTANCE"), which notice shall include the
Accepting Holder's name and the statement that it elects to exercise its right
to receive the Additional Prepayment Amount pursuant to this Section 8.4. In
addition, the Company shall subsequently provide notice of the final
determination of any Make-Whole Amount as required by Section 8.7. Any
Acceptance and Additional Acceptance having been so delivered by an Accepting
Holder of Notes pursuant to this Section 8.4(c) and not rescinded prior to the
Special Prepayment Date, the aggregate principal amount of Notes held by such
Accepting Holder determined to be subject to prepayment pursuant to Section
8.4(a) and this Section 8.4(c), together with accrued interest thereon and the
premium on the principal amount of Notes to be prepaid equal to the Make-Whole
Amount, if any, shall become due and payable on the Special Prepayment Date.
8.5 MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and Make-
Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.6 PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except (a) upon the payment or prepayment of the Notes in
-
accordance with the terms of this Agreement and the Notes or (b) pursuant to an
-
offer to purchase made by the Company or an Affiliate pro rata to the
16
<PAGE>
holders of all Notes at the time outstanding upon the same terms and conditions.
Any such offer shall provide each holder with sufficient information to enable
it to make an informed decision with respect to such offer, and shall remain
open for at least 15 Business Days. If the holders of more than 25% of the
principal amount of the Notes then outstanding accept such offer, the Company
shall promptly notify the remaining holders of such fact and the expiration date
for the acceptance by holders of Notes of such offer shall be extended by the
number of days necessary to give each such remaining holder at least 15 Business
Days from its receipt of such notice to accept such offer. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
8.7 MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, provided that the Make-Whole Amount may in no
--------
event be less than zero. For the purposes of determining the Make-Whole Amount,
the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or 8.4 has become or is
declared to be immediately due and payable pursuant to Section 12.1, as the
context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Note, the sum of (x) 0.50% plus (y) the yield to maturity implied by (i) the
- - -
yields reported, as of 10:00 A.M. (New York City time) on the second Business
Day preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page PX-1" on the Bloomberg Financial Markets Service (or
such other display as may replace Page PX-1 on Bloomberg Financial Markets
Service) for actively traded U.S. Treasury securities having a maturity equal to
the Remaining Average Life of such Called Principal as of such Settlement Date,
or (ii) if such yields are not reported as of such time or the yields reported
--
as of such time are not ascertainable, the Treasury Constant Maturity Series
Yields reported, for the latest day for which such yields have been so reported
as of the second Business Day preceding the Settlement Date with respect to such
Called Principal, in U.S. Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield will be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent
-
yields in accordance with accepted financial practice and (b) interpolating
-
linearly between (1) the "on the run" U.S. Treasury security with the
-
17
<PAGE>
maturity closest to and greater than the Remaining Average Life and (2) the "on
-
the run" U.S. Treasury security with the maturity closest to and less than the
Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained by
dividing (i) such Called Principal into (ii) the sum of the products obtained by
- --
multiplying (a) the principal component of each Remaining Scheduled Payment with
-
respect to such Called Principal by (b) the number of years (calculated to the
-
nearest one-twelfth year) that will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such Remaining
Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such Called
Principal if no payment of such Called Principal were made prior to its
scheduled due date, provided that if such Settlement Date is not a date on which
--------
interest payments are due to be made under the terms of the Notes, then the
amount of the next succeeding scheduled interest payment will be reduced by the
amount of interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2, 8.4 or 12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or 8.4 or has become or is declared to be immediately due and
payable pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1 COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the operation and ownership
of their respective properties or to the conduct of their respective businesses,
in each case to the extent necessary to ensure that non-compliance with such
laws, ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
9.2 INSURANCE.
The Company will and will cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles, co-
insurance and self-insurance, if adequate reserves are
18
<PAGE>
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
9.3 MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to maintain
and keep, or cause to be maintained and kept, their respective properties in
good repair, working order and condition (other than ordinary wear and tear), so
that the business carried on in connection therewith may be properly conducted
at all times, provided that this Section 9.3 shall not prevent the Company or
--------
any Subsidiary from discontinuing the operation and the maintenance of any of
its properties if such discontinuance is desirable in the conduct of its
business and the Company has concluded that such discontinuance would not,
individually or in the aggregate, have a Material Adverse Effect.
9.4 PAYMENT OF TAXES.
The Company will and will cause each of its Subsidiaries to file all
income tax or similar tax returns required to be filed in any jurisdiction and
to pay and discharge all taxes shown to be due and payable on such returns and
all other taxes, assessments, governmental charges, or levies payable by any of
them, to the extent such taxes and assessments have become due and payable and
before they have become delinquent, provided that neither the Company nor any
--------
Subsidiary need pay any such tax or assessment if (i) the amount, applicability
-
or validity thereof is diligently contested by the Company or such Subsidiary on
a timely basis in good faith and in appropriate proceedings, and the Company or
a Subsidiary has established adequate reserves therefor in accordance with GAAP
on the books of the Company or such Subsidiary or (ii) the nonpayment of all
--
such taxes and assessments in the aggregate would not reasonably be expected to
have a Material Adverse Effect.
9.5 CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and
effect its corporate existence, except as otherwise permitted by Section 10.2.
Subject to Sections 10.2, 10.7 and 10.9, the Company will at all times preserve
and keep in full force and effect the corporate existence of each of its
Subsidiaries and all rights and franchises of the Company and its Subsidiaries
unless, in the good faith judgment of the Company, the termination of or failure
to preserve and keep in full force and effect such corporate existence, right or
franchise would not, individually or in the aggregate, have a Material Adverse
Effect.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1 TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any Subsidiary to, enter
into directly or indirectly any Material transaction or Material group of
related transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate (other than the Company or another Subsidiary), except pursuant to
19
<PAGE>
the reasonable requirements of the Company's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would be obtainable in a comparable arm's-length transaction
with a Person not an Affiliate.
10.2 MERGER, CONSOLIDATION, ETC.
The Company will not, and will not permit any of its Subsidiaries to,
consolidate with or merge with any other corporation, or convey, transfer or
lease substantially all of its assets in a single transaction or series of
transactions, except:
(a) the Company may consolidate with or merge with any corporation, or
convey, transfer or lease substantially all of its assets in a single
transaction or series of transactions to any Person, so long as (i) the
-
successor formed by such consolidation or the survivor of such merger or the
Person that acquires by conveyance, transfer or lease substantially all of the
assets of the Company as an entirety, as the case may be (the "SUCCESSOR
CORPORATION"), shall be a solvent corporation organized and existing under the
laws of the United States of America, any State thereof or the District of
Columbia, and, if the Company is not the Successor Corporation, (x) the
-
Successor Corporation shall have executed and delivered to each holder of Notes
its assumption of the due and punctual performance and observance of each
covenant and condition of this Agreement and the Notes (pursuant to agreements
and instruments approved by the Required Holders, such approval not to be
unreasonably withheld) and (y) the Company shall have caused to be delivered to
-
each holder of Notes an opinion of nationally recognized independent counsel or
other counsel satisfactory to the Required Holders, to the effect that all
agreements are enforceable in accordance with their terms and comply with all
terms hereof; (ii) immediately prior to such transaction, no Default or Event
--
of Default exists; and (iii) immediately after giving effect to such
---
transaction, (x) no Default or Event of Default would exist, and (y) the
- -
Successor Corporation would be permitted by the provisions of Section 10.3 to
incur at least $1.00 of additional Funded Debt owing to a Person other than a
Subsidiary of the Successor Corporation; and
(b) any Subsidiary may consolidate with or merge with, or convey,
transfer or lease substantially all of its assets in a single transaction or
series of transactions to, (i) the Company or any Substantial Subsidiary or (ii)
- --
any Person (other than the Company or any Substantial Subsidiary), provided that
--------
in the case of a transaction covered by this clause (ii), such conveyance,
--
merger, transfer or lease would be permitted by the provisions of Section
10.7(a); provided, however, if as a result of any such merger or consolidation,
-------- -------
such Subsidiary shall cease to be a Subsidiary, any Indebtedness of the Company
or any other Subsidiary held by such Subsidiary, and any Indebtedness of such
Subsidiary held by the Company or any other Subsidiaries, shall have been paid
in full.
