<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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 0-21752
NORTHSTAR HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 25-1697152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
665 PHILADELPHIA STREET, INDIANA, PENNSYLVANIA 15701
(Address of principal executive offices)
724-349-7500
(Registrant's telephone number, including area code)
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 ____
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date:
CLASS OUTSTANDING AS OF November 1, 1999
- ------------------------------------- -------------------------------------
Common Stock, par value $.01 per share 5,975,424
Transitional Small Business Disclosure Format (Check one):
YES ______ NO __X__
<PAGE> 2
NORTHSTAR HEALTH SERVICES, INC. AND SUBSIDIARIES
INDEX PAGE
- ----- ----
Part I - FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998 1
Condensed Consolidated Statements of Operations
for the three months ended September 30, 1999 and 1998 3
Condensed Consolidated Statements of Operations
for the nine months ended September 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3.
Quantitative and Qualitative Disclosure About Market
Risk Sensitive Instruments 15
Part II - OTHER INFORMATION
Item 1. - Legal Proceedings 16
Item 2. - Changes in Securities and Use of Proceeds 16
Item 3. - Defaults Upon Senior Securities 16
Item 5. - Other Information 16
Item 6. - Exhibits and Reports on Form 8-K 17
<PAGE> 3
Item 1. - Financial Statements
NORTHSTAR HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Note 1)
(Dollars in Thousands)
<TABLE>
<CAPTION>
A S S E T S September 30, December 31,
----------- 1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 590 $ 901
Accounts receivable-
Patients, net of allowances for doubtful accounts of
$ 447 and $ 497 respectively 4,242 4,624
Management fees 43 224
Miscellaneous 76 458
Prepaid expenses and other current assets 113 399
------------ ------------
Total current assets 5,064 6,606
------------ ------------
PROPERTY AND EQUIPMENT, net 1,623 2,231
INTANGIBLE ASSETS, net (Note 2) 18,276 19,811
OTHER ASSETS 121 126
------------ ------------
TOTAL ASSETS $ 25,084 $ 28,774
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
NORTHSTAR HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Note 1)
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY September 30, December 31,
------------------------------------ 1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt (Note 3)
Senior Debt $ 2,941 $ 14,083
Thomas Zaucha and Zaucha Family Limited Partnership 4,619 4,069
Other debt 415 509
Accounts payable 546 833
Accrued expenses
Thomas Zaucha and Zaucha Family Limited Partnership 8,541 8,907
Other Obligations 1,709 4,318
Contractual obligations to employees 710 915
-------- --------
Total current liabilities 19,481 33,634
-------- --------
LONG-TERM DEBT (Note 3)
Senior Debt 11,611 --
Thomas Zaucha and Zaucha Family Limited Partnership 196 809
Other debt 253 242
-------- --------
Total long-term debt 12,060 1,051
MINORITY INTEREST 175 181
-------- --------
Total liabilities 31,716 34,866
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share, 1,000,000 shares
authorized, none issued -- --
Common stock, par value $.01 per share, 20,000,000 shares authorized;
6,337,988 shares issued at September 30, 1999 and December 31, 1998
63 63
Additional paid-in capital 22,642 22,599
Warrants outstanding 1,487 1,487
Retained deficit (30,371) (29,788)
Less: Treasury stock, 362,564 shares in 1999 and 1998, at cost (453) (453)
-------- --------
Total stockholders' equity/(deficit) (6,632) (6,092)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,084 $ 28,774
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
NORTHSTAR HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Note 1)
(Dollars in Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------
1999 1998
----------- -----------
<S> <C> <C>
REVENUE:
Net patient service revenue $ 6,666 $ 7,601
Management fee revenue 106 332
----------- -----------
Total revenue 6,772 7,933
COSTS OF SERVICE 3,060 3,690
----------- -----------
Gross profit 3,712 4,243
OPERATING EXPENSES:
Selling, general and administrative expenses 2,244 2,665
Bad debt expense 44 72
Restructuring and other non-recurring expenses (Note 4) -- 22
Amortization of intangibles 227 232
Depreciation and amortization 268 144
Management fee expenses 154 305
Provision for impairment of subsidiary assets 930 --
----------- -----------
Total operating expenses 3,867 3,440
----------- -----------
OPERATING INCOME/(LOSS) (155) 803
NON-OPERATING EXPENSES:
Interest expense, net 505 535
Other expense, net (1) (40)
----------- -----------
Total non-operating expenses 504 495
----------- -----------
(LOSS)/INCOME BEFORE INCOME TAXES (659) 308
INCOME TAXES 0 0
----------- -----------
(LOSS)/INCOME BEFORE MINORITY INTEREST (659) 308
MINORITY INTEREST 84 95
----------- -----------
NET (LOSS)/INCOME $ (743) $ 213
=========== ===========
NET (LOSS)/INCOME PER SHARE - BASIC $ (0.12) $ 0.04
=========== ===========
NET (LOSS)/INCOME PER SHARE - DILUTED $ (0.12) $ 0.04
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 5,975,424 5,975,424
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND EQUIVALENTS 5,975,424 6,002,517
=========== ===========
</TABLE>
3
<PAGE> 6
NORTHSTAR HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Note 1)
(Dollars in Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
1999 1998
----------- -----------
<S> <C> <C>
REVENUE:
Net patient service revenue $ 20,063 $ 23,313
Management fee revenue 750 1,090
----------- -----------
Total revenue 20,813 24,403
COSTS OF SERVICE 9,376 11,380
----------- -----------
Gross profit 11,437 13,023
OPERATING EXPENSES:
Selling, general and administrative expenses 7,061 8,353
Bad debt expense 302 238
Restructuring and other non-recurring expenses (Note 4) -- 237
Amortization of intangibles 682 695
Depreciation and amortization 540 424
Management fee expenses 734 1,023
Provision for impairment of subsidiary assets 930 --
----------- -----------
Total operating expenses 10,249 10,970
----------- -----------
OPERATING INCOME 1,188 2,053
NON-OPERATING EXPENSES:
Interest expense, net 1,518 1,598
Other expense, net 3 (57)
----------- -----------
Total non-operating expenses 1,521 1,541
----------- -----------
(LOSS)/INCOME BEFORE INCOME TAXES (333) 512
INCOME TAX (BENEFIT)/PROVISION (14) 1
----------- -----------
(LOSS)/INCOME BEFORE MINORITY INTEREST (319) 511
MINORITY INTEREST 264 355
----------- -----------
NET (LOSS)/INCOME $ (583) $ 156
=========== ===========
NET (LOSS)/INCOME PER SHARE - BASIC $ (0.10) $ 0.03
=========== ===========
NET (LOSS)/INCOME PER SHARE - DILUTED $ (0.10) $ 0.03
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 5,975,424 5,975,424
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND EQUIVALENTS 5,975,424 5,988,638
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
NORTHSTAR HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 1)
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1999 1998
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)/income $ (583) $ 156
Adjustments to reconcile net income/(loss) to net cash provided by
(used in) operating activities-
Depreciation and amortization 1,772 1,748
Provision for doubtful accounts 302 238
Interest on discounted obligation 103 165
Provision for impairment of subsidiary assets 930 --
(Gain)/loss on sale of equipment 7 (8)
Legal Settlement and other (263) (17)
Provision for (decrease)/increase in contractual obligations to
employees (107) 41
Minority interest 265 353
Change in current assets and liabilities-
Decrease in receivables 643 942
Decrease in other current assets 286 43
Decrease in accounts payable (287) (1,205)
Decrease in accrued expenses (2,975) (864)
------- -------
Net cash provided by operating activities 93 1,592
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 10 33
Capital expenditures (380) (292)
Deposits, loans and investments 5 6
------- -------
Net cash used in investing activities (365) (253)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (661) (847)
Distributions to minority interests (271) (313)
Payments of contractual obligations to employees (98) (112)
Borrowings on long-term debt 991 75
------- -------
Net cash used in financing activities (39) (1,197)
------- -------
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (311) 142
CASH AND CASH EQUIVALENTS, beginning balance 901 657
------- -------
CASH AND CASH EQUIVALENTS, ending balance $ 590 $ 799
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:
Interest paid $ 2,161 $ 1,252
Income taxes (refunded)/paid (14) 1
NONCASH INVESTING ACTIVITIES:
Capital lease obligations 89 28
Issue warrants to bank as debt discount 43 --
</TABLE>
5
<PAGE> 8
The accompanying notes are an integral part of these financial statements.
NORTHSTAR HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
General
These condensed consolidated financial statements of Northstar Health Services,
Inc. (the "Company") are unaudited and reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results of
operations for the interim period. These statements should be read in
conjunction with the consolidated financial statements and notes thereto
contained in the Company's Form 10-K for the year ended December 31, 1998.
Management Fees
The Company manages a business on a contract basis that provides mobile
diagnostic services. In conjunction with this contract, the Company receives
compensation in the form of a monthly management fee. This fee is equal to the
net income or loss of the managed business after the payment of certain
agreed-upon salaries and benefits to certain parties. The Company's mobile
diagnostic services business was terminated on August 13, 1999.
Earnings Per Common Share
Earnings per share for the three and nine month periods ended September 30, 1999
and 1998 were calculated in accordance with Statement of Financial Accounting
Standards No. 128 (SFAS No. 128), "Earnings per Share", using the weighted
average number of shares outstanding during the period and including the effect
of stock options outstanding. Pursuant to the Company's 1992, 1994, and 1997
Stock Option plans and certain stock options granted outside of these plans,
options for a total of 42,500 and 71,000 shares of the Company's common stock
have been granted for the three and nine month periods ended September 30, 1999,
respectively, and no options have been exercised for the three and nine month
periods ended September 30, 1999.
The following table reconciles the number of shares utilized in the earnings per
share calculations for the three-month periods ended September 30, 1999 and 1998
(dollars in thousands, except per share data):
<TABLE>
<CAPTION>
For the three months ended September 30,
----------------------------------------
1999 1998
---- ----
<S> <C> <C>
Basic earnings per share:
Net (loss)/income $ (743) $ 213
Average shares outstanding 5,975,424 5,975,424
(Loss)/income per share $ (0.12) $ 0.04
Diluted earnings per share:
Net (loss)/income $ (743) $ 213
Average shares outstanding 5,975,424 5,975,424
Stock options 0 27,094
----------- ----------
Diluted average shares outstanding 5,975,424 6,002,517
(Loss)/income per share $ (0.12) $ 0.04
</TABLE>
6
<PAGE> 9
The following table reconciles the number of shares utilized in the earnings per
share calculations for the nine-month periods ended September 30, 1999 and 1998
(dollars in thousands, except per share data):
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1999 1998
---- ----
<S> <C> <C>
Basic earnings per share:
Net (loss)/income $ (583) $ 156
Average shares outstanding 5,975,424 5,975,424
(Loss)/income per share $ (0.10) $ 0.03
Diluted earnings per share:
Net (loss)/income $ (583) $ 156
Average shares outstanding 5,975,424 5,975,424
Stock options 0 13,214
----------- ----------
Diluted average shares outstanding 5,975,424 5,988,638
(Loss)/income per share $ (0.10) $ 0.03
</TABLE>
For the three month periods ended September 30, 1999 and 1998, and the nine
month periods ended September 30, 1999 and 1998, options to purchase 969,366,
909,800, 942,366 and 933,800 and warrants to purchase 565,000, 633,500, 565,000
and 633,500 shares of common stock, respectively, were outstanding, but were not
included in the computation of diluted earnings per share because the options'
exercise prices were greater than the average market price of the Company's
common shares for the respective periods. Also, not included in the calculation
of diluted earnings per share were the shares that may be issued to the Zauchas
in connection with the Keystone merger. See Note 6. The Zaucha Stock Guarantee
could be satisfied by all cash, all stock, or a combination of both cash and
stock.
2. INTANGIBLE ASSETS:
Intangible assets and the related amortization periods consist of the following
(dollars in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
Excess of cost over net assets acquired (40 years) $ 18,708 $ 18,708
Employment agreements (2 to 7 1/2 years) 625 625
Keystone tradename (20 years) 2,500 2,500
Covenant not to compete (5 years) 78 78
Assembled Keystone workforce (5 years) 450 450
Deferred financing and other costs (5 years) 828 831
-------- --------
Gross intangible assets 23,189 23,192
Less- accumulated amortization (4,913) (3,381)
-------- --------
Net intangible assets $ 18,276 $ 19,811
======== ========
</TABLE>
At September 30, 1999, Accumulated Amortization of Intangible Assets includes a
charge of $596,000 related to the impairment of the goodwill related to the
Company's Penn Vascusonics subsidiary.
7
<PAGE> 10
3. DEBT:
Debt consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
Amended and restated term loan with Senior Lender (See Below) $ 14,552 $ --
Term loan with Senior Lender -- 6,083
Revolving line of credit with Senior Lender -- 2,000
Acquisition facility with Senior Lender -- 6,000
Non-interest bearing term notes to Thomas Zaucha and the Zaucha Family
Limited Partnership 2,625 2,625
Term notes to Thomas Zaucha and the Zaucha Family Limited Partnership
2,400 2,400
Capital lease obligations with interest rates ranging from 9% to 15.6%
301 579
Other debt 433 441
-------- --------
Total long-term debt 20,311 20,128
Less:
Current portion (7,975) (18,661)
Debt discount (276) (416)
-------- --------
Long-term debt $ 12,060 $ 1,051
======== ========
</TABLE>
On September 30, 1999, the Company restructured its credit facility with its
Senior Lender, Cerberus Capital Management, LLC. As a result, the Company is no
longer in default of its obligations to its Senior Lender. The restructured
credit facility is due and payable in monthly installments with a final payment
of all remaining obligations due on or before December 31, 2000.
During the third quarter of 1999, the Company's weighted average interest rate
was 9.5%.
4. RESTRUCTURING AND NON-RECURRING EXPENSES:
Since 1996, the Company has incurred significant legal, accounting and
consulting expenses arising out of its investigation of the actions of the
management team that controlled the Company prior to 1996 and the resulting
litigation brought both against and by the Company. It has also incurred
significant expenses related to the consent solicitation that was conducted in
1997, and the reorganization of the management and operations of the Company
after the reinstatement of Thomas Zaucha as Chairman and CEO in May 1997. The
majority of these issues were resolved in 1997 and 1998 and the remaining
matters have been resolved in 1999, with the exception of a potential action
which may be brought by a former Director of and consultant to the Company. The
amount of the expenses incurred in 1999 related to these matters was not
material. Please refer to Note 6, Commitments and Contingencies.
5. RELATED-PARTY TRANSACTIONS:
Keystone Acquisition
In connection with the Company's acquisition of Keystone Rehabilitation Systems,
Inc., on November 15, 1995, Mr. Thomas Zaucha, an officer of the Company, and
Mr. Zaucha's family limited partnership, have debt and other amounts due
directly to them of $3,919,500 and $1,105,500, respectively, as of September 30,
1999. In addition, Mr. Zaucha and the Zaucha Family Limited Partnership have
other amounts due directly to them of $6,814,520 and $1,726,065, respectively,
as of September 30, 1999.
8
<PAGE> 11
The Company also rents office and clinical space in buildings owned by the
Zaucha Family Limited Partnership and other related entities. Through September
30, 1999, the Company has incurred an expense of $362,521 related to rent due on
these spaces. The Company also contracts with Impulse Development, a maintenance
and construction company owned by Mr. Zaucha, from time-to-time for various
projects. Through September 30, 1999, the Company has paid Impulse $52,300 for
services rendered or projects in progress. As of September 30, 1999, outstanding
advances to Impulse Development total $10,173.
6. COMMITMENTS AND CONTINGENCIES:
Zaucha Stock Guarantee
The Company guaranteed the value of certain stock issued to Mr. Zaucha and the
Zaucha Family Limited Partnership to be at least $5,600,000 through certain
periods ending no later than December 31, 1997. The Company has an obligation to
fund the shortfall in stock value through a cash payment equal to the shortfall
or, with shareholder approval, through the issuance of additional shares of
Common Stock in an amount equal to the shortfall. As of the December 31, 1997
final determination date, the Company was obligated to either make a cash
payment of $4,693,423 or issue approximately 4,888,982 additional shares of
Common Stock.
The Company presently does not have sufficient cash to meet its obligations
under the guarantee. This amount is recorded as a liability in accrued expenses.
At the Company's Annual Meeting held on June 11, 1998, the Company's
stockholders approved the issuance of up to 4,888,982 shares of Common Stock in
order to enable the Company to fully satisfy the obligations of the Company
under the guarantee in stock if deemed appropriate. The Company has not issued
any shares of Common Stock to Mr. Zaucha to satisfy this obligation.
Other
David D. Watson, former President of the Company has made claims against the
Company in relation to an Employment Agreement and Note. On August 2, 1999, a
settlement has been reached between the Company and David D. Watson.
7. SUBSEQUENT EVENT
On August 13, 1999, the Company terminated the mobile diagnostic services
performed by its Penn Vascusonics subsidiary. In the third quarter of 1999, the
Company recorded a provision for the impairment related to this subsidiary.
These costs included a provision of $334,000 for impaired fixed assets and
$596,000 for impaired goodwill. In the nine months ended September 30 of 1999
and 1998, Penn Vascusonics lost $397,000 and $225,000, respectively, from
operations. Management believes that Penn Vascusonics was its only remaining
under-performing asset.
9
<PAGE> 12
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Information Relating to Forward-Looking Statements
Management's Discussion and Analysis and other sections of this Quarterly Report
include forward-looking statements that reflect the Company's current
expectations relating to such matters as anticipated financial performance,
business prospects, and projected plans for and results of its operations. A
variety of factors could cause the Company's actual results to differ materially
from the anticipated results or other expectations expressed in the Company's
forward looking statements. The risks and uncertainties that may affect the
operations and performance of the Company's business include the following:
changes in regulatory, governmental and payor policies regarding reimbursement;
competition, both directly in terms of other providers of physical therapy and
other services, and the competition for qualified personnel; the outcomes of the
current litigation involving the Company; the Company's ability to refinance its
Senior Debt before December 31, 2000 and the ability to comply with various
covenants in connection with existing financing; the ability to access
additional financing or capital; the ability of the Company to have its Common
Stock relisted on a national market or exchange; and the uncertainties
surrounding the healthcare industry in general.
Results of Operations
THREE MONTHS ENDED SEPTEMBER 30, 1999 and 1998
Total revenue
During the third quarter of 1999, the Company's total revenues declined by
$1,161,000, or 14.6%, from $7,933,000 for the third quarter of 1998 to
$6,772,000 for the third quarter of 1999. Revenues decreased approximately
$829,000 as the result of the closure or termination of certain clinics and
contracts. A decline in management fee revenues of approximately $226,000 is
attributable to the termination of all mobile diagnostic services effective
August 13, 1999. The Company opened new outpatient offices and entered into new
contracts that resulted in an increase in net patient service revenues of
$253,000. Net patient service revenue from continuing operations decreased
$145,000 as a result of a change in Medicare compensation for therapy services
provided by outpatient rehabilitation agencies that was effective January 1,
1999, that negatively affected net reimbursement from Medicare and certain other
payors. Revenues also declined $214,000 as the result of the sale in 1998 of the
Company's interests in two joint ventures that provided mobile diagnostic
services, including cardiac services, in Western Pennsylvania.
Costs of service and Gross profit
Due to the decrease in total revenues and the Company's cost reduction program
initiated in 1998, costs of service decreased $630,000 from $3,690,000 for the
third quarter of 1998 to $3,060,000 for 1999, or 17.1%. As a percentage of net
patient service revenue, costs of service decreased from 48.5% in the third
quarter of 1998 to 45.9% in the third quarter of 1999. Gross profit declined
$531,000, from $4,243,000 for the third quarter of 1998 to $3,712,000 for 1999,
as the cost reduction program did not fully offset the decrease in gross margin
due to volume. However, as a percentage of total revenue, gross profit increased
from 53.5% of total revenue for the third quarter of 1998 to 54.8% of total
revenue for 1999.
10
<PAGE> 13
Selling, general and administrative expense
Total selling, general and administrative expenses for the third quarter
decreased $421,000 from $2,665,000 in 1998 to $2,244,000 in 1999. The 15.8%
decrease can be attributed to the cost reduction program initiated in May 1998,
and the regional management reorganization that was completed in December 1998.
Bad debt expense
The Company incurred bad debt expense of $44,000 or approximately .7% of net
patient service revenue during the third quarter of 1999 versus $72,000 or
approximately 1.0% during the third quarter of 1998. Bad debt expense in both
years was reduced by the recovery of contract billings deemed uncollectible in
prior years. Bad debt expense without any recoveries would have been
approximately 1.7% and 2.1%, respectively, in the third quarter of 1999 and
1998.
Provision for loss on sale of subsidiary
On August 13, 1999, the Company terminated the mobile diagnostic services
performed by its Penn Vascusonics subsidiary. In the third quarter of 1999, the
Company recorded a provision for the impairment related to this subsidiary.
These costs included a provision of $334,000 for impaired fixed assets and
$596,000 for impaired goodwill. In the third quarter of 1999 and 1998, Penn
Vascusonics lost $175,000 and $134,000, respectively, from operations.
Management believes that Penn Vascusonics was its only remaining
under-performing asset.
Interest and other non-operating expenses
Interest expense was $505,000 for the third quarter of 1999 compared to $535,000
for 1998. This decrease can be attributed to a decline in the Company's weighted
average interest rate from 1998 to 1999. Certain costs estimated at $175,000
associated with the restructuring of the Company's senior debt were recorded in
the third quarter of 1999, as well as the write-off of deferred financing costs
related to the previous debt instrument of $151,000. These costs were partially
offset by a favorable reversal of legal expenses of $118,000. The Company
reported net non-operating income of $1,000 in the third quarter of 1999
compared to net non-operating income of $40,000 in the third quarter of 1998.
Income taxes
The Company has not recorded a tax provision during the third quarter of 1999.
As a result of the losses experienced in 1997 and prior years, the Company
anticipates that any taxable income in 1999 will be offset by tax loss
carryforwards.
Net income
The net loss for the third quarter of 1999 was $743,000 compared to net income
of $213,000 for the same period in 1998. The significant decline in
profitability is due to the provision for the impairment of assets related to
the mobile diagnostic subsidiary and certain of the costs associated with
restructuring of the Company's senior debt.
11
<PAGE> 14
NINE MONTHS ENDED SEPTEMBER 30, 1999 and 1998
Total revenue
For the nine month period ended September 30, 1999, the Company's total revenues
declined by $3,590,000, or 14.7%, from $24,403,000 for the first nine months of
1998 to $20,813,000 for 1999. Revenues decreased approximately $2,437,000 as the
result of the closure or termination of certain clinics and contracts. This was
partially offset by the Company opening new outpatient offices and entering into
new contracts that resulted in an increase in net patient service revenues of
$488,000. A decline in Management fee revenues of approximately $340,000 is
attributable to the termination of all mobile diagnostic services effective
August 13, 1999. Net patient service revenue from continuing operations
decreased $590,000 as a result of a change in Medicare compensation for therapy
services provided by outpatient rehabilitation agencies that was effective
January 1, 1999, that negatively affected net reimbursement from Medicare and
certain other payors. Revenues also declined $711,000 as the result of the sale
in 1998 of the company's interests in two joint ventures that provided mobile
diagnostic services, including cardiac services, in Western Pennsylvania.
Cost of service and Gross profit
Due to a decrease in total revenues, the continued stabilization of the
Company's workforce and revenue base and the Company's cost reduction program
initiated in 1998, subcontracted services were significantly reduced and direct
labor costs declined, thereby decreasing the Company's costs of service by
$2,004,000 from $11,380,000 for the first nine months of 1998 to $9,376,000 for
1999, or 17.6%. As a percentage of net patient service revenue, cost of service
decreased during the first nine months of 1999, from 48.8% in 1998 to 46.7% in
1999. As a result of the decrease in total revenue in the first nine months of
1999, gross profit decreased $1,586,000 from $13,023,000 for the first nine
months of 1998 to $11,437,000 for 1999. As a percentage of total revenue, gross
profit increased from 53.4% of revenue for the first nine months of 1998 to
55.0% for the first nine months of 1999.
Selling, general and administrative expense
Total selling, general and administrative expenses for the first nine months
decreased $1,292,000 from $8,353,000 in 1998 to $7,061,000 in 1999. The 15.5%
decrease can be attributed to the cost reduction program initiated in May 1998,
and the regional management reorganization that was completed in December 1998.
Bad debt expense
The Company incurred bad debt expense of $302,000 or approximately 1.5% of net
patient service revenue during the first nine months of 1999 versus $238,000 or
approximately 1.0% during the first nine months of 1998. Bad debt expense in
both years was reduced by the recovery of contract billings deemed uncollectable
in prior years. Bad debt expense without any recoveries would have been
approximately 2.6% and 2.3%, respectively, in the first nine months of 1999 and
1998.
Restructuring and non-recurring expense
In 1998, the Company continued to incur additional legal and other professional
fees resulting from the continuing reorganization of the Company and litigation
both against and on behalf of the Company in various matters. During the first
nine months of 1999, the expenses deemed non-recurring were considered
immaterial.
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Provision for loss on sale of subsidiary
On August 13, 1999, the Company terminated the mobile diagnostic services
performed by its Penn Vascusonics subsidiary. In the third quarter of 1999, the
Company recorded a provision for the impairment related to this subsidiary.
These costs included a provision of $334,000 for impaired fixed assets and
$596,000 for impaired goodwill. In the nine months ended September 30 of 1999
and 1998, Penn Vascusonics lost $397,000 and $225,000, respectively, from
operations. Management believes that Penn Vascusonics was its only remaining
under-performing asset.
Interest and other non-operating expenses
Interest expenses were $1,518,000 for the first nine months of 1999 compared to
$1,598,000 for 1998. This decrease can be attributed to the amortization of
leases and other debt. The Company reported net non-operating expense of $3,000
for the first nine months of 1999 compared to $57,000 in net non-operating
income in the first nine months of 1998. Net operating income for the first nine
months of 1998 included approximately $7,900 in gain on the disposal of fixed
assets compared to $7,000 in losses for the first nine months of 1999. Certain
costs estimated at $175,000 associated with the restructuring of the company's
senior debt were recorded in the third quarter of 1999, as well as the write-off
of deferred financing costs related to the previous debt instrument of $151,000.
These costs were partially offset by a favorable reversal of legal expenses of
$118,000.
Income taxes
The Company has recorded a tax benefit of $14,000 as the result of the receipt
of an income tax refund from prior years. The Company has not recorded a tax
provision during the first nine months of 1999. As a result of the losses
experienced in 1997 and prior years, the Company anticipates that any taxable
income in 1999 will be offset by tax loss carryforwards.
Net Income
The net loss for the first nine months of 1999 was $583,000 compared to income
of $156,000 for the same period in 1998. The significant decline in
profitability is due to the provision for the impairment of assets related to
the mobile diagnostic subsidiary and certain of the costs associated with
restructuring of the Company's senior debt.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1999, the Company restructured its credit facility with its
Senior Lender, Cerberus Capital Management, LLC. As a result, the Company is no
longer in default of its obligations to its Senior Lender. The restructured
credit facility is due and payable in monthly installments with a final payment
of all remaining obligations due on or before December 31, 2000.
During the nine months ended September 30, 1999, the Company provided $93,000
versus $1,592,000 of net cash provided during the first nine months of 1998
primarily due to a decrease in accrued expense liabilities. The net cash used in
investing activities increased from $253,000 in the first nine months of 1998 to
$365,000 in the first nine months of 1999 resulting primarily from an increase
in expenditures for capital items in 1999.
13
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During the first nine months of 1998, the Company made debt principal payments
of $847,000 which were primarily scheduled debt and lease payments as well as
payments on debt to former owners and managers of the Company. This amount
decreased to $661,000 for the first nine months of 1999 due to the net effect of
final payment of certain debt after the first nine months of 1998 and principal
payments of $100,000 to Cerberus on May 3, June 1 and July1 and combined
principal and interest payments of $300,000 on August 2 and September 1, 1999.
In addition, during the first nine months of 1999, the Company paid
approximately $271,000 to minority interest holders in companies controlled by
Northstar and $98,000 under contractual obligations with certain employees.
SUMMARY OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company continues to experience problems with liquidity as a result of the
expenses related to the contest for corporate control in 1997; the investigation
and litigation expenses arising out of certain actions taken by the Company's
pre-1996 management; prior year's operating losses; and prior obligations to buy
out profit-sharing interests in several of the Company's key clinics. As a
result of these circumstances, the Company's access to the capital and debt
markets has been severely impaired. If it is unable to raise additional capital
and/or effect refinancing of its outstanding long-term debt obligations in the
foreseeable future, the Company could be required to file a petition for relief
under the provisions of the Bankruptcy Code.
In response to these developments, the Company continues to focus its efforts on
improving the performance of its core physical therapy and rehabilitation
businesses. During the third quarter of 1999, the Company negotiated the sale of
it's Penn Vascusonics mobile diagnostic business, which had been unprofitable.
The Company is also continuing to review all expenses in an effort to reduce
costs wherever possible, and to seek additional sources of revenues. The
Company's Chairman continues to indicate that he will not demand immediate
reimbursement of all amounts currently due to him and his family partnership.
There can be no assurance that the Company will be successful in raising
additional equity or other capital, or that it will be in a position to do so on
terms that will not significantly dilute the equity interest of the Company's
existing stockholders. The Company is not currently eligible to utilize Form S-3
to register offerings of securities under the Securities Act of 1933, and its
shares are not currently listed on either the NASDAQ National Market or the
NASDAQ Small Cap Market. These circumstances could adversely affect the
Company's ability to attract additional equity capital.
YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Computer programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar normal business activities.
The Company is aware of potential Year 2000 issues in its internal computer
systems and software, payor and supplier systems and software, Electronic Data
Interchange (EDI) software, and certain therapy equipment that contain computer
operating systems. In response to these issues, the Company has formed a Year
2000 Project Team (the "Team") that is headed by the Director of Management
Information Systems. This Team includes members of senior management,
Information Systems professionals, department heads and outside consultants. The
Year 2000 Project Team has developed and implemented a work plan that includes
inventory, assessment, planning, implementation and testing. The scope of this
plan encompasses many elements, including hardware, operating systems,
application software, end user computing, communications, facilities, equipment
and suppliers. Monthly status/progress reports, including Y2K Compliance Status
Worksheets, are issued to the Chief Financial Officer who, in turn, updates the
Board of Directors.
14
<PAGE> 17
The Company's software systems, including its internal financial and billing
systems, have all been assessed. The Team has obtained compliance certificates
for the General Ledger (general accounting), Accounts Payable, Billing &
Accounts Receivable, Fixed Asset and Stock Option software packages. All
upgrades, if any, to these systems were done at no cost to the Company. The
Company generally utilizes Microsoft based Office Suites and networking products
for its office computing software needs and upgrades to newer software as deemed
necessary. The Company's current standard products are Windows 95 and Office 97,
which are Year 2000 compliant.
The Company has inventoried its computer equipment and identified potential Year
2000 issues. The upgrade on the Company's IBM RS/6000 operating system was
installed in April 1999. All Personal Computer hardware is Year 2000 compliant,
with the exception of a few older machines that require a "patch" that will be
installed at a total cost of less than $1,000.
The Company has initiated formal communications with its significant payors and
suppliers to determine the extent to which the Company is vulnerable to those
third parties' failure to remediate their own Year 2000 Issue. These
communications ask for written assurances that they are or will be Year 2000
compliant. Currently, the Company does not believe the failure of such third
parties to remediate their own Year 2000 Issue will have a material adverse
effect on the Company. There can be no guarantee, however, that the systems of
other companies on which the Company's systems rely will be timely converted, or
that failure to convert by another company, or a conversion that is incompatible
with the Company's systems, would not have a material adverse effect on the
Company.
The inventory and assessment phases of the plan have been completed. All planned
hardware and software upgrades to internal financial billing systems have been
completed on schedule. In-house testing of the components has been
satisfactorily completed. Retesting will continue through year end.
Based on the assessment to date, the Company has determined that it will not be
required to invest significant funds to replace hardware or software in order
for its computer systems or equipment to properly utilize dates beyond December
31, 1999. Estimated costs to upgrade systems or equipment are not expected to
exceed $25,000, which have been provided out of internally generated cash flow.
The Company presently believes that if any additional modifications are required
that are unknown at this time, they will be insignificant in scope and cost. All
remediation of the Company's computer systems or equipment, relating to the Year
2000 Issue, has been completed.
The Company does not currently believe that it has any material exposure for the
Year 2000 issue. However, if the Company discovers any such exposure, it will
implement projects to correct or prepare contingency plans to address any such
issue. The Company believes that a material failure would occur if a major
payor, such as Blue Cross/Blue Shield, was unable to reimburse the Company in a
timely manner for services provided. The Company does not believe, based on its
current financial situation and access to capital, that it can produce an
adequate contingency plan if its significant payors are unable to reimburse the
Company on a timely basis for services provided.
The Company's assessment of its Year 2000 Issue and the associated costs are
based on management's best estimates, which were derived utilizing assumptions
of future events, including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from these plans. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct relevant
computer codes and similar uncertainties. Therefore, there can be no assurance
that management's assessment that the Company's Year 2000 Issue is insignificant
is correct.
Item - 3. Quantitative and Qualitative Disclosure About Market Risk Sensitive
Instruments
The Company currently does not invest excess funds in derivative financial
instruments or other market risk sensitive instruments for the purpose of
managing its interest rate risk or for any other purpose.
15
<PAGE> 18
Part II - OTHER INFORMATION
Item 1. - Legal Proceedings
On October 2, 1998, Commercial Financial Corporation, a named defendant in the
lawsuit filed by the Company in September 1996 in federal court in Pittsburgh,
filed a demand for arbitration against the Company for alleged breach of
contract. A settlement has been reached between the Company, Commercial
Financial Corporation, and Nichlaus P. Horoszko, Commercial Financial
Corporation's President, in that federal court action. As part of that
settlement, Commercial Financial Corporation agreed to withdraw its demand for
arbitration, with prejudice.
Item 2. - Changes in Securities and Use of Proceeds
Chapter 1, Title 8, Section 170 of the Delaware Corporation Law provides that
the directors of every corporation may declare and pay dividends either out of
surplus or, in the event that there is no surplus, out of net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year.
Although the Company has experienced a small profit for fiscal year 1998 and for
the first two quarters of 1999, the Company has not had surplus during the past
fiscal year and does not have surplus during the three quarters of fiscal year
1999, and therefore, the Company does not plan to declare and pay dividends on
its Common Stock.
In addition, the Company is prohibited from declaring any dividend, other than
dividends payable solely in common stock, on any shares of any class of stock
under the terms of the Company's Amended and Restated Credit Agreement with
Cerberus Capital Management, LLC.
Item 3. - Defaults upon Senior Securities
None
Item 5. - Other Information
Future Business Opportunities
From time to time, the Company engages in exploratory discussions with possible
candidates for a merger or joint venture in an effort to improve its liquidity
and operations and as part of its strategic planning to improve shareholder
value. However, there is no guarantee that the Company will decide to enter into
a merger or joint venture, or that it will find a suitable merger or joint
venture partner. It is Management's intent to focus on existing operations until
the Amended and Restated Credit Agreement is refinanced by December 31, 2000.
16
<PAGE> 19
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits Required by Item 601 of Regulation S-K
The following exhibits required by Item 601 of Regulation S-K are set
forth in the following list and are filed either by incorporation or by
reference from previous filings with the Securities and Exchange
Commission or by attachment to this Form 10-Q.
3.1.1 Articles of Incorporation of Northstar Health Services, Inc., as filed
in the state of Delaware, filed as an exhibit to the Company's Annual
Report on Form 10-K for fiscal year ended December 31, 1996, is
incorporated by reference.
3.1.2 Amendment to Certificate of Incorporation, as filed in the state of
Delaware, filed as an exhibit to the Company's Quarterly Report on Form
10-Q dated August 7, 1998, is incorporated by reference.
3.2.1 Bylaws of Northstar Health Services, Inc., filed as an exhibit to the
Company's Quarterly Report on Form 10-Q dated August 14, 1997, is
incorporated by reference.
3.2.2 Amendment to the Bylaws of Northstar Health Services, Inc., filed as an
exhibit in the Company's Form 8-K, dated September 1, 1998, is
incorporated by reference.
4.1 1997 Stock Option Plan, filed as an exhibit to the Company's Annual
Report on Form 10-K for fiscal year ended December 31, 1997, is
incorporated by reference.
4.2 1992 Stock Option Plan, as amended, filed as an exhibit to the
Company's Annual Report on Form 10-K for fiscal year ended December 31,
1996, is incorporated by reference.
4.3 Form S-8 Registration Statement (No. 33-94584), 1992 Stock Option Plan
filed July 14, 1995, is incorporated by reference.
4.4 Form S-8 Registration Statement (No. 333-57051), 1997 Stock Option Plan
filed June 17, 1998, is incorporated by reference.
4.5 Post Effective Amendment No. 1 to Form S-8 Registration Statement (No.
33-94584), 1994 Stock Option Plan, filed June 17, 1998, is incorporated
by reference.
10.1 Employment Agreement dated November 15, 1995, between Northstar Health
Services, Inc. and Thomas W. Zaucha, filed as an exhibit to the
Company's Form 8-K dated November 15, 1995, is incorporated by
reference.
10.2 Amended and Restated Credit Agreement.
10.3 Amended and Restated Promissory Note: Cerberus Capital Management, LLC.
10.4 Amended and Restated Promissory Note: Bear Stearns & Co.
10.5 Amended and Restated Company Security Agreement.
10.6 Amended and Restated Subsidiaries Guaranty.
10.7 Amended and Restated Company Pledge Agreement.
10.8 Amended and Restated Subsidiaries Stock Pledge Agreement.
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<PAGE> 20
10.9 Amended and Restated Subsidiaries Security Agreement.
10.10 Zaucha Subordination Agreement.
10.11 Zaucha Payment Letter.
10.12 Warrant to Purchase Shares of Common Stock.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
18
<PAGE> 21
SIGNATURES
In accordance with 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.
Northstar Health Services, Inc.
(Registrant)
By: /s/ Thomas W. Zaucha
--------------------
Thomas W. Zaucha
Chairman of the Board, President and Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1999
By: /s/ James R. Martin
-------------------
James R. Martin
Executive Vice President and Chief Financial Officer
and Treasurer
(Principal Accounting and Financial Officer)
Date: November 12, 1999
19
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EXHIBIT 10.2
[EXECUTION COPY]
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1999
AMONG
NORTHSTAR HEALTH SERVICES, INC.
AS BORROWER,
THE SUBSIDIARY GUARANTORS,
THE LENDERS LISTED HEREIN,
AS LENDERS,
CERBERUS CAPITAL MANAGEMENT, LLC,
AS AGENT
AND
THE CHASE MANHATTAN BANK
AS COLLATERAL AGENT
================================================================================
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NORTHSTAR HEALTH SERVICES, INC.
CREDIT AGREEMENT
TABLE OF CONTENTS
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SECTION 1
DEFINITIONS
1.1 Certain Defined Terms....................................................................................2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement......................22
1.3 Other Definitional Provisions and Rules of Construction.................................................22
SECTION 2
AMOUNTS AND TERMS OF LOANS
2.1 Loans; Notes............................................................................................22
2.2 Interest on the Loans...................................................................................23
2.3 Fees....................................................................................................24
2.4 Repayments and Prepayments; General Provisions Regarding Payments.......................................24
2.5 Use of Proceeds.........................................................................................29
2.6 Increased Costs; Taxes; Capital Adequacy................................................................29
2.7 Obligations of Lenders to Mitigate......................................................................33
2.8 Acknowledgment and Consent to Amendment and Restatement of Original Credit Agreement....................33
SECTION 3
CONDITIONS TO LOANS
3.1 Loan Party Documents....................................................................................34
3.2 Legal Opinions..........................................................................................35
3.3 Fees....................................................................................................35
3.4 Officers' Certificate Regarding Certain Conditions......................................................35
3.5 Resignation of Agent; New Collateral Agent..............................................................36
3.6 Collateral Documents....................................................................................36
3.7 Cash Management System..................................................................................36
3.8 Evidence of Insurance. .................................................................................36
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3.9 Zaucha Agreements. .....................................................................................36
3.10 Warrant. ...............................................................................................37
3.11 Miscellaneous Other Conditions..........................................................................37
SECTION 4
COMPANY'S REPRESENTATIONS AND WARRANTIES
4.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries...........................38
4.2 Authorization of Borrowing, etc.........................................................................39
4.3 Financial Condition.....................................................................................40
4.4 No Material Adverse Change: No Restricted Junior Payments...............................................40
4.5 Title to Properties; Liens; Real Property...............................................................40
4.6 Litigation; Violation of Law or Order...................................................................41
4.7 Payment of Taxes........................................................................................41
4.8 Performance of Agreements; Materially Adverse Agreements;Material Contracts, Leases,
Transactions with Affiliates............................................................................42
4.9 Governmental Regulation. ...............................................................................42
4.10 Securities Activities...................................................................................43
4.11 Employee Benefits Plans.................................................................................43
4.12 Certain Fees............................................................................................44
4.13 Environmental Protection................................................................................44
4.14 Employee Matters........................................................................................45
4.15 [INTENTIONALLY OMITTED].................................................................................45
4.16 Matters Relating to Collateral..........................................................................45
4.17 Disclosure .............................................................................................46
SECTION 5
COMPANY'S AFFIRMATIVE COVENANTS
5.1 Financial Statements and Other Reports..................................................................46
5.2 Corporate Existence, etc................................................................................52
5.3 Payment of Taxes and Claims; Tax Consolidation..........................................................53
5.4 Maintenance of Properties; Insurance....................................................................53
5.5 Inspection Rights; Audits of Inventory and Accounts Receivable; Lender Meetings.........................54
5.6 Compliance with Laws, etc...............................................................................54
5.7 Environmental Review and Investigation, Disclosure, etc.; Company's Actions Regarding
Hazardous Materials Activities, Environmental Claims and Violations of Environmental Laws...............55
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5.8 Execution of Subsidiary Guaranty and Personal Property Collateral Documents by
Certain Subsidiaries and Future Subsidiaries............................................................58
5.9 After-Acquired Real Property............................................................................59
5.10 Key Man Insurance.......................................................................................59
5.11 Chief Financial Officer.................................................................................59
SECTION 6
COMPANY'S NEGATIVE COVENANTS
6.1 Indebtedness............................................................................................59
6.2 Liens and Related Matters...............................................................................60
6.3 Investments; Joint Ventures.............................................................................61
6.4 Contingent Obligations..................................................................................61
6.5 Restricted Junior Payments..............................................................................62
6.6 Financial Covenants.....................................................................................62
6.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions........................................63
6.8 Consolidated Capital Expenditures.......................................................................64
6.9 Restriction on Leases...................................................................................64
6.10 Sales and Lease-Backs...................................................................................65
6.11 Sale or Discount of Receivables.........................................................................65
6.12 Transactions with Shareholders and Affiliates...........................................................65
6.13 Disposal of Subsidiary Stock............................................................................65
6.14 Conduct of Business.....................................................................................66
6.15 Amendments of Documents Relating to Subordinated Indebtedness...........................................66
6.16 Fiscal Year.............................................................................................66
6.17 Cash Management System..................................................................................66
6.18 Collections and Disbursements...........................................................................66
SECTION 7
EVENTS OF DEFAULT
7.1 Failure to Make Payments When Due.......................................................................67
7.2 Default in Other Agreements.............................................................................68
7.3 Breach of Certain Covenants.............................................................................68
7.4 Breach of Warranty......................................................................................68
7.5 Other Defaults Under Loan Documents.....................................................................68
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc....................................................68
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc......................................................69
7.8 Judgments and Attachments...............................................................................69
7.9 Dissolution.............................................................................................69
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7.10 Employee Benefit Plans..................................................................................69
7.11 Material Adverse Effect.................................................................................70
7.12 Change in Control.......................................................................................70
7.13 Invalidity of Subsidiary Guaranty; Failure of Security; Repudiation of Obligations......................70
7.14 Loss of Approval........................................................................................70
7.15 Cash Management System..................................................................................71
SECTION 8
AGENT
8.1 Appointment.............................................................................................71
8.2 Powers and Duties; General Immunity.....................................................................72
8.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness.....................75
8.4 Right to Indemnity......................................................................................75
8.5 Successor Agent.........................................................................................75
8.6 Collateral Documents and Guaranties.....................................................................76
8.7 Application of Proceeds.................................................................................77
SECTION 9
MISCELLANEOUS
9.1 Assignments and Participations in Loans.................................................................77
9.2 Expenses................................................................................................79
9.3 Indemnity...............................................................................................80
9.4 Set-Off; Security Interest in Deposit Accounts..........................................................81
9.5 Ratable Sharing.........................................................................................81
9.6 Amendments and Waivers..................................................................................82
9.7 Independence of Covenants...............................................................................83
9.8 Notices.................................................................................................83
9.9 Survival of Representations, Warranties and Agreements..................................................83
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative...................................................84
9.11 Marshalling: Payments Set Aside........................................................................84
9.12 Severability. .........................................................................................84
9.13 Obligations Several: Independent Nature of Lenders' Rights.............................................84
9.14 Headings................................................................................................84
9.15 Applicable Law..........................................................................................84
9.16 Successors and Assigns..................................................................................85
9.17 Consent to Jurisdiction and Service of Process..........................................................85
9.18 Waiver of Jury Trial....................................................................................86
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9.19 Confidentiality.........................................................................................86
9.20 Counterparts............................................................................................87
9.21 Continuity of Loans and Security Interests..............................................................87
9.22 Effectiveness...........................................................................................87
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EXHIBITS
<S> <C>
Exhibit 2.1B Amended and Restated Note
Exhibit 2.6B(iii) Certificate of Non-Bank Status
Exhibit 3.1A Amended and Restated Company Pledge Agreement
Exhibit 3.1B Amended and Restated Company Security Agreement
Exhibit 3.1C Amended and Restated Subsidiary Guaranty
Exhibit 3.1D Amended and Restated Subsidiary Stock Pledge Agreement
Exhibit 3.1E Amended and Restated Subsidiary Security Agreement
Exhibit 3.2 Opinions
Exhibit 3.5 IBJS Resignation
Exhibit 3.9A Zaucha Subordination Agreement
Exhibit 3.9B Zaucha Payment Letter
Exhibit 3.10 Warrant to Purchase Shares of Common Stock
Exhibit 5.1(iv) Compliance Certificate
Exhibit 5.1(xix) Receivables Report
Exhibit 9.1B Assignment Agreement
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SCHEDULES
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Schedule 2.1 Loans and Pro Rata Share
Schedule 3.4B Certain Events of Default
Schedule 3.8 Summary of Insurance
Schedule 3.11 Certain Material Adverse Effects
Schedule 4.1D Information Regarding Company and Subsidiaries
Schedule 4.1E Changes
Schedule 4.4 Adverse Changes
Schedule 4.5 Real Property Interests
Schedule 4.6 Litigation
Schedule 4.8C Material Contracts
Schedule 4.8D Operating and Capital Leases
Schedule 4.8E Holders of 5% Equity/Affiliate Transactions
Schedule 4.11 Certain ERISA Matters
Schedule 4.13 Environmental Matters
Schedule 6.1 Permitted Indebtedness
Schedule 6.2 Liens
Schedule 6.3 Investments Owned
</TABLE>
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Schedule 6.4 Contingent Obligations
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NORTHSTAR HEALTH SERVICES, INC.
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT is dated as of September 30,
1999 and entered into by and among NORTHSTAR HEALTH SERVICES, INC., a Delaware
corporation ("COMPANY"), THE SUBSIDIARY GUARANTORS LISTED ON THE SIGNATURE PAGES
HEREOF, THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each
individually referred to herein as a "LENDER" and collectively as "LENDERS"),
and CERBERUS CAPITAL MANAGEMENT, LLC ("CERBERUS"), for itself and as agent for
Lenders and THE CHASE MANHATTAN BANK, as Collateral Agent (the "COLLATERAL
AGENT").
R E C I T A L S
WHEREAS, pursuant to the Original Credit Agreement (this and
other capitalized terms used in these recitals without definition being used as
defined in Section 1.1), the Lenders agreed to extend certain credit facilities
to Company, the proceeds of which were used (i) to refinance substantially all
indebtedness of Company and its Subsidiaries outstanding on the date thereof,
(ii) to pay certain fees and expenses, (iii) to provide financing for the
working capital needs of Company and its Subsidiaries and (iv) to provide a
portion of the purchase price of certain acquisitions by Company and its
Subsidiaries;
WHEREAS, Company secured all of the Obligations under the
Original Credit Agreement and under the other Loan Documents by granting to
Agent, on behalf of Lenders, a first priority security interest in all of its
personal property, including a pledge of all of the capital stock of each of its
Subsidiaries;
WHEREAS, the Subsidiary Guarantors guaranteed the Obligations
of the Loan Parties under the Original Credit Agreement and the other Loan
Documents and granted to Agent, on behalf of Lenders, a first priority security
interest in all of their respective personal property as security therefor,
including a pledge of all of the equity interests in each of their respective
Subsidiaries, other than the KRS Partnerships;
WHEREAS, IBJS desires to resign as Agent under the Original
Credit Agreement and Cerberus has agreed to become Agent in its place;
WHEREAS, the parties hereto have agreed to amend and restate
the Original Credit Agreement to (i) extend the maturity of the Loans on the
terms set forth herein, (ii) to effect IBJ's resignation as Agent thereunder and
to appoint Cerberus as its successor as Agent under the Credit Agreement, as
amended and restated hereby, and (iii) make certain other changes as more fully
set forth herein, which amendment and restatement shall become effective upon
the satisfaction of the conditions precedent set forth in Section 3;
<PAGE> 9
WHEREAS, it is the intent of the parties hereto that this
Agreement shall not constitute a novation of the obligations and liabilities of
the parties under the Original Credit Agreement nor be deemed to evidence or
constitute repayment of all or any portion of such obligations and liabilities
and that this Agreement shall amend and restate in its entirety the Obligations
under the Original Credit Agreement and re-evidence the Obligations of Company
outstanding thereunder;
WHEREAS, it is the intent of the Loan Parties to confirm that
all Obligations of the Loan Parties under the other Loan Documents shall
continue in full force and effect and that, from and after the Restatement
Closing Date, all references to the "Credit Agreement" contained therein shall
be deemed to refer to this Agreement;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Company, Lenders and Agent, intending to be legally bound, hereby
agree that on the Restatement Closing Date, the Original Credit Agreement shall
be amended and restated in its entirety as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the
following meanings:
"ACQUISITION LOANS" means the Acquisition Loans made under and
defined in Section 4.1(a) of the Original Credit Agreement.
"AFFILIATE", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contact or otherwise.
"AGENT" means, prior to the Restatement Closing Date, IBJS, in
its capacity as agent to Lenders under the Original Credit Agreement, and, on
and after the Restatement Closing Date, Cerberus, as successor to IBJS, and any
successor Agent appointed pursuant to Section 8.5.
"AGREEMENT" means this Amended and Restated Credit Agreement
dated as of September 30, 1999, as it may be further amended, restated,
supplemented or otherwise modified from time to time.
"APPROVALS" has the meaning assigned to that term in Section
5.6.
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<PAGE> 10
"ASSET SALE" means the sale by Company or any of its
Subsidiaries to any Person other than Company or any of its wholly-owned
Subsidiaries of (i) any of the stock of any of Company's Subsidiaries, (ii)
substantially all of the assets of any division or line business of Company or
any of its Subsidiaries, or (iii) any other assets (whether tangible or
intangible) of Company or any of its Subsidiaries (other than any such assets to
the extent that the aggregate value of such assets sold in any single
transaction or related series of transactions is equal to $100,000 or less).
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in
substantially the form of EXHIBIT 9.1B annexed hereto.
"BAD DEBT EXPENSE" means, for any period, (a) bad debt
write-offs for such period, plus (b) the change in bad debt reserves for such
period, less (c) bad debt recoveries for such period all determined in
accordance with GAAP.
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASE RATE" means at any time, the higher of (x) the Prime
Rate or (y) the rate which is 2 of 1% in excess of the Federal Funds Effective
Rate.
"BUSINESS DAY" means any day excluding Saturday, Sunday and
any day which is a legal holiday under the laws of the State of New York or is a
day on which banking institutions located in such state are authorized or
required by law or other governmental action to close.
"CAPITAL LEASE", as applied to any Person, means any lease of
any property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CASH" means money, currency or a credit balance in a Deposit
Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws
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<PAGE> 11
of the United States of America or any state thereof or the District of Columbia
that (a) is at least "adequately capitalized" (as defined in the regulations of
its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in
such regulations) of not less than $100,000,000; and (v) shares of any money
market mutual fund that (a) has at least 95% of its assets invested continuously
in the types of investments referred to in clauses (i) and (ii) above, (b) has
net assets of not less than $500,000,000, and (c) has the highest rating
obtainable from either S&P or Moody's.
"CASH MANAGEMENT SYSTEM" has the meaning assigned to that term
in the Company Security Agreement.
"CERBERUS" has the meaning assigned to that term in the
introduction to this Agreement.
"CERTIFICATE OF NON-BANK STATUS" means a certificate
substantially in the form of EXHIBIT 2.6B(III) annexed hereto delivered by a
Lender to Agent pursuant to Section 2.6B(iii).
"CLOSING DATE" means October 20, 1995, the date on which the
initial Loans under the Original Credit Agreement were made.
"COLLATERAL" means collectively, all of the real, personal and
mixed property (including capital stock) in which Liens are purported to be
granted pursuant to the Collateral Documents as security for the Obligations and
all proceeds thereof.
"COLLATERAL AGENT" means The Chase Manhattan Bank, as
collateral agent or any successor Collateral Agent from time to time appointed
pursuant to Section 8.5 hereof.
"COLLATERAL DOCUMENTS" means the Company Pledge Agreement, the
Company Security Agreement, the Subsidiary Pledge Agreement, the Subsidiary
Security Agreement and all other instruments or documents delivered by any Loan
Party pursuant to this Agreement or any of the other Loan Documents, each as
contemplated to be amended hereby and as it may be further amended, in order to
grant to Agent, on behalf of Lenders, a Lien on any real, personal or mixed
property of that Loan party as security for the Obligations.
"COLLECTING AGENTS" has the meaning stated in Section 6.17.
"COMPANY" has the meaning assigned to that term in the
introduction to this Agreement.
"COMPANY COMMON STOCK" means the common stock of Company, par
value $0.01 per share.
"COMPANY PLEDGE AGREEMENT" means the Stock Pledge Agreement
dated as of the Closing Date made by Company in favor of the Agent and the
Collateral Agent, as amended and
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<PAGE> 12
restated by the Amended and Restated Company Pledge Agreement in the form of
EXHIBIT 3.1A hereto, as the same may be further amended, restated, supplemented
or otherwise modified from time to time.
"COMPANY SECURITY AGREEMENT" means the Security Agreement
dated as of the Closing Date made by Company in favor of the Agent and the
Collateral Agent, as amended and restated by the Amended and Restated Company
Security Agreement in the form of EXHIBIT 3.1B hereto, as the same may be
further amended, restated, supplemented or otherwise modified from time to time.
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of EXHIBIT 5.1(IV) annexed hereto delivered to Agent and Lenders by
Company pursuant to Section 5.1(iv).
"CONSOLIDATED ADJUSTED EBITDA" means, for any period, (A)
Consolidated EBITDA, less (B) the sum of (i) Consolidated Capital Expenditures
paid in cash for such period and (ii) scheduled principal payments of the Loans
during such period.
"CONSOLIDATED AVAILABLE CASH" means for any period, an amount
of Cash and Cash Equivalents equal to (a) Consolidated Excess Cash Flow, plus
(b) the scheduled repayments of the Loans pursuant to Section 2.4A of this
Agreement, plus (c) the amounts referred to in clause (f) of the definition of
"Consolidated Excess Cash Flow".
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
sum of (i) the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of Capital
Leases which is capitalized on the consolidated balance sheet of Company and its
Subsidiaries) by Company and its Subsidiaries during that period that, in
conformity with GAAP, are included in "additions to property, plant or
equipment" or comparable items reflected in the consolidated statement of cash
flows of Company and its Subsidiaries plus (ii) to the extent not covered by
clause (i) of this definition, the aggregate of all expenditures by Company and
its Subsidiaries during that period (a) to purchase or develop computer software
or systems (but only to the extent such expenditures are capitalized on the
consolidated balance sheet of Company and its Subsidiaries in conformity with
GAAP) or (b) to acquire (by purchase or otherwise) the business, property or
fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Company.
"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period,
Consolidated Interest Expense for such period excluding, however, any interest
expense not payable in Cash (including amortization of discount and amortization
of debt issuance costs).
"CONSOLIDATED CURRENT ASSETS" means, as at any date of
determination, the total assets of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current assets in
conformity with GAAP, excluding Cash and Cash Equivalents.
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<PAGE> 13
"CONSOLIDATED CURRENT LIABILITIES" means, as at any date of
determination, the total liabilities of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities in
conformity with GAAP, excluding the Zaucha Obligations and the Obligations.
"CONSOLIDATED EBITDA" means, for any period, the sum of the
amounts of such period of (A) Consolidated Net Income, (B) Consolidated Interest
Expense, (C) provisions for taxes based on income, (D) total depreciation
expense, (E) total amortization expense, and (E) other non-cash items reducing
Consolidated Net Income less other non-cash items increasing Consolidated Net
Income, all of the foregoing as determined on a consolidated basis for Company
and its Subsidiaries in conformity with GAAP.
"CONSOLIDATED EXCESS CASH FLOW" means, for any period, an
amount (if positive) equal to Consolidated EBITDA, minus (a) Consolidated
Capital Expenditures (net of any proceeds of any related financing with respect
to such expenditures), minus (b) the scheduled repayments of the Loans pursuant
to Section 2.4A of this Agreement, minus (c) the Consolidated Working Capital
Adjustment, minus (d) the provision for current taxes based on income of the
Company and its Subsidiaries and payable in cash with respect to such period,
minus (e) Consolidated Cash Interest Expense (excluding the interest component
of the scheduled repayments under this Agreement), minus (f) all other amounts
payable by the Company and its Subsidiaries under this Agreement, other than the
payments referred to in Section 2.4B(ii)(e).
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum
(without duplication) of the amounts for such period of (i) Consolidated
Interest Expense, (ii) provisions for taxes based on income, and (iii)
Consolidated Rental Payments, all of the foregoing as determined on a
consolidated basis for Company and its Subsidiaries in conformity with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total
interest expense (including that portion attributable to Capital Leases in
accordance with GAAP and capitalized interest) of Company and its Subsidiaries
on a consolidated basis with respect to all outstanding Indebtedness of Company
and its Subsidiaries, including all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs under Interest Rate Agreements, but excluding, however, any
amounts referred to in Section 2.3 payable to Agent and Lenders on or before the
Closing Date.
"CONSOLIDATED NET INCOME" means, for any period, the net
income (or loss) of Company, its Subsidiaries and the other members of its
consolidated group on a consolidated basis for such period taken as a single
accounting period determined in conformity with GAAP; provided that there shall
be excluded (i) the income (or loss) of any Person which is not a guarantor or
co-obligor on the Loan (other than a Subsidiary of Company) in which any other
Person (other than Company or any of its Subsidiaries) has a joint interest,
except to the extent of the amount of dividends or other distributions actually
paid to Company or any of its Subsidiaries by such Person during such period,
(ii) the income (or loss) of any Person accrued prior to the date it becomes a
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<PAGE> 14
Subsidiary of Company or is merged into or consolidated with Company or any of
its Subsidiaries or that Person's assets are acquired by Company or any of its
Subsidiaries, (iii) the income of any Subsidiary of Company which is not a
guarantor or co-obligor on the Loan to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (iv) any after-tax gains or losses
attributable to Asset Sales or returned surplus assets of any Pension Plan, and
(v) (to the extent not included in clauses (i) through (iv) above) any net
extraordinary gains or income or net non-cash extraordinary losses.
"CONSOLIDATED NET WORTH" means, as at any date of
determination, the sum of the capital stock and additional paid-in capital plus
retained earnings (or minus accumulated deficits) of Company and its
Subsidiaries on a consolidated basis determined in conformity with GAAP.
"CONSOLIDATED RENTAL PAYMENTS" means, for any period, the
aggregate amount of all rents paid or payable by Company and its Subsidiaries on
a consolidated basis during that period under all Capital Leases and Operating
Leases to which Company or any of its Subsidiaries is a party as lessee.
"CONSOLIDATED TOTAL DEBT" means, as at any date of
determination, the aggregate stated balance sheet amount of all Indebtedness of
Company and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED WORKING CAPITAL" means, as at any date of
determination, (a) the Consolidated Current Assets, minus (b) Consolidated
Current Liabilities.
"CONSOLIDATED WORKING CAPITAL ADJUSTMENT" means, for any
period on a consolidated basis, the amount (which may be a negative number) by
which Consolidated Working Capital as of the end of such period exceeds (or is
less than) Consolidated Working Capital as of the beginning of such period.
"CONTINGENT OBLIGATION", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Hedge Agreements. Contingent Obligations shall include
(a) the direct or indirect guaranty, endorsement (otherwise than for collection
or deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another, (b)
the obligation to make take-or-pay or similar payments if required regardless of
non-performance by any other party
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<PAGE> 15
or parties to an agreement, and (c) any liability of such Person for the
obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclauses (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"CONTINUING DIRECTORS" shall mean the directors of Company on
the Restatement Closing Date and each other director whose nomination for
election to the Board of Directors is recommended by a majority of the then
Continuing Directors.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"CURRENCY AGREEMENT" means any foreign exchange contract,
currency swap agreement, futures contract, option contract, synthetic cap or
other similar agreement or arrangement to which Company or any of its
Subsidiaries is a party.
"DEPOSIT ACCOUNT" means (i) a demand, time, savings, passbook
or like account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit and (ii) any "deposit account" as defined in the UCC in effect in the
State of New York.
"DOLLARS" and the sign "$" mean the lawful money of the United
States of America.
"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized
under the laws of the United States or any state thereof; (ii) a savings and
loan association or savings bank organized under the laws of the United States
or any state thereof; (iii) a commercial bank organized under the laws of any
other country or a political subdivision thereof; provided that (x) such bank is
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including insurance companies, investment funds,
investment accounts, mutual funds and lease financing companies; and (B) any
Lender and any Affiliate of any Lender; provided that no Affiliate of Company
shall be an Eligible Assignee.
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<PAGE> 16
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as
defined in Section 3(3) of ERISA which is or was maintained or contributed to by
Company, any of its Subsidiaries or any of their respective ERISA Affiliates.
"ENVIRONMENTAL CLAIM" means any investigation, notice, notice
of violation, claim, action, suit, proceeding, demand, abatement order or other
order or directive (conditional or otherwise), by any governmental authority or
any other Person, arising (i) pursuant to or in connection with any actual or
alleged violation of any Environmental Law, (ii) in connection with any
Hazardous Materials or any actual or alleged Hazardous Materials Activity, or
(iii) in connection with any actual or alleged damage, injury, threat or harm to
health, safety, natural resources or the environment.
"ENVIRONMENTAL LAWS" means any and all current or future
statutes, ordinances, orders, rules, regulations, guidance documents, judgments,
Governmental Authorizations, or any other requirements or governmental
authorities relating to (i) environmental matters, including those relating to
any Hazardous Materials Activity, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant or
animal health or welfare, in any manner applicable to Company or any of its
Subsidiaries or any Facility, including the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean
Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. Section 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide
Act (7 U.S.C. Section 136 et seq.), the Occupational Safety and Health Act (29
U.S.C. Section 651 et seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et
seq.), and the Emergency Planning and Community Right-to-Know Act (42 U.S.C.
Section 11001 et seq.), each as amended or supplemented, any analogous present
or future state or local statutes or laws, and any regulations promulgated
pursuant to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor thereto.
"ERISA AFFILIATE" means, as applied to any Person, (i) any
corporation which is a member of a controlled group of corporations within the
meaning of Section 414(b) of the Internal Revenue Code of which that Person is a
member; (ii) any trade or business (whether or not incorporated) which is a
member of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Internal Revenue Code of which that Person is a
member; and (iii) any member of an affiliated service group within the meaning
of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is a member. Any former ERISA Affiliate of Company or any of
its Subsidiaries shall continue to be considered an ERISA Affiliate of company
or such Subsidiary within the meaning of this definition with respect to the
period such entity was an ERISA Affiliate of Company or such Subsidiary and with
respect to liabilities arising after such
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<PAGE> 17
period for which Company or such Subsidiary could be liable under the Internal
Revenue Code or ERISA.
"ERISA EVENT" means (i) a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations issued thereunder with
respect to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation); (ii) the failure to meet the
minimum funding standard of Section 412 of the Internal Revenue Code with
respect to any Pension Plan (whether or not waived in accordance with Section
412(d) of the Internal Revenue Code) or the failure to make by its due date a
required installment under Section 412(m) of the Internal Revenue Code with
respect to any Pension Plan or the failure to make any required contribution to
a Multiemployer Plan; (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA; (iv)
the withdrawal by Company, any of its Subsidiaries or any of their respective
ERISA Affiliates from any Pension Plan with two or more contributing sponsors or
the termination of any such Pension Plan resulting in liability pursuant to
Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition which
might constitute grounds under ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; (vi) the imposition of liability
on Company, any of its Subsidiaries or any of their respective ERISA Affiliates
pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal of Company, any of its
Subsidiaries or any of their respective ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefor, or the
receipt by Company, any of its Subsidiaries or any of their respective ERISA
Affiliates of notice from any Multiemployer Plan that is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to
terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the
occurrence of an act or omission which could give rise to the imposition on
Company, any of its Subsidiaries or any of their respective ERISA Affiliates of
fines, penalties, taxes or related charges under Chapter 43 of the Internal
Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071
of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a
material claim (other than routine claims for benefits) against any Employee
Benefit Plan other than a Multiemployer Plan or the assets thereof, or against
Company, any of its Subsidiaries or any of their respective ERISA Affiliates in
connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue
Service of notice of the failure of any Pension Plan (or any other Employee
Benefit Plan intended to be qualified under Section 401(a) of the Internal
Revenue Code, to qualify under Section 401(a) of the Internal Revenue Code, or
the failure of any trust forming part of any Pension Plan to qualify for
exemption from taxation under Section 501(a) of the Internal Revenue Code; or
(xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan.
"EVENT OF DEFAULT" means each of the events set forth in
Section 7.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"FACILITIES" means any and all real property (including all
buildings, fixtures or other improvements located thereon) now, hereafter or
heretofore owned, leased, operated or used by Company or any of its Subsidiaries
or any of their respective predecessors or Affiliates.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by Agent from three Federal funds brokers of
recognized standing selected by Agent.
"FINANCIAL PLAN" has the meaning assigned to that term in
Section 5.1(xiii).
"FIRST PRIORITY" means, with respect to any Lien purported to
be created in any Collateral pursuant to any Collateral Document, that (i) such
Lien has priority over any other Lien on such Collateral and (ii) such Lien is
the only Lien (other than Permitted Encumbrances and Liens permitted pursuant to
Section 6.2) to which such Collateral is subject.
"FISCAL QUARTER" means the fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means the fiscal year of the Company and its
Subsidiaries, each of which ends on December 31 of each calendar year. For
purposes of this Agreement, any particular Fiscal Year shall be designated by
reference to the calendar year in which such Fiscal Year ends.
"FUNDING AND PAYMENT OFFICE" means (i) the office of Agent
located at 450 Park Avenue, New York, New York 10022 or (ii) such other office
of Agent as may from time to time hereafter be designated as such in a written
notice delivered by Agent to Company and each Lender.
"GAAP" means, subject to the limitations on the application
thereof set forth in Section 1.2, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.
"GOVERNMENTAL AUTHORIZATION" means any permit, license,
authorization, plan, directive, consent, consent order or consent decree of or
from any federal, state or local governmental authority, agency or court.
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"HAZARDOUS MATERIALS" means (i) any chemical, material or
substance at any time defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
waste", acutely hazardous waste, "radioactive waste", "biohazardous waste",
"pollutant", "toxic pollutant", "contaminant", "restricted hazardous wastes",
"infectious waste", "toxic substances", or any other term or expression intended
to define, list or classify substances by reason of properties harmful to
health, safety or the indoor or outdoor environment (including harmful
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of
similar import under any applicable Environmental Laws); (ii) any oil,
petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling
fluids produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources;
(iv) any flammable substances or explosives; (v) any radioactive materials; (vi)
any asbestos-containing materials; (vii) urea formaldehyde foam insulation;
(viii) electrical equipment which contains any oil or dielectric fluid
containing polychlorinated biphenyls; (ix) pesticides; and (x) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority or which may or could pose a hazard to
the health and safety of the owners, occupants or any Persons in the vicinity of
any Facility or to the indoor or outdoor environment.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current,
proposed or threatened activity, event or occurrence involving any Hazardous
Materials, including the use, manufacture, possession, storage, holding,
presence, existence, location, Release, threatened Release, discharge,
placement, generation, transportation, processing, construction, treatment,
abatement, removal, remediation, disposal, disposition or handling of any
Hazardous Materials, and any corrective action or response action with respect
to any of the foregoing.
"HEALTHCARE FACILITY" means each outpatient rehabilitation
clinic or patient care facility operated by Company or any of its Subsidiaries
in connection with the provision of rehabilitation therapy and related services.
"HEDGE AGREEMENT " means an Interest Rate Agreement or a
Currency Agreement designed to hedge against fluctuations in interest rates or
currency values, respectively.
"IBJS" means IBJ Whitehall Bank & Trust Company, formerly
known as IBJ Schroder Bank and Trust Company.
"INDEBTEDNESS", as applied to any Person, means (i) all
indebtedness for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a balance sheet
in conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services (excluding any such obligations incurred under ERISA),
which purchase price is (a) due more than three months from the date of
incurrence of the obligation in respect thereof or (b) evidenced by a note or
similar written instrument, and (v) all indebtedness secured by any Lien on any
property or
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<PAGE> 20
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements constitute Indebtedness.
"INDEMNITEE" has the meaning assigned to that term in Section
9.3.
"INTELLECTUAL PROPERTY" means all patents, trademarks,
tradenames, copyrights, technology, know-how and processes used in or necessary
for the conduct of the business of Company and its Subsidiaries as currently
conducted that are material to the condition (financial or otherwise), business
or operation of Company and its Subsidiaries, taken as a whole.
"INTEREST PAYMENT DATE" means the first day of each calendar
month, commencing on October 1, 1999.
"INTEREST RATE AGREEMENT" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement to which Company or any of its Subsidiaries is
a party.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time hereafter, and any
successor statute.
"INVESTMENT" means (i) any direct or indirect purchase or
other acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary of
Company), (ii) any direct or indirect redemption, retirement, purchase or other
acquisition for value, by Company or by any Subsidiary of Company from any
Person other than Company or any of its Subsidiaries, of any equity Securities
of such Subsidiary, (iii) any direct or indirect loan, advance, (other than
advances to employees for moving, entertainment and travel expenses, drawing
accounts and similar expenditures in the ordinary course of business) or capital
contribution by Company or any of its Subsidiaries to any other Person other
than a wholly-owned Subsidiary of Company, including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business, or
(iv) Interest Rate Agreements or Currency Agreements not constituting Hedge
Agreements. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"JOINT VENTURE" means a joint venture, partnership, limited
partnership, limited liability company or other similar arrangement, whether in
corporate, partnership or other legal form; provided that in no event shall any
corporate Subsidiary of any Person be considered to be a Joint Venture to which
such Person is a party.
"KRS PARTNERSHIPS" means Keystone Rehabilitation Associates of
Warren, an Ohio general partnership, Keystone Rehabilitation Systems of
McMurray, a Pennsylvania general
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partnership, The Rehab Center, formerly known as Keystone Rehabilitation Systems
of Ephrata, a Pennsylvania general partnership and Keystone Rehabilitation
Systems of Washington, a Pennsylvania general partnership.