No such conveyance, transfer or lease of substantially all of the
assets of the Company shall have the effect of releasing the Company or any
Successor Corporation from its liability under this Agreement or the Notes.
20
<PAGE>
10.3 INCURRENCE OF FUNDED DEBT.
The Company will not, and will not permit any Subsidiary to, directly
or indirectly, create, assume, incur, guarantee or in any manner become liable,
contingently or otherwise, in respect of any Funded Debt, except for:
(a) the Notes;
(b) Funded Debt of the Company and its Subsidiaries outstanding on the
date of this Agreement and the Other Agreements;
(c) other Funded Debt owing to a Person other than the Company or any
Subsidiary not referred to in Section 10.3 (a) or (b), provided that,
--------
immediately after giving effect to the incurrence of Funded Debt and any
application of the proceeds thereof to the repayment of any Indebtedness, the
pro forma ratio of (i) Consolidated Adjusted Funded Debt to the sum of (ii)(x)
- -- -
Consolidated Net Worth plus (y) Consolidated Adjusted Funded Debt would not
-
exceed 0.50 to 1.00; and
(d) any renewal, extension, substitution, refinancing, or replacement
of any Funded Debt then outstanding, provided that (i) the principal amount of
--------
Funded Debt resulting from such renewal, extension, substitution, refinancing or
replacement shall not exceed the principal amount of Funded Debt so renewed,
extended, substituted for, refinanced or replaced or (ii) if the principal
amount of Funded Debt resulting from such renewal, extension, substitution,
refinancing or replacement does exceed the principal amount of Funded Debt so
renewed, extended, substituted for, refinanced or replaced, after giving effect
to the renewal, extension, substitution, refinancing or replacement of an
equivalent principal amount, the excess principal amount of Funded Debt shall be
permitted to be incurred under Section 10.3(c).
For the purpose of this Section 10.3, any Person becoming a Subsidiary after the
date of Closing shall be deemed, at the time it becomes a Subsidiary, to have
incurred all of its outstanding Indebtedness, and any Person renewing,
extending, substituting, refinancing, refunding or replacing of any Indebtedness
shall be deemed to have incurred such Indebtedness at the time of such renewal,
extension, substitution, refinancing, refunding or replacement.
10.4 PRIORITY DEBT.
The Company will not at any time permit Priority Debt to exceed the
greater of (i) $100,000,000 and (ii) 15% of Consolidated Net Worth.
- --
10.5 CONSOLIDATED NET WORTH.
The Company will not at any time permit Consolidated Net Worth to be
less than the sum of (i) $325,000,000 plus (ii) an aggregate amount equal to 25%
- --
of its Consolidated Net Income (but, in each case, only if a positive number)
for each completed fiscal year beginning with the fiscal year ending December
31, 1999.
10.6 FIXED CHARGE RATIO.
21
<PAGE>
The Company will not at any time permit the ratio of Income Available
for Fixed Charges to Fixed Charges for the four fiscal quarters then most
recently ended to be less than 1.75 to 1.00.
10.7 SALE OF ASSETS.
(a) Except as permitted under Section 10.2, the Company will not, and
will not permit any of its Subsidiaries to, make any Asset Disposition unless:
(i) in the good faith opinion of the Company, such Asset
Disposition is in exchange for consideration having a Fair Market Value at least
equal to that of the property exchanged and is in the best interest of the
Company or such Subsidiary;
(ii) immediately prior to such Asset Disposition, no Default or
Event of Default exists;
(iii) immediately after giving effect to such Asset Disposition,
no Default or Event of Default would exist; and
(iv) immediately after giving effect to the Asset Disposition,
the Disposition Value of all property that was the subject of any Asset
Disposition during the 365-day period ending on the date the Asset Disposition
is consummated would not exceed 15% of Consolidated Total Assets as of the end
of the then most recently ended fiscal year of the Company; provided that the
--------
portion (the "EXCESS PORTION") of the Disposition Value of any Asset Disposition
that (when added to the Disposition Value of any other Asset Dispositions during
the 365-day period ending on the date such Asset Disposition was consummated)
would exceed 15% of Consolidated Total Assets as of the end of the then most
recently ended fiscal year of the Company shall be excluded from the computation
required by this Section 10.7(a) if (x) the Net Proceeds Amount in respect of
-
such Excess Portion (the "EXCESS AMOUNT") is applied within 360 days to purchase
other noncurrent assets which are intended to be used in the business of the
Company or its Subsidiaries or (y) the Company makes an offer to prepay
-
outstanding Senior Debt in an amount equal to the Excess Amount in connection
with such Asset Disposition in compliance with Sections 8.4 and 10.7(b);
provided further, that (A) any such offer shall be made ratably to holders of
- -------- ------- -
all outstanding Senior Debt and (B) the Special Prepayment Date in connection
-
with any such offer shall be a day not more than 360 days after the date on
which such Asset Disposition is consummated.
(b) In the event that the Excess Amount in respect of any Asset
Disposition is to be applied to the prepayment of Senior Debt pursuant to
Section 10.7(a), (i) if no Senior Debt (other than the Notes) is at the time
outstanding, such Excess Amount shall be deemed to equal the Allocated Excess
Amount and shall be applied to an offer to prepay Notes pursuant to the
provisions of Section 8.4; or (ii) if Senior Debt (other than the Notes) is at
the time outstanding, such Excess Amount shall be allocated pro rata among the
Notes and such Senior Debt (other than the Notes) in proportion to the aggregate
unpaid principal amount of each thereof. The portion of such Excess Amount so
allocated to the Notes (the "ALLOCATED EXCESS AMOUNT") shall be applied to an
offer to prepay Notes pursuant to Section 8.4, and the portion of such Excess
22
<PAGE>
Amount allocated to any Senior Debt (other than the Notes) shall be applied to
the prepayment of or an offer to prepay such Senior Debt.
(c) Any Notice and Offer to Prepay delivered to the holders of the
Notes pursuant to Section 8.4 shall be accompanied by an Officer's Certificate
setting forth in reasonable detail (i) the date, amount of Net Proceeds Amount
-
and description of the assets disposed of in each Asset Disposition during the
365-day period in which the Asset Disposition giving rise to the Excess Amount
was consummated; (ii) the calculations of the Excess Portion and Excess Amount
--
with respect to any such Asset Disposition; (iii) the calculation of the
---
Allocated Excess Amount being applied to the offer to prepay Notes pursuant to
Section 8.4; (iv) the application to the prepayment of, or offer to prepay,
--
Senior Debt (other than the Notes) in compliance with Section 10.7(a) hereof
with the remaining portion of such Excess Amount; and (v) the aggregate amount
-
of the premium on the principal amount of Notes to be prepaid equal to the Make-
Whole Amount that the Company would be required to pay if such payment were made
on the date of the Notice and Offer to Prepay (including in detail all
calculations made to determine such amount, whether or not a premium is
determined to be due and payable).
10.8 LIENS.
The Company will not, and will not permit any Subsidiary to, directly
or indirectly create, incur, assume or permit to exist (upon the happening of a
contingency or otherwise) any Lien on or with respect to any property or asset
(including, without limitation, any document or instrument in respect of goods
or accounts receivable) of the Company or any such Subsidiary, whether now owned
or held or hereafter acquired, or any income or profits therefrom, or assign or
otherwise convey any right to receive income or profits, except:
(a) Liens for taxes, assessments or other governmental charges which
are not yet due and payable or the payment of which is not at the time required
by Section 9.4;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other similar Liens, in each case, incurred in the
ordinary course of business for sums not yet due and payable, or if overdue and
not paid (i) the amount, applicability or validity of any such Lien is being
diligently contested by the Company or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Company or such Subsidiary or (ii) the nonpayment of all such Liens in the
aggregate would not reasonably be expected to have a Material Adverse Effect.
(c) any attachment or judgment Lien, provided the Company or any such
--------
Subsidiary has established adequate reserves therefor in accordance with GAAP on
the books of the Company or any such Subsidiary, unless the judgment it secures
shall not, within 60 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 60 days after the expiration of any such stay;
(d) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business (i) in connection with workers'
-
compensation, unemployment insurance and other types of social security or
retirement benefits, or (ii) to secure (or to obtain
--
23
<PAGE>
letters of credit that secure) the performance of tenders, statutory
obligations, surety bonds, appeal bonds, bids, leases (other than Capitalized
Leases), performance bonds, purchase, construction or sales contracts and other
similar obligations, in each case not incurred or made in connection with the
borrowing of money, the obtaining of advances or credit or the payment of the
deferred purchase price of property; provided, however, in each case the
-------- -------
obligation secured is not overdue, or if overdue, (i) is being diligently
-
contested in good faith by appropriate actions or proceedings, and (ii) the
--
Company or any such Subsidiary has established adequate reserves therefor in
accordance with GAAP on the books of the Company or any such Subsidiary;
(e) leases or subleases granted to others, easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case
incidental to, and not interfering with, the ordinary conduct of the
business of the Company or any of its Subsidiaries, provided that such
--------
Liens do not, in the aggregate, materially detract from the value or
utility of such property as it is currently used;
(f) Liens on property of any Subsidiary securing Indebtedness owing to
the Company;
(g) Liens existing on the date of this Agreement and securing
Indebtedness of the Company and its Subsidiaries set forth in Schedule
5.15;
(h) any Lien created to secure all or any part of the purchase price,
or to secure Indebtedness (including Capitalized Leases) incurred or assumed to
pay all or any part of the purchase price or cost of construction, of tangible
property (or any improvement thereon) acquired or constructed by the Company or
a Subsidiary after the date of the Closing, provided that:
--------
(i) any such Lien shall extend solely to the item or items of
such property (or improvement thereon) so acquired or constructed and, if
required by the terms of the instrument originally creating such Lien, other
property (or improvement thereon) which is an improvement to or is acquired for
specific use in connection with such acquired or constructed property (or
improvement thereon) or which is real property being improved by such acquired
or constructed property (or improvement thereon),
(ii) the principal amount of the Indebtedness secured by any
such Lien shall at no time exceed an amount equal to 100% of the lesser of (A)
the cost to the Company or such Subsidiary of the property (or improvement
thereon) so acquired or constructed and (B) the Fair Market Value (as determined
in good faith by the board of directors of the Company) of such property (or
improvement thereon) at the time of such acquisition or construction, and
(iii) any such Lien shall be created contemporaneously with, or
within 180 days after, the acquisition or construction of such property (or
improvement thereon);
(i) any Lien existing on property of a Person immediately prior to
its being consolidated with or merged into the Company or a Subsidiary or its
becoming a Subsidiary, or any Lien existing on any property acquired by the
Company or any Subsidiary at the time such property is so acquired (whether or
not the Indebtedness secured thereby shall have been assumed), provided that (i)
-------- -
no such Lien shall have been created or assumed in contemplation of
24
<PAGE>
such consolidation or merger or such Person's becoming a Subsidiary or such
acquisition of property, and (ii) each such Lien shall extend solely to the item
--
or items of property so acquired and, if required by the terms of the instrument
originally creating such Lien, other property which is an improvement to or is
acquired for specific use in connection with such acquired property;
(j) any Lien renewing, extending or refunding any Lien permitted by
paragraphs (g), (h) or (i) of this Section 10.8, provided that (i) the principal
-------- -
amount of Indebtedness secured by such Lien immediately prior to such extension,
renewal or refunding is not increased or the maturity thereof reduced, (ii) such
--
Lien is not extended to any other property, (iii) immediately prior to such
---
extension, renewal or refunding no Default or Event of Default exists, and (iv)
--
immediately after such extension, renewal or refunding, no Default or Event of
Default would exist; and
(k) other Liens not otherwise permitted by paragraphs (a) through (j)
of this Section 10.8, provided that (i) all Indebtedness secured by such other
-------- -
Liens plus (ii) Indebtedness of Subsidiaries (other than Indebtedness owed to
--
the Company or another Subsidiary) does not exceed the limitations set forth in
Section 10.4.