"LENDER" and "LENDERS" means the persons identified as
"Lenders" and listed on the signature pages of this Agreement, together with
their successors and permitted assigns pursuant to Section 9.1.
"LENDER AGENTS" means the Agent, the Collateral Agent and each
Supplemental Collateral Agent.
"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"LOAN DOCUMENTS" means this Agreement, the Notes, the
Subsidiary Guaranty, the Collateral Documents, the Subordination Agreement, the
Zaucha Subordination Agreement the Zaucha Payment Letter, and the Block Account
Agreements, each as contemplated to be amended hereby and as they may be further
amended.
"LOAN EXPOSURE" means, with respect to any Lender as of any
date of determination, the outstanding principal amount of the Loan of that
Lender.
"LOAN PARTY" means each of Company and any of Company's
Subsidiaries from time to time executing a Loan Document, and "LOAN PARTIES"
means all such Persons, collectively.
"LOANS" has the meaning stated in Section 2.1A.
"MARGIN STOCK" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect
upon the business, operation, properties, assets, condition (financial or
otherwise) or prospects of Company or any of its Subsidiaries, (ii) the
impairment of the ability of any Loan Party to perform, or of Agent or Lenders
to enforce, the Obligations, or (iii) the failure of Agent, for and on behalf of
Lenders, to have a valid and perfected First Priority Lien on any of the
Collateral.
"MATERIAL CONTRACT" means any contract or other arrangement to
which Company or any of its Subsidiaries is a party (other than the Loan
Documents) for which breach, nonperformance, cancellation or failure to renew
could have a Material Adverse Effect.
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<PAGE> 22
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is
a "multiemployer plan" as defined in Section 3(37) of ERISA.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset
Sale, Cash payments (including any Cash received by way of deferred payment
pursuant to, or by monetization of, a note receivable or otherwise, but only as
and when so received) received from such Asset Sale, net of any bona fide direct
costs incurred in connection with such Asset Sale, including (i) income taxes
reasonably estimated to be actually payable within two years of the date of such
Asset Sale as a result of any gain recognized in connection with such Asset Sale
and (ii) payment of the outstanding principal amount of, premium or penalty, if
any, and interest on any Indebtedness (other than the Loans) that is secured by
a Lien on the stock or assets in question and that is required to be repaid
under the terms thereof as a result of such Asset Sale.
"NET INSURANCE/CONDEMNATION PROCEEDS" means any Cash payments
or proceeds received by Company or any of its Subsidiaries (i) under any
business interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Company or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of any
actual and reasonable documented costs incurred by Company or any of its
Subsidiaries in connection with the adjustment or settlement of any claims of
Company or such Subsidiary in respect thereof.
"NET PATIENT SERVICE REVENUES" means, for any period, (a)
gross billings for such period, less (b) contractual allowances for such period,
each as reported in the financial statements and calculated in accordance with
GAAP.
"NOTES" means (i) the promissory notes of Company issued
pursuant to Section 2.1B on the Restatement Closing Date evidencing the
obligation of Company to repay the Loans and amending and restating the
"Revolving Credit Notes", the "Term Notes" and the "Acquisition Notes", in each
case as defined in and issued to Lenders under the Original Credit Agreement,
and (ii) any promissory notes issued by Company pursuant to the last sentence of
Section 9.1B(i) in connection with assignments of the Loans of any Lenders, in
each case substantially in the form of EXHIBIT 2.1B annexed hereto, in each case
as they may be amended, restated, supplemented or otherwise modified from time
to time.
"OBLIGATIONS" means all obligations of every nature of each
Loan Party from time to time owed to Agent, the Collateral Agent, Lenders or any
of them under the Loan Documents, whether for principal, interest, fees,
expenses, indemnification or otherwise.
"OFFICERs' CERTIFICATE" means, as applied to any corporation,
a certificate executed on behalf of such corporation by its chairman of the
board (if an officer) or its president or one of its vice presidents and by its
chief financial officer or its treasurer; provided that every Officers'
Certificate with respect to the compliance with a condition precedent to the
making of the Loans
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<PAGE> 23
hereunder shall include (i) a statement that the officer or officers making or
giving such Officers' Certificate have read such condition and any definitions
or other provisions contained in this Agreement relating thereto, (ii) a
statement that, in the opinion of the signers, they have made or have caused to
be made such examination or investigation as is necessary to enable them to
express an informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion of the
signers, such condition has been complied with.
"OPERATING LEASE" means, as applied to any Person, any lease
(including leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"ORIGINAL CREDIT AGREEMENT" means that certain Credit
Agreement dated as of October 20, 1995, by and among Company, as borrower, the
financial institutions listed on the signature pages thereof, as Lender, and
IBJS, as agent for the Lenders, as amended as of November 15, 1995 and as of
December 1, 1995.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"PERMITTED ENCUMBRANCES" means the following types of Liens
(excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or by ERISA, any such Lien relating to or imposed in
connection with any Environmental Claim and any such Lien expressly prohibited
by any applicable terms of any of the Collateral Documents):
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by Section
5.3;
(ii) statutory Liens of landlords, statutory Liens of banks
and rights of set-off, statutory Liens of carriers, warehousemen,
mechanics, repairmen, workmen and materialmen, and other Liens imposed
by law, in each case incurred in the ordinary course of business (a)
for amounts not yet overdue or (b) for amounts that are overdue and
that (in the case of any such amounts overdue for a period in excess of
5 days) are being contested in good faith by appropriate proceedings,
so long as (1) such reserves or other appropriate provision, if any, as
shall be required by GAAP shall have been made for any such contested
amounts and (2) in the case of a Lien with respect to any portion of
the Collateral, such contest proceedings conclusively operate to stay
the sale of any portion of the Collateral on account of such Lien;
(iii) Liens incurred on deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids,
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leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money, so long as no
foreclosure, sale or similar proceedings have been commenced with
respect to any portion of the Collateral on account thereof);
(iv) any Lien serving as an attachment or judgment not
constituting an Event of Default under Section 7.8;
(v) leases or subleases granted to third parties in accordance
with any applicable terms of the Collateral Documents and not
interfering in any material respect with the ordinary conduct of the
business of Company or any of its Subsidiaries or resulting in a
material diminution in the value of any Collateral as security for the
Obligations;
(vi) easements, rights-of-way, restrictions, encroachments,
and other minor defects or irregularities in title, in each case which
do not and will not interfere in any material respect with the ordinary
conduct of the business of Company or any of its Subsidiaries or result
in a material diminution in the value of any Collateral as security for
the Obligations;
(vii) any (a) interest or title of a lessor or sublessor under
any lease permitted by Section 6.9, (b) restriction or encumbrance that
the interest or title of such lessor or sublessor may be subject to, or
(c) subordination of the interest of the lessee or sublessee under such
lease to any restriction or encumbrance referred to in the preceding
clause (b), so long as the holder of such restriction or encumbrance
agrees to recognize the rights of such lessee or sublessee under such
lease;
(viii) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement;
(ix) any zoning or similar law or right reserved to or vested
in any governmental office or agency to control or regulate the use of
any real property; and
(x) Liens securing obligations (other than obligations
representing Indebtedness for borrowed money) under operating,
reciprocal easement or similar agreements entered into in the ordinary
course of business of Company and its Subsidiaries.
"PERSON" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.
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"PLEDGED COLLATERAL" means, collectively, the "PLEDGED
COLLATERAL" as defined in the Company Pledge Agreement and the Subsidiary Pledge
Agreement.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that,
after notice or lapse of time or both, would constitute an Event of Default.
"POTENTIAL REVOCATION" has the meaning stated in Section
5.6(i).
"PRIME RATE" means the rate that The Chase Manhattan Bank
announces from time to time as its prime lending rate, as in effect from time to
time. The Prime Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. Cerberus or any other
Lender may make commercial loans or other loans at rates of interest at, above
or below the Prime Rate.
"PRO RATA SHARE" means, with respect to each Lender, the
percentage obtained by dividing (x) the Loan Exposure of that Lender by (y) the
aggregate Loan Exposure of all Lenders, as such percentage may be adjusted by
assignments permitted pursuant to Section 9.1. The initial Pro Rata Share of
each Lender is set forth opposite the name of that Lender in SCHEDULE 2.1
annexed hereto.
"RELEASE" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including the abandonment or disposal of any barrels, containers or
other closed receptacles containing any Hazardous Materials), including the
movement of any Hazardous Materials through the air, soil, surface water or
groundwater.
"REQUISITE LENDERS" means Lenders having or holding more than
50% of the aggregate Loan Exposure of all Lenders.
"RESPONSIBLE OFFICER" means when used with respect to the
Collateral Agent, any officer assigned to the Global Trust Services (or any
successor thereto), including any Vice President, Assistant Vice President,
Trust Officer, any Assistant Secretary, any trust officer or any other officer
of the Collateral Agent customarily performing functions similar to those
performed by any of the above designated officers and in each case having direct
responsibility for the administration of this Agreement.
"RESTATEMENT CLOSING DATE" means September 30, 1999, which is
the date on which this Agreement becomes effective.
"RESTRICTED JUNIOR PAYMENT" means (A)(i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Company now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value,
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direct or indirect, of any shares of any class of stock of Company now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Company now or hereafter outstanding, and (iv)
any payment or prepayment of principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Subordinated
Indebtedness or any other Indebtedness of the Company subordinated in right of
payment to the Loans or the Obligations or (B) any payment of the kinds set
forth in (A) above by any other Loan Party unless paid to a Loan Party which is
a wholly-owned subsidiary of the Company.
"REVOLVING LOANS" means the Revolving Loans made under and
defined in Section 3.1(a) of the Original Credit Agreement.
"SECURITIES" means any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, any
warrants, rights and options or any right to subscribe to, purchase or acquire,
any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, and any successor statute.
"SUBORDINATED INDEBTEDNESS" means (i) the Indebtedness of
Company evidenced by the Zaucha Obligations and (ii) any other Indebtedness of
Company subordinated in right of payment to the Obligations pursuant to
documentation containing maturities, amortization schedules, covenants,
defaults, remedies, subordination provisions and other material terms in form
and substance satisfactory to Agent and Requisite Lenders.
"SUBORDINATION AGREEMENT" means the Intercreditor and
Subordination Agreement, dated as of October 20, 1995, as amended and
supplemented as of November 15, 1995, as of November 30, 1995 and as of December
1, 1995, among Company, certain of its Subsidiaries, Agent, and the Subordinated
Creditors (as therein defined).
"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, limited liability company, association, joint venture
or other business entity of which more than 50% of the total voting power of
shares of stock or other ownership interests entitled (without regard to the
occurrence of any contingency) unless such contingency occurs to vote in the
election of the Person or Persons (whether directors, managers, trustees or
other Persons performing similar functions) having the power to direct or cause
the direction of the management and policies thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
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"SUBSIDIARY GUARANTOR" means any Subsidiary of Company that is
party to the Subsidiary Guaranty as of the Restatement Closing Date or will
execute and deliver a counterpart thereof from time to time hereafter pursuant
to Section 5.8.
"SUBSIDIARY GUARANTY" means the Subsidiaries Guarantee
executed and delivered by the Original Guarantors on the Closing Date, as
supplemented as of November 15, 1995 and as of December 1, 1995 as amended and
restated by the Amended and Restated Subsidiaries Guaranty in the form of
EXHIBIT 3.1C hereto and to be executed and delivered by additional Subsidiaries
of Company from time to time hereafter in accordance with Section 5.8, as such
Subsidiary Guaranty may further be amended, restated, supplemented or otherwise
modified from time to time.
"SUBSIDIARY PLEDGE AGREEMENT" means the Subsidiaries Stock
Pledge Agreement executed and delivered by the Original Guarantors on the
Closing Date, as supplemented as of November 15, 1995 and as of December 1, 1995
as amended and restated by the Amended and Restated Subsidiaries Stock Pledge
Agreement in the form of EXHIBIT 3.1D hereto and to be executed and delivered by
any additional Subsidiary Guarantor from time to time hereafter in accordance
with Section 5.8, as such Subsidiary Pledge Agreement may be amended, restated,
supplemented or otherwise modified from time to time.
"SUBSIDIARY SECURITY AGREEMENT" means the Subsidiary Security
Agreement executed and delivered by the Original Guarantors on the Closing Date,
as amended and supplemented as of November 15, 1995 and as of December 1, 1995
as amended and restated by the Amended and Restated Subsidiaries Security
Agreement in the form of EXHIBIT 3.1E hereto and to be executed and delivered by
any additional Subsidiary Guarantor from time to time hereafter in accordance
with Section 5.8, as such Subsidiary Security Agreement may be amended,
restated, supplemented or otherwise modified from time to time.
"SUPPLEMENTAL COLLATERAL AGENT" has the meaning assigned to
that term in Section 8.1B.
"TAX" OR "TAXES" means any present or future tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied, collected,
withheld or assessed; provided that "Tax on the overall net income" of a Person
shall be construed as a reference to a tax imposed by the jurisdiction in which
that Person is organized or in which that Person's principal office (and/or, in
the case of a Lender, its lending office) is located or in which that Person
(and/or, in the case of a Lender, its lending office) is deemed to be doing
business on all or part of the net income, profits or gains (whether worldwide,
or only insofar as such income, profits or gains are considered to arise in or
to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in
the case of a Lender, its lending office).
"TERM LOANS" means the Term Loans made under and defined in
Section 2.1(a) of the Original Credit Agreement.
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"TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT," "TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS," "TRANSACTIONS CONTEMPLATED HEREBY,"
TRANSACTIONS CONTEMPLATED THEREBY," and any similar phrase includes the making
and holding of the Loans, the granting, perfection and priority of the security
interests in Collateral, making the payments contemplated under the Loan
Documents, maintaining the Deposit Accounts, maintaining and complying with the
Cash Management System and with all other terms and covenants hereof.
"UCC" means, for any state, the Uniform Commercial Code from
time to time in effect for that state.
"WARRANT" means the Warrant to Purchase Shares of Common Stock
of the Company, substantially in the form of EXHIBIT 3.10.
"ZAUCHA OBLIGATIONS" means all obligations of each Loan Party
to one or more Zaucha Parties (including without limitation the obligations to
the Zaucha Parties set forth on SCHEDULE 6.1).
"ZAUCHA PARTIES" means, collectively, Thomas W. Zaucha, Alice
L. Zaucha and the Zaucha Family Limited Partnership, a Pennsylvania limited
partnership and any other of their Affiliates.
"ZAUCHA PAYMENT LETTER" means the Letter Agreement, among the
Zaucha Parties, the Company and the Lenders, substantially in the form of
EXHIBIT 3.9B.
"ZAUCHA SUBORDINATION AGREEMENT" means the Agreement, dated as
of the date hereof, among the Zaucha Parties, the Company and the Agent, in the
form of EXHIBIT 3.9A thereto.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
AGREEMENT. Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (i), (ii),
(iii), (v) and (xiii) of Section 5.1 shall be prepared in accordance with GAAP
as in effect at the time of such preparation (and delivered together with the
reconciliation statements provided for in Section 5.1(v)). Calculations in
connection with the definitions, covenants and other provisions of this
Agreement shall utilize accounting principles and policies in conformity with
those used to prepare the financial statements referred to in Section 4.3.
1.3 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.
A. Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.
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B. References to "Sections" and "Sections" shall be to Sections and
Sections, respectively, of this Agreement unless otherwise specifically
provided.
C. The use in any of the Loan Documents of the word "include" or
"including", when following any general statement, term or matter, shall not be
construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, whether or not nonlimiting language (such as "without limitation" or
"but not limited to" or words of similar import) is used with reference thereto,
but rather shall be deemed to refer to all other items or matters that fall
within the broadest possible scope of such general statement, term or matter.
SECTION 2. AMOUNTS AND TERMS OF LOANS
2.1 LOANS; NOTES.
A. LOANS. Company and Lenders hereby acknowledge and agree that as of
the Restatement Closing Date the amount of the Term Loans, Revolving Loans and
Acquisition Loans (together, the "LOANS"), and all accrued interest and fees
outstanding thereon, is as set forth on SCHEDULE 2.1 annexed hereto and the
amount of each Lender's Pro Rata Share is as set forth opposite its name on
SCHEDULE 2.1. On the Restatement Closing Date, all Term Loans, Revolving Loans
and Acquisition Loans outstanding on such date shall be converted to and
maintained as Loans hereunder, and all accrued interest and fees outstanding
thereon shall be capitalized and maintained as Loans hereunder.
B. NOTES. Company shall execute and deliver to each Lender (or to Agent
for that Lender) on the Restatement Closing Date an amended and restated Note
substantially in the form of EXHIBIT 2.1B annexed hereto to evidence that
Lender's Loan, in the principal amount of that Lender's Loan and with other
appropriate insertions. Agent may deem and treat the payee of any Note as the
owner thereof for all purposes hereof unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by Agent
as provided in Section 9.1B(ii). Any request, authority or consent of any person
or entity who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, assignee or transferee of that Note or of any Note or Notes
issued in exchange therefor.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. Subject to the provisions of Sections 2.2C and
2.6, each Loan shall bear interest on the unpaid principal amount thereof from
the date made through maturity (whether by acceleration or otherwise) at a rate
equal to the sum of the Base Rate plus 2.125% per annum.
B. INTEREST PAYMENTS. Subject to the provisions of Section 2.2C,
interest on each Loan shall be payable in arrears on each Interest Payment Date
applicable to that Loan, upon any
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<PAGE> 30
prepayment of that Loan (to the extent accrued on the amount being prepaid) and
at maturity (including final maturity). Such interest payments shall include all
interest accrued through such Interest Payment Date.
C. DEFAULT RATE. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest allowable in any
proceeding under the Bankruptcy Code or other applicable bankruptcy laws)
payable upon demand at a rate that is 2.5% per annum in excess of the interest
rate otherwise payable under this Agreement with respect to the applicable Loans
(or, in the case of any such fees and other amounts, at a rate which is 2.5% per
annum in excess of the interest rate otherwise payable under this Agreement for
Loans).
D. COMPUTATION OF INTEREST. Interest on the Loans shall be computed on
the basis of a 360-day year in each case for the actual number of days elapsed
in the period during which it accrues. In computing interest on any Loan, the
date of the making of such Loan shall be included and the date of payment of
such Loan shall be excluded; provided that if a Loan is repaid on the same day
on which it is made, one day's interest shall be paid on that Loan.
E. CAPITALIZATION OF INTEREST AND LEGAL FEES. The parties acknowledge
and agree that the outstanding principal amount of the Loans as of the
Restatement Closing Date includes accrued and unpaid interest on the Loans in
the amount of $293,114.35 and the legal fees of Richards Spears Kibbe & Orbe,
counsel to the Lenders and the Agent, incurred in connection with the amendment
and restatement of the Loan Documents, in the amount of $175,000.
2.3 FEES.
A. ANNUAL ADMINISTRATIVE FEE. Company agrees to pay to Agent an annual
administrative fee in the amount of $15,000, payable in advance on the Closing
Date and on each anniversary of the Closing Date.
B. COLLATERAL AGENT'S FEE. Company agrees to pay to Collateral Agent a
fee in the amount of $125 per month ($1,250 per month during the occurrence of a
Default), together with the Collateral Agent's expenses incurred in connection
with the transactions described herein.
C. OTHER FEES. Company agrees to pay to Agent such other fees in the
amounts and at the times separately agreed upon between Company and Agent.
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<PAGE> 31
2.4 REPAYMENTS AND PREPAYMENTS; GENERAL PROVISIONS REGARDING PAYMENTS.
A. SCHEDULED PAYMENTS OF LOANS. Company shall make payments of
principal and interest on the Loans on the first day of each calendar month,
commencing October 1, 1999, in installments in the amounts and on the dates set
forth below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
REPAYMENT DATE SCHEDULED MONTHLY REPAYMENT
(INCLUDING INTEREST)
-----------------------------------------------------------------
<S> <C>
October 1, 1999 $300,000
-----------------------------------------------------------------
November 1, 1999 $300,000
-----------------------------------------------------------------
December 1, 1999 $300,000
-----------------------------------------------------------------
January 1, 2000 $350,000
-----------------------------------------------------------------
February 1, 2000 $350,000
-----------------------------------------------------------------
March 1, 2000 $350,000
-----------------------------------------------------------------
April 1, 2000 $350,000
-----------------------------------------------------------------
May 1, 2000 $350,000
-----------------------------------------------------------------
June 1, 2000 $350,000
-----------------------------------------------------------------
July 1, 2000 $400,000
-----------------------------------------------------------------
August 1, 2000 $450,000
-----------------------------------------------------------------
September 1, 2000 $500,000
-----------------------------------------------------------------
October 1, 2000 $550,000
-----------------------------------------------------------------
November 1, 2000 $600,000
-----------------------------------------------------------------
December 1, 2000 $650,000
-----------------------------------------------------------------
December 31, 2000 $8,401,449.35
-----------------------------------------------------------------
</TABLE>
; provided that the scheduled installments of principal of the Loans set forth
above shall be reduced in inverse order of maturity in connection with any
voluntary or mandatory prepayments of the Loans in accordance with Section
2.4B(iii); and provided, further that the Loans and all other amounts owed
hereunder with respect to the Loans and all other Obligations shall be paid in
full no later than December 31, 2000, and the final installment payable by
Company in respect of the Loans on such date shall be in an amount, if such
amount is different from that specified above, sufficient to repay all
Obligations in full. In addition, notwithstanding Section 7.1 of this Agreement
the failure to make the Scheduled Monthly Repayment in full on such Repayment
Date shall not constitute an
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<PAGE> 32
Event of Default, if both (i) no Event of Default or Potential Event of Default
shall have otherwise occurred and (ii) the Company has on any Repayment Date set
forth above repaid in respect of the Obligations the greater of (A) all of the
Company's Consolidated Available Cash and (B) $350,000.
B. PREPAYMENTS.
(i) Voluntary Prepayments. Company may, upon not less than one
Business Day's prior written or telephonic notice given to Agent by
12:00 Noon (New York City time) on the date required and, if given by
telephone, promptly confirmed in writing to Agent (which original
written or telephonic notice Agent will promptly transmit by
telefacsimile or telephone to each Lender), at any time and from time
to time prepay any Loans on any Business Day in whole or in part in an
aggregate minimum amount of $100,000 and integral multiples of $100,000
in excess of that amount. Notice of prepayment having been given as
aforesaid, the principal amount of the Loans specified in such notice
shall become due and payable on the prepayment date specified therein.
Any such voluntary prepayment shall be applied as specified in Section
2.4B(iii).
(ii) Mandatory Prepayments. The Loans shall be prepaid in the
amounts and under the circumstances set forth below, all such
prepayments to be applied as set forth below or as more specifically
provided in Section 2.4B(iii);
(a) Prepayments and Reductions From Net Asset Sale
Proceeds. No later than the first Business Day following the
date of receipt by Company or any of its Subsidiaries of any
Net Asset Sale Proceeds in respect of any Asset Sale, Company
shall prepay the Loans in an aggregate amount equal to such
Net Asset Sale Proceeds.
(b) Prepayments from Net Insurance/Condemnation
Proceeds. No later than the first Business Day following the
date of receipt by Agent or by Company or any of its
Subsidiaries of any Net Insurance/Condemnation Proceeds,
Agent, on behalf of Company, or Company shall prepay the Loans
in an aggregate amount equal to the amount of such Net
Insurance/Condemnation Proceeds minus any such Net
Insurance/Condemnation Proceeds in an aggregate amount less
than $100,000 (the "PROPOSED REINVESTMENT PROCEEDS") that
Company or such Subsidiary intends to use within 180 days of
such date of receipt to pay or reimburse the costs of
repairing, restoring or replacing the assets in respect of
which such Net Insurance/Condemnation Proceeds were received;
provided that Company shall have delivered to Agent, on or
before such first Business Day, an Officers' Certificate
setting forth the proposed use of the Proposed Reinvestment
Proceeds and such other information with respect to such
proposed use as Agent may reasonably request. In addition, no
later than 180 days after receipt of any Net
Insurance/Condemnation Proceeds, Company shall prepay the
Loans in an amount equal to the amount of any related Proposed
Reinvestment Proceeds that have not been applied to the costs
of
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<PAGE> 33
repairing, restoring or replacing the applicable assets of
Company or such Subsidiary as provided above.
(c) Prepayments Due to Reversion of Surplus Assets of
Pension Plans. On the date of return to Company or any of its
Subsidiaries of any surplus assets of any pension plan of
Company or any of its Subsidiaries, Company shall prepay the
Loans in an aggregate amount (such amount being the "NET
PENSION PROCEEDS") equal to 100% of such returned surplus
assets, net of transaction costs and expenses incurred in
obtaining such return, including incremental taxes payable as
a result thereof.
(d) Prepayments Due to Issuance of Debt or Equity
Securities. On the date of receipt by Company of the cash
proceeds (any such proceeds, net of underwriting discounts and
commissions and other reasonable costs and expenses associated
therewith, including reasonable legal fees and expenses, being
"NET SECURITIES PROCEEDS") from the issuance of any debt or
equity Securities of Company, Company shall prepay the Loans
in an aggregate amount equal to such Net Securities Proceeds.
(e) Prepayments from Consolidated Excess Cash Flow.
In the event that there shall be Consolidated Excess Cash Flow
for any month, the Company shall, no later than 25 days after
the end of such month, distribute such Consolidated Excess
Cash Flow as follows:
(i) So long as no Event of Default or
Potential Event of Default has occurred or will occur
after giving effect to such payment, then
Consolidated Excess Cash Flow for such month shall be
distributed by the Company as follows:
(I) First, if the repayments under
Section 2.4A shall not have been made in
full as scheduled, then all such
Consolidated Excess Cash Flow shall be used
to repay the Obligations in an amount equal
to the aggregate amount of all such
scheduled repayments which have not been so
made until such time as the Company shall
have repaid all amounts then due under
Section 2.4A in accordance with the schedule
set forth therein.
(II) Second, the excess (if any) up
to the next $52,500 may be retained or used
by the Company (provided that no more than
$25,000 per month may be used to repay the
Zaucha Obligations);
(III) Third, the excess (if any)
shall be split 50% to repay the Obligations
and 50% to the Company (provided the Company
agrees
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<PAGE> 34
it shall not use any of such 50% to pay or
repay any of the Zaucha Obligations).
(ii) In all other cases (including without
limitation, if an Event of Default or a Potential
Event of Default has occurred or would otherwise
result), then 100% of Consolidated Excess Cash Flow
for all periods shall be applied by the Company to
prepay the Obligations.
(f) Calculations of Net Proceeds Amounts; Additional
Prepayments Based on Subsequent Calculations. Concurrently
with any prepayment of the Loans pursuant to Sections
2.4B(ii)(a)-(e), Company shall deliver to Agent an Officers'
Certificate demonstrating the calculation of the amount (the
"NET PROCEEDS AMOUNT") of the applicable Net Asset Sale
Proceeds or Net Insurance/Condemnation Proceeds, the
applicable Net Pension Proceeds or Net Securities Proceeds (as
such terms are defined in Sections 2.4B(ii)(c) and (d)), or
the applicable Consolidated Excess Cash Flow, as the case may
be, that gave rise to such prepayment. In the event that
Company shall subsequently determine that the actual Net
Proceeds Amount was greater than the amount set forth in such
Officers' Certificate, Company shall promptly make an
additional prepayment of the Loans in an amount equal to the
amount of such excess, and Company shall concurrently
therewith deliver to Agent an Officers' Certificate
demonstrating the derivation of the additional Net Proceeds
Amount resulting in such excess.
(iii) Application of Prepayments. Any prepayments of the Loans
pursuant to Section 2.4B(i) or Section 2.4B(ii) shall be applied to
reduce the scheduled installments of principal of the Loans set forth
in Section 2.4A in inverse order of maturity.
C. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Company of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in Dollars in same day funds, without defense,
setoff or counterclaim, free of any restriction or condition, and
delivered to Agent not later than 12:00 Noon (New York City time) on
the date due at the Funding and Payment Office for the account of
Lenders; funds received by Agent after that time on such due date shall
be deemed to have been paid by Company on the next succeeding Business
Day. Company and each other Loan Party hereby authorizes Agent and the
Collateral Agent to charge the Company's and each other Loan Party's
accounts with Agent and/or the Collateral Agent and/or all other
Deposit Accounts in order to cause timely payment to be made of all
principal, interest, fees and expenses due hereunder (subject to
sufficient funds being available in its accounts for that purpose). The
Company hereby waives any and all requirements or conditions to its
Obligations hereunder including diligence, presentment, demand, protest
and notice of any kind.
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<PAGE> 35
(ii) Application of Payments to Principal and Interest. All
payments in respect of the principal amount of any Loan shall include
payment of accrued interest on the principal amount being repaid or
prepaid, and all such payments shall be applied to the payment of
interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and
interest payments shall be apportioned among all outstanding Loans to
which such payments relate, in each case proportionately to Lenders'
respective Pro Rata Shares. Agent shall promptly distribute to each
Lender, at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such
Lender may request, its Pro Rata Share of all such payments received by
Agent and the commitment fees of such Lender when received by Agent.
(iv) Payments on Business Days. Whenever any payment to be
made hereunder shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the
computation of the payment of interest hereunder or of the commitment
fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before
disposing of the Note held by it, or any part thereof (other than by
granting participation therein), that Lender will make a notation
thereon of the Loan evidenced by that Note and all principal payments
previously made thereon and of the date to which interest thereon has
been paid; provided that the failure to make (or any error in the
making of) a notation of the Loan made under such Note shall not limit
or otherwise affect the obligations of Company hereunder or under such
Note with respect to such Loan or any payments of principal or interest
on such Note.
2.5 USE OF PROCEEDS.
A. LOANS. The proceeds of (i) the Term Loans were used by Company to
refinance the Indebtedness owed to the Existing Creditor (as defined in the
Original Credit Agreement) under the Existing Financing Documents (as defined in
the Original Credit Agreement) and to pay certain related fees and expenses,
(ii) the Revolving Loans were used to pay certain fees and expenses and to
finance the working capital needs of Company and its subsidiaries in the
ordinary course of business and (iii) the Acquisition Loans were used to finance
a portion of the purchase price of certain acquisitions permitted under the
Original Credit Agreement and to pay certain related costs and expenses.
B. MARGIN REGULATIONS. The Company represents and warrants to each
Lender that no portion of the proceeds of any borrowing under this Agreement
were used by Company or any of its Subsidiaries in any manner that might cause
the borrowing or the application of such proceeds to violate Regulation G,
Regulation U, Regulation T or Regulation X of the Board of Governors of the
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<PAGE> 36
Federal Reserve System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of such borrowing
and such use of proceeds.
2.6 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the provision
of Section 2.6B (which shall be controlling with respect to the matters covered
thereby), in the event that any Lender shall determine (which determination
shall, absent manifest error, be final and conclusive and binding upon all
parties hereto) that any law, treaty or governmental rule, regulation or order,
or any change therein or in the interpretation, administration or application
thereof (including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by such
Lender with any guideline, request or directive issued or made after the date
hereof by any central bank or other governmental or quasi-governmental authority
(whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to
any additional Tax (other than any Tax on the overall net income of
such Lender) with respect to this Agreement or any of its obligations
hereunder or any payments to such Lender (or its applicable lending
office) of principal, interest, fees or any other amount payable
hereunder;
(ii) imposes, modifies or holds applicable any reserve
(including any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in
or for the account of, or advances or loans by, or other credit
extended by, or any other acquisition of funds by, any office of such
Lender; or
(iii) imposes any other condition (other than with respect to
a Tax matter) on or affecting such Lender (or its applicable lending
office) or its obligations hereunder;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining its Loan hereunder or to reduce any
amount received or receivable by such Lender (or its applicable lending office)
with respect thereto; then, in any such case, Company shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to Company (with a copy to Agent) a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to such Lender under this Section 2.6A, which statement
shall be conclusive and binding upon all parties hereto absent manifest error.
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<PAGE> 37
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by Company
under this Agreement and the other Loan Documents shall (except to the
extent required by law) be paid free and clear of, and without any
deduction or withholding on account of, any Tax (other than a Tax on
the overall net income of any Lender) imposed, levied, collected,
withheld or assessed by or within the United States of America or any
political subdivision in or of the United States of America or any
other jurisdiction or governmental authority from or to which a payment
is made by or on behalf of Company or by any federation or organization
or governmental authority of which the United States of America or any
such jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If Company or any other Person
is required by law to make any deduction or withholding on account of
any such Tax from any sum paid or payable by Company to Agent or any
Lender under any of the Loan Documents:
(a) Company shall notify Agent of any such
requirement or any change in any such requirement as soon as
Company becomes aware of it;
(b) Company shall pay any such Tax before the date on
which penalties attach thereto, such payment to be made (if
the liability to pay is imposed on Company) for its own
account or (if that liability is imposed on Agent or such
Lender, as the case may be) on behalf of and in the name of
Agent or such Lender;
(c) the sum payable by Company in respect of which
the relevant deduction, withholding or payment is required
shall be increased to the extent necessary to ensure that,
after the making of that deduction, withholding or payment,
Agent or such Lender, as the case may be, receives on the due
date a net sum equal to what it would have received had no
such deduction, withholding or payment been required or made;
and
(d) within 30 days after paying any sum from which it
is required by law to make any deduction or withholding, and
within 30 days after the due date of payment of any Tax which
it is required by clause (b) above to pay, Company shall
deliver to Agent evidence satisfactory to the other affected
parties of such deduction, withholding or payment and of the
remittance thereof to the relevant taxing or other authority;
provided that no such additional amount shall be required to be paid to any
Lender under clause (c) above except to the extent that any change after the
date hereof (in the case of each Lender listed on the signature pages hereof) or
after the date of the Assignment Agreement pursuant to which such Lender became
a Lender (in the case of each other Lender) in any such requirement for a
deduction, withholding or payment as is mentioned therein shall result in an
increase in the rate of such
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<PAGE> 38
deduction, withholding or payment from that in effect at the date of this
Agreement or at the date of such Assignment Agreement, as the case may be, in
respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of
any jurisdiction other than the United States or any state or
other political subdivision thereof (for purposes of this
Section 2.6B(iii), a "NON-US LENDER") shall deliver to Agent
for transmission to Company, on or prior to the Closing Date
(in the case of each Lender listed on the signature pages
hereof) or on or prior to the date of the Assignment Agreement
pursuant to which it becomes a Lender (in the case of each
other Lender), and at such other times as may be necessary in
the determination of Company or Agent (each in the reasonable
exercise of its discretion), (1) two original copies of
Internal Revenue Service Form 1001 or 4224 (or any successor
forms), properly completed and duly executed by such Lender,
together with any other certificate or statement of exemption
required under the Internal Revenue Code or the regulations
issued thereunder to establish that such Lender is not subject
to deduction or withholding of United States federal income
tax with respect to any payments to such Lender of principal,
interest, fees or other amounts payable under any of the Loan
Documents or (2) if such Lender is not a "bank" or other
Person described in Section 881(c)(3) of the Internal Revenue
Code and cannot deliver either Internal Revenue Service Form
1001 or 4224 pursuant to clause (1) above, a Certificate re
Non-Bank Status together with two original copies of Internal
Revenue Service Form W-8 (or any successor form), properly
completed and duly executed by such Lender, together with any
other certificate or statement of exemption required under the
Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect
to any payments to such Lender of interest payable under any
of the Loan Documents.
(b) Each Lender required to deliver any forms,
certificates or other evidence with respect to United States
federal income tax withholding matters pursuant to Section
2.6B(iii)(a) hereby agrees, from time to time after the
initial delivery by such Lender of such forms, certificates or
other evidence, whenever a lapse in time or change in
circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, that
such Lender shall promptly (1) deliver to Agent for
transmission to Company two new original copies of Internal
Revenue Service Form 1001 or 4224, or a Certificate re
Non-Bank Status and two original copies of Internal Revenue
Service form W-8, as the case may be, properly completed and
duly executed by such Lender, together with any other
certificate or statement of exemption required in order to
confirm or establish that such Lender is not subject to
deduction or withholding of United States federal income tax
with respect to payments to such Lender under the Loan
Documents or
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<PAGE> 39
(2) notify Agent and Company of its inability to deliver any
such forms, certificates or other evidence.
(c) Company shall not be required to pay any
additional amount to any Non-US Lender under clause (c) of
Section 2.6B(ii) which become payable because such Lender
shall have failed to satisfy the requirements of clause (a) or
(b)(1) of this Section 2.6B(iii); provided that if such Lender
shall have satisfied the requirements of Section 2.6B(iii)(a)
on the Closing Date (in the case of each Lender listed on the
signature pages hereof) or on the date of the Assignment
Agreement pursuant to which it became a Lender (in the case of
each other Lender), nothing in this Section 2.6B(iii)(c) shall
relieve Company of its obligation to pay any additional
amounts pursuant to clause (c) of Section 2.6B(ii) in the
event that, as a result of any change in any applicable law,
treaty or governmental rule, regulation or order, or any
change in the interpretation, administration or application
thereof, such Lender is no longer properly entitled to deliver
forms, certificates or other evidence at a subsequent date
establishing the fact that such Lender is not subject to
withholding as described in Section 2.6B(iii)(a).
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined
that the adoption, effectiveness, phase-in or applicability after the date
hereof of any law, rule or regulation (or any provision thereof) regarding
capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its applicable lending office) with any guideline, request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of, or with reference
to, such Lender's Loan or other obligations hereunder to a level below that
which such Lender or such controlling corporation could have achieved but for
such adoption, effectiveness, phase-in, applicability, change or compliance
(taking into consideration the policies of such Lender or such controlling
corporation with regard to capital adequacy), then from time to time, within
five Business Days after receipt by Company from such Lender of the statement
referred to in the next sentence, Company shall pay to such Lender such
additional amount or amounts as will compensate such Lender or such controlling
corporation on an after-tax basis for such reduction. Such Lender shall deliver
to Company (with a copy to Agent) a written statement, setting forth in
reasonable detail the basis of the calculation of such additional amounts, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
2.7 OBLIGATIONS OF LENDERS TO MITIGATE. Each Lender agrees that, as promptly as
practicable after the officer of such Lender responsible for administering the
Loan of such Lender becomes aware of the occurrence of an event or the existence
of a condition that would entitle such Lender to receive payments under Section
2.6, it will, to the extent not inconsistent with the internal policies of such
Lender and any applicable legal or regulatory restrictions, use reasonable
efforts (i) to make,
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<PAGE> 40
fund or maintain the Loan of such Lender through another lending office of such
Lender, or (ii) take such other measures as such Lender may deem reasonable, if
as a result thereof the additional amounts which would otherwise be required to
be paid to such Lender pursuant to Section 2.6 would be materially reduced and
if, as determined by such Lender in its sole discretion, the making, funding or
maintaining of such Loan through such other lending office or in accordance with
such other measures, as the case may be, would not otherwise materially
adversely affect such Loan or the interests of such Lender; provided that such
Lender will not be obligated to utilize such other lending office pursuant to
this Section 2.7 unless Company agrees to pay all incremental expense incurred
by such Lender as a result of utilizing such other lending office as described
in clause (i) above. A certificate as to the amount of any such expenses payable
by Company pursuant to this Section 2.7 (setting forth in reasonable detail the
basis for requesting such amount) submitted by such Lender to Company (with a
copy to Agent) shall be conclusive absent manifest error.
2.8 ACKNOWLEDGMENT AND CONSENT TO AMENDMENT AND RESTATEMENT OF ORIGINAL CREDIT
AGREEMENT. Company is a party to the Company Security Agreement and the Company
Pledge Agreement pursuant to which Company has created Liens in favor of Agent
on certain Collateral to secure the Obligations. The Subsidiary Guarantors are a
party to the Subsidiary Guaranty, the Subsidiary Security Agreement and the
Subsidiary Pledge Agreement pursuant to which the Subsidiary Guarantors have (i)
guarantied the Obligations and (ii) created Liens in favor of Agent on certain
Collateral and pledged certain Collateral to Agent to secure the obligations of
such Subsidiary Guarantors under the Subsidiary Guaranty. Each Subsidiary
Guarantor hereby acknowledges that it has reviewed the terms and provisions of
this Agreement and consents to the amendment of the Original Credit Agreement
effected pursuant hereto. Each Loan Party hereby confirms that each Loan
Document to which it is a party or otherwise bound and all Collateral encumbered
thereby will continue to guaranty or secure, as the case may be, to the fullest
extent possible pursuant to its respective terms, the payment and performance of
all Obligations (as such term is defined in the applicable Loan Document)
including without limitation the payment and performance of all such
Obligations, as the case may be, in respect of the Obligations of Company now or
hereafter existing under or in respect of the Original Credit Agreement (as
amended hereby). Each Loan Party acknowledges and agrees that any of the Loan
Documents to which it is a party or otherwise bound shall continue in full force
and effect and that all of its obligations thereunder shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Agreement. Each Subsidiary Guarantor represents and
warrants that all representations and warranties contained in the Subsidiary
Guaranty, the Subsidiary Security Agreement and the Subsidiary Pledge Agreement
to which it is party are true, correct and complete in all material respects as
of the Restatement Closing Date, to the same extent as though made on and as of
that date, except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true, correct and complete in
all material respects on and as of such earlier date. Each Subsidiary Guarantor
acknowledges and agrees that (i) notwithstanding the conditions to effectiveness
set forth in this Agreement, such Subsidiary Guarantor is not required by the
terms of the Subsidiary Guaranty or any other Loan Documents to consent to the
amendment and restatement of the Credit Agreement effected pursuant to this
Agreement and (ii) nothing in this
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<PAGE> 41
Agreement or any other Loan document shall be deemed to require the consent of
such Subsidiary Guarantor to any future amendments, restatements or other
modifications to this Agreement.
SECTION 3. CONDITIONS TO LOANS
The obligations of Lenders to amend and restate the Original
Credit Agreement on the terms set forth herein are subject to the prior or
concurrent satisfaction of the following conditions.
3.1 LOAN PARTY DOCUMENTS. On or before the Restatement Closing Date, Company
shall, and shall cause each other Loan Party to, deliver or cause to be
delivered to Lenders (or to Agent for Lenders with sufficient originally
executed copies, where appropriate, for each Lender and its counsel) the
following with respect to Company or such Loan Party, as the case may be, each,
unless otherwise noted, dated the Restatement Closing Date:
(i) Certified copies of the Certificate or Articles of
Incorporation, together with a good standing certificate from the
Secretary of State of the State of its jurisdiction of incorporation
and each other state in which such Person is qualified as a foreign
corporation to do business and, to the extent generally available, a
certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing
authority of each of such jurisdictions, each dated a recent date prior
to the Restatement Closing Date;
(ii) Copies of the Bylaws of such Person, certified as of the
Restatement Closing Date by its corporate secretary or an assistant
secretary;
(iii) Resolutions of the Board of Directors and (except for
the Company) shareholders of such Person approving and authorizing the
execution, delivery and performance of this Agreement and the other
Loan Documents to which it is a party, certified as of the Restatement
Closing Date by the corporate secretary or an assistant secretary of
such Person as being in full force and effect without modification or
amendment;
(iv) Signature and incumbency certificates of the officers of
such Person executing this Agreement and the other Loan Documents to
which it is a party;
(v) Executed originals of this Agreement, the Notes (duly
executed in accordance with Section 2.1B, drawn to the order of each
Lender and with appropriate insertions) (in the case of Company), each
of the amended and restated Loan Documents in the forms attached as
Exhibits 3.1A through 3.1E hereto, and the other Loan Documents to
which such Person is a party; and
(vi) Such other documents as Agent may reasonably request.
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3.2 LEGAL OPINIONS. Lenders and their respective counsel shall have received (i)
originally executed copies of one or more favorable written opinions of Duane
Morris & Heckscher, LLP, counsel for Loan Parties in form and substance
reasonably satisfactory to Agent and its counsel, dated as of the Restatement
Closing Date and setting forth substantially the matters in the opinions
designated in EXHIBIT 3.2 annexed hereto and as to such other matters as Agent
acting on behalf of Lenders may reasonably request and (ii) evidence
satisfactory to Agent that Company has requested such counsel to deliver such
opinions to Lenders.
3.3 FEES. Company shall have paid to Agent, for distribution (as appropriate) to
Agent and Lenders, the fees payable on the Restatement Closing Date referred to
in Section 2.3.
3.4 OFFICERS' CERTIFICATE REGARDING CERTAIN CONDITIONS. The following conditions
shall be satisfied and the Loan Parties shall have delivered to Agent an
Officers' Certificate, in form and substance satisfactory to Agent, to that
effect:
A. REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained herein and in the other Loan Documents shall be true, correct and
complete in all material respects on and as of the Restatement Closing Date to
the same extent as though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall have been true, correct and
complete in all material respects on and as of such earlier date.
B. NO EVENT OF DEFAULT. Except for the events set forth on SCHEDULE
3.4B, no event shall have occurred and be continuing as of the Restatement
Closing Date, or would result from the consummation of the borrowing of the
Loans thereon or from the consummation of the transactions contemplated hereby
and by the other Loan Documents, that would constitute an Event of Default or a
Potential Event of Default.
C. PERFORMANCE OF AGREEMENTS. Company shall have performed in all
material respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by it on or before the
Restatement Closing Date.
3.5 RESIGNATION OF AGENT; NEW COLLATERAL AGENT. IBJS shall have resigned as
Agent and shall have executed a resignation which resignation shall have been
accepted by the Lenders, all substantially in the form of EXHIBIT 3.5 attached
hereto. The Collateral Agent shall have accepted its appointment as Collateral
Agent and shall have executed and delivered the Loan Documents to which it is a
party.
3.6 COLLATERAL DOCUMENTS. The Collateral Documents shall be in full force and
effect and no default shall have occurred and be continuing thereunder. The
Agent shall have received evidence satisfactory to it of the perfection of all
security interests and liens with the priority contemplated by the Loan
Documents and arrangements satisfactory to the Lenders shall have been made for
the
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transfer of the Collateral and the recordation of such transfer to Cerberus, as
Agent, on the Restatement Closing Date.
3.7 CASH MANAGEMENT SYSTEM. The Cash Management System shall be in place in form
and substance satisfactory in all respects to the Agent.
3.8 EVIDENCE OF INSURANCE. Agent shall have received a certificate from
Company's insurance broker or other evidence satisfactory to it that all
insurance required to be maintained pursuant to Section 5.4 is in full force and
effect and that Agent on behalf of Lenders has been named as additional insured
and/or loss payee thereunder to the extent required under Section 5.4. A correct
and complete summary of the Company's insurance is set forth on SCHEDULE 3.8.
3.9 ZAUCHA AGREEMENTS.
A. ZAUCHA SUBORDINATION AGREEMENT. Each of the Zaucha Parties shall
have executed and delivered the Zaucha Subordination Agreement.
B. ZAUCHA PAYMENT LETTER. Each of the Zaucha Parties and the Company
shall have executed and delivered the Zaucha Payment Letter.
3.10 WARRANT. The Company shall have executed, delivered and issued to the
Lenders the Warrant.
3.11 MISCELLANEOUS OTHER CONDITIONS.
A. NO MATERIAL ADVERSE EFFECT. Except as set forth on SCHEDULE 3.11,
since March 31, 1999, no Material Adverse Effect (in the sole opinion of Agent)
shall have occurred.
B. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Agent, acting on
behalf of Lenders, and its counsel shall be satisfactory in form and substance
to Agent and such counsel, and Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents as Agent may
reasonably request.
C. NO INJUNCTION OR RESTRAINING ORDER. No order, judgment or decree of
any court, arbitrator or governmental authority shall purport to enjoin or
restrain any Lender from making or holding the Loan to be made or held by it on
the Restatement Closing Date or shall impair in any respect the priority or
perfection of the security interests or liens contemplated hereby or by the
other Loan Documents.
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D. NO VIOLATION OF LAW. The making of the Loans requested on the
Restatement Closing Date shall not violate any law including Regulation G,
Regulation T, Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System.
E. NO ADVERSE LITIGATION. As of the Restatement Closing Date, there
shall not be pending or, to the knowledge of Company, threatened, any action,
suit, proceeding, governmental investigation or arbitration against or affecting
Company or any of its Subsidiaries or any property of Company or any of its
Subsidiaries that has not been disclosed by Company in writing pursuant to
Section 4.6 prior to the execution of this Agreement, and there shall have
occurred no development not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that, in either event,
in the opinion of Agent or of Requisite Lenders, would be expected to have a
Material Adverse Effect.
SECTION 4. COMPANY's REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement,
Company represents and warrants to each Lender, on the date of this Agreement
and on the Closing Date, that the following statements are true, correct and
complete:
4.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Each Loan Party is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation as specified in SCHEDULE 4.1D annexed hereto. Each
Loan Party has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents to which it is a party and to carry
out the transactions contemplated thereby. Except as set forth on SCHEDULE 4.1D,
there are no outstanding warrants, options or rights for the purchase of the
equity Securities of Company and no stockholder of Company has or will have any
preemptive rights to subscribe for any additional equity Securities of Company.
The issuance and sale of all Company Common Stock was, or will be, upon the
issuance and sale thereof, either (a) registered or qualified under applicable
federal and state securities laws or (b) exempt therefrom.
B. QUALIFICATION AND GOOD STANDING. Each Loan Party is qualified to do
business and in good standing in every jurisdiction where its assets are located
and wherever necessary to carry out its business and operation, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only
in the businesses identified in Section 6.14.
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D. CAPITALIZATION; LOCATION. All of the Subsidiaries of the Company,
including, without limitation, the KRS Partnerships, are identified on SCHEDULE
4.1D annexed hereto. SCHEDULE 4.1D also sets forth for the Company and for each
Subsidiary of the Company: (i) the legal name and each "dba" and trade name;
(ii) its form and jurisdiction of organization; (iii) the total authorized
shares of each class of capital stock or other ownership interests thereof; (iv)
the total number of Securities, by class, issued and outstanding; (v) the name
of the holders thereof and the number of shares of each class or other ownership
interests held by each holder; (vi) each state in which it does business; (vii)
each state in which it is authorized to do business; (viii) each state and
county in which it has a "place of business" within the meaning of the UCC for
such state or in which it maintains an office; (ix) each state and county in
which Collateral is located; (x) the location of its chief executive office
(within the meaning of the UCC of that state), and (xi) the sole manager of each
KRS Partnership, as said SCHEDULE 4.1D may be supplemented from time to time
pursuant to the provisions of Section 5.1(xvi). The capital stock of the Company
and of each of the Subsidiaries of Company identified in SCHEDULE 4.1D annexed
hereto (as so supplemented) as issued and outstanding is duly authorized,
validly issued, fully paid and nonassessable and none of such capital stock
constitutes Margin Stock. Each of the Subsidiaries of Company identified in
SCHEDULE 4.1D annexed hereto (as so supplemented) is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation set forth therein, has all requisite
corporate power and authority to own and operate its properties and to carry on
its business as now conducted and as proposed to be conducted, and is qualified
to do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, in each
case except where failure to be so qualified or in good standing or a lack of
such corporate power and authority has not had and will not have a Material
Adverse Effect. SCHEDULE 4.1D annexed hereto (as so supplemented) correctly sets
forth the ownership interest of Company in each of its Subsidiaries.
E. CHANGES. SCHEDULE 4.1E annexed hereto sets forth a true and complete
description of any and all mergers, name changes, and dispositions (whether by
dividend or otherwise), acquisitions or similar transactions to which Company
and its Subsidiaries have been party or otherwise affecting the Company or any
Subsidiary since the Closing Date.
F. APPROVALS. The Company and each of its Subsidiaries and each
Healthcare Facility has obtained all Approvals required to conduct its business
as presently conducted and all such Approvals remain in full force and effect
and no Potential Revocations exist.
4.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance
of the Loan Documents have been duly authorized by all necessary corporate
action on the part of each Loan Party that is a party thereto.
B. NO CONFLICT. The execution, delivery and performance by Loan Parties
of the Loan Documents and the consummation of the transactions contemplated by
the Loan Documents do not
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and will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Company or any of its Subsidiaries, the Certificate or
Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of company or any of its Subsidiaries (other than any Liens created under
any of the Loan Documents in favor of Agent on behalf of Lenders), or (iv)
required any approval of stockholders or any approval or consent of any Person
under any Contractual Obligation of Company or any of its Subsidiaries, except
for such approvals or consents which will be obtained on or before the Closing
Date and disclosed in writing to Lenders.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by
Loan Parties of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body or other
Person.
D. BINDING OBLIGATION. Each of the Loan Documents has been duly
executed and delivered by each Loan Party that is a party thereto and is the
legally valid and binding obligation of such Loan Party, enforceable against
such Loan Party in accordance with its respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
E. SUBORDINATED OBLIGATIONS. The Subordination Agreement will be legal,
valid, binding and enforceable against David D. Watson in accordance with its
terms and the Loans and all other monetary Obligations hereunder shall and will
be within the definition of "Senior Obligations" included in such Subordination
Agreement. The Zaucha Subordination Agreement and the Zaucha Payment Letter will
each be legal, valid, binding and enforceable against the Zaucha Parties in
accordance with their respective terms.
4.3 FINANCIAL CONDITION. Company has heretofore delivered to Lenders, at
Lenders' request, the following financial statements and information: (i) the
audited consolidated and consolidating balance sheet of Company and its
Subsidiaries as at December 31, 1998 and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows of
Company and its Subsidiaries for the Fiscal Year then ended and (ii) the
unaudited consolidated and consolidating balance sheet of Company and its
Subsidiaries as at June 30, 1999 and the related unaudited consolidated and
consolidating statements of income, stockholders' equity and cash flows of
Company and its Subsidiaries for the 6 months then ended. All such statements
were prepared in conformity with GAAP consistently applied and fairly present,
in all material respects, the financial position (on a consolidated and, where
applicable, consolidating basis) of the entities described in such financial
statements as at the respective dates thereof and the results of operations and
cash flows (on a consolidated and, where applicable, consolidating basis) of the
entities described therein
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for each of the periods then ended, subject, in the case of any such unaudited
financial statements, to changes resulting from audit and normal year-end
adjustments. Company does not (and will not following the funding of the initial
Loans) have any Contingent Obligation, contingent liability or liability for
taxes, long-term lease or unusual forward or long-term commitment that is not
reflected in the foregoing financial statements or the notes thereto and which
in any such case is material in relation to the business, operations,
properties, assets, condition (financial or otherwise) or prospects of Company
or any of its Subsidiaries.
4.4 NO MATERIAL ADVERSE CHANGE: NO RESTRICTED JUNIOR PAYMENTS. Except as
described on SCHEDULE 4.4 annexed hereto, since December 31, 1994, no event or
change has occurred that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect. Neither Company nor any of its
Subsidiaries has directly or indirectly declared, ordered, paid or made, or set
apart any sum or property for, any Restricted Junior Payment or agreed to do so
except as permitted by Section 6.5.
4.5 TITLE TO PROPERTIES; LIENS; REAL PROPERTY.
A. TITLE TO PROPERTIES; LIENS. Company and its Subsidiaries have (i)
good, sufficient and legal title to (in the case of fee interests in real
property), (ii) valid leasehold interests in (in the case of leasehold interests
in real or personal property), or (iii) good title to (in the case of all other
personal property), all of their respective properties and assets reflected in
the financial statements referred to in Section 4.3 or in the most recent
financial statements delivered pursuant to Section 5.1, in each case except for
assets disposed of since the date of such financial statements in the ordinary
course of business or as otherwise permitted under Section 6.7. Except as
permitted by Section 6.2A, all such properties and assets are free and clear of
Liens.
B. REAL PROPERTY. As of the Closing Date, SCHEDULE 4.5 annexed hereto
contains a true, accurate and complete list of (i) all real property in which
any Loan Party has a fee interest, and (ii) all leases, subleases or assignments
of leases (together with all amendments, modifications, supplements, renewals or
extensions of any thereof) affecting any interest owned by any Loan Party in any
real property, regardless of whether such Loan Party is the landlord or tenant
(whether directly or as an assignee or successor in interest) under such lease,
sublease or assignment. Except as specified in SCHEDULE 4.5 annexed hereto, each
agreement listed in clause (ii) of the immediately preceding sentence is in full
force and effect and Company does not have knowledge of any default that has
occurred and is continuing thereunder, and each such agreement constitutes the
legally valid and binding obligation of each applicable Loan Party, enforceable
against such Loan Party in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles.
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4.6 LITIGATION; VIOLATION OF LAW OR ORDER.
A. Except as set forth on SCHEDULE 4.6, there are no actions, suits,
proceedings, arbitrations or governmental investigations (whether or not
purportedly on behalf of Company or any of its Subsidiaries) at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign (including any Environmental Claims) that are pending or, to the
knowledge of Company, threatened against or affecting Company or any of its
Subsidiaries or any property of Company or any of its Subsidiaries and that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries nor any of their
properties (i) is in violation of any applicable laws (including Environmental
Laws) that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect, or (ii) is in violation of or is subject to
or in default with respect to any final judgments, writ, injunctions, decrees,
rules or regulations of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
4.7 PAYMENT OF TAXES. Except to the extent permitted by Section 5.3, all tax
returns and reports of Company and its Subsidiaries required to be filed by any
of them have been timely filed, and all taxes shown on such tax returns to be
due and payable and all assessments, fees and other governmental charges upon
Company and its Subsidiaries and upon their respective properties, assets,
income, businesses and franchises which are due and Payable have been paid when
due and payable. Company knows of no proposed tax assessment against Company or
any of its Subsidiaries which is not being actively contested by Company or such
Subsidiary in good faith and by appropriate proceedings; provided that such
reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.
4.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS; MATERIAL
CONTRACTS, LEASES, TRANSACTIONS WITH AFFILIATES.
A. Neither Company nor any of its Subsidiaries has breached or is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any of its Contractual Obligations, and no
condition exists that, with the giving of notice or the lapse of time or both,
would constitute such a default, except where the consequences, direct or
indirect, of such default or defaults, if any, would not have a Material Adverse
Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is
otherwise subject to any Contractual Obligations, Contingent Obligations,
agreements or instruments or any charter or other internal restrictions which
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
C. SCHEDULE 4.8C annexed hereto contains a true, correct and complete
list of all the Material Contracts in effect on the Restatement Closing Date.
Except as described on SCHEDULE
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4.8C, all such Material Contracts are in full force and effect and no material
defaults currently exist thereunder.
D. SCHEDULE 4.8D annexed hereto contains a true, correct and complete
list of all Operating Leases and Capital Leases to which Company or any of its
Subsidiaries is a party as of the Restatement Closing Date.
E. SCHEDULE 4.8E annexed hereto contains a true, correct and complete
list of any transaction to which Company or any of its Subsidiaries is a party
as of the Restatement Closing Date with any holder of 5% or more of any class of
equity Securities of Company or any Affiliate of Company or of any such holder.
4.9 GOVERNMENTAL REGULATION. Neither Company nor any of its Subsidiaries is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable or may limit, impair or restrict the enforceability of any of the
transactions contemplated by the Loan Documents.
4.10 SECURITIES ACTIVITIES.
A. Neither Company nor any of its Subsidiaries is engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Loan, not more than
25% of the value of the assets (either of Company only or of Company and its
Subsidiaries on a consolidated basis) subject to the provisions of Section 6.2
or 6.7 or subject to any restriction contained in any agreement or instrument,
between Company and any Lender or any Affiliate or any Lender, relating to
Indebtedness and within the scope of Section 6.1, will be Margin Stock.
C. If requested by the Agent or any Lender, the Borrower will furnish
to the Agent and each Lender a statement on Federal Reserve Form U-1 or
otherwise satisfying the requirements as to Margin Stock and to insure
compliance with Applicable Federal Regulations.
4.11 EMPLOYEE BENEFITS PLANS.
A. Except as set forth on SCHEDULE 4.11, the Company, each of its
Subsidiaries and each of their respective ERISA Affiliates are in compliance
with all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan,
and have performed all their obligations under each Employee Benefit
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Plan. Each Employee Benefit Plan which is intended to qualify under Section
401(a) of the Internal Revenue Code is so qualified.
B. No ERISA Event has occurred or is reasonably expected to occur.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code, no Employee Benefit Plan provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employee of Company, any of its Subsidiaries or any of their respective ERISA
Affiliates.
D. As of the most recent valuation date for any Pension Plan, the
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), does not exceed $100,000.
E. As of the most recent valuation date for each Multiemployer Plan for
which the actuarial report is available, the potential liability of Company, its
Subsidiaries and their respective ERISA Affiliates for a complete withdrawal
from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when
aggregated with such potential liability for a complete withdrawal from all
Multiemployer plans, based on information available pursuant to Section 4221(e)
of ERISA, does not exceed $100,000.
4.12 CERTAIN FEES. No broker's or finder's fee or commission will be payable
with respect to this Agreement, the Original Credit Agreement or any of the
transactions contemplated hereby or thereby, and Company hereby indemnifies
Lenders against, and agrees that it will hold Lenders harmless from, any claim,
demand or liability for any such broker's or finder's fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.
4.13 ENVIRONMENTAL PROTECTION. Except as set forth in SCHEDULE 4.13 annexed
hereto:
(i) neither Company nor any of its Subsidiaries nor any of
their respective Facilities or operations are subject to any
outstanding written order, consent decree or settlement agreement with
any Person relating to (a) any Environmental Law, (b) any Environmental
Claim, or (c) any Hazardous Materials Activity;
(ii) neither Company nor any of its Subsidiaries has received
any letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act
(42 U.S.C. Section 9604) or any comparable state law;
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(iii) there are and, to Company's knowledge, have been no
conditions, occurrences, or Hazardous Materials Activities which could
reasonably be expected to form the basis of an Environmental Claim
against Company or any of its Subsidiaries;
(iv) neither Company nor any of its Subsidiaries nor, to
Company's knowledge, any predecessor of Company or any of its
Subsidiaries has filed any notice under any Environmental law
indicating past or present treatment of Hazardous Materials at any
Facility, and none of Company's or any of its Subsidiaries' operations
involves the generation, transportation, treatment, storage or disposal
of hazardous wastes, as defined under 40 C.F.R. Parts 260-170 or any
state equivalent;
(v) compliance with all current or reasonably foreseeable
future requirements pursuant to or under Environmental Laws will not,
individually or in the aggregate, have a reasonable possibility of
giving rise to a Material Adverse Effect.
Notwithstanding anything in this Section 4.13 to the contrary,
no event or condition has occurred or is occurring with respect to Company or
any of its Subsidiaries relating to any Environmental Law, any Release of
Hazardous Materials, or any Hazardous Materials Activity, including any matter
disclosed on SCHEDULE 4.13 annexed hereto, which individually or in the
aggregate has had or could reasonably be expected to have a Material Adverse
Effect.
4.14 EMPLOYEE MATTERS. There is no strike or work stoppage in existence or
threatened involving Company or any of its Subsidiaries that could reasonably be
expected to have a Material Adverse Effect.
4.15 [INTENTIONALLY OMITTED]
4.16 MATTERS RELATING TO COLLATERAL.
A. CREATION, PERFECTION AND PRIORITY OF LIENS. The execution and
delivery of the Collateral Documents by Loan Parties, together with the actions
taken on or prior to the date hereof, create in favor of Agent for the benefit
of Lenders, as security for the respective Secured Obligations (as defined in
the applicable Collateral Document in respect of any Collateral), a valid and
perfected First Priority Lien on all of the Collateral, and all filings and
other actions necessary or desirable to perfect and maintain the perfection and
First Priority status of such Liens have been duly made or taken and remain in
full force and the periodic filing of UCC continuation statements in respect of
UCC financing statements filed by or on behalf of Agent.
B. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge or grant by any Loan Party
of the Liens purported to be created in favor of Agent pursuant to any of the
Collateral Documents or (ii) the exercise by Agent of any rights or remedies in
respect of any Collateral (whether specifically granted or created pursuant to
any filings or recordings
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contemplated by Section 4.16A) except as may be required in connection with the
dispositions of any Pledged Collateral, by laws generally affecting the offering
and sale of securities.
C. ABSENCE OF THIRD-PARTY FILINGS. Except such as may have been filed
in favor of Agent as contemplated hereby no effective UCC financing statement,
fixture filing or other instrument similar in effect covering all or any part of
the Collateral is on file in any filing or recording office.
D. MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant to
the Collateral Documents does not violate any regulation (including Regulation
G, T, U or X) of the Board of Governors of the Federal Reserve System.
E. INFORMATION REGARDING COLLATERAL. All information supplied to Agent
by or on behalf of any Loan Party with respect to any of the Collateral (in each
case taken as a whole with respect to any particular Collateral) is accurate and
complete in all material respects.
F. CASH MANAGEMENT SYSTEM. The Cash Management System attached to the
Company Security Agreement as Annex A is an accurate and complete description in
all respects as of the Restatement Closing Date of the Deposit Accounts
maintained by the Loan Parties and Cash Management System and does not omit to
state any material fact necessary to make the statements set forth therein not
misleading. No Loan Party nor any of its Subsidiaries (including, without
limitation, the KRS Partnerships) owns or maintains any Deposit Account which is
not described in the Cash Management System.
4.17 DISCLOSURE.
A. NO UNTRUE STATEMENT. No representation or warranty of Company or any
of its Subsidiaries contained in any Loan Document or in any other document,
certificate or written statement furnished to Lenders by or on behalf of Company
or any of its Subsidiaries for use in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact (known to Company, in the case of any document
not furnished by it) necessary in order to make the statements contained herein
or therein not misleading in light of the circumstances in which the same were
made.
B. PROJECTIONS. Any projections and pro forma financial information
contained in such materials are based upon good faith estimates and assumptions
believed by Company to be reasonable at the time made, it being recognized by
Lenders that such projections as to future events are not to be viewed as facts
and that actual results during the period or periods covered by any such
projections may differ from the projected results.
C. NO OTHER FACTS. There are no facts known (or which should upon the
reasonable exercise of diligence be known) to Company (other than matters of a
general economic nature) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect
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and that have not been disclosed herein or in such other documents, certificates
and statements furnished to Lenders for use in connection with the transactions
contemplated hereby.