10.9 DISPOSAL OF OWNERSHIP OF A SUBSIDIARY.
The Company will not, and will not permit any of its Subsidiaries to, sell
or otherwise dispose of any shares of Subsidiary Stock, nor will the Company
permit any such Subsidiary to issue, sell or otherwise dispose of any shares of
its own Subsidiary Stock, provided that the foregoing restrictions do not apply
--------
to:
(a) the issue of directors' qualifying shares by any such Subsidiary;
(b) any such Transfer of Subsidiary Stock constituting a Transfer
described in clause (a) of the definition of "Asset Disposition"; and
(c) a Transfer of any of the Subsidiary Stock of a Subsidiary of the
Company owned by the Company and its other Subsidiaries if such Transfer
satisfies the requirements of Section 10.7(a) hereof; provided, however, if as a
-------- -------
result of any such Transfer of Subsidiary Stock of a Subsidiary such Subsidiary
shall cease to be a Subsidiary, any Indebtedness of the Company or any other
Subsidiary held by such Subsidiary, and any Indebtedness of such Subsidiary held
by the Company or any other Subsidiaries, shall have been paid in full.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or Make-Whole
Amount, if any, on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or
25
<PAGE>
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable; or
(c) the Company defaults in the performance of or compliance with any
term contained in Sections 7.1(d) or Section 10.1 through 10.9, inclusive, for
more than five Business Days; or
(d) the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a), (b) and
(c) of this Section 11) and such default is not remedied within 30 days after
the earlier of (i) a Responsible Officer obtaining actual knowledge of such
-
default and (ii) the Company receiving written notice of such default from any
--
holder of a Note (any such written notice to be identified as a "notice of
default" and to refer specifically to this paragraph (d) of Section 11); or
(e) any representation or warranty made in writing by or on behalf of
the Company or by any officer of the Company in this Agreement or in any writing
furnished in connection with the transactions contemplated hereby proves to have
been false, misleading or incorrect in any material respect on the date as of
which made; or
(f) (i) the Company or any Subsidiary is in default (as principal or
-
as guarantor or other surety) in the payment of any principal of or premium or
make-whole amount or interest on any Indebtedness that constitutes all or part
of one or more series or issues of Indebtedness outstanding in an aggregate
principal amount of at least $15,000,000 beyond any period of grace provided
with respect thereto, or (ii) the Company or any Subsidiary is in default in
--
the performance of or compliance with any term of any evidence or evidences of
Indebtedness in an aggregate outstanding principal amount of at least
$15,000,000 or of any mortgage, indenture or other agreement relating thereto or
any other condition exists, and as a consequence of such default or condition
such Indebtedness has become, or has been declared due and payable before its
stated maturity or before its regularly scheduled dates of payment; or
(g) the Company or any Significant Subsidiary (i) is generally not
-
paying, or admits in writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the filing against it of, a
--
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
---
an assignment for the benefit of its creditors, (iv) consents to the appointment
--
of a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, (v) is
-
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
--
the purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the Company or any of its Significant
Subsidiaries, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for liquidation or to
take advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the Company or any of its
Significant Subsidiaries, or any such petition shall be
26
<PAGE>
filed against the Company or any of its Significant Subsidiaries and such
petition shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money aggregating
in excess of $15,000,000 are rendered against one or more of the Company and its
Subsidiaries and which judgments are not, within 30 days after entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged within 30
days after the expiration of such stay; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
-
standards of ERISA or the Code for any plan year or part thereof or a waiver of
such standards or extension of any amortization period is sought or granted
under Section 412 of the Code, (ii) a notice of intent to terminate any Plan
--
shall have been or is reasonably expected to be filed with the PBGC or the PBGC
shall have instituted proceedings under ERISA Section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have notified the
Company or any ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate "amount of unfunded benefit liabilities"
---
(within the meaning of Section 4001(a)(18) of ERISA) under all Plans, determined
in accordance with Title IV of ERISA, shall exceed $15,000,000, (iv) the Company
--
or any ERISA Affiliate shall have incurred or is reasonably expected to incur
any liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, other than routine
liabilities for contributions and benefit payments under such plans, or, (v) the
-
Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi)
--
the Company or any Subsidiary establishes or amends any employee welfare benefit
plan that provides post-employment welfare benefits in a manner that would
increase the liability of the Company or any Subsidiary thereunder; and any such
event or events described in clauses (i) through (vi) above, either individually
or together with any other such event or events, would reasonably be expected to
have a Material Adverse Effect.
As used in Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1 ACCELERATION.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default described in
clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has
occurred, all the Notes then outstanding shall automatically become immediately
due and payable.
(b) If any other Event of Default has occurred and is continuing, the
holders of a majority of the principal amount of the Notes then outstanding may
at any time at their option, by written notice or notices to the Company,
declare all the Notes then outstanding to be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by
27
<PAGE>
such Event of Default may at any time, at its or their option, by written notice
or notices to the Company, declare all the Notes held by it or them to be
immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
-
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
-
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
12.2 OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
12.3 RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the Required Holders, by written
notice to the Company, may rescind and annul any such declaration and its
consequences if (a) the Company has paid all overdue interest on the Notes, all
-
principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) all Events of Default and Defaults, other than
-
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17, and (c)
-
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section
12.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
12.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right,
power or remedy conferred by this Agreement or by any Note upon any holder
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute
28
<PAGE>
or otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 12, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1 REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2 TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibits 1-A, 1-B,
1-C and 1-D, as applicable. Each such new Note shall be dated and bear interest
from the date to which interest shall have been paid on the surrendered Note or
dated the date of the surrendered Note if no interest shall have been paid
thereon. The Company may require payment of a sum sufficient to cover any stamp
tax or governmental charge imposed in respect of any such transfer of Notes.
Notes shall not be transferred or exchanged in denominations of less than
$1,000,000, provided that if necessary to enable the registration of transfer or
--------
exchange by a holder of any Note in a principal amount then outstanding of less
than $1,000,000, one Note may be issued in the same denomination as the Note
being transferred or exchanged. Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be deemed to have
made the representation set forth in Section 6.2.
13.3 REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be,
29
<PAGE>
in the case of an Institutional Investor, notice from such Institutional
Investor of such ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that, if the holder of such Note is, or is a
--------
nominee for, an original Purchaser or another holder of a Note with a minimum
net worth of at least $10,000,000, such Person's own unsecured agreement of
indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof, the Company at its own expense shall execute and deliver, in lieu
thereof, a new Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
14. PAYMENTS ON NOTES.
14.1 PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made in
Malvern, Pennsylvania at the principal office of the Company in such
jurisdiction. The Company may at any time, by notice to each holder of a Note,
change the place of payment of the Notes so long as such place of payment shall
be either the principal office of the Company in such jurisdiction or the
principal office of a bank or trust company in such jurisdiction.
14.2 HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.
30
<PAGE>
15. EXPENSES, ETC.
15.1 TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all costs and expenses (including reasonable attorneys'
fees of a special counsel and, if reasonably required, local or other counsel)
incurred by you and each Other Purchaser or holder of a Note in connection with
such transactions and in connection with any amendments, waivers or consents
under or in respect of this Agreement or the Notes (whether or not such
amendment, waiver or consent becomes effective), including, without limitation:
(a) the costs and expenses incurred in enforcing or defending (or determining
-
whether or how to enforce or defend) any rights under this Agreement or the
Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, and (b) the costs and expenses,
-
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any Subsidiary or in connection with any work-
out or restructuring of the transactions contemplated hereby and by the Notes.
The Company will pay, and will save you and each other holder of a Note harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by you).
15.2 SURVIVAL.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1 REQUIREMENTS.
This Agreement and the Notes may be amended or supplemented, and the
observance of any term hereof or thereof may be waived, with the written consent
of the Company and (i) on or prior to the Closing, you, and (ii) after the
- --
Closing, the holders of a majority of the principal amount of Notes then
outstanding ; provided, however, that no such
-------- -------
31
<PAGE>
amendment, supplement or waiver shall, without written consent of the holders of
all the Notes then outstanding, (a) subject to the provisions of Section 12
-
relating to acceleration or rescission, change, with respect to the Notes, the
final maturity, the amount or time of any prepayment or payment of principal of,
or reduce the rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, the Notes, or (b) change the percentage
-
of the principal amount of Notes which are required to consent to any amendment
or waiver, or (c) amend any of Sections 1-6, 8, 11(a), 11(b), 12, 17 or 20 or
-
any defined term (as it is used therein). Notwithstanding any other provision of
this Agreement, no consent to any such amendment or supplement by any holder of
a Note and no such waiver by any holder of a Note shall have any effect for the
purposes of this Section 17.1 if such consent or waiver was obtained in
connection with or in anticipation of the purchase by the Company, any Affiliate
of the Company or any person of any portion of the Notes held by such holder of
a Note, unless the holder of each Note at a time outstanding has executed a
consent or waiver, as the case may be, to substantially the same effect as the
consent or waiver obtained from such holder of a Note.
17.2 SOLICITATION OF HOLDERS OF NOTES.
(a) Solicitation. The Company will provide each holder of the Notes
------------
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
-------
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for, as an inducement to or otherwise in connection with, the
entering into by any holder of Notes of any waiver or amendment of any of the
terms and provisions hereof unless such remuneration is concurrently paid, or
security is concurrently granted, on the same terms, ratably to each holder of
Notes then outstanding even if such holder did not consent to such waiver or
amendment.
17.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note
nor any delay in exercising any rights hereunder or under any Note shall operate
as a waiver of any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
32
<PAGE>
17.4 NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
-
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
-
requested (postage prepaid), or (c) by a recognized overnight delivery service
-
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or it
shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in writing, or
(iii) if to the Company, to the Company at its address set forth at
the beginning hereof to the attention of its Chief Financial Officer, or at such
other address as the Company shall have specified to the holder of each Note in
writing.
Notices under this Section 18 will be deemed given only when actually received.
33
<PAGE>
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
-
executed, (b) documents received by you at the Closing (except the Notes
-
themselves), and (c) financial statements, certificates and other information
-
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
--------
include information that (a) was publicly available or otherwise known to you
-
prior to the time of such disclosure, (b) subsequently becomes publicly
-
available through no act or omission by you or any person acting on your behalf,
(c) otherwise becomes known to you other than through disclosure by the Company
-
or any Subsidiary or (d) constitutes financial statements delivered to you under
-
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
--------
Information to (i) your directors, officers, employees, agents, attorneys and
-
affiliates, (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your financial
--
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor
--- --
to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
20), (v) any Person from which you offer to purchase any security of the Company
-
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (vi) any federal
--
or state regulatory authority having jurisdiction over you, (vii) the National
---
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio, or (viii) any other Person to which such delivery or
----
disclosure may be necessary or appropriate (w) to effect compliance with any
-
law, rule, regulation or order applicable to you, (x) in response to any
-
subpoena or other legal process, (y) in connection with any litigation to which
-
you are a
34
<PAGE>
party or (z) if an Event of Default has occurred and is continuing, to
-
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
22. MISCELLANEOUS.
22.1 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
22.2 PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-whole Amount or interest on
any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
22.3 SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition
35
<PAGE>
or unenforceability in any jurisdiction shall (to the full extent permitted by
law) not invalidate or render unenforceable such provision in any other
jurisdiction.
22.4 CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.5 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.6 GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
36
<PAGE>
[SEPARATE IDENTICAL AGREEMENTS WERE EXECUTED BY THE COMPANY AND EACH OF THE
FOLLOWING ENTITIES]
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
SHARED MEDICAL SYSTEMS CORPORATION
By: /s/ T. W. Kyle
-------------------------------
Name: T. W. Kyle
Title: Senior Vice President
37
<PAGE>
The foregoing is hereby agreed to as of the
date thereof.
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
By: CIGNA Investments, Inc. (authorized agent)
By: /s/ Stepen A. Osborn
-------------------------------------
Name: Stephen A. Osborn
Title: Managing Director
MODERN WOODMEN OF AMERICA
By: /s/ G. P. Odean
-------------------------------------------
Name: G. P. Odean
Title: Assistant National Secretary
NATIONWIDE LIFE AND ANNUITY
INSURANCE COMPANY
By: /s/ Mark W. Poeppelman
-------------------------------------------
Name: Mark W. Poeppelman
Title: Authorized Signatory
NATIONWIDE INDEMNITY COMPANY
By: /s/ Mark W. Poeppelman
-------------------------------------------
Name: Mark W. Poeppelman
Title: Authorized Signatory
ALLIED LIFE INSURANCE COMPANY A
By: /s/ Mark W. Poeppelman
-------------------------------------------
Name: Mark W. Poeppelman
Title: Authorized Signatory
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Brian Keating
-------------------------------------------
Name: Brian Keating
Title: Director
38
<PAGE>
MONY LIFE INSURANCE COMPANY OF AMERICA
By: /s/ Suzanne E. Walton
------------------------------------
Name: Suzanne E. Walton
Title: Authorized Agent
MONY LIFE INSURANCE COMPANY,
on behalf of a separate account
By: /s/ Suzanne E. Walton
------------------------------------
Name: Suzanne E. Walton
Title: Vice President
GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY
By: /s/ Jon M. Lucia
------------------------------------
Name: Jon M. Lucia
Title: Assistant Vice President and Investment Officer
GE EDISON LIFE INSURANCE COMPANY
By: /s/ Koichi Ogawa
------------------------------------
Name: Koichi Ogawa
Title: General Manager of Investment Department
AMERICAN MAYFLOWER LIFE INSURANCE
COMPANY OF NEW YORK
By: /s/ Jon M. Lucia
------------------------------------
Name: Jon M. Lucia
Title: Assistant Vice President and Investment Officer
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
By: Lincoln Investment Management, Inc.
Its Attorney-in-Fact
By: /s/ Timothy L. Powell
------------------------------
Timothy L. Powell, Vice President
39
<PAGE>
LINCOLN NATIONAL HEALTH & CASUALTY
INSURANCE COMPANY
By: Lincoln Investment Management, Inc.
Its Attorney-in-Fact
By: /s/ Timothy L. Powell
-----------------------------------
Timothy L. Powell, Vice President
FIRST PENN-PACIFIC LIFE INSURANCE COMPANY
By: Lincoln Investment Management, Inc.
Its Attorney-in-Fact
By: /s/ Timothy L. Powell
-----------------------------------
Timothy L. Powell, Vice President
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA
By: /s/ Estelle Simsolo
-----------------------------------------
Name: Estelle Simsolo
Title: Director - Private Placements
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Richard E. Spencer III
-----------------------------------------
Name: Richard E. Spencer III
Title: Managing Director
C.M. LIFE INSURANCE COMPANY
By: /s/ Richard E. Spencer III
-----------------------------------------
Name: Richard E. Spencer III
Title: Investment Director
40
<PAGE>
SCHEDULE B
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"ACCEPTANCE" is defined in Section 8.4(c).
"ACCEPTING HOLDER" is defined in Section 8.4.
"ADDITIONAL ACCEPTANCE" is defined in Section 8.4(c).
"ADDITIONAL PAYMENT NOTICE" is defined in Section 8.4(c).
"ADDITIONAL PREPAYMENT AMOUNT" is defined in Section 8.4(c).
"ALLOCATED EXCESS AMOUNT" is defined in Section 10.7(b).
"AFFILIATE" means, at any time, and with respect to any Person, any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person. As used in this definition, "CONTROL" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an Affiliate of the
Company.
"ASSET DISPOSITION" means any merger of a Subsidiary into a Person
other than the Company or a Substantial Subsidiary and any Transfer except:
(a) any Transfer from a Subsidiary to the Company or a Substantial
Subsidiary; and
(b) any Transfer made in the ordinary course of business and
involving only property that is either (i) inventory held for sale or (ii)
- --
equipment, fixtures, supplies or materials of a type no longer utilized in the
operation of the business of the Company or any of its Subsidiaries or that is
obsolete.
"BUSINESS DAY" means (a) for the purposes of Section 8.7 only, any day
-
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
-
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in New York or Pennsylvania are required or
authorized to be closed.
"CAPITALIZED LEASE" means any lease obligation for rentals which is
required to be capitalized on a Consolidated balance sheet of the Company and
its Subsidiaries in accordance with GAAP.