SECTION 5. COMPANY's AFFIRMATIVE COVENANTS
Company covenants and agrees that, until payment in full of all of the
Loans and other Obligations, unless Requisite Lenders shall otherwise give prior
written consent, Company shall perform, and shall cause each of its Subsidiaries
to perform, all covenants in this Section 5.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Company will maintain, and cause
each of its Subsidiaries to maintain, a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in conformity with GAAP consistently applied. Company
will deliver to Agent, the Collateral Agent and Lenders:
(i) Monthly Financials: as soon as available and in any event
within 25 days after the end of each month ending after the Closing
Date, (a) the consolidated and consolidating balance sheets of Company
and its Subsidiaries as at the end of such month and the related
consolidated and consolidating statements of income, stockholders'
equity and cash flows of Company and its Subsidiaries for such month
and for the period from the beginning of the then current Fiscal Year
to the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding periods of the
previous Fiscal Year and the corresponding figures from the Financial
Plan for the current Fiscal Year, to the extent prepared on a monthly
basis, all in reasonable detail and certified by the chief financial
officer of Company that they fairly present, in all material respects,
the financial condition of Company and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for
the periods indicated, subject to changes resulting from audit and
normal year-end adjustments, and (b) a narrative report describing the
operations of Company and its Subsidiaries in the form prepared for
presentation to senior management for such month and for the period
from the beginning of the then current Fiscal Year to the end of such
month;
(ii) Quarterly Financials: as soon as available and in any
event within 45 days after the end of each Fiscal Quarter, (a) the
consolidated and consolidating balance sheets of Company and its
Subsidiaries as at the end of such Fiscal Quarter and the related
consolidated and consolidating statements of income, stockholders'
equity and cash flows of Company and its Subsidiaries for such Fiscal
Quarter and for the period from the beginning of the then current
Fiscal Year to the end of such Fiscal Quarter, setting forth in each
case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year and the corresponding
figures from the Financial Plan for the current Fiscal Year, all in
reasonable detail and certified by the chief financial officer of
Company that they fairly present, in all material respects, the
financial condition of Company and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for
the periods indicated, subject to changes resulting from audit and
normal year-end
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adjustments, and (b) a narrative report describing the operations of
Company and its Subsidiaries in the form prepared for presentation to
senior management for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal
Quarter;
(iii) Year-End Financials: as soon as available and in any
event within 90 days after the end of each Fiscal Year; (a) the
consolidated and consolidating balance sheets of Company and its
Subsidiaries as at the end of such Fiscal Year and the related
consolidated and consolidating statements of income, stockholders'
equity and cash flows of Company and its Subsidiaries for such Fiscal
Year, setting forth in each case in comparative form the corresponding
figures for the previous Fiscal Year and the corresponding figures from
the Financial Plan for the current Fiscal Year, covered by such
financial statements, all in reasonable detail and certified by the
chief financial officer of Company that they fairly present, in all
material respects, the financial conditions of Company and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, (b) a
narrative report describing the operations of Company and its
Subsidiaries in the form prepared for presentation to senior management
for such Fiscal Year, and (c) in the case of such consolidated
financial statements, an audit report thereon of Arthur Andersen, LLP
or other independent certified public accountants of recognized
national standing selected by Company and satisfactory to Agent, which
report shall be unqualified and shall state that such consolidated
financial statements fairly present, in all material respects, the
consolidated financial position of Company and its Subsidiaries as at
the dates indicated and the results of their operations and their cash
flows for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (except as otherwise disclosed in
such financial statements) and that the examination by such accountants
in connection with such consolidated financial statements has been made
in accordance with generally accepted auditing standards;
(iv) Officers' and Compliance Certificates: together with each
delivery of financial statements of Company and its Subsidiaries
pursuant to subdivisions (i), (ii) and (iii) above, (a) an Officers'
Certificate of Company stating that the signers have reviewed the terms
of this Agreement and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of Company and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not
disclosed the existence during or at the end of such accounting period,
and that the signers do not have knowledge of the existence as at the
date of such Officers' Certificate, of any condition or event that
constitutes an Event of Default or Potential Event of Default, or, if
any such condition or event existed or exists, specifying the nature
and period of existence thereof and what action Company has taken, is
taking and proposes to take with respect thereto; and (b) a Compliance
Certificate demonstrating in reasonable detail compliance during and at
the end of the applicable accounting periods with the restrictions
contained in Section 6, in each case to the extent compliance with such
restrictions is required to be tested at the end of the applicable
accounting period;
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(v) Reconciliation Statements: if, as a result of any change
in accounting principles and policies from those used in the
preparation of the audited financial statements referred to in Section
4.3, the consolidated financial statements of Company and its
Subsidiaries delivered pursuant to subdivisions (i), (ii), (iii) or
(xiii) of this Section 5.1 will differ in any material respect from the
consolidated financial statements that would have been delivered
pursuant to such subdivisions had no such change in accounting
principles and policies been made, then (a) together with the first
delivery of financial statements pursuant to subdivision (i), (ii),
(iii) or (xiii) of this subdivision 5.1 following such change,
consolidated financial statements of Company and its Subsidiaries for
(y) the current Fiscal Year to the effective date of such change and
(z) the two full Fiscal Years immediately preceding the Fiscal Year in
which such change is made, in each case prepared on a pro forma basis
as if such change had been in effect during such periods, and (b)
together with each delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this Section 5.1 following
such change, a written statement of the chief accounting officer or
chief financial officer of Company setting forth the differences
(including any differences that would affect any calculations relating
to the financial covenants set forth in Section 6.6) which would have
resulted if such financial statements had been prepared without giving
effect to such change;
(vi) Accountants' Certification: together with each delivery
of consolidated financial statements of Company and its Subsidiaries
pursuant to subdivision (iii) above, a written statement by the
independent certified public accountants giving the report thereon (a)
stating that their audit examination has included a review of the terms
of this Agreement and the other Loan Documents as they relate to
accounting matters, (b) stating whether, in connection with their audit
examination, any condition or event that constitutes an Event of
Default or Potential Event of Default has come to their attention and,
if such a condition or event has come to their attention, specifying
the nature and period of existence thereof; provided that such
accountants shall not be liable by reason of any failure to obtain
knowledge of any such Event of Default or Potential Event of Default
that would not be disclosed in the course of their audit examination,
and (c) stating that based on their audit examination nothing has come
to their attention that causes them to believe either or both that the
information contained in the certificates delivered therewith pursuant
to subdivision (iv) above is not correct or that the matters set forth
in the Compliance Certificates delivered therewith pursuant to clause
(b) of the subdivision (iv) above for the applicable Fiscal Year are
not stated in accordance with the terms of this Agreement;
(vii) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of all
reports submitted to Company by independent certified public
accountants in connection with each annual, interim or special audit of
the financial statements of Company and its Subsidiaries made by such
accountants, including any comment letter submitted by such accountants
to management in connection with their annual audit;
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(viii) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by
Company to its security holders or by any Subsidiary of Company to its
security holders other than Company or another Subsidiary of Company,
(b) all regular and periodic reports and all registration statements
(other than on Form S-8 or a similar form) and prospectuses, if any,
filed by Company or any of its Subsidiaries with any securities
exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority, and (c) all press
releases and other statements made available generally by Company or
any of its Subsidiaries to the public concerning material developments
in the business of Company of any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of
Company obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or
becoming aware that any Lender has given any notice (other than to
Agent) or taken any other action with respect to a claimed Event of
Default or Potential Event of Default, (b) that any Person has given
any notice to Company or any of its Subsidiaries or taken any other
action with respect to a claimed default or event or condition of the
type referred to in Section 7.2, (c) of any condition or event that
would be required to be disclosed in a current report filed by Company
with the Securities and Exchange Commission on Form 8-K (Items 1, 2, 4,
5 and 6 of such Form as in effect on the date hereof) if Company were
required to file such reports under the Exchange Act, or (d) of the
occurrence of any event or change that has caused or evidences, either
in any case or in the aggregate, a Material Adverse Effect, an
Officers' Certificate specifying the nature and period of existence of
such condition, event or change, or specifying the notice given or
action taken by any such Person and the nature of such claimed Event of
Default, Potential Event of Default, default, event or condition, and
what action Company has taken, is taking and proposes to take with
respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any
officer of Company obtaining knowledge of (X) the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or
any property of Company of any of its Subsidiaries (collectively,
"PROCEEDINGS") not previously disclosed in writing by Company to
Lenders or (Y) any material development in any Proceeding that, in any
case:
(1) if adversely determined, has a reasonable
possibility of giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise present the
consummation of, or to recover any damages or obtain relief as
a result of, the transactions contemplated hereby;
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written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters; and (b) within twenty days after the end of each
Fiscal Quarter, a schedule of all Proceedings involving an alleged
liability of, or claims against or affecting, Company or any of its
Subsidiaries equal to or greater than $100,000, and promptly after
request by Agent such other information as may be reasonable requested
by Agent to enable Agent and its counsel to evaluate any of such
Proceedings;
(xi) ERISA Events: promptly upon becoming aware of the
occurrence of or forthcoming occurrence of any ERISA Event, a written
notice specifying the nature thereof, what action Company, any of its
Subsidiaries or any of their respective ERISA Affiliates has taken, is
taking or proposes to take with respect thereto and, when known, any
action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a)
each Schedule B (Actuarial Information) to the annual report (Form 5500
Series) filed by Company, any of its Subsidiaries or any of their
respective ERISA Affiliates with the Internal Revenue Service with
respect to each Pension Plan; (b) all notices received by Company, any
of its Subsidiaries or any of their respective ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event; and (c) copies of
such other documents or governmental reports or filings relating to any
Employee Benefit Plan as Agent shall reasonably request;
(xiii) Financial Plans/Budgets: as soon as practicable and in
any event no later than 30 days prior to the beginning of each Fiscal
Year, a consolidated and consolidating plan/budget and financial
forecast for such Fiscal Year and the next four succeeding Fiscal Years
approved by the Company's Board of Directors (the "FINANCIAL PLAN" for
such Fiscal Year), including (a) forecasted consolidated and
consolidating balance sheets and forecasted consolidated and
consolidating statements of income and cash flows of Company and its
Subsidiaries for each such Fiscal Year, together with pro forma
Compliance Certificates for each such Fiscal Year and an explanation of
the assumptions on which such forecasts are based, (b) forecasted
consolidated and consolidating statements of income and cash flows of
Company and its Subsidiaries for each month of the first each such
Fiscal Year, together with an explanation of the assumptions on which
such forecasts are based, (c) the amount of forecasted unallocated
overhead for each such Fiscal Year, and (d) such other information and
projections as any Lender may reasonably request;
(xiv) Insurance: as soon as practicable and in any event by
the last day of each Fiscal Year, a report in form and substance
satisfactory to Agent outlining all material insurance coverage
maintained as of the date of such report by Company and its
Subsidiaries and all material insurance coverage planned to be
maintained by Company and its Subsidiaries in the immediately
succeeding Fiscal Year;
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(xv) Board of Directors: (a) promptly and in any event within
five Business Days after the approval of such minutes by the Board of
Directors, copies of all minutes of meetings of, and written consents
of, the Board of Directors of the Company and any committees thereof,
(b) promptly and in any event within five Business Days after any
change in the Board of Directors of the Company, written notice of such
change, and (c) at least two Business Days prior to any meeting of the
Board of Directors of the Company of committee thereof, notice of such
meeting;
(xvi) New Subsidiaries: promptly upon any Person becoming a
Subsidiary of Company, a written notice setting forth with respect to
such Person (a) the date on which such Person became a subsidiary of
Company and (b) all of the data required to be set forth on SCHEDULE
4.1D AND SCHEDULE 4.1E annexed hereto with respect to all Subsidiaries
of Company (it being understood that such written notice shall be
deemed to supplement SCHEDULE 4.1D AND SCHEDULE 4.1E annexed hereto for
all purposes of this Agreement;
(xvii) Material Contracts: promptly, and in any event within
ten Business Days after any Material Contract of Company or any of its
Subsidiaries is terminated or amended in a manner that is materially
adverse to Company or such Subsidiary, as the case may be, or any new
Material Contract is entered into, a written statement describing such
event with copies of such material amendments or new contracts, and an
explanation of any actions being taken with respect thereto;
(xviii) UCC Search Report: As promptly as practicable after
the date of delivery to Agent of any UCC financing statement executed
by any Loan Party pursuant to Section 3 or Section 5.8, copies of
completed UCC searches evidencing the proper filing, recording and
indexing of all such UCC financing statements and listing all other
effective financing statements that name such Loan Party as debtor,
together with copies of all such other financing statements not
previously delivered to Agent by or on behalf of Company or such Loan
Party;
(xix) Receivables Reports: Within 25 days of the end of each
calendar month, a monthly report regarding receivables (including
without limitation, a list of payors and the amounts owning by each,
receivables allocated by category and by Loan Party, performance data
(including a comparison of gross to net income), an aging report
reconciled to the report for the prior month and to the plan for the
month and a bad debt expense report all substantially in the form of
EXHIBIT 5.1(xix);
(xx) Fiscal Intermediary Reports: Promptly, and in any event
within five Business Days after any cost reports or settlement sheets
are delivered to or received from any fiscal intermediary or any
governmental authority, a copy of such report or settlement sheet;
(xxi) Healthcare Notices and Reports: Promptly after
commencement of any Medicare audit by Veritus, notice to the Lenders,
the Agent and the Collateral Agent of each
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audit; and promptly after receipt thereof, copies of all
correspondence, notices, reports and audit results with respect to
Medicare payments;
(xxii) Adjustments to EBITDA: promptly after any calculation
of Consolidated EBITDA hereunder, written notice, specifying in
reasonable detail, any non-cash adjustments to Consolidated EBITDA; and
(xxiii) Other Information: with reasonable promptness, such
other information and data with respect to Company or any of its
Subsidiaries as from time to time may be reasonably requested by any
Lender.
5.2 CORPORATE EXISTENCE, ETC. Except as permitted under Section 6.7, Company
will, and will cause each of its Subsidiaries to, at all times preserve and keep
in full force and effect its corporate existence and all rights and franchises
material to its business; provided, however that neither Company nor any of its
Subsidiaries shall be required to preserve any such right or franchise if the
Board of Directors of Company or such Subsidiary shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
Company or such Subsidiary, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to Company, such Subsidiary or Lenders.
5.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
A. Company will, and will cause each of its Subsidiaries to, pay all
Taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including claims
for labor, services, materials and supplies) for sums that have become due and
payable and that by law or otherwise have or may become a Lien upon any of its
properties or assets, prior to the time when any penalty or fine shall be
incurred with respect thereto; provided that no such charge or claim need be
paid if it is being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, so long as (1) such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor and (2) in the case of a charge or claim which has
or may become a Lien against any of the Collateral, such contest proceedings
conclusively operate to stay the sale of any portion of the Collateral to
satisfy such charge or claim.
B. Company will not, nor will it permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with any
Person (other than Company or any of its Subsidiaries).
5.4 MAINTENANCE OF PROPERTIES; INSURANCE.
A. MAINTENANCE OF PROPERTIES. Company will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear
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and tear excepted, all material properties used or useful in the business of
Company and its Subsidiaries (including all Intellectual Property) and from time
to time will make or cause to be made all appropriate repairs, renewals and
replacements thereof.
B. INSURANCE. Company will maintain or cause to be maintained, with
financially sound and reputable insurers, such public liability insurance, third
party property damage insurance, business interruption insurance and casualty
insurance with respect to liabilities, losses or damage in respect of the
assets, properties and businesses of Company and its Subsidiaries as may
customarily be carried or maintained under similar circumstances by corporations
of established reputation engaged in similar businesses, in each case in such
amounts (giving effect to self-insurance), with such deductibles, covering such
risks and otherwise on such terms and conditions as shall be customary for
corporations similarly situated in the industry. Without limiting the generality
of the foregoing, Company will maintain or cause to be maintained (i) flood
insurance with respect to any property subject to a mortgage in favor of Agent
and Lenders that is located in a community that participates in the National
Flood Insurance Program, in each case in compliance with any applicable
regulations of the Board of Governors of the Federal Reserve System, and (ii)
replacement value casualty insurance on the Collateral under such policies of
insurance, with such insurance companies, in such amounts, with such
deductibles, and covering such risks as are at all times satisfactory to Agent
in its commercially reasonable judgment. Each such policy of insurance shall (a)
name Agent for the benefit of Lenders as an additional insured thereunder as its
interests may appear and (b) in the case of each business interruption and
casualty insurance policy, contain a loss payable clause or endorsement,
satisfactory in form and substance to Agent, that names Agent for the benefit of
Lenders as the loss payee thereunder and provides for at least 30 days prior
written notice to Agent of any modification or cancellation of such policy.
5.5 INSPECTION RIGHTS; AUDITS OF INVENTORY AND ACCOUNTS RECEIVABLE; LENDER
MEETINGS.
A. INSPECTION RIGHTS. Company shall, and shall cause each of its
Subsidiaries to, permit any authorized representatives designated by any Lender
to visit and inspect any of the properties of Company or of any of its
Subsidiaries, to inspect, copy and take extracts from its and their financial
and accounting records, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants
(provided that Company may, if it so chooses, be present at or participate in
any such discussion), all upon reasonable notice and at such reasonable times
during normal business hours and as often as may reasonably be requested.
B. AUDITS OF ACCOUNTS RECEIVABLE. Company shall, and shall cause each
of its Subsidiaries to, permit any authorized representatives designated by
Agent to conduct two audits of all accounts receivable of Loan Parties during
each twelve-month period after the Restatement Closing Date, each such audit to
be in scope and substance satisfactory to Agent and Requisite Lender, all upon
reasonable notice and at such reasonable times during normal business hours as
may reasonably be requested.
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C. LENDER MEETING. Company will, upon the request of Agent or Requisite
Lenders, participate in a meeting of Agent and Lenders to be held at Company's
corporate offices (or at such other location as may be agreed to by Company and
Agent) at such time as may be agreed to by Company and Agent.
5.6 COMPLIANCE WITH LAWS, ETC. Company shall comply, and shall cause each of its
Subsidiaries and all other Persons on or occupying any Facilities to comply,
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority (including all Environmental Laws), noncompliance
with which could reasonably be expected to cause, individually or in the
aggregate, a Material Adverse Effect.
Without limitation of the foregoing:
(i) Company and each of its Subsidiaries, and each Healthcare
Facility, has obtained and will continue to maintain all material
licenses, consents, registrations, certifications, certificates of need
and other approvals or authorizations from, and has made all material
filings, reports submissions and registrations to or with
(collectively, the "APPROVALS"), all governmental authorities
(including, without limitation, the U.S. Department of Health and Human
Services, Health Care Financing Administration and applicable State and
local authorities) necessary to be obtained to conduct its business as
currently conducted and to operate the Healthcare Facilities. No such
Approvals have or threaten to be expired or to be revoked, terminated,
suspended, limited or amended and no proceedings for any such
revocation, termination, suspension, limitation or amendment, or
investigation, audit, or other action by any governmental authority
with respect to any such revocation, termination, suspension,
limitation or amendment, is pending or, to the best knowledge of
Company, threatened (each a "POTENTIAL REVOCATION").
(ii) Company, each of its Subsidiaries and each Healthcare
Facility is qualified and will continue to be qualified for
participation in any material federal or state programs for the funding
and administration of payments for rehabilitation therapy and related
services which relate to the business of Company, such Subsidiary or
such healthcare Facility (including, without limitation, Titles 18 and
19 of the Federal Social Security Act, commonly known as the Medicare
and Medicaid programs), and will maintain "provider" status within the
meaning of the regulations of the Health Care Financing Administration,
in each case to the extent such qualification or status is necessary or
applicable to the conduct of the business of Company or such Subsidiary
or the operation of such healthcare Facility. Company, each of its
Subsidiaries and each of the healthcare Facilities is in compliance and
will continue to be in compliance in all material respects with all
applicable laws, rules, regulations and orders (including, without
limitation all administrative, operating and financial or reimbursement
requirements established by all applicable governmental authorities)
with respect to the operation of the Healthcare Facilities and the
provision of rehabilitation therapy and related services applicable to
it and the conduct of the business conducted by it.
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5.7 ENVIRONMENTAL REVIEW AND INVESTIGATION, DISCLOSURE, ETC.; COMPANY'S ACTIONS
REGARDING HAZARDOUS MATERIALS ACTIVITIES, ENVIRONMENTAL CLAIMS AND
VIOLATIONS OF ENVIRONMENTAL LAWS.
A. ENVIRONMENTAL REVIEW AND INVESTIGATION. Company agrees that Agent
may, from time to time and in its reasonable discretion, (i) retain, at
Company's expense, an independent professional consultant to review any
environmental audits, investigations, analyses and reports relating to Hazardous
Materials prepared by or for Company and (ii) in the event (a) Agent reasonably
believes the Company has breached any representation, warranty or covenant
contained in Section 4.6, 4.13, 5.6 or 5.7 or that there has been a material
violation of Environmental Laws at any Facility or by Company or any of its
Subsidiaries at any other location or (b) an Event of Default has occurred and
is continuing, conduct its own investigation of any Facility; provided that, in
the case of any Facility no longer owned, leased, operated or used by Company or
any of its subsidiaries, Company shall only be obligated to use its best efforts
to obtain permission for Agent's professional consultant to conduct an
investigation of such Facility. For purposes of conducting such a review and/or
investigation, Company hereby grants to Agent and its agents, employees,
consultants and contractors the right to enter into or onto any Facilities
currently owned, leased, operated or used by Company or any of its Subsidiaries
and to perform such tests on such property (including taking samples of soil,
groundwater and suspected asbestos-containing materials) as are reasonably
necessary in connection therewith. Any such investigation of any Facility shall
be conducted, unless otherwise agreed to by Company and Agent, during normal
business hours and, to the extent reasonable practicable, shall be conducted so
as not to interfere with the ongoing operations at such Facility or to cause any
damage or loss to any property at such Facility. Company and Agent hereby
acknowledge and agree that any report of any investigation conducted at the
request of Agent pursuant to this Section 5.7A will be obtained and shall be
used by Agent and Lenders for the purposes of Lenders' internal credit
decisions, to monitor and police the Loans and to protect Lenders' security
interests, if any, created by the Loan Documents. Agent agrees to deliver a copy
of any such report to Company with the understanding that Company acknowledges
and agrees that (x) it will indemnify and hold harmless Agent and each Lender
from any costs, losses or liabilities relating to Company's use of or reliance
on such report, (y) neither Agent nor any Lender makes any representation or
warranty with respect to such report, and (z) by delivering such report to
Company, neither Agent nor and Lender is requiring or recommending the
implementation of any suggestions or recommendations contained in such report.
B. ENVIRONMENTAL DISCLOSURE. Company will deliver to Agent and Lenders:
(i) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits,
investigations, analyses and reports of any kind or character, whether
prepared by personnel of Company or any of its Subsidiaries or by
independent consultants, governmental authorities or any other Persons,
with respect to significant environmental matters at any Facility or
with respect to any Environmental Claim;
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(ii) Notice of Certain Releases, Remedial Actions, etc.
promptly upon the occurrence thereof, written notice describing in
reasonable detail (a) any Release required to be reported to any
federal, state or local governmental or regulatory agency under any
applicable Environmental Laws, (b) any remedial action taken by company
or any other Person in response to (1) any Hazardous Materials
Activities the existence of which has a reasonable possibility of
resulting in one or more Environmental Claims having, individually or
in the aggregate, a Material Adverse Effect, or (2) any Environmental
Claims that, individually or in the aggregate, have a reasonable
possibility of resulting in a Material Adverse Effect.
(iii) Written Communications Regarding Environmental Claims,
Releases, etc. as soon as practicable following the sending or receipt
thereof by Company or any of its Subsidiaries, a copy of any and all
written communications with respect to (a) any Environmental Claims
that, individually or in the aggregate, have a reasonable possibility
of giving rise to a Material Adverse Effect, (b) any Release required
to be reported to any federal, state or local governmental or
regulatory agency, and (c) any request for information from any
governmental agency that suggests such agency is investigating whether
Company or any of its Subsidiaries may be potentially responsible for
any Hazardous Materials Activity.
(iv) Notice of Certain Proposed Actions Having Environmental
Impact. prompt written notice describing in reasonable detail (a) any
proposed acquisition of stock, assets, or property by Company or any of
its Subsidiaries that could reasonably be expected to (1) expose
Company or any of its Subsidiaries to, or result in, Environmental
Claims that could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect or (2) affect the ability of
Company or any of its Subsidiaries to maintain in full force and effect
all material Governmental Authorizations required under any
Environmental Laws for their respective operations and (b) any proposed
action to be taken by Company or any of its Subsidiaries to modify
current operations in a manner that could reasonably be expected to
subject Company or any of its Subsidiaries to any material additional
obligations or requirements under any Environmental Laws.
(v) Other Information. with reasonable promptness, such other
documents and information as from time to time may be reasonably
requested by Agent in relation to any matters disclosed pursuant to
this Section 5.7.
C. COMPANY'S ACTIONS REGARDING HAZARDOUS MATERIALS ACTIVITIES,
ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS.
(i) Remedial Actions Relating to Hazardous Materials
Activities. Company shall promptly undertake, and shall cause each of
its Subsidiaries promptly to undertake, any and all investigations,
studies, sampling, testing, abatement, cleanup, removal, remediation or
other response actions necessary to remove, remediate, clean up or
abate any Hazardous Materials Activity on, under or about any Facility
that is in violation of any Environmental
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Laws or that presents a material risk of giving rise to an
Environmental Claim. In the event Company or any of its Subsidiaries
undertakes any such action with respect to any Hazardous Materials,
Company or such Subsidiary shall conduct and complete such action in
compliance with all applicable Environmental Laws and in accordance
with the policies, orders and directives of all federal, state and
local governmental authorities except when, and only to the extent
that, Company's or such Subsidiary's liability with respect to such
hazardous materials Activity is being contested in good faith by
Company or such Subsidiary.
(ii) Actions With Respect to Environmental Claims and
Violations of Environmental Laws. Company shall promptly take, and
shall cause each of its Subsidiaries promptly to take, any and all
actions necessary to (i) cure any material violation of applicable
Environmental Laws by Company or its Subsidiaries and (ii) make an
appropriate response to any Environmental claim against Company or any
of its Subsidiaries and discharge any obligations it may have to any
Person thereunder.
5.8 EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PROPERTY COLLATERAL DOCUMENTS
BY CERTAIN SUBSIDIARIES AND FUTURE SUBSIDIARIES.
A. EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PROPERTY COLLATERAL
DOCUMENTS. In the event that any Person becomes a Subsidiary of Company after
the date hereof, Company will promptly notify Agent of that fact and cause such
Subsidiary to execute and deliver to Agent counterparts of the Subsidiary
Guaranty, Subsidiary Pledge Agreement and Subsidiary Security Agreement and to
take all such further actions and execute all such further documents and
instruments as may be necessary or, in the opinion of Agent, desirable to create
in favor of Agent, for the benefit of Lenders, a valid and perfected First
Priority Lien on all of the personal and mixed property assets of such
Subsidiary described in the applicable forms of Collateral Documents.
B. SUBSIDIARY CHARTER DOCUMENTS, LEGAL OPINIONS, ETC. Company shall
deliver to Agent, together with such Loan Documents, (i) certified copies of
such Subsidiary's Certificate or Articles of Incorporation, together with a good
standing certificate from the Secretary of State of the jurisdiction of its
incorporation and each other state in which such Person is qualified as a
foreign corporation to do business and, to the extent generally available, a
certificate or other evidence of good standing as to payment of any applicable
franchise or similar taxes from the appropriate taxing authority of each of such
jurisdictions, each to be dated a recent date prior to their delivery to Agent,
(ii) a copy of such Subsidiary's Bylaws, certified by its corporate secretary or
an assistant secretary as of a recent date prior to their delivery to Agent,
(iii) a certificate executed by the secretary or an assistant secretary of such
Subsidiary as to (a) the fact that the attached resolutions of the Board of
Directors of such Subsidiary approving and authorizing the execution, delivery
and performance of such Loan Documents are in full force and effect and have not
been modified or amended and (b) the incumbency and signatures of the officers
of such Subsidiary executing such Loan Documents, and (iv) a favorable opinion
of counsel to such Subsidiary, in form and substance satisfactory to Agent and
its counsel, as to (a) the due organization and good standing of such
Subsidiary, (b) the
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due authorization, execution and delivery by such Subsidiary of such Loan
Documents, (c) the enforceability of such Loan Documents against such
Subsidiary, (d) such other matters (including matters relating to the creation
and perfection of Liens in any collateral pursuant to such Loan Documents) as
Agent may reasonably request, all of the foregoing to be satisfactory in form
and substance to Agent and its counsel.
C. COLLATERAL PERFECTION AND INFORMATION. The Company shall take all
action to ensure that the representation and warranties given in Section 4.1
shall remain true and correct at all times. The Company shall and shall cause
each of its Subsidiaries to execute and deliver all documents and instruments,
and take all other action that Agent or Requisite Lenders may request, such that
Agent, on behalf of Lenders, as security for the Obligations, shall at all times
have a First Priority Lien (subject to Liens permitted hereunder) on all
property and assets of the Company and each of the subsidiaries. If at any time
any information set forth on SCHEDULES 4.1D OR 4.1E shall become untrue, the
Company shall immediately send to the Agent replacement SCHEDULES 4.1D AND 4.1E
which shall be true and correct as of such date and which shall replace the
prior SCHEDULES 4.1D AND 4.1E from and after the date of receipt thereof by
Agent.
5.9 AFTER-ACQUIRED REAL PROPERTY. If Company or any of its Subsidiaries
purchases or otherwise acquires any interest in real property after the
Restatement Closing Date (including any interests arising under a lease), then
Company shall and shall cause its Subsidiaries to, concurrently with such
purchase or other acquisition, execute and deliver all documents and instruments
and take all other action that Agent or Requisite Lenders may request to grant
to Agent, on behalf of Lenders, as security for the Obligations, a First
Priority Lien (subject to liens permitted hereunder) on all such real property
interests; provided, that this Section 5.9 shall not be construed to permit any
transaction not otherwise permitted by the terms of this Agreement.
5.10 KEY MAN INSURANCE. The Company shall obtain, and maintain in full force and
effect until all Obligations hereunder have been repaid in full, a "key man"
life insurance policy, in the amount of $1,000,000 on Thomas W. Zaucha.
5.11 CHIEF FINANCIAL OFFICER. The Company agrees to use best efforts to retain a
chief financial officer by October 15, 1999.
SECTION 6. COMPANY's NEGATIVE COVENANTS
Company covenants and agrees that, until payment in full of
all of the Loans and other Obligations, unless Requisite Lenders shall otherwise
give prior written consent, Company shall perform, and shall cause each of its
Subsidiaries to perform, all covenants in this Section 6.
6.1 INDEBTEDNESS. Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
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(i) Company may become and remain liable with respect to the
Obligations;
(ii) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations permitted by Section 6.4 and,
upon any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so
extinguished;
(iii) Company and its Subsidiaries may become and remain
liable with respect to Indebtedness in respect of Capital Leases;
provided that such Capital Leases are permitted under the terms of
Section 6.9;
(iv) Company may become and remain liable with respect to
Indebtedness to any of its wholly-owned Subsidiaries, and any
wholly-owned Subsidiary of Company may become and remain liable with
respect to Indebtedness to Company or any other wholly-owned Subsidiary
of Company; provided that (a) all such intercompany Indebtedness shall
be evidenced by promissory notes, (b) all such intercompany
Indebtedness owed by Company to any of its Subsidiaries shall be
subordinated in right of payment to the payment in full of the
Obligations pursuant to the terms of the applicable promissory notes or
an intercompany subordination agreement, and (c) any payment by any
Subsidiary of Company under any guaranty of the Obligations shall
result in a pro tanto reduction of the amount of any intercompany
Indebtedness owed by such Subsidiary to Company or to any of its
Subsidiaries for whose benefit such payment is made; and
(v) Company and its Subsidiaries, as applicable, may remain
liable with respect to Indebtedness described in SCHEDULE 6.1 annexed
hereto; and
6.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statements or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Liens described in SCHEDULE 6.2 annexed hereto.
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B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of Section 6.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall so be secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
Section 6.2A.
C. NO FURTHER NEGATIVE PLEDGES. Except with respect to specific
property encumbered to secure payment of particular Indebtedness neither Company
nor any of its Subsidiaries shall enter into any agreement (other than an
agreement prohibiting only the creation of Liens securing Subordinated
Indebtedness) prohibiting the creation or assumption of any Lien upon any of its
properties or assets, whether now owned or hereafter acquired.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER
SUBSIDIARIES. Except as provided herein, Company will not, and will not permit
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on any such Subsidiary's capital stock owned by Company or any
other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or
advances to Company or any other Subsidiary of Company, or (iv) transfer any of
its property or assets to Company or any other Subsidiary of Company.
6.3 INVESTMENTS; JOINT VENTURES. Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, including any Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments
in Cash Equivalents;
(ii) Company and its Subsidiaries may continue to own the
Investments owned by them as of the Closing Date in any Subsidiaries of
Company;
(iii) Company and its Subsidiaries may make intercompany loans
to the extent permitted under Section 6.1(iv);
(iv) Company and its Subsidiaries may make Consolidated
Capital Expenditures permitted by Section 6.8; and
(v) Company and its Subsidiaries may continue to own the
Investments owned by them and described in SCHEDULE 6.3 annexed hereto.
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6.4 CONTINGENT OBLIGATIONS. Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create or become or remain liable with
respect to any Contingent Obligation, except:
(i) Subsidiaries of Company may become and remain liable with
respect to Contingent Obligations in respect of the Subsidiary
Guaranty; and
(ii) Company and its Subsidiaries, as applicable, may remain
liable with respect to Contingent Obligations described in SCHEDULE 6.4
annexed hereto.
6.5 RESTRICTED JUNIOR PAYMENTS. Except as specifically provided for in Section
2.4B(ii)(e), the Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, declare, order, pay, make or set apart any sum for
any Restricted Junior Payment.
6.6 FINANCIAL COVENANTS.
A. MINIMUM INTEREST COVERAGE RATIO.
(i) Company shall not permit the ratio of (x) Consolidated
EBITDA to (y) Consolidated Interest Expense for any calendar month set
forth below to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
Month Minimum
Ended Interest Coverage Ratio
----- -----------------------
<S> <C>
October 1999 3.00:1.00
November 1999 2.80:1.00
December 1999 2.80:1.00
</TABLE>
(ii) The Company shall not permit the ratio of (x)
Consolidated EBITDA to (y) Consolidated Interest Expense for any
calendar month during the year 2000 to be less than 3.00:1.00.
B. MAXIMUM LEVERAGE RATIO. Company shall not permit the ratio of (i)
Consolidated Total Debt to (ii) Consolidated EBITDA as of the last day of any
Fiscal Quarter ending during any of the periods set forth below to exceed the
correlative ratio indicated:
<TABLE>
<CAPTION>
Quarter Ended Maximum Leverage Ratio
------------- ----------------------
<S> <C>
December 31, 1999 4.30:1.00
March 31, 2000 4.00:1.00
June 30, 2000 3.80:1.00
September 30, 2000 3.60:1.00
</TABLE>
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<TABLE>
<S> <C>
December 31, 2000 3.60:1.00
</TABLE>
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<PAGE> 70
C. MINIMUM CONSOLIDATED EBITDA.
(i) Company shall not permit Consolidated EBITDA for any month
set forth below to be less than the correlative amount indicated for
such month:
<TABLE>
<CAPTION>
Minimum Consolidated
Month EBITDA
----- ------
<S> <C>
October 1999 $430,000
November 1999 $385,000
December 1999 $382,000
</TABLE>
(ii) Company shall not permit Consolidated EBITDA for any
Fiscal Year set forth below to be less than the correlative amount
indicated for such Fiscal Year:
<TABLE>
<CAPTION>
Minimum Consolidated
Fiscal Year EBITDA
----------- ------
<S> <C>
1999 $4,595,000
2000 $4,950,000
</TABLE>
(iii) Company shall not permit Consolidated EBITDA for any
month set forth below to be less than the correlative amount indicated
for such month:
<TABLE>
<CAPTION>
Minimum Consolidated
Month EBITDA
----- ------
<S> <C>
January 2000 $408,000
February 2000 $408,000
March 2000 $447,000
April 2000 $388,000
May 2000 $427,000
June 2000 $427,000
July 2000 $388,000
August 2000 $447,000
September 2000 $388,000
October 2000 $427,000
November 2000 $407,000
December 2000 $388,000
</TABLE>
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D. NET PATIENT SERVICE REVENUE/BAD DEBT COVERAGE. Company shall not
permit Bad Debt Expense (x) for any Fiscal Quarter to be more than 2.5% of Net
Patient Service Revenue and (y) for any Fiscal Year to be more than 2.0% of Net
Patient Service Revenues.
6.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS. Company
shall not, and shall not permit any of its Subsidiaries to, alter the corporate,
capital or legal structure of Company or any of its Subsidiaries, or enter into
any transaction of merger or consolidation, or liquidate, wind-up or dissolve
itself (or suffer any liquidation or dissolution), or convey, sell, lease or
sub-lease (as lessor or sub-lessor), transfer or otherwise dispose of, in one
transaction or a series of transactions, all or any part of its business,
property or assets, whether now owned or hereafter acquired, or acquire by
purchase or otherwise all or substantially all the business, property or fixed
assets of, or stock or other evidence of beneficial ownership of, any Person or
any division or line of business of any Person, except;
(i) any Subsidiary of Company may be merged with or into
Company or any wholly-owned Subsidiary Guarantor, or be liquidated,
wound up or dissolved, or all or any part of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed
of, in one transaction or a series of transactions, to Company or any
wholly-owned Subsidiary Guarantor; provided that, in the case of such a
merger, Company or such wholly-owned Subsidiary Guarantor shall be the
continuing or surviving corporation;
(ii) Company and its Subsidiaries may make Consolidated
Capital Expenditures permitted under Section 6.8;
(iii) Company and its Subsidiaries may dispose of obsolete,
worn out or surplus property in the ordinary course of business;
(iv) Company and its Subsidiaries may sell or otherwise
dispose of assets in transactions that do not constitute Asset Sales;
provided that the consideration received for such assets shall be, in
the reasonable judgment of the Agent, in an amount at least equal to
the fair market value thereof; and
(v) the Company may wind-up, and sell the assets of, the
Company's mobile diagnostic division.
6.8 CONSOLIDATED CAPITAL EXPENDITURES. Company shall not, and shall not permit
its Subsidiaries to, make or incur Consolidated Capital Expenditures; provided,
that Company and its Subsidiaries may make Consolidated Capital Expenditures in
an aggregate amount of $10,000 per calendar month; provided further, however,
that notwithstanding the foregoing limitation, the Company and its Subsidiaries
may make Consolidated Capital Expenditures in excess of $10,000 per month
utilizing the Company's portion, if any, of Consolidated Excess Cash Flow
properly allocated to the Company under Section 2.4B(ii)(e)(III) for the
immediately preceding month;
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provided, further, however, that any remaining Excess Cash Flow may be used to
make Capital Expenditures in the next succeeding month, so long as there is
sufficient Excess Cash Flow for such month to make such Capital Expenditures.
6.9 RESTRICTION ON LEASES. Company shall not, and shall not permit any of its
Subsidiaries to, become liable in any way, whether directly or by assignment or
as a guarantor or other surety, for the obligations of the lessee under any
lease, whether an Operating Lease or a Capital Lease (other than intercompany
leases between Company and its wholly-owned Subsidiaries), unless, immediately
after giving effect to the incurrence of liability with respect to such lease,
the Consolidated Rental Payments at the time in effect during the then current
Fiscal Year or any future period of 12 consecutive calendar months shall not
exceed the corresponding amount set forth below opposite such Fiscal Year:
<TABLE>
<CAPTION>
MAXIMUM CONSOLIDATED
FISCAL YEAR RENTAL PAYMENTS
----------- ---------------
<S> <C>
1999 $4,200,000
2000 $4,620,000
</TABLE>
6.10 SALES AND LEASE-BACKS. Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, become or remain liable as lessee or as
a guarantor or other surety with respect to any lease, whether an Operating
Lease or a Capital Lease, of any property (whether real, personal or mixed),
whether now owned or hereafter acquired, (i) which Company or any of its
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person (other than Company or any of its Subsidiaries) or (ii) which Company or
any of its Subsidiaries intends to use for substantially the same purpose as any
other property which has been or is to be sold or transferred by Company or any
of its Subsidiaries to any Person (other than Company or any of its
Subsidiaries) in connection with such lease.
6.11 SALE OR DISCOUNT OF RECEIVABLES. Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, sell with recourse, or
discount or otherwise sell for less than the face value thereof, any of its
notes or accounts receivable.
6.12 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, enter into or
permit to exist any transaction (including the purchase, sale, lease or exchange
of any property or the rendering of any service) with any holder of 5% or more
of any class of equity Securities of Company or with an Affiliate of Company or
of any such holder, on terms that are less favorable to Company or that
Subsidiary, as the case may be, than those that might be obtained at the time
from Persons who are not such a holder or Affiliate; provided that the foregoing
restriction shall not apply to (i) any transaction between Company and any of
its wholly-owned Subsidiaries or between any of its wholly-owned Subsidiaries or
(ii) reasonable and customary fees paid to members of the Boards of Directors of
Company and its Subsidiaries.
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6.13 DISPOSAL OF SUBSIDIARY STOCK. Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify directors if
required by applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly to
sell, assign, pledge or otherwise encumber or dispose of any shares of
capital stock or other equity Securities of any of its Subsidiaries
(including such Subsidiary), except to Company, another Subsidiary of
Company, or to qualified directors if required by applicable law.
6.14 CONDUCT OF BUSINESS. From and after the Restatement Closing Date, Company
shall not, and shall not permit any of its Subsidiaries to, engage in any
business other than the businesses engaged in by Company and its Subsidiaries on
the Restatement Closing Date and similar or related businesses.
6.15 AMENDMENTS OF DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS. Company
shall not, and shall not permit any of its Subsidiaries to, (A) amend or
otherwise change the terms of the Subordination Agreement or of any Subordinated
Indebtedness, or make any payment consistent with an amendment thereof or change
thereto, if the effect of such amendment or change is to increase the interest
rate on such Subordinated Indebtedness, change (to earlier dates) any dates upon
which payments of principal or interest are due thereon, change any event of
default or condition to an event of default with respect thereto (other than to
eliminate any such event of default or increase any grace period related
thereto), change the redemption, prepayment or defeasance provisions thereof,
change the subordination provisions thereof (or of any guaranty thereof), or
change any collateral therefor (other than to release such collateral), or (B)
if the effect of such amendment or change, together with all other amendments or
changes made, is to increase materially the obligations of the obligor
thereunder or to confer any additional rights on the holders of such
Subordinated Indebtedness (or a trustee or other representative on their behalf)
which would be adverse to Company or Lenders.
6.16 FISCAL YEAR. Company shall not change its Fiscal Year-end from December 31.
6.17 CASH MANAGEMENT SYSTEM.
A. MAINTENANCE OF CASH MANAGEMENT SYSTEM. The Company and each Loan
Party shall, and shall cause its Subsidiaries to, maintain and strictly comply
with all terms of the Cash Management System in strict accordance with the terms
thereof attached to the Company Security Agreement as Annex A.
B. NO OTHER ACCOUNTS. No Loan Party nor any of its Subsidiaries
(including, without limitation, the KRS Partnerships) shall own, open or
maintain any Deposit Account other than a Deposit Account described on Annex A
to the Company Security Agreement.
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<PAGE> 74
C. [INTENTIONALLY OMITTED]
D. CASH MANAGEMENT SYSTEM. Company and each Loan Party agrees to
perform and comply and to cause each of its respective Subsidiaries to perform
and comply with the terms and provisions of the Cash Management System,
including, without limitation the following covenants and agreements:
(i) All funds on deposit in the Deposit Accounts of each Loan
Party and each of its Subsidiaries shall be transferred on a daily
basis in accordance with the Cash Management System.
(ii) No Loan Party may withdraw or pay any funds from any
Deposit Account except as provided in the Cash Management System.
(iii) Any receipts received or held by each Loan Party and any
of their respective officers, employees, agent or other Persons acting
for or in concert with any Loan Party to make collections for or on
behalf of any Loan Party ("COLLECTING AGENTS"), shall be held in trust
for Agent as Collateral.
6.18 COLLECTIONS AND DISBURSEMENTS
A. MINIMUM COLLECTIONS. Collections of the Company and its Subsidiaries
for each successive four-week period ending on a Friday shall be no less than
$2,100,000.
B. MAXIMUM DISBURSEMENTS. Cash disbursements of the Company and its
Subsidiaries for each successive four-week period ending on Friday, shall not
exceed the sum of collections for such period and the amount of cash balances on
the first day of such period. Except as provided in the immediately prior
sentence, without the prior consent of Lenders, Company and each of its
Subsidiaries agrees that it shall not pay, or commit to pay, or undertake any
transaction which would result in or require the payment of, any cash
disbursement that would be unusual or extraordinary or outside the ordinary
course of business, such determination to be made by reference both to the
business of the Company and its Subsidiaries as presently conducted and by
reference to the business plan, budget and projections delivered pursuant to
Section 5.1(xiii).
C. OUTPATIENT CLINICS. The Company and its Subsidiaries shall not spend
or otherwise incur expenses with respect to the funding, creation or acquisition
of new outpatient clinics, centers or facilities in excess of $50,000 per year
starting in 2000.
D. MINIMUM INVOICES. Amounts invoiced by Company and its Subsidiaries
on or prior to the tenth day of each month for services rendered during the
prior month shall be no less than $3,000,000.
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SECTION 7. EVENTS OF DEFAULT
If any of the following conditions or events ("EVENTS OF DEFAULT")
shall occur:
7.1 FAILURE TO MAKE PAYMENTS WHEN DUE. Failure by Company to pay any installment
of principal of any Loan when due, whether at stated maturity, by acceleration,
by notice of voluntary prepayment, by mandatory prepayment or otherwise; or
failure by Company to pay any interest on any Loan or any fee or any other
amount due under this Agreement within two days after the date due; or
7.2 DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Company or of any of its Subsidiaries to pay
when due any principal of or interest on or any other amount payable in
respect of one or more items of Indebtedness (other than Indebtedness
referred to in Section 7.1) or Contingent Obligations in an individual
principal amount of $250,000 or more or with an aggregate principal
amount of $250,000 or more, in each case beyond the end of any grace
period provided therefor; or (ii) breach or default by Company or any
of its Subsidiaries with respect to any other material term of (a) one
or more items of Indebtedness or Contingent Obligations in the
individual or aggregate principal amounts referred to in clause (i)
above or (b) any loan agreement, mortgage, indenture or other agreement
relating to such item(s) of Indebtedness or Contingent Obligation(s),
if the effect of such breach or default is to cause, or to permit the
holder or holders of that Indebtedness or Contingent Obligation(s) (or
a trustee on behalf of such holder or holders) to cause, that
Indebtedness of Contingent Obligation(s) to become or be declared due
and payable prior to its stated maturity or the stated maturity of any
underlying obligation, as the case may be (upon the giving or receiving
of notice, lapse of time, both, or otherwise); or
7.3 BREACH OF CERTAIN COVENANTS. Failure of Company to perform or comply with
any term or condition contained in Section 2.5 or 5.2 or Section 6 of this
Agreement; or
7.4 BREACH OF WARRANTY. Any representation, warranty, certification or other
statement made by Company or any of its Subsidiaries in any Loan Document or in
any statement or certificate at any time given by Company or any of its
Subsidiaries in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false in any material respect on the date as of which made;
or
7.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS. Any Loan Party shall default in the
performance of or compliance with any term contained in this Agreement or any of
the other Loan Documents, other than any such term referred to in any other
Section of this Section 7, and such default shall not have been remedied or
waived within 10 days after the earlier of (i) an officer of Company or such
Loan Party becoming aware of such default or (ii) receipt by Company and such
Loan Party of notice from Agent or any Lender of such default; or
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7.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court having
jurisdiction in the premises shall enter a decree or order for relief in respect
of Company or any of its Subsidiaries in an involuntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, which decree or order is not stayed; or any
other similar relief shall be granted under any applicable federal or state law;
or (ii) an involuntary case shall be commenced against Company or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect; or a decree or order of a
court having jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over Company or any of its Subsidiaries, or over all or a substantial
part of its property, shall have been entered; or there shall have occurred the
involuntary appointment of an interim receiver, trustee or other custodian of
Company or any of its Subsidiaries for all or a substantial part of its
property; or a warrant of attachment, execution or similar process shall have
been issued against any substantial part of the property of Company or any of
its Subsidiaries; or
7.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i)Company or any of its
Subsidiaries shall have an order for relief entered with respect to it or
commence a voluntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case, or to
the conversion of an involuntary case to a voluntary case, under any such law,
or shall consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or
Company or any of its Subsidiaries shall make any assignment for the benefit of
creditors; or (ii) Company or any of its Subsidiaries shall be unable, or shall
fail generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the Board of Directors of company of any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise
authorize any action to approve any of the actions referred to in clause (i)
above or this clause (ii); or
7.8 JUDGMENTS AND ATTACHMENTS. Any money judgment, order, award, decree, writ or
warrant of attachment or similar order or process involving (i) in any
individual case an amount in excess of $250,000 or (ii) in the aggregate at any
time an amount in excess of $250,000 (in either case not adequately covered by
insurance as to which a solvent and unaffiliated insurance company has
acknowledged coverage) shall be entered or filed against Company or any of its
Subsidiaries or any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 15 days (or in any event later
than five days prior to the date of any proposed sale thereunder); or
7.9 DISSOLUTION. Any order, judgment or decree shall be entered against Company
or any of its Subsidiaries for the dissolution or split up of Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
7.10 EMPLOYEE BENEFIT PLANS. There shall occur one or more ERISA Events which
individually or in the aggregate results in or might reasonably be expected to
result in liability of
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Company, any of its Subsidiaries or any of their respective ERISA Affiliates in
excess of $150,000 during the term of this Agreement; or there shall exist an
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), which exceeds $150,000; or
7.11 MATERIAL ADVERSE EFFECT. Any event or change shall occur that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect; or
7.12 CHANGE IN CONTROL. (i) Company shall cease to own, directly or indirectly,
beneficially or of record at least that percentage of the Capital Stock of its
Subsidiaries that is owned by Company or its Subsidiaries on the Restatement
Closing Date; or (ii) any Person or any two or more Persons acting in concert
(other than the Zaucha Parties) shall have acquired beneficial ownership (within
the meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Exchange Act), directly or indirectly, of Securities of Company (or other
Securities convertible into such Securities) representing 30% or more of the
combined voting power of all Securities of Company entitled to vote in the
election of directors (other than Securities having such power only by reason of
the happening of a contingency unless such contingency occurs); or (iii) on or
after the Restatement Closing Date, the Board of Directors of Company shall not
consist of a majority of Continuing Directors; or (iv) Thomas Zaucha shall cease
for any reason whatsoever, to be an executive officer of Company and
continuously perform his duties as of the Restatement Closing Date as such
officer, unless a successor satisfactory to Agent and Requisite Lenders shall
have replaced him in such capacity within 30 days after such cessation; or
7.13 INVALIDITY OF SUBSIDIARY GUARANTY; FAILURE OF SECURITY; REPUDIATION OF
OBLIGATIONS. At any time after the execution and delivery thereof; (A) the
Subsidiary Guaranty for any reason, other than the satisfaction in full of all
Obligations, shall, as to one or more Loan Parties, in whole or in part (i)
cease to be in full force and effect (other than in accordance with its terms)
or (ii) be declared to be null and void, (B) any Collateral Document shall, as
to one or more Loan Parties, in whole or in part, (i) cease to be in full force
and effect (other than by reason of a release of Collateral thereunder in
accordance with the terms hereof or thereof, the satisfaction in full of the
Obligations or any other termination of such Collateral Document in accordance
with the terms hereof or thereof) or (ii) be declared null and void, or (C)
Agent shall not have or shall cease to have a valid and perfected First Priority
Lien in any Collateral purported to be covered thereby, having a fair market
value in the reasonable judgment of Agent, individually or in the aggregate,
exceeding $100,000, in each case for any reason other than the failure of Agent
or any Lender to take any action within its control, or (D) any Loan Party shall
contest the validity or enforceability of any Loan Document in writing or deny
in writing that it has any further liability under any Loan Document to which it
is a party; or
7.14 LOSS OF APPROVAL. Any Approval shall have expired, or been revoked or
terminated, suspended, limited or been amended in any manner, or Company or any
of its Subsidiaries or any of their respective Healthcare Facilities shall cease
to be qualified to participate in any Federal or
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state program for the funding and administration of payments for rehabilitation
therapy and related services which relate to the business of Company or any of
its Subsidiaries or any of their respective Healthcare Facilities or Company or
any of its Subsidiaries or any of their respective Facilities shall become the
subject of any investigation or audit by any governmental authority adverse to
Company or any of its Subsidiaries or any of the respective Facilities, which,
in any such case, whether individually or in the aggregate with any other such
expirations, revocations, terminations, suspensions, limitations, amendments,
cessation of qualification, investigations or audits, could reasonably be
expected to have a Material Adverse Effect; or Company or any of its
Subsidiaries or any of their respective Healthcare Facilities shall have
received any notice of overpayment;
7.15 CASH MANAGEMENT SYSTEM. Failure by any Loan Party to comply with any term
or provision of the Cash Management System.
THEN (i) upon the occurrence of any Event of Default described in Section 7.6 or
7.7, each of (a) the unpaid principal amount of and any accrued interest on the
Loans and (b) all other Obligations shall automatically become immediately due
and payable, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by Company, and (ii) upon the
occurrence and during the continuation of any other Event of Default, Agent
shall, upon the written request or with the written consent of Requisite
Lenders, by written notice to Company, declare all or any portion of the amounts
described in clauses (a) and (b) above to be, and the same shall forthwith
become, immediately due and payable, and the obligation of each Lender to make
any Loan shall thereupon terminate.
SECTION 8. AGENT
8.1 APPOINTMENT.
A. APPOINTMENT OF AGENTS. Each Lender hereby appoints Cerberus as Agent
and The Chase Manhattan Bank as Collateral Agent hereunder and under the other
Loan Documents as successor to IBJS and each Lender hereby authorizes Agent,
Collateral Agent and any other Lender Agents to execute and deliver the Loan
Documents and to act as its agent in accordance with the terms of this Agreement
and the other Loan Documents. Agent, Collateral Agent and any other Lender Agent
agree to act upon the express conditions contained in this Agreement and the
other Loan Documents, as applicable. The provisions of this Section 8 are solely
for the benefit of Lender Agents and Lenders. The Company shall have no rights
as a third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement, Lender Agents shall act solely as an
agent of Lenders and do not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Company or any
of its Subsidiaries.
B. APPOINTMENT OF SUPPLEMENTAL COLLATERAL AGENTS. Lender Agents shall
have the right at any time and from time to time to appoint any Person as a
separate trustee, co-trustee, collateral agent or collateral co-agent or
sub-agent (any such additional Person being referred to herein individually as a
"SUPPLEMENTAL COLLATERAL AGENT" and collectively as "SUPPLEMENTAL
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COLLATERAL AGENTS") to have any of the rights or perform any of the duties of
Agent hereunder or under any other Loan Document.
8.2 POWERS AND DUTIES; GENERAL IMMUNITY.
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes each
Lender Agent to take such action on such Lender's behalf and to exercise such
powers, rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to Lender Agent by the terms hereof and
thereof, together with such powers, rights and remedies as are reasonably
incidental thereto. Lender Agents shall have only those duties and
responsibilities that are expressly specified in this Agreement and the other
Loan Documents. Lender Agents may exercise such powers, rights and remedies and
perform such duties by or through its agents or employees. No Lender Agent shall
have, by reason of this Agreement or any of the other Loan Documents, a
fiduciary relationship in respect of any Lender; and nothing in this Agreement
or any of the other Loan Documents, expressed or implied, is intended to or
shall be so construed as to impose upon any Lender Agent any obligations in
respect of this Agreement or any of the other Loan Documents except as expressly
set forth herein or therein.
B. COLLATERAL AGENT. Notwithstanding any other term of this Agreement
or Loan Document to the contrary, but subject to this Section 8.2, the
Collateral Agent shall not exercise any discretion under or make any decision to
be made under any Loan Document. If a Loan Document requires the Collateral
Agent to determine whether to take an action or refrain from taking an action,
the Collateral Agent shall (i) notify Agent in writing in advance thereof and
(ii) follow Agent's instructions with respect thereto (unless otherwise directed
by the Required Lenders pursuant to Section 8.6). The Collateral Agent agrees to
keep the Agent informed as to (i) any material change in the Collateral or in
the security interests therein or the perfection thereof of which a Responsible
Officer of the Collateral Agent becomes aware, (ii) any Event of Default or
Potential Event of Default of which a Responsible Officer of the Collateral
Agent becomes aware and (iii) any other matter or information reasonably
requested by the Agent within the Collateral Agent's actual knowledge, provided,
however, the Collateral Agent shall have no duty or responsibility, either
initially or continually, to make any investigation, evaluation or appraisal
regarding the Collateral, the Loans, any Loan Document or Collateral Document,
the Company or any Subsidiary or to monitor the Company's, any Subsidiary's or
any other party's performance or non-performance on any Loan Document or
Collateral Document.
C. NO RESPONSIBILITY FOR CERTAIN MATTERS. No Lender Agent shall be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by Lender Agent to Lenders or by or on
behalf of Company to Agent or any Lender in connection with the Loan Documents
and the transactions contemplated thereby or for the financial
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condition or business affairs of Company or any other Person liable for the
payment of any Obligations, nor shall any Lender Agent be required to ascertain
or inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Loans or as to the existence or possible
existence of any Event of Default or Potential Event of Default. Anything
contained in this Agreement to the contrary notwithstanding, no Lender Agent
shall have any liability arising from confirmations of the amount of outstanding
Loans.
D. EXCULPATORY PROVISIONS.
(a) No Lender Agent nor any of its officers, directors,
employees or agents shall be liable to Lenders for any action taken or
omitted by any Lender Agent under or in connection with any of the Loan
Documents except to the extent caused by such Lender Agent's gross
negligence or willful misconduct. The Agent and the Collateral Agent
may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct or any such agents or
attorneys-in-fact selected by it except to the extent such selection is
the result of gross negligence or willful misconduct of the Agent or
the Collateral Agent, as the case may be.
(b) Each Lender Agent shall be entitled to refrain from any
act or the taking of any action (including the failure to take an
action) in connection with this Agreement or any of the other Loan
Documents or from the exercise of any power, discretion or authority
vested in it hereunder or thereunder (i) unless and until with respect
to the Agent, Agent shall have received instructions in respect thereof
from Requisite Lenders (or such other Lenders as may be required to
give such instructions under Section 9.6) and with respect to the
Collateral Agent, the Collateral Agent shall have received instructions
in respect thereof from the Agent and, upon receipt of such
instructions from Requisite Lenders (or such other Lenders, as the case
may be), each Lender Agent shall be entitled to act or (where so
instructed) refrain from acting, or to exercise such power, discretion
or authority, in accordance with such instructions or (ii) if such
instruction is, in the Agent's or the Collateral Agent's judgement,
contrary to any applicable provisions of law, or any Loan Document.
Without limiting the foregoing, no Lender shall have any right of
action whatsoever against the Agent or the Collateral Agent as a result
of the Agent or Collateral Agent acting or refraining from acting under
this Agreement or any of the Loan Documents in accordance with the
instructions of the Lenders, Required Lenders or Agent (as applicable).
Without prejudice to the generality of the foregoing, (i) each Lender
Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it
to be genuine and correct and to have been signed or sent by the proper
person or persons, and shall be entitled to rely and shall be protected
in relying on opinions and judgments of attorneys (who may be attorneys
for Company and its Subsidiaries), accountants, experts and other
professional advisors selected by it; and (ii) no Lender shall have any
right of action whatsoever against any Lender Agent as a result of such
Lender Agent acting or (where
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so instructed) refraining from acting under this Agreement or any of
the other Loan Documents in accordance with the instructions of
Requisite Lenders (or such other Lenders as may be required to give
such instructions under Section 9.6) or in accordance with the
instructions of Agent.
(c) The Agent and the Collateral Agent shall not be liable for
any allocation or distribution of payments made by it to Lenders in
good faith pursuant hereto, and if any such allocation or distribution
is subsequently determined to have been made in error, the sole
recourse of any Lender to whom payment was due but not made shall be to
recover from the other Lenders any payment in excess of the amount to
which such other Lenders are determined to have been entitled. Each
other Lender agrees to pay over such excess.
(d) Except for liability resulting from the Agent's or the
Collateral Agent's own recklessness or willful misconduct, the Lenders
hereby exonerate and release the Agent and Collateral Agent now and
hereafter from any existing or future obligation or liability to the
Lenders, express or implied, for any (i) loss of, depreciation of, or
failure to realize upon, the Collateral; (ii) failure to collect or
receive payment of sums owing to the Loan; (iii) mistake, omission or
error in judgement in (A) passing upon, making or accepting any Loan
Documents in respect of the Collateral, or (B) making or failing to
make any examinations, appraisals, audits or reviews of the affairs of
the Borrower and its Affiliates and the Collateral; or (iv) any other
action taken or omitted to be taken by it hereunder. IN NO EVENT SHALL
THE AGENT OR COLLATERAL AGENT BE OR BECOME LIABLE UNDER THIS AGREEMENT
OR IN RESPECT OF ANY ACT, OMISSION OR EVENT RELATING TO THE SUBJECT
MATTER HEREOF, ON ANY THEORY OF LIABILITY, FOR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES.
(e) As to any matters not expressly provided for by this
Agreement or the Loan Documents, the Agent and the Collateral Agent
shall in all cases be fully protected in acting, or in refraining from
acting, hereunder in accordance with instructions signed by the
Lenders, Required Lenders or Agent, as applicable, and such
instructions and any action taken or failure to act pursuant thereto
shall be binding on all of the Lenders.
(f) Neither Lender Agent shall have any duty (A) to see to any
recording, filing, or depositing of this Agreement, any Loan Document
or any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to see to the
maintenance of any such recording or filing or depositing or to any
rerecording, refiling or redepositing of any thereof, (B) to see to any
insurance or (C) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any lien or encumbrance of
any kind owing with respect to, assessed or levied against, any part of
the Collateral.
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E. DEFAULT NOTICES; ACTION UPON DEFAULT. Neither the Agent nor the
Collateral Agent shall be deemed to have knowledge of the occurrence of an Event
of Default unless the Agent or Collateral Agent (as applicable) has received a
written notice of such Event of Default from a Buyer or from a Loan Party.
F. LENDER AGENTS ENTITLED TO ACT AS LENDER. The agency hereby created
shall in no way impair or affect any of the rights and powers of, or impose any
duties or obligations upon, any Lender Agent in its individual capacity as a
Lender hereunder. With respect to its participation in the Loans, each Lender
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include each Agent
having an interest in the Loans in its individual capacity. Each Lender Agent
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of banking, trust, financial advisory or other business with Company
or any of its Affiliates as if it were not performing the duties specified
herein, and may accept fees and other consideration from Company for services in
connection with this Agreement and otherwise without having to account for the
same to Lenders.
8.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
CREDITWORTHINESS. Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the making of the Loans hereunder and that
it has made and shall continue to make its own appraisal of the creditworthiness
of Company and its Subsidiaries. No Lender Agent shall have any duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Lenders or to provide any
Lender with any credit or other information with respect thereto, whether coming
into its possession before the making of the Loans or at any time or times
thereafter, and no Lender Agent shall have any responsibility with respect to
the accuracy of or the completeness of any information provided to Lenders.
8.4 RIGHT TO INDEMNITY. Each Lender, in proportion to its Pro Rata Share,
severally agrees to indemnify each Lender Agent, to the extent that such Lender
Agent shall not have been reimbursed by Company, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or asserted
against Lender Agent in exercising its powers, rights and remedies or performing
its duties hereunder or under the other Loan Documents or otherwise in its
capacity as Lender Agent in any way relating to or arising out of this Agreement
or the other Loan Documents; provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Lender Agent's
gross negligence or willful misconduct. If any indemnity furnished to Lender
Agent for any purpose shall, in the opinion of Agent, be insufficient or become
impaired, such Lender Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished.
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8.5 SUCCESSOR AGENT. Any Lender Agent may resign at any time by giving 30 days'
prior written notice thereof to Lenders and Company, and any Lender Agent may be
removed at any time with or without cause by an instrument or concurrent
instruments in writing delivered to Company and Lender Agents and signed by
Requisite Lenders; provided however, no Collateral Agent may resign or be
removed unless and until a successor has been appointed and accepts as successor
Collateral Agent and becomes party to the Collateral Documents. Unless a
successor Collateral Agent shall have been appointed and have accepted
appointment within 60 days after the giving of such notice of resignation, the
resigning Collateral Agent may petition any court of competent jurisdiction for
the appointment of a successor collateral agent. Upon any such notice of
resignation or any such removal, Requisite Lenders shall have the right, upon
five Business Days' notice to Company, to appoint a one or more successor Lender
Agents. Upon the acceptance of any appointment as Lender Agent hereunder by a
successor Lender Agent, that successor Lender Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring or removed Lender Agent and the retiring or removed Lender Agent shall
be discharged from its duties and obligations under this Agreement. After any
retiring or removed Lender Agent's resignation or removal hereunder as Lender
Agent, the provisions of this Section 8 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Lender Agent under this
Agreement.
8.6 COLLATERAL DOCUMENTS AND GUARANTIES. Each Lender hereby further authorizes
Agent and Collateral Agent, on behalf of and for the benefit of Lenders, to
enter into each Collateral Document as secured party and to be the agents for
and representative of Lenders under the Subsidiary Guaranty, and each Lender
agrees to be bound by the terms of each Collateral Document and the Subsidiary
Guaranty; provided that Agent and Collateral Agent shall not (i) enter into or
consent to any material amendment, modification, termination or waiver of any
provision contained in any Collateral Document or the Subsidiary Guaranty or
(ii) release any Collateral (except as otherwise expressly permitted or required
pursuant to the terms of this Agreement or the applicable Collateral Document),
in each case without the prior consent of Requisite Lenders (or, if required
pursuant to Section 9.6, all Lenders) or the Agent (as applicable); provided
further, however, that, without further written consent or authorization from
Lenders, Agent may execute any documents or instruments necessary to (a) release
any Lien encumbering any item of Collateral that is the subject of a sale or
other disposition of assets permitted by this Agreement or to which Requisite
Lenders or the Agent (as applicable) have otherwise consented or (b) release any
Subsidiary Guarantor from the Subsidiary Guaranty if all of the capital stock of
such Subsidiary Guarantor is sold to any Person (other than an Affiliate of
Company) pursuant to a sale or other disposition permitted hereunder or to which
Requisite Lenders or the Agent (as applicable) have otherwise consented.
Anything contained in any of the Loan Documents to the contrary notwithstanding,
Company, the Loan Parties, Agent, Collateral Agent and each Lender hereby agree
that (X) no Lender shall have any right individually to realize upon any of the
Collateral under any Collateral Document or to enforce the Subsidiary Guaranty,
it being understood and agreed that all powers, rights and remedies under the
Collateral Documents and the Subsidiary Guaranty may be exercised solely by
Agent and/or Collateral Agent for the benefit of Lenders in accordance with the
terms thereof, and (Y) in the event of a foreclosure by Agent or Collateral
Agent on any of the Collateral
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pursuant to a public or private sale, Agent or any Lender may be the purchaser
of any or all of such Collateral at any such sale and Agent, as agent for and
representative of Lenders (but not any Lender or Lenders in its or their
respective individual capacities unless Requisite Lenders shall otherwise agree
in writing) and Collateral Agent, as agent for Agent (as applicable) shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public
sale, to use and apply any of the Obligations as a credit on account of the
purchase price for any collateral payable by agent at such sale.
8.7 APPLICATION OF PROCEEDS. If, following the occurrence of an Event of
Default, any Lender Agent receives any moneys, proceeds or other amounts
("COLLATERAL PROCEEDS") paid to it in respect of the Collateral or pursuant to
the Loan Documents, whether pursuant to enforcement proceedings with respect to
the Collateral or otherwise, all such Collateral Proceeds and all other payments
received from or for the account of the Company or any Loan Party shall be
applied first to the payment of Expenses incurred by Lender Agents and any other
sums due to the Agent or Collateral Agent or any other Lender Agent pursuant to
this Agreement, or any Loan Document, and then shall be distributed to the
Lenders, in the following order, unless such Collateral Proceeds or other
payments are required to be otherwise applied by agreement, or applicable law:
(a) to unpaid Expenses due to the Lenders; (b) to accrued interest on the Loans;
(c) to the unpaid principal amount of the Loans; and (d) to all other
Obligations.
SECTION 9. MISCELLANEOUS
9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS.
A. GENERAL. Subject to Section 9.1B, each Lender shall have the right
at any time to (i) sell, assign or transfer to any Eligible Assignee, or (ii)
sell participations to any Person in, all or any part of the Loan made by it or
any other interest herein or in any other Obligations owed to it; provided that
no such sale, assignment, transfer or participation shall, without the consent
of Company, require Company to file a registration statement with the Securities
and Exchange Commission or apply to qualify such sale, assignment, transfer or
participation under the securities law of any state. Except as otherwise
provided in this section 9, no Lender shall, as between Company and such Lender,
be relieved of any of its obligations hereunder as a result of any sale,
assignment or transfer of, or any granting of participations in, all or any part
of the Loan or other Obligations owed to such Lender.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Each Loan or other
obligation may (a) be assigned in any amount to another Lender, or to
an Affiliate of the assigning Lender or another Lender, with the giving
of notice to Company and Agent or (b) be assigned in an aggregate
amount of not less than $3,000,000 (or such lesser amount as shall
constitute the aggregate amount of the Loan and other Obligations of
the assigning Lender) to any other Eligible Assignee with the consent
of Agent (which consent shall
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not be unreasonably withheld or delayed provided that on the date of
such assignment if such other lender or Affiliate of the assigning
Lender is a non-U.S. Lender, it shall deliver evidence of exemption
from United States federal income tax withholding). To the extent of
any such assignment in accordance with either clause (a) or (b) above,
the assigning Lender shall be relieved of its obligations with respect
to its Loan or other obligations or the portion thereof so assigned.
The parties to each such assignment shall execute and deliver to the
Agent, for its acceptance an Assignment Agreement, together with a
processing fee of $3,000 and such forms, certificates or other
evidence, if any, with respect to United States federal income tax
withholding matters as the assignee under such Assignment Agreement may
be required to deliver to Agent pursuant to Section 2.6B(iii)(a). Upon
such execution, delivery and acceptance from and after the effective
date specified in such Assignment Agreement, (y) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and (z) the assigning Lender thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant
to such Assignment Agreement, relinquish its rights (other than any
rights which survive the termination of this Agreement under Section
9.9B) and be released from its obligations under this Agreement (and,
in the case of an Assignment Agreement covering all or the remaining
portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto). The assigning
Lender shall, upon the effectiveness of such assignment or as promptly
thereafter as practicable, surrender its Note to Agent for
cancellation, and thereupon new Notes shall be issued to the assignee
and/or to the assigning Lender, substantially in the form of EXHIBIT
2.1B annexed hereto and with appropriate insertions, to reflect the
outstanding Loans of the assignee and/or the assigning Lender.
(ii) Acceptance by Agent. Upon its receipt of an Assignment
Agreement executed by an assigning Lender and an assignee representing
that it is an Eligible Assignee, together with the processing fee
referred to in Section 9.1B(i) and any forms, certificates or other
evidence with respect to United States federal income tax withholding
matters that such assignee may be required to deliver to Agent pursuant
to Section 2.6B(iii)(a), Agent shall, if Agent has consented to the
assignment evidenced thereby (to the extent such consent is required
pursuant to Section 9.1B(i)), (a) accept such Assignment Agreement by
executing a counterpart thereof as provided therein (which acceptance
shall evidence any required consent of Agent to such assignment) and
(b) give prompt notice thereof to Company. Agent shall maintain a copy
of each Assignment Agreement delivered to and accepted by it as
provided in this Section 9.1B(ii).
C. PARTICIPATIONS. The holder of any participation, other an Affiliate
of the Lender granting such participation, shall not be entitled to require such
Lender to take or omit to take any action hereunder except action directly
affecting (i) the extension of the scheduled final maturity date
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of any Loan allocated to such participation or (ii) a reduction of the principal
amount of or the rate of interest payable on any Loan allocated to such
participation, and all amounts payable by Company hereunder (including amounts
payable to such Lender, pursuant to Section 2.6) shall be determined as if such
Lender had not sold such participation. Company and each Lender hereby
acknowledge and agree that, solely for purposes of Sections 9.4 and 9.5, (a) any
participation will give rise to a direct obligation of Company to the
participant and (b) the participant shall be considered to be a "Lender".
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments
and participations permitted under the foregoing provisions of this Section 9.1,
any Lender may assign and pledge all or any portion of its Loan, the other
Obligations owed to such Lender, and its Note to any Federal Reserve Bank as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between Company and such Lender, be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank be considered to
be a "Lender" or be entitled to require the assigning Lender to take or omit to
take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to Section 9.19.
F. REPRESENTATIONS OF LENDERS. Each Lender listed on the signature
pages hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loan; and (iii) that it will
make its Loan for its own account in the ordinary course of its business and
without a view to distribution of such Loan within the meaning of the Securities
Act or the Exchange Act or other federal securities laws (it being understood
that, subject to the provisions of this Section 9.1, the disposition of such
Loan or any interests therein shall at all times remain within it exclusive
control). Each Lender that becomes a party hereto pursuant to an Assignment
Agreement shall be deemed to agree that the representations and warranties of
such Lender contained in Section 5 of such Assignment Agreement are incorporated
by this reference.
9.2 EXPENSES. Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and expenses of preparation of the Loan Documents and any consents,
amendments, waivers or other modifications thereto incurred by the Lender Agents
or any Lender; (ii) all costs of furnishing all opinions by counsel for Company
(including any opinions requested by Lenders as to any legal matters arising
hereunder) and of Company's performance of and compliance with all agreements
and conditions on its part to be performed or complied with under this Agreement
and the other Loan Documents including with respect to confirming compliance
with environmental, insurance and solvency requirements; (iii) the reasonable
fees, expenses and disbursements of all counsel to Lender Agents (including any
local counsel and allocated costs of internal counsel) in connection with the
negotiation, preparation,
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execution and administration of the Loan Documents and any consents, amendments,
waivers or other modifications thereto and any other documents or matters
requested by Company; (iv) all the actual costs and expenses of creating and
perfecting Liens in favor of Lender Agents on behalf of Lenders pursuant to any
Collateral Document, including filing and recording fees, expenses and taxes,
stamp or documentary taxes, search fees, title insurance premiums, and
reasonable fees, expense and disbursements of counsel to Agent and of counsel
providing any opinions that any Lender Agent or Requisite Lenders may request in
respect of the Collateral Documents or the Liens created pursuant thereto; (v)
all the actual costs and reasonable expenses (including the reasonable fees,
expenses and disbursements of any auditors, accountants or appraisers and any
environmental or other consultants, advisors and agents employed or retained by
any Lender Agent or its counsel) of examining the books, records and accounts of
the Company and/or its Subsidiaries and of obtaining and reviewing any
appraisals, environmental audits or reports and any audits or reports with
respect to accounts receivable of Company and its Subsidiaries, in each case, as
provided for hereunder; (vi) all the actual costs and reasonable expenses in
respect of the custody or preservation of any of the Collateral and the
maintenance of collateral accounts (including without limitation, custodial fees
and fees of banks and/or other financial institutions for maintaining the
Pledged Accounts); (vii) all other actual and reasonable costs and expenses
incurred by Lender Agents in connection with the negotiation, preparation and
execution of the Loan Documents and any consents, amendments, waivers or other
modifications thereto and the transactions contemplated thereby; and (viii)
after the occurrence of an Event of Default or a Potential Event of Default, all
costs and expenses, including attorneys' fees (including allocated costs of
internal counsel) and costs of settlement, incurred by Lender Agents and Lenders
in enforcing any Obligations of or in collecting any payments due from any Loan
Party hereunder or under the other Loan Documents by reason of such Event of
Default or Potential Event of Default (including in connection with the sale of,
collection from, or other realization upon any of the Collateral or the
enforcement of the Subsidiary Guaranty) or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or pursuant to any reorganization, insolvency or
bankruptcy proceedings, including post-petition expenses relating in any way to
the administration, monitoring or any other aspect of any bankruptcy case (the
foregoing all collectively referred to as "EXPENSES").
9.3 INDEMNITY. In addition to the payment of expenses pursuant to Section 9.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend (subject to Indemnities' selection of counsel),
indemnify, pay and hold harmless Agent, Collateral Agent and Lenders, and the
officers, directors, employees, agents and affiliates of Agent, Collateral Agent
and Lenders (collectively called the "INDEMNITEES"), from and against any and
all Indemnified Liabilities (as hereinafter defined); provided that Company
shall not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise solely
from the gross negligence or willful misconduct of that Indemnitee as determined
by a final judgment of a court of competent jurisdiction.
As used herein, "INDEMNIFIED LIABILITIES" means, collectively, any
and all liabilities, obligations, losses, damages (including natural resource
damages), penalties, actions, judgments,
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suits, claims (including Environmental Claims), costs (including the costs of
any investigation, study, sampling, testing, abatement, cleanup, removal,
remediation or other response action necessary to remove, remediate, clean up or
abate any Hazardous Materials Activity), expenses and disbursements of any kind
or nature whatsoever (including the reasonable fees and disbursements of counsel
for Indemnitees including without limitation in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto, and any fees or expenses incurred by Indemnitees in
enforcing this indemnity), whether direct, indirect or consequential and whether
based on any federal, state or foreign laws, statutes, rules or regulations
(including securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of (i) this Agreement or
the other Loan Documents or the transactions contemplated hereby or thereby
(including Lenders' agreement to make or maintain the Loans hereunder or the use
or intended use of the proceeds thereof, or any enforcement of any of the Loan
Documents (including any sale of, collection from, or other realization upon any
of the Collateral or the enforcement of the Subsidiary Guaranty), (ii) the
statements contained in the commitment letter delivered by any Lender to Company
with respect thereto, or (iii) any Environmental Claim or any Hazardous
Materials Activity relating to or arising from, directly or indirectly, any past
or present activity, operation, land ownership, or practice of Company or any of
its Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and
hold harmless set forth in this Section 9.3 may be unenforceable in whole or in
part because they are violative of any law or public policy, Company shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them.
9.4 SET-OFF; SECURITY INTEREST IN DEPOSIT ACCOUNTS. In addition to any rights
now or hereafter granted under applicable law and not by way of limitation of
any such rights, upon the occurrence of any Event of Default each Lender is
hereby authorized by Company at any time or from time to time, without notice to
Company or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and to apply any and all deposits (general or
special, including Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by that Lender to or for the credit or
the account of Company against and on account of the obligations and liabilities
of Company to that Lender under this Agreement and the other Loan Documents,
including all claims of any nature or description arising our of or connected
with this Agreement or any other Loan Document, irrespective of whether or not
(i) that Lender shall have made any demand hereunder or (ii) the principal of or
the interest on the Loans or any other amounts due hereunder shall have become
due and payable pursuant to Section 7 and although said obligations and
liabilities, or any of them, may be contingent or unmatured. Company hereby
further grants to Agent and each Lender a security interest in all deposits and
accounts maintained with Agent or such Lender as security for the Obligations.
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9.5 RATABLE SHARING. Lenders hereby agree among themselves that if any of them
shall, whether by voluntary payment (other than a voluntary prepayment of Loans
made and applied in accordance with the terms of this Agreement), by realization
upon security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, fees and other
amounts then due and owing to that Lender hereunder or under the other Loan
Documents (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender) which is
greater than the proportion received by any other Lender in respect of the
Aggregate Amounts Due to such other Lender, then the Lender receiving such
proportionately greater payment shall (i) notify Agent and each other Lender of
the receipt of such payment and (ii) apply a portion of such payment to purchase
participations (which it shall be deemed to have purchased from each seller of a
participation simultaneously upon the receipt by such seller of its portion of
such payment) in the Aggregate Amounts Due to the other Lenders so that all such
recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion
to the Aggregate Amounts Due to them; provided that if all or part of such
proportionately greater payment received by such purchasing Lender is thereafter
recovered from such Lender upon the bankruptcy or reorganization of Company or
otherwise, those purchases shall be rescinded and the purchase prices paid for
such participations shall be returned to such purchasing Lender ratably to the
extent of such recovery, but without interest. Company expressly consents to the
foregoing arrangement and agrees that any holder of a participation so purchased
may exercise any and all rights of banker's lien, set-off or counterclaim with
respect to any and all monies owing by Company to that holder with respect
thereto as fully as if that holder were owed the amount of the participation
held by that holder.
9.6 AMENDMENTS AND WAIVERS. No amendment, modification, termination or waiver of
any provision of this Agreement or of the Notes, and no consent to any departure
by Company therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders; provided that any such amendment,
modification, termination, waiver or consent which: reduces the principal amount
of any of the Loans; changes in any manner the definition of "Pro Rata Share" or
the definition of "Requisite Lenders"; changes in any manner any provision of
this Agreement which, by its terms, expressly requires the approval or
concurrence of all Lenders; postpones the scheduled final maturity date (but not
the date of any scheduled installment of principal) of any of the Loans;
postpones the date on which any interest or any fees are payable; decreases the
interest rate borne by any of the Loans (other than any waiver of any increase
in the interest rate applicable to any of the Loans pursuant to Section 2.2C) or
the amount of any fees payable hereunder; releases any Lien granted in favor of
the Agent or Collateral Agent with respect to any material portion of the
Collateral or releases any material Subsidiary Guarantor from its obligations
under the Subsidiary Guaranty, in each case other than in accordance with the
terms of the Loan Documents; or changes in any manner the provisions contained
in Section 7.1 or this Section 9.6 shall be effective only if evidenced by a
writing signed by or on behalf of all Lenders. In addition, (i) any amendment,
modification, termination or waiver of any of the provisions contained in
Section 3 shall be effective only if evidenced by a writing signed by or on
behalf of Agent, Collateral Agent and Requisite
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Lenders, (ii) no amendment, modification, termination or waiver of any provision
of any Note shall be effective without the written concurrence of the Lender
which is the holder of that Note, and (iii) no amendment, modification,
termination or waiver of any provision of Section 8 or of any other provision of
this Agreement which, by its terms, expressly requires the approval or
concurrence of Agent and the Collateral Agent shall be effective without the
written concurrence of Agent and the Collateral Agent. Agent and the Collateral
Agent may, but shall have no obligation to, with the concurrence of any Lender,
execute amendments, modifications, waivers or consents on behalf of that Lender.
Any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given. No notice to or demand on Company
in any case shall entitle Company to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
of consent effected in accordance with this Section 9.6 shall be binding upon
each Lender at the time outstanding, each future Lender and, if signed by
Company, on Company.
9.7 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of an Event of Default or Potential Event of Default if
such action is taken or condition exists.
9.8 NOTICES. Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile (so long as such
notice sent by telefacsimile is followed within two Business Days by a notice
sent by another method specified hereunder) or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile or telex, or three Business Days
after depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Agent and Collateral Agent shall not be
effective until received. For the purposes hereof, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof or (i) as to Company, Agent and Collateral Agent, such other address as
shall be designated by such Person in a written notice delivered to the other
parties hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Agent and Collateral
Agent.
9.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in Sections 2.6, 9.2 and 9.3 and
the agreements of Lenders set forth in Sections 8.2C, 8.4 and 9.5 shall survive
the payment of the Loans and the termination of this Agreement.
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9.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay
on the part of Agent, Collateral Agent or any Lender in the exercise of any
power, right or privilege hereunder or under any other Loan Document shall
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other power, right or privilege. All rights and remedies existing under this
Agreement and the other Loan Documents are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
9.11 MARSHALLING: PAYMENTS SET ASIDE. Neither Agent, Collateral Agent nor any
Lender shall be under any obligation to marshal any assets in favor of Company
or any other party or against or in payment of any or all of the Obligations. To
the extent that Company makes a payment or payments to Agent, Collateral Agent
or Lenders (or to Agent or the Collateral Agent for the benefit of Lenders), or
Agent, Collateral Agent or Lenders enforce any security interests or exercise
their rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, any other state
or federal law, common law or any equitable cause, then, to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor or related thereto, shall be revived
and continued in full force and effect as if such payment or payments had not
been made or such enforcement or setoff had not occurred.
9.12 SEVERABILITY. In case any provision in or obligation under this Agreement
or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
9.13 OBLIGATIONS SEVERAL: INDEPENDENT NATURE OF LENDERS' RIGHTS. The obligations
of Lenders hereunder are several and no Lender shall be responsible for the
obligations of any other Lender hereunder. Nothing contained herein or in any
other Loan Document, and no action taken by Lenders pursuant hereto or thereto,
shall be deemed to constitute Lenders as a partnership, an association, a joint
venture or any other kind of entity. The amounts payable at any time hereunder
to each Lender shall be a separate and independent debt, and each Lender shall
be entitled to protect and enforce its rights arising out of this Agreement and
it shall not be necessary for any other Lender to be joined as an additional
party in any proceeding for such purpose.
9.14 HEADINGS. Section and Section headings in this Agreement are included
herein for convenience or reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
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9.15 APPLICABLE LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
9.16 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns and shall inure to the
benefit of the partes hereto and the successors and assigns of Lenders (it being
understood that Lenders' rights of assignment are subject to Section 9.1).
Neither Company's rights or obligations hereunder nor any interest therein may
be assigned or delegated by Company without the prior written consent of all
Lenders.
9.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY AND/OR EACH
OTHER LOAN PARTY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY
EXECUTING AND DELIVERING THIS AGREEMENT, COMPANY AND EACH OTHER LOAN PARTY, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO COMPANY AND EACH
OTHER LOAN PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SECTION 9.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III)
ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER
COMPANY AND EACH OTHER LOAN PARTY IN ANY SUCH PROCEEDING IN
ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING
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PROCEEDINGS AGAINST COMPANY AND EACH OTHER LOAN PARTY IN THE
COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 9.17
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND
ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK
GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
9.18 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT AND EACH OTHER LOAN PARTY
HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF
THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING
ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including contract claims, tort claims, breach of
duty claims and all other common law and statutory claims. Each party hereto
acknowledges that this waiver is a material inducement to enter into a business
relationship, that each has already relied on this waiver in entering into this
Agreement, and that each will continue to rely on this waiver in their related
future dealings. Each party hereto further warrants and represents that it has
reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SECTION 9.18 AND EXECUTED BY EACH OF THE PARTIES HERETO),AND
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In any event
of litigation, this Agreement may be filed as a written consent to a trial by
the court.
9.19 CONFIDENTIALITY. Each Lender shall hold all non-public information obtained
pursuant to the requirements of this Agreement which has been identified as
confidential by Company in accordance with such Lender's customary procedures
for handling confidential information of this nature and in accordance with safe
and sound banking practices, it being understood and agreed by Company that in
any event a Lender may make disclosures to Affiliates of such Lender or
disclosures reasonably required by any bona fide assignee, transferee or
participant in connection with the contemplated assignment or transfer by such
Lender of its Loan or any participations therein or disclosures required or
requested by any governmental agency or representative thereof or pursuant to
legal process; provided that, unless specifically prohibited by applicable law
or court order, each
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Lender shall notify Company of any request by any governmental agency or
representative thereof (other than any such request in connection with any
examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure of
such information; and provided, further that in no event shall any Lender be
obligated or required to return any materials furnished by Company or any of its
Subsidiaries.
9.20 COUNTERPARTS. This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Agent of written or telephonic notification of such execution and authorization
of delivery thereof.
9.21 CONTINUITY OF LOANS AND SECURITY INTERESTS. It is the intention of each of
the parties hereto that the Original Credit Agreement be amended and restated so
as to preserve the perfection and priority of all security interests securing
indebtedness under the Original Credit Agreement and the other Loan Documents
and that all indebtedness and obligations of Company and its Subsidiaries
hereunder and thereunder shall be secured by the Collateral Documents and that
this Agreement shall not constitute a novation of the obligations and
liabilities existing under the Original Credit Agreement or be deemed to
evidence or constitute repayment of all or any portion of any such obligations
or liabilities. The parties hereto further acknowledge and agree that this
Agreement constitutes an amendment of the Original Credit Agreement made under
the terms of Section 12.1 thereof.
9.22 EFFECTIVENESS. This Agreement shall become effective upon the execution of
a counterpart hereof by each of the parties hereto and receipt by Company and
Agent of written or telephonic notification of such execution and authorization
of delivery thereof; provided that, unless and until all of the conditions set
forth in Section 3.1 have been satisfied or waived, the Original Credit
Agreement and the Loan Documents shall remain in full force and effect without
giving effect to the amendments set forth herein or the amendments to the Loan
Documents executed in connection herewith, all as if this Amended and Restated
Credit Agreement and the amendments to the Loan Documents executed in connection
herewith had never been executed and delivered.
-87-
<PAGE> 95
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
COMPANY:
Address: NORTHSTAR HEALTH SERVICES, INC.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701 By:________________________________
Attention: Thomas W. Zaucha Name:
Telephone: (724) 349-7500 Title:
Facsimile: (724) 465-3726
SUBSIDIARY
GUARANTORS:
Address: NSHS SERVICES, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 349-7500
Facsimile No.: (724) 465-3726 By:________________________________
Name:
Title:
-88-
<PAGE> 96
Address: KEYSTONE REHABILITATION
SYSTEMS, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 349-7500
Facsimile No.: (724) 465-3726 By:________________________________
Name:
Title:
Address: NORTHSTAR MEDICAL SERVICES, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 349-7500
Facsimile No.: (724) 465-3726 By:________________________________
Name:
Title:
Address: NORTHSTAR DIAGNOSTIC SERVICES, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 349-7500
Facsimile No.: (724) 465-3726 By:________________________________
Name:
Title:
-89-
<PAGE> 97
Address: VASCUSONICS INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 349-7500
Facsimile No.: (724) 465-3726 By:________________________________
Name:
Title:
Address: KEYSTONE REHABILITATION
MANAGEMENT, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 349-7500
Facsimile No.: (724) 465-3726 By:________________________________
Name:
Title:
-90-
<PAGE> 98
LENDERS:
Address: CERBERUS CAPITAL MANAGEMENT, LLC,
450 Park Avenue individually and as Agent
New York, New York 10022
Attention: Joyce Johnson-Miller
Telephone: (212) 891-2119
Facsimile: (212) 750-5212 By:________________________________
Name:
Title:
Address: BEAR STEARNS & CO.
245 Park Avenue
New York, New York 10167
Attention: Ross Weiner
Telephone: (212) 272-5831
Facsimile: (212) 272-8102 By:________________________________
Name:
Title:
-91-
<PAGE> 99
COLLATERAL AGENT:
Address: THE CHASE MANHATTAN BANK,
as Collateral Agent
450 West 33rd Street
14th Floor
New York, New York 10001
Attention: Capital Markets Fiduciary
Services, Cerberus Capital
Telephone: (212) 946-3200
Facsimile: (212) 946-8302 By:________________________________
Name:
Title:
-92-
<PAGE> 1
EXHIBIT 10.3
[RICHARDS SPEARS KIBBE & ORBE LETTERHEAD]
BY HAND
October 21, 1999
MEMORANDUM TO: Persons on the Attached Distribution List
FROM: Andrew M. Weinfeld
RE: Cerberus: Northstar Credit Agreement
In connection with the above-referenced transaction, I am enclosing the
final versions of the operative documents marked to show changes from the
previous drafts.
Please feel free to contact me if you have any questions or comments on
the enclosed documents.
A.M.W.
(Enclosures)
cc: William Q. Orbe
<PAGE> 2
RICHARDS SPEARS KIBBE & ORBE Page 2
DISTRIBUTION LIST
Jennifer Cupo
The Chase Manhattan Bank
450 West 33rd Street
14th Floor
New York, New York 10001
Maria Livanas
Thacher Proffitt & Wood
Two World Trade Center
40th Floor
New York, New York 10048
<PAGE> 1
EXHIBIT 10.4
[EXECUTION COPY]
AMENDED AND RESTATED
NOTE
New York, New York
$11,696,314.04 September 30, 1999
Northstar Health Services, Inc., a Delaware corporation (the
"Company"), for value received, promises to pay to the order of CERBERUS CAPITAL
MANAGEMENT, LLC (the "Lender"), $11,696,314.04 (ELEVEN MILLION, SIX HUNDRED AND
NINETY SIX THOUSAND, THREE HUNDRED AND FOURTEEN DOLLARS AND FOUR CENTS)
constituting the aggregate unpaid principal amount of all Loans made by the
Lender to the Company pursuant to the Credit Agreement referred to below.
The Company promises to pay the principal amount of the Loans on the
dates provided in the Credit Agreement and to pay interest on the unpaid
principal amount of the Loans on the dates and at the rate or rates provided for
in the Credit Agreement. All payments of principal and interest shall be made in
lawful money of the United States in Federal or other immediately available
funds in the manner and at the locations provided in the Credit Agreement.
This Note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of September 30, 1999, between the Company, Cerberus
Capital Management, LLC, as Agent, The Chase Manhattan Bank, as Collateral
Agent, the Lender, and certain other parties (the "Credit Agreement"). Reference
is made to the Credit Agreement for provisions for the prepayment of this Note
and the acceleration of the maturity of this Note. Terms not otherwise defined
have the meanings stated in the Credit Agreement.
This Note amends and restates in its entirety the Note dated October
20, 1995, previously executed by the Company.
The payment of the principal amount of and interest on this Note, and
the other obligations under the Loan Documents, is secured by liens on
collateral pursuant to the Collateral Documents, is guaranteed pursuant to the
Subsidiary Guaranty and is senior in right of payment to certain other
obligations of the Company pursuant to the Subordination Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW DOCTRINE, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
<PAGE> 2
NORTHSTAR HEALTH SERVICES, INC.
By:_____________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.5
[EXECUTION COPY]
AMENDED AND RESTATED COMPANY SECURITY AGREEMENT
This AMENDED AND RESTATED COMPANY SECURITY AGREEMENT dated as of
September 30, 1999, among NORTHSTAR HEALTH SERVICES, INC., a Delaware
corporation (the "Company"), CERBERUS CAPITAL MANAGEMENT, LLC (the "Agent") and
THE CHASE MANHATTAN BANK, as Collateral Agent as provided for in Section 8.1B of
the Credit Agreement referred to below (as successor collateral agent to IBJ
WHITEHALL BANK & TRUST COMPANY, formerly known as IBJ SCHRODER BANK & TRUST
COMPANY, the "Collateral Agent"), amends and restates in its entirety that
certain Security Agreement, dated as of October 20, 1995 (as amended, modified
or supplemented prior to the date hereof, the "Original Security Agreement"),
between the Company and IBJ Schroder Bank & Trust Company (the "Original
Agent").
RECITALS
A. The Company, the Original Agent and the lenders set forth on the
signature pages thereto are parties to that certain Credit Agreement, dated as
of October 20, 1995 (as amended, modified or supplemented prior to the date
hereof, the "Original Credit Agreement"), pursuant to which the Lenders agreed
to extend certain credit facilities to the Company (the "Original Loans") which
were represented by certain promissory notes (the "Original Notes"), the
proceeds of which were used (i) to refinance substantially all indebtedness of
the Company and its Subsidiaries outstanding on the date thereof, (ii) to pay
certain fees and expenses, (iii) to provide financing for the working capital
needs of the Company and its Subsidiaries and (iv) to provide a portion of the
purchase price of certain acquisitions by the Company and its Subsidiaries.
B. The Company secured all of the Obligations under the Original Credit
Agreement and under the other Loan Documents by granting to the Original Agent,
on behalf of Lenders, a first priority security interest in all of its personal
property, including, without limitation, a pledge of all of the capital stock of
each of its Subsidiaries.
C. The Original Agent now wishes to resign as agent for the Lenders and
(i) the Agent wishes to replace the Original Agent as agent for the Lenders and
(ii) the Collateral Agent wishes to replace the Original Agent as collateral
agent for the Lenders under this Agreement.
D. The Company, the Lenders, the Agent and the Original Agent have
agreed to amend and restate the Original Credit Agreement as of the date hereof
(the Original Credit Agreement, as so amended and restated being referred to
herein as the "Credit Agreement") to (i) extend the maturity of the Original
Loans on the terms set forth therein, (ii) reflect the Original Agent's
resignation as agent for the Lenders thereunder and the appointment of the Agent
as successor agent for the Lenders and the appointment of the Collateral Agent
as its successor as collateral agent for the Lenders under this Agreement, and
(iii) make certain other changes as more fully set forth therein.
E. The Company, the Agent and the Collateral Agent now wish to amend
and restate the Original Security Agreement in its entirety to (i) secure the
Lenders' interest in the Obligations and (ii) reflect the Original Agent's
resignation as collateral agent for the Lenders and the appointment of the
Collateral Agent as its successor as collateral agent for the Lenders.
F. It is the intent of the Company, the Lenders, the Agent and the
Collateral
<PAGE> 2
Agent that the amendment and restatement of the Original Credit Agreement shall
not constitute a novation of the obligations and liabilities of the parties
under the Original Credit Agreement nor be deemed to evidence or constitute
repayment of all or any portion of such obligations and liabilities and that the
Credit Agreement shall amend and restate in its entirety the Obligations under
the Original Credit Agreement and re-evidence the Obligations of Company
outstanding thereunder.
G. The Company represents and confirms, and the Agent and the
Collateral Agent each acknowledge, that (i) the security interests granted
pursuant to the Original Security Agreement continue in full force and effect
and continue to secure the Obligations under the Credit Agreement, (ii) the
Loans represented by the Notes are the same Original Loans which were, prior to
the date hereof, represented by the Original Notes, and (iii) the transactions
contemplated by the Credit Agreement and this Agreement did not and do not
constitute a discharge or release of the security interests granted by the
Original Security Agreement and that the security interests and the Collateral
securing the Original Loans and Obligations continue to secure the Loans and the
Obligations.
AGREEMENT
In consideration of the premises and the mutual covenants and the
mutual agreements herein set forth, the parties agree as follows:
ARTICLE I
Defined Terms
Section 1.01. Certain Defined Terms. Unless otherwise defined herein,
capitalized terms used but not otherwise defined in this Agreement have the
meaning given to them in the Credit Agreement. In addition, the following terms
have the following meanings:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights and all other debts and obligations owing to
Company, including, but not limited to those arising out of the sale or
lease of goods or the rendition of services by Company, whether or not
earned by performance, including Health-care-insurance Receivables, all
credit insurance, guaranties and other security therefor and
enhancements thereof, as well as all goods returned to or reclaimed by
Company, and Company's books and records (both hard copy and
electronic) relating to any and all of the foregoing.
"Action" against a Person means an action, suit,
investigation, complaint, litigation, arbitration, contest, hearing,
inquiry, inquest, audit, examination or other proceeding threatened or
pending against or affecting the Person or its property, whether civil,
criminal, administrative, investigative or appellate, in law or equity
before any arbitrator or Governmental Body.
"Cash Management System" has the meaning stated in Section
3.05(e).
"Code" means the New York Uniform Commercial Code, as set
forth in N.Y. U.C.C. Law Sections 1-101, et seq. (McKinney 1990), as
amended from time to time.
"Collateral" means all of the following: Accounts; Equipment;
General Intangibles; Inventory; Investment Property; Negotiable
Collateral; Vehicles; Deposit Accounts; Fixtures; any money or other
assets of Company which hereafter come into the possession, custody or
control of Agent or Collateral
<PAGE> 3
Agent; and all proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance covering any
or all of the Collateral, and any and all Accounts, Equipment, General
Intangibles, Inventory, Investment Property, Negotiable Collateral,
money, Deposit Accounts or other tangible or intangible property
resulting from the sale or other disposition of the Collateral, or any
portion thereof or interest therein, and the proceeds thereof.
"Collateral Agent's Office" means the office of the Collateral
Agent located at 1411 Broadway, New York, New York.
"Concentration Account" means the deposit account established
in the name of the Collateral Agent with the Collateral Agent at the
Collateral Agent's Office, account number 507-890817.
"Copyright Licenses" means (a) any agreement, written or oral,
naming the Company as licensor or licensee, granting any right in or to
any Copyright or copyright registration in the United States or any
foreign country, including, without limitation, any thereof referred to
on Part I of Schedule 4.10 hereto, or (b) any and all present and
future agreements, including, without limitation, assignments and
consents, as any such agreements may from time to time be amended or
supplemented, pursuant to which the Company now has or hereafter
acquires any direct or indirect beneficial interest in any Copyright,
or is a grantor of rights to any third party with respect to any
Copyright, whether as a party to any such agreement or as an assignee
of any rights under any such agreement, including, without limitation,
any thereof referred to on Part I of Schedule 4.10 hereto, excluding,
however, non-exclusive computer software licenses.
"Copyrights" means (a) the copyrights in all original works of
authorship fixed in any tangible medium of expression, including,
without limitation, any thereof referred to on Part I of Schedule 4.10
hereto, including, without limitation, all databases, source codes,
object codes and manuals, whether published or unpublished, now or
hereafter existing, in the United States and all foreign countries, and
all applications, registrations, renewals, extensions and recordings
relating thereto filed in the United States Copyright Office or in any
other governmental office or agency in the United States or elsewhere,
in each case in which the Company has any right, title or interest, and
all other rights which the Company presently has or hereafter acquires
pursuant to any Copyright License, including, without limitation,
copyright assignments, exclusive and nonexclusive licenses, and (b) all
right, title and interest of the Company in all physical materials
embodying works with respect to which the Company owns or holds rights
in any Copyrights or Copyright Licenses.
"Deposit Account" means a demand, time, savings, passbook or
similar account maintained with a bank, other than Investment Property
or an account evidenced by an Instrument.
"Disbursement Account" means the deposit account, established
in the name of the Company with the Collateral Agent at the Collateral
Agent's Office, account number 507-890833.
"Equipment" means all of Company's present and hereafter
acquired equipment, machinery, machine tools, motors, furniture,
furnishings, fixtures, motor vehicles, rolling stock, processors,
tools, parts, dies, jigs, goods (other than consumer goods, farm
products or Inventory), wherever located, and any interest of Company
in any of the foregoing and all attachments, accessories, accessions,
replacements, substitutions, additions and improvements to any of
foregoing, wherever located.
<PAGE> 4
"Fixtures" means goods that have become so related to
particular real property that an interest in them arises under real
property law.
"General Intangibles" means all of Company's present and
future general intangibles and other personal property (including
contract rights, rights arising under common law, statutes or
regulations, licenses, franchises, Payment Intangibles, choses or
things in action, goodwill, Patents, Patent Licenses and Patent
applications, trade names, Trademarks, Trademark Licenses and trademark
applications, service marks, Copyrights, Copyright Licenses and
Copyright applications, trade secrets, blueprints, drawings,
intellectual property of any nature whatsoever, purchase orders,
customer lists, monies due or recoverable from pension funds, monies
due under any royalty or licensing agreements, route lists,
infringement claims, computer programs, computer discs, source codes,
computer tapes, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds and tax refund claims) other
than goods and Accounts, and Company's books and records relating to
any of the foregoing.
"Governmental Body" means any agency, bureau, commission,
court, department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Health-care-insurance Receivable" means an interest in or
claim under a policy of insurance which is a right to payment of a
monetary obligation for health-care goods or services provided.
"Instrument" means a negotiable instrument or any other
writing that evidences a right to the payment of a monetary obligation,
is not itself a security agreement or lease, and is of a type that in
ordinary course of business is transferred by delivery with any
necessary endorsement or assignment.
"Inventory" means all present and future inventory in which
Company has any interest, including goods held for sale or lease or to
be furnished under a contract of service, Company's present and future
raw materials, work in process, finished goods and materials used in or
consumed in Company's business, goods which have been returned to,
repossessed by or stopped in transit by Company, packing and shipping
materials, wherever located, any documents of title representing any of
the above, and Company's books and records relating to any of the
foregoing.
"Investment Property" means all of Company's present and
future certificated and uncertificated securities, securities
entitlements, securities accounts, commodity accounts and commodity
contracts.
"Medicare" means the federal program authorized under 42
U.S.C. 301 et. seq.
"Medicare Collection Account" means the deposit account,
established in the name of the Company with the Collateral Agent at the
Collateral Agent's Office, account number 507-890809.
"Medicare Receivable" means any receivable of the Company or
one of its Subsidiaries created in connection with services provided
under Medicare.
"Negotiable Collateral" means all of Company's present and
future letters
<PAGE> 5
of credit, notes, drafts, Instruments, documents, leases and chattel
paper and Company's books and records relating to any of the foregoing.
"Non-Medicare Collection Account" means the deposit account
established in the name of the Company with S&T Bank at S&T Bank's
Office, account number 00- 32168.
"Patent Licenses" means any agreement, whether written or
oral, providing for the grant by the Company of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in Part II Schedule 4.10
hereto.
"Patents" means (a) all letters patent of the United States
and all reissues and extensions thereof, including, without limitation,
any thereof referred to in Part II of Schedule 4.10 hereto, and (b) all
applications for letters patent of the United States and all divisions,
continuations and continuations-in-part thereof or any other country,
including, without limitation, any thereof referred to in Part II of
Schedule 4.10 hereto.
"Payment Intangible" means a general intangible under which
the account debtor's principal obligation is a monetary obligation.
"Payroll Account" means the deposit account, established in
the name of the Company with the Collateral Agent at the Collateral
Agent's Office, account number 507-890841.
"Pledged Accounts" has the meaning stated in Section 3.05(b).
"Regulation" means each applicable law, rule, regulation,
order or recommendation (or any change in its interpretation or
administration) by any Governmental Body, central bank or comparable
agency and any request or directive (whether or not having the force of
law) of any of those Persons and each writ, judgment, injunction,
order, decree or award of any arbitrator or Governmental Body.
"S&T Bank" means S&T Bank.
"S&T Bank's Office" means the office of S&T Bank located at
800 Philadelphia Street, Indiana, Pennsylvania 15701.
"Trademark Licenses" means any agreement, written or oral,
providing for the grant by the Company of any right to use any
Trademark, including, without limitation, any thereof referred to in
Part III of Schedule 4.10 hereto.
"Trademarks" means (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency or the
United States, any State thereof of any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Part III of Schedule 4.10 hereto, and (b) all
renewals thereof.
"Vehicles" means vehicles operated or driven upon a public
highway and propelled by any power other than muscular power as set
forth in N.Y. Veh. & Traf. Law Section 125 (McKinney 1996), as amended.
<PAGE> 6
ARTICLE II
Grant of Security
Section 2.01. Grant of Security. Company hereby grants to Agent and
Collateral Agent, for their benefit and for the ratable benefit of the Lenders,
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Company of each and all
of its covenants and duties under the Loan Documents. Agent's and Collateral
Agent's security interest in the Collateral shall attach to all Collateral
without further act on the part of Agent, Collateral Agent or Company. Other
than sales of Inventory to buyers in the ordinary course of business, Company
has no authority, express or implied, to dispose of any item or portion of the
Collateral, except as set forth in the Credit Agreement.
Section 2.02. Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Company shall, upon the request of Agent, immediately endorse and assign such
Negotiable Collateral to Agent or the Collateral Agent and deliver physical
possession of such Negotiable Collateral to Collateral Agent.
ARTICLE III
Company Remains Liable; Delivery of Collateral; Deposit Accounts
Section 3.01. Company Remains Liable. Anything in this Agreement to the
contrary notwithstanding:
(a) Company Remains Liable. The Company shall remain liable to
perform all its obligations (whether under the Contract, Negotiable
Collateral or otherwise) under or in respect of the Collateral to the
same extent as if this Agreement had not been executed.
(b) Company Not Released. The exercise by the Collateral
Agent, the Agent or any Lender of any of their rights under any Loan
Document shall not release the Company from any of those obligations,
(c) Collateral Agent, Agent and Lenders Not Liable. Neither
the Collateral Agent, the Agent nor any Lender shall have, by reason of
any Loan Document, any obligation or liability under or in respect of
any Collateral or any contract or agreement included in the Collateral.
(d) Collateral Agent, Agent and Lenders Not Obligated to
Perform. Neither the Collateral Agent, the Agent nor any Lender shall
be obligated to perform any of the obligations of the Company under or
in respect of any Collateral or any other contract or agreement
included in the Collateral or to take any action to collect or enforce
any claim for payment assigned by this Agreement.
Section 3.02. Delivery of Collateral.
(a) Delivery of Collateral. All certificates and instruments, whether
negotiable or otherwise, representing or evidencing the Investment Property
shall be delivered to the Collateral Agent duly endorsed in blank or accompanied
by undated stock powers, instruments of transfer or undated assignments duly
executed in blank, in each case with signatures guaranteed and otherwise in form
and substance satisfactory to the
<PAGE> 7
Collateral Agent (the "Stock Powers"), or in the case of non-negotiable
Investment Property such Investment Property has been re-registered in the
Collateral Agent's name.
(b) Re-Registration of Collateral. Upon the occurrence and during the
continuation of an Event of Default under the Credit Agreement, at the request
of the Agent, the Company shall promptly cause the Investment Property,
Negotiable Collateral or Instruments specified by the Agent to be registered in
the name of the Collateral Agent or in the name of the nominee or nominees
specified by the Agent.
(c) Exchange of Certificates. The Collateral Agent may from time to
time exchange certificates or instruments representing or evidencing the
Investment Property, Negotiable Collateral or Instruments for replacement
certificates or instruments.
Section 3.03 Notices and Analysis.
(a) Notice to Account Debtors and Contracting Parties. The Company
shall promptly notify account debtors on the Accounts, parties to the Contracts
and all other obligors in respect of any Collateral that the Accounts, Contracts
and all other Collateral have been assigned to the Collateral Agent for the
ratable benefit of the Lenders and that payments in respect thereof shall be
made directly to S&T Bank by delivering a written notice, substantially in the
form of Exhibit 3.03(a) hereto to each such account debtor, Contract party and
obligor. The Collateral Agent and the Agent may in their own names or in the
name of others communicate with account debtors on the Accounts, parties to the
Contracts and the other obligors to verify with them to its satisfaction the
existence, amount and terms of any Accounts, Contracts or other Collateral.
(b) Analysis of Accounts. The Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonable considers advisable, and the Company shall furnish all such
assistance and information as the Agent may require in connection therewith. At
any time and from time to time, upon the Agent's request and at the expense of
the Company, the Company shall cause independent public accountants or others
satisfactory to the Agent to furnish to the Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Accounts; provided, that unless an Event of Default shall have occurred and be
continuing (in which case this right shall not be so limited) such activities
shall not take place more often than two times during any calendar year.
Section 3.04. Voting of Investment Property. Unless an Event of Default
shall have occurred and is continuing, the Company shall be entitled to exercise
any and all voting and other consensual rights pertaining to all or any part of
the Investment Property for any purpose not inconsistent with the terms of this
Agreement or any other Loan Document; provided, however, that the Company shall
not exercise or refrain from exercising any right if, in the judgment of the
Agent, the action would have a material adverse effect on the value of all or
any part of any Collateral or on the interest of the Company, the Collateral
Agent, the Agent or the Lenders in any Collateral. The Company shall give the
Collateral Agent and the Agent at least five Business Days prior written notice
of the manner in which it intends to exercise, or the reasons for refraining
from exercising, any such right.
Section 3.05. Deposit Accounts.
(a) No Other Accounts. The Company shall not, and shall not permit any
of its Subsidiaries to, own, open, establish, have or maintain any Deposit
Account other than the Pledged Accounts (as defined below).
<PAGE> 8
(b) Establishment of Pledged Accounts. There have been established by
the Company and its Subsidiaries on or prior to the date hereof the Medicare
Collection Account, the Non- Medicare Collection Account, the Concentration
Account, the Payroll Account and the Disbursement Account (collectively, the
"Pledged Accounts").
The terms and conditions of each of the Pledged Accounts shall at all
times be in all respects satisfactory to the Collateral Agent and the Agent.
(c) Blocked Accounts. On or prior to the date hereof (i) the Company,
the Agent and S&T Bank will enter into a Blocked Account Agreement,
substantially in the form of Exhibit 3.05(c) hereto, with respect to the
Non-Medicare Collection Account and (ii) the Company, the Agent and the
Collateral Agent will enter into Blocked Account Agreements, substantially in
the form of Exhibit 3.05(c) hereto, with respect to each of the Pledged
Accounts, other than the Non-Medicare Collection Account.
(d) Control of the Pledged Accounts. The parties hereto agree that the
Pledged Accounts (other than the Medicare Collection Account) shall be under the
exclusive dominion and control of the Collateral Agent. The Collateral Agent
hereby authorizes the Company to collect amounts due under the Collateral,
subject to the Agent's direction and control, and the Agent may curtail or
terminate said authority at any time.
(e) Cash Management System. The Company agrees to, and shall cause the
Subsidiaries to, operate their respective businesses, manage their cash flows,
and maintain the Pledged Accounts strictly in accordance with the terms and
provisions of the cash management system set forth on Annex A to this Agreement
(the "Cash Management System"). In addition, the Company shall not, and shall
cause the Subsidiaries not to, take any action or omit to take any action that
would violate, breach, conflict with, or otherwise frustrate the purposes of the
Cash Management System. The Company agrees that any such violation or breach of
the Cash Management System shall be treated as a breach or violation of any
provision of this Agreement.
(f) Reports and Documents. Promptly (but in no event later than 10
days) after the end of each calendar month, the Company shall deliver to the
Collateral Agent a certification from the Chief Financial Officer of the Company
that all deposits into the Pledged Accounts consist solely of Collateral or
Proceeds of Collateral. At the Collateral Agent's request, the Company shall
deliver to the Collateral Agent all original and other documents evidencing, and
relating to, the agreements and transactions which gave rise to such deposits,
including, without limitation, all original orders and invoices.
(g) Turn-Over of Proceeds. All Proceeds of Collateral which are not
sent or delivered directly to a Pledged Account by an obligor, when collected by
the Company, whether consisting of checks, notes, drafts, bills of exchange,
money orders, commercial paper of any kind whatsoever, or other documents or
otherwise, received in payment of any Collateral or on account of any Collateral
shall be promptly deposited by the Company in the exact form received, except
for any endorsement by the Company to the Collateral Agent, if required, in the
Medicare Collection Account, or the Non-Medicare Collection Account, as
applicable, or shall be turned over to the Collateral Agent, and until so
deposited or turned over, shall be deemed to be held in trust by the Company for
and as the Collateral Agent's property and shall not be commingled with the
Company's other funds.
(h) Proceeds Remain Collateral. All Proceeds constituting collections
of Collateral while held by the Collateral Agent (or by the Company in trust for
the Collateral Agent) shall continue to be collateral security for all of the
Obligations and
<PAGE> 9
shall not constitute payment thereof until applied as hereinafter provided.
(i) KRS Partnerships. The Company agrees to use its best efforts to
cause each of the partners of the KRS Partnerships to execute and deliver the
Addendum to Management Agreement, in the form of Exhibit 3.05(i) (1), (2), (3)
and (4) attached hereto within 60 days after the date of this Agreement. In the
event that all such agreements are not executed and delivered within such 60 day
period the Company agrees to modify the Cash Management System to the
satisfaction of the Agent.
ARTICLE IV
Representations and Warranties of the Company
The Company hereby represents and warrants to the Collateral Agent, the
Agent and the Lenders as follows:
Section 4.01. Power. The Company has good right and all necessary power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, including, without limitation, the granting of
the security interests, Liens and pledges in the Collateral to the Collateral
Agent.
Section 4.02. Authorization; Binding Effect. The execution and delivery
by the Company of this Agreement, the performance by the Company of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby has been duly authorized by all necessary corporate action.
No other proceedings on the part of the Company are necessary to approve and
adopt this Agreement or to approve the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and is a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
Section 4.03. Contravention. Neither the execution, delivery and
performance of this Agreement by the Company nor the consummation of the
transactions contemplated hereby will (with or without notice or lapse of time
or both) (a) conflict with, violate or breach any provision of the Company's
organizational documents or bylaws, (b) violate, conflict with or result in a
breach of any Regulation, writ, judgment, injunction, order, decree or award of
any Governmental Body or any other Person by which the Company, any of the
Collateral or any of its other properties may be bound or affected, (c) conflict
with, result in a default under, or give rise to a right of termination,
cancellation, or acceleration or to a loss of a benefit under any Contract or
other material agreement to which the Company is a party or by which the
Company, the Collateral or any of its other properties may be bound or affected
or (d) result in or require the creation or imposition of any Lien on any
Collateral or any of the other properties now owned or hereafter acquired by the
Company, except for the Liens in favor of the Collateral Agent created by this
Agreement.
Section 4.04. Approvals. No authorization, consent, order or approval
of, notice to or registration or filing with, or any other action by any
Governmental Body or other Person, including any other party to a Contract, is
required or advisable in connection with (a) the due execution and delivery by
the Company of this Agreement, (b) the consummation of the transactions
contemplated by this Agreement, including the granting of the security
interests, Liens and pledges of the Collateral to the Collateral Agent, (c) the
perfection of the security interests, Liens and pledges granted by this
Agreement, (d) the performance by the Company of its obligations under this
Agreement, or (e) the exercise by the Collateral Agent of its rights and
remedies under this Agreement.
Section 4.05. Title. The Company is and, with respect to Collateral to
be
<PAGE> 10
acquired, will be, the sole legal and beneficial owner of the Collateral, free
and clear of any Lien or option in favor of any other Person, except for the
Liens created by this Agreement and the Company has good and marketable title to
the Collateral. No security agreement, financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office, except such as may have been filed in favor of the Collateral
Agent relating to this Agreement.
Section 4.06. Perfected First Priority Liens. The Liens originally
granted pursuant to this Security Agreement constitute first priority perfected
Liens in favor of the Original Agent for the ratable benefit of the Lenders, and
upon filing of appropriate amendments to the UCC financing statements filed in
connection with such Liens, will constitute first priority perfected Liens in
favor of the Collateral Agent, for the ratable benefit of the Lenders, which
Liens are prior to all other Liens on the Collateral and which are enforceable
as such against (a) all creditors of, and purchasers from, the Company, (b) upon
receipt of landlord waivers in the form of Exhibit 5.02, any owner or purchaser
of the real property where any of the Equipment is located, (c) any present or
future creditor obtaining a Lien on such real property or any of the Collateral,
and (d) any other third party, and all filings and other actions necessary or
desirable to perfect and protect such Liens and security interests have been
duly made or taken.
Section 4.07. Chief Place of Business. The chief place of business and
chief executive office of the Company are located at The Atrium, 665
Philadelphia Street, Indiana, Pennsylvania 15701. The Company keeps all of its
records concerning the Collateral and the original copies of the Contracts only
at that address.
Section 4.08. Accounts, Negotiable Collateral, Instruments and General
Intangibles.
(a) Bona Fide Accounts; Amounts. Except as set forth on Schedule
4.08(a) hereto, each of the Accounts, Negotiable Collateral, Instruments and
General Intangibles arose from bona fide transactions in the ordinary course of
the Company's business and are current and collectible net of any reserves shown
on the Company's financial statements (which reserves are adequate and were
calculated consistent with past practice). The amount represented by the Company
to the Collateral Agent from time to time as owing by each account debtor or by
all account debtors in respect of the Accounts, Negotiable Collateral,
Instruments and General Intangibles will at such time be the correct amount
actually owing by such account debtor or debtors thereunder. There exists no
default under the Accounts, Negotiable Collateral, Instruments or General
Intangibles by any party. The Company has given notice to the issuer of each
Instrument, Investment Property and Negotiable Collateral existing on the date
of this Agreement of the Collateral Agent's security interest in such
Collateral.
(b) Delivery to Agent. All of the certificates and instruments
representing or evidencing Negotiable Collateral and Instruments have been
endorsed, and/or issued and delivered to the Agent in accordance with Section
3.02. No amount payable to the Company under or in connection with any Account
is evidenced by any Instrument or Negotiable Collateral which has not been
delivered to the Agent.
(c) Schedule. Schedule 4.08(c) sets forth a true, correct and complete
list and description of all (i) Accounts in excess of $5,000, (ii) Negotiable
Collateral, (iii) Instruments and (iv) General Intangibles, in each case, in
which the Company has an interest as of the date of the Agreement.
Section 4.09. Contracts.
(a) Legal, Valid and Binding. Each of the Contracts (i) has been duly
authorized, executed and delivered by the Company and, to the best of the
Company's knowledge, by the other parties thereto, and is in full force and
effect and (ii) constitutes
<PAGE> 11
the legal, valid and binding obligation of each of the parties thereto.
(b) Full Force and Effect. Except as set forth on Schedule 4.09(b)
hereto, each Contract will continue in full force and effect following the
transactions contemplated by this Agreement, including, without limitation, the
collateral assignment of the Contracts hereunder, in each case without the
breach of any terms or conditions of thereof, without the forfeiture or
impairment of any rights thereunder and without material penalty or other
material adverse consequence.
(c) No Defaults; No Defenses. There exists no breach or default (or
event which with or without the lapse of time or the giving of notice, or both,
would constitute a breach or default) under the Contracts by the Company, or to
the Company's knowledge, any other party thereto. The Company has fully
performed all its obligations under each Contract. The right, title and interest
of the Company in, to and under each Contract are not subject to any defense,
offset, counterclaim or claim which would materially adversely affect the value
of such Contract as Collateral, nor have any of the foregoing been asserted or
alleged against the Company as to any Contract.
(d) Copies of Contracts; No Instruments. At the request of the Agent,
the Company will deliver to the Agent a complete and correct copy of each
Contract, including all amendments, supplements and other modifications thereto.
No amount payable to the Company under or in connection with any Contract is
evidenced by any Instrument or Negotiable Collateral which has not been
delivered to the Collateral Agent. Schedule 4.09(d) sets forth a true, correct
and complete list and description of all of the Contracts.
Section 4.10. Copyrights, Patents and Trademarks.
(a) Schedules. Part I of Schedule 4.10 sets forth a true, correct and
complete list and description of all Copyrights and Copyright Licenses in which
the Company has an interest as of the date hereof. Part II of Schedule 4.10 sets
forth a true, correct and complete list and description of all Patents and
Patent Licenses in which the Company has an interest as of the date hereof. Part
III of Schedule 4.10 sets forth a true, correct and complete list and
description of all Trademarks and Trademark Licenses in which the Company has an
interest as of the date hereof, in each case, including a list of all
jurisdictions in which such Proprietary Rights are registered or applied for and
all registration and application numbers, where applicable.
(b) General. The Company has good and marketable title to each of the
interests created by the Proprietary Rights. All Proprietary Rights of the
Company are valid and in good standing and are in full force and effect. The
Company has not granted any options, licenses or agreements of any kind relating
to Proprietary Rights, including the marketing or distribution thereof. Except
as set forth on Schedule 4.10, the Company is not bound by or a party to any
options, licenses or agreements of any kind relating to the Proprietary Rights
of any other Person. There is no obligation or liability of the Company with
respect to any of the Proprietary Rights which is required to have been paid or
otherwise performed which has not been paid or otherwise performed in full.
(c) No Actions. Except as disclosed on Schedule 4.10, no Action is
pending (i) questioning or challenging the Company's title to, or right to use
such Proprietary Rights, (ii) seeking to limit, cancel or question the validity
of any Proprietary Right, or (iii) which, if adversely determined, would have a
material adverse effect on the value of any Proprietary Rights.
<PAGE> 12
Section 4.11. Investment Property.
(a) Schedules. Part I of Schedule 4.11 sets forth a true, correct and
complete list and description of all of the Investment Property constituting
capital stock or other equity interests (the "Equity Interests") and the issuers
thereof (the "Equity Issuers"). Part II of Schedule 4.11 sets forth a true,
correct and complete list and description of all of the Investment Property
constituting indebtedness (the "Debt Interests") and the issuers thereof (the
"Debt Issuers", and together with the Equity Issuers, the "Issuers").
(b) Equity Interests. Each of the Equity Interests is duly authorized,
validly issued, fully paid and non-assessable.
(c) Debt Interests. Each of the Debt Interests is duly authorized,
validly issued and constitutes the legal, valid and binding obligation of the
Issuers thereof enforceable against each such Issuer in accordance with their
respective terms.
(d) No Other Securities or Interests. There are no (i) outstanding
capital stock or securities convertible into or exchangeable or exercisable for
any shares of capital stock or securities of any Equity Issuer, (ii) outstanding
rights to subscribe for or to purchase, or any options for the purchase of, or
any calls, commitments or claims of any character relating to, any shares of
capital stock or securities of any Equity Issuer, (iii) outstanding securities
convertible into or exchangeable or exercisable for any shares of capital stock
or securities of any Equity Issuer and (iv) agreements or arrangements providing
for the issuance of any shares of capital stock or securities of any Equity
Issuer.
(e) No Voting or Transfer Restrictions. There is no agreement or
arrangement restricting the voting or transfer of the Equity Interests or the
Debt Interests or any other Investment Property, except as provided in this
Agreement.
(f) No Payment Restrictions. There are no legal, contractual or other
restrictions on the payment of (i) dividends or other distributions on any
shares of the capital stock or securities of any Equity Issuer, including,
without limitation, the Equity Interests, or (ii) principal or interest on any
indebtedness of any Debt Issuer, including, without limitation, the Debt
Interests, in each case, except for restrictions imposed by this Agreement and
the Credit Agreement.
(g) No Repurchase Obligations. No Person is subject to any obligation,
contingent or otherwise, to repurchase or otherwise acquire or retire any of the
Equity Interests or the Debt Interests.
(h) Delivery to Collateral Agent. All of the certificates and
instruments representing or evidencing the Investment Property and the Stock
Powers have been delivered to the Collateral Agent in accordance with Section
3.02.
Section 4.12. Inventory, Equipment and Fixtures.
(a) Possession. The Company has exclusive possession and control of the
Inventory, Equipment and Fixtures.
(b) Condition. All of the Inventory, Equipment and Fixtures are in good
working order, condition and repair, except for ordinary, wear and tear which is
not material, and are suitable and adequate for the uses for which they are used
and intended.
(c) Schedule. Schedule 4.12 sets forth a true, correct and complete
list, description and location of all (i) Inventory, (ii) Equipment and (iii)
Fixtures, in each case, in which the Company has an interest as of the date of
this Agreement.
Section 4.13. Vehicles. Schedule 4.13 sets forth a true, correct and
complete
<PAGE> 13
list and description of all Vehicles in which the Company has an interest as of
the date of this Agreement. All such Vehicles are in good working order,
condition and repair (except for ordinary wear and tear) and are suitable and
adequate for the uses for which they are used and intended.
Section 4.14. Governmental Obligors. Schedule 4.14 sets forth a true,
correct and complete list and description, including the name and address and
outstanding amount owed (as of the date hereof), by each of the account debtors
on the Accounts, parties to the Contracts and the obligors under any other
Collateral which is a Governmental Body as of the date of this Agreement whose
payments must be segregated from other receivables of the Company under
Medicare. The Company has notified any obligor which is a Governmental Body of
the security interest granted hereby and has instructed such Governmental Bodies
making Medicare payments to the Company to make such payments only to the
Medicare Collection Account.
ARTICLE V
Covenants of the Company
Section 5.01. No Liens on Collateral. The Company will not create,
incur, assume or permit to exist, will defend the Collateral against, and will
take such other actions as is necessary to remove, any Lien or claim on or to
the Collateral, other than the Liens created hereby, and will defend the right,
title and interest of the Collateral Agent and the Lenders in and to any of the
Collateral against the claims and demands of any and all Persons.
Section 5.02. Perfection. The Company will take any and all actions, at
the Company's expense, which are necessary or advisable to ensure that (a) the
Liens granted pursuant to this Security Agreement at all times constitute
perfected Liens in favor of the Collateral Agent, for the ratable benefit of the
Lenders, and (b) such Liens are at all times prior to all other Liens on the
Collateral and will be enforceable as such against all creditors of, and
purchasers from, the Company and against any owner or purchaser of the real
property where any of the Equipment is located and any present or future
creditor obtaining a Lien on such real property, and will use its best efforts
to obtain landlord waivers in the form of Exhibit 5.02 hereto, from all of the
landlords owning property at which the Company conducts business or has
Equipment.
Section 5.03. Limitations on Dispositions of Collateral. The Company
will not sell, transfer, lease, convey or otherwise dispose of any of the
Collateral, or attempt, offer or contract to do so, except for, so long as no
Default or Event of Default has occurred and is continuing, the disposition in
the ordinary course of the Company's business consistent with past practice of
property not material to the conduct of the Company's or the Subsidiaries'
respective businesses.
Section 5.04. Payment of Obligations. The Company will promptly pay and
discharge when due all taxes, assessments and governmental charges or levies
assessed, levied or imposed upon or relating to, and all claims against, the
Collateral or the Company or in respect of the Company's income or profits
therefrom, as well as all claims of any kind, including, without limitation,
claims for labor, materials and supplies, against or with respect to the
Collateral.
Section 5.05. Compliance with Laws, etc. The Company will comply in all
material respects with all Regulations applicable to the Collateral or any part
thereof or to the operation of the Company's business.
Section 5.06. Maintenance of Records. The Company will keep and
maintain, at its own cost and expense, satisfactory and complete records of the
Collateral, including,
<PAGE> 14
without limitation, a record of all payments received and all credits granted
with respect to the Accounts. The Company will mark its books and records
pertaining to the Collateral to evidence this Security Agreement and the Liens,
security interests and pledges granted hereby. For the Collateral Agent's and
Lenders' further security, the Collateral Agent, for the ratable benefit of the
Lenders, shall have a security interest in all of the Company's books and
records pertaining to the Collateral and, upon the occurrence of an Event of
Default which is continuing, the Company shall, upon request, turn over any such
books and records to the Collateral Agent or to its representatives.
Section 5.07. Right of Inspection. The Collateral Agent, the Agent and
the Lenders shall at all times have full and free access during normal business
hours and, upon the occurrence and continuation of an Event of Default, at any
time, to all the books, correspondence and records of the Company, and the
Collateral Agent, the Agent and the Lenders or their respective representatives
may examine the same, take extracts therefrom and make photocopies thereof, and
the Company agrees to render to the Collateral Agent, the Agent and the Lenders,
at the Company's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. The Collateral Agent, the Agent and
the Lenders and their respective representatives shall at all times also have
the right to enter into and upon any premises where any of the Inventory,
Equipment or other Collateral is located for the purpose of inspecting the same,
observing its use or otherwise protecting their interests therein.
Section 5.08. Impairment of Collateral.
(a) General. The Company shall not take, or fail to take, any action in
connection with any Collateral that would impair the value of the Collateral or
the interest or rights of the Company, the Collateral Agent, the Agent or any
Lender in, to or under that Collateral.
(b) Certain Actions Prohibited. The Company will not (i) amend, modify,
terminate, cancel or waive any provision of any Account, Negotiable Collateral,
Instrument, General Intangible, Contract or Investment Property in any manner
which could reasonably be expected to materially adversely affect the value of
the Collateral or the interest of the Company, the Collateral Agent, the Agent
or the Lenders in such Collateral, (ii) fail to exercise promptly and diligently
each and every material right which it may have under each Contract, each
agreement giving rise to an Account (other than any right of termination) or any
other right with respect to Collateral or (iii) fail to deliver to the
Collateral Agent a copy of each material demand, notice or document received by
it relating in any way to any Contract, any agreement giving rise to an Account
or any other Collateral.
(c) Limitations on Discounts, Compromises, Extensions of Accounts.
Other than in the ordinary course of the Company's business consistent with past
practice, the Company will not grant any extension of the time of payment of any
of the Accounts, Negotiable Collateral, Instruments, General Intangibles,
Contracts or Investment Property, or compromise, compound or settle the same for
less than the full amount thereof, release, wholly or partially, any Person
liable for the payment thereof, or allow any credit or discount whatsoever
thereon.
Section 5.09. Notices; Reports.
(a) Liens. The Company will advise the Collateral Agent and the Agent
promptly, in reasonable detail, of (i) any Lien (other than Liens created hereby
or permitted under the Credit Agreement) on, or claim asserted against, any of
the Collateral and (ii) the occurrence of any other event which could reasonably
be
<PAGE> 15
expected to have a material adverse effect on (x) the aggregate value of the
Collateral or (y) the Liens created hereunder.
(b) Reports, Notices, Etc. The Company shall furnish to the Collateral
Agent and the Agent (i) promptly upon receipt, copies of all notices, requests
and other documents received by the Company under or in respect of the
Collateral, (ii) promptly upon the request of the Agent, information and reports
regarding that Collateral and (iii) promptly upon the request of the Agent, make
the demands and requests for information or action that the Company is en titled
to make under that Collateral. The Company will also promptly furnish to the
Collateral Agent copies of any monthly management reports prepared by the
Company.
(c) Further Identification of Collateral. The Company will furnish to
the Collateral Agent and the Agent from time to time statements and schedules
further listing, identifying and describing the Collateral and such other
reports in connection with the Collateral as the Agent may reasonably request,
all in reasonable detail.
Section 5.10. Changes in Locations, Name, etc. The Company will not (i)
change the location of its chief executive office or its chief place of business
from that specified in Section 4.07 or remove its books and records from the
location specified in Section 4.07, (ii) permit any of the Collateral to be
kept, stored or used at a location other than those listed on the Schedules to
this Agreement or (iii) change its name, identity or corporate structure or
merge or take or suffer any other action that might result in any financing
statement filed by the Agent in connection with this Security Agreement becoming
misleading, unless, in each case, it shall have given the Collateral Agent and
the Agent at least 30 days prior written notice thereof.
Section 5.11. Accounts, Negotiable Collateral, Instruments, General
Intangibles, Contracts and Investment Property.
(a) Collections. Subject to the provisions of Article VI hereof and the
Cash Management System, the Company shall timely collect all amounts due or to
become due to the Company under the Accounts, Negotiable Collateral,
Instruments, General Intangibles, Contracts and Investment Property and
otherwise enforce its rights under and in respect of such Collateral.
(b) Deliver Collateral to Agent. In the event that any Account,
Negotiable Collateral, Instrument or General Intangible is evidenced by a
promissory note, certificate or instrument, the Company shall deliver and pledge
to the Agent the note or instrument. In the event any Investment Property is
evidenced by a promissory note, certificate or instrument, the Company shall
deliver and pledge to be Collateral Agent the note or instrument, accompanied by
Stock Powers. The Company will also deliver to the Agent or the Collateral
Agent, with respect to Investment Property, all Instruments, Negotiable
Collateral and Investment Property existing on and after the date of this
Agreement endorsed and issued as provided in Section 3.02.
(c) Pledge of Additional Collateral. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
Negotiable Collateral, Instrument or Investment Property, such Negotiable
Collateral, Instrument or Investment Property shall be immediately delivered to
the Agent, or the Collateral Agent (with respect to Investment Property)
accompanied by Stock Powers, to be held as Collateral pursuant to this
Agreement.
Section 5.12. Contracts. The Company will fully and timely perform and
comply in all material respects with all its obligations under the Contracts and
all its other contractual obligations relating to the Collateral and maintain
such Collateral in full force and effect.
<PAGE> 16
Section 5.13. Copyrights.
(a) No Bad Acts. The Company (either itself or through licensees) will,
except with respect to any Copyright that the Company shall reasonably determine
is of negligible value (i) employ the Copyright for each published work with an
appropriate notice of Copyright and (ii) not (and will not knowingly permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do any act
whereby any Copyright may become invalidated. The Company will not (either
itself or knowingly permit any licensee or sublicensee to) do any act, or
knowingly omit to do any act, whereby any Copyright may become injected into the
public domain.
(b) Notice of Events. (i) The Company shall notify the Collateral Agent
immediately if it knows, or has reason to know, that any Copyright may become
injected into the public domain or of any adverse determination or development,
including, without limitation, the institution of, or any such determination or
development in, any court or tribunal in the United States or any other country,
regarding the Company's ownership of any such Copyright or its validity.
(ii) The Company will promptly notify the Collateral Agent of any
infringement of any Copyright of which it becomes aware and will take such
actions as it shall reasonably deem appropriate under the circumstances to
protect such Copyright, including, where appropriate, the bringing of suit for
infringement, seeking injunctive relief and seeking to recover any and all
damages for such infringement.
(c) Regulatory Filings. The Company will file in the United States
Copyright Office an application for copyright registration for each material
Copyright and Copyright License and will take all necessary steps as it shall
reasonably deem appropriate under the circumstances, to maintain and pursue each
United States application (and to obtain the relevant registration) and to
maintain each United States registration of each material Copyright owned by the
Company including, without limitation, filing of applications for renewal, where
necessary and shall report all such filings and registrations to the Collateral
Agent within five Business Days after the same are made and execute and deliver
all documents and instruments necessary to perfect the Collateral Agent's
security interest, for the ratable benefit of the Lenders, in any Copyright or
Copyright License.
Section 5.14. Patents and Trademarks.
(a) No Bad Acts. The Company (either itself or through licensees) will,
except with respect to any Trademark that the Company shall reasonably determine
is of negligible economic value to it, (i) continue to use each Trademark on
each and every trademark class of goods applicable to its current line as
reflected in its current catalogs, brochures and price lists in order to
maintain such Trademark in full force free from any claim of abandonment for
non- use, (ii) maintain as in the past the quality of products and services
offered under such Trademark, (iii) employ such Trademark with the appropriate
notice of registration, (iv) not adopt or use any mark which is confusingly
similar or a colorable imitation of such Trademark unless the Collateral Agent,
for the ratable benefit of the Lenders, shall obtain a perfected security
interest in such mark pursuant to this Security Agreement, and (v) not (and not
permit any licensee or sublicensee thereof to) do any act or knowingly omit to
do any act whereby any Trademark may become invalidated. The Company will not,
except with respect to any Patent that the Company shall reasonably determine is
of negligible economic value to it, do any act or omit to do any act, whereby
any Patent may become abandoned or dedicated.
(b) Notice of Events. (i) The Company will notify the Collateral Agent
<PAGE> 17
immediately if it knows, or has reason to know, that any application or
registration relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development, including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or any court or
tribunal in any country, regarding the Company's ownership of any Patent or
Trademark or its right to register the same or to keep and maintain the same.
(ii) In the event that any Patent or Trademark included in the
Collateral is infringed, misappropriated or diluted by a third party, the
Company shall promptly notify the Collateral Agent after it learns thereof and,
at the Company's sole expense, shall, unless the Company shall reasonably
determine that such Patent or Trademark is of negligible economic value to the
Company, promptly sue for infringement, misappropriation or dilution, to seek
injunctive relief where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution, or take such other actions as the
Company shall reasonably deem appropriate under the circumstances to protect
such Patent or Trademark.
(c) Regulatory Filings. Whenever the Company, either by itself or
through any agent, employee, licensee or designee, shall file an application for
the registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, the Company shall report such filing to the
Collateral Agent within five Business Days after the last day of the fiscal
quarter in which such filing occurs. The Company will take all reasonable and
necessary steps, including, without limitation, in any proceeding before the
United States Patent and Trademark Office, or any similar office or agency in
any other country or any political subdivision thereof, to maintain and pursue
each application (and to obtain the relevant registration) and to maintain each
registration of the Patents and Trademarks, including, without limitation,
filing of applications for renewal, affidavits of use and affidavits of
incontestability.
(d) Further Filings. The Company shall execute and deliver any and all
agreements, instruments, documents, and papers as the Agent may reasonably
request, including, without limitation, the Notice of Security Interest in
Patents attached hereto as Exhibit 5.14(d)(i) and the Memorandum of Security
Agreement - Trademarks attached hereto as Exhibit 5.14(d)(ii), to evidence the
Collateral Agent's security interest for the ratable benefit of the Lenders in
any Patent or Trademark and the goodwill and general intangibles of the Company
relating thereto or represented thereby, and the Company hereby constitutes the
Collateral Agent its attorney-in-fact to execute and file all such writings for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Obligations are paid in full and the Commitment is terminated.
Section 5.15. Inventory, Equipment and Fixtures.
(a) Maintenance of Collateral. The Company shall maintain, keep and
preserve the Inventory, Equipment and Fixtures in good working order and
condition, ordinary wear and tear excepted, and in accordance with any
manufacturer's manual and any Regulations. The Company shall promptly after the
occurrence of any loss or damage to any Inventory, Equipment or Fixtures (i)
make or cause to be made all repairs, replacements and other improvements that
are necessary or desirable to maintain the value of such Collateral and (ii)
furnish to the Collateral Agent a statement in respect of any loss or damage to
any Inventory, Equipment or Fixtures.
(b) Reports. The Company shall, at the request of the Agent, furnish to
the Collateral Agent and the Agent, with sufficient copies for each Lender, a
report detailing changes in the amount and condition of the Inventory, Equipment
and Fixtures, including purchases, depreciation, sales and losses.
<PAGE> 18
Section 5.16. Vehicles. The Company will maintain each Vehicle in good
operating condition, ordinary wear and tear and immaterial impairments of value
and damage by the elements excepted, and will provide all maintenance, service
and repairs necessary for such purpose. The Company will notify the Agent of
each acquisition or sale of a vehicle, promptly following the acquisition or
sale thereof. If an Event of Default shall occur and be continuing, at the
request of the Agent the Company shall, within five Business Days after such
request, file applications for certificates of title indicating the Collateral
Agent's first priority Lien for the ratable benefit of the Lenders on the
Vehicles covered by such certificates, together with any other necessary
documentation, in each office in each jurisdiction which the Agent shall deem
advisable to perfect its Liens on the Vehicles.
Section 5.17. Maintenance of Insurance.
(a) Adequate Insurance. The Company will maintain at its own expense,
with financially sound and reputable companies, insurance policies covering the
Collateral (i) insuring the Collateral against loss by fire, explosion, theft
and such other casualties in amounts comparable to amounts of insurance coverage
obtained by similar businesses of similar size acting prudently and (ii)
insuring the Company, the Collateral Agent, the Agent and the Lenders against
liability for personal injury and property damage relating to such Collateral,
such policies to be in such form and amounts and having such coverage as shall
be comparable to forms, amounts and coverage, respectively, obtained by similar
businesses of similar size acting prudently, with losses payable to the Company,
the Collateral Agent, the Agent and the Lenders as their respective interests
may appear.
(b) Terms of Policies. All such insurance shall (i) provide that no
cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days after receipt by the
Collateral Agent of written notice thereof, (ii) name the Collateral Agent, the
Agent and the Lenders as insured and loss payee, (iii) contain the agreement by
the insurer that any loss under the policy shall be payable to the Collateral
Agent notwithstanding any action, inaction or breach of representation or
warranty by the Company, (iv) provide that there shall be no recourse against
the Collateral Agent, the Agent or any Lender for payment of premiums or other
amounts with respect to the policy and (v) be reasonably satisfactory in all
other respects to the Collateral Agent.
(c) Broker's Report. The Company shall deliver to the Collateral Agent
a report of a reputable insurance broker with respect to such insurance during
the month of January in each calendar year and such supplemental reports with
respect thereto as the Collateral Agent may from time to time reasonably
request.
(d) Payment of Proceeds. Reimbursement under any liability insurance
may be paid directly to the Person who shall have incurred liability covered by
the insurance. In case of any loss involving damage to any Collateral, the
Company shall cause the proceeds to be paid directly to the Collateral Agent
and, if an Event of Default shall not have occurred and is not then continuing,
the Agent shall reimburse the Company for the costs of any repairs or
replacements from such proceeds.
(e) Assignment of Policies. At the request of the Agent, the Company
shall duly execute and deliver instruments of assignment of the insurance
policies and all notices of that assignment, in each case in form and substance
satisfactory to the Collateral Agent, and cause the respective insurers to
acknowledge notice of the assignment.
(f) Copies of Policies. Upon the request of the Agent, the Company
shall deliver to the Collateral Agent original or duplicate copies of all
policies of insurance evidencing compliance with this Section.
<PAGE> 19
Section 5.18. Indemnification. The Company will indemnify the
Collateral Agent, the Agent, the Lenders and their respective Affiliates and
each of their respective shareholders, partners, members, directors, officers,
employees, agents and Affiliates (collectively, the "Indemnified Persons")
against and hold each Indemnified Person harmless from any and all liabilities,
obligations, losses, damages, penalties, Actions, judgments, costs, expenses,
claims, diminution in value, or disbursements of any kind or nature whatsoever
(including interest, penalties, fines, judgments, settlements, costs of
preparation and investigation, costs incurred in enforcing this indemnity and
reasonable attorneys' fees and expenses) that the Indemnified Persons may
suffer, sustain, incur or become subject to arising out of, relating to, or due
to:
(a) any inaccuracy or breach of any of the representations and
warranties of the Company contained in this Agreement or in any
certificate delivered hereunder;
(b) the nonfulfillment of any covenant, undertaking, agreement
or other obligation of the Company contained in this Agreement or in
any certificate delivered hereunder;
(c) the failure or delay by the Company in paying, any and all
excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral; or
(d) any defense, setoff, counterclaim, recoupment or reduction
or liability whatsoever of the account debtor or obligor under any of
the Collateral, arising out of a breach by the Company of any
obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such
account debtor or obligor or its successors from the Company.
Section 5.19. Medicare Matters.
(a) Directions to Obligors. The Company agrees to notify and instruct
all obligors from time to time with respect to any Medicare Receivables to make
any and all payments in respect of such Medicare Receivable only to the Medicare
Collection Account.
(b) No Commingling. The Company agrees that only the Proceeds of
Medicare Receivables will be deposited into the Medicare Collection Account and
that no other funds or payments will be commingled with such Medicare
Receivables or the Proceeds thereof. The Company agrees that all Medicare
Receivables and the Proceeds thereof will at all times be segregated from all
other funds, be identifiable as Proceeds of Medicare Receivables and will not be
commingled with any other funds. The Company agrees that all other funds of the
Company will be deposited or paid, in accordance with the Cash Management
System, into Pledged Accounts other than the Medicare Collection Account.
(c) Certification. Within 10 days after the end of each calendar month,
the Company will provide to the Agent (i) a written certification of the Chief
Financial Officer of the Company stating that all deposits made into the
Medicare Collection Account consist only of Proceeds of Medicare Receivables and
(ii) a true, correct and complete copy of a bank statement showing such
deposits.
Section 5.20. Further Assurances. At any time and from time to time,
upon the written request of the Agent, and at the sole expense of the Company,
the Company will promptly and duly execute and deliver such further instruments
and documents and
<PAGE> 20
take such further action as the Agent may reasonably request for the purpose of
obtaining or preserving the full benefits of this Security Agreement and of the
rights and powers herein granted, including, without limitation, the filing of
any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the Liens created hereby and all
actions and filings necessary to maintain the Collateral Agent's first priority
perfected Lien on, security interest in and pledge of all of the Collateral. The
Company also hereby authorizes the Collateral Agent to file any such financing
or continuation statement without the signature of the Company to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Security Agreement shall be sufficient as a financing statement for filing
in any jurisdiction.
ARTICLE VI
Remedies
Section 6.01. Remedies. If an Event of Default shall occur and be
continuing, the Collateral Agent and the Agent shall have each and every right
and remedy available to it whether at law, in equity or otherwise, including,
without limitation, each of the following:
(a) UCC Remedies. The Collateral Agent or the Agent may
exercise all rights and remedies in respect of the Collateral available
to a secured party under the Uniform Commercial Code in effect in the
relevant jurisdiction (whether or not the Uniform Commercial Code
applies to the affected Collateral), by law or otherwise.
(b) Exercise Rights of Company. The Collateral Agent or the
Agent may exercise any and all rights and remedies of the Company under
or in respect of the Collateral, including, without limitation, any and
all rights of the Company to demand or otherwise require payment of any
amount under, or performance of any provision of, the Collateral, or
the right of the Company to vote or consent with respect to any
Collateral.
(c) Take Possession of Collateral. The Collateral Agent or the
Agent may take possession of the Collateral and, without liability for
trespass, enter on any premises for the purpose of taking possession of
or removing any Collateral.
(d) Right to Sell Collateral.
(i) The Collateral Agent or the Agent may, without demand of
performance or other demand, presentment, protest, advertisement or
notice of any kind, and without notice to the Company except as
specified in this Section 6.01, sell, lease, assign, give option or
options to purchase, or otherwise dispose of and deliver all or any
part of the Collateral in one or more parcels at public or private
sale, at any of the Collateral Agent's offices, on any securities
exchange, or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Agent may deem commercially reasonable.
(ii) The Company agrees that, to the extent notice of sale
shall be required by law, at least ten days notice to the Company of
the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.
The Collateral Agent shall not be obligated to consummate any sale of
Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public sale from time to time by any
notice or announcement and may make any sale without further notice of
the time and
<PAGE> 21
place to which the sale was so adjourned.
(iii) For purposes of this Agreement, a written agreement to
purchase all or any of the Collateral shall be deemed to be a sale of
that property and the Collateral Agent shall be free to carry out the
agreement notwithstanding that the Event of Default shall have been
cured and the Obligations paid in full.
(iv) If all or any part of the Collateral is sold on credit or
for future delivery, the property may be retained by the Collateral
Agent until the sale price is paid by the purchaser or purchasers, but
the Collateral Agent shall not be liable if the purchaser or purchasers
fail to take up and pay for the property and, in that event, the
Collateral Agent may again sell the property pursuant to this Section.
(v) The Collateral Agent may restrict the bidders or
purchasers to persons (A) representing that they are purchasing the
Collateral for their own account for investment and not with a view to
further distribution or sale and (B) satisfying the offeree and
purchaser requirements for a valid private placement or limited
offering under the Securities Act of 1933, as amended. The Company
understands and agrees that the sale may be made at prices and on terms
less favorable than a public sale and agrees that any such sale shall
be deemed to have been made in a commercially reasonable manner even if
the Collateral Agent accepts the first offer received.