Schedule B-1
<PAGE>
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
"COMPANY" means Shared Medical Systems Corporation, a Delaware
corporation.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED" means, when used with respect to any of the terms
defined herein, such terms as reflected in a consolidation of the accounts of
the Company and its Subsidiaries in accordance with GAAP.
"CONSOLIDATED ADJUSTED FUNDED DEBT" means (a) Consolidated Funded Debt
plus (b) Consolidated Current Debt in an amount, for the period of 12
consecutive months most recently ended at the time of any determination of
Funded Debt, equal to the largest amount of Consolidated Current Debt
outstanding on any day of the period of 30 consecutive days within such 12-month
period with the lowest average daily amount of outstanding Consolidated Current
Debt; provided that through the first anniversary of the Closing, Consolidated
--------
Current Debt outstanding prior to the Closing shall be reduced by $150,000,000
for purposes of this definition.
"CONSOLIDATED NET INCOME" means, with reference to any period, the net
income (or loss) of the Company and its Subsidiaries for such period (taken as a
cumulative whole), as determined in accordance with GAAP, after eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP, provided that there shall be excluded:
--------
(a) the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary or is merged into or consolidated with the Company or a
Subsidiary, and the income (or loss) of any Person, substantially all of the
assets of which have been acquired in any manner, realized by such other Person
prior to the date of acquisition,
(b) the income (or loss) of any Person (other than a Subsidiary) in
which the Company or any Subsidiary has an ownership interest, except to the
extent that any such income has been actually received by the Company or such
Subsidiary in the form of cash dividends or similar cash distributions,
(c) the undistributed earnings of any Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary,
(d) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of income accrued during
such period,
(e) any aggregate net gain or aggregate net loss during such period
arising from the sale, conversion, exchange or other disposition of capital
assets (such term to include,
Schedule B-2
<PAGE>
without limitation, (i) all non-current assets and, without duplication, (ii)
the following. whether or not current: all fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the disposition of fixed
assets, and all Securities),
(f) any gains resulting from any write-up of any assets and any loss
resulting from any write-down of any assets,
(g) any gain or loss arising from the acquisition of any Security, or
the extinguishment, under GAAP, of any Indebtedness, of the Company or any
Subsidiary,
(h) any net income or gain or loss during such period from (i) any
-
change in accounting principles in accordance with GAAP, (ii) any prior period
--
adjustments resulting from any change in accounting principles in accordance
with GAAP, (iii) any extraordinary or nonrecurring items (including provisions
---
for reorganization costs and write-down of inprocess research and development in
connection with an acquisition), or (iv) any discontinued operations or the
--
disposition thereof,
(i) in the case of a successor to the Company by consolidation or
merger or as a transferee of its assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets, and
(j) any portion of such net income that cannot be freely converted
into United States Dollars.
"CONSOLIDATED NET WORTH" means, as of the date of any determination
thereof, the net worth of the Company and its Subsidiaries on a consolidated
basis determined in accordance with GAAP.
"CONSOLIDATED TOTAL ASSETS" means, at any time, the total assets of
the Company and its Subsidiaries which would be shown as assets on a
consolidated balance sheet of the Company and its Subsidiaries as of such time
prepared in accordance with GAAP, after eliminating all amounts properly
attributable to minority interests, if any, in the stock and surplus of
Subsidiaries.
"CURRENT DEBT" means, with respect to any person, all Indebtedness of
such Person (other than Intercompany Debt) which by its terms or by the terms of
any instrument or agreement relating thereto matures on demand or within one
year from the date of the creation thereof, provided that Current Maturities of
--------
Funded Debt shall constitute Funded Debt and not Current Debt, even though such
Indebtedness by its terms matures on demand or within one year from such date.
"CURRENT MATURITIES OF FUNDED DEBT" means, at any time with respect to
any item of Funded Debt, the portion of such Funded Debt outstanding at such
time which by the terms of such Funded Debt or the terms of any instrument or
agreement relating thereto is due on demand within one year from such time
(whether by sinking fund, other required prepayment or final payment at
maturity).
Schedule B-3
<PAGE>
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"DEFAULT RATE" means that rate of interest that is the greater of (i)
-
2% per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes and (ii) 2% over the rate of interest publicly announced
--
by Chase Manhattan Bank in New York, New York as its "base" or "prime" rate.
"DISPOSITION VALUE" means, at any time, with respect to any property,
(a) in the case of property that does not constitute Subsidiary Stock,
the book value thereof, valued at the time of such disposition in good faith by
the Company, and
(b) in the case of property that constitutes Subsidiary Stock, an
amount equal to that percentage of book value of the assets of the Subsidiary
that issued such stock as is equal to the percentage that the book value of such
Subsidiary Stock represents of the book value of all of the outstanding capital
stock of such Subsidiary (assuming, in making such calculations, that all
Securities convertible into such capital stock are so converted and giving full
effect to all transactions that would occur or be required in connection with
such conversion) determined at the time of the disposition thereof, in good
faith by the Company.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCESS AMOUNT" is defined in Section 10.7(a)(iv).
"EXCESS PORTION" is defined in Section 10.7(a)(iv)
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" means, at any time and with respect to any
property, the sale value of such property that would be realized in an arm's-
length sale at such time between an informed and willing buyer and an informed
and willing seller (neither being under a compulsion to buy or sell).
Schedule B-4
<PAGE>
"FIXED CHARGES" means the sum of Interest Charges and Lease Rentals
for such period.
"FUNDED DEBT" means, with respect to any Person, all Indebtedness of
such Person which by its terms or by the terms of any instrument or agreement
relating thereto matures, or which is otherwise payable or unpaid, one year or
more from, the date of creation thereof, provided that Funded Debt shall
--------
include, as at any date of determination, Current Maturities of Funded Debt;
provided, further, that Funded Debt shall not include Intercompany Debt.
- -------- -------
"GAAP" means generally accepted accounting principles consistently
applied as in effect from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts jurisdiction over any
properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial, regulatory
or administrative functions of, or pertaining to, any such government.
"GROSS PROCEEDS" is defined in the definition of Net Proceeds Amount.
"GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of such
-
indebtedness or obligation, or (ii) to maintain any working capital or other
--
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
Schedule B-5
<PAGE>
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"INCOME AVAILABLE FOR FIXED CHARGES" means, with reference to any
period, the sum of Consolidated Net Income plus taxes imposed on or measured by
income or excess profits for such period, plus Fixed Charges.
"INDEBTEDNESS" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption obligations
in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including all liabilities created or arising under any
conditional sale or other title retention agreement with respect to any such
property);
(c) all liabilities appearing on its balance sheet in accordance with
GAAP in respect of Capitalized Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or instruments
serving a similar function issued or accepted for its account by banks and other
financial institutions securing the payment of any obligations of the type
referred to in clause (a), (b), (c) or (f) of this definition; and
(f) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (e) hereof;
provided that Indebtedness shall not include overnight borrowings incurred in
- --------
any clearing account or overdraft account which is used to provide liquidity to
uncompleted transactions; provided, further, that such borrowings are paid in
-------- -------
full as of the close of business the following day.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
Schedule B-6
<PAGE>
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note,
-
(b) any holder of a Note holding more than 10% of the aggregate principal amount
- --
of the Notes then outstanding, and (c) any bank, trust company, savings and loan
-
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"INTERCOMPANY DEBT" means Indebtedness of the Company owed to its
Subsidiaries or Indebtedness of a Subsidiary owed to the Company or another
Subsidiary.