(vi) To the extent permitted by law, the Collateral Agent, the
Agent or any Lender may purchase all or any part of the Collateral at
any public or private sale or sales free of any equity or right of
redemption, stay, valuation or appraisal on the part of the Company
(all said rights being hereby waived and released to the extent
permitted by law) and may make payment for the purchase by using any
claim then due and payable to the Collateral Agent, the Agent or any
Lender, as applicable, from the Company as a credit against the
purchase price, and the Collateral Agent may, upon compliance with the
terms of sale, hold, retain and transfer the property without further
accountability to the Company.
(vii) Each purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of the
Company, and the Company hereby waives (to the extent permitted by law)
all rights of redemption, stay, valuation and appraisal which the
Company now has or may at any time in the future have under rule of law
or statute now existing or hereafter enacted.
(e) Store Collateral. The Collateral Agent or the Agent may
cause any Collateral to be held, stored, processed or completed prior
to sale, and expenses incurred for this purpose shall constitute
Obligations hereunder. The Company agrees to assemble the Collateral
and make it available to the Collateral Agent and the Agent at places
where the Collateral Agent or the Agent may reasonably select, whether
at the Company's premises or elsewhere.
(f) Notices to Account Debtors, Obligors, Etc. The Collateral
Agent or the Agent may, without notice to the Company, (i) notify the
account debtors, obligors or bailees under or of any of the Collateral
of the assignment and pledge to the Agent of the Collateral, (ii)
direct the account debtors or obligors to make payment and direct the
bailees to make delivery directly to the Collateral Agent, or as the
Agent shall otherwise direct, of all amounts due or to become due to
the Company under the Collateral and (iii) collect, adjust, settle or
compromise those obligations. While the Collateral Agent is exercising
any authority under this Section the Company shall not adjust, settle
or compromise any obligation under the Collateral, release wholly or
partly any account debtor or obligor in respect of those obligations,
or allow any credit or discount on those obligations.
<PAGE> 22
(g) All Other Remedies. The Collateral Agent and the Agent may
exercise all other rights and/or remedies available, whether at law, in
equity or otherwise.
Section 6.02. Waiver. To the extent permitted by applicable law, the
Company waives all claims, damages and demands it may acquire against the
Collateral Agent, the Agent or any of the Lenders arising out of the exercise by
the Collateral Agent, the Agent or any Lender of any of their rights under this
Agreement.
Section 6.03. Remedies Cumulative. All rights and remedies of the
Collateral Agent, the Agent and the Lenders existing under this Agreement and
any other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
Section 6.04. Payments Held in Trust. All payments, funds, instruments
and other items received by the Company under or in respect of any Collateral
shall be received in trust for the Collateral Agent, segregated from other funds
of the Company and promptly delivered to the Collateral Agent in the same form
received, together with all necessary endorsements or Stock Powers.
Section 6.05. Application of Funds.
(a) Funds Applied in Accordance with Credit Agreement. The Agent shall
apply all Account Collateral and all payments received under or in respect of
all other Collateral and all cash proceeds received by the Collateral Agent and
the Agent in respect of any sale of, collection from, or other realization upon
all or any part of the Collateral in accordance with the Credit Agreement.
(b) Company Remains Liable. The Company shall remain fully liable for
any deficiency if the proceeds or other realization of the Collateral are
insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Collateral Agent, the Agent or the Lenders to collect
such deficiency.
(c) Collateral In Excess of Obligations. Any amount held by the
Collateral Agent under this Agreement after all the Obligations have been
indefeasibly and finally paid in full in cash shall be paid over to the Company
or to any other Person lawfully entitled to receive payment.
ARTICLE VII
Appointment, Rights and Duties of Collateral Agent
Section 7.01. Appointment of Collateral Agent. In accordance with the
provisions of Section 8.1B of the Credit Agreement, The Chase Manhattan Bank is
hereby appointed Collateral Agent hereunder and under the other Loan Documents
as successor to the Original Agent and the Agent and each Lender hereby
authorizes the Collateral Agent to act as its collateral agent in accordance
with the terms of this Agreement and the other Loan Documents.
Section 7.02. Collateral Agent Appointed Attorney-in-Fact. The Company
hereby irrevocably appoints the Collateral Agent (with full power of
substitution) the Company's attorney-in-fact, with full authority in the place
and stead of the Company and in the name of the Company or otherwise, from time
to time in the Agent's discretion, to execute any instrument and to take any
other action that the Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation:
<PAGE> 23
(a) Further Documents. To execute, deliver and file on behalf
of and in the name of the Company one or more financing statements,
notices, copies of this Agreement or such other documents, and
amendments and continuations to those statements or documents, relating
to all or any part of the Collateral without the signature of the
Company where permitted by law. The Company agrees that a carbon,
photographic or other reproduction of this Agreement, any financing
statement, notice or other document covering the Collateral shall be
sufficient as a financing statement where permitted by law.
(b) Continue Perfection. To take any and all actions on behalf
of and in the name of the Company, at the Company's expense, which are
necessary or advisable to ensure that (i) the Liens granted pursuant to
this Security Agreement at all times constitute perfected Liens in
favor of the Collateral Agent, for the ratable benefit of the Lenders,
and (ii) such Liens are at all times prior to all other Liens on the
Collateral and will be enforceable as such against all creditors of,
and purchasers from, the Company and against any owner or purchaser of
the real property where any of the Equipment is located and any present
or future creditor obtaining a Lien on such real property.
(c) Insurance Matters. To obtain and adjust insurance required
to be paid to the Collateral Agent pursuant to Section 5.17 and cancel,
assign, and surrender any policies of insurance.
(d) Pay Taxes. To pay or discharge taxes and Liens levied or
placed on or threatened against the Collateral, to effect any repairs
called for by the terms of this Security Agreement and to pay all or
any part of the costs thereof.
(e) Collect Collateral. Upon the occurrence and during the
continuation of an Event of Default, to ask, demand, collect, sue for,
recover, compromise, receive, indorse and give acquittance, discharge
and receipts for moneys or other instruments, documents and chattel
paper due and to become due under or in respect of all or any part of
the Collateral (whether as interest, dividend, other distribution or
otherwise) and to direct any party liable for any payment under any of
the Collateral to make such payment directly to the Collateral Agent or
as the Agent shall direct.
(f) Institute Proceedings. Upon the occurrence and during the
continuation of an Event of Default, to file any claims, proofs of
claim, subrogation receipts or take any action or commence or institute
any proceedings which the Agent may deem necessary or desirable for the
collection of all or any part of the Collateral or otherwise to enforce
the rights of the Collateral Agent with respect to all or any part of
the Collateral.
(g) Transfer Collateral Into Collateral Agent's Name. Upon the
occurrence and during the continuation of an Event of Default, to
transfer any Collateral into the Collateral Agent's or its nominee's
name.
(h) Vote Collateral. Upon the occurrence and during the
continuation of an Event of Default, to exercise all or any of the
voting rights and other consensual rights pertaining to the Collateral.
(i) Other Actions. (x) Upon the occurrence and during the
continuation of an Event of Default, to take any other action it deems
advisable with respect to the Collateral or to accomplish the purposes
of this Agreement, including, but not limited to, (i) sell or assign
any Account upon such terms, for such amount and at such time or times
as Agent deems advisable, (ii) notify the post office authorities to
change the address for delivery of Company's mail to an address
designated by Agent, and open all mail addressed to Company and (iii)
do all other acts and
<PAGE> 24
things necessary, in Agent's determination, to fulfill Company's
obligations under this Agreement or any of the other Loan Documents;
and (y) at any time that Agent determines that it is necessary or
appropriate to preserve, protect, insure or maintain its rights
hereunder (i) take control, in any manner, of any item of payment or
proceeds of any Collateral, (ii) sign Company's name on any of the
documents described in Section 5.20 and 7.02(a) or on any other similar
documents to be executed, recorded or filled in order to perfect or
continue perfected Agent's and Collateral Agent's security interest in
the Collateral and file or record any of the foregoing documents, (iii)
endorse Company's name on any items of payment or proceeds thereof and
deposit the same to the account of Agent or the Collateral Agent for
application to the Obligations, (iv) sign Company's name on any
invoices, bills of lading, freight bills, chattel paper, documents,
instruments or similar documents or agreement relating to any Accounts
or any goods pertaining thereto or any other Collateral, (v) sign
Company's name on any verification of Accounts and notices thereof to
Account debtors.
The Company hereby ratifies all that said attorney shall lawfully do or cause to
be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
Section 7.03. Collateral Agent May Perform. If the Company fails to
perform any obligation under this Agreement or under or in respect of any
Collateral or any representation of the Company contained in this Agreement or
in any document included in the Collateral shall be untrue or incorrect in any
material respect, the Collateral Agent or the Agent may, but shall be under no
obligation to, perform the obligation or remedy that breach, or cause it to be
performed or remedied, and the expenses incurred by or on behalf of the
Collateral Agent and the Agent in connection with the performance of the
obligation or the remedy of the breach shall constitute Obligations.
Section 7.04. Duties of Collateral Agent.
(a) Duties. The powers conferred on the Agent and the Collateral Agent
by this Agreement are solely to protect the Collateral Agent's, the Agent's and
the Lenders' interest in the Collateral and shall not impose on the Collateral
Agent, the Agent or any Lender any duty to exercise any powers. Except for the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it under this Agreement, the Collateral Agent, the Agent
nor any Lender shall have any duty or liability as to any Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or as
to any other rights or matters pertaining to any Collateral. The Collateral
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral Agent treats
the Collateral substantially the same as it treats similar property of its own.
(b) Not Responsible. The Collateral Agent, the Agent and the Lenders
shall not have any responsibility or liability for (i) ascertaining or taking
action with respect to calls, con versions, exchanges, maturities, tenders or
other matters relative to any Collateral, whether or not the Collateral Agent,
the Agent or any Lender has or is deemed to have knowledge of such matters, (ii)
taking any necessary steps to preserve rights against any parties with respect
to any Collateral, (iii) collecting any proceeds of any Collateral or by reason
of any invalidity, lack of value or uncollectability of any of the payments
received by it from obligors or otherwise or (iv) any other matter in connection
with any Loan Document except in respect of duties specifically undertaken by it
in this Agreement and in that case none of the Collateral Agent, the Agent or
any of the Lenders shall be liable to any party in the absence of gross
negligence or willful misconduct.
<PAGE> 25
ARTICLE VIII
Termination and Waiver
Section 8.01. Continuing Security Interest. This Agreement shall create
a continuing security interest in, Lien on, and pledge of, the Collateral,
without respect to the amount of the Obligations outstanding from time to time,
and shall remain in full force and effect until the Obligations have been
indefeasibly paid and otherwise performed in full in cash. Thereafter, this
Agreement shall be reinstated if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned upon the insolvency,
bankruptcy or reorganization of the Company or any other Person or otherwise,
all as though the payment had not been made.
Section 8.02. Termination. Upon the indefeasible payment and
performance of the Obligations in full in cash, the security interests granted
by this Agreement shall terminate and all rights to the Collateral shall revert
to the Company. At the Company's expense, the Collateral Agent shall then
execute and deliver to the Company the documents reasonably requested and
prepared by the Company to evidence the termination.
Section 8.03. Waiver. The Company unconditionally waives, to the full
extent permitted by law:
(a) Set-Off. Any defense, set-off or counterclaim which the
Company may otherwise assert against the Collateral Agent, the Agent or
the Lenders.
(b) Notice, etc. Presentment, protest, demand for payment,
promptness, diligence, notice of protest, notice of any other action at
any time taken or omitted by the Collateral Agent, the Agent or any
Lender and, generally, all demands and notices of every kind in
connection with any Loan Document or the Obligations, including,
without limitation:
(i) notice of any of the matters referred to in
Section 8.04; and
(ii) all notices which may be required by statute,
rule of law or otherwise, now or hereafter in effect, to
preserve intact any rights against the Company under any Loan
Document or as a requirement to the enforcement, assertion or
exercise against the Company of any right, power, privilege or
remedy conferred under any Loan Document.
(c) Exhaust Other Remedies. Any requirement to exhaust any
rights or remedies or to mitigate the damages resulting from any
default under any Loan Document or any other document or any
requirement to protect, secure, perfect or insure any Lien or any
property subject to the Lien or take any other action against any
person or any collateral or other property.
(d) Claims. All claims that the sale price of any Collateral
was inadequate or unreasonable for any reason and all other claims to
damages and demands of any nature against the Collateral Agent, the
Agent and the Lenders.
(e) Equitable Rights. All equities and rights of appraisal,
stay and redemption (whether now or hereafter existing), in each case
arising out of the Collateral Agent, the Agent or the Lenders enforcing
any of their rights and remedies under any Loan Document.
(f) Subrogation and/or Contribution. Any exoneration or
release from the Obligations resulting from any loss by the Company of
its rights, if any, of subrogation or contribution.
<PAGE> 26
(g) Other Circumstances. Any other circumstance whatsoever,
including, without limitation, those stated in Section 8.04, which
might otherwise constitute a defense to or a legal or equitable
discharge or release of a guarantor or surety or a party granting
security or which might otherwise limit recourse against the Company.
Section 8.04. Obligations Not Affected. The rights of the Collateral
Agent, the Agent and the Lenders and the obligations of the Company under this
Agreement shall be absolute and unconditional, present and continuing and shall
remain in full force and effect and shall not be released, discharged or in any
way affected by any circumstance or condition of any nature (whether or not the
Company, the Collateral Agent, the Agent or any Lender shall have any notice or
knowledge of the circumstance or condition), including, without limitation:
(a) Failure of Documents. The invalidity, illegality,
unenforceability, discharge, termination, cancellation or frustration,
in whole or in part, of any Obligation, Loan Document or other
document.
(b) Failure to Exercise Rights and/or Remedies. The exercise
or failure to exercise by any person any right, remedy, privilege or
power under any Loan Document or other document.
(c) Collection Attempts. Any demand or attempt to collect
from, or failure to demand or attempt to collect from, the Company or
any other Person under any Loan Document or other document.
(d) Security and Guarantees. The giving, acceptance,
existence, non-existence, validity, invalidity or value of any security
or collateral securing the Obligations or any guarantee of the
Obligations, including, without limitation, the Collateral and the
guarantees by the Subsidiary Guarantors, any attempt or failure to
attempt to realize upon that security, collateral or guarantee or the
exchange, substitution, renewal, extension, modification, compromise,
release, discharge or failure to perfect for any reason that security,
collateral or guarantee.
(e) Actions. Any change in the time, place or manner of
payment or the waiver, consent, extension, renewal, indulgence,
compromise, release, settlement, refunding, funding, or any other
forbearance or other action taken, delayed or omitted by the Collateral
Agent, the Agent, any Lender, the Company, or any other Person under or
in respect of any term or provision of any Obligation, Loan Document or
other document.
(f) Modifications. The termination, modification, alteration,
amendment, waiver, addition, deletion or other change to any
Obligation, Loan Document or other document or any provision of any of
those documents.
(g) Reorganizations. The liquidation, dissolution, merger or
consolidation of the Company or any other Person, or the transfer by
the Company or any other Person of all or any part of its property or
assets, or the change in the ownership of any shares of capital stock
of the Company or any other Person.
(h) Bankruptcy. The voluntary or involuntary bankruptcy,
receivership, liquidation, insolvency, reorganization, arrangement,
assignment for the benefit of creditors or similar proceedings
involving or affecting the Company any other Person or any of their
property.
<PAGE> 27
(i) Release. The release or discharge, by operation of law or
otherwise, of the Company or any other Person from any Obligation or
any provision of any Loan Document or other document.
(j) Other Circumstances. Any other circumstance whatsoever,
foreseen or unforseen, which may or might in any manner or to any
extent vary the risks of the Company or otherwise constitute a defense
available to or a legal or equitable discharge of or limit recourse
against a surety, a guarantor or a party granting security, the Company
or otherwise.
ARTICLE IX
Miscellaneous
Section 9.01. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telexed or sent by telefacsimile (so
long as such notice sent by telefacsimile is followed within two Business Days
by a notice sent by another method specified hereunder) or United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service, upon receipt of telefacsimile or telex, or three Business
Days after depositing it in the United States mail with postage prepaid and
properly addressed; provided that notices to Agent shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be as
set forth under such party's name on the signature pages hereof or (i) as to
Company, the Collateral Agent and Agent, such other address as shall be
designated by such Person in a written notice delivered to the other parties
hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Agent.
Section 9.02. Expenses. The Company agrees to pay to the Collateral
Agent, the Agent and the Lenders on demand the amount of any and all expenses,
including, without limitation, the fees and expenses of the Collateral Agent's,
the Agent's or the Lenders' counsel, which the Collateral Agent, the Agent or
any Lender may pay or incur in exercising or enforcing their rights under this
Agreement.
Section 9.03. Transfer of Notes. If any Lender shall transfer any Note
held by it or grant participations in all or any of its Obligations, the
transferees of the Note or the grantees of the participations, as the case may
be, shall have the rights of the Lender under this Agreement in respect of the
Note or Obligations.
Section 9.04. Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, and by different parties hereto in
separate counterparts, each of which when executed will be deemed an original,
but all of which taken together will constitute one and the same instrument.
Section 9.05. Interpretation. As used in this Agreement, references to
the singular will include the plural and vice versa and references to the
masculine gender will include the feminine and neuter genders and vice versa, as
appropriate. Unless otherwise expressly provided in this Agreement (a) the words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement will refer to this Agreement as a whole and not to any particular
provision of this Agreement and (b) article, section, subsection, schedule and
exhibit references are references with respect to this Agreement unless
otherwise specified. References in this Agreement to any law or regulation will
refer to such laws and regulations as from time to time amended and to any laws
or regulations successor thereto. Unless the context otherwise requires, the
term "including" will mean "including, without limitation".
<PAGE> 28
Section 9.06. Descriptive Headings. The headings in this Agreement and
in the Schedules, Exhibits and Annexes are included for convenience of reference
only and will not affect in any way the meaning or interpretation of this
Agreement.
Section 9.07. Incorporation of Schedules, Exhibits and Annexes. The
Schedules, Exhibits and Annexes hereto are incorporated into this Agreement and
will be deemed a part hereof as if set forth herein in full. In the event of any
conflict between the provisions of this Agreement and any Schedule, Exhibit or
Annex, the provisions of this Agreement will control.
Section 9.08. Amendment of Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 9.09. Successors and Assigns. This Agreement will be binding
upon and inures to the benefit of and is enforceable by the respective
successors and permitted assigns of the parties hereto. This Agreement may not
be assigned by any party hereto without the prior written consent of all other
parties hereto except for the assignment of all or any part of the rights and
obligations of the Collateral Agent under this Agreement, which may be assigned
by the Collateral Agent as provided in Section 8.1B and 9.1 of the Credit
Agreement. Any assignment or attempted assignment in contravention of this
Section will be void ab initio and will not relieve the assigning party of any
obligation under this Agreement
Section 9.10. No Waiver; Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement will operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege will not preclude any other or further exercise of the
right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement and the other Loan
Documents will be cumulative and not exclusive of any rights or remedies
provided by law.
Section 9.11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
Section 9.12. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the state of New York applicable to
contracts executed in and to be performed entirely within that state.
Section 9.13. No Third-Party Rights. This Agreement is not intended,
and will not be construed, to create any rights in any parties other than the
Company, the Collateral Agent, the Agent and the Lenders, and no Person may
assert any rights as third-party beneficiary hereunder, except as provided in
Section 5.18.
Section 9.14. Submission to Jurisdiction. Any Action with respect to
this Agreement may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and each of the
Company, the Collateral Agent, the Agent and the Lenders hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of these courts. Each of the Company, the Collateral Agent, the
Agent and the Lenders hereby irrevocably waives
<PAGE> 29
any objection, including, without limitation, any objection to the laying of
venue or based on the grounds of forum non conveniens, which it may now or
hereafter have to the bringing of any Action in those jurisdictions.
Section 9.15. Waiver of Jury Trial. Each party waives any right to a
trial by jury in any Action to enforce or defend any right under this Agreement
or any amendment, instrument, document or agreement delivered or to be delivered
in connection with this Agreement and agrees that any Action will be tried
before a court and not before a jury.
<PAGE> 30
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above in New York, New York.
NORTHSTAR HEALTH SERVICES, INC.
By:_____________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as
Collateral Agent for the Lenders
By:_____________________________________
Name:
Title:
CERBERUS CAPITAL MANAGEMENT, L.L.C,
as Agent for the Lenders
By:_____________________________________
Name:
Title:
<PAGE> 31
List of Annexes, Schedules and Exhibits
---------------------------------------
Annex A Cash Management System
Schedule 4.08(a) Certain Accounts
Schedule 4.08(c) List of Accounts, Negotiable Collateral, Instruments
and General Intangibles
Schedule 4.09(b) Certain Contracts
Schedule 4.09(d) List of Contracts
Schedule 4.10 Proprietary Rights
Schedule 4.11 Investment Property
Schedule 4.12 Inventory, Equipment and Fixtures
Schedule 4.13 Vehicles
Schedule 4.14 Governmental Obligors
Exhibit 3.03(a) Form of Account Notice
Exhibit 3.05(c) Form of Blocked Account Agreement
Exhibit 3.05(i) (1),
(2), (3) and (4) Form of Addendum to Management Agreement
Exhibit 5.02 Form of Landlord Waiver
Exhibit 5.14(d)(i) Form of Notice of Security Interest--Patents
Exhibit 5.14(d)(ii) Form of Memorandum of Security Interest--Trademarks
<PAGE> 32
ANNEX A
to
AMENDED AND RESTATED COMPANY SECURITY AGREEMENT
Cash Management System
Subject in all cases to the rights of the Agent, the Collateral Agent
and the Lenders in the event that an Event of Default shall have occurred and be
continuing as set forth in Section F below, the Company and the Subsidiaries
shall maintain and manage the Pledged Accounts strictly in accordance with the
following:
A. NO COMMINGLING OF NON-COLLATERAL WITH COLLATERAL
1. The Company will not, and will cause each of its Subsidiaries not to,
make, or permit to be made, any deposit consisting of funds or other
amounts that are not Collateral or Proceeds of Collateral into any
Pledged Account. The Company shall, and shall cause each of its
Subsidiaries to, make, or permit to be made, deposits consisting only
of Collateral or Proceeds of Collateral into any Pledged Account.
B. TRANSFERS INTO COMPANY NON-MEDICARE COLLECTION ACCOUNT
2. The Company and each of its Subsidiaries shall instruct each obligor or
account debtor to deliver or pay all non-Medicare Proceeds of
Collateral, payments, collections, funds, cash and other monies
(collectively, the "Non-Medicare Funds") owed or payable to the Company
or such Subsidiary directly to the Non-Medicare Collection Account. All
Non-Medicare Funds collected or received by the Company or any
Subsidiary of the Company, shall immediately, but no later than the
close of business on the day on which such Non-Medicare Funds are
received, be deposited in the Non-Medicare Collection Account.
C. TRANSFERS INTO COMPANY MEDICARE COLLECTION ACCOUNT
3. The Company and each of its Subsidiaries shall instruct each obligor or
account debtor to deliver or pay all Medicare Proceeds of Collateral,
payments, collections, funds, cash and other monies (collectively, the
"Medicare Funds") owed or payable to the Company or such Subsidiary
directly to the Medicare Collection Account by wire transfer of
immediately available funds. All Medicare Funds collected or received
by the Company or any of its Subsidiaries shall immediately, but no
later than the close of business on the day on which such Funds are
received, be deposited in the Medicare Collection Account.
<PAGE> 33
D. TRANSFERS INTO CONCENTRATION ACCOUNT
4. The Company, the Agent and S&T Bank shall enter into Blocked Account
Agreements pursuant to which S&T Bank shall be instructed to transfer
all available funds in the Non-Medicare Collection Account to the
Concentration Account once (or more frequently as directed by the
Agent) daily prior to the close of business on each Business Day (the
"Non-Medicare Sweep").
5. The Company, Agent and Collateral Agent shall enter into Blocked
Account Agreements pursuant to which the Collateral Agent shall be
instructed to transfer all available funds in the Medicare Collection
Account to the Concentration Account once daily (or more frequently as
directed by the Agent) prior to the close of business on each Business
Day (the"Medicare Sweep").
E. TRANSFERS FROM THE CONCENTRATION ACCOUNT
6. On any Business Day, the Collateral Agent is authorized upon receipt of
written instructions from the Agent, to make a transfer from the
Concentration Account to an account maintained by the Agent, the
Lenders, the Collateral Agent or any third party, of any amounts which
the Collateral Agent or the Agent is instructed by the Lenders to
disburse under or pursuant to the Loan Documents, to the Agent, the
Collateral Agent, the Lenders or any other party.
7. No earlier than one Business Day prior to the day on which the Company
is required to make a payroll payment to its officers and employees,
the Company shall be entitled to transfer an amount equal to (but not
greater than) the amount required to make the next aggregate payroll
payment that the Company is required to make (the "Payroll Amount")
from the Concentration Account to the Payroll Account.
8. On each Business Day, the Company shall be entitled to transfer an
amount equal to the funds required to cover the checks presented for
payment out of the Disbursement Account for such Business Day (such
amount being the "Disbursement Amount") from the Concentration Account
to the Disbursement Account; provided, however, that any funds
remaining in the Disbursement Account at the close of business on any
day shall automatically be transferred back to the Concentration
Account.
F. EVENTS OF DEFAULT
If an Event of Default shall have occurred and be continuing,
notwithstanding any other provision of this Cash Management System to the
contrary:
9. With respect to each and all of the Pledged Accounts, the Agent, the
Collateral Agent and/or the Lenders shall have the right to immediately
take control of any or all such Pledged Accounts and exercise their
rights under the Blocked Account Agreements.
10. Except for the Medicare Sweep and the Non-Medicare Sweep, no funds may
be withdrawn, transferred, paid or disbursed out of the Medicare
Collection Account, the Non-Medicare Collection Account, the
Concentration Account, the Disbursement Account or the Payroll Account
without the prior written consent of the Agent, which
may be withheld in its sole and absolute discretion.
11. At the discretion of the Agent, and without the consent of, or notice
to, the Company, (i) the Collateral Agent shall withdraw any and all
funds held in the Medicare Collection Account, the Concentration
Account, the Disbursement Account and/or the Payroll Account and (ii)
S&T Bank shall withdraw any and all
<PAGE> 34
funds held in the Non- Medicare Collection Account.
12. The Collateral Agent, the Agent or the Lenders shall have the right to
instruct any obligor, payor or account debtor to make any payments
otherwise payable to the Company or any of its Subsidiaries, directly
to the Agent or as the Agent may direct.
13. If the Agent or the Lenders shall so elect funds held in the Payroll
Account or the Disbursement Account shall immediately be transferred to
the Concentration Account.
14. The Collateral Agent, the Agent and the Lenders shall be entitled to
exercise any and all other rights they may have under the Loan
Documents, the UCC or applicable law.
<PAGE> 35
EXHIBIT 3.03(a)
to
COMPANY SECURITY AGREEMENT
Form of Account Notice
[TO BE PROVIDED BY JEREMY FRIEDBERG]
<PAGE> 36
EXHIBIT 3.05(c)
to
COMPANY SECURITY AGREEMENT
Form of Blocked Account Agreement
See attached sheets.
<PAGE> 37
EXHIBIT 3.05(i)
to
COMPANY SECURITY AGREEMENT
Form of Addenda to Management Agreements
(1) See attached sheets.
(2) See attached sheets.
(3) See attached sheets.
(4) See attached sheets.
<PAGE> 38
EXHIBIT 5.02
to
COMPANY SECURITY AGREEMENT
Form of Landlord Waiver
______________ __, 1999
Cerberus Capital Management, LLC, as Agent
450 Park Avenue
New York, New York 10022
Re: Waiver, License and Agreement by Landlord
Gentlemen:
We are the owners of record of real property at ________________________ (the
"Premises"). The Premises are occupied by ________________________ ("Tenant"),
under a lease dated _________________ (the "Lease").
You have previously entered into or are about to enter into certain financing
agreements (the "Agreements") with Tenant and you have requested that we grant
this Waiver. We understand that the payment and performance of all of Tenant's
obligations to you, including without limitation indebtedness arising under the
Agreements, is and shall be secured by a security interest in, among other
things, all of the present and future inventory and equipment owned by Tenant,
and the proceeds and products thereof (as defined in the Uniform Commercial
Code), now or hereafter located at the Premises (the "Collateral").
In consideration of financial accommodations extended by you to Tenant, and in
recognition of the benefits afforded to Tenant therefrom, we hereby waive any
present or future interest which we may have in the Collateral, regardless of
how such interest arises or has arisen, including, but not limited to, any lien
for unpaid rent, whether arising under statute, common law or any agreement
between us and Tenant (including the Lease).
Furthermore, we grant you the right to enter the Premises for the purpose of
repossessing, removing, selling or otherwise handling the Collateral in
accordance with the provisions of the Agreements (said right hereinafter
referred to as the "License"). The License shall continue, at your option, for a
minimum of ninety (90) days from the date you enter into possession of the
Premises. As a condition of your exercise of the License, you agree to pay to
the undersigned a per diem license fee based upon the average monthly rental
provided for in the Lease. In no event shall the License continue beyond the
time that the Collateral remains on the Premises.
We understand that you will rely upon this instrument in connection with your
financial accommodations to Tenant, and that any additional financial
accommodations you may hereafter extend will also be in reliance on this
instrument.
This Waiver, License and Agreement may not be changed or terminated orally, and
it shall be binding upon the successors, transferees, and assigns of the
undersigned.
Very truly yours,
<PAGE> 39
State of _______________
.ss:
County of ______________
On the ___ day of ___________, 1999 before me personally came
_______________ to me known, who, being by me duly sworn, did depose and say
that (s)he resides at ________; that (s)he is the _______________ of
____________, the corporation described in an which executed the foregoing
instrument; that (s)he knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was affixed by order of the
board of directors of said corporation, and that (s)he signed her/his name
thereto by like order.
_______________________________
Notary Public
<PAGE> 40
EXHIBIT 5.14(d)(i)
to
AMENDED AND RESTATED COMPANY SECURITY AGREEMENT
Form of Notice of Security Interest in Patents
September 30, 1999
United States Department of Commerce
Commissioner of Patents and Trademarks
Box Assignments
Washington, D.C. 20231
Northstar Health Services, Inc.
Ladies and Gentlemen:
Pursuant to an Amended and Restated Security Agreement, dated
as of September 30, 1999 (the "Security Agreement"), NORTHSTAR HEALTH SERVICES,
INC., a Delaware corporation, (the "Assignor"), has granted THE CHASE MANHATTAN
BANK, as Collateral Agent, (the "Assignee") a continuing security interest in,
and a continuing lien upon, the Patents (as such term is defined in the Security
Agreement) including the patents and patent applications listed on the annexed
Annex A, and all applications, registrations, renewals and proceeds (including
accounts receivable and royalties) thereof (the "Patents"). The Assignee's
security interest in the Patents can only be terminated in accordance with the
terms of the Security Agreement.
Very truly yours,
NORTHSTAR HEALTH SERVICES,
INC.
By_________________________________
Name:
Title:
ACKNOWLEDGED BY:
THE CHASE MANHATTAN BANK,
as Collateral Agent
By_________________________________
Name:
Title:
<PAGE> 41
ANNEX A
to
NOTICE OF SECURITY INTEREST IN PATENTS
Patents
United States Patent Numbers and
Design Patent Numbers Issue Date
--------------------- ----------
None
----
Patent Licenses
---------------
United States
Patent Number Owner Issue Date
------------- ----- ----------
None
----
Patent Applications
-------------------
Nature of
Serial No. Owner Interest Filing Date
---------- ----- -------- -----------
None
----
<PAGE> 42
EXHIBIT 5.14(d)(ii)
to
AMENDED AND RESTATED COMPANY SECURITY AGREEMENT
Form of Memorandum of Security Interest in Trademarks
September 30, 1999
United States Department of Commerce
Commissioner of Patents and Trademarks
Box Assignments
Washington, D.C. 20231
Northstar Health Services, Inc.
Ladies and Gentlemen:
Pursuant to an Amended and Restated Security Agreement, dated as of
September 30, 1999 (the "Security Agreement"), NORTHSTAR HEALTH SERVICES, INC.,
a Delaware corporation, (the "Assignor"), has granted THE CHASE MANHATTAN BANK,
as Collateral Agent, (the "Assignee") a continuing security interest in, and a
continuing lien upon, the Trademarks (as such term is defined in the Security
Agreement) including the trademarks listed on the annexed Annex A, and all
applications, registrations, renewals and proceeds (including accounts
receivable and royalties) thereof (the "Trademarks"), together with the goodwill
of the business connected with the use of and symbolized by the Trademarks. The
Assignee's security interest in the Trademarks can only be terminated in
accordance with the terms of the Security Agreement.
Very truly yours,
NORTHSTAR HEALTH SERVICES, INC.
By________________________
Name:
Title:
ACKNOWLEDGED BY:
THE CHASE MANHATTAN BANK,
as Collateral Agent
By_________________________
Name:
Title:
<PAGE> 43
ANNEX A
to
MEMORANDUM OF SECURITY INTEREST IN TRADEMARKS
Trademarks
Mark: Keystone Rehabilitation Systems + design
Reg. No.: 1,490,615
Reg. Date: May 31, 1988
Class: Int. Class 42; U.S. Class 100
Trademark Applications
Mark: K Keystone Rehabilitation Enterprises
Serial Number: 75/521065
Filing Date: July 17, 1998
<PAGE> 44
[EXECUTION COPY]
NON-BANK CERTIFICATE
Reference is made to the Credit Agreement, dated as of September 30,
1999 (as supplemented, amended or restated from time to time, the "Credit
Agreement"), among Northstar Health Services, Inc., and its subsidiaries,
Cerberus Capital Management, LLC, as Agent, The Chase Manhattan Bank, as
Collateral Agent and certain other financial institutions. Pursuant to the
provisions of Section 2.6B(iii) of the Credit Agreement, the undersigned hereby
certifies that it is not a "bank" as such term is used in Section 881(c)(3)(A)
of the United States Internal Revenue Code of 1986, as amended.
Dated as of September 30, 1999
BEAR STEARNS & CO.
By_________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.6
[EXECUTION COPY]
AMENDED AND RESTATED SUBSIDIARIES GUARANTEE
This AMENDED AND RESTATED SUBSIDIARIES GUARANTEE dated as of September
30, 1999, among the subsidiaries of Northstar Health Services, Inc. (the
"Company") set forth on Schedule I hereto (as the successors to the Guarantors
(as such term is defined in the Original Guarantee (as defined below)), each, a
"Guarantor", and collectively, the "Guarantors"), CERBERUS CAPITAL MANAGEMENT,
LLC (the "Agent") and THE CHASE MANHATTAN BANK, as Collateral Agent as provided
for in Section 8.1B of the Credit Agreement referred to below (as successor
collateral agent to IBJ WHITEHALL BANK & TRUST COMPANY, formerly known as IBJ
SCHRODER BANK & TRUST COMPANY, the "Collateral Agent"), amends and restates in
its entirety that certain Subsidiaries Guarantee, dated as of October 20, 1995
(as amended, modified or supplemented prior to the date hereof, the "Original
Guarantee"), among the Guarantors and IBJ Schroder Bank & Trust Company (the
"Original Agent").
RECITALS
A. The Company, the Original Agent and the lenders set forth on the
signature pages thereto are parties to that certain Credit Agreement, dated as
of October 20, 1995 (as amended, modified or supplemented prior to the date
hereof, the "Original Credit Agreement"), pursuant to which the Lenders agreed
to extend certain credit facilities to the Company (the "Original Loans") which
were represented by certain promissory notes (the "Original Notes"), the
proceeds of which were used (i) to refinance substantially all indebtedness of
the Company and the Guarantors outstanding on the date thereof, (ii) to pay
certain fees and expenses, (iii) to provide financing for the working capital
needs of the Company and the Guarantors and (iv) to provide a portion of the
purchase price of certain acquisitions by the Company and the Guarantors.
B. The Original Agent now wishes to resign as agent for the Lenders and
the Agent wishes to replace the Original Agent as agent for the Lenders.
C. The Company, the Guarantors, the Lenders, the Agent and the
Collateral Agent (together with the Agent, the "Agents") have agreed to amend
and restate the Original Credit Agreement as of the date hereof (the Original
Credit Agreement, as so amended and restated being referred to herein as the
"Credit Agreement") to (i) extend the maturity of the Original Loans on the
terms set forth therein, (ii) reflect the Original Agent's resignation as agent
for the Lenders thereunder and the appointment of the Agent as successor agent
for the Lenders, and (iii) make certain other changes as more fully set forth
therein.
D. The Guarantors and the Agents now wish to amend and restate the
Original Guarantee in its entirety to (i) provide for the continuation of the
guarantee of the Obligations by the Guarantors and (ii) reflect the Original
Agent's resignation as agent for the Lenders and the appointment of the Agent as
its successor as agent for the Lenders.
E. The Company owns, directly or indirectly, all of the issued and
outstanding capital stock of the Guarantors.
F. The Company and the Guarantors are engaged in related businesses,
and each of the Guarantors will derive substantial direct and indirect benefit
from the continuation of the Loans pursuant to the Credit Agreement.
G. It is the intent of the Company, the Guarantors, the Lenders, the
Agent and
<PAGE> 2
the Collateral Agent that the amendment and restatement of the Original Credit
Agreement shall not constitute a novation of the obligations and liabilities of
the parties under the Original Credit Agreement nor be deemed to evidence or
constitute repayment of all or any portion of such obligations and liabilities
and that the Credit Agreement shall amend and restate in its entirety the
Obligations under the Original Credit Agreement and re-evidence the Obligations
of the Company outstanding thereunder.
H. Each of the Guarantors hereby represents and confirms, and the
Agents acknowledge, that (i) the guarantee of the Obligations pursuant to the
Original Guarantee continues in full force and effect and continues as a valid
and enforceable guarantee of the Obligations under the Credit Agreement, (ii)
the Loans represented by the Notes are the same Original Loans which were, prior
to the date hereof, represented by the Original Notes, and (iii) the
transactions contemplated by the Credit Agreement and this Agreement did not and
do not constitute a discharge or release of the guarantee under the Original
Guarantee and that the guarantee of the Obligations continues as a valid
guarantee of the Loans and the Obligations.
I. It is a condition precedent to the obligation of the Lenders to
amend and restate the Original Credit Agreement and to extend the maturity of
the Original Loans that the Guarantors execute this Agreement and continue to
guarantee the Obligations.
AGREEMENT
In consideration of the premises and the mutual covenants and the
mutual agreements herein set forth, the parties agree as follows:
ARTICLE I
Definitions
Section 1.01. Certain Defined Terms. Capitalized terms used but not
defined herein have the meanings given to them in the Credit Agreement.
ARTICLE II
Guarantee
Section 2.01. Unconditional Guarantee. The Guarantors, jointly and
severally, hereby unconditionally guarantee to the Agent and the Collateral
Agent for their benefit and the ratable benefit of the Lenders the due and
punctual payment of the Obligations when and as the Obligations shall become
due, whether at maturity, by acceleration or otherwise. The obligations of the
Guarantors under this Agreement constitute an absolute, unconditional, present
and continuing irrevocable guaranty of payment and not of collectibility. If the
Company shall fail to pay any amount of the Obligations when due the Guarantors
shall immediately pay the amount to the Agent for its benefit, the benefit of
the Collateral Agent and the ratable benefit of the Lenders.
Section 2.02. No Defenses.
(a) Laws. Each Guarantor guarantees that the Obligations will be paid
to the Agents and the Lenders strictly in accordance with the terms of the Loan
Documents regardless of any law, statute, regulation, rule, writ, judgment,
order, decree or award now or hereafter in effect which might in any way affect
any of those terms or the rights
<PAGE> 3
of the Agents or the Lenders against the Company or the Guarantors, or which
might cause or permit to be invoked any alteration of the time, amount or manner
of payment by the Company or the Guarantors under those terms.
(b) No Other Defenses. To the full extent permitted by law, the
obligations of the Guarantors under this Guarantee shall not be subject to any
counterclaim, set-off, deduction, diminution, abatement, recoupment, suspension,
deferment, reduction or defense (other than the full and strict compliance by
the Guarantors with those obligations) based on any claim that any Guarantor or
any other Person may have against the Company, the Agents, any Lender or any
other Person.
(c) Guarantee Unaffected. The obligations of the Guarantors under this
Agreement shall be absolute and unconditional, present and continuing and shall
remain in full force and effect and shall not be released, discharged or in any
way affected by any circumstance or condition of any nature (whether or not any
Guarantor, the Company, the Agents or any Lender shall have any notice or
knowledge of the circumstance or condition), including, without limitation:
(i) the invalidity, illegality, unenforceability, discharge,
termination, cancellation or frustration, in whole or in part, of any
Obligation, Loan Document or other document;
(ii) the exercise or failure to exercise or enforce by any
Person any right, remedy, privilege or power under any Loan Document or
other document;
(iii) any demand or attempt to collect from, or failure to
demand or attempt to collect from, the Company, Guarantor or any other
Person under any Loan Document or other document;
(iv) the giving, acceptance, existence, non-existence,
validity, invalidity or value of any security or collateral, including,
without limitation, the Collateral and the Pledged Collateral, securing
the Obligations or any guarantee of the Obligations or any attempt or
failure to attempt to realize upon that security, collateral or
guarantee;
(v) the exchange, substitution, renewal, extension,
modification, compromise, release, discharge or failure to perfect for
any reason any security, collateral or Guarantee, including, without
limitation, the guarantee under this Agreement;
(vi) any change in the time, place or manner of payment or the
waiver, consent, extension, renewal, indulgence, compromise, release,
settlement, refunding, funding, or any other forbearance or other
action taken, delayed or omitted by the Agents, any Lender, the
Company, any Guarantor or any other Person under or in respect of any
term or provision of any Obligation, Loan Document or other document;
(vii) the termination, modification, alteration, amendment,
waiver, addition, deletion or other change to any Obligation, Loan
Document or other document or any provision of any of those documents;
(viii) the liquidation, dissolution, merger or consolidation
of the Company, any Guarantor or any other Person, or the transfer by
the Company, any Guarantor or any other Person of all or any part of
its property or assets;
(ix) the voluntary or involuntary bankruptcy, receivership,
liquidation, insolvency, reorganization, arrangement, assignment for
the benefit of creditors
<PAGE> 4
or similar proceedings involving or affecting the Company, any
Guarantor or any other Person or any of their property;
(x) the change in the ownership of any shares of capital stock
of the Company or any Guarantor or the change in or termination of the
corporate relationship between the Company and any Guarantor, as the
case may be;
(xi) the release or discharge, by operation of law or
otherwise, of the Company, any Guarantor or any other Person from any
Obligation or any provision of any Loan Document or other document; and
(xii) any other circumstance whatsoever, foreseen or
unforseen, which may or might in any manner or to any extent vary the
risks of any Guarantor or might otherwise constitute a defense
available to or a legal or equitable discharge of a surety or a
guarantor or limit recourse against any Guarantor or otherwise.
IT IS THE PURPOSE AND INTENT OF THIS GUARANTY AGREEMENT THAT THE OBLIGATIONS OF
THE GUARANTORS UNDER THIS AGREEMENT ARE ABSOLUTE AND UNCONDITIONAL, PRESENT AND
CONTINUING UNDER ANY AND ALL CIRCUMSTANCES.
Section 2.03. Right of Set-off. Upon the occurrence and during the
continuation of an Event of Default, the Agents and the Lenders are hereby
irrevocably authorized at any time and from time to time without notice to, or
the consent of, any Guarantor, any such notice being hereby waived by the
Guarantors, to set off and appropriate and apply any and all deposits (general
or special, time or demand, provisional or final, but excluding trust deposits),
in any currency, and any other credits, indebtedness or claims, in any currency,
in each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by the Agents or any Lender to or for the
credit or the account of such Guarantor, or any part thereof in such amounts as
the Agents or any Lender may elect, on account of the liabilities of such
Guarantor hereunder and claims of every nature and description of the Agents or
any Lender against such Guarantor, in any currency, whether arising hereunder,
under the Loan Documents, the Notes or otherwise, as the Agents or any Lender
may elect, whether or not the Agents or any Lender has made any demand for
payment and although such liabilities and claims may be contingent or unmatured.
The Agents or such Lenders shall notify such Guarantor promptly of any such
set-off and the application made by the Agents or such Lenders, provided that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of the Agents or any Lender under this paragraph are
in addition to other rights and remedies, including, without limitation, other
rights of set-off, which the Agents or such Lenders may have.
ARTICLE III
Representations and Warranties
Each of the Guarantors hereby represents and warrants to the Agents
and the Lenders as follows:
Section 3.01. Power. Such Guarantor has good right and all necessary
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, including, without limitation, the guarantee
of the Obligations.
Section 3.02. Authorization; Binding Effect. The execution and delivery
by such Guarantor of this Agreement, the performance by such Guarantor of its
obligations
<PAGE> 5
under this Agreement and the consummation of the transactions contemplated
hereby has been duly authorized by all necessary corporate or partnership
action, as the case may be. No other proceedings on the part of such Guarantor
are necessary to approve and adopt this Agreement or to approve the consummation
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by such Guarantor and is a legal, valid and binding obligation of
such Guarantor enforceable against such Guarantor in accordance with its terms.
Section 3.03. Contravention. Neither the execution, delivery and
performance of this Agreement by such Guarantor nor the consummation of the
transactions contemplated hereby will (with or without notice or lapse of time
or both) (a) conflict with, violate or breach any provision of such Guarantor's
organizational documents or bylaws, (b) violate, conflict with or result in a
breach of any Regulation, writ, judgment, injunction, order, decree or award of
any Governmental Body or any other Person by which such Guarantor or any of its
properties may be bound or affected, (c) conflict with, result in a default
under, or give rise to a right of termination, cancellation, or acceleration or
to a loss of a benefit under any material contract or agreement to which such
Guarantor is a party or by which such Guarantor or any of its properties may be
bound or affected or (d) result in or require the creation or imposition of any
Lien on any property now owned or hereafter acquired by such Guarantor.
Section 3.04. Approvals. No authorization, consent, order or approval
of, notice to or registration or filing with, or any other action by any
Governmental Body or other Person, is required or advisable in connection with
(a) the due execution and delivery by such Guarantor of this Agreement, (b) the
consummation of the transactions contemplated by this Agreement, (c) the
performance by such Guarantor of its obligations under this Agreement, or (d)
the exercise by the Agents or any Lender of their rights and remedies under this
Agreement.
Section 3.05. Credit Agreement Representations and Warranties. Each of
the representations and warranties set forth in the Credit Agreement is true and
correct insofar as the same relate to such Guarantor, and such representations
and warranties are hereby incorporated by reference as if set forth in full
herein. Such Guarantor agrees that such representations and warranties shall be
deemed to have been made by such Guarantor on the date of each borrowing by the
Company under the Credit Agreement on and as of the date of borrowing as though
made hereunder on and as of such date.
ARTICLE IV
Covenants
Section 4.01. Credit Agreement Covenants. Each of the Guarantors
covenants and agrees that it will perform or comply with each of the covenants
and agreements contained in the Credit Agreement to the extent such covenants
relate to such Guarantor, and such covenants and agreements are hereby
incorporated by reference as if set forth in full herein.
ARTICLE V
Termination, Waivers and Subrogation
Section 5.01. Continuing Guaranty. This Agreement shall continue to be
effective and shall remain in full force and effect until the Obligations shall
be paid and otherwise performed in full. For the purposes of this Agreement, the
Obligations shall not be deemed to have been paid and performed in full until
the holders or owners of the Obligations shall have indefeasibly received
payment of the Obligations in full in cash. Thereafter, this Agreement shall be
reinstated if at any time any payment of any
<PAGE> 6
of the Obligations is rescinded or must otherwise be returned upon the
insolvency, bankruptcy or reorganization of the Company or any other person or
otherwise, all as though the payment had not been made.
Section 5.02. Waivers by the Guarantors. Each of the Guarantors
unconditionally waives, to the full extent permitted by law:
(a) Set-Off. Any defense, set-off or counterclaim which such
Guarantor may otherwise assert against the Agents, the Lenders or any
other Person.
(b) Notice, etc. Presentment, protest, demand for payment,
promptness, diligence, notice of protest, notice of any other action at
any time taken or omitted by the Agents, any Lender or any other Person
and, generally, all demands and notices of every kind in connection
with any Loan Document or the Obligations, including, without
limitation:
(i) notice of any of the matters referred to in
Section 2.02(c); and
(ii) all notices which may be required by statute,
rule of law or otherwise, now or hereafter in effect, to
preserve intact any rights against the Company or such
Guarantor under any Loan Document or as a requirement to the
enforcement, assertion or exercise against the Company of any
right, power, privilege or remedy conferred under any Loan
Document.
(c) Exhaust Other Remedies. Any requirement to exhaust any
rights or remedies or to mitigate the damages resulting from any
default under any Loan Document or any other document or any
requirement to protect, secure, perfect or insure any Lien or any
property subject to the Lien or take any other action against any
person or any collateral or other property.
(d) Claims. All claims that the sale price of any Collateral
was inadequate or unreasonable for any reason and all other claims to
damages and demands of any nature against the Agents and the Lenders.
(e) Equitable Rights. All equities and rights of appraisal,
stay and redemption (whether now or hereafter existing), in each case
arising out of the Agents or the Lenders enforcing any of their rights
and remedies under any Loan Document.
(f) Other Circumstances. Any other circumstance whatsoever,
including, without limitation, those stated in Section 2.02(c), which
might otherwise constitute a defense to or a legal or equitable
discharge or release of a guarantor or surety or a party granting
security or which might otherwise limit recourse against such
Guarantor.
Section 5.03. Subrogation; Subordination.
(a) Subrogation. No Guarantor shall be subrogated, in whole or in part,
to the rights of the Agents or any Lender against the Company under any Loan
Document until the payment in full of the Obligations.
(b) Subordination. Any claim of any Guarantor against the Company
arising from payments made by such Guarantor under this Agreement shall be in
all respects subordinate to the payment and performance in full and discharge of
the Obligations.
(c) No Claims. No payment under this Agreement by any Guarantor shall
give rise to any claim of such Guarantor against the Agents, the Lenders or any
other holder of the Obligations.
<PAGE> 7
(d) No Assignment of Claims. Unless and until all Obligations shall
have been paid and performed in full, no Guarantor will assign or otherwise
transfer any claim against the Company to any other person.
(e) Postponement of Rights. Each Guarantor agrees that any rights it
may have against any other guarantor of any of the Obligations for
contributions, exoneration from payment or otherwise, in respect of any amounts
paid by such Guarantor under this Agreement or which may continue to be owing
under this Agreement, shall be postponed until, and such Guarantor agrees not to
seek to enforce any such right until, the Obligations are paid and performed in
full.
Section 5.04. Effect of Bankruptcy Proceedings. If an event permitting
the acceleration of any of the Obligations shall at any time have occurred and
be continuing, and the acceleration shall at such time be prevented by reason of
the pendency against the Company of a case or proceeding under a bankruptcy or
insolvency law, each Guarantor agrees that, for purposes of this Agreement and
each Guarantor's obligations under this Agreement, the Obligations shall be
deemed to have been accelerated with the same effect as if they had been
accelerated in accordance with the terms of the Loan Documents. In such an event
each Guarantor shall immediately pay the full amount of the Obligations due and
owing by reason of the acceleration, without further notice or demand.
ARTICLE VI
Miscellaneous
Section 6.01. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telexed or sent by telefacsimile (so
long as such notice sent by telefacsimile is followed within two Business Days
by a notice sent by another method specified hereunder) or United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service, upon receipt of telefacsimile or telex, or three Business
Days after depositing it in the United States mail with postage prepaid and
properly addressed; provided that notices to Agent shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be as
set forth under such party's name on the signature pages hereof or (i) as to
Company, the Collateral Agent and Agent, such other address as shall be
designated by such Person in a written notice delivered to the other parties
hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Agent.
Section 6.02. Expenses. Each Guarantor agrees to pay any and all
expenses, including, without limitation, all fees and disbursements of counsel,
which may be paid or incurred by the Agents or any Lender in enforcing, or
obtaining advice of counsel in respect of, any rights with respect to, or
collecting, any or all of the Obligations and/or enforcing any rights with
respect to, or collecting against, such Guarantor under this Guarantee.
Section 6.03. Transfer of Notes. If any Lender shall transfer any Note
held by it or grant participations in all or any of its Obligations, the
transferees of the Note or the grantees of the participations, as the case may
be, shall have the rights of the Lender under this Agreement in respect of the
Note or Obligations.
Section 6.04. Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, and by different parties hereto in
separate counterparts,
<PAGE> 8
each of which when executed will be deemed an original, but all of which taken
together will constitute one and the same instrument.
Section 6.05. Interpretation. As used in this Agreement, references to
the singular will include the plural and vice versa and references to the
masculine gender will include the feminine and neuter genders and vice versa, as
appropriate. Unless otherwise expressly provided in this Agreement (a) the words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement will refer to this Agreement as a whole and not to any particular
provision of this Agreement and (b) article, section, subsection, schedule and
exhibit references are references with respect to this Agreement unless
otherwise specified. References in this Agreement to any law or regulation will
refer to such laws and regulations as from time to time amended and to any laws
or regulations successor thereto. Unless the context otherwise requires, the
term "including" will mean "including, without limitation".
Section 6.06. Descriptive Headings. The headings in this Agreement and
in the Schedules, Exhibits and Annexes are included for convenience of reference
only and will not affect in any way the meaning or interpretation of this
Agreement.
Section 6.07. Incorporation of Schedules, Exhibits and Annexes. The
Schedules, Exhibits and Annexes hereto are incorporated into this Agreement and
will be deemed a part hereof as if set forth herein in full. In the event of any
conflict between the provisions of this Agreement and any Schedule, Exhibit or
Annex, the provisions of this Agreement will control.
Section 6.08. Amendment of Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 6.09. Successors and Assigns. This Agreement will be binding
upon and inures to the benefit of and is enforceable by the respective
successors and permitted assigns of the parties hereto. This Agreement may not
be assigned by any party hereto without the prior written consent of all other
parties hereto. Any assignment or attempted assignment in contravention of this
Section will be void ab initio and will not relieve the assigning party of any
obligation under this Agreement.
Section 6.10. No Waiver; Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement will operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege will not preclude any other or further exercise of the
right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement and the other Loan
Documents will be cumulative and not exclusive of any rights or remedies
provided by law.
Section 6.11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
Section 6.12. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the state of New York applicable to
contracts executed in and to be performed entirely within that state.
<PAGE> 9
Section 6.13. No Third-Party Rights. This Agreement is not intended,
and will not be construed, to create any rights in any parties other than the
Guarantors, the Agents and the Lenders, and no Person may assert any rights as
third-party beneficiary hereunder.
Section 6.14. Submission to Jurisdiction. Any Action with respect to
this Agreement may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and each of the
Guarantors, the Agents and the Lenders hereby accepts for itself and in respect
of its property, generally and unconditionally, the jurisdiction of these
courts. Each of the Guarantors, the Agents and the Lenders hereby irrevocably
waives any objection, including, without limitation, any objection to the laying
of venue or based on the grounds of forum non conveniens, which it may now or
hereafter have to the bringing of any Action in those jurisdictions.
Section 6.15. Waiver of Jury Trial. Each party waives any right to a
trial by jury in any Action to enforce or defend any right under this Agreement
or any amendment, instrument, document or agreement delivered or to be delivered
in connection with this Agreement and agrees that any Action will be tried
before a court and not before a jury.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above in New York, New York.
AGENT:
CERBERUS CAPITAL MANAGEMENT, LLC,
Address: as Agent for the Lenders
450 Park Avenue
New York, New York 10022
Attention: Joyce Johnson-Miller
Telephone: (212) 891-2119
Facsimile: (212) 750-5212 By:________________________________
Name:
Title:
COLLATERAL AGENT:
THE CHASE MANHATTAN BANK, as
Address: Collateral Agent for the Lenders
450 West 33rd Street
14th Floor
New York, New York 10001
Attention: Capital Markets Fiduciary
Services, Cerberus Capital
Telephone: (212) 946-3200
Facsimile: (212) 946-8302 By:________________________________
Name:
Title:
<PAGE> 10
SUBSIDIARY GUARANTORS:
Address: NSHS SERVICES, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zavcha
Telephone: (724) 465-3200
Facsimile: (724) 465-3726 By:________________________________
Name:
Title:
Address: KEYSTONE REHABILITATION
SYSTEMS, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zavcha
Telephone: (724) 465-3200
Facsimile: (724) 465-3726 By:________________________________
Name:
Title:
Address: KEYSTONE REHABILITATION
MANAGEMENT, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zavcha
Telephone: (724) 465-3200
Facsimile: (724) 465-3726 By:________________________________
Name:
Title:
<PAGE> 11
Address: NORTHSTAR MEDICAL SERVICES, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zavcha
Telephone: (724) 465-3200
Facsimile: (724) 465-3726 By:________________________________
Name:
Title:
Address: NORTHSTAR DIAGNOSTIC SERVICES, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zavcha
Telephone: (724) 465-3200
Facsimile: (724) 465-3726 By:________________________________
Name:
Title:
Address: VASCUSONICS, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zavcha
Telephone: (724) 465-3200
Facsimile: (724) 465-3726 By:________________________________
Name:
Title:
<PAGE> 12
SCHEDULE I
to
AMENDED AND RESTATED SUBSIDIARIES GUARANTEE
Guarantors
NSHS Services, Inc.
Keystone Rehabilitation Systems, Inc.
Keystone Rehabilitation Management Inc.
Northstar Medical Services, Inc.
Northstar Diagnostic Services, Inc.
Vascusonics Inc.
<PAGE> 1
EXHIBIT 10.7
[EXECUTION COPY]
AMENDED AND RESTATED COMPANY PLEDGE AGREEMENT
This AMENDED AND RESTATED COMPANY PLEDGE AGREEMENT dated as of
September 30, 1999, among NORTHSTAR HEALTH SERVICES, INC., a Delaware
corporation (the "Company"), CERBERUS CAPITAL MANAGEMENT, LLC (the "Agent") and
THE CHASE MANHATTAN BANK, as Collateral Agent as provided for in Section 8.1B of
the Credit Agreement referred to below (as successor collateral agent to IBJ
WHITEHALL BANK & TRUST COMPANY, formerly known as IBJ SCHRODER BANK & TRUST
COMPANY, the "Collateral Agent"), amends and restates in its entirety that
certain Pledge Agreement, dated as of October 20, 1995 (as amended, modified or
supplemented prior to the date hereof, the "Original Pledge Agreement"), between
the Company and IBJ Schroder Bank & Trust Company (the "Original Agent").
RECITALS
A. The Company, the Original Agent and the lenders set forth on the
signature pages thereto are parties to that certain Credit Agreement, dated as
of October 20, 1995 (as amended, modified or supplemented prior to the date
hereof, the "Original Credit Agreement"), pursuant to which the Lenders agreed
to extend certain credit facilities to the Company (the "Original Loans") which
were represented by certain promissory notes (the "Original Notes"), the
proceeds of which were used (i) to refinance substantially all indebtedness of
the Company and its Subsidiaries outstanding on the date thereof, (ii) to pay
certain fees and expenses, (iii) to provide financing for the working capital
needs of the Company and its Subsidiaries and (iv) to provide a portion of the
purchase price of certain acquisitions by the Company and its Subsidiaries.
B. The Company secured all of the Obligations under the Original Credit
Agreement and under the other Loan Documents by granting to the Original Agent,
on behalf of Lenders, a first priority security interest in all of its personal
property, including, without limitation, a pledge of all of the capital stock of
each of its Subsidiaries.
C. The Original Agent now wishes to resign as agent for the Lenders and
(i) the Agent wishes to replace the Original Agent as agent for the Lenders and
(ii) the Collateral Agent wishes to replace the Original Agent as collateral
agent for the Lenders under this Agreement.
D. The Company, the Lenders, the Agent and the Original Agent have
agreed to amend and restate the Original Credit Agreement as of the date hereof
(the Original Credit Agreement, as so amended and restated being referred to
herein as the "Credit Agreement") to (i) extend the maturity of the Original
Loans on the terms set forth therein, (ii) reflect the Original Agent's
resignation as agent for the Lenders thereunder and the appointment of the Agent
as successor agent for the Lenders and the appointment of the Collateral Agent
as its successor as collateral
<PAGE> 2
agent for the Lenders under this Agreement, and (iii) make certain other changes
as more fully set forth therein.
E. The Company, the Agent and the Collateral Agent now wish to amend
and restate the Original Pledge Agreement in its entirety to (i) secure the
Lenders= interest in the Obligations and (ii) reflect the Original Agent's
resignation as collateral agent for the Lenders and the appointment of the
Collateral Agent as its successor as collateral agent for the Lenders.
F. It is the intent of the Company, the Lenders, the Agent and the
Collateral Agent that the amendment and restatement of the Original Credit
Agreement shall not constitute a novation of the obligations and liabilities of
the parties under the Original Credit Agreement nor be deemed to evidence or
constitute repayment of all or any portion of such obligations and liabilities
and that the Credit Agreement shall amend and restate in its entirety the
Obligations under the Original Credit Agreement and re-evidence the Obligations
of Company outstanding thereunder.
G. The Company represents and confirms, and the Agent and the
Collateral Agent each acknowledge, that (i) the pledge of the pledged collateral
and securities pursuant to the Original Pledge Agreement continues in full force
and effect and continues to secure the Obligations under the Credit Agreement,
(ii) the Loans represented by the Notes are the same Original Loans which were,
prior to the date hereof, represented by the Original Notes, and (iii) the
transactions contemplated by the Credit Agreement and this Agreement did not and
do not constitute a discharge or release of the pledge under the Original Pledge
Agreement and that the pledge and the Pledged Collateral (as defined below)
securing the Original Loans and Obligations continue to secure the Loans and the
Obligations.
AGREEMENT
In consideration of the premises and the mutual covenants and the
mutual agreements herein set forth and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
ARTICLE I
Definitions
Section 1.01. Certain Defined Terms. Unless otherwise defined herein,
capitalized terms used but not otherwise defined in this Agreement have the
meaning given to them in the Credit Agreement. In addition, the following terms
have the following meanings:
"Action" against a Person means an action, suit,
investigation, complaint, litigation, arbitration, contest, hearing,
inquiry, inquest, audit, examination or other
-2-
<PAGE> 3
proceeding threatened or pending against or affecting the Person or its
property, whether civil, criminal, administrative, investigative or
appellate, in law or equity before any arbitrator or Governmental Body.
"Governmental Body" means any agency, bureau, commission,
court, department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Issuer" means each of the corporations and entities set forth
on Schedule 4.09 as an issuer of Pledged Stock and any other
corporation or entity that becomes a Subsidiary of the Company.
"Obligors" means each of the individuals, corporations and
entities set forth on Schedule 4.10 as an obligor of Pledged Debt and
any other corporation or entity that becomes a Subsidiary of the
Company.
"Pledged Debt" means all indebtedness, together with any notes
or other instruments evidencing or representing such indebtedness, and
all options or other rights of any nature whatsoever which may be
issued or granted by any of the Obligors to the Company while this
Agreement is in effect, each as set forth on Schedule 4.10 hereto.
"Pledged Shares" means the shares of capital stock and other
equity interests, together with all certificates representing such
shares or equity interests, and all options or other rights of any
nature whatsoever which may be issued or granted by any of the Issuers
to the Company while this Agreement is in effect, each as set forth on
Schedule 4.09 hereto.
"Regulation" means each applicable law, rule, regulation,
order or recommendation (or any change in its interpretation or
administration) by any Governmental Body, central bank or comparable
agency and any request or directive (whether or not having the force of
law) of any of those Persons and each writ, judgment, injunction,
order, decree or award of any arbitrator or Governmental Body.
-3-
<PAGE> 4
ARTICLE II
Pledge and Grant of Security
Section 2.01. Pledge and Grant of Security. As collateral security for
the prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Company hereby
assigns and pledges to the Collateral Agent for its benefit and the ratable
benefit of the Lenders and grants to the Collateral Agent for its benefit and
the ratable benefit of the Lenders a Lien on, security interest in and pledge of
all of the right, title and interest of the Company in and to the following
(collectively, the "Pledged Collateral"):
(a) Pledged Shares. The Pledged Shares and all dividends,
cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
all or any of the Pledged Shares.
(b) Additional Equity Interests. All additional shares of
capital stock or other equity interests of the Issuers from time to
time acquired by the Company in any manner, the certificates
representing those additional shares, all options and other rights of
any nature whatsoever which may be issued or granted by any of the
Issuers to the Company while this Agreement is in effect, and all
dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for all or any of those shares.
(c) Pledged Debt. All Pledged Debt and all interest, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for all or any of
the indebtedness.
(d) Additional Indebtedness. All additional indebtedness from
time to time owed to the Company by any Obligor of the Pledged Debt,
the instruments evidencing the additional indebtedness and all
interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for all or any of the additional indebtedness.
(e) Other Securities and Instruments. All notes, certificates
of deposit, certificates and all other instruments from time to time
delivered to or otherwise possessed by the Collateral Agent for or on
behalf of the Company in substitution for or in addition to all or part
of the Pledged Stock, the Pledged Debt or the Pledged Collateral.
(f) Subscription and Other Rights. All rights to subscribe for
securities, and all other rights incident to the Pledged Stock, the
Pledged Debt or the Pledged Collateral.
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(g) Proceeds. All proceeds of any and all of the foregoing
Pledged Collateral.
ARTICLE III
Company Remains Liable; Proceeds; Delivery and Voting of Pledged Collateral
Section 3.01. Company Remains Liable. Anything in this Agreement to the
contrary notwithstanding:
(a) Company Remains Liable. The Company shall remain liable to
fully and timely perform all its obligations (whether under contract,
law or otherwise) under or in respect of the Pledged Collateral to the
same extent as if this Agreement had not been executed.
(b) Company Not Released. The exercise by the Collateral
Agent, the Agent or any Lender of any of their rights under any Loan
Document shall not release the Company from any of those obligations.
(c) Collateral Agent, Agent and Lenders Not Liable. Neither
the Collateral Agent, the Agent nor any Lender shall have, by reason of
any Loan Document, any duty, obligation or liability under or in
respect of any Pledged Collateral or any contract or agreement included
in the Pledged Collateral.
(d) Collateral Agent, Agent and Lenders Not Obligated to
Perform. Neither the Collateral Agent, the Agent nor any Lender shall
be obligated to perform any of the obligations of the Company under or
in respect of any Pledged Collateral or any other contract or agreement
included in the Pledged Collateral or to take any action to collect or
enforce any claim for payment assigned by this Agreement.
Section 3.02. Proceeds. Unless an Event of Default shall have occurred
and is continuing:
(a) Hold in Trust. The Company shall hold the funds,
instruments and other items received as proceeds of Pledged Collateral
in trust for the Collateral Agent, segregated from other funds of the
Company and shall deliver the funds, instruments and other items to the
Collateral Agent in the form received, together with any necessary
endorsements.
(b) Deposit. Upon the receipt of the proceeds referred to in
Section 3.02(a), the Collateral Agent shall deposit the proceeds into
the Concentration Account (as defined in the Company Security
Agreement). Thereafter, the proceeds shall be treated and applied in
the same manner as other funds in the Concentration Account.
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Section 3.03. Delivery of Pledged Collateral
(a) Delivery to Collateral Agent. All certificates and instruments,
whether negotiable or otherwise, representing or evidencing the Pledged
Collateral shall be delivered to the Collateral Agent duly endorsed in blank or
accompanied by undated stock powers, instruments of transfer or undated
assignments duly executed in blank, in each case with signatures guaranteed and
otherwise in form and substance satisfactory to the Agent (the "Stock Powers").
(b) Re-registration of Pledged Collateral. At the request of the Agent,
the Company shall promptly cause the Pledged Collateral specified by the Agent
to be registered in the name of the Collateral Agent, the Agent or in the name
of the nominee or nominees specified by the Agent.
(c) Exchange of Certificates. The Collateral Agent may from time to
time exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations.
Section 3.04. Voting of Pledged Collateral. Unless an Event of Default
shall have occurred and is continuing, the Company shall be entitled to exercise
any and all voting and other consensual rights pertaining to all or any part of
the Pledged Collateral for any purpose not inconsistent with or in violation of
any of the terms of this Agreement or of any other Loan Document; provided,
however, that the Company shall not exercise or refrain from exercising any
right if, in the sole judgment of the Agent, the action would have a material
adverse effect on the value of all or any part of the Pledged Collateral or on
the interest of the Company, the Collateral Agent, the Agent or the Lenders in
any of the Pledged Collateral. The Company shall give the Collateral Agent and
the Agent at least five Business Days prior written notice of the manner in
which it intends to exercise, or the reasons for refraining from exercising, any
such right.
ARTICLE IV
Representations and Warranties of the Company
The Company hereby represents and warrants to the Collateral Agent, the
Agent and the Lenders as follows:
Section 4.01. Power. The Company has good right and all necessary power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, including, without limitation, the granting of
the security interests, Liens and pledges in the Pledged Collateral to the
Collateral Agent.
Section 4.02. Authorization; Binding Effect. The execution and delivery
by the Company of this Agreement, the performance by the Company of its
obligations under this
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Agreement and the consummation of the transactions contemplated hereby has been
duly authorized by all necessary corporate action. No other proceedings on the
part of the Company are necessary to approve and adopt this Agreement or to
approve the consummation of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Company and is a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
Section 4.03. Contravention. Neither the execution, delivery and
performance of this Agreement by the Company nor the consummation of the
transactions contemplated hereby will (with or without notice or lapse of time
or both) (a) conflict with, violate or breach any provision of the Company's
organizational documents or bylaws, (b) violate, conflict with or result in a
breach of any Regulation, writ, judgment, injunction, order, decree or award of
any Governmental Body or any other Person by which the Company, any of the
Pledged Collateral or any of its other properties may be bound or affected, (c)
conflict with, result in a default under, or give rise to a right of
termination, cancellation, or acceleration or to a loss of a benefit under any
material contract or material agreement to which the Company is a party or by
which the Company, the Pledged Collateral or any of its other properties may be
bound or affected or (d) result in or require the creation or imposition of any
Lien on any Pledged Collateral or any of the other properties now owned or
hereafter acquired by the Company, except for the Liens in favor of the
Collateral Agent created by this Agreement.
Section 4.04. Approvals. No authorization, consent, order or approval
of, notice to or registration or filing with, or any other action by any
Governmental Body or other Person, is required or advisable in connection with
(a) the due execution and delivery by the Company of this Agreement, (b) the
consummation of the transactions contemplated by this Agreement, including the
granting of the security interests, Liens and pledges of the Pledged Collateral
to the Collateral Agent, (c) the perfection of the security interests, Liens and
pledges granted by this Agreement, (d) the performance by the Company of its
obligations under this Agreement, or (e) the exercise by the Collateral Agent of
its rights and remedies under this Agreement.
Section 4.05. Title. The Company is and, with respect to Pledged
Collateral to be acquired, will be, the sole legal, record and beneficial owner
of the Pledged Collateral, free and clear of any Lien, or option in favor of any
other Person, except for the Liens created by this Agreement and the Company has
good and marketable title to the Pledged Collateral. No security agreement,
financing statement or other instrument similar in effect covering all or any
part of the Pledged Collateral is on file in any recording office, except such
as may have been filed in favor of the Collateral Agent relating to this
Agreement.
Section 4.06. Perfected First Priority Liens. The delivery of the
certificates and instruments to the Collateral Agent in accordance with this
Agreement creates a valid and perfected first priority Lien on, security
interest in and pledge of the Pledged Collateral in favor of the Collateral
Agent, for the ratable benefit of the Lenders, which Liens are prior to all
other
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Liens on the Pledged Collateral and which are enforceable as such against (a)
all creditors of, and purchasers from, the Company, (b) any present or future
creditor obtaining a Lien on the Pledged Collateral, and (c) any other third
party, and all filings and other actions necessary or desirable to perfect and
protect such Liens and security interests have been duly made or taken.
Section 4.07. Chief Place of Business. The chief place of business and
chief executive office of the Company are located at The Atrium, 665
Philadelphia Street, Indiana, Pennsylvania 15701. The Company keeps all of its
records concerning the Pledged Collateral only at that address.