"INTEREST CHARGES" means, with respect to any period, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP): (a) all interest in respect of Indebtedness of the Company and its
-
Subsidiaries (including imputed interest on Capitalized Leases) deducted in
determining Consolidated Net Income for such period, (b) all capitalized and
-
deferred interest and (c) all debt discount and expense amortized or required to
-
be amortized in the determination of Consolidated Net Income for such period.
"INVESTMENT" means any investment, made in cash or by delivery of
property, by the Company or any of its Subsidiaries (i) in any Person, whether
-
by acquisition of stock, indebtedness or other obligation or Security, or by
loan, Guaranty, advance, capital contribution or otherwise, or (ii) in any
--
property.
"LEASE RENTALS" means, with respect to any period, the sum of the
minimum amount of rental and other obligations required to be paid during such
period by the Company or any of its Subsidiaries as lessee under all leases of
real or personal property (other than Capitalized Leases), excluding any amounts
required to be paid by the lessee (whether or not therein designated as rental
or additional rental): (a) which are on account of maintenance and repairs,
-
insurance, taxes, assessments, water rates and similar charges; or (b) which are
-
based on profits, revenues, or sales realized by the lessee from the leased
property or otherwise based on performance of the lessee.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capitalized Lease, upon
or with respect to any property or asset of such Person (including in the case
of stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MAKE-WHOLE AMOUNT" is defined in Section 8.7.
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, or properties of the Company and its
Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
-
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries
Schedule B-7
<PAGE>
taken as a whole, or (b) the ability of the Company to perform its obligations
-
under this Agreement and the Notes, or (c) the validity or enforceability of
-
this Agreement or the Notes.
"MEMORANDUM" is defined in Section 5.3.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).
"NET PROCEEDS AMOUNT" means, with respect to any Excess Portion of any
Asset Disposition, an amount equal to the difference between
(a) the aggregate amount of the consideration (valued at the Fair
Market Value of such consideration at the time of the consummation of such Asset
Disposition as determined by the board of directors of the Company in good
faith) paid by the transferee in respect of such Asset Disposition, multiplied
by a fraction, the numerator of which shall be the amount of such Excess Portion
and the denominator of which shall be the Disposition Value of property that was
the subject of such Asset Disposition, and
(b) all ordinary and reasonable out-of-pocket costs and expenses
actually incurred by the transferor in connection with such Asset Disposition
and all Indebtedness secured by such property and required by its terms to be
paid in connection with the consummation of such Asset Disposition.
"NOTES" is defined in Section 1.
"NOTICE AND OFFER TO PREPAY" is defined in Section 8.4(a).
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"OTHER AGREEMENTS" is defined in Section 2.
"OTHER PURCHASERS" is defined in Section 2..
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
Schedule B-8
<PAGE>
"PREFERRED STOCK" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"PRIORITY DEBT" means, without duplication, the sum of (a) all
-
Indebtedness of the Company secured by Liens on property owned by the Company
(except Indebtedness secured by Liens permitted by the provisions of Sections
10.8(a) through 10.8(j)) and (b) all Indebtedness of Subsidiaries (except
-
Indebtedness held by the Company or a Subsidiary).
"PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"REQUIRED HOLDERS" means, at any time, the holders of at least 66 2/3%
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this agreement.
"SECOND NOTICE" is defined in Section 8.4(c).
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SECURITY" has the meaning set forth in Section 2(i) of the Securities
Act of 1933, as amended.
"SENIOR DEBT" means any unsecured Indebtedness of the Company that is
not in any manner subordinated in right of payment to the Notes or to any other
Indebtedness of the Company.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"SERIES A NOTES" is defined in Section 1.
"SERIES B NOTES" is defined in Section 1.
"SERIES C NOTES" is defined in Section 1.
"SERIES D NOTES" is defined in Section 1.
"SIGNIFICANT SUBSIDIARY" means, as of any date of determination
thereof, any Subsidiary that would at such time meet any of the following
conditions:
Schedule B-9
<PAGE>
(a) the Company's and its other Subsidiaries' investments in and
advances to the Subsidiary exceed 5% of the total assets of the Company and its
other Subsidiaries consolidated as of the end of the fiscal year then most
recently ended; or
(b) the Company's and its other Subsidiaries' proportionate share of
the total assets (after intercompany eliminations) of the Subsidiary exceeds 5%
of the total assets of the Company and its other Subsidiaries consolidated as of
the end of the fiscal year then most recently ended; or
(c) the Company's and its other Subsidiaries equity in the income
from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principles of the Subsidiary exceeds
5% of such income of the Company and its other Subsidiaries consolidated for the
fiscal year then most recently ended;
provided that if either of the consolidated total assets and consolidated net
- --------
income of the Company and its Significant Subsidiaries as of and for the fiscal
year then most recently ended is less than 90% of each of consolidated total
assets and consolidated net income of the Company and the Subsidiaries as of and
for such fiscal year, the term Significant Subsidiary shall mean any Subsidiary
that would be a Significant Subsidiary if "5%" (or any other percentage that
would be substituted pursuant to this proviso) in the foregoing clauses (a), (b)
and (c) were replaced with "4%" (or if another percentage has been substituted
pursuant to this proviso, that percentage reduced by 1%).
"SPECIAL PREPAYMENT DATE" is defined in Section 8.4(b).
"SUBSIDIARY" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to
a "Subsidiary" is a reference to a Subsidiary of the Company.
"SUBSIDIARY STOCK" means, with respect to any Person, the stock (or
any options or warrants to purchase stock or other Securities exchangeable for
or convertible into stock) of any Subsidiary of such Person.
"SUBSTANTIAL SUBSIDIARY" means, at any time, any Subsidiary more than
ninety percent (90%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company's other Substantial Subsidiaries at such time.
"TRANSFER" means, with respect to any Person, any transaction in which
such Person sells, conveys, transfers or leases (as lessor) any of its property,
including, without limitation, Subsidiary Stock.