Section 4.08. Delivery of Certificates. All of the certificates and
instruments representing or evidencing Pledged Collateral and the Stock Powers
have been duly delivered to the Collateral Agent in accordance with Section
3.03.
Section 4.09. Pledged Shares.
(a) Schedule. Schedule 4.09 sets forth a true, correct and complete
list and description of all of the Pledged Shares and the Issuers thereof.
(b) Duly Authorized, Etc. The Pledged Shares are duly authorized,
validly issued, fully paid and non-assessable.
(c) No Other Securities or Interests. The Pledged Shares constitute all
the issued and outstanding shares of capital stock or equity interests of the
Issuers. There are no (i) outstanding capital stock or securities convertible
into or exchangeable or exercisable for any shares of capital stock or
securities of any Issuer, (ii) outstanding rights to subscribe for or to
purchase, or any options for the purchase of, or any calls, commitments or
claims of any character relating to, any shares of capital stock or securities
of any Issuer, (iii) outstanding securities convertible into or exchangeable or
exercisable for any shares of capital stock or securities of any Issuer and (iv)
agreements or arrangements providing for the issuance of any shares of capital
stock or securities of any Issuer.
Section 4.10. Pledged Debt.
(a) Schedule. Schedule 4.10 sets forth a true, correct and complete
list and description of all of the Pledged Debt and the Obligors thereon.
(b) Duly Authorized, Etc. The Pledged Debt is duly authorized, validly
issued and constitutes the legal, valid and binding obligation of the Issuers
thereof enforceable against each such Issuer in accordance with their respective
terms.
Section 4.11. Pledged Collateral.
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(a) No Voting or Transfer Restrictions. There is no agreement or
arrangement restricting the voting or transfer of the Pledged Collateral except
as provided in this Agreement.
(b) No Payment Restrictions. There are no legal, contractual or other
restrictions on the payment of (i) dividends or other distributions on any
shares of the capital stock or securities of any Issuer, including, without
limitation, the Pledged Shares, or (ii) principal or interest on any
indebtedness of any Issuer, including, without limitation, the Pledged Debt, in
each case, except for restrictions imposed by this Agreement and the Credit
Agreement.
(c) No Repurchase Obligations. No Person is subject to any obligation,
contingent or otherwise, to repurchase or otherwise acquire or retire any of the
Pledged Collateral.
ARTICLE V
Covenants of the Company
Section 5.01. No Liens on Pledged Collateral. The Company will not
create, incur, assume or permit to exist, will defend the Pledged Collateral
against, and will take such other actions as is necessary to remove, any Lien or
claim on or to the Pledged Collateral, other than the Liens created hereby, and
will defend the right, title and interest of the Collateral Agent and the
Lenders in and to any of the Pledged Collateral against the claims and demands
of any and all Persons.
Section 5.02. Perfection. The Company will take any and all actions, at
the Company's expense, which are necessary or advisable to ensure that (a) the
Liens granted pursuant to this Agreement at all times constitute perfected Liens
in favor of the Collateral Agent, for the ratable benefit of the Lenders, and
(b) such Liens are at all times prior to all other Liens on the Pledged
Collateral and will be enforceable as such against (i) all creditors of, and
purchasers from, the Company, (ii) any present or future creditor obtaining a
Lien on the Pledged Collateral, and (iii) any other third party.
Section 5.03. No Dispositions of Pledged Collateral. The Company will
not sell, transfer, lease, convey or otherwise dispose of any of the Pledged
Collateral, or attempt, offer or contract to do so.
Section 5.04. Payment of Obligations. The Company will promptly pay and
discharge when due all taxes, assessments and governmental charges or levies
assessed, levied or imposed upon or relating to, and all claims against, the
Pledged Collateral or the Company or in respect of the Company's income or
profits therefrom, as well as all claims of any kind, including, without
limitation, claims for labor, materials and supplies, against or with respect to
the Pledged Collateral.
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Section 5.05. Compliance with Laws, etc. The Company will comply in all
material respects with all Regulations applicable to the Pledged Collateral or
any part thereof or to the operation of the Company's business.
Section 5.06. Maintenance of Records. The Company will keep and
maintain, at its own cost and expense, satisfactory and complete records of the
Pledged Collateral, including, without limitation, a record of all payments
received. The Company will mark its books and records pertaining to the Pledged
Collateral to evidence this Agreement and the Liens, security interests and
pledges granted hereby. For the Collateral Agent's and Lenders' further
security, the Collateral Agent, for the ratable benefit of the Lenders, shall
have a security interest in all of the Company's books and records pertaining to
the Pledged Collateral and, upon the occurrence of an Event of Default which is
continuing, the Company shall turn over any such books and records to the
Collateral Agent or to its representatives.
Section 5.07. Right of Inspection. The Collateral Agent, the Agent and
the Lenders shall at all times have full and free access during normal business
hours and, upon the occurrence and continuation of an Event of Default, at any
time, to all the books, correspondence and records of the Company, and the
Collateral Agent, the Agent and the Lenders or their respective representatives
may examine the same, take extracts therefrom and make photocopies thereof, and
the Company agrees to render to the Collateral Agent, the Agent and the Lenders,
at the Company's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto.
Section 5.08. Impairment of Pledged Collateral.
(a) General. The Company shall not take, or fail to take, any action in
connection with any Pledged Collateral that would impair the value of the
Pledged Collateral or the interest or rights of the Company, the Collateral
Agent, the Agent or any Lender in, to or under that Pledged Collateral.
(b) Certain Actions Prohibited. The Company will not (i) amend, modify,
terminate, cancel or waive any provision of any Pledged Collateral in any manner
which could reasonably be expected to materially adversely affect the value of
the Pledged Collateral or the interest of the Company, the Collateral Agent, the
Agent or the Lenders in such Pledged Collateral, (ii) fail to exercise promptly
and diligently each and every material right which it may have under or with
respect to the Pledged Collateral or (iii) fail to deliver to the Collateral
Agent a copy of each material demand, notice or document received by it relating
in any way to any of the Pledged Collateral.
(c) Limitations on Extensions. The Company will not grant any extension
of the time of payment of any of the Pledged Collateral, or compromise, compound
or settle the same for less
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than the full amount thereof, release, wholly or partially, any Person liable
for the payment thereof, or allow any credit or discount whatsoever thereon.
Section 5.09. Notices; Reports.
(a) Liens. The Company will advise the Collateral Agent and the Agent
promptly, in reasonable detail, of (i) any Lien (other than Liens created hereby
or permitted under the Credit Agreement) on, or claim asserted against, any of
the Pledged Collateral and (ii) the occurrence of any other event which could
reasonably be expected to have a material adverse effect on (x) the aggregate
value of the Pledged Collateral or (y) the Liens created hereunder.
(b) Reports, Notices, Etc. The Company shall furnish to the Collateral
Agent and the Agent (i) promptly upon receipt, copies of all notices, requests
and other documents received by the Company under or in respect of the Pledged
Collateral, (ii) promptly upon the request of the Agent, information and reports
regarding that Pledged Collateral and (iii) promptly upon the request of the
Agent, make the demands and requests for information or action that the Company
is entitled to make under the Pledged Collateral.
(c) Further Identification of the Pledged Collateral. The Company will
furnish to the Collateral Agent and the Agent from time to time statements and
schedules further listing, identifying and describing the Pledged Collateral and
such other reports in connection with the Pledged Collateral as the Agent may
reasonably request, all in reasonable detail.
Section 5.10. Changes in Locations, Name, etc. The Company will not (i)
change the location of its chief executive office or its chief place of business
from that specified in Section 4.07 or remove its books and records from the
location specified in Section 4.07, or (ii) change its name, identity or
corporate structure or merge or take or suffer any other action that might
result in any financing statement filed by the Collateral Agent in connection
with this Agreement becoming misleading, unless, in each case, it shall have
given the Collateral Agent and the Agent at least 30 days prior written notice
thereof.
Section 5.11. Pledged Collateral.
(a) Collections. Subject to the provisions of Article VI hereof and the
Cash Management System, the Company shall timely collect all amounts due or to
become due to the Company under the Pledged Collateral and otherwise enforce its
rights under and in respect of such Collateral.
(b) Deliver Pledged Collateral to Collateral Agent. In the event that
the Company shall receive any instruments, documents and certificates
representing or evidencing any of the Pledged Collateral, the Company shall
immediately deliver and pledge to the Collateral Agent
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such Pledged Collateral accompanied by Stock Powers, to be held as Pledged
Collateral pursuant to this Agreement.
(c) Performance. The Company will fully and timely perform and observe
all of the terms and provisions of the Pledged Collateral to be performed or
observed by it, except as otherwise provided by law, and maintain the Pledged
Collateral in full force and effect;
(d) No Other Securities. The Company will not permit any Issuer to (i)
issue any capital stock or other securities in addition to or in substitution
for the Pledged Collateral, (ii) issue any other class or series of stock or
securities, (iii) cancel any of the Pledged Collateral, (iv) merge or
consolidate with any Person or acquire all or a substantial portion of the
assets or business of any Person without giving at least 45 days prior written
notice to the Agent or (v) transfer any of its assets except in accordance with
the terms of the Loan Documents.
Section 5.12. Indemnification. The Company will indemnify the
Collateral Agent, the Agent, the Lenders and their respective Affiliates and
each of their respective shareholders, partners, members, directors, officers,
employees, agents and Affiliates (collectively, the "Indemnified Persons")
against and hold each Indemnified Person harmless from any and all liabilities,
obligations, losses, damages, penalties, Actions, judgments, costs, expenses,
claims, diminution in value, or disbursements of any kind or nature whatsoever
(including interest, penalties, fines, judgments, settlements, costs of
preparation and investigation, costs incurred in enforcing this indemnity and
reasonable attorneys' fees and expenses) that the Indemnified Persons may
suffer, sustain, incur or become subject to arising out of, relating to, or due
to:
(a) any inaccuracy or breach of any of the representations and
warranties of the Company contained in this Agreement or in any
certificate delivered hereunder;
(b) the nonfulfillment of any covenant, undertaking, agreement
or other obligation of the Company contained in this Agreement or in
any certificate delivered hereunder;
(c) the failure or delay by the Company in paying, any and all
excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Pledged Collateral; or
(d) any defense, setoff, counterclaim, recoupment or reduction
or liability whatsoever of the account debtor or obligor under any of
the Pledged Collateral, arising out of a breach by the Company of any
obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such
account debtor or obligor or its successors from the Company.
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Section 5.13. Further Assurances. At any time and from time to time,
upon the written request of the Agent, and at the sole expense of the Company,
the Company will promptly and duly execute and deliver such further instruments
and documents and take such further action as the Agent may reasonably request
for the purpose of obtaining or preserving the full benefits of this Agreement
and of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform Commercial
Code in effect in any jurisdiction with respect to the Liens created hereby and
all actions and filings necessary to maintain the Collateral Agent's first
priority perfected Lien on, security interest in and pledge of all of the
Pledged Collateral. The Company also hereby authorizes the Collateral Agent and
the Agent to file any such financing or continuation statement without the
signature of the Company to the extent permitted by applicable law. A carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement for filing in any jurisdiction.
ARTICLE VI
Remedies
Section 6.01. Remedies. If an Event of Default shall occur and be
continuing, the Collateral Agent and the Agent shall have each and every right
and remedy available to it whether at law, in equity or otherwise, including,
without limitation, each of the following:
(a) UCC Remedies. The Collateral Agent or the Agent may
exercise all rights and remedies in respect of the Pledged Collateral
available to a secured party under the Uniform Commercial Code in
effect in the relevant jurisdiction (whether or not the Uniform
Commercial Code applies to the affected Pledged Collateral), by law or
otherwise.
(b) Exercise Rights of Company. The Collateral Agent or the
Agent may exercise any and all rights and remedies of the Company under
or in respect of the Pledged Collateral, including, without limitation,
any and all rights of the Company to demand or otherwise require
payment of any amount under, or performance of any provision of, the
Pledged Collateral.
(c) Exercise Voting Rights. The Collateral Agent or the Agent
may terminate all rights of the Company to exercise the voting and
other consensual rights that the Company would otherwise be entitled to
exercise pursuant to Section 3.04 of this Agreement. Upon such
termination, all those rights shall immediately become vested in the
Agent who shall have the sole right to exercise those rights by proxy
or otherwise.
(d) Take Possession of Pledged Collateral. The Collateral
Agent or the Agent may take possession of the Pledged Collateral and,
without liability for trespass, enter on any premises for the purpose
of taking possession of or removing any Pledged Collateral.
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(e) Right to Sell Pledged Collateral.
(i) The Collateral Agent or the Agent may, without demand of
performance or other demand, presentment, protest, advertisement or
notice of any kind, and without notice to the Company except as
specified in this Section 6.01, sell, lease, assign, give option or
options to purchase, or otherwise dispose of and deliver all or any
part of the Pledged Collateral in one or more parcels at public or
private sale, at any of the Collateral Agent's offices, on any
securities exchange, or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Agent may deem commercially
reasonable.
(ii) The Company agrees that, to the extent notice of sale
shall be required by law, at least ten days notice to the Company of
the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.
The Collateral Agent shall not be obligated to consummate any sale of
Pledged Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public sale from time to time by any
notice or announcement and may make any sale without further notice of
the time and place to which the sale was so adjourned.
(iii) For purposes of this Agreement, a written agreement to
purchase all or any of the Pledged Collateral shall be deemed to be a
sale of that property and the Collateral Agent shall be free to carry
out the agreement notwithstanding that the Event of Default shall have
been cured and the Obligations paid in full.
(iv) If all or any part of the Pledged Collateral is sold on
credit or for future delivery, the property may be retained by the
Collateral Agent until the sale price is paid by the purchaser or
purchasers, but the Collateral Agent shall not be liable if the
purchaser or purchasers fail to take up and pay for the property and,
in that event, the Collateral Agent may again sell the property
pursuant to this Section.
(v) The Collateral Agent may restrict the bidders or
purchasers to persons (A) representing that they are purchasing the
Pledged Collateral for their own account for investment and not with a
view to further distribution or sale and (B) satisfying the offeree and
purchaser requirements for a valid private placement or limited
offering under the Securities Act of 1933, as amended. The Company
understands and agrees that the sale may be made at prices and on terms
less favorable than a public sale and agrees that any such sale shall
be deemed to have been made in a commercially reasonable manner even if
the Collateral Agent accepts the first offer received.
(vi) To the extent permitted by law, the Collateral Agent, the
Agent or any Lender may purchase all or any part of the Pledged
Collateral at any public or private sale or sales free of any equity or
right of redemption, stay, valuation or appraisal on the part of the
Company (all said rights being hereby waived and released to the extent
permitted by
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law) and may make payment for the purchase by using any claim then due
and payable to the Collateral Agent, the Agent or any Lender, as
applicable, from the Company as a credit against the purchase price,
and the Collateral Agent may, upon compliance with the terms of sale,
hold, retain and transfer the property without further accountability
to the Company.
(vii) Each purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of the
Company, and the Company hereby waives (to the extent permitted by law)
all rights of redemption, stay, valuation and appraisal which the
Company now has or may at any time in the future have under rule of law
or statute now existing or hereafter enacted.
(f) Store Pledged Collateral. The Collateral Agent or the
Agent may cause any Pledged Collateral to be held, stored, processed or
completed prior to sale, and expenses incurred for this purpose shall
constitute Obligations hereunder. The Company agrees to assemble the
Pledged Collateral and make it available to the Collateral Agent or the
Agent at places where the Collateral Agent or the Agent may reasonably
select, whether at the Company's premises or elsewhere.
(g) Notices to Issuers. The Collateral Agent or the Agent may,
without notice to the Company, (i) notify the Issuers of any of the
Pledged Collateral of the assignment and pledge to the Collateral Agent
of the Pledged Collateral, (ii) direct the account debtors or obligors
to make payment and direct the bailees to make delivery directly to the
Collateral Agent, or as the Agent shall otherwise direct, of all
amounts due or to become due to the Company under the Pledged
Collateral and (iii) collect, adjust, settle or compromise those
obligations. While the Collateral Agent or Agent is exercising any
authority under this Section the Company shall not adjust, settle or
compromise any obligation under the Pledged Collateral, release wholly
or partly any account debtor or obligor in respect of those
obligations, or allow any credit or discount on those obligations.
(h) All Other Remedies. The Collateral Agent and the Agent may
exercise all other rights and/or remedies available, whether at law, in
equity or otherwise.
Section 6.02. Waiver. To the extent permitted by applicable law, the
Company waives all claims, damages and demands it may acquire against the
Collateral Agent, the Agent or any of the Lenders arising out of the exercise by
the Collateral Agent, the Agent or any Lender of any of their rights under this
Agreement.
Section 6.03. Remedies Cumulative. All rights and remedies of the
Collateral Agent, the Agent and the Lenders existing under this Agreement and
any other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
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Section 6.04. Payments Held in Trust. All payments, funds, instruments
and other items received by the Company under or in respect of any Pledged
Collateral shall be received in trust for the Collateral Agent, segregated from
other funds of the Company and promptly delivered to the Collateral Agent in the
same form received, together with all necessary endorsements or Stock Powers.
Section 6.05. Application of Funds.
(a) Funds Applied in Accordance with Credit Agreement. The Agent shall
apply all payments and proceeds received under or in respect of the Pledged
Collateral and all cash proceeds received by the Collateral Agent and the Agent
in respect of any sale of, collection from, or other realization upon all or any
part of the Pledged Collateral in accordance with the Credit Agreement.
(b) Company Remains Liable. The Company shall remain fully liable for
any deficiency if the proceeds or other realization of the Pledged Collateral
are insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Collateral Agent, the Agent or the Lenders to collect
such deficiency.
(c) Pledged Collateral In Excess of Obligations. Any amount held by the
Collateral Agent under this Agreement after all the Obligations have been
indefeasibly and finally paid in full in cash shall be paid over to the Company
or to any other Person lawfully entitled to receive payment.
ARTICLE VII
Appointment, Rights and Duties of Collateral Agent
Section 7.01. Appointment of Collateral Agent. In accordance with the
provisions of Section 8.1B of the Credit Agreement, The Chase Manhattan Bank is
hereby appointed Collateral Agent hereunder and under the other Loan Documents
as successor to the Original Agent and the Agent and each Lender hereby
authorizes the Collateral Agent to act as its collateral agent in accordance
with the terms of this Agreement and the other Loan Documents.
Section 7.02. Agent Appointed Attorney-in-Fact. The Company hereby
irrevocably appoints the Agent (with full power of substitution) the Company's
attorney-in-fact, with full authority in the place and stead of the Company and
in the name of the Company or otherwise, from time to time in the Agent's
discretion, to execute any instrument and to take any other action that the
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
-16-
<PAGE> 17
(a) Further Documents. To execute, deliver and file on behalf
of and in the name of the Company one or more financing statements,
notices, copies of this Agreement or such other documents, and
amendments and continuations to those statements or documents, relating
to all or any part of the Pledged Collateral without the signature of
the Company where permitted by law. The Company agrees that a carbon,
photographic or other reproduction of this Agreement, any financing
statement, notice or other document covering the Pledged Collateral
shall be sufficient as a financing statement where permitted by law.
(b) Continue Perfection. To take any and all actions on behalf
of and in the name of the Company, at the Company's expense, which are
necessary or advisable to ensure that (i) the Liens granted pursuant to
this Agreement at all times constitute perfected Liens in favor of the
Collateral Agent, for the ratable benefit of the Lenders, and (ii) such
Liens are at all times prior to all other Liens on the Pledged
Collateral and will be enforceable as such against (x) all creditors
of, and purchasers from, the Company, (y) any present or future
creditor obtaining a Lien on the Pledged Collateral, and (z) any other
third party.
(c) Pay Taxes. To pay or discharge taxes and Liens levied or
placed on or threatened against the Pledged Collateral, to effect any
repairs called for by the terms of this Agreement and to pay all or any
part of the costs thereof.
(d) Collect Collateral. Upon the occurrence and during the
continuation of an Event of Default, to ask, demand, collect, sue for,
recover, compromise, receive, indorse and give acquittance, discharge
and receipts for moneys or other instruments, documents and chattel
paper due and to become due under or in respect of all or any part of
the Pledged Collateral (whether as interest, dividend, other
distribution or otherwise) and to direct any party liable for any
payment under any of the Pledged Collateral to make such payment
directly to the Collateral Agent or as the Agent shall direct.
(e) Institute Proceedings. Upon the occurrence and during the
continuation of an Event of Default, to file any claims, proofs of
claim, subrogation receipts or take any action or commence or institute
any proceedings which the Agent may deem necessary or desirable for the
collection of all or any part of the Pledged Collateral or otherwise to
enforce the rights of the Collateral Agent with respect to all or any
part of the Pledged Collateral.
(f) Transfer Collateral Into Collateral Agent's Name. Upon the
occurrence and during the continuation of an Event of Default, to
transfer any Pledged Collateral into the Collateral Agent's or its
nominee's name.
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<PAGE> 18
(g) Vote Pledged Collateral. Upon the occurrence and during
the continuation of an Event of Default, to exercise all or any of the
voting rights and other consensual rights pertaining to the Pledged
Collateral.
(h) Other Actions. Upon the occurrence and during the
continuation of an Event of Default, to take any other action it deems
advisable with respect to the Pledged Collateral or to accomplish the
purposes of this Agreement and, generally, to sell, transfer, pledge
and make any agreement with respect to or otherwise deal with any of
the Pledged Collateral as fully and completely as though the Collateral
Agent were the absolute owner thereof for all purposes, and to do, at
the Agent's option and the Company's expense, at any time, or from time
to time, all acts and things which the Agent deems necessary to
protect, preserve or realize upon the Pledged Collateral and the
Collateral Agent's Liens thereon for the ratable benefit of the Lenders
and to effect the intent of this Agreement, all as fully and
effectively as the Company might do.
The Company hereby ratifies all that said attorney shall lawfully do or cause to
be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable. Nothing contained in this Section 7.02 shall
in any way obligate the Collateral Agent or the Agent to take or refrain from
taking any of the actions specified in this Section 7.02.
Section 7.03. Collateral Agent or Agent May Perform. If the Company
fails to perform any obligation under this Agreement or under or in respect of
any Pledged Collateral or any representation of the Company contained in this
Agreement or in any document included in the Pledged Collateral shall be untrue
or incorrect in any material respect, the Collateral Agent or the Agent may, but
shall be under no obligation to, perform the obligation or remedy that breach,
or cause it to be performed or remedied, and the expenses incurred by or on
behalf of the Collateral Agent or the Agent in connection with the performance
of the obligation or the remedy of the breach shall constitute Obligations.
Section 7.04. Duties of Collateral Agent and The Agent.
(a) Duties. The powers conferred on the Collateral Agent and the Agent
by this Agreement are solely to protect the Collateral Agent's, the Agent's and
the Lenders' interest in the Pledged Collateral and shall not impose on the
Collateral Agent, the Agent or any Lender any duty to exercise any powers.
Except for the safe custody of any Pledged Collateral in its possession and the
accounting for moneys actually received by it under this Agreement, the
Collateral Agent, the Agent nor any Lender shall have any duty or liability as
to any Pledged Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or as to any other rights or matters pertaining to
any Pledged Collateral. The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Collateral Agent treats the Pledged Collateral substantially
the same as it treats similar property of its own.
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<PAGE> 19
(b) Not Responsible. The Collateral Agent, the Agent and the Lenders
shall not have any responsibility or liability for (i) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Pledged Collateral, whether or not the Collateral
Agent, the Agent or any Lender has or is deemed to have knowledge of such
matters, (ii) taking any necessary steps to preserve rights against any parties
with respect to any Pledged Collateral, (iii) collecting any proceeds of any
Pledged Collateral or by reason of any invalidity, lack of value or
uncollectability of any of the payments received by it from obligors or
otherwise or (iv) any other matter in connection with any Loan Document except
in respect of duties specifically undertaken by it in this Agreement and in that
case none of the Collateral Agent, the Agent or any of the Lenders shall be
liable to any party in the absence of gross negligence or willful misconduct.
ARTICLE VIII
Termination and Waiver
Section 8.01. Continuing Security Interest. This Agreement shall create
a continuing security interest in, Lien on, and pledge of, the Pledged
Collateral, without respect to the amount of the Obligations outstanding from
time to time, and shall remain in full force and effect until the Obligations
have been indefeasibly paid and otherwise performed in full in cash. Thereafter,
this Agreement shall be reinstated if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned upon the insolvency,
bankruptcy or reorganization of the Company or any other Person or otherwise,
all as though the payment had not been made.
Section 8.02. Termination. Upon the indefeasible payment and
performance of the Obligations in full in cash, the security interests granted
by this Agreement shall terminate and all rights to the Pledged Collateral shall
revert to the Company. At the Company's expense, the Collateral Agent shall then
execute and deliver to the Company the documents reasonably requested and
prepared by the Company to evidence the termination.
Section 8.03. Waiver. The Company unconditionally waives, to the full
extent permitted by law:
(a) Set-Off. Any defense, set-off or counterclaim which the
Company may otherwise assert against the Collateral Agent, the Agent or
the Lenders.
(b) Notice, etc. Presentment, protest, demand for payment,
promptness, diligence, notice of protest, notice of any other action at
any time taken or omitted by the Collateral Agent, the Agent or any
Lender and, generally, all demands and notices of every kind in
connection with any Loan Document or the Obligations, including,
without limitation:
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<PAGE> 20
(i) notice of any of the matters referred to in
Section 8.04; and
(ii) all notices which may be required by statute,
rule of law or otherwise, now or hereafter in effect, to
preserve intact any rights against the Company under any Loan
Document or as a requirement to the enforcement, assertion or
exercise against the Company of any right, power, privilege or
remedy conferred under any Loan Document.
(c) Exhaust Other Remedies. Any requirement to exhaust any
rights or remedies or to mitigate the damages resulting from any
default under any Loan Document or any other document or any
requirement to protect, secure, perfect or insure any Lien or any
property subject to the Lien or take any other action against any
person or any collateral or other property.
(d) Claims. All claims that the sale price of any Pledged
Collateral was inadequate or unreasonable for any reason and all other
claims to damages and demands of any nature against the Collateral
Agent, the Agent and the Lenders.
(e) Equitable Rights. All equities and rights of appraisal,
stay and redemption (whether now or hereafter existing), in each case
arising out of the Collateral Agent, the Agent or the Lenders enforcing
any of their rights and remedies under any Loan Document.
(f) Subrogation and/or Contribution. Any exoneration or
release from the Obligations resulting from any loss by the Company of
its rights, if any, of subrogation or contribution.
(g) Other Circumstances. Any other circumstance whatsoever,
including, without limitation, those stated in Section 8.04, which
might otherwise constitute a defense to or a legal or equitable
discharge or release of a guarantor or surety or a party granting
security or which might otherwise limit recourse against the Company.
Section 8.04. Obligations Not Affected. The rights of the Collateral
Agent, the Agent and the Lenders and the obligations of the Company under this
Agreement shall be absolute and unconditional, present and continuing and shall
remain in full force and effect and shall not be released, discharged or in any
way affected by any circumstance or condition of any nature (whether or not the
Company, the Collateral Agent, the Agent or any Lender shall have any notice or
knowledge of the circumstance or condition), including, without limitation:
(a) Failure of Documents. The invalidity, illegality,
unenforceability, discharge, termination, cancellation or frustration,
in whole or in part, of any Obligation, Loan Document or other
document.
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<PAGE> 21
(b) Failure to Exercise Rights and/or Remedies. The exercise
or failure to exercise by any person any right, remedy, privilege or
power under any Loan Document or other document.
(c) Collection Attempts. Any demand or attempt to collect
from, or failure to demand or attempt to collect from, the Company or
any other Person under any Loan Document or other document.
(d) Security and Guarantees. The giving, acceptance,
existence, non-existence, validity, invalidity or value of any security
or collateral securing the Obligations or any guarantee of the
Obligations, including, without limitation, the Pledged Collateral and
the guarantees by the Subsidiary Guarantors, any attempt or failure to
attempt to realize upon that security, collateral or guarantee or the
exchange, substitution, renewal, extension, modification, compromise,
release, discharge or failure to perfect for any reason that security,
collateral or guarantee.
(e) Actions. Any change in the time, place or manner of
payment or the waiver, consent, extension, renewal, indulgence,
compromise, release, settlement, refunding, funding, or any other
forbearance or other action taken, delayed or omitted by the Collateral
Agent, the Agent, any Lender, the Company, or any other Person under or
in respect of any term or provision of any Obligation, Loan Document or
other document.
(f) Modifications. The termination, modification, alteration,
amendment, waiver, addition, deletion or other change to any
Obligation, Loan Document or other document or any provision of any of
those documents.
(g) Reorganizations. The liquidation, dissolution, merger or
consolidation of the Company or any other Person, or the transfer by
the Company or any other Person of all or any part of its property or
assets, or the change in the ownership of any shares of capital stock
of the Company or any other Person.
(h) Bankruptcy. The voluntary or involuntary bankruptcy,
receivership, liquidation, insolvency, reorganization, arrangement,
assignment for the benefit of creditors or similar proceedings
involving or affecting the Company any other Person or any of their
property.
(i) Release. The release or discharge, by operation of law or
otherwise, of the Company or any other Person from any Obligation or
any provision of any Loan Document or other document.
(j) Other Circumstances. Any other circumstance whatsoever,
foreseen or unforseen, which may or might in any manner or to any
extent vary the risks of the
-21-
<PAGE> 22
Company or otherwise constitute a defense available to or a legal or
equitable discharge of or limit recourse against a surety, a guarantor
or a party granting security, the Company or otherwise.
ARTICLE IX
Miscellaneous
Section 9.01. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telexed or sent by telefacsimile (so
long as such notice sent by telefacsimile is followed within two Business Days
by a notice sent by another method specified hereunder) or United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service, upon receipt of telefacsimile or telex, or three Business
Days after depositing it in the United States mail with postage prepaid and
properly addressed; provided that notices to Agent shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be as
set forth under such party's name on the signature pages hereof or (i) as to
Company, the Collateral Agent and Agent, such other address as shall be
designated by such Person in a written notice delivered to the other parties
hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Agent.
Section 9.02. Expenses. The Company agrees to pay to the Collateral
Agent, the Agent and the Lenders on demand the amount of any and all expenses,
including, without limitation, the fees and expenses of the Collateral Agent's,
the Agent's or the Lenders' counsel, which the Collateral Agent, the Agent or
any Lender may pay or incur in exercising or enforcing their rights under this
Agreement.
Section 9.03. Transfer of Notes. If any Lender shall transfer any Note
held by it or grant participations in all or any of its Obligations, the
transferees of the Note or the grantees of the participations, as the case may
be, shall have the rights of the Lender under this Agreement in respect of the
Note or Obligations.
Section 9.04. Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, and by different parties hereto in
separate counterparts, each of which when executed will be deemed an original,
but all of which taken together will constitute one and the same instrument.
Section 9.05. Interpretation. As used in this Agreement, references to
the singular will include the plural and vice versa and references to the
masculine gender will include the feminine and neuter genders and vice versa, as
appropriate. Unless otherwise expressly provided in this
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<PAGE> 23
Agreement (a) the words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement will refer to this Agreement as a whole and
not to any particular provision of this Agreement and (b) article, section,
subsection, schedule and exhibit references are references with respect to this
Agreement unless otherwise specified. References in this Agreement to any law or
regulation will refer to such laws and regulations as from time to time amended
and to any laws or regulations successor thereto. Unless the context otherwise
requires, the term "including" will mean "including, without limitation@.
Section 9.06. Descriptive Headings. The headings in this Agreement and
in the Schedules, Exhibits and Annexes are included for convenience of reference
only and will not affect in any way the meaning or interpretation of this
Agreement.
Section 9.07. Incorporation of Schedules, Exhibits and Annexes. The
Schedules, Exhibits and Annexes hereto are incorporated into this Agreement and
will be deemed a part hereof as if set forth herein in full. In the event of any
conflict between the provisions of this Agreement and any Schedule, Exhibit or
Annex, the provisions of this Agreement will control.
Section 9.08. Amendment of Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 9.09. Successors and Assigns. This Agreement will be binding
upon and inures to the benefit of and is enforceable by the respective
successors and permitted assigns of the parties hereto. This Agreement may not
be assigned by any party hereto without the prior written consent of all other
parties hereto except for the assignment of all or any part of the rights and
obligations of the Collateral Agent under this Agreement, which may be assigned
by the Collateral Agent as provided in Section 8.1B and 9.1 of the Credit
Agreement. Any assignment or attempted assignment in contravention of this
Section will be void ab initio and will not relieve the assigning party of any
obligation under this Agreement.
Section 9.10. No Waiver; Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement will operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege will not preclude any other or further exercise of the
right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement and the other Loan
Documents will be cumulative and not exclusive of any rights or remedies
provided by law.
Section 9.11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to
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<PAGE> 24
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
Section 9.12. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the state of New York applicable to
contracts executed in and to be performed entirely within that state.
Section 9.13. No Third-Party Rights. This Agreement is not intended,
and will not be construed, to create any rights in any parties other than the
Company, the Collateral Agent, the Agent and the Lenders, and no Person may
assert any rights as third-party beneficiary hereunder, except as provided in
Section 5.12.
Section 9.14. Submission to Jurisdiction. Any Action with respect to
this Agreement may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and each of the
Company, the Collateral Agent, the Agent and the Lenders hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of these courts. Each of the Company, the Collateral Agent, the
Agent and the Lenders hereby irrevocably waives any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of forum non conveniens, which it may now or hereafter have to the bringing of
any Action in those jurisdictions.
Section 9.15. Waiver of Jury Trial. Each party waives any right to a
trial by jury in any Action to enforce or defend any right under this Agreement
or any amendment, instrument, document or agreement delivered or to be delivered
in connection with this Agreement and agrees that any Action will be tried
before a court and not before a jury.
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<PAGE> 25
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above in New York, New York.
NORTHSTAR HEALTH SERVICES, INC.
By:___________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Collateral
Agent for the Lenders
By:___________________________________
Name:
Title:
CERBERUS CAPITAL MANAGEMENT, LLC, as
Agent for the Lenders
By:___________________________________
Name:
Title:
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<PAGE> 26
SCHEDULE 4.09
to
AMENDED AND RESTATED COMPANY PLEDGE AGREEMENT
<TABLE>
<CAPTION>
Pledged Shares
--------------
Issuer Authorized Shares Pledged Shares
------ ----------------- --------------
<S> <C> <C>
NSHS Services, Inc. 1,000 100
</TABLE>
-26-
<PAGE> 27
SCHEDULE 4.10
to
AMENDED AND RESTATED COMPANY PLEDGE AGREEMENT
<TABLE>
<CAPTION>
Pledged Debt
------------
Obligor Pledged Debt
------- ------------
<S> <C> <C>
None
</TABLE>
-27-
<PAGE> 1
EXHIBIT 10.8
[EXECUTION COPY]
AMENDED AND RESTATED SUBSIDIARIES STOCK PLEDGE AGREEMENT
This AMENDED AND RESTATED SUBSIDIARIES STOCK PLEDGE AGREEMENT dated as
of September 30, 1999, among NSHS SERVICES, INC., a wholly-owned subsidiary of
Northstar Health Services, Inc. (the "Company") (as the successor to the
Pledgors (as such term is defined in the Original Subsidiaries Stock Pledge
Agreement (as defined below)), each a "Pledgor" and, collectively, the
"Pledgors"), CERBERUS CAPITAL MANAGEMENT, LLC (the "Agent") and THE CHASE
MANHATTAN BANK, as Collateral Agent as provided for in Section 8.1B of the
Credit Agreement referred to below (as successor collateral agent to IBJ
WHITEHALL BANK & TRUST COMPANY, formerly known as IBJ SCHRODER BANK & TRUST
COMPANY, the "Collateral Agent"), amends and restates in its entirety that
certain Subsidiaries Stock Pledge Agreement, dated as of October 20, 1995 (as
amended, modified or supplemented prior to the date hereof, the "Original
Subsidiaries Stock Pledge Agreement"), among the Pledgors and IBJ Schroder Bank
& Trust Company (the "Original Agent").
RECITALS
A. The Company, the Original Agent and the lenders set forth on the
signature pages thereto are parties to that certain Credit Agreement, dated as
of October 20, 1995 (as amended, modified or supplemented prior to the date
hereof, the "Original Credit Agreement"), pursuant to which the Lenders agreed
to extend certain credit facilities to the Company (the "Original Loans") which
were represented by certain promissory notes (the "Original Notes"), the
proceeds of which were used (i) to refinance substantially all indebtedness of
the Company and its Subsidiaries outstanding on the date thereof, (ii) to pay
certain fees and expenses, (iii) to provide financing for the working capital
needs of the Company and its Subsidiaries and (iv) to provide a portion of the
purchase price of certain acquisitions by the Company and its Subsidiaries.
B. The Pledgors and the Original Agent are parties to that certain
Subsidiaries Guarantee, dated as of October 20, 1995 (as amended, modified or
supplemented prior to the date hereof, the "Original Subsidiaries Guarantee"),
pursuant to which the Pledgors guaranteed the Company's Obligations under the
Original Credit Agreement and under the other Loan Documents.
C. In order to secure the Obligations under the Original Subsidiaries
Guarantee, the Pledgors and the Agent entered into the Original Subsidiaries
Stock Pledge Agreement, pursuant to which the Pledgors pledged to the Original
Agent, on behalf of Lenders, a first priority security interest in all equity
securities and debt securities of the Subsidiaries of the Company owned by such
Pledgors.
D. The Original Agent now wishes to resign as agent for the Lenders and
(i) the Agent wishes to replace the Original Agent as agent for the Lenders and
(ii) the Collateral Agent wishes to replace the Original Agent as collateral
agent for the Lenders under this Agreement.
E. The Company, the Pledgors, the Lenders, the Agent and the Original
Agent have agreed to amend and restate the Original Credit Agreement as of the
date hereof (the Original Credit Agreement, as so amended and restated being
referred to herein as the "Credit Agreement") to (i) extend the maturity of the
Original Loans on the terms set forth therein, (ii) reflect the Original Agent's
resignation as agent for the Lenders thereunder and the appointment of the Agent
as successor agent for the Lenders and
<PAGE> 2
the appointment of the Collateral Agent as its successor as collateral agent for
the Lenders under this Agreement, and (iii) make certain other changes as more
fully set forth therein.
F. The Pledgors, the Agent and the Collateral Agent have agreed to
amend and restate the Original Subsidiaries Stock Pledge Agreement in its
entirety to (i) provide for the continuation of the pledge of the Pledged
Collateral (as defined below) by the Pledgors and (ii) to reflect the Original
Agent's resignation as collateral agent for the Lenders and the appointment of
the Agent and the Collateral Agent as successor agents for the Lenders.
G. The Pledgors, the Agent and the Collateral Agent now wish to amend
and restate the Original Subsidiaries Stock Pledge Agreement in its entirety to
(i) secure the Lenders' interest in the Obligations and (ii) reflect the
Original Agent's resignation as collateral agent for the Lenders and the
appointment of the Collateral Agent as its successor as collateral agent for the
Lenders.
H. The Company owns, directly or indirectly, all of the issued and
outstanding capital stock of the Pledgors.
I. The Company and the Pledgors are engaged in related businesses, and
each of the Pledgors will derive substantial direct and indirect benefit from
the continuance of the Loans pursuant to the Credit Agreement.
J. It is the intent of the Company, the Pledgors, the Lenders, the
Agent and the Collateral Agent that the amendment and restatement of the
Original Credit Agreement shall not constitute a novation of the obligations and
liabilities of the parties under the Original Credit Agreement nor be deemed to
evidence or constitute repayment of all or any portion of such obligations and
liabilities and that the Credit Agreement shall amend and restate in its
entirety the Obligations under the Original Credit Agreement and re-evidence the
Obligations of Company outstanding thereunder.
K. Each of the Pledgors represents and confirms, and the Agent and the
Collateral Agent each acknowledge, that (i) the pledge of the pledged collateral
and securities pursuant to the Original Subsidiaries Stock Pledge Agreement
continues in full force and effect and continues to secure the Obligations under
the Credit Agreement, (ii) the Loans represented by the Notes are the same
Original Loans which were, prior to the date hereof, represented by the Original
Notes, and (iii) the transactions contemplated by the Credit Agreement and this
Agreement did not and do not constitute a discharge or release of the pledge
under the Original Subsidiaries Stock Pledge Agreement and that the pledge and
the Pledged Collateral (as defined below) securing the Original Loans and
Obligations continue to secure the Loans and the Obligations.
L. It is a condition precedent to the obligation of the Lenders to
amend and restate the Original Credit Agreement and to extend the maturity of
the Original Loans that the Pledgors execute this Agreement and continue to
grant the pledge hereunder.
AGREEMENT
In consideration of the premises and the mutual covenants and the
mutual agreements herein set forth and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
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<PAGE> 3
ARTICLE I
Definitions
Section 1.01. Certain Defined Terms. Unless otherwise defined herein,
capitalized terms used but not otherwise defined in this Agreement have the
meaning given to them in the Credit Agreement. In addition, the following terms
have the following meanings:
"Action" against a Person means an action, suit,
investigation, complaint, litigation, arbitration, contest, hearing,
inquiry, inquest, audit, examination or other proceeding threatened or
pending against or affecting the Person or its property, whether civil,
criminal, administrative, investigative or appellate, in law or equity
before any arbitrator or Governmental Body.
"Governmental Body" means any agency, bureau, commission,
court, department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Issuer" means each of the corporations and entities set forth
on Schedule 4.09 as an issuer of Pledged Stock and any other
corporation or entity that becomes a Subsidiary of the Company.
"Obligors" means each of the individuals, corporations and
entities set forth on Schedule 4.10 as an obligor of Pledged Debt and
any other corporation or entity that becomes a Subsidiary of the
Company.
"Pledged Debt" means all indebtedness, together with any notes
or other instruments evidencing or representing such indebtedness, and
all options or other rights of any nature whatsoever which may be
issued or granted by any of the Obligors to the Pledgors while this
Agreement is in effect, each as set forth on Schedule 4.10 hereto.
"Pledged Shares" means the shares of capital stock and other
equity interests, together with all certificates representing such
shares or equity interests, and all options or other rights of any
nature whatsoever which may be issued or granted by any of the Issuers
to the Pledgors while this Agreement is in effect, each as set forth on
Schedule 4.09 hereto.
"Regulation" means each applicable law, rule, regulation,
order or recommendation (or any change in its interpretation or
administration) by any Governmental Body, central bank or comparable
agency and any request or directive (whether or not having the force of
law) of any of those Persons and each writ, judgment, injunction,
order, decree or award of any arbitrator or Governmental Body.
ARTICLE II
Pledge and Grant of Security
Section 2.01. Pledge and Grant of Security. As collateral security for
the prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, each of the Pledgors
hereby assigns and pledges to the Collateral Agent for its benefit and the
ratable benefit of the Lenders and grants to the Collateral Agent for its
benefit and the ratable benefit of the Lenders a Lien on, security interest in
and pledge of all of the right, title and interest of the Pledgors in and to the
following (collectively, the "Pledged Collateral"):
(a) Pledged Shares. The Pledged Shares and all dividends,
cash, instruments and other property from time to time received,
receivable or
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otherwise distributed in respect of or in exchange for all or any of
the Pledged Shares.
(b) Additional Equity Interests. All additional shares of
capital stock or other equity interests of the Issuers from time to
time acquired by the Pledgors in any manner, the certificates
representing those additional shares, all options and other rights of
any nature whatsoever which may be issued or granted by any of the
Issuers to the Pledgors while this Agreement is in effect, and all
dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for all or any of those shares.
(c) Pledged Debt. All Pledged Debt and all interest, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for all or any of
the indebtedness.
(d) Additional Indebtedness. All additional indebtedness from
time to time owed to the Pledgors by any Obligor of the Pledged Debt,
the instruments evidencing the additional indebtedness and all
interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for all or any of the additional indebtedness.
(e) Other Securities and Instruments. All notes, certificates
of deposit, certificates and all other instruments from time to time
delivered to or otherwise possessed by the Collateral Agent for or on
behalf of the Pledgors in substitution for or in addition to all or
part of the Pledged Stock, the Pledged Debt or the Pledged Collateral.
(f) Subscription and Other Rights. All rights to subscribe for
securities, and all other rights incident to the Pledged Stock, the
Pledged Debt or the Pledged Collateral.
(g) Proceeds. All proceeds of any and all of the foregoing
Pledged Collateral.
ARTICLE III
Pledgors Remain Liable; Proceeds; Delivery and Voting of Pledged Collateral
Section 3.01. Pledgors Remain Liable. Anything in this Agreement to the
contrary notwithstanding:
(a) Pledgors Remain Liable. Each of the Pledgors shall remain
liable to fully and timely perform all its obligations (whether under
contract, law or otherwise) under or in respect of the Pledged
Collateral to the same extent as if this Agreement had not been
executed.
(b) Pledgors Not Released. The exercise by the Collateral
Agent, the Agent or any Lender of any of their rights under any Loan
Document shall not release any of the Pledgors from any of those
obligations.
(c) Collateral Agent, Agent and Lenders Not Liable. Neither
the Collateral Agent, the Agent nor any Lender shall have, by reason of
any Loan Document, any duty, obligation or liability under or in
respect of any Pledged Collateral or any contract or agreement included
in the Pledged Collateral.
(d) Collateral Agent, Agent and Lenders Not Obligated to
Perform. Neither the Collateral Agent, the Agent nor any Lender shall
be obligated to perform any of the obligations of the Pledgors under or
in respect of any Pledged
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Collateral or any other contract or agreement included in the Pledged
Collateral or to take any action to collect or enforce any claim for
payment assigned by this Agreement.
Section 3.02. Proceeds. Unless an Event of Default shall have occurred
and is continuing:
(a) Hold in Trust. Each of the Pledgors shall hold the funds,
instruments and other items received as proceeds of Pledged Collateral
in trust for the Collateral Agent, segregated from other funds of such
Pledgor and shall deliver the funds, instruments and other items to the
Collateral Agent in the form received, together with any necessary
endorsements.
(b) Deposit. Upon the receipt of the proceeds referred to in
Section 3.02(a), the Collateral Agent shall deposit the proceeds into
the Concentration Account (as defined in the Company Security
Agreement). Thereafter, the proceeds shall be treated and applied in
the same manner as other funds in the Concentration Account.
Section 3.03. Delivery of Pledged Collateral
(a) Delivery to Collateral Agent. All certificates and instruments,
whether negotiable or otherwise, representing or evidencing the Pledged
Collateral shall be delivered to the Collateral Agent duly endorsed in blank or
accompanied by undated stock powers, instruments of transfer or undated
assignments duly executed in blank, in each case with signatures guaranteed and
otherwise in form and substance satisfactory to the Agent (the "Stock Powers").
(b) Re-registration of Pledged Collateral. At the request of the Agent,
each of the Pledgors shall promptly cause the Pledged Collateral specified by
the Agent to be registered in the name of the Collateral Agent, the Agent or in
the name of the nominee or nominees specified by the Agent.
(c) Exchange of Certificates. The Collateral Agent may from time to
time exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations.
Section 3.04. Voting of Pledged Collateral. Unless an Event of Default
shall have occurred and is continuing, the Pledgors shall be entitled to
exercise any and all voting and other consensual rights pertaining to all or any
part of the Pledged Collateral for any purpose not inconsistent with or in
violation of any of the terms of this Agreement or of any other Loan Document;
provided, however, that the Pledgors shall not exercise or refrain from
exercising any right if, in the sole judgment of the Agent, the action would
have a material adverse effect on the value of all or any part of the Pledged
Collateral or on the interest of the Pledgors, the Collateral Agent, the Agent
or the Lenders in any of the Pledged Collateral. Each of the Pledgors shall give
the Collateral Agent and the Agent at least five Business Days prior written
notice of the manner in which it intends to exercise, or the reasons for
refraining from exercising, any such right.
ARTICLE IV
Representations and Warranties of the Pledgors
Each of the Pledgors, jointly and severally, hereby represent and
warrant to the Collateral Agent, the Agent and the Lenders as follows:
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Section 4.01. Power. Such Pledgor has good right and all necessary
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, including, without limitation, the granting of
the security interests, Liens and pledges in the Pledged Collateral to the
Collateral Agent.
Section 4.02. Authorization; Binding Effect. The execution and delivery
by such Pledgor of this Agreement, the performance by such Pledgor of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby has been duly authorized by all necessary corporate action.
No other proceedings on the part of such Pledgor are necessary to approve and
adopt this Agreement or to approve the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
Pledgor and is a legal, valid and binding obligation of such Pledgor enforceable
against such Pledgor in accordance with its terms.
Section 4.03. Contravention. Neither the execution, delivery and
performance of this Agreement by such Pledgor nor the consummation of the
transactions contemplated hereby will (with or without notice or lapse of time
or both) (a) conflict with, violate or breach any provision of such Pledgor's
organizational documents or bylaws, (b) violate, conflict with or result in a
breach of any Regulation, writ, judgment, injunction, order, decree or award of
any Governmental Body or any other Person by which such Pledgor, any of the
Pledged Collateral or any of its other properties may be bound or affected, (c)
conflict with, result in a default under, or give rise to a right of
termination, cancellation, or acceleration or to a loss of a benefit under any
material contract or material agreement to which such Pledgor is a party or by
which such Pledgor, the Pledged Collateral or any of its other properties may be
bound or affected or (d) result in or require the creation or imposition of any
Lien on any Pledged Collateral or any of the other properties now owned or
hereafter acquired by such Pledgor, except for the Liens in favor of the
Collateral Agent created by this Agreement.
Section 4.04. Approvals. No authorization, consent, order or approval
of, notice to or registration or filing with, or any other action by any
Governmental Body or other Person, is required or advisable in connection with
(a) the due execution and delivery by such Pledgor of this Agreement, (b) the
consummation of the transactions contemplated by this Agreement, including the
granting of the security interests, Liens and pledges of the Pledged Collateral
to the Collateral Agent, (c) the perfection of the security interests, Liens and
pledges granted by this Agreement, (d) the performance by such Pledgor of its
obligations under this Agreement, or (e) the exercise by the Collateral Agent of
its rights and remedies under this Agreement.
Section 4.05. Title. Such Pledgor is and, with respect to Pledged
Collateral to be acquired, will be, the sole legal, record and beneficial owner
of the Pledged Collateral, free and clear of any Lien, or option in favor of any
other Person, except for the Liens created by this Agreement and such Pledgor
has good and marketable title to the Pledged Collateral. No security agreement,
financing statement or other instrument similar in effect covering all or any
part of the Pledged Collateral is on file in any recording office, except such
as may have been filed in favor of the Collateral Agent relating to this
Agreement.
Section 4.06. Perfected First Priority Liens. The delivery of the
certificates and instruments to the Collateral Agent in accordance with this
Agreement creates a valid and perfected first priority Lien on, security
interest in and pledge of the Pledged Collateral in favor of the Collateral
Agent, for the ratable benefit of the Lenders, which Liens are prior to all
other Liens on the Pledged Collateral and which are enforceable as such against
(a) all creditors of, and purchasers from, such Pledgor, (b) any present or
future creditor obtaining a Lien on the Pledged Collateral, and (c) any other
third party, and all filings and other actions necessary or desirable to perfect
and protect such Liens and security interests have been duly made or taken.
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Section 4.07. Chief Place of Business. The chief place of business and
chief executive office of such Pledgor are located at The Atrium, 665
Philadelphia Street, Indiana, Pennsylvania 15701. Such Pledgor keeps all of its
records concerning the Pledged Collateral only at that address.
Section 4.08. Delivery of Certificates. All of the certificates and
instruments representing or evidencing Pledged Collateral and the Stock Powers
have been duly delivered to the Collateral Agent in accordance with Section
3.03.
Section 4.09. Pledged Shares.
(a) Schedule. Schedule 4.09 sets forth a true, correct and complete
list and description of all of the Pledged Shares and the Issuers thereof.
(b) Duly Authorized, Etc. The Pledged Shares are duly authorized,
validly issued, fully paid and non-assessable.
(c) No Other Securities or Interests. The Pledged Shares constitute all
the issued and outstanding shares of capital stock or equity interests of the
Issuers. There are no (i) outstanding capital stock or securities convertible
into or exchangeable or exercisable for any shares of capital stock or
securities of any Issuer, (ii) outstanding rights to subscribe for or to
purchase, or any options for the purchase of, or any calls, commitments or
claims of any character relating to, any shares of capital stock or securities
of any Issuer, (iii) outstanding securities convertible into or exchangeable or
exercisable for any shares of capital stock or securities of any Issuer and (iv)
agreements or arrangements providing for the issuance of any shares of capital
stock or securities of any Issuer.
Section 4.10. Pledged Debt.
(a) Schedule. Schedule 4.10 sets forth a true, correct and complete
list and description of all of the Pledged Debt and the Obligors thereon.
(b) Duly Authorized, Etc. The Pledged Debt is duly authorized, validly
issued and constitutes the legal, valid and binding obligation of the Issuers
thereof enforceable against each such Issuer in accordance with their respective
terms.
Section 4.11. Pledged Collateral.
(a) No Voting or Transfer Restrictions. There is no agreement or
arrangement restricting the voting or transfer of the Pledged Collateral except
as provided in this Agreement.
(b) No Payment Restrictions. There are no legal, contractual or other
restrictions on the payment of (i) dividends or other distributions on any
shares of the capital stock or securities of any Issuer, including, without
limitation, the Pledged Shares, or (ii) principal or interest on any
indebtedness of any Issuer, including, without limitation, the Pledged Debt, in
each case, except for restrictions imposed by this Agreement and the Credit
Agreement.
(c) No Repurchase Obligations. No Person is subject to any obligation,
contingent or otherwise, to repurchase or otherwise acquire or retire any of the
Pledged Collateral.
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ARTICLE V
Covenants of the Pledgors
Section 5.01. No Liens on Pledged Collateral. None of the Pledgors will
create, incur, assume or permit to exist, will defend the Pledged Collateral
against, and will take such other actions as is necessary to remove, any Lien or
claim on or to the Pledged Collateral, other than the Liens created hereby, and
will defend the right, title and interest of the Collateral Agent and the
Lenders in and to any of the Pledged Collateral against the claims and demands
of any and all Persons.
Section 5.02. Perfection. Each of the Pledgors will take any and all
actions, at such Pledgor's expense, which are necessary or advisable to ensure
that (a) the Liens granted pursuant to this Agreement at all times constitute
perfected Liens in favor of the Collateral Agent, for the ratable benefit of the
Lenders, and (b) such Liens are at all times prior to all other Liens on the
Pledged Collateral and will be enforceable as such against (i) all creditors of,
and purchasers from, such Pledgor, (ii) any present or future creditor obtaining
a Lien on the Pledged Collateral, and (iii) any other third party.
Section 5.03. No Dispositions of Pledged Collateral. None of the
Pledgors will sell, transfer, lease, convey or otherwise dispose of any of the
Pledged Collateral, or attempt, offer or contract to do so.
Section 5.04. Payment of Obligations. Each of the Pledgors will
promptly pay and discharge when due all taxes, assessments and governmental
charges or levies assessed, levied or imposed upon or relating to, and all
claims against, the Pledged Collateral or such Pledgor or in respect of such
Pledgor's income or profits therefrom, as well as all claims of any kind,
including, without limitation, claims for labor, materials and supplies, against
or with respect to the Pledged Collateral.
Section 5.05. Compliance with Laws, etc. Each Pledgor will comply in
all material respects with all Regulations applicable to the Pledged Collateral
or any part thereof or to the operation of such Pledgor's business.
Section 5.06. Maintenance of Records. Each Pledgor will keep and
maintain, at its own cost and expense, satisfactory and complete records of the
Pledged Collateral, including, without limitation, a record of all payments
received. Each Pledgor will mark its books and records pertaining to the Pledged
Collateral to evidence this Agreement and the Liens, security interests and
pledges granted hereby. For the Collateral Agent's and Lenders' further
security, the Collateral Agent, for the ratable benefit of the Lenders, shall
have a security interest in all of such Pledgor's books and records pertaining
to the Pledged Collateral and, upon the occurrence of an Event of Default which
is continuing, such Pledgor shall turn over any such books and records to the
Collateral Agent or to its representatives.
Section 5.07. Right of Inspection. The Collateral Agent, the Agent and
the Lenders shall at all times have full and free access during normal business
hours and, upon the occurrence and continuation of an Event of Default, at any
time, to all the books, correspondence and records of the Pledgors, and the
Collateral Agent, the Agent and the Lenders or their respective representatives
may examine the same, take extracts therefrom and make photocopies thereof, and
each of the Pledgors agrees to render to the Collateral Agent, the Agent and the
Lenders, at such Pledgor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto.
Section 5.08. Impairment of Pledged Collateral.
(a) General. None of the Pledgors shall take, or fail to take, any
action in connection with any Pledged Collateral that would impair the value of
the Pledged Collateral or the interest or rights of the Pledgors, the Collateral
Agent, the Agent or any Lender in, to or under that Pledged Collateral.
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(b) Certain Actions Prohibited. None of the Pledgors will (i) amend,
modify, terminate, cancel or waive any provision of any Pledged Collateral in
any manner which could reasonably be expected to materially adversely affect the
value of the Pledged Collateral or the interest of the Pledgors, the Collateral
Agent, the Agent or the Lenders in such Pledged Collateral, (ii) fail to
exercise promptly and diligently each and every material right which it may have
under or with respect to the Pledged Collateral or (iii) fail to deliver to the
Collateral Agent a copy of each material demand, notice or document received by
it relating in any way to any of the Pledged Collateral.
(c) Limitations on Extensions. None of the Pledgors will grant any
extension of the time of payment of any of the Pledged Collateral, or
compromise, compound or settle the same for less than the full amount thereof,
release, wholly or partially, any Person liable for the payment thereof, or
allow any credit or discount whatsoever thereon.
Section 5.09. Notices; Reports.
(a) Liens. Each of the Pledgors will advise the Collateral Agent and
the Agent promptly, in reasonable detail, of (i) any Lien (other than Liens
created hereby or permitted under the Credit Agreement) on, or claim asserted
against, any of the Pledged Collateral and (ii) the occurrence of any other
event which could reasonably be expected to have a material adverse effect on
(x) the aggregate value of the Pledged Collateral or (y) the Liens created
hereunder.
(b) Reports, Notices, Etc. Each of the Pledgors shall furnish to the
Collateral Agent and the Agent (i) promptly upon receipt, copies of all notices,
requests and other documents received by such Pledgor under or in respect of the
Pledged Collateral, (ii) promptly upon the request of the Agent, information and
reports regarding that Pledged Collateral and (iii) promptly upon the request of
he Agent, make the demands and requests for information or action that such
Pledgor is entitled to make under the Pledged Collateral.
(c) Further Identification of the Pledged Collateral. Each of the
Pledgors will furnish to the Collateral Agent and the Agent from time to time
statements and schedules further listing, identifying and describing the Pledged
Collateral and such other reports in connection with the Pledged Collateral as
the Agent may reasonably request, all in reasonable detail.
Section 5.10. Changes in Locations, Name, etc. None of the Pledgors
will (i) change the location of its chief executive office or its chief place of
business from that specified in Section 4.07 or remove its books and records
from the location specified in Section 4.07, or (ii) change its name, identity
or corporate structure or merge or take or suffer any other action that might
result in any financing statement filed by the Collateral Agent in connection
with this Agreement becoming misleading, unless, in each case, it shall have
given the Collateral Agent and the Agent at least 30 days prior written notice
thereof.
Section 5.11. Pledged Collateral.
(a) Collections. Subject to the provisions of Article VI hereof and the
Cash Management System, the Pledgors shall timely collect all amounts due or to
become due to the Company under the Pledged Collateral and otherwise enforce its
rights under and in respect of such Pledged Collateral.
(b) Deliver Pledged Collateral to Collateral Agent. In the event that
any Pledgor shall receive any instruments, documents and certificates
representing or evidencing
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any of the Pledged Collateral, such Pledgor shall immediately deliver and pledge
to the Collateral Agent such Pledged Collateral accompanied by Stock Powers, to
be held as Pledged Collateral pursuant to this Agreement.
(c) Performance. Each of the Pledgors will fully and timely perform and
observe all of the terms and provisions of the Pledged Collateral to be
performed or observed by it, except as otherwise provided by law, and maintain
the Pledged Collateral in full force and effect;
(d) No Other Securities. None of the Pledgors will permit any Issuer to
(i) issue any capital stock or other securities in addition to or in
substitution for the Pledged Collateral, (ii) issue any other class or series of
stock or securities, (iii) cancel any of the Pledged Collateral, (iv) merge or
consolidate with any Person or acquire all or a substantial portion of the
assets or business of any Person without giving at least 45 days prior written
notice to the Agent or (v) transfer any of its assets except in accordance with
the terms of the Loan Documents.
Section 5.12. Indemnification. Each of the Pledgors, jointly and
severally, will indemnify the Collateral Agent, the Agent, the Lenders and their
respective Affiliates and each of their respective shareholders, partners,
members, directors, officers, employees, agents and Affiliates (collectively,
the "Indemnified Persons") against and hold each Indemnified Person harmless
from any and all liabilities, obligations, losses, damages, penalties, Actions,
judgments, costs, expenses, claims, diminution in value, or disbursements of any
kind or nature whatsoever (including interest, penalties, fines, judgments,
settlements, costs of preparation and investigation, costs incurred in enforcing
this indemnity and reasonable attorneys' fees and expenses) that the Indemnified
Persons may suffer, sustain, incur or become subject to arising out of, relating
to, or due to:
(a) any inaccuracy or breach of any of the representations and
warranties of any Pledgor contained in this Agreement or in any
certificate delivered hereunder;
(b) the nonfulfillment of any covenant, undertaking, agreement
or other obligation of any Pledgor contained in this Agreement or in
any certificate delivered hereunder;
(c) the failure or delay by any Pledgor in paying, any and all
excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Pledged Collateral; or
(d) any defense, setoff, counterclaim, recoupment or reduction
or liability whatsoever of the account debtor or obligor under any of
the Pledged Collateral, arising out of a breach by any Pledgor of any
obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such
account debtor or obligor or its successors from any Pledgor.
Section 5.13. Further Assurances. At any time and from time to time,
upon the written request of the Agent, and at the sole expense of the Pledgors,
each of the Pledgors will promptly and duly execute and deliver such further
instruments and documents and take such further action as the Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements under
the Uniform Commercial Code in effect in any jurisdiction with respect to the
Liens created hereby and all actions and filings necessary to maintain the
Collateral Agent's first priority perfected Lien on, security interest in and
pledge of all of the Pledged Collateral. Each of the Pledgors also hereby
authorizes the
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Collateral Agent and the Agent to file any such financing or continuation
statement without the signature of the Pledgors to the extent permitted by
applicable law. A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement for filing in any jurisdiction.
ARTICLE VI
Remedies
Section 6.01. Remedies. If an Event of Default shall occur and be
continuing, the Collateral Agent and the Agent shall have each and every right
and remedy available to it whether at law, in equity or otherwise, including,
without limitation, each of the following:
(a) UCC Remedies. The Collateral Agent or the Agent may
exercise all rights and remedies in respect of the Pledged Collateral
available to a secured party under the Uniform Commercial Code in
effect in the relevant jurisdiction (whether or not the Uniform
Commercial Code applies to the affected Pledged Collateral), by law or
otherwise.
(b) Exercise Rights of the Pledgors. The Collateral Agent or
the Agent may exercise any and all rights and remedies of the Pledgors
under or in respect of the Pledged Collateral, including, without
limitation, any and all rights of the Pledgors to demand or otherwise
require payment of any amount under, or performance of any provision
of, the Pledged Collateral.
(c) Exercise Voting Rights. The Collateral Agent or the Agent
may terminate all rights of the Pledgors to exercise the voting and
other consensual rights that the Pledgors would otherwise be entitled
to exercise pursuant to Section 3.04 of this Agreement. Upon such
termination, all those rights shall immediately become vested in the
Agent who shall have the sole right to exercise those rights by proxy
or otherwise.
(d) Take Possession of Pledged Collateral. The Collateral
Agent or the Agent may take possession of the Pledged Collateral and,
without liability for trespass, enter on any premises for the purpose
of taking possession of or removing any Pledged Collateral.
(e) Right to Sell Pledged Collateral.
(i) The Collateral Agent or the Agent may, without demand of
performance or other demand, presentment, protest, advertisement or
notice of any kind, and without notice to the Pledgors except as
specified in this Section 6.01, sell, lease, assign, give option or
options to purchase, or otherwise dispose of and deliver all or any
part of the Pledged Collateral in one or more parcels at public or
private sale, at any of the Collateral Agent's offices, on any
securities exchange, or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Agent may deem commercially
reasonable.
(ii) Each of the Pledgors agrees that, to the extent notice of
sale shall be required by law, at least ten days notice to the Pledgors
of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.
The Collateral Agent shall not be obligated to consummate any sale of
Pledged Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public sale from time to time by any
notice or announcement and may make any sale without further notice of
the time and place to which the sale was so adjourned.
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(iii) For purposes of this Agreement, a written agreement to
purchase all or any of the Pledged Collateral shall be deemed to be a
sale of that property and the Collateral Agent shall be free to carry
out the agreement notwithstanding that the Event of Default shall have
been cured and the Obligations paid in full.
(iv) If all or any part of the Pledged Collateral is sold on
credit or for future delivery, the property may be retained by the
Collateral Agent until the sale price is paid by the purchaser or
purchasers, but the Collateral Agent shall not be liable if the
purchaser or purchasers fail to take up and pay for the property and,
in that event, the Collateral Agent may again sell the property
pursuant to this Section.
(v) The Collateral Agent may restrict the bidders or
purchasers to persons (A) representing that they are purchasing the
Pledged Collateral for their own account for investment and not with a
view to further distribution or sale and (B) satisfying the offeree and
purchaser requirements for a valid private placement or limited
offering under the Securities Act of 1933, as amended. Each of the
Pledgors understands and agrees that the sale may be made at prices and
on terms less favorable than a public sale and agrees that any such
sale shall be deemed to have been made in a commercially reasonable
manner even if the Collateral Agent accepts the first offer received.
(vi) To the extent permitted by law, the Collateral Agent, the
Agent or any Lender may purchase all or any part of the Pledged
Collateral at any public or private sale or sales free of any equity or
right of redemption, stay, valuation or appraisal on the part of the
Pledgors (all said rights being hereby waived and released to the
extent permitted by law) and may make payment for the purchase by using
any claim then due and payable to the Collateral Agent, the Agent or
any Lender, as applicable, from the Pledgors as a credit against the
purchase price, and the Collateral Agent may, upon compliance with the
terms of sale, hold, retain and transfer the property without further
accountability to the Pledgors.
(vii) Each purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of any
Pledgor, and each of the Pledgors hereby waives (to the extent
permitted by law) all rights of redemption, stay, valuation and
appraisal which the Pledgors now have or may at any time in the future
have under rule of law or statute now existing or hereafter enacted.
(f) Store Pledged Collateral. The Collateral Agent or the
Agent may cause any Pledged Collateral to be held, stored, processed or
completed prior to sale, and expenses incurred for this purpose shall
constitute Obligations hereunder. Each of the Pledgors agrees to
assemble the Pledged Collateral and make it available to the Collateral
Agent or the Agent at places where the Collateral Agent or the Agent
may reasonably select, whether at such Pledgor's premises or elsewhere.
(g) Notices to Issuers. The Collateral Agent or the Agent may,
without notice to any Pledgor, (i) notify the Issuers of any of the
Pledged Collateral of the assignment and pledge to the Collateral Agent
of the Pledged Collateral, (ii) direct the account debtors or obligors
to make payment and direct the bailees to make delivery directly to the
Collateral Agent, or as the Agent shall otherwise direct, of all
amounts due or to become due to the Pledgors under the Pledged
Collateral and (iii) collect, adjust, settle or compromise those
obligations. While the Collateral Agent or the Agent is exercising any
authority under this Section none of the Pledgors shall adjust, settle
or compromise any obligation under the
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<PAGE> 13
Pledged Collateral, release wholly or partly any account debtor or
obligor in respect of those obligations, or allow any credit or
discount on those obligations.
(h) All Other Remedies. The Collateral Agent and the Agent may
exercise all other rights and/or remedies available, whether at law, in
equity or otherwise.
Section 6.02. Waiver. To the extent permitted by applicable law, each
of the Pledgors waives all claims, damages and demands it may acquire against
the Collateral Agent, the Agent or any of the Lenders arising out of the
exercise by the Collateral Agent, the Agent or any Lender of any of their rights
under this Agreement.
Section 6.03. Remedies Cumulative. All rights and remedies of the
Collateral Agent, the Agent and the Lenders existing under this Agreement and
any other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
Section 6.04. Payments Held in Trust. All payments, funds, instruments
and other items received by any Pledgor under or in respect of any Pledged
Collateral shall be received in trust for the Collateral Agent, segregated from
other funds of such Pledgor and promptly delivered to the Collateral Agent in
the same form received, together with all necessary endorsements or Stock
Powers.
Section 6.05. Application of Funds.
(a) Funds Applied in Accordance with Credit Agreement. The Agent shall
apply all payments and proceeds received under or in respect of the Pledged
Collateral and all cash proceeds received by the Collateral Agent and the Agent
in respect of any sale of, collection from, or other realization upon all or any
part of the Pledged Collateral in accordance with the Credit Agreement.
(b) Pledgors Remain Liable. Each of the Pledgors shall remain fully
liable for any deficiency if the proceeds or other realization of the Pledged
Collateral are insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by the Collateral Agent, the Agent or
the Lenders to collect such deficiency.
(c) Pledged Collateral In Excess of Obligations. Any amount held by the
Collateral Agent under this Agreement after all the Obligations have been
indefeasibly and finally paid in full in cash shall be paid over to the Pledgors
or to any other Person lawfully entitled to receive payment.
ARTICLE VII
Appointment, Rights and Duties of Collateral Agent
Section 7.01. Appointment of Collateral Agent. In accordance with the
provisions of Section 8.1B of the Credit Agreement, The Chase Manhattan Bank is
hereby appointed Collateral Agent hereunder and under the other Loan Documents
as successor to the Original Agent and the Agent and each Lender hereby
authorizes the Collateral Agent to act as its collateral agent in accordance
with the terms of this Agreement and the other Loan Documents.
Section 7.02. Agent Appointed Attorney-in-Fact. Each of the Pledgors
hereby
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<PAGE> 14
irrevocably appoints the Agent (with full power of substitution) such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, from time to time in the Agent's
discretion, to execute any instrument and to take any other action that the
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
(a) Further Documents. To execute, deliver and file on behalf
of and in the name of such Pledgor one or more financing statements,
notices, copies of this Agreement or such other documents, and
amendments and continuations to those statements or documents, relating
to all or any part of the Pledged Collateral without the signature of
such Pledgor where permitted by law. Each of the Pledgors agrees that a
carbon, photographic or other reproduction of this Agreement, any
financing statement, notice or other document covering the Pledged
Collateral shall be sufficient as a financing statement where permitted
by law.
(b) Continue Perfection. To take any and all actions on behalf
of and in the name of such Pledgor, at such Pledgor's expense, which
are necessary or advisable to ensure that (i) the Liens granted
pursuant to this Agreement at all times constitute perfected Liens in
favor of the Collateral Agent, for the ratable benefit of the Lenders,
and (ii) such Liens are at all times prior to all other Liens on the
Pledged Collateral and will be enforceable as such against (x) all
creditors of, and purchasers from, such Pledgor, (y) any present or
future creditor obtaining a Lien on the Pledged Collateral, and (z) any
other third party.
(c) Pay Taxes. To pay or discharge taxes and Liens levied or
placed on or threatened against the Pledged Collateral, to effect any
repairs called for by the terms of this Agreement and to pay all or any
part of the costs thereof.
(d) Collect Collateral. Upon the occurrence and during the
continuation of an Event of Default, to ask, demand, collect, sue for,
recover, compromise, receive, indorse and give acquittance, discharge
and receipts for moneys or other instruments, documents and chattel
paper due and to become due under or in respect of all or any part of
the Pledged Collateral (whether as interest, dividend, other
distribution or otherwise) and to direct any party liable for any
payment under any of the Pledged Collateral to make such payment
directly to the Collateral Agent or as the Agent shall direct.