Schedule B-10
<PAGE>
EXHIBIT 1-A
[FORM OF SERIES A NOTE]
SHARED MEDICAL SYSTEMS CORPORATION
6.58% SERIES A SENIOR NOTE DUE 2006
No. RA-[_] [DATE]
$[_______] PPN: 819486 A* 2
FOR VALUE RECEIVED, the undersigned, SHARED MEDICAL SYSTEMS
CORPORATION (herein called the "Company"), a corporation organized and existing
under the laws of the State of Delaware, hereby promises to pay to
[_______________________________________________________or,] registered assigns,
the principal sum of [______________________________________________________]
DOLLARS on April 29, 2006, with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of
-
6.58% per annum from the date hereof, payable semiannually, on the 29th day of
April and October in each year, commencing with the April 29 or October 29 next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by law on any overdue payment
-
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any Make-Whole Amount (as defined in the Note
Purchase Agreements referred to below), payable semiannually as aforesaid (or,
at the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to the greater of (i) 8.58% or (ii) 2% over the rate of
- --
interest publicly announced by Chase Manhattan Bank from time to time in New
York, New York as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at Malvern, Pennsylvania or at such other place as the Company shall
have designated by written notice to the holder of this Note as provided in the
Note Purchase Agreements referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated as of April
29, 1999 (as from time to time amended, the "Note Purchase Agreements"), between
the Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
-
Section 20 of the Note Purchase Agreements and (ii) to have made the
--
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the
Exhibit 1-A-1
<PAGE>
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreements. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
This Note shall be construed and enforced in accordance with the law
of the State of New York, excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
SHARED MEDICAL SYSTEMS CORPORATION
By:
---------------------------------
Name:
Title:
Exhibit 1-A-2
<PAGE>
EXHIBIT 1-B
[FORM OF SERIES B NOTE]
SHARED MEDICAL SYSTEMS CORPORATION
6.58% SERIES B SENIOR NOTE DUE 2009
No. RB-[_] [DATE]
$[_______] PPN: 819486 A@ 0
FOR VALUE RECEIVED, the undersigned, SHARED MEDICAL SYSTEMS
CORPORATION (herein called the "Company"), a corporation organized and existing
under the laws of the State of Delaware, hereby promises to pay to
[______________________________________________________or,] registered assigns,
the principal sum of [______________________________________________________]
DOLLARS on April 29, 2009, with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of
-
6.58% per annum from the date hereof, payable semiannually, on the 29th day of
April and October in each year, commencing with the April 29 or October 29 next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by law on any overdue payment
-
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any Make-Whole Amount (as defined in the Note
Purchase Agreements referred to below), payable semiannually as aforesaid (or,
at the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to the greater of (i) 8.58% or (ii) 2% over the rate of
- --
interest publicly announced by Chase Manhattan Bank from time to time in New
York, New York as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at Malvern, Pennsylvania or at such other place as the Company shall
have designated by written notice to the holder of this Note as provided in the
Note Purchase Agreements referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated as of April
29, 1999 (as from time to time amended, the "Note Purchase Agreements"), between
the Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
-
Section 20 of the Note Purchase Agreements and (ii) to have made the
--
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the
Exhibit 1-B-1
<PAGE>
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreements. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
This Note shall be construed and enforced in accordance with the law
of the State of New York, excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
SHARED MEDICAL SYSTEMS CORPORATION
By:
-------------------------------
Name:
Title:
Exhibit 1-B-2
<PAGE>
EXHIBIT 1-C
[FORM OF SERIES C NOTE]
SHARED MEDICAL SYSTEMS CORPORATION
6.75% SERIES C SENIOR NOTE DUE 2009
No. RC-[_] [DATE]
$[_______] PPN: 819486 A# 8
FOR VALUE RECEIVED, the undersigned, SHARED MEDICAL SYSTEMS
CORPORATION (herein called the "Company"), a corporation organized and existing
under the laws of the State of Delaware, hereby promises to pay to
[______________________________________________________or,] registered assigns,
the principal sum of [______________________________________________________]
DOLLARS on April 29, 2009, with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of
-
6.75% per annum from the date hereof, payable semiannually, on the 29th day of
April and October in each year, commencing with the April 29 or October 29 next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by law on any overdue payment
-
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any Make-Whole Amount (as defined in the Note
Purchase Agreements referred to below), payable semiannually as aforesaid (or,
at the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to the greater of (i) 8.75% or (ii) 2% over the rate of
- --
interest publicly announced by Chase Manhattan Bank from time to time in New
York, New York as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at Malvern, Pennsylvania or at such other place as the Company shall
have designated by written notice to the holder of this Note as provided in the
Note Purchase Agreements referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated as of April
29, 1999 (as from time to time amended, the "Note Purchase Agreements"), between
the Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
-
Section 20 of the Note Purchase Agreements and (ii) to have made the
--
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the
Exhibit 1-C-1
<PAGE>
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreements. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
This Note shall be construed and enforced in accordance with the law
of the State of New York, excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
SHARED MEDICAL SYSTEMS CORPORATION
By:
-------------------------------
Name:
Title:
Exhibit 1-C-2
<PAGE>
EXHIBIT 1-D
[FORM OF SERIES D NOTE]
SHARED MEDICAL SYSTEMS CORPORATION
6.75% SERIES D SENIOR NOTE DUE 2011
No. RD-[_] [DATE]
$[_______] PPN: 819486 B* 1
FOR VALUE RECEIVED, the undersigned, SHARED MEDICAL SYSTEMS
CORPORATION (herein called the "Company"), a corporation organized and existing
under the laws of the State of Delaware, hereby promises to pay to
[______________________________________________________or,] registered assigns,
the principal sum of [______________________________________________________]
DOLLARS on April 29, 2011, with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of
-
6.75% per annum from the date hereof, payable semiannually, on the 29th day of
April and October in each year, commencing with the April 29 or October 29 next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by law on any overdue payment
-
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any Make-Whole Amount (as defined in the Note
Purchase Agreements referred to below), payable semiannually as aforesaid (or,
at the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to the greater of (i) 8.75% or (ii) 2% over the rate of
- --
interest publicly announced by Chase Manhattan Bank from time to time in New
York, New York as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at Malvern, Pennsylvania or at such other place as the Company shall
have designated by written notice to the holder of this Note as provided in the
Note Purchase Agreements referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated as of April
29, 1999 (as from time to time amended, the "Note Purchase Agreements"), between
the Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
-
Section 20 of the Note Purchase Agreements and (ii) to have made the
--
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the
Exhibit 1-D-1
<PAGE>
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreements. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
This Note shall be construed and enforced in accordance with the law
of the State of New York, excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
SHARED MEDICAL SYSTEMS CORPORATION
By:
--------------------------------
Name:
Title:
Exhibit 1-D-2
<PAGE>
Exhibit (10)
1999 INCENTIVE COMPENSATION PLAN FOR MARVIN S. CADWELL
------------------------------------------------------
The incentive compensation plan for Mr. Cadwell for 1999 is not set forth in a
formal document. In summary, Mr. Cadwell's calculated bonus amount will be
computed using a targeted bonus, which will be adjusted based on the Company's
performance against targeted earnings per share. The calculated bonus may range
from 0% to 125% of the targeted bonus. The calculated bonus is subject to
further adjustment based on sales attainment versus target. Such adjustment may
range from 60% to 120% of the calculated bonus. The result from the preceding
sentence is subject to a final adjustment, which may range from 90% and 115%,
based on improvement in accounts receivable days outstanding versus target.
Mr. Cadwell's plan also includes an incentive based on targets for revenue and
earnings per share growth for the first half of 1999.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 54,922
<SECURITIES> 0
<RECEIVABLES> 367,077
<ALLOWANCES> 12,870
<INVENTORY> 0
<CURRENT-ASSETS> 445,662
<PP&E> 333,308
<DEPRECIATION> 186,149
<TOTAL-ASSETS> 856,230
<CURRENT-LIABILITIES> 222,258
<BONDS> 178,621
0
0
<COMMON> 307
<OTHER-SE> 425,412
<TOTAL-LIABILITY-AND-EQUITY> 856,230
<SALES> 60,522
<TOTAL-REVENUES> 591,508
<CGS> 48,737
<TOTAL-COSTS> 437,780
<OTHER-EXPENSES> 38,718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,177
<INCOME-PRETAX> 61,096
<INCOME-TAX> 23,218
<INCOME-CONTINUING> 37,878
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,878
<EPS-BASIC> 1.42
<EPS-DILUTED> 1.40
</TABLE>