(e) Institute Proceedings. Upon the occurrence and during the
continuation of an Event of Default, to file any claims, proofs of
claim, subrogation receipts or take any action or commence or institute
any proceedings which the Agent may deem necessary or desirable for the
collection of all or any part of the Pledged Collateral or otherwise to
enforce the rights of the Collateral Agent and the Agent with respect
to all or any part of the Pledged Collateral.
(f) Transfer Collateral Into Collateral Agent's Name. Upon the
occurrence and during the continuation of an Event of Default, to
transfer any Pledged Collateral into the Collateral Agent's or its
nominee's name.
(g) Vote Pledged Collateral. Upon the occurrence and during
the continuation of an Event of Default, to exercise all or any of the
voting rights and other consensual rights pertaining to the Pledged
Collateral.
(h) Other Actions. Upon the occurrence and during the
continuation of an Event of Default, to take any other action it deems
advisable with respect to the
-14-
<PAGE> 15
Pledged Collateral or to accomplish the purposes of this Agreement and,
generally, to sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the Pledged Collateral as
fully and completely as though the Collateral Agent were the absolute
owner thereof for all purposes, and to do, at the Agent's option and
such Pledgor's expense, at any time, or from time to time, all acts and
things which the Agent deems necessary to protect, preserve or realize
upon the Pledged Collateral and the Collateral Agent's Liens thereon
for the ratable benefit of the Lenders and to effect the intent of this
Agreement, all as fully and effectively as the Pledgors might do.
Each of the Pledgors hereby ratifies all that said attorney shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable. Nothing contained in this Section
7.02 shall in any way obligate the Collateral Agent or the Agent to take or
refrain from taking any of the actions specified in this Section 7.02.
Section 7.03. Collateral Agent or Agent May Perform. If any Pledgor
fails to perform any obligation under this Agreement or under or in respect of
any Pledged Collateral or any representation of any Pledgor contained in this
Agreement or in any document included in the Pledged Collateral shall be untrue
or incorrect in any material respect, the Collateral Agent or the Agent may, but
shall be under no obligation to, perform the obligation or remedy that breach,
or cause it to be performed or remedied, and the expenses incurred by or on
behalf of the Collateral Agent and the Agent in connection with the performance
of the obligation or the remedy of the breach shall constitute Obligations.
Section 7.04. Duties of Collateral Agent and the Agent.
(a) Duties. The powers conferred on the Collateral Agent and the Agent
by this Agreement are solely to protect the Collateral Agent's, the Agent's and
the Lenders' interest in the Pledged Collateral and shall not impose on the
Collateral Agent, the Agent or any Lender any duty to exercise any powers.
Except for the safe custody of any Pledged Collateral in its possession and the
accounting for moneys actually received by it under this Agreement, the
Collateral Agent, the Agent nor any Lender shall have any duty or liability as
to any Pledged Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or as to any other rights or matters pertaining to
any Pledged Collateral. The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Collateral Agent treats the Pledged Collateral substantially
the same as it treats similar property of its own.
(b) Not Responsible. The Collateral Agent, the Agent and the Lenders
shall not have any responsibility or liability for (i) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Pledged Collateral, whether or not the Collateral
Agent, the Agent or any Lender has or is deemed to have knowledge of such
matters, (ii) taking any necessary steps to preserve rights against any parties
with respect to any Pledged Collateral, (iii) collecting any proceeds of any
Pledged Collateral or by reason of any invalidity, lack of value or
uncollectability of any of the payments received by it from obligors or
otherwise or (iv) any other matter in connection with any Loan Document except
in respect of duties specifically undertaken by it in this Agreement and in that
case none of the Collateral Agent, the Agent or any of the Lenders shall be
liable to any party in the absence of gross negligence or willful misconduct.
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<PAGE> 16
ARTICLE VIII
Termination and Waiver
Section 8.01. Continuing Security Interest. This Agreement shall create
a continuing security interest in, Lien on, and pledge of, the Pledged
Collateral, without respect to the amount of the Obligations outstanding from
time to time, and shall remain in full force and effect until the Obligations
have been indefeasibly paid and otherwise performed in full in cash. Thereafter,
this Agreement shall be reinstated if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned upon the insolvency,
bankruptcy or reorganization of the Company, and Pledgor or any other Person or
otherwise, all as though the payment had not been made.
Section 8.02. Termination. Upon the indefeasible payment and
performance of the Obligations in full in cash, the security interests granted
by this Agreement shall terminate and all rights to the Pledged Collateral shall
revert to the Pledgors. At the Pledgors' expense, the Collateral Agent shall
then execute and deliver to the Pledgors the documents reasonably requested and
prepared by the Pledgors to evidence the termination.
Section 8.03. Waiver. Each of the Pledgors unconditionally waives, to
the full extent permitted by law:
(a) Set-Off. Any defense, set-off or counterclaim which such
Pledgor may otherwise assert against the Collateral Agent, the Agent or
the Lenders.
(b) Notice, etc. Presentment, protest, demand for payment,
promptness, diligence, notice of protest, notice of any other action at
any time taken or omitted by the Collateral Agent, the Agent or any
Lender and, generally, all demands and notices of every kind in
connection with any Loan Document or the Obligations, including,
without limitation:
(i) notice of any of the matters referred to in
Section 8.04; and
(ii) all notices which may be required by statute,
rule of law or otherwise, now or hereafter in effect, to
preserve intact any rights against such Pledgor under any Loan
Document or as a requirement to the enforcement, assertion or
exercise against such Pledgor of any right, power, privilege
or remedy conferred under any Loan Document.
(c) Exhaust Other Remedies. Any requirement to exhaust any
rights or remedies or to mitigate the damages resulting from any
default under any Loan Document or any other document or any
requirement to protect, secure, perfect or insure any Lien or any
property subject to the Lien or take any other action against any
person or any collateral or other property.
(d) Claims. All claims that the sale price of any Pledged
Collateral was inadequate or unreasonable for any reason and all other
claims to damages and demands of any nature against the Collateral
Agent, the Agent and the Lenders.
(e) Equitable Rights. All equities and rights of appraisal,
stay and redemption (whether now or hereafter existing), in each case
arising out of the Collateral Agent, the Agent or the Lenders enforcing
any of their rights and remedies under any Loan Document.
(f) Subrogation and/or Contribution. Any exoneration or
release from the Obligations resulting from any loss by such Pledgor of
its rights, if any, of subrogation or contribution.
(g) Other Circumstances. Any other circumstance whatsoever,
including, without limitation, those stated in Section 8.04, which
might otherwise constitute
-16-
<PAGE> 17
a defense to or a legal or equitable discharge or release of a
guarantor or surety or a party granting security or which might
otherwise limit recourse against such Pledgor.
Section 8.04. Obligations Not Affected. The rights of the Collateral
Agent, the Agent and the Lenders and the obligations of the Pledgors under this
Agreement shall be absolute and unconditional, present and continuing and shall
remain in full force and effect and shall not be released, discharged or in any
way affected by any circumstance or condition of any nature (whether or not the
Company, any Pledgor, the Collateral Agent, the Agent or any Lender shall have
any notice or knowledge of the circumstance or condition), including, without
limitation:
(a) Failure of Documents. The invalidity, illegality,
unenforceability, discharge, termination, cancellation or frustration,
in whole or in part, of any Obligation, Loan Document or other
document.
(b) Failure to Exercise Rights and/or Remedies. The exercise
or failure to exercise by any person any right, remedy, privilege or
power under any Loan Document or other document.
(c) Collection Attempts. Any demand or attempt to collect
from, or failure to demand or attempt to collect from, the Company, any
Pledgor or any other Person under any Loan Document or other document.
(d) Security and Guarantees. The giving, acceptance,
existence, non-existence, validity, invalidity or value of any security
or collateral securing the Obligations or any guarantee of the
Obligations, including, without limitation, the Pledged Collateral and
the guarantees by the Pledgors, any attempt or failure to attempt to
realize upon that security, collateral or guarantee or the exchange,
substitution, renewal, extension, modification, compromise, release,
discharge or failure to perfect for any reason that security,
collateral or guarantee.
(e) Actions. Any change in the time, place or manner of
payment or the waiver, consent, extension, renewal, indulgence,
compromise, release, settlement, refunding, funding, or any other
forbearance or other action taken, delayed or omitted by the Collateral
Agent, the Agent, any Lender, the Company, any Pledgor, or any other
Person under or in respect of any term or provision of any Obligation,
Loan Document or other document.
(f) Modifications. The termination, modification, alteration,
amendment, waiver, addition, deletion or other change to any
Obligation, Loan Document or other document or any provision of any of
those documents.
(g) Reorganizations. The liquidation, dissolution, merger or
consolidation of the Company, and Pledgor or any other Person, or the
transfer by the Company, any Pledgor or any other Person of all or any
part of its property or assets, or the change in the ownership of any
shares of capital stock of the Company, and Pledgor or any other
Person.
(h) Bankruptcy. The voluntary or involuntary bankruptcy,
receivership, liquidation, insolvency, reorganization, arrangement,
assignment for the benefit of creditors or similar proceedings
involving or affecting the Company, any Pledgor any other Person or any
of their property.
(i) Release. The release or discharge, by operation of law or
otherwise, of the Company, any Pledgor or any other Person from any
Obligation or any provision of any Loan Document or other document.
-17-
<PAGE> 18
(j) Other Circumstances. Any other circumstance whatsoever,
foreseen or unforseen, which may or might in any manner or to any
extent vary the risks of the Pledgors or otherwise constitute a defense
available to or a legal or equitable discharge of or limit recourse
against a surety, a guarantor or a party granting security, the
Company, any Pledgor or otherwise.
ARTICLE IX
Miscellaneous
Section 9.01. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telexed or sent by telefacsimile (so
long as such notice sent by telefacsimile is followed within two Business Days
by a notice sent by another method specified hereunder) or United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service, upon receipt of telefacsimile or telex, or three Business
Days after depositing it in the United States mail with postage prepaid and
properly addressed; provided that notices to Agent shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be as
set forth under such party's name on the signature pages hereof or (i) as to the
Pledgors, the Collateral Agent and Agent, such other address as shall be
designated by such Person in a written notice delivered to the other parties
hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Agent.
Section 9.02. Expenses. Each of the Pledgors, jointly and severally,
agrees to pay to the Collateral Agent, the Agent and the Lenders on demand the
amount of any and all expenses, including, without limitation, the fees and
expenses of the Collateral Agent's, the Agent's or the Lenders' counsel, which
the Collateral Agent, the Agent or any Lender may pay or incur in exercising or
enforcing their rights under this Agreement.
Section 9.03. Transfer of Notes. If any Lender shall transfer any Note
held by it or grant participations in all or any of its Obligations, the
transferees of the Note or the grantees of the participations, as the case may
be, shall have the rights of the Lender under this Agreement in respect of the
Note or Obligations.
Section 9.04. Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, and by different parties hereto in
separate counterparts, each of which when executed will be deemed an original,
but all of which taken together will constitute one and the same instrument.
Section 9.05. Interpretation. As used in this Agreement, references to
the singular will include the plural and vice versa and references to the
masculine gender will include the feminine and neuter genders and vice versa, as
appropriate. Unless otherwise expressly provided in this Agreement (a) the words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement will refer to this Agreement as a whole and not to any particular
provision of this Agreement and (b) article, section, subsection, schedule and
exhibit references are references with respect to this Agreement unless
otherwise specified. References in this Agreement to any law or regulation will
refer to such laws and regulations as from time to time amended and to any laws
or regulations successor thereto. Unless the context otherwise requires, the
term "including" will mean "including, without limitation".
Section 9.06. Descriptive Headings. The headings in this Agreement and
in the Schedules, Exhibits and Annexes are included for convenience of reference
only and
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<PAGE> 19
will not affect in any way the meaning or interpretation of this Agreement.
Section 9.07. Incorporation of Schedules, Exhibits and Annexes. The
Schedules, Exhibits and Annexes hereto are incorporated into this Agreement and
will be deemed a part hereof as if set forth herein in full. In the event of any
conflict between the provisions of this Agreement and any Schedule, Exhibit or
Annex, the provisions of this Agreement will control.
Section 9.08. Amendment of Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 9.09. Successors and Assigns. This Agreement will be binding
upon and inures to the benefit of and is enforceable by the respective
successors and permitted assigns of the parties hereto. This Agreement may not
be assigned by any party hereto without the prior written consent of all other
parties hereto except for the assignment of all or any part of the rights and
obligations of the Collateral Agent under this Agreement, which may be assigned
by the Collateral Agent as provided in Section 8.1B and 9.1 of the Credit
Agreement. Any assignment or attempted assignment in contravention of this
Section will be void ab initio and will not relieve the assigning party of any
obligation under this Agreement.
Section 9.10. No Waiver; Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement will operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege will not preclude any other or further exercise of the
right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement and the other Loan
Documents will be cumulative and not exclusive of any rights or remedies
provided by law.
Section 9.11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
Section 9.12. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the state of New York applicable to
contracts executed in and to be performed entirely within that state.
Section 9.13. No Third-Party Rights. This Agreement is not intended,
and will not be construed, to create any rights in any parties other than the
Pledgors, the Collateral Agent, the Agent and the Lenders, and no Person may
assert any rights as third-party beneficiary hereunder, except as provided in
Section 5.12.
Section 9.14. Submission to Jurisdiction. Any Action with respect to
this Agreement may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and each of the
Pledgors, the Collateral Agent, the Agent and the Lenders hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of these courts. Each of the Pledgors, the Collateral Agent, the
Agent and the Lenders hereby irrevocably waives any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of forum non conveniens, which it may now or hereafter have to the bringing of
any Action in those jurisdictions.
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<PAGE> 20
Section 9.15. Waiver of Jury Trial. Each party waives any right to a
trial by jury in any Action to enforce or defend any right under this Agreement
or any amendment, instrument, document or agreement delivered or to be delivered
in connection with this Agreement and agrees that any Action will be tried
before a court and not before a jury.
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<PAGE> 21
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above in New York, New York.
AGENT:
CERBERUS CAPITAL MANAGEMENT, LLC,
Address: as Agent for the Lenders
450 Park Avenue
New York, New York 10022
Attention: Joyce Johnson-Miller
Telephone: (212) 891-2119 By:______________________________
Facsimile: (212) 750-5212 Name:
Title:
COLLATERAL AGENT:
THE CHASE MANHATTAN BANK, as
Address: Collateral Agent for the Lenders
450 West 33rd Street
14th Floor
New York, New York 10001
Telephone: (212) 946-3200 By:______________________________
Facsimile: (212) 946-8302 Name:
Title:
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<PAGE> 22
PLEDGOR:
Address: NSHS SERVICES, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289 By:______________________________
Indiana, Pennsylvania 15701 Name:
Attention: Thomas W. Zaucha Title:
Telephone: (724) 465-3200
Facsimile: (724) 465-3726
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<PAGE> 23
SCHEDULE 4.09
to
AMENDED AND RESTATED COMPANY PLEDGE AGREEMENT
<TABLE>
<CAPTION>
Pledged Shares
--------------
Authorized Issued and
Issuer Shares Outstanding Pledged Shares
------ ---------- ----------- --------------
<S> <C> <C> <C>
Keystone Rehabilitation
Systems, Inc. 2,000 2,000 2,000
Keystone Rehabilitation
Management Inc. 100 100 100
Northstar Medical
Services, Inc. 1,000 1,000 1,000
Northstar Diagnostic
Services, Inc. 1,000 1,000 1,000
Vascusonics Inc. 100 100 100
</TABLE>
-23-
<PAGE> 24
SCHEDULE 4.10
to
AMENDED AND RESTATED COMPANY PLEDGE AGREEMENT
<TABLE>
<CAPTION>
Pledged Debt
------------
Obligor Pledged Debt
------- ------------
<S> <C> <C>
None.
</TABLE>
-24-
<PAGE> 1
EXHIBIT 10.9
[EXECUTION COPY]
AMENDED AND RESTATED SUBSIDIARIES SECURITY AGREEMENT
This AMENDED AND RESTATED SUBSIDIARIES SECURITY AGREEMENT dated as of
September 30, 1999, among the subsidiaries of Northstar Health Services, Inc.
(the "Company") set forth on Schedule I hereto (as the successors to the
Grantors (as such term is defined in the Original Subsidiaries Security
Agreement (as defined below), each, a "Grantor", and collectively, the
"Grantors"), CERBERUS CAPITAL MANAGEMENT, LLC (the "Agent") and THE CHASE
MANHATTAN BANK, as Collateral Agent as provided for in Section 8.1B of the
Credit Agreement referred to below (as successor collateral agent to IBJ
WHITEHALL BANK & TRUST COMPANY, formerly known as IBJ SCHRODER BANK & TRUST
COMPANY, the "Collateral Agent"), amends and restates in its entirety that
certain Subsidiaries Security Agreement, dated as of October 20, 1995 (as
amended, modified or supplemented prior to the date hereof, the "Original
Subsidiaries Security Agreement"), among the Grantors and IBJ Schroder Bank &
Trust Company (the "Original Agent").
RECITALS
A. The Company, the Original Agent and the lenders set forth on the
signature pages thereto are parties to that certain Credit Agreement, dated as
of October 20, 1995 (as amended, modified or supplemented prior to the date
hereof, the "Original Credit Agreement"), pursuant to which the Lenders agreed
to extend certain credit facilities to the Company (the "Original Loans") which
were represented by certain promissory notes (the "Original Notes"), the
proceeds of which were used (i) to refinance substantially all indebtedness of
the Company and its Subsidiaries outstanding on the date thereof, (ii) to pay
certain fees and expenses, (iii) to provide financing for the working capital
needs of the Company and its Subsidiaries and (iv) to provide a portion of the
purchase price of certain acquisitions by the Company and its Subsidiaries.
B. The Grantors and the Original Agent are parties to that certain
Subsidiaries Guarantee, dated as of October 20, 1995 (as amended, modified or
supplemented prior to the date hereof, the "Original Subsidiaries Guarantee"),
among the Grantors and the Agent, pursuant to which the Grantors guaranteed the
Company's Obligations under the Original Credit Agreement and under the other
Loan Documents.
C. In order to secure the Obligations under the Original Subsidiaries
Guarantee, the Grantors and the Agent entered into the Original Subsidiaries
Security Agreement, pursuant to which the Grantors granted to the Original
Agent, on behalf of Lenders, a first priority security interest in all of their
personal property.
D. The Original Agent now wishes to resign as agent for the Lenders and
(i) the Agent wishes to replace the Original Agent as agent for the Lenders and
(ii) the Collateral Agent wishes to replace the Original Agent as collateral
agent for the Lenders under this Agreement.
<PAGE> 2
E. The Company, the Grantors, the Lenders, the Agent and the Original
Agent have agreed to amend and restate the Original Credit Agreement as of the
date hereof (the Original Credit Agreement, as so amended and restated being
referred to herein as the "Credit Agreement") to (i) extend the maturity of the
Original Loans on the terms set forth therein, (ii) reflect the Original Agent's
resignation as agent for the Lenders thereunder and the appointment of the Agent
as successor agent for the Lenders and the appointment of the Collateral Agent
as its successor as collateral agent for the Lenders under this Agreement, and
(iii) make certain other changes as more fully set forth therein.
F. The Grantors, the Agent and the Collateral Agent have agreed to
amend and restate the Original Subsidiaries Guarantee in its entirety to (i)
provide for the continuation of the guarantee of the Obligations by the Grantors
and (ii) to reflect the Original Agent's resignation as collateral agent for the
Lenders and the appointment of the Agent and the Collateral Agent as successor
agents for the Lenders.
G. The Grantors, the Agent and the Collateral Agent now wish to amend
and restate the Original Subsidiaries Security Agreement in its entirety to (i)
secure the Lenders' interest in the Obligations and (ii) reflect the Original
Agent's resignation as collateral agent for the Lenders and the appointment of
the Collateral Agent as its successor as collateral agent for the Lenders.
H. The Company owns, directly or indirectly, all of the issued and
outstanding capital stock of the Grantors.
I. The Company and the Grantors engaged in related businesses, and each
of the Grantors will derive substantial direct and indirect benefit from the
continuance of the Loans pursuant to the Credit Agreement.
J. It is the intent of the Company, the Grantors, the Lenders, the
Agent and the Collateral Agent that the amendment and restatement of the
Original Credit Agreement shall not constitute a novation of the obligations and
liabilities of the parties under the Original Credit Agreement nor be deemed to
evidence or constitute repayment of all or any portion of such obligations and
liabilities and that the Credit Agreement shall amend and restate in its
entirety the Obligations under the Original Credit Agreement and re-evidence the
Obligations of Company outstanding thereunder.
K. Each of the Grantors represents and confirms, and the Agent and the
Collateral Agent each acknowledge, that (i) the security interests granted
pursuant to the Original Subsidiaries Security Agreement continue in full force
and effect and continue to secure the Obligations under the Subsidiaries
Guarantee, (ii) the Loans represented by the Notes are the same Original Loans
which were, prior to the date hereof, represented by the Original Notes, and
(iii) the transactions contemplated by the Credit Agreement and this Agreement
did not and do not constitute a discharge or release of the security interests
granted by the Original Subsidiaries Security
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Agreement and that the security interests and the Collateral securing the
Original Loans and Obligations continue to secure the Loans and the Obligations.
L. It is a condition precedent to the obligation of the Lenders to
amend and restate the Original Credit Agreement and to extend the maturity of
the Original Loans that the Grantors execute this Agreement and continue to
grant the security interests hereunder.
AGREEMENT
In consideration of the premises and the mutual covenants and the
mutual agreements herein set forth, the parties agree as follows:
ARTICLE I
Defined Terms
Section 1.01. Certain Defined Terms. Unless otherwise defined herein,
capitalized terms used but not otherwise defined in this Agreement have the
meaning given to them in the Credit Agreement. In addition, the following terms
have the following meanings:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other debts and obligations owing to
the Grantors, including, but not limited to those arising out of the
sale or lease of goods or the rendition of services by the Grantors,
whether or not earned by performance, including Health-care-insurance
Receivables, all credit insurance, guaranties, and other security
therefor and enhancements thereof, as well as all goods returned to or
reclaimed by the Grantors, and the Grantor's books and records (both
hard copy and electronic) relating to any and all of the foregoing.
"Action" against a Person means an action, suit,
investigation, complaint, litigation, arbitration, contest, hearing,
inquiry, inquest, audit, examination or other proceeding threatened or
pending against or affecting the Person or its property, whether civil,
criminal, administrative, investigative or appellate, in law or equity
before any arbitrator or Governmental Body.
"Cash Management System" has the meaning stated in the Credit
Agreement.
"Code" means the New York Uniform Commercial Code, as set
forth in N.Y.U.C.C. Law Section 1-101, et seq. (McKinney 1990), as
amended from time to time.
"Collateral" means all of the following: Accounts; Equipment:
General Intangibles; Inventory; Investment Property; Negotiable
Collateral; Vehicles; Deposit Accounts; Fixtures; Pledged Partnership
Interests: any money or other assets of the
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Grantors which hereafter come into the possession, custody or control
of Agent or Collateral Agent; and all proceeds and products, whether
tangible or intangible, of any of the foregoing, including proceeds of
insurance covering any or all of the Collateral, and any and all
Accounts, Equipment, General Intangibles, Inventory, Investment
Property, Negotiable Collateral, money, Deposit Accounts or other
tangible or intangible property resulting from the sale or other
disposition of the Collateral, or any portion thereof or interest
therein, and the proceeds thereof.
"Collateral Agent's Office" means the office of the Collateral
Agent located at 1411 Broadway, New York, New York.
"Company Security Agreement" has the meaning stated in the
Credit Agreement.
"Concentration Account" has the meaning stated in the Company
Security Agreement.
"Copyright Licenses" means (a) any agreement, written or oral,
naming the Company as licensor or licensee, granting any right in or to
any Copyright or copyright registration in the United States or any
foreign country, including, without limitation, any thereof referred to
on Part I of Schedule 4.10 hereto, or (b) any and all present and
future agreements, including, without limitation, assignments and
consents, as any such agreements may from time to time be amended or
supplemented, pursuant to which the Company now has or hereafter
acquires any direct or indirect beneficial interest in any Copyright,
or is a grantor of rights to any third party with respect to any
Copyright, whether as a party to any such agreement or as an assignee
of any rights under any such agreement, including, without limitation,
any thereof referred to on Part I of Schedule 4.10 hereto, excluding,
however, non-exclusive computer software licenses.
"Copyrights" means (a) the copyrights in all original works of
authorship fixed in any tangible medium of expression, including,
without limitation, any thereof referred to on Part I of Schedule 4.10
hereto, including, without limitation, all databases, source codes,
object codes and manuals, whether published or unpublished, now or
hereafter existing, in the United States and all foreign countries, and
all applications, registrations, renewals, extensions and recordings
relating thereto filed in the United States Copyright Office or in any
other governmental office or agency in the United States or elsewhere,
in each case in which the Company has any right, title or interest, and
all other rights which the Company presently has or hereafter acquires
pursuant to any Copyright License, including, without limitation,
copyright assignments, exclusive and nonexclusive licenses, and (b) all
right, title and interest of the Company in all physical materials
embodying works with respect to which the Company owns or holds rights
in any Copyrights or Copyright Licenses.
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"Deposit Accounts" means a demand, time, savings, passbook, or
similar account maintained with a bank, other than Investment Property
or an account evidenced by an Instrument.
"Disbursement Account" has the meaning stated in the Company
Security Agreement.
"Equipment" means all of the Grantors' present and hereafter
acquired equipment, machinery, machine tools, motors, furniture,
furnishings, fixtures, motor vehicles, rolling stock, processors,
tools, parts, dies, jigs, goods (other than consumer goods, farm
products or Inventory), wherever located, and any interest of the
Grantors in any of the foregoing, and all attachments, accessories,
accessions, replacements, substitutions, additions and improvements to
any of the foregoing, wherever located.
"Fixtures" means goods that have become so related to
particular real property that an interest in them arises under real
property law.
"General Intangibles" means all of the Grantors' present and
future general intangibles and other personal property (including
contract rights, rights arising under common law, statutes or
regulations, licenses, franchises, Payment Intangibles, choses or
things in action, goodwill, patents and patent applications, trade
names, trademarks and trademark applications, service marks, copyrights
and copyright applications, trade secrets, blueprints, drawings,
intellectual property or any nature whatsoever, purchase orders,
customer lists, monies due or recoverable from pension funds, monies
due under any royalty or licensing agreements, route lists,
infringement claims, computer programs, computer discs, source codes,
computer tapes, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds and tax refund claims) other
than goods and Accounts, and the Grantors' books and records relating
to any of the foregoing.
"Health-care-insurance Receivable" means an interest in or
claim under a policy of insurance which is a right to payment of a
monetary obligation for health-care goods or services provided.
"Instrument" means a negotiable instrument or any other
writing that evidences a right to the payment of a monetary obligation,
is not itself a security agreement or lease, and is of a type that in
ordinary course of business is transferred by delivered with any
necessary endorsement or assignment.
"Inventory" means all present and future inventory in which
the Grantors have any interest, including goods held for sale or lease
or to be furnished under a contract of service, the Grantors' present
and future raw materials, work in process, finished goods and materials
used in or consumed in the Grantors's business, goods, which have been
returned to, repossessed by or stopped in transit by the Grantors,
packing and shipping
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materials, wherever located, any documents of title representing any of
the above, and the Grantors' books and records relating to any of the
foregoing.
"Investment Property" means all of the Grantors' present and
future certificated and uncertificated securities, securities
entitlements, securities accounts, commodity accounts and commodity
contracts.
"Governmental Body" means any agency, bureau, commission,
court, department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Medicare" the federal program authorized under 42 U.S.C. 301
et seq.
"Medicare Collection Account" has the meaning stated in the
Company Security Agreement.
"Medicare Receivable" means any receivable of the Company or
one of its Subsidiaries created in connection with services provided
under Medicare.
"Negotiable Collateral" means all of the Grantors' present and
future letters of credit, notes, drafts, Instruments, documents, leases
and chattel paper, and Company's books and records relating to any of
the foregoing.
"Non-Medicare Collection Account" has the meaning stated in
the Company Security Agreement.
"Partnership" means each of the partnerships set forth in Part
III of Schedule 4.11.
"Patent Licenses" means any agreement, whether written or
oral, providing for the grant by the Company of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in Part II Schedule 4.10
hereto.
"Patents" means (a) all letters patent of the United States
and all reissues and extensions thereof, including, without limitation,
any thereof referred to in Part II of Schedule 4.10 hereto, and (b) all
applications for letters patent of the United States and all divisions,
continuations and continuations-in-part thereof or any other country,
including, without limitation, any thereof referred to in Part II of
Schedule 4.10 hereto.
"Payment Intangible" means a general intangible under which
the account debtor's principal obligation is a monetary obligation.
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"Payroll Account" has the meaning stated in the Company
Security Agreement.
"Pledged Accounts" has the meaning stated in the Company
Security Agreement.
"Pledged Partnership Interests" means the partnership
interests (general or limited) and other equity interests, together
with all certificates and instruments, if any, representing such
interests, each as set forth in Part III of Schedule 4.11 hereto.
"Regulation" means each applicable law, rule, regulation,
order or recommendation (or any change in its interpretation or
administration) by any Governmental Body, central bank or comparable
agency and any request or directive (whether or not having the force of
law) of any of those Persons and each writ, judgment, injunction,
order, decree or award of any arbitrator or Governmental Body.
"S&T Bank" means S&T Bank.
"Trademark Licenses" means any agreement, written or oral,
providing for the grant by the Company of any right to use any
Trademark, including, without limitation, any thereof referred to in
Part III of Schedule 4.10 hereto.
"Trademarks" means (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency or the
United States, any State thereof of any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Part III of Schedule 4.10 hereto, and (b) all
renewals thereof.
"Vehicles" means vehicles operated or driven upon a public
highway and propelled by any power other than muscular power as set
forth in N.Y. Veh. & Traf. Law Section 125 (McKinney 1996), as amended.
ARTICLE II
Grant of Security
Section 2.01. Grant of Security. The Grantors hereby grants to Agent
and the Collateral Agent, for their benefit and the ratable benefit of the
Lenders a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by the Grantors
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<PAGE> 8
of each and all of their covenants and duties under the Loan Documents. Agent's
and Collateral Agent's security interest in the Collateral shall attach to all
Collateral without further act on the part of Agent, Collateral Agent or the
Grantors. Other than sales of Inventory to buyers in the ordinary course of
business, the Grantors have no authority, express or implied, to dispose of any
item or portion of the Collateral, except as provided for in the Credit
Agreement.
Section 2.02. Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, the
Grantors shall, upon the request of Agent, immediately endorse and assign such
Negotiable Collateral to Agent or the Collateral Agent and deliver physical
possession of such Negotiable Collateral to Collateral Agent.
ARTICLE III
Grantors Remains Liable; Delivery of Collateral; Deposit Accounts
Section 3.01. Grantors Remains Liable. Anything in this Agreement to
the contrary notwithstanding:
(a) Grantors Remains Liable. The Grantors shall remain liable
to perform all its obligations (whether under the Contracts, Negotiable
Collateral or otherwise) under or in respect of the Guarantee
Collateral to the same extent as if this Agreement had not been
executed.
(b) Grantors Not Released. The exercise by the Collateral
Agent, the Agent or any Lender of any of their rights under any Loan
Document shall not release the Grantors from any of those obligations,
(c) Collateral Agent, Agent and Lenders Not Liable. Neither
the Collateral Agent, the Agent nor any Lender shall have, by reason of
any Loan Document, any obligation or liability under or in respect of
any Guarantee Collateral or any contract or agreement included in the
Guarantee Collateral.
(d) Collateral Agent, Agent and Lenders Not Obligated to
Perform. Neither the Collateral Agent, the Agent nor any Lender shall
be obligated to perform any of the obligations of the Grantors under or
in respect of any Guarantee Collateral or any other contract or
agreement included in the Guarantee Collateral or to take any action to
collect or enforce any claim for payment assigned by this Agreement.
Section 3.02. Delivery of Guarantee Collateral.
(a) Delivery of Guarantee Collateral. All certificates and instruments,
whether negotiable or otherwise, representing or evidencing the Investment
Property shall be delivered to the Collateral Agent duly endorsed in blank or
accompanied by undated stock powers,
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instruments of transfer or undated assignments duly executed in blank, in each
case with signatures guaranteed and otherwise in form and substance satisfactory
to the Collateral Agent (the "Stock Powers"), or in the case of non-negotiable
Investment Property, such Investment Property has been re-registered in the
Collateral Agent's name.
(b) Re-Registration of Guarantee Collateral. Upon the occurrence and
during the continuation of an Event of Default under the Credit Agreement, at
the request of the Agent, each Grantor shall promptly cause the Investment
Property, Negotiable Collateral or Instruments specified by the Agent to be
registered in the name of the Collateral Agent or in the name of the nominee or
nominees specified by the Agent.
(c) Exchange of Certificates. The Collateral Agent may from time to
time exchange certificates or instruments representing or evidencing the
Investment Property, Negotiable Collateral or Instruments for replacement
certificates or instruments.
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Section 3.03 Notices and Analysis.
(a) Notice to Account Debtors and Contracting Parties. Each Grantor
shall promptly notify account debtors on the Accounts, parties to the Contracts
and all other obligors in respect of any Guarantee Collateral that the Accounts,
Contracts and all other Guarantee Collateral have been assigned to the
Collateral Agent for the ratable benefit of the Lenders and that payments in
respect thereof shall be made directly to S&T Bank by delivering a written
notice, substantially in the form of Exhibit 3.03(a) to the Company Security
Agreement to each such account debtor, Contract party and obligor. The
Collateral Agent and the Agent may in their own names or in the name of others
communicate with account debtors on the Accounts, parties to the Contracts and
the other obligors to verify with them to its satisfaction the existence, amount
and terms of any Accounts, Contracts or other Guarantee Collateral.
(b) Analysis of Accounts. The Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonable considers advisable, and the Grantors shall furnish all such
assistance and information as the Agent may require in connection therewith. At
any time and from time to time, upon the Agent's request and at the expense of
the Grantors, the Grantors shall cause independent public accountants or others
satisfactory to the Agent to furnish to the Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Accounts; provided, that unless an Event of Default shall have occurred and be
continuing (in which case this right shall not be so limited) such activities
shall not take place more often than two times during any calendar year.
Section 3.04. Voting of Investment Property. Unless an Event of Default
shall have occurred and is continuing, the Grantors shall be entitled to
exercise any and all voting and other consensual rights pertaining to all or any
part of the Investment Property for any purpose not inconsistent with the terms
of this Agreement or any other Loan Document; provided, however, that the
Grantors shall not exercise or refrain from exercising any right if, in the
judgment of the Agent, the action would have a material adverse effect on the
value of all or any part of any Guarantee Collateral or on the interest of the
Grantors, the Collateral Agent, the Agent or the Lenders in any Guarantee
Collateral. The Grantors shall give the Collateral Agent and the Agent at least
five Business Days prior written notice of the manner in which it intends to
exercise, or the reasons for refraining from exercising, any such right.
Section 3.05. Deposit Accounts.
(a) No Other Accounts. The Grantors shall not own, open, establish,
have or maintain any Deposit Account other than the Pledged Accounts.
(b) Establishment of Pledged Accounts. There have been established by
the Company and the Grantors on or prior to the date hereof, the Pledged
Accounts.
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The terms and conditions of each of the Pledged Accounts shall at all
times be in all respects satisfactory to the Collateral Agent and the Agent.
(c) Blocked Accounts. On or prior to the date hereof, the Company, the
Agent, S&T Bank and the Collateral Agent shall have entered into the Blocked
Account Agreements, substantially in the form of Exhibit 3.05(c) to the Company
Security Agreement as provided in Section 3.05 (c) of the Company Security
Agreement.
(d) Control of the Pledged Accounts. The parties hereto agree that the
Pledged Accounts (other than the Medicare Collection Account) shall be under the
exclusive dominion and control of the Collateral Agent. The Collateral Agent
hereby authorizes the Grantors to collect amounts due under the Guarantee
Collateral, subject to the Agent's direction and control, and the Agent may
curtail or terminate said authority at any time.
(e) Cash Management System. Each of the Grantors agrees to operate
their respective businesses, manage their cash flows, and maintain the Pledged
Accounts strictly in accordance with the terms and provisions of the cash
management system set forth in the Cash Management System. In addition, the
Grantors shall not take any action or omit to take any action that would
violate, breach, conflict with, or otherwise frustrate the purposes of the Cash
Management System. Each Grantor agrees that any such violation or breach of the
Cash Management System shall be treated as a violation or breach of this
Agreement.
(f) Reports and Documents. Promptly (but in no event later than 10
days) after the end of each calendar month, the Grantors shall deliver to the
Collateral Agent a certification from the Chief Financial Officer of such
Grantor that all deposits into the Pledged Accounts consist solely of Guarantee
Collateral or Proceeds of Guarantee Collateral. At the Collateral Agent's
request, the Grantors shall deliver to the Collateral Agent all original and
other documents evidencing, and relating to, the agreements and transactions
which gave rise to such deposits, including, without limitation, all original
orders and invoices.
(g) Turn-Over of Proceeds. All Proceeds of Guarantee Collateral which
are not sent or delivered directly to a Pledged Account by an obligor, when
collected by a Grantor, whether consisting of checks, notes, drafts, bills of
exchange, money orders, commercial paper of any kind whatsoever, or other
documents or otherwise, received in payment of any Guarantee Collateral or on
account of any Guarantee Collateral shall be promptly deposited by such Grantor
in the exact form received, except for any endorsement by such Grantor to the
Collateral Agent, if required, in the Medicare Collection Account, or the
Non-Medicare Collection Account, as applicable, or shall be turned over to the
Collateral Agent, and until so deposited or turned over, shall be deemed to be
held in trust by such Grantor for and as the Collateral Agent's property and
shall not be commingled with such Grantor's other funds.
(h) Proceeds Remain Guarantee Collateral. All Proceeds constituting
collections of Guarantee Collateral while held by the Collateral Agent (or by a
Grantor in trust for the
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Collateral Agent) shall continue to be collateral security for all of the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided.
(i) KRS Partnerships. Each Grantor agrees to use its respective best
efforts to cause each of the partners of the KRS Partnerships to execute and
deliver the Addendum to Management Agreement, in the form of Exhibit 3.05(i)
(1), (2), (3), and (4) attached to the Company Security Agreement within 60 days
after the date of this Agreement. In the event that all such agreements are not
executed and delivered within such 60 day period each Grantor agrees to modify
the Cash Management System to the satisfaction of the Agent.
ARTICLE IV
Representations and Warranties of the Grantors
Each of the Grantors hereby represents and warrants to the Collateral
Agent, the Agent and the Lenders as follows:
Section 4.01. Power. Such Grantor has good right and all necessary
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, including, without limitation, the granting of
the security interests, Liens and pledges in the Guarantee Collateral to the
Collateral Agent.
Section 4.02. Authorization; Binding Effect. The execution and delivery
by such Grantor of this Agreement, the performance by such Grantor of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby has been duly authorized by all necessary corporate action.
No other proceedings on the part of such Grantor are necessary to approve and
adopt this Agreement or to approve the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
Grantor and is a legal, valid and binding obligation of such Grantor enforceable
against such Grantor in accordance with its terms.
Section 4.03. Contravention. Neither the execution, delivery and
performance of this Agreement by such Grantor nor the consummation of the
transactions contemplated hereby will (with or without notice or lapse of time
or both) (a) conflict with, violate or breach any provision of such Grantor's
organizational documents or bylaws, (b) violate, conflict with or result in a
breach of any Regulation, writ, judgment, injunction, order, decree or award of
any Governmental Body or any other Person by which such Grantor, any of the
Guarantee Collateral or any of its other properties may be bound or affected,
(c) conflict with, result in a default under, or give rise to a right of
termination, cancellation, or acceleration or to a loss of a benefit under any
Contract or other material agreement to which such Grantor is a party or by
which such Grantor, the Guarantee Collateral or any of its other properties may
be bound or affected or (d) result in or require the creation or imposition of
any Lien on any Guarantee Collateral or any of the other
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properties now owned or hereafter acquired by such Grantor, except for the Liens
in favor of the Collateral Agent created by this Agreement.
Section 4.04. Approvals. No authorization, consent, order or approval
of, notice to or registration or filing with, or any other action by any
Governmental Body or other Person, including any other party to a Contract, is
required or advisable in connection with (a) the due execution and delivery by
such Grantor of this Agreement, (b) the consummation of the transactions
contemplated by this Agreement, including the granting of the security
interests, Liens and pledges of the Guarantee Collateral to the Collateral
Agent, (c) the perfection of the security interests, Liens and pledges granted
by this Agreement, (d) the performance by such Grantor of its obligations under
this Agreement, or (e) the exercise by the Collateral Agent of its rights and
remedies under this Agreement.
Section 4.05. Title. Such Grantor is and, with respect to Guarantee
Collateral to be acquired, will be, the sole legal and beneficial owner of the
Guarantee Collateral, free and clear of any Lien or option in favor of any other
Person, except for the Liens created by this Agreement and such Grantor has good
and marketable title to the Guarantee Collateral. No security agreement,
financing statement or other instrument similar in effect covering all or any
part of the Guarantee Collateral is on file in any recording office, except such
as may have been filed in favor of the Collateral Agent relating to this
Agreement.
Section 4.06. Perfected First Priority Liens. The Liens originally
granted pursuant to this Agreement constitute first priority perfected Liens in
favor of the Original Agent for the ratable benefit of the Lenders, and upon
filing of appropriate amendments to the UCC financing statements filed in
connection with such Liens, will constitute first priority perfected Liens in
favor of the Collateral Agent, for the ratable benefit of the Lenders, which
Liens are prior to all other Liens on the Guarantee Collateral and which are
enforceable as such against (a) all creditors of, and purchasers from, such
Grantor, (b) upon receipt of the landlord waivers referred to in Section 5.02,
any owner or purchaser of the real property where any of the Equipment is
located, (c) any present or future creditor obtaining a Lien on such real
property or any of the Guarantee Collateral, and (d) any other third party, and
all filings and other actions necessary or desirable to perfect and protect such
Liens and security interests have been duly made or taken.
Section 4.07. Chief Place of Business. The chief place of business and
chief executive office of such Grantor are located at The Atrium, 665
Philadelphia Street, Indiana, Pennsylvania 15701. Such Grantor keeps all of its
records concerning the Guarantee Collateral and the original copies of the
Contracts only at that address.
Section 4.08. Accounts, Negotiable Collateral, Instruments and General
Intangibles.
(a) Bona Fide Accounts; Amounts. Except as set forth on Schedule
4.08(a) hereto, each of the Accounts, Negotiable Collateral, Instruments and
General Intangibles arose from bona fide transactions in the ordinary course of
such Grantor's business and are current and collectible net
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of any reserves shown on such Grantor's financial statements (which reserves are
adequate and were calculated consistent with past practice). The amount
represented by such Grantor to the Collateral Agent from time to time as owing
by each account debtor or by all account debtors in respect of the Accounts,
Negotiable Collateral, Instruments and General Intangibles will at such time be
the correct amount actually owing by such account debtor or debtors thereunder.
There exists no default under the Accounts, Negotiable Collateral, Instruments
or General Intangibles by any party. Such Grantor has given notice to the issuer
of each Instrument, Investment Property and Negotiable Collateral existing on
the date of this Agreement of the Collateral Agent's security interest in such
Collateral.
(b) Delivery to Agent. All of the certificates and instruments
representing or evidencing Negotiable Collateral and Instruments have been
endorsed, and/or issued and delivered to the Agent in accordance with Section
3.02. No amount payable to such Grantor under or in connection with any Account
is evidenced by any Instrument or Negotiable Collateral which has not been
delivered to the Agent.
(c) Schedule. Schedule 4.08(c) sets forth a true, correct and complete
list and description of all (i) Accounts in excess of $5,000, (ii) Negotiable
Collateral, (iii) Instruments and (iv) General Intangibles, in each case, in
which such Grantor has an interest as of the date of the Agreement.
Section 4.09. Contracts.
(a) Legal, Valid and Binding. Each of the Contracts (i) has been duly
authorized, executed and delivered by such Grantor and, to the best of such
Grantor's knowledge, by the other parties thereto, and is in full force and
effect and (ii) constitutes the legal, valid and binding obligation of each of
the parties thereto.
(b) Full Force and Effect. Except as set forth on Schedule 4.09(b)
hereto, each Contract will continue in full force and effect following the
transactions contemplated by this Agreement, including, without limitation, the
collateral assignment of the Contracts hereunder, in each case without the
breach of any terms or conditions of thereof, without the forfeiture or
impairment of any rights thereunder and without material penalty or other
material adverse consequence.
(c) No Defaults; No Defenses. There exists no breach or default (or
event which with or without the lapse of time or the giving of notice, or both,
would constitute a breach or default) under the Contracts by such Grantor, or to
such Grantor's knowledge, any other party thereto. Such Grantor has fully
performed all its obligations under each Contract. The right, title and interest
of such Grantor in, to and under each Contract are not subject to any defense,
offset, counterclaim or claim which would materially adversely affect the value
of such Contract as Guarantee Collateral, nor have any of the foregoing been
asserted or alleged against such Grantor as to any Contract.
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(d) Copies of Contracts; No Instruments. At the request of the Agent,
the Grantors will deliver to the Agent a complete and correct copy of each
Contract, including all amendments, supplements and other modifications thereto.
No amount payable to such Grantor under or in connection with any Contract is
evidenced by any Instrument or Negotiable Collateral which has not been
delivered to the Collateral Agent. Schedule 4.09(d) sets forth a true, correct
and complete list and description of all of the Contracts.
Section 4.10. Copyrights, Patents and Trademarks.
(a) Schedules. Part I of Schedule 4.10 sets forth a true, correct and
complete list and description of all Copyrights and Copyright Licenses in which
any Grantor have an interest as of the date hereof. Part II of Schedule 4.10
sets forth a true, correct and complete list and description of all Patents and
Patent Licenses in which any Grantor has an interest as of the date hereof. Part
III of Schedule 4.10 sets forth a true, correct and complete list and
description of all Trademarks and Trademark Licenses in which any Grantor has an
interest as of the date hereof, in each case, including a list of all
jurisdictions in which such Proprietary Rights are registered or applied for and
all registration and application numbers, where applicable.
(b) General. One of the Grantors has good and marketable title to each
of the interests created by the Proprietary Rights. All Proprietary Rights of
the Grantors are valid and in good standing and are in full force and effect.
None of the Grantors has granted any options, licenses or agreements of any kind
relating to Proprietary Rights, including the marketing or distribution thereof.
Except as set forth on Schedule 4.10, none of the Grantors is bound by or a
party to any options, licenses or agreements of any kind relating to the
Proprietary Rights of any other Person. There is no obligation or liability of
any Grantor with respect to any of the Proprietary Rights which is required to
have been paid or otherwise performed which has not been paid or otherwise
performed in full.
(c) No Actions. Except as disclosed on Schedule 4.10, no Action is
pending (i) questioning or challenging any Grantor's title to, or right to use
such Proprietary Rights, (ii) seeking to limit, cancel or question the validity
of any Proprietary Right, or (iii) which, if adversely determined, would have a
material adverse effect on the value of any Proprietary Rights.
Section 4.11. Investment Property.
(a) Schedules. Part I of Schedule 4.11 sets forth a true, correct and
complete list and description of all of the Investment Property constituting
capital stock or other equity interests (the "Equity Interests") and the issuers
thereof (the "Equity Issuers"). Part II of Schedule 4.11 sets forth a true,
correct and complete list and description of all of the Investment Property
constituting indebtedness (the "Debt Interests") and the issuers thereof (the
"Debt Issuers", and together with the Equity Issuers, the "Issuers"). Part III
of Schedule 4.11 sets forth a true, correct and complete list and description of
all of the Pledged Partnership Interests and the Partnerships.
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(b) Equity Interests. Each of the Equity Interests is duly authorized,
validly issued, fully paid and non-assessable.
(c) Debt Interests. Each of the Debt Interests is duly authorized,
validly issued and constitutes the legal, valid and binding obligation of the
Issuers thereof enforceable against each such Issuer in accordance with their
respective terms.
(d) No Other Securities or Interests. There are no (i) outstanding
capital stock or securities convertible into or exchangeable or exercisable for
any shares of capital stock or securities of any Equity Issuer, (ii) outstanding
rights to subscribe for or to purchase, or any options for the purchase of, or
any calls, commitments or claims of any character relating to, any shares of
capital stock or securities of any Equity Issuer, (iii) outstanding securities
convertible into or exchangeable or exercisable for any shares of capital stock
or securities of any Equity Issuer and (iv) agreements or arrangements providing
for the issuance of any shares of capital stock or securities of any Equity
Issuer.
(e) No Voting or Transfer Restrictions. There is no agreement or
arrangement restricting the voting or transfer of the Equity Interests or the
Debt Interests or any other Investment Property, except as provided in this
Agreement.
(f) No Payment Restrictions. There are no legal, contractual or other
restrictions on the payment of (i) dividends or other distributions on any
shares of the capital stock or securities of any Equity Issuer, including,
without limitation, the Equity Interests, or (ii) principal or interest on any
indebtedness of any Debt Issuer, including, without limitation, the Debt
Interests, in each case, except for restrictions imposed by this Agreement and
the Credit Agreement.
(g) No Repurchase Obligations. No Person is subject to any obligation,
contingent or otherwise, to repurchase or otherwise acquire or retire any of the
Equity Interests or the Debt Interests.
(h) Delivery to Collateral Agent. All of the certificates and
instruments representing or evidencing the Investment Property and the Stock
Powers have been delivered to the Collateral Agent in accordance with Section
3.02.
(i) Capital Account Balances, etc. The capital account balance with
respect to each of the Pledged Partnership Interests as of December 31, 1998 is
as set forth in Part III of Schedule 4.11 under the heading "Capital Account
Balance". The Grantors' total capital commitment and their total capital
contributions made and their unfunded capital commitment for each Partnership as
of December 31, 1998 are set forth in Part III of Schedule 4.11. Each of the
Grantors has paid in full to each Partnership when due its entire commitment to
make contributions to the capital of such Partnership and there is no unfunded
capital commitment or other obligations under any Partnership Agreement in
respect of its Partnership Interest. None of the Grantors is not now, and to its
knowledge, has never been, in default under or in breach of, any of its
obligations,
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duties, representations, warranties, covenants or agreements contained in any
Partnership Agreement.
(j) Copies of Agreements. The Grantors have delivered to the Agent
true, correct and complete copies of (i) the Agreement of Limited Partnership of
each of the Partnerships, together with all amendments and waivers thereto and
(ii) all agreements and other documents pursuant to which each Grantor acquired
each Pledged Partnership Interest. Except as set forth in Part III of Schedule
4.11, no Partnership Agreement has been amended and no terms thereof waived and
there are no side letters outstanding with respect to any Partnership. Except
for the Partnership Agreements, the Grantors are not party to or bound by any
agreements or understandings affecting or relating to any of the Pledged
Partnership Interests.
Section 4.12. Inventory, Equipment and Fixtures.
(a) Possession. Each of the Grantors has exclusive possession and
control of its Inventory, Equipment and Fixtures.
(b) Condition. All of the Inventory, Equipment and Fixtures are in good
working order, condition and repair, except for ordinary, wear and tear which is
not material, and are suitable and adequate for the uses for which they are used
and intended.
(c) Schedule. Schedule 4.12 sets forth a true, correct and complete
list, description and location of all (i) Inventory, (ii) Equipment and (iii)
Fixtures, in each case, in which one of the Grantors has an interest as of the
date of this Agreement.
Section 4.13. Vehicles. Schedule 4.13 sets forth a true, correct and
complete list and description of all Vehicles in which one of the Grantors has
an interest as of the date of this Agreement. All such Vehicles are in good
working order, condition and repair (except for ordinary wear and tear) and are
suitable and adequate for the uses for which they are used and intended.
Section 4.14. Governmental Obligors. Schedule 4.14 sets forth a true,
correct and complete list and description, including the name and address and
outstanding amount owed (as of the date hereof), by each of the account debtors
on the Accounts, parties to the Contracts and the obligors under any other
Guarantee Collateral which is a Governmental Body as of the date of this
Agreement whose payments must be segregated from other receivables of any of the
Grantors under Medicare. The Grantors have notified any obligor which is a
Governmental Body of the security interest granted hereby and has instructed
such Governmental Bodies making Medicare payments to the Grantors to make such
payments only to the Medicare Collection Account.
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ARTICLE V
Covenants of the Grantors
Section 5.01. No Liens on Guarantee Collateral. None of the Grantors
will create, incur, assume or permit to exist, will defend the Guarantee
Collateral against, and will take such other actions as is necessary to remove,
any Lien or claim on or to the Guarantee Collateral, other than the Liens
created hereby, and will defend the right, title and interest of the Collateral
Agent and the Lenders in and to any of the Guarantee Collateral against the
claims and demands of any and all Persons.
Section 5.02. Perfection. Each of the Grantors will take any and all
actions, at such Grantor's expense, which are necessary or advisable to ensure
that (a) the Liens granted pursuant to this Agreement at all times constitute
perfected Liens in favor of the Collateral Agent, for the ratable benefit of the
Lenders, and (b) such Liens are at all times prior to all other Liens on the
Guarantee Collateral and will be enforceable as such against all creditors of,
and purchasers from, such Grantor and against any owner or purchaser of the real
property where any of the Equipment is located and any present or future
creditor obtaining a Lien on such real property, and will use its best efforts
to obtain landlord waivers in the form of Exhibit 5.02 to the Company Security
Agreement, from all of the landlords owing property at which the Grantors
conduct business or have Equipment.
Section 5.03. Limitations on Dispositions of Guarantee Collateral. Each
of the Grantors agrees that it will not sell, transfer, lease, convey or
otherwise dispose of any of the Guarantee Collateral, or attempt, offer or
contract to do so, except for, so long as no Default or Event of Default has
occurred and is continuing, the disposition in the ordinary course of such
Grantor's business consistent with past practice of property not material to the
conduct of the Company's or such Grantor's respective businesses.
Section 5.04. Payment of Obligations. Each of the Grantors will
promptly pay and discharge when due all taxes, assessments and governmental
charges or levies assessed, levied or imposed upon or relating to, and all
claims against, the Guarantee Collateral or such Grantor or in respect of such
Grantor's income or profits therefrom, as well as all claims of any kind,
including, without limitation, claims for labor, materials and supplies, against
or with respect to the Guarantee Collateral.
Section 5.05. Compliance with Laws, etc. Each of the Grantors will
comply in all material respects with all Regulations applicable to the Guarantee
Collateral or any part thereof or to the operation of such Grantor's business.
Section 5.06. Maintenance of Records. Each of the Grantors will keep
and maintain, at its own cost and expense, satisfactory and complete records of
the Guarantee Collateral, including, without limitation, a record of all
payments received and all credits granted with respect to the Accounts. Each of
the Grantors will mark its books and records pertaining to the Guarantee
Collateral to evidence this Agreement and the Liens, security interests and
pledges
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granted hereby. For the Collateral Agent's and Lenders' further security, the
Collateral Agent, for the ratable benefit of the Lenders, shall have a security
interest in all of the Grantors' books and records pertaining to the Guarantee
Collateral and, upon the occurrence of an Event of Default which is continuing,
each of the Grantors shall, upon request, turn over any such books and records
to the Collateral Agent or to its representatives.
Section 5.07. Right of Inspection. The Collateral Agent, the Agent and
the Lenders shall at all times have full and free access during normal business
hours and, upon the occurrence and continuation of an Event of Default, at any
time, to all the books, correspondence and records of the Grantors, and the
Collateral Agent, the Agent and the Lenders or their respective representatives
may examine the same, take extracts therefrom and make photocopies thereof, and
each of the Grantors agrees to render to the Collateral Agent, the Agent and the
Lenders, at such Grantor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Collateral Agent, the
Agent and the Lenders and their respective representatives shall at all times
also have the right to enter into and upon any premises where any of the
Inventory, Equipment or other Guarantee Collateral is located for the purpose of
inspecting the same, observing its use or otherwise protecting their interests
therein.
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Section 5.08. Impairment of Guarantee Collateral.
(a) General. None of the Grantors shall take, or fail to take, any
action in connection with any Guarantee Collateral that would impair the value
of the Guarantee Collateral or the interest or rights of any Grantor, the
Collateral Agent, the Agent or any Lender in, to or under that Guarantee
Collateral.
(b) Certain Actions Prohibited. None of the Grantors will (i) amend,
modify, terminate, cancel or waive any provision of any Account, Negotiable
Collateral, Instrument, General Intangible, Contract or Investment Property in
any manner which could reasonably be expected to materially adversely affect the
value of the Guarantee Collateral or the interest of such Grantor, the
Collateral Agent, the Agent or the Lenders in such Guarantee Collateral, (ii)
fail to exercise promptly and diligently each and every material right which it
may have under each Contract, each agreement giving rise to an Account (other
than any right of termination) or any other right with respect to the Guarantee
Collateral or (iii) fail to deliver to the Collateral Agent a copy of each
material demand, notice or document received by it relating in any way to any
Contract, any agreement giving rise to an Account or any other Guarantee
Collateral.
(c) Limitations on Discounts, Compromises, Extensions of Accounts.
Other than in the ordinary course of the Grantors' business consistent with past
practice, none of the Grantors will grant any extension of the time of payment
of any of the Accounts, Negotiable Collateral, Instruments, General Intangibles,
Contracts or Investment Property, or compromise, compound or settle the same for
less than the full amount thereof, release, wholly or partially, any Person
liable for the payment thereof, or allow any credit or discount whatsoever
thereon.
Section 5.09. Notices; Reports.
(a) Liens. Each of the Grantors will advise the Collateral Agent and
the Agent promptly, in reasonable detail, of (i) any Lien (other than Liens
created hereby or permitted under the Credit Agreement) on, or claim asserted
against, any of the Guarantee Collateral and (ii) the occurrence of any other
event which could reasonably be expected to have a material adverse effect on
(x) the aggregate value of the Guarantee Collateral or (y) the Liens created
hereunder.
(b) Reports, Notices, Etc. Each of the Grantors shall furnish to the
Collateral Agent and the Agent (i) promptly upon receipt, copies of all notices,
requests and other documents received by the Company under or in respect of the
Guarantee Collateral, (ii) promptly upon the request of the Agent, information
and reports regarding that Guarantee Collateral and (iii) promptly upon the
request of the Agent, make the demands and requests for information or action
that such Grantor is entitled to make under that Guarantee Collateral. Each of
the Grantors will also promptly furnish to the Collateral Agent copies of any
monthly management reports prepared by the Grantors.
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(c) Further Identification of Guarantee Collateral. Each of the
Grantors will furnish to the Collateral Agent and the Agent from time to time
statements and schedules further listing, identifying and describing the
Guarantee Collateral and such other reports in connection with the Guarantee
Collateral as the Agent may reasonably request, all in reasonable detail.
Section 5.10. Changes in Locations, Name, etc. None of the Grantors
will (i) change the location of its chief executive office or its chief place of
business from that specified in Section 4.07 or remove its books and records
from the location specified in Section 4.07, (ii) permit any of the Guarantee
Collateral to be kept, stored or used at a location other than those listed on
the Schedules to this Agreement or (iii) change its name, identity or corporate
structure or merge or take or suffer any other action that might result in any
financing statement filed by the Agent in connection with this Agreement
becoming misleading, unless, in each case, it shall have given the Collateral
Agent and the Agent at least 30 days prior written notice thereof.
Section 5.11. Accounts, Negotiable Collateral, Instruments, General
Intangibles, Contracts and Investment Property.
(a) Collections. Subject to the provisions of Article VI hereof and the
Cash Management System, each of the Grantors shall timely collect all amounts
due or to become due to such Grantor under the Accounts, Negotiable Collateral,
Instruments, General Intangibles, Contracts and Investment Property and
otherwise enforce its rights under and in respect of such Guarantee Collateral.
(b) Deliver Guarantee Collateral to Agent. In the event that any
Account, Negotiable Collateral, Instrument, General Intangible or Investment
Property is evidenced by a promissory note, certificate or instrument, the
Grantors shall deliver and pledge to the Agent the note or instrument. In the
event any Investment Property is evidenced by a promissory note, certificate or
instrument, the Company shall deliver and pledge to be Collateral Agent the note
or instrument accompanied by Stock Powers. Each of the Grantors will also
deliver to the Agent or the Collateral Agent, with respect to Investment
Property, all Instruments, Negotiable Collateral and Investment Property
existing on and after the date of this Agreement endorsed and issued as provided
in Section 3.02.
(c) Pledge of Additional Guarantee Collateral. If any amount payable
under or in connection with any of the Guarantee Collateral shall be or become
evidenced by any Negotiable Collateral, Instrument or Investment Property, such
Negotiable Collateral, Instrument or Investment Property shall be immediately
delivered to the Agent, or the Collateral Agent (with respect to Investment
Property) accompanied by Stock Powers, to be held as Guarantee Collateral
pursuant to this Agreement.
Section 5.12. Contracts. Each of the Grantors will fully and timely
perform and comply in all material respects with all its obligations under the
Contracts and all its other contractual
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obligations relating to the Guarantee Collateral and maintain such Guarantee
Collateral in full force and effect.
Section 5.13. Copyrights.
(a) No Bad Acts. Each of the Grantors (either itself or through
licensees) will, except with respect to any Copyright that such Grantor shall
reasonably determine is of negligible value (i) employ the Copyright for each
published work with an appropriate notice of Copyright and (ii) not (and will
not knowingly permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any Copyright may become invalidated. None
of the Grantors will not (either itself or knowingly permit any licensee or
sublicensee to) do any act, or knowingly omit to do any act, whereby any
Copyright may become injected into the public domain.
(b) Notice of Events. (i) Each of the Grantors shall notify the
Collateral Agent immediately if it knows, or has reason to know, that any
Copyright may become injected into the public domain or of any adverse
determination or development, including, without limitation, the institution of,
or any such determination or development in, any court or tribunal in the United
States or any other country, regarding such Grantor's ownership of any such
Copyright or its validity.
(ii) Each of the Grantors will promptly notify the Collateral Agent of
any infringement of any Copyright of which it becomes aware and will take such
actions as it shall reasonably deem appropriate under the circumstances to
protect such Copyright, including, where appropriate, the bringing of suit for
infringement, seeking injunctive relief and seeking to recover any and all
damages for such infringement.
(c) Regulatory Filings. Each of the Grantors will file in the United
States Copyright Office an application for copyright registration for each
material Copyright and Copyright License and will take all necessary steps as it
shall reasonably deem appropriate under the circumstances, to maintain and
pursue each United States application (and to obtain the relevant registration)
and to maintain each United States registration of each material Copyright owned
by such Grantor including, without limitation, filing of applications for
renewal, where necessary and shall report all such filings and registrations to
the Collateral Agent within five Business Days after the same are made and
execute and deliver all documents and instruments necessary to perfect the
Collateral Agent's security interest, for the ratable benefit of the Lenders, in
any Copyright or Copyright License.
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Section 5.14. Patents and Trademarks.
(a) No Bad Acts. Each of the Grantors (either itself or through
licensees) will, except with respect to any Trademark that such Grantor shall
reasonably determine is of negligible economic value to it, (i) continue to use
each Trademark on each and every trademark class of goods applicable to its
current line as reflected in its current catalogs, brochures and price lists in
order to maintain such Trademark in full force free from any claim of
abandonment for non- use, (ii) maintain as in the past the quality of products
and services offered under such Trademark, (iii) employ such Trademark with the
appropriate notice of registration, (iv) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless the
Collateral Agent, for the ratable benefit of the Lenders, shall obtain a
perfected security interest in such mark pursuant to this Security Agreement,
and (v) not (and not permit any licensee or sublicensee thereof to) do any act
or knowingly omit to do any act whereby any Trademark may become invalidated.
None of the Grantors will, except with respect to any Patent that such Grantor
shall reasonably determine is of negligible economic value to it, do any act or
omit to do any act, whereby any Patent may become abandoned or dedicated.
(b) Notice of Events. (i) Each of the Grantors will notify the
Collateral Agent immediately if it knows, or has reason to know, that any
application or registration relating to any Patent or Trademark may become
abandoned or dedicated, or of any adverse determination or development,
including, without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office
or any court or tribunal in any country, regarding such Grantor's ownership of
any Patent or Trademark or its right to register the same or to keep and
maintain the same.
(ii) In the event that any Patent or Trademark included in the
Guarantee Collateral is infringed, misappropriated or diluted by a third party,
the Grantors shall promptly notify the Collateral Agent after any Grantor learns
thereof and, at the Grantors' sole expense, shall, unless the Grantors shall
reasonably determine that such Patent or Trademark is of negligible economic
value to the Grantors, promptly sue for infringement, misappropriation or
dilution, to seek injunctive relief where appropriate and to recover any and all
damages for such infringement, misappropriation or dilution, or take such other
actions as the Grantors shall reasonably deem appropriate under the
circumstances to protect such Patent or Trademark.
(c) Regulatory Filings. Whenever any of the Grantors, either by itself
or through any agent, employee, licensee or designee, shall file an application
for the registration of any Patent or Trademark with the United States Patent
and Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, such Grantor shall report such filing to the
Collateral Agent within five Business Days after the last day of the fiscal
quarter in which such filing occurs. Each of the Grantors will take all
reasonable and necessary steps, including, without limitation, in any proceeding
before the United States Patent and Trademark Office, or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each
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registration of the Patents and Trademarks, including, without limitation,
filing of applications for renewal, affidavits of use and affidavits of
incontestability.
(d) Further Filings. Each of the Grantors shall execute and deliver any
and all agreements, instruments, documents, and papers as the Agent may
reasonably request, including, without limitation, the Notice of Security
Interest in Patents attached to the Company Security Agreement as Exhibit
5.14(d)(i) and the Memorandum of Security Agreement - Trademarks attached to the
Company Security Agreement as Exhibit 5.14(d)(ii), to evidence the Collateral
Agent's security interest for the ratable benefit of the Lenders in any Patent
or Trademark and the goodwill and general intangibles of the Grantors relating
thereto or represented thereby, and each of the Grantors hereby constitutes the
Collateral Agent its attorney-in-fact to execute and file all such writings for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Obligations are paid in full and the Commitment is terminated.
Section 5.15. Inventory, Equipment and Fixtures.
(a) Maintenance of Guarantee Collateral. Each of the Grantors shall
maintain, keep and preserve the Inventory, Equipment and Fixtures in good
working order and condition, ordinary wear and tear excepted, and in accordance
with any manufacturer's manual and any Regulations. Each of the Grantors shall
promptly after the occurrence of any loss or damage to any Inventory, Equipment
or Fixtures (i) make or cause to be made all repairs, replacements and other
improvements that are necessary or desirable to maintain the value of such
Guarantee Collateral and (ii) furnish to the Collateral Agent a statement in
respect of any loss or damage to any Inventory, Equipment or Fixtures.
(b) Reports. Each of the Grantors shall, at the request of the Agent,
furnish to the Collateral Agent and the Agent, with sufficient copies for each
Lender, a report detailing changes in the amount and condition of the Inventory,
Equipment and Fixtures, including purchases, depreciation, sales and losses.
Section 5.16. Vehicles. Each of the Grantors will maintain each Vehicle
in good operating condition, ordinary wear and tear and immaterial impairments
of value and damage by the elements excepted, and will provide all maintenance,
service and repairs necessary for such purpose. Each of the Grantors will notify
the Collateral Agent of each acquisition or sale of a vehicle, promptly
following the acquisition or sale thereof. If an Event of Default shall occur
and be continuing, at the request of the Agent each of the Grantors shall,
within five Business Days after such request, file applications for certificates
of title indicating the Collateral Agent's first priority Lien for the ratable
benefit of the Lenders on the Vehicles covered by such certificates, together
with any other necessary documentation, in each office in each jurisdiction
which the Agent shall deem advisable to perfect its Liens on the Vehicles.
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Section 5.17. Maintenance of Insurance.
(a) Adequate Insurance. Each of the Grantors will maintain at its own
expense, with financially sound and reputable companies, insurance policies
covering the Guarantee Collateral (i) insuring the Guarantee Collateral against
loss by fire, explosion, theft and such other casualties in amounts comparable
to amounts of insurance coverage obtained by similar businesses of similar size
acting prudently and (ii) insuring the Grantors, the Collateral Agent, the Agent
and the Lenders against liability for personal injury and property damage
relating to such Guarantee Collateral, such policies to be in such form and
amounts and having such coverage as shall be comparable to forms, amounts and
coverage, respectively, obtained by similar businesses of similar size acting
prudently, with losses payable to the Grantors, the Collateral Agent, the Agent
and the Lenders as their respective interests may appear.
(b) Terms of Policies. All such insurance shall (i) provide that no
cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days after receipt by the
Collateral Agent of written notice thereof, (ii) name the Collateral Agent, the
Agent and the Lenders as insured and loss payee, (iii) contain the agreement by
the insurer that any loss under the policy shall be payable to the Collateral
Agent notwithstanding any action, inaction or breach of representation or
warranty by the Grantors, (iv) provide that there shall be no recourse against
the Collateral Agent, the Agent or any Lender for payment of premiums or other
amounts with respect to the policy and (v) be reasonably satisfactory in all
other respects to the Collateral Agent.
(c) Broker's Report. The Grantors shall deliver to the Collateral Agent
a report of a reputable insurance broker with respect to such insurance during
the month of January in each calendar year and such supplemental reports with
respect thereto as the Collateral Agent may from time to time reasonably
request.
(d) Payment of Proceeds. Reimbursement under any liability insurance
may be paid directly to the Person who shall have incurred liability covered by
the insurance. In case of any loss involving damage to any Guarantee Collateral,
the Grantors shall cause the proceeds to be paid directly to the Collateral
Agent and, if an Event of Default shall not have occurred and is not then
continuing, the Agent shall reimburse the Grantors for the costs of any repairs
or replacements from such proceeds.
(e) Assignment of Policies. At the request of the Agent, each of the
Grantors shall duly execute and deliver instruments of assignment of the
insurance policies and all notices of that assignment, in each case in form and
substance satisfactory to the Collateral Agent, and cause the respective
insurers to acknowledge notice of the assignment.
(f) Copies of Policies. Upon the request of the Agent, each of the
Grantors shall deliver to the Collateral Agent original or duplicate copies of
all policies of insurance evidencing compliance with this Section.
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Section 5.18. Indemnification. The Grantors, jointly and severally,
will indemnify the Collateral Agent, the Agent, the Lenders and their respective
Affiliates and each of their respective shareholders, partners, members,
directors, officers, employees, agents and Affiliates (collectively, the
"Indemnified Persons") against and hold each Indemnified Person harmless from
any and all liabilities, obligations, losses, damages, penalties, Actions,
judgments, costs, expenses, claims, diminution in value, or disbursements of any
kind or nature whatsoever (including interest, penalties, fines, judgments,
settlements, costs of preparation and investigation, costs incurred in enforcing
this indemnity and reasonable attorneys' fees and expenses) that the Indemnified
Persons may suffer, sustain, incur or become subject to arising out of, relating
to, or due to:
(a) any inaccuracy or breach of any of the representations and
warranties of any Grantor contained in this Agreement or in any
certificate delivered hereunder;
(b) the nonfulfillment of any covenant, undertaking, agreement
or other obligation of any Grantor contained in this Agreement or in
any certificate delivered hereunder;
(c) the failure or delay by any Grantor in paying, any and all
excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Guarantee Collateral; or
(d) any defense, setoff, counterclaim, recoupment or reduction
or liability whatsoever of the account debtor or obligor under any of
the Guarantee Collateral, arising out of a breach by any Grantor of any
obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such
account debtor or obligor or its successors from the Grantors.
Section 5.19. Medicare Matters.
(a) Directions to Obligors. Each of the Grantors agrees to notify and
instruct all obligors from time to time with respect to any Medicare Receivables
to make any and all payments in respect of such Medicare Receivable only to the
Medicare Collection Account.
(b) No Commingling. Each of the Grantors agrees that only the Proceeds
of Medicare Receivables will be deposited into the Medicare Collection Account
and that no other funds or payments will be commingled with such Medicare
Receivables or the Proceeds thereof. Each of the Grantors agrees that all
Medicare Receivables and the Proceeds thereof will at all times be segregated
from all other funds, be identifiable as Proceeds of Medicare Receivables and
will not be commingled with any other funds. Each of the Grantors agrees that
all other funds of such Grantor will be deposited or paid, in accordance with
the Cash Management System, into Pledged Accounts other than the Medicare
Collection Account.
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(c) Certification. Within 10 days after the end of each calendar month,
each of the Grantors will provide to the Agent (i) a written certification of
the Chief Financial Officer of such Grantor stating that all deposits made into
the Medicare Collection Account consist only of Proceeds of Medicare Receivables
and (ii) a true, correct and complete copy of a bank statement showing such
deposits.
Section 5.20. Further Assurances. At any time and from time to time,
upon the written request of the Agent, and at the sole expense of the Grantors,
each of the Grantors will promptly and duly execute and deliver such further
instruments and documents and take such further action as the Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Security Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code in effect in any jurisdiction with
respect to the Liens created hereby and all actions and filings necessary to
maintain the Collateral Agent's first priority perfected Lien on, security
interest in and pledge of all of the Guarantee Collateral. Each of the Grantors
also hereby authorizes the Collateral Agent to file any such financing or
continuation statement without the signature of any Grantor to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
ARTICLE VI
Remedies
Section 6.01. Remedies. If an Event of Default shall occur and be
continuing, the Collateral Agent and the Agent shall have each and every right
and remedy available to it whether at law, in equity or otherwise, including,
without limitation, each of the following:
(a) UCC Remedies. The Collateral Agent or the Agent may
exercise all rights and remedies in respect of the Guarantee Collateral
available to a secured party under the Uniform Commercial Code in
effect in the relevant jurisdiction (whether or not the Uniform
Commercial Code applies to the affected Guarantee Collateral), by law
or otherwise.
(b) Exercise Rights of the Grantors. The Collateral Agent or
the Agent may exercise any and all rights and remedies of the Grantors
under or in respect of the Guarantee Collateral, including, without
limitation, any and all rights of the Grantors to demand or otherwise
require payment of any amount under, or performance of any provision
of, the Guarantee Collateral, or the right of the Grantors to vote or
consent with respect to any Guarantee Collateral.
(c) Take Possession of Guarantee Collateral. The Collateral
Agent or the Agent may take possession of the Guarantee Collateral and,
without liability for trespass, enter
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on any premises for the purpose of taking possession of or removing any
Guarantee Collateral.
(d) Right to Sell Guarantee Collateral.
(i) The Collateral Agent or the Agent may, without demand of
performance or other demand, presentment, protest, advertisement or
notice of any kind, and without notice to any of the Grantors except as
specified in this Section 6.01, sell, lease, assign, give option or
options to purchase, or otherwise dispose of and deliver all or any
part of the Guarantee Collateral in one or more parcels at public or
private sale, at any of the Collateral Agent's offices, on any
securities exchange, or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Agent may deem commercially
reasonable.
(ii) Each of the Grantors agrees that, to the extent notice of
sale shall be required by law, at least ten days notice to the Grantors
of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.
The Collateral Agent shall not be obligated to consummate any sale of
Guarantee Collateral regardless of notice of sale having been given.
The Collateral Agent may adjourn any public sale from time to time by
any notice or announcement and may make any sale without further notice
of the time and place to which the sale was so adjourned.
(iii) For purposes of this Agreement, a written agreement to
purchase all or any of the Guarantee Collateral shall be deemed to be a
sale of that property and the Collateral Agent shall be free to carry
out the agreement notwithstanding that the Event of Default shall have
been cured and the Obligations paid in full.
(iv) If all or any part of the Guarantee Collateral is sold on
credit or for future delivery, the property may be retained by the
Collateral Agent until the sale price is paid by the purchaser or
purchasers, but the Collateral Agent shall not be liable if the
purchaser or purchasers fail to take up and pay for the property and,
in that event, the Collateral Agent may again sell the property
pursuant to this Section.
(v) The Collateral Agent may restrict the bidders or
purchasers to persons (A) representing that they are purchasing the
Guarantee Collateral for their own account for investment and not with
a view to further distribution or sale and (B) satisfying the offeree
and purchaser requirements for a valid private placement or limited
offering under the Securities Act of 1933, as amended. Each of the
Grantors understands and agrees that the sale may be made at prices and
on terms less favorable than a public sale and agrees that any such
sale shall be deemed to have been made in a commercially reasonable
manner even if the Collateral Agent accepts the first offer received.
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(vi) To the extent permitted by law, the Collateral Agent, the
Agent or any Lender may purchase all or any part of the Guarantee
Collateral at any public or private sale or sales free of any equity or
right of redemption, stay, valuation or appraisal on the part of any of
the Grantors (all said rights being hereby waived and released to the
extent permitted by law) and may make payment for the purchase by using
any claim then due and payable to the Collateral Agent, the Agent or
any Lender, as applicable, from any of the Grantors as a credit against
the purchase price, and the Collateral Agent may, upon compliance with
the terms of sale, hold, retain and transfer the property without
further accountability to any of the Grantors.
(vii) Each purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of any of the
Grantors, and each of the Grantors hereby waives (to the extent
permitted by law) all rights of redemption, stay, valuation and
appraisal which any such Grantor now has or may at any time in the
future have under rule of law or statute now existing or hereafter
enacted.
(e) Store Guarantee Collateral. The Collateral Agent or the
Agent may cause any Guarantee Collateral to be held, stored, processed
or completed prior to sale, and expenses incurred for this purpose
shall constitute Obligations hereunder. Each of the Grantors agrees to
assemble the Guarantee Collateral and make it available to the
Collateral Agent and the Agent at places where the Collateral Agent or
the Agent may reasonably select, whether at a Grantor's premises or
elsewhere.
(f) Notices to Account Debtors, Obligors, Etc. The Collateral
Agent or the Agent may, without notice to any of the Grantors, (i)
notify the account debtors, obligors or bailees under or of any of the
Guarantee Collateral of the assignment and pledge to the Collateral
Agent of the Guarantee Collateral, (ii) direct the account debtors or
obligors to make payment and direct the bailees to make delivery
directly to the Collateral Agent, or as the Agent shall otherwise
direct, of all amounts due or to become due to the Grantors under the
Guarantee Collateral and (iii) collect, adjust, settle or compromise
those obligations. While the Collateral Agent is exercising any
authority under this Section none of the Grantors shall adjust, settle
or compromise any obligation under the Guarantee Collateral, release
wholly or partly any account debtor or obligor in respect of those
obligations, or allow any credit or discount on those obligations.
(g) All Other Remedies. The Collateral Agent and the Agent may
exercise all other rights and/or remedies available, whether at law, in
equity or otherwise.
Section 6.02. Waiver. To the extent permitted by applicable law, each
of the Grantors waives all claims, damages and demands it may acquire against
the Collateral Agent, the Agent or any of the Lenders arising out of the
exercise by the Collateral Agent, the Agent or any Lender of any of their rights
under this Agreement.
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Section 6.03. Remedies Cumulative. All rights and remedies of the
Collateral Agent, the Agent and the Lenders existing under this Agreement and
any other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
Section 6.04. Payments Held in Trust. All payments, funds, instruments
and other items received by any of the Grantors under or in respect of any
Guarantee Collateral shall be received in trust for the Collateral Agent,
segregated from other funds of such Grantor and promptly delivered to the
Collateral Agent in the same form received, together with all necessary
endorsements or Stock Powers.
Section 6.05. Application of Funds.
(a) Funds Applied in Accordance with Credit Agreement. The Agent shall
apply all Account Collateral and all payments received under or in respect of
all other Guarantee Collateral and all cash proceeds received by the Collateral
Agent and the Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Guarantee Collateral in accordance with
the Credit Agreement.
(b) Grantors Remain Liable. Each of the Grantors shall remain fully
liable for any deficiency if the proceeds or other realization of the Guarantee
Collateral are insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by the Collateral Agent, the Agent or
the Lenders to collect such deficiency.
(c) Guarantee Collateral In Excess of Obligations. Any amount held by
the Collateral Agent under this Agreement after all the Obligations have been
indefeasibly and finally paid in full in cash shall be paid over to the Grantors
or to any other Person lawfully entitled to receive payment.
ARTICLE VII
Appointment, Rights and Duties of Collateral Agent
Section 7.01. Appointment of Collateral Agent. In accordance with the
provisions of Section 8.1B of the Credit Agreement, The Chase Manhattan Bank is
hereby appointed Collateral Agent hereunder and under the other Loan Documents
as successor to the Original Agent and the Agent and each Lender hereby
authorizes the Collateral Agent to act as its collateral agent in accordance
with the terms of this Agreement and the other Loan Documents.
Section 7.02. Collateral Agent Appointed Attorney-in-Fact. Each of the
Grantors hereby irrevocably appoints the Collateral Agent (with full power of
substitution) such Grantor's attorney-in-fact, with full authority in the place
and stead of such Grantor and in the name of such Grantor or otherwise, from
time to time in the Agent's discretion, to execute any instrument and
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to take any other action that the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
(a) Further Documents. To execute, deliver and file on behalf
of and in the name of such Grantor one or more financing statements,
notices, copies of this Agreement or such other documents, and
amendments and continuations to those statements or documents, relating
to all or any part of the Guarantee Collateral without the signature of
such Grantor where permitted by law. Each of the Grantors agrees that a
carbon, photographic or other reproduction of this Agreement, any
financing statement, notice or other document covering the Guarantee
Collateral shall be sufficient as a financing statement where permitted
by law.
(b) Continue Perfection. To take any and all actions on behalf
of and in the name of such Grantor, at such Grantor's expense, which
are necessary or advisable to ensure that (i) the Liens granted
pursuant to this Agreement at all times constitute perfected Liens in
favor of the Collateral Agent, for the ratable benefit of the Lenders,
and (ii) such Liens are at all times prior to all other Liens on the
Guarantee Collateral and will be enforceable as such against all
creditors of, and purchasers from, such Grantor and against any owner
or purchaser of the real property where any of the Equipment is located
and any present or future creditor obtaining a Lien on such real
property.
(c) Insurance Matters. To obtain and adjust insurance required
to be paid to the Collateral Agent pursuant to Section 5.17 and cancel,
assign, and surrender any policies of insurance.
(d) Pay Taxes. To pay or discharge taxes and Liens levied or
placed on or threatened against the Guarantee Collateral, to effect any
repairs called for by the terms of this Agreement and to pay all or any
part of the costs thereof.
(e) Collect Guarantee Collateral. Upon the occurrence and
during the continuation of an Event of Default, to ask, demand,
collect, sue for, recover, compromise, receive, indorse and give
acquittance, discharge and receipts for moneys or other instruments,
documents and chattel paper due and to become due under or in respect
of all or any part of the Guarantee Collateral (whether as interest,
dividend, other distribution or otherwise) and to direct any party
liable for any payment under any of the Guarantee Collateral to make
such payment directly to the Collateral Agent or as the Agent shall
direct.
(f) Institute Proceedings. Upon the occurrence and during the
continuation of an Event of Default, to file any claims, proofs of
claim, subrogation receipts or take any action or commence or institute
any proceedings which the Agent may deem necessary or desirable for the
collection of all or any part of the Guarantee Collateral or otherwise
to
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enforce the rights of the Collateral Agent with respect to all or any
part of the Guarantee Collateral.
(g) Transfer Guarantee Collateral Into Collateral Agent's
Name. Upon the occurrence and during the continuation of an Event of
Default, to transfer any Guarantee Collateral into the Collateral
Agent's or its nominee's name.
(h) Vote Guarantee Collateral. Upon the occurrence and during
the continuation of an Event of Default, to exercise all or any of the
voting rights and other consensual rights pertaining to the Guarantee
Collateral.
(i) Other Actions. (x) Upon the occurrence and during the
continuation of an Event of Default, to take any other action it deems
advisable with respect to the Collateral or to accomplish the purposes
of this Agreement, including, but not limited to, (i) sell or assign
any Account upon such terms, for such amount and at such time or times
as Agent deems advisable, (ii) notify the post office authorities to
change the address for delivery of the Grantors' mail to an address
designated by Agent, and open all mail addressed to such Grantor, and
(iii) do all other acts and things necessary, in Agent's determination,
to fulfill the Grantors' obligations under this Agreement or any of the
other Loan Documents; and (y) at any time that Agent determines that it
is necessary or appropriate to preserve, protect, insure or maintain
its rights hereunder (i) take control, in any manner, of any item of
payment or proceeds of any Collateral, (ii) sign the Grantors' name of
any of the documents described in Sections 5.20 and 7.02(a) or on any
other similar documents to be executed, recorded or filed in order to
perfect or continue perfected Agent's and Collateral Agent's security
interest in the Collateral and file or record any of the foregoing
documents, (iii) endorse the Grantors' name on any items of payment or
proceeds thereof and deposit the same to the account of Agent or the
Collateral Agent for application to the Obligations, (iv) sign the
Grantors' name on any invoices, bills of lading, freight bills, chattel
paper, documents, instruments or similar documents or agreements
relating to any Accounts or any goods pertaining thereto or any other
Collateral, (v) sign the Grantors' name on any verification of Accounts
and notices thereof to Account debtors.
Each of the Grantors hereby ratifies all that said attorney shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
Section 7.03. Collateral Agent May Perform. If any of the Grantors
shall fail to perform any obligation under this Agreement or under or in respect
of any Guarantee Collateral or any representation of any Grantor contained in
this Agreement or in any document included in the Guarantee Collateral shall be
untrue or incorrect in any material respect, the Collateral Agent or the Agent
may, but shall be under no obligation to, perform the obligation or remedy that
breach, or cause it to be performed or remedied, and the expenses incurred by or
on behalf of the
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Collateral Agent and the Agent in connection with the performance of the
obligation or the remedy of the breach shall constitute Obligations.
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Section 7.04. Duties of Collateral Agent.
(a) Duties. The powers conferred on the Collateral Agent and the Agent
by this Agreement are solely to protect the Collateral Agent's, the Agent's and
the Lenders' interest in the Guarantee Collateral and shall not impose on the
Collateral Agent, the Agent or any Lender any duty to exercise any powers.
Except for the safe custody of any Guarantee Collateral in its possession and
the accounting for moneys actually received by it under this Agreement, the
Collateral Agent, the Agent nor any Lender shall have any duty or liability as
to any Guarantee Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or as to any other rights or matters
pertaining to any Guarantee Collateral. The Collateral Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Guarantee
Collateral in its possession if the Collateral Agent treats the Guarantee
Collateral substantially the same as it treats similar property of its own.
(b) Not Responsible. The Collateral Agent, the Agent and the Lenders
shall not have any responsibility or liability for (i) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Guarantee Collateral, whether or not the
Collateral Agent, the Agent or any Lender has or is deemed to have knowledge of
such matters, (ii) taking any necessary steps to preserve rights against any
parties with respect to any Guarantee Collateral, (iii) collecting any proceeds
of any Guarantee Collateral or by reason of any invalidity, lack of value or
uncollectability of any of the payments received by it from obligors or
otherwise or (iv) any other matter in connection with any Loan Document except
in respect of duties specifically undertaken by it in this Agreement and in that
case none of the Collateral Agent, the Agent or any of the Lenders shall be
liable to any party in the absence of gross negligence or willful misconduct.
ARTICLE VIII
Termination and Waiver
Section 8.01. Continuing Security Interest. This Agreement shall create
a continuing security interest in, Lien on, and pledge of, the Guarantee
Collateral, without respect to the amount of the Obligations outstanding from
time to time, and shall remain in full force and effect until the Obligations
have been indefeasibly paid and otherwise performed in full in cash. Thereafter,
this Agreement shall be reinstated if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned upon the insolvency,
bankruptcy or reorganization of any of the Grantors, the Company or any other
Person or otherwise, all as though the payment had not been made.
Section 8.02. Termination. Upon the indefeasible payment and
performance of the Obligations in full in cash, the security interests granted
by this Agreement shall terminate and all rights to the Guarantee Collateral
shall revert to the Grantors. At the Grantors' expense, the
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Collateral Agent shall then execute and deliver to the Grantors the documents
reasonably requested and prepared by the Grantors to evidence the termination.
Section 8.03. Waiver. Each of the Grantors unconditionally waives, to
the full extent permitted by law:
(a) Set-Off. Any defense, set-off or counterclaim which such
Grantor may otherwise assert against the Company, the Collateral Agent,
the Agent or the Lenders.
(b) Notice, etc. Presentment, protest, demand for payment,
promptness, diligence, notice of protest, notice of any other action at
any time taken or omitted by the Collateral Agent, the Agent or any
Lender and, generally, all demands and notices of every kind in
connection with any Loan Document or the Obligations, including,
without limitation:
(i) notice of any of the matters referred to in
Section 8.04; and
(ii) all notices which may be required by statute,
rule of law or otherwise, now or hereafter in effect, to
preserve intact any rights against such Grantor under any Loan
Document or as a requirement to the enforcement, assertion or
exercise against such Grantor of any right, power, privilege
or remedy conferred under any Loan Document.
(c) Exhaust Other Remedies. Any requirement to exhaust any
rights or remedies or to mitigate the damages resulting from any
default under any Loan Document or any other document or any
requirement to protect, secure, perfect or insure any Lien or any
property subject to the Lien or take any other action against any
person or any collateral or other property.
(d) Claims. All claims that the sale price of any Guarantee
Collateral was inadequate or unreasonable for any reason and all other
claims to damages and demands of any nature against the Collateral
Agent, the Agent and the Lenders.
(e) Equitable Rights. All equities and rights of appraisal,
stay and redemption (whether now or hereafter existing), in each case
arising out of the Collateral Agent, the Agent or the Lenders enforcing
any of their rights and remedies under any Loan Document.
(f) Subrogation and/or Contribution. Any exoneration or
release from the Obligations resulting from any loss by such Grantor of
its rights, if any, of subrogation or contribution.
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(g) Other Circumstances. Any other circumstance whatsoever,
including, without limitation, those stated in Section 8.04, which
might otherwise constitute a defense to or a legal or equitable
discharge or release of a guarantor or surety or a party granting
security or which might otherwise limit recourse against such Grantor.
Section 8.04. Obligations Not Affected. The rights of the Collateral
Agent, the Agent and the Lenders and the obligations of the Grantors under this
Agreement shall be absolute and unconditional, present and continuing and shall
remain in full force and effect and shall not be released, discharged or in any
way affected by any circumstance or condition of any nature (whether or not any
Grantor, the Collateral Agent, the Agent or any Lender shall have any notice or
knowledge of the circumstance or condition), including, without limitation:
(a) Failure of Documents. The invalidity, illegality,
unenforceability, discharge, termination, cancellation or frustration,
in whole or in part, of any Obligation, Loan Document or other
document.
(b) Failure to Exercise Rights and/or Remedies. The exercise
or failure to exercise by any person any right, remedy, privilege or
power under any Loan Document or other document.
(c) Collection Attempts. Any demand or attempt to collect
from, or failure to demand or attempt to collect from, the Company, and
Grantor or any other Person under any Loan Document or other document.
(d) Security and Guarantees. The giving, acceptance,
existence, non-existence, validity, invalidity or value of any security
or collateral securing the Obligations or any guarantee of the
Obligations, including, without limitation, the Guarantee Collateral
and the guarantees by the Grantors, any attempt or failure to attempt
to realize upon that security, collateral or guarantee or the exchange,
substitution, renewal, extension, modification, compromise, release,
discharge or failure to perfect for any reason that security,
collateral or guarantee.
(e) Actions. Any change in the time, place or manner of
payment or the waiver, consent, extension, renewal, indulgence,
compromise, release, settlement, refunding, funding, or any other
forbearance or other action taken, delayed or omitted by the Collateral
Agent, the Agent, any Lender, the Company, any Grantor or any other
Person under or in respect of any term or provision of any Obligation,
Loan Document or other document.
(f) Modifications. The termination, modification, alteration,
amendment, waiver, addition, deletion or other change to any
Obligation, Loan Document or other document or any provision of any of
those documents.
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(g) Reorganizations. The liquidation, dissolution, merger or
consolidation of the Company, any Grantor or any other Person, or the
transfer by the Company, any Grantor or any other Person of all or any
part of its property or assets, or the change in the ownership of any
shares of capital stock of the Company, any Grantor or any other
Person.
(h) Bankruptcy. The voluntary or involuntary bankruptcy,
receivership, liquidation, insolvency, reorganization, arrangement,
assignment for the benefit of creditors or similar proceedings
involving or affecting the Company, any Grantor, any other Person or
any of their property.
(i) Release. The release or discharge, by operation of law or
otherwise, of the Company, and Grantor or any other Person from any
Obligation or any provision of any Loan Document or other document.
(j) Other Circumstances. Any other circumstance whatsoever,
foreseen or unforseen, which may or might in any manner or to any
extent vary the risks of the Company or any Grantor or otherwise
constitute a defense available to or a legal or equitable discharge of
or limit recourse against a surety, a guarantor or a party granting
security, the Company or any Grantor or otherwise.
ARTICLE IX
Miscellaneous
Section 9.01. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telexed or sent by telefacsimile (so
long as such notice sent by telefacsimile is followed within two Business Days
by a notice sent by another method specified hereunder) or United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service, upon receipt of telefacsimile or telex, or three Business
Days after depositing it in the United States mail with postage prepaid and
properly addressed; provided that notices to Agent shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be as
set forth under such party's name on the signature pages hereof or (i) as to the
Grantors, the Collateral Agent and Agent, such other address as shall be
designated by such Person in a written notice delivered to the other parties
hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Agent.
Section 9.02. Expenses. The Grantors, jointly and severally, agree to
pay to the Collateral Agent, the Agent and the Lenders on demand the amount of
any and all expenses, including, without limitation, the fees and expenses of
the Collateral Agent's, the Agent's or the Lenders' counsel, which the
Collateral Agent, the Agent or any Lender may pay or incur in exercising or
enforcing their rights under this Agreement.
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Section 9.03. Transfer of Notes. If any Lender shall transfer any Note
held by it or grant participations in all or any of its Obligations, the
transferees of the Note or the grantees of the participations, as the case may
be, shall have the rights of the Lender under this Agreement in respect of the
Note or Obligations.
Section 9.04. Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, and by different parties hereto in
separate counterparts, each of which when executed will be deemed an original,
but all of which taken together will constitute one and the same instrument.
Section 9.05. Interpretation. As used in this Agreement, references to
the singular will include the plural and vice versa and references to the
masculine gender will include the feminine and neuter genders and vice versa, as
appropriate. Unless otherwise expressly provided in this Agreement (a) the words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement will refer to this Agreement as a whole and not to any particular
provision of this Agreement and (b) article, section, subsection, schedule and
exhibit references are references with respect to this Agreement unless
otherwise specified. References in this Agreement to any law or regulation will
refer to such laws and regulations as from time to time amended and to any laws
or regulations successor thereto. Unless the context otherwise requires, the
term "including" will mean "including, without limitation".
Section 9.06. Descriptive Headings. The headings in this Agreement and
in the Schedules, Exhibits and Annexes are included for convenience of reference
only and will not affect in any way the meaning or interpretation of this
Agreement.
Section 9.07. Incorporation of Schedules, Exhibits and Annexes. The
Schedules, Exhibits and Annexes hereto are incorporated into this Agreement and
will be deemed a part hereof as if set forth herein in full. In the event of any
conflict between the provisions of this Agreement and any Schedule, Exhibit or
Annex, the provisions of this Agreement will control.
Section 9.08. Amendment of Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 9.09. Successors and Assigns. This Agreement will be binding
upon and inures to the benefit of and is enforceable by the respective
successors and permitted assigns of the parties hereto. This Agreement may not
be assigned by any party hereto without the prior written consent of all other
parties hereto except for the assignment of all or any part of the rights and
obligations of the Collateral Agent under this Agreement, which may be assigned
by the Collateral Agent as provided in Section 8.1B and 9.1 of the Credit
Agreement. Any assignment or attempted assignment in contravention of this
Section will be void ab initio and will not relieve the assigning party of any
obligation under this Agreement.
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Section 9.10. No Waiver; Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement will operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege will not preclude any other or further exercise of the
right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement and the other Loan
Documents will be cumulative and not exclusive of any rights or remedies
provided by law.
Section 9.11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
Section 9.12. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the state of New York applicable to
contracts executed in and to be performed entirely within that state.
Section 9.13. No Third-Party Rights. This Agreement is not intended,
and will not be construed, to create any rights in any parties other than the
Grantors, the Collateral Agent, the Agent and the Lenders, and no Person may
assert any rights as third-party beneficiary hereunder, except as provided in
Section 5.18.
Section 9.14. Submission to Jurisdiction. Any Action with respect to
this Agreement may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and each of the
Grantors, the Collateral Agent, the Agent and the Lenders hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of these courts. Each of the Grantors, the Collateral Agent, the
Agent and the Lenders hereby irrevocably waives any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of forum non conveniens, which it may now or hereafter have to the bringing of
any Action in those jurisdictions.
Section 9.15. Waiver of Jury Trial. Each party waives any right to a
trial by jury in any Action to enforce or defend any right under this Agreement
or any amendment,
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<PAGE> 40
instrument, document or agreement delivered or to be delivered in connection
with this Agreement and agrees that any Action will be tried before a court and
not before a jury.
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<PAGE> 41
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above in New York, New York.
AGENT:
CERBERUS CAPITAL MANAGEMENT, LLC,
Address: as Agent for the Lenders
450 Park Avenue
New York, New York 10022
Attention: Joyce Johnson-Miller
Telephone: (212) 891-2119
Facsimile: (212) 750-5212 By:______________________________
Name:
Title:
COLLATERAL AGENT:
THE CHASE MANHATTAN BANK, as
Address: Collateral Agent for the Lenders
450 West 33rd Street
14th Floor
New York, New York 10001
Attention: Capital Markets Fiduciary
Services, Cerberus Capital
Telephone: (212) 946-3200
Facsimile: (212) 391-6091 By:______________________________
Name:
Title:
GRANTORS:
Address: NSHS SERVICES, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 465-3200
Facsimile: (724) 465-3726 By:______________________________
Name:
Title:
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<PAGE> 42
Address: KEYSTONE REHABILITATION
SYSTEMS, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 465-3200
Facsimile: (724) 465-3726 By:______________________________
Name:
Title:
Address: KEYSTONE REHABILITATION
MANAGEMENT, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 465-3200
Facsimile: (724) 465-3726 By:______________________________
Name:
Title:
Address: NORTHSTAR MEDICAL SERVICES, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 465-3200
Facsimile: (724) 465-3726 By:______________________________
Name:
Title:
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<PAGE> 43
Address: NORTHSTAR DIAGNOSTIC SERVICES, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 465-3200
Facsimile: (724) 465-3726 By:______________________________
Name:
Title:
Address: VASCUSONICS, INC.
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 465-3200
Facsimile: (724) 465-3726 By:______________________________
Name:
Title:
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<PAGE> 44
List of Annexes, Schedules and Exhibits
Schedule I Grantors
Schedule 4.08(a) Certain Accounts
Schedule 4.08(c) List of Grantors' Accounts, Chattel Paper,
Instruments, General Intangibles and Documents
Schedule 4.09(b) Certain Grantors' Contracts
Schedule 4.09(d) List of Grantors' Contracts
Schedule 4.10 Grantors' Proprietary Rights
Schedule 4.11 Grantors' Investment Property
Schedule 4.12 Grantors' Inventory, Equipment and Fixtures
Schedule 4.13 Grantors' Vehicles
Schedule 4.14 Governmental Obligors
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<PAGE> 45
SCHEDULE I
to
AMENDED AND RESTATED SUBSIDIARIES SECURITY AGREEMENT
Grantors
NSHS Services, Inc.
Keystone Rehabilitation Systems, Inc.
Keystone Rehabilitation Management Inc.
Northstar Medical Services, Inc.
Northstar Diagnostic Services, Inc.
Vascusonics Inc.
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<PAGE> 1
EXHIBIT 10.10
[EXECUTION COPY]
ZAUCHA SUBORDINATION AGREEMENT
ZAUCHA SUBORDINATION AGREEMENT (the "Agreement"), dated as of September
30, 1999, among NORTHSTAR HEALTH SERVICES, INC., a Delaware corporation (the
"Company"), certain creditors of the Company set forth on Schedule I hereto (the
"Subordinated Creditors"), CERBERUS CAPITAL MANAGEMENT, LLC (the "Agent") and
THE CHASE MANHATTAN BANK (the "Collateral Agent"), as collateral agent for the
Senior Lenders (as defined below).
RECITALS
A. The Company, IBJ Schroder Bank & Trust Company (the "Original
Agent") and the Senior Lenders are parties to that certain Credit Agreement,
dated as of October 20, 1995 (as amended, modified or supplemented prior to the
date hereof, the "Original Credit Agreement"), pursuant to which the Senior
Lenders agreed to extend certain credit facilities to the Company (the "Original
Loans") which were represented by certain promissory notes (the "Original
Notes"), the proceeds of which were used (i) to refinance substantially all
indebtedness of the Company and its Subsidiaries outstanding on the date
thereof, (ii) to pay certain fees and expenses, (iii) to provide financing for
the working capital needs of the Company and its Subsidiaries and (iv) to
provide a portion of the purchase price of certain acquisitions by the Company
and its Subsidiaries.
B. The Company secured all of the Senior Obligations (as defined below)
under the Original Credit Agreement and under the other Senior Loan Documents
(as defined below) by granting to the Original Agent, on behalf of Senior
Lenders, a first priority security interest in all of its personal property,
including, without limitation, a pledge of all of the capital stock of each of
its Subsidiaries.
C. Thomas W. Zaucha ("Zaucha"), Alice L. Zaucha, the Zaucha Family
Limited Partnership, the Company, Keystone Rehabilitation Systems, Inc.
("Keystone") and NSK Merger Corp., a wholly-owned subsidiary of the Company
("NSK"), entered into that certain Merger Agreement (as amended, modified or
supplemented, the "Merger Agreement"), dated as of November 15, 1995, pursuant
to which Keystone merged with and into NSK (the "Merger"). Pursuant to the
Merger Agreement, Zaucha became the president and a director of the Company.
D. Pursuant to the Merger, the Company (i) agreed to make the Stock
Guarantee Payments (as defined below) to the Subordinated Creditors, (ii) issued
the Merger Notes (as defined below) to the Subordinated Creditors and (iii)
agreed to make the Contingent Payments (as defined below) to the Subordinated
Creditors.
E. Subsequent to the Merger, Zaucha was removed as president and
director of the Company. In an effort to regain control of the Company, Zaucha
waged and won a proxy fight through the solicitation of proxy consents from the
shareholders of the Company (the "Consent Solicitation") and in doing so
personally incurred significant costs and expenses in connection
<PAGE> 2
with such Consent Solicitation. Zaucha, after his reinstatement as president of
the Company, requested that the Company reimburse and pay to Zaucha the Consent
Solicitation Expenses (as defined below).
F. The Company, the Senior Lenders, the Agent and the Collateral Agent
have agreed to amend and restate the Original Credit Agreement as of the date
hereof (the Original Credit Agreement, as so amended and restated being referred
to herein as the "Credit Agreement") to (i) extend the maturity of the Original
Loans on the terms set forth therein, (ii) reflect the Original Agent's
resignation as agent for the Senior Lenders thereunder and the appointment of
the Agent as successor agent for the Senior Lenders and the appointment of the
Collateral Agent as collateral agent for the Senior Lenders under this
Agreement, and (iii) make certain other changes as more fully set forth therein.
G. The Company, the Subordinated Creditors, Agent and the Collateral
Agent now wish to enter into this Agreement pursuant to which the Subordinated
Creditors agree to subordinate, to the extent provided herein, the obligations
of the Company to the Subordinated Creditors in respect of the Subordinated
Obligations (as defined below).
H. It is a condition precedent to the obligation of the Senior Lenders
to amend and restate the Original Credit Agreement and to extend the maturity of
the Original Loans that the Subordinated Creditors execute this Agreement and
agree to subordinate the Subordinated Obligations in accordance with the terms
of this Agreement.
AGREEMENT
In consideration of the premises and the mutual covenants and the
mutual agreements herein set forth, the parties, intending to be legally bound,
hereby agree as follows:
Section 1. Certain Defined Terms. Capitalized terms used but not
defined herein have the meanings given to them in the Credit Agreement. In
addition, the following terms have the following meanings:
"Consent Solicitation Expenses" means any and all expenses
incurred by or on behalf of Zaucha, due to, arising out of, relating
to, or in respect of, the Consent Solicitation.
"Contingent Payments" means the payments that are payable or
may become payable to the Subordinated Creditors under Section 2.3 of
the Merger Agreement.
"Guarantee Agreement" means that certain Guaranty Agreement,
dated as of November 15, 1995, among the Company and the Subordinated
Creditors.
"Insolvency Event" means any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution or winding up or total or
partial liquidation or reorganization of the Company,
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<PAGE> 3
whether voluntary or involuntary or upon bankruptcy, insolvency,
receivership or other proceedings.
"Merger Notes" means the (a) Three Year Notes (as defined in
the Merger Agreement) and (b) Northstar Term Notes (as defined in the
Merger Agreement) and any replacements or substitutes thereof.
"Senior Lenders" means the Lenders (as defined in the Credit
Agreement).
"Senior Lien" means the security interest granted to the
Collateral Agent for the benefit of the Senior Lenders, pursuant to the
Collateral Documents (as defined in the Credit Agreement).
"Senior Loan Documents" means the Loan Documents (as defined
in the Credit Agreement).
"Senior Loan Event of Default" means any Event of Default (as
defined in the Credit Agreement).
"Senior Obligations" means the Obligations (as defined in the
Credit Agreement).
"Stock Guarantee Payments" means the payments that are payable
or may become payable to the Subordinated Creditors under Section 2.7
of the Merger Agreement and under the Guarantee Agreement.
"Subordinated Documents" means (a) the Merger Agreement and
all documents, agreements and instruments executed in connection
therewith, (b) the Merger Notes and (c) the Guarantee Agreement.
"Subordinated Lien" means any lien, claim, encumbrance or
security interest that the Subordinated Creditors may have, or which
may arise in the future, on or with respect to any of the Company's
assets.
"Subordinated Obligations" means (i) all liabilities,
obligations and/or amounts owed by or on behalf of the Company under or
in respect of (a) the Consent Solicitation Expenses, (b) the Contingent
Payments, (c) the Stock Guarantee Payments, (d) the Merger Agreement,
(e) the Merger Notes, (f) the Guarantee Agreement or (g) any of the
other Subordinated Documents and (ii) all liabilities, obligations
and/or amounts owed by or on behalf of the Company to one or more
Subordinated Creditors; provided, however, that the term "Subordinated
Obligations" shall not include (A) the salary payable to Mr. Thomas W.
Zaucha by the Company or (B) the lease payments payable by the Company
and its Subsidiaries under the lease agreements (as such agreements
exist as of the date of this Agreement) with certain of the
Subordinated Creditors and Ms. Paula K. Mangiarelli, in each case, not
exceeding the current amount of such payments as of the date of this
Agreement.
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<PAGE> 4
Section 2. Agreement and Acknowledgment.
(a) Agreement to Subordinate. Each of the Subordinated Creditors
acknowledges and agrees that the Subordinated Obligations are and shall be
subordinate, to the extent and in the manner provided by this Agreement, in
right of payment to the prior payment in full of the Senior Obligations.
(b) Priority of Liens. Each of the Subordinated Creditors hereby (i)
acknowledges the grant to the Agent, the Collateral Agent and the Senior Lenders
of the Senior Lien in the Collateral, and (ii) acknowledges and agrees that the
Subordinate Lien (if any) is subordinate, junior and inferior and postponed in
priority, operation and effect to the priority, operation and effect of the
Senior Lien, notwithstanding the perfection, order of perfection or failure by
the Senior Lender to perfect any such Senior Lien and other liens or the filing
or recording, order of filing or recording of, or failure to file or record any
instrument or other document in any filing or recording office in any
jurisdiction.
Section 3. Subordination Provisions.
(a) Payment of Subordinated Obligations.
(i) Except as provided in Section 3(a)(ii) below:
(A) none of the Subordinated Creditors shall ask, demand, sue
for, take or receive from the Company or any of its Subsidiaries,
directly or indirectly, in cash or other property or by setoff or in
any other manner, including, without limitation, from or by way of
collateral, payment of all or any of the Subordinated Obligations
unless and until the Senior Obligations have been indefeasibly paid in
full; provided, however, that with (and only with) the prior written
consent of the Senior Lenders, the Subordinated Creditors may convert
all or a portion of the Subordinated Obligations into equity of the
Company; provided, further, however, that the Subordinated Creditors
may convert their entire right to receive the Stock Guarantee Payments
into 4,888,982 shares of common stock of the Company, without the
consent of the Senior Lenders; and
(B) the Company shall not, and shall not permit any of its
Subsidiaries to, make any payment on or in respect of all or any part
of the Subordinated Obligations or take any other action prejudicial to
or inconsistent with the priority position of the Agent, the Collateral
Agent and the Senior Lenders under this Agreement or otherwise in
contravention of the provisions of this Agreement.
(ii) So long as all of the conditions to such payments set forth in the
Senior Loan Documents are satisfied, the Subordinated Creditors may receive
payments, and the Company may make payments to the Subordinated Creditors, in
respect of the Subordinated Obligations to the extent (and only to the extent)
permitted in Section 2.4B(ii)(e)(i)(II) of the Credit Agreement; provided,
however, that in no event shall such payments exceed $25,000 per month.
(b) Payments to be Held in Trust; Turn-Over of Collateral.
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<PAGE> 5
(i) All payments, funds, instruments or distributions received by the
Subordinated Creditors under, on or in respect of the Subordinated Obligations
(other than the payments permitted by Section 3(a)(ii) above) shall be held in
trust by the Subordinated Creditors for the benefit of the Agent, the Collateral
Agent and the Senior Lenders, shall be segregated from other funds and property
of or held by the Subordinated Creditors and shall be promptly paid and
delivered to the Agent or the Collateral Agent in the form received, with all
necessary endorsements. The Agent or the Collateral Agent may supply any
necessary endorsements that are omitted.
(ii) If any Collateral (or proceeds thereof) shall be received by the
Subordinated Creditors, such Collateral and/or proceeds shall be delivered
forthwith to the Agent or the Collateral Agent for the benefit of the Senior
Lenders by the Subordinated Creditors in the form received. Until so delivered,
any such Collateral shall be held by the Subordinated Creditors in trust for the
Senior Lenders and shall not be commingled with other funds or property of the
Subordinated Creditors.
(c) Senior Loan Event of Default.
(i) Each of the Subordinated Creditors acknowledges that upon the
occurrence and during the continuance of a Senior Loan Event of Default, the
Agent, the Collateral Agent and the Senior Lenders shall be entitled to take any
and all actions and to exercise any and all rights, remedies and options which
the Agent, the Collateral Agent and the Senior Lenders may have under the Senior
Loan Documents and at law or in equity.
(ii) Upon and after the occurrence of a Senior Loan Event of Default:
(A) Any payment or distribution of any kind (whether
in cash, property or securities) that otherwise would be
payable or deliverable on or in respect of the Subordinated
Obligations shall be paid or delivered directly to the Agent
or the Collateral Agent;
(B) In its own name or in the name of the
Subordinated Creditors as the Subordinated Creditors'
attorney-in-fact or otherwise, the Agent and/or the Collateral
Agent may (but shall have no obligation to) demand, sue for,
collect and receive every payment or distribution on or in
respect of the Subordinated Obligations, give acquittance for
any payment and file claims and proofs of claim and take such
other action, including, without limitation, voting all or any
part of the Subordinated Obligations or enforcing any
Subordinated Lien, as it may deem necessary or advisable for
the exercise or enforcement of any of the rights or interests
of the Agent, the Collateral Agent, or the Senior Lenders
under this Agreement.
(d) Priority in An Insolvency Event. Upon the payment or distribution
of assets of the Company or any of its Subsidiaries of any kind or character,
whether in cash, property, securities or otherwise, to creditors in connection
with an Insolvency Event:
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<PAGE> 6
(i) all principal, premium (if any) and interest and all other
amounts due or to become due upon the Senior Obligations shall first be
paid in full before the holders of any of the Subordinated Obligations
shall be entitled to receive or retain any assets so paid or
distributed in respect of the Subordinated Obligations (for principal,
premium (if any), interest or otherwise), and
(ii) any and all payments and distributions of assets of the
Company or any of its Subsidiaries of any kind or character, whether in
cash, property, securities or otherwise, to which the holders of any of
the Subordinated Obligations would be entitled but for the provisions
hereof, shall be paid by the Company or any of its Subsidiaries or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or
other person making such payment or distribution, or by the holders of
any of the Subordinated Obligations if received by any of them,
directly to the holders of the Senior Obligations, to the extent
necessary to pay the Senior Obligations in full, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Obligations, before any payment or distribution is made to the holders
of any of the Subordinated Obligations.
(e) Certain Actions. Upon the occurrence of an Insolvency Event or a
Senior Loan Event of Default, the Subordinated Creditors shall duly and promptly
take such action as the Agent, the Collateral Agent or the Senior Lenders may
request (i) to accelerate, enforce and collect the Subordinated Obligations for
account of the Agent, the Collateral Agent and the Senior Lenders and to file
appropriate claims or proofs of claim in respect of the Subordinated
Obligations, (ii) to execute and deliver to the Agent, the Collateral Agent or
the Senior Lenders the powers of attorney, assignments or other instruments
requested by the Agent, the Collateral Agent or the Senior Lenders in order to
enable it to enforce any and all claims in respect of the Subordinated
Obligations and any Subordinated Liens and (iii) to collect and receive any and
all payments or distributions that may be payable or deliverable on or in
respect of the Subordinated Obligations.
Section 4. Affirmative Covenants. So long as any of the Senior
Obligations shall not have been indefeasibly paid or performed in full or this
Agreement shall remain in effect, each of the Company and the Subordinated
Creditors, at their own expense, shall:
(a) Certificates. Cause any Subordinated Obligation that is
not evidenced by any instrument to be so evidenced by an appropriate
instrument or instruments endorsed with the legend stated in Section 6.
(b) Delivery of Instruments. Promptly upon the request of the
Agent, the Collateral Agent or the Senior Lenders, deliver to the
Agent, the Collateral Agent or the Senior Lenders, all certificates and
instruments, whether negotiable or otherwise, representing or
evidencing the Subordinated Obligations duly endorsed or accompanied by
undated instruments of transfer or undated assignments duly executed in
blank, in each case with signatures guaranteed and otherwise in form
and substance satisfactory to the Agent, the Collateral Agent or the
Senior Lenders, as the case may be.
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<PAGE> 7
(c) Notices. Simultaneously with the delivery of any such
notice to the Company, provide the Agent, the Collateral Agent and the
Senior Lenders with a copy of any notice of any default or event of
default under any of the Subordinated Documents.
Section 5. Negative Covenants. So long as any of the Senior Obligations
shall not have been indefeasibly paid or performed in full or this Agreement
shall remain in effect, neither the Company nor any Subordinated Creditor shall,
unless the Agent shall otherwise expressly consent in writing:
(a) No Proceedings. Commence, or join with any creditor other
than the Agent, the Collateral Agent and the Senior Lenders in
commencing, any proceeding to collect, enforce or otherwise enforce any
rights with respect to the Subordinated Obligations against the
Company, any of its Subsidiaries or any of their respective properties.
(b) No Exercise of Rights. Exercise any rights of subrogation
in respect of any payment or distribution to the Agent, the Collateral
Agent or the Senior Lenders pursuant to this Agreement.
(c) No Discharge, Etc. Except as provided in Section 3(a)(ii)
above, cancel, repay, prepay or otherwise discharge any of the
Subordinated Obligations, accelerate any of the Subordinated
Obligations, or convert any of the Subordinated Obligations into other
indebtedness of the Company or its Subsidiaries.
(d) No Disposition. Sell, assign, pledge, encumber or
otherwise dispose of any of the Subordinated Obligations unless the
sale, assignment, pledge, encumbrance or disposition (i) is to a person
or entity other than the Company or any of the Subsidiaries or any of
their affiliates and (ii) is made expressly subject to this Agreement.
(e) No Security. Grant or take any collateral security for any
of the Subordinated Obligations or convert any Subordinated Obligation
into any property or capital stock or other securities of the Company
or any of the Subsidiaries; provided, however, that with (and only
with) the prior written consent of the Senior Lenders, the Subordinated
Creditors may convert all or a portion of the Subordinated Obligations
into equity of the Company; provided, further, however, that the
Subordinated Creditors may convert their entire right to receive the
Stock Guarantee Payments into 4,888,982 shares of common stock of the
Company, without the consent of the Senior Lenders.
(f) No Alterations. Permit the terms of any of the
Subordinated Obligations to be changed in such a manner as to have an
adverse effect upon the rights or interests of the Agent, the
Collateral Agent or the Senior Lenders under this Agreement.
(g) No Disputing Senior Lien. Challenge or dispute the Senior
Lien or the priority thereof.
(h) No Inconsistent Actions. Take or permit any action
prejudicial to or inconsistent with the priority position of the Agent,
the Collateral Agent and the Senior
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<PAGE> 8
Lenders created under this Agreement or otherwise in contravention of
the provisions of this Agreement or interfere with the exercise by the
Agent, the Collateral Agent or the Senior Lenders of any right, remedy
or power under this Agreement.
(i) No Interference. Notwithstanding any provision of this
Agreement to the contrary, the Subordinated Creditors (i) shall in no
way interfere with the ability of the Company to perform its
obligations under the Senior Loan Documents, and (ii) shall in no way
adversely affect the validity, existence, priority or effect of the
Senior Lien, or the exercise of remedies or rights by the Senior
Lender.
Section 6. Notation of Subordination. Each of the Subordinated
Creditors and the Company will cause each instrument or certificate evidencing
Subordinated Obligations to be endorsed with the following legend:
"The indebtedness evidenced by this instrument is subordinated
to the prior payment in full of certain Senior Obligations as provided
in the Subordination Agreement dated as of September 30, 1999, among
Northstar Health Services, Inc. (the "Company"), certain creditors of
the Company set forth on Schedule I thereto, Cerberus Capital
Management, LLC, as agent and The Chase Manhattan Bank, as Collateral
Agent."
Each of the Subordinated Creditors and the Company shall mark their respective
books of account to give effective notice of this Agreement. The Agent, the
Collateral Agent and the Senior Lenders may examine books of account of the
Subordinated Creditors and the Company from time to time and make any notations
required by this Agreement.
Section 7. Assignment of Interests. Each of the Senior Lenders may
assign, transfer, sell, convey or otherwise dispose of (any such event being a
"Transfer") all or any portion of its share of the Senior Obligations and its
respective rights hereunder without the consent of the Subordinated Creditors,
the Company or any other party. Except as provided in Section 3(a) and Section
5(e) of this Agreement, none of the Subordinated Creditors may Transfer all or
any portion of its share of the Subordinated Obligations or its respective
rights and obligations hereunder unless both (a) the Agent shall have expressly
consented in writing to such Transfer and (b) such Transfer is made subject to
the provisions of this Agreement and upon the execution and delivery to the
Agent of an agreement by any such assignee to be bound by the terms of this
Agreement (including provisions relating to assignment), in the form hereof. The
Company may not transfer any of its rights or obligations hereunder without the
prior written consent of the Agent and the Senior Lenders, which may be withheld
in each such party's sole discretion.
Section 8. Remedies. In addition to the other rights and remedies
stated in this Agreement, if a default has occurred under this Agreement, the
Agent, the Collateral Agent and the Senior Lenders may exercise all other rights
and remedies in respect of the Subordinated Obligations and against the
Subordinated Creditors available to it by law or equity, whether under the UCC
of the State of New York, or otherwise.
Section 9. Duties of Agent and the Collateral Agent. The powers
conferred on the Agent and Collateral Agent by this Agreement are solely to
protect its interest in the Senior Obligations
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<PAGE> 9
and shall not impose on it any duty to exercise any powers. Except for the safe
custody of any instruments representing Subordinated Obligations in its
possession and the accounting for moneys actually received by it under this
Agreement, neither the Agent nor the Collateral Agent shall have any duty or
liability as to any Person in respect of the Subordinated Obligations. The Agent
and the Collateral Agent shall be deemed to have exercised reasonable care in
the custody and preservation of instruments representing Subordinated
Obligations if the Agent and the Collateral Agent treats those instruments
substantially the same as it treats similar property of their own. The Agent,
the Collateral Agent and the Senior Lenders shall not have any duty,
responsibility or liability for (a) ascertaining or taking action with respect
to any Subordinated Obligations, (b) collecting of any proceeds of any
Subordinated Obligations or (c) any other matter in connection with any
Subordinated Document except in respect of duties specifically undertaken by it
in this Agreement and in that case none of the Agent, the Collateral Agent or
any of the Senior Lenders shall be liable to any party in the absence of gross
negligence or willful misconduct.
Section 10. Continuing Subordination. This Agreement shall continue to
be effective and shall remain in full force and effect until the Senior
Obligations have been indefeasibly paid and otherwise performed in full. For the
purposes of this Agreement, the Senior Obligations shall not be deemed to have
been paid and performed in full until the holders or owners of the Senior
Obligations shall have indefeasibly received payment of the Senior Obligations
in full in cash. Thereafter, this Agreement shall be reinstated if at any time
any payment of any of the Senior Obligations is rescinded or must otherwise be
returned upon the insolvency, bankruptcy or reorganization of the Company, any
Subsidiary or any other Person or otherwise, all as though the payment had not
been made. This Agreement shall apply to the Subordinated Obligations and shall
bind the holders thereof and their successors and assigns.
Section 11. Waiver. Each of the Subordinated Creditors unconditionally
waives, to the full extent permitted by law:
(a) Set Off. Any defense, set-off or counterclaim which such
Subordinated Creditor may otherwise assert against the Agent, the
Collateral Agent or the Senior Lenders.
(b) Notice, etc. Presentment, protest, demand for payment,
promptness, diligence, notice of protest, notice of any other action at
any time taken or omitted by the Agent, the Collateral Agent or any
Senior Lender and, generally, all demands and notices of every kind in
connection with any Senior Loan Document or the Senior Obligations,
including, without limitation:
(i) notice of any of the matters referred to in
Section 12;
(ii) all notices which may be required by statute,
rule of law or otherwise, now or hereafter in effect, to
preserve intact any rights against such Subordinated Creditor
under any Senior Loan Document or as a requirement to the
enforcement, assertion or exercise against the Company, any
Subsidiary or any Subordinated
-9-
<PAGE> 10
Creditor of any right, power, privilege or remedy conferred
under any Senior Loan Document.
(c) Exhaust Other Remedies. Any requirement to exhaust any
rights or remedies or to mitigate the damages resulting from any
default under any Senior Loan Document or any other document or any
requirement to protect, secure, perfect or insure any Lien or any
property subject to the Lien or take any other action against any
person or any collateral or other property.
(d) Claims. All claims that the sale price of any collateral
was inadequate or unreasonable for any reason and all other claims to
damages and demands of any nature against the Agent, the Collateral
Agent and the Senior Lenders.
(e) Equitable Rights. All equities and rights of appraisal,
stay and redemption (whether now or hereafter existing), in each case
arising out of the Agent, the Collateral Agent or the Senior Lenders
enforcing any of their rights and remedies under any Senior Loan
Document.
(f) Subrogation and/or Contribution. Any exoneration or
release from the Senior Obligations resulting from any loss by any
Subordinated Creditor of its rights, if any, of subrogation or
contribution.
(g) Other Circumstances. Any other circumstance whatsoever
which might otherwise constitute a defense to or a legal or equitable
discharge or release of a subordinated creditor from its subordination
obligations or which might otherwise limit recourse against any
Subordinated Creditor or affect the rights of the Senior Lenders
hereunder.
Section 12. Obligations Not Affected. The rights of the Agent, the
Collateral Agent and the Senior Lenders and the obligations of the Subordinated
Creditors and the Company under this Agreement shall be absolute and
unconditional, present and continuing and shall remain in full force and effect
and shall not be released, discharged or in any way affected by any circumstance
or condition of any nature (whether or not any Subordinated Creditor, the
Company, any Subsidiary, the Agent, the Collateral Agent or any Senior Lender
shall have any notice or knowledge of the circumstance or condition), including,
without limitation:
(a) Failure of Documents. The invalidity, illegality,
unenforceability, discharge, termination, cancellation or frustration,
in whole or in part, of any Senior Obligation, Senior Loan Document, or
other document.
(b) Failure to Exercise Rights and/or Remedies. The exercise
or failure to exercise by any person any right, remedy, privilege or
power under any Senior Loan Document or other document.
(c) Collection Attempts. Any demand or attempt to collect
from, or failure to demand or attempt to collect from, the Company, any
Subsidiary, any Subordinated Creditor, or any other Person under any
Senior Loan Document or other document.
-10-
<PAGE> 11
(d) Security and Guarantees. The giving, acceptance,
existence, non-existence, validity, invalidity, value or release of any
security or collateral securing the Senior Obligations or any guarantee
of the Senior Obligations, including, without limitation the Collateral
and the subordination and security interest given under this Agreement,
or any attempt or failure to attempt to realize upon that security or
collateral.
(e) Actions. The exchange, substitution, renewal, extension,
modification, compromise, release, discharge or failure to perfect for
any reason that security, or collateral.
(f) Modifications. Any change in the time, place or manner of
payment or the waiver, consent, extension, renewal, indulgence,
compromise, release, settlement, refunding, funding, or any other
forbearance or other action taken, delayed or omitted by the Agent, the
Collateral Agent, any Senior Lender, the Company, any Subsidiary, any
Subordinated Creditor, or any other person under or in respect of any
term or provision of any Senior Obligation, Senior Loan Document, or
other document.
(g) Reorganizations. The termination, modification,
alteration, amendment, waiver, addition, deletion or other change to
any Senior Obligation, Senior Loan Document, or other document or any
provision of any of those documents.
(h) Bankruptcy. The liquidation, dissolution, merger or
consolidation of the Company, any Subsidiary, any Subordinated
Creditor, or any other Person, or the transfer by the Company, any
Subordinated Creditor, or any other Person of all or any part of its
property or assets. The voluntary or involuntary bankruptcy,
receivership, liquidation, insolvency, reorganization, arrangement,
assignment for the benefit of creditors or similar proceedings
involving or affecting the Company, any Subsidiary, any the
Subordinated Creditor, or any other Person or any of their property.
(i) Change in Ownership. The change in the ownership of any
shares of capital stock of the Company, any Subsidiary, any
Subordinated Creditor or the change in or termination of the
relationship between the Company, any Subsidiary, and any Subordinated
Creditor.
(j) Release. The release or discharge, by operation of law or
otherwise, of the Company, any Subsidiary, any Subordinated Creditor,
or any other person from any Senior Obligation or any provision of any
Senior Loan Document or other document.
(k) Other Circumstances. Any other circumstance whatsoever,
foreseen or unforseen, which may or might in any manner or to any
extent vary the risks of the Subordinated Creditors or might otherwise
constitute a defense available to or a legal or equitable discharge of
or limit recourse against a surety, a guarantor, a party granting
security, the Subordinated Creditors or otherwise.
Section 13. Subrogation. Notwithstanding any payments or distributions
received by the Collateral Agent in respect of the Subordinated Obligations and
applied by the Collateral Agent
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<PAGE> 12
toward the payment or prepayment of any Senior Obligation, the Subordinated
Creditors shall be subrogated to the then existing rights of the Agent, the
Collateral Agent and the Lenders, if any, in respect of the Senior Obligations
only when the Senior Obligations have been indefeasibly paid in full.
Section 14. Miscellaneous.
(a) Notices. All notices, requests, demands and other communications to
any party or given under this Agreement (collectively, "Notices") will be in
writing and delivered personally, by overnight courier or by registered mail to
the parties at the addresses specified for such Person on the signature pages of
this Agreement. All Notices will be deemed delivered when actually received;
provided, however, that Notices to the Collateral Agent will not be deemed to be
received and will not be effective until a copy of such Notice has also been
actually received by the Agent. Each of the parties will hereafter notify the
others in accordance with this Section of any change of address or telecopy
number to which any Notice is required to be mailed.
(b) Expenses. The Company agrees to pay to the Agent, the Collateral
Agent and the Senior Lenders on demand the amount of any and all expenses,
including, without limitation, the fees and expenses of the Agent's, the
Collateral Agent's or the Senior Lenders' counsel, which the Agent, the
Collateral Agent or any Senior Lender may pay or incur in exercising or
enforcing their rights under this Agreement.
(c) Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, and by different parties hereto in separate counterparts,
each of which when executed will be deemed an original, but all of which taken
together will constitute one and the same instrument.
(d) Interpretation. As used in this Agreement, references to the
singular will include the plural and vice versa and references to the masculine
gender will include the feminine and neuter genders and vice versa, as
appropriate. Unless otherwise expressly provided in this Agreement (i) the words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement will refer to this Agreement as a whole and not to any particular
provision of this Agreement and (ii) article, section, subsection, schedule and
exhibit references are references with respect to this Agreement unless
otherwise specified. References in this Agreement to any law or regulation will
refer to such laws and regulations as from time to time amended and to any laws
or regulations successor thereto. Unless the context otherwise requires, the
term "including" will mean "including, without limitation".
(e) Incorporation of Schedules, Exhibits and Annexes. The Schedules,
Exhibits and Annexes hereto are incorporated into this Agreement and will be
deemed a part hereof as if set forth herein in full. In the event of any
conflict between the provisions of this Agreement and any Schedule, Exhibit or
Annex, the provisions of this Agreement will control.
-12-
<PAGE> 13
(f) Amendment of Agreement. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties against whom
enforcement of such amendment is sought.
(g) Successors and Assigns. This Agreement will be binding upon and
inures to the benefit of and is enforceable by the respective successors and
permitted assigns of the parties hereto.
(h) No Waiver; Remedies. No failure or delay by any party in exercising
any right, power or privilege under this Agreement will operate as a waiver of
the right, power or privilege. A single or partial exercise of any right, power
or privilege will not preclude any other or further exercise of the right, power
or privilege or the exercise of any other right, power or privilege. The rights
and remedies provided in this Agreement and the other Senior Loan Documents will
be cumulative and not exclusive of any rights or remedies provided by law.
(i) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto will negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
(j) Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the state of New York applicable to contracts
executed in and to be performed entirely within that state.
(k) No Third-Party Rights. This Agreement is not intended, and will not
be construed, to create any rights in any parties other than the Company, the
Subsidiaries, the Subordinated Creditors, the Agent, the Collateral Agent and
the Senior Lenders, and no Person may assert any rights as third-party
beneficiary hereunder.
(l) Submission to Jurisdiction. Any Action with respect to this
Agreement may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and each of the
Company, the Subsidiaries, the Subordinated Creditors, the Agent, the Collateral
Agent and the Senior Lenders hereby accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of these courts. Each
of the Company, the Subsidiaries, the Subordinated Creditors, the Agent, the
Collateral Agent and the Senior Lenders hereby irrevocably waives any objection,
including, without limitation, any objection to the laying of venue or based on
the grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any Action in those jurisdictions.
(m) Waiver of Jury Trial. Each party waives any right to a trial by
jury in any Action to enforce or defend any right under this Agreement or any
amendment, instrument, document or
-13-
<PAGE> 14
agreement delivered or to be delivered in connection with this Agreement and
agrees that any Action will be tried before a court and not before a jury.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
Address for Notices: NORTHSTAR HEALTH SERVICES, INC.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 349-7500
Facsimile No.: (724) 465-3726 By:______________________________
Name:
Title:
Address for Notices:
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 349-7500
Facsimile No.: (724) 465-3726
_________________________________
THOMAS W. ZAUCHA
Address for Notices:
c/o Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 349-7500
Facsimile No.: (724) 465-3726
_________________________________
ALICE L. ZAUCHA
-15-
<PAGE> 16
Address for Notices: ZAUCHA FAMILY LIMITED PARTNERSHIP,
c/o Northstar Health Services, Inc. L.P.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Attention: Thomas W. Zaucha
Telephone: (724) 349-7500
Facsimile No.: (724) 465-3726
By:_______________________________
Thomas W. Zaucha
General Partner
By:_______________________________
Alice L. Zaucha
General Partner
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<PAGE> 17
Address for Notices: CERBERUS CAPITAL MANAGEMENT, LLC,
450 Park Avenue as Agent
New York, New York 10022
Attention: Joyce Johnson-Miller
Telephone: (212) 891-2119
Facsimile: (212) 750-5212
By:_______________________________
Name:
Title:
Address for Notices: CHASE MANHATTAN BANK,
450 West 33rd Street as Collateral Agent
14th Floor
New York, New York 10001
Attention: Capital Markets Fiduciary
Services, Cerberus Capital
Telephone: (212) 946-3200
Facsimile: (212) 946-8302
By:_______________________________
Name:
Title:
-17-
<PAGE> 18
SCHEDULE I
to
ZAUCHA SUBORDINATION AGREEMENT
Subordinated Creditors
Thomas W. Zaucha
Alice L. Zaucha
Zaucha Family Partnership
-18-
<PAGE> 1
EXHIBIT 10.11
[EXECUTION COPY]
ZAUCHA PAYMENT LETTER
September 30, 1999
Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
Cerberus Capital Management, LLC,
as agent for the Lenders
450 Park Avenue
New York, New York 10022
Attention: Joyce Johnson-Miller
Northstar Health Services, Inc.
Ladies and Gentlemen:
Reference is hereby made to that certain Amended and Restated Credit
Agreement (the "Credit Agreement"), dated as of September 30, 1999, among
Northstar Health Services, Inc. (the "Company"), the Subsidiary Guarantors party
thereto, the Lenders listed therein (the "Lenders"), Cerberus Capital
Management, LLC (the "Agent") and The Chase Manhattan Bank as collateral agent.
Capitalized terms used but not defined herein have the meanings given to them in
the Credit Agreement.
Pursuant to Section 2.4B(ii)(e)(i)(II) of the Credit Agreement, in the
event that certain conditions are satisfied, the Company is permitted to retain
up to $52,500 of Consolidated Excess Cash Flow per month.
Mr. Thomas W. Zaucha ("Zaucha") and the Company agree that, for so
long as (a) the Company is entitled to retain amounts under Section
2.4B(ii)(e)(i)(II) and (b) any of the creditors set forth on Schedule I (the
"Zaucha Creditors") are owed any amounts by Zaucha, then the Company shall
allocate the monthly amount so available to the Company among the Zaucha
Creditors, and distribute the amounts for each such Zaucha Creditor set forth on
Schedule I under the heading "Monthly Payment Amount"; provided, however, that
in the event that the amount allocated by the Company for such month is
insufficient to make the monthly payment to the Zaucha Creditors in full, such
amount shall be distributed pro rata among the Zaucha Creditors.
<PAGE> 2
In the event that at any time the Payment Conditions set forth in
Section 2.4B(ii)(e)(i)(II) shall not be satisfied, the Company shall immediately
stop all such payments to the Zaucha Creditors and Zaucha shall not be entitled
to direct that any further payments be made until such Payment Conditions have
been remedied and satisfied.
In addition, the Company and Zaucha hereby acknowledge and agree, for
the benefit of the Agent and the Lenders, as follows:
1. The outstanding amount owed by Zaucha to each of the Zaucha
Creditors is the amount set forth opposite such Zaucha Creditor's name
on Schedule I under the heading "Total Amount Owed" (collectively, such
amounts being the "Zaucha Obligations").
2. Zaucha, and not the Company, is solely responsible for the
repayment of the Zaucha Obligations. Payments made by the Company
directly to the Zaucha Creditors were reimbursement payments to Zaucha
which he requested be paid directly to the Zaucha Creditors. To the
extent the Company has paid, and may in the future pay, reimbursement
payments directly to the Zaucha Creditors, such payments shall not
imply or impose any liability or obligation on the Company of any kind,
including without limitation, (a) to continue making any payments to
the Zaucha Creditors, or (b) to repay the Zaucha Obligations.
3. The obligation of the Company to reimburse Zaucha for his
expenses is expressly subordinate to, and junior in right of payment
to, any and all amounts owed by the Company to the Lenders under the
Credit Agreement and is expressly subject to the Zaucha Subordination
Agreement.
Each of the parties represents to each of the others that:
(a) It has full power and authority to enter into the
performance of this letter agreement, and this letter agreement (i) has
been duly authorized, (ii) is legal, valid and binding and enforceable
against such party, and (iii) is not in contravention of any law, order
or agreement by which such party is bound; and
(b) No consents, notices, filings, approvals or authorizations
are required to be made to or with or received from any person, entity,
or governmental body for the consummation of the transactions
contemplated by this letter agreement.
Please acknowledge your acceptance of these terms by executing this
letter agreement in the appropriate space provided below.
This Agreement may not be amended and no terms hereof waived without
the express written consent of the three parties hereto.
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<PAGE> 3
This letter agreement shall be governed by the laws of the State of New
York and may be executed in counterparts, each of which shall constitute an
original and all of which together shall constitute one and the same instrument.
___________________________
Thomas Zaucha
ACKNOWLEDGED AND AGREED:
NORTHSTAR HEALTH SERVICES, INC.
By:__________________________________
Name:
Title:
CERBERUS CAPITAL MANAGEMENT, LLC,
as agent for the lenders
By:__________________________________
Name:
Title:
-3-
<PAGE> 4
SCHEDULE I
to
ZAUCHA PAYMENT LETTER
<TABLE>
<CAPTION>
Zaucha Creditors
----------------
Zaucha Creditor Monthly Payment Amount Total Amount Owed
--------------- ---------------------- -----------------
<S> <C> <C>
Willkie Farr & Gallagher $18,600 $500,239
Morris Nichols $ 6,400 $172,600
Commonwealth Associates $ 2,500 $ 49,500
----------------------- -------- --------
Total: $27,500 $722,339
</TABLE>
-4-
<PAGE> 5
[EXECUTION COPY]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER ANY STATE
SECURITIES LAWS AND SUCH WARRANTS HAVE BEEN ISSUED TO THE HOLDER IN RELIANCE
UPON CERTAIN EXEMPTIONS FROM REGISTRATION AND QUALIFICATION PROVIDED IN THE 1933
ACT AND THE RULES AND REGULATIONS THERETO AND THE APPLICABLE STATE SECURITIES
LAWS. ACCORDINGLY, NEITHER SUCH SECURITIES OR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE 1933 ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED, OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS.
Warrant No.: W-1 As of September 30, 1999
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
NORTHSTAR HEALTH SERVICES, INC.
THIS CERTIFIES THAT, for value received, CERBERUS CAPITAL MANAGEMENT
LLC, as Agent for the Lenders under the Credit Agreement referred to below, or
its assignee together with any transferee (the "Holder"), is entitled, in
accordance with the terms and conditions hereinafter set forth, to subscribe for
and purchase from Northstar Health Services, Inc., a Delaware corporation (the
"Company"), at any time after the date of this Warrant and on or prior to 5:00
p.m. New York City time on January 1, 2003 (the "Expiration Date"), up to
240,000 shares of the Company's common stock, par value $0.01 per share (the
"Common Stock") (such number of shares as from time to time adjusted as
hereinafter provided, the "Warrant Shares"), at the price of $.25 per share
(such price as from time to time adjusted as hereinafter provided, the "Exercise
Price") and to receive a certificate or certificates for the Warrant Shares so
purchased, upon presentation and surrender of this Warrant at the location set
forth in Section 1(a) below, together with the Exercise Price of the shares so
purchased. For purposes of this Warrant, the term "Credit Agreement" means that
certain Amended and Restated Credit Agreement, dated as of September 30, 1999,
among the Company, the Subsidiary Guarantors party thereto, the Lenders listed
therein, Cerberus Capital Management, LLC, as Agent and The Chase Manhattan
Bank, as Collateral Agent.
<PAGE> 6
Section 1. Exercise.
(a) Method of Exercise. Subject to compliance with all applicable
securities laws, this Warrant may be exercised from time to time in whole or in
part on or prior to the Expiration Date, by delivering to the Company at The
Atrium, 665 Philadelphia Street, P.O. Box 1289, Indiana, Pennsylvania 15701 (i)
this Warrant, (ii) a subscription form, substantially in the form of Exhibit A
attached hereto (the "Subscription Form") duly completed and executed by the
Holder and (iii) payment of the Exercise Price as set forth below in Section
1(b).
(b) Payment of Exercise Price. Payment of the Exercise Price may be
made, at the option of the Holder, either (i) by payment to the Company, by
check or wire transfer of an amount in immediately available funds equal to the
product of (A) the then applicable Exercise Price, multiplied by (B) the number
of Warrant Shares then being purchased, or (ii) by surrender of the right to
receive upon exercise of this Warrant a number of shares of Common Stock having
a value (as determined below) equal to the product of (A) the then applicable
Exercise Price, multiplied by (B) the number of Warrant Shares then being
purchased, in which case, the number of Warrant Shares to be issued to the
Holder upon such exercise shall be calculated using the following formula:
Y * (A - B)
-----------
X = A
with X = the number of shares of Common Stock to be issued
to the Holder
Y = the number of Warrant Shares with respect to which
the Warrant is being exercised
A = the Fair Market Value (as determined below) of one
share of Common Stock
B = the then applicable Exercise Price of the Warrant.
For purposes of this Warrant, the term "Fair Market Value" shall mean
the average of the daily Closing Prices (as hereinafter defined) for the 10
consecutive Trading Days (as hereinafter defined) immediately prior to the date
in question. "Closing Price" on any day means the last sales price, regular way,
per share of such stock on such day, or if no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the shares of such stock are listed or admitted to
trading, or, if the shares of such stock are not listed or admitted to trading
on any national securities exchange, the average of the high bid and low asked
prices in the over-the-counter market as reported by the National Association of
Securities Dealers Inc.'s Automated Quotation System. "Trading Day" means a day
on which the principal national securities exchange on which such
-2-
<PAGE> 7
shares of such stock are listed or admitted to trading is open for the
transaction of business or, if the shares of such stock are not listed or
admitted to trading on any national securities exchange, a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in the Borough of
Manhattan, City and State of New York, are not authorized or obligated by law or
executive order to close.
(c) Date of Exercise. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided in Section 1(a) above, and the person
entitled to receive the Warrant Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Warrant Shares as of
the close of business on such date.
(d) Issuance of Certificates for Warrant Shares; No Fractional Shares.
As soon as practicable after the Company's receipt of the Warrant surrendered in
connection with an exercise provided for in Section 1(a) above, the Company
shall issue and deliver to the person or persons entitled to receive the Warrant
Shares issuable upon such exercise of the Warrant, a certificate or certificates
for the number of whole shares of Warrant Shares issuable upon such exercise,
together with cash in lieu of any fraction of a share equal to such fraction of
the current fair market value of one whole share of Common Stock as of the date
of exercise, as determined in good faith by the Board of Directors of the
Company. No fractional shares shall be issued upon the exercise of this Warrant,
and any fractions shall be rounded down to the nearest whole number of shares.
(e) Partial Exercise. Upon a partial exercise of this Warrant, this
Warrant shall be surrendered by the Holder and replaced with a new Warrant of
like tenor in the name of the Holder providing for the right to purchase the
number of shares of Common Stock as to which this Warrant has not then been
exercised.
(f) Taxes. The issuance of certificates for shares of Common Stock upon
the exercise of this Warrant will be made without charge by the Company to the
Holder for any issue tax (other than applicable income tax).
Section 2. Adjustment of Exercise Price and Number of Warrant Shares.
The Exercise Price and the number of Warrant Shares shall each be subject to
adjustment from time to time as set forth below.
(a) Dividends and Distributions. In the event the Company shall, at any
time or from time to time, distribute to the holders of any of its Common Stock
any dividend or other distribution of any Assets, other than dividends payable
in Common Stock, Options or Convertible Securities, and any cash dividend that,
when added to all other cash dividends paid in the 12 months immediately
preceding the declaration date of such dividend (excluding any such other
dividend included in a previous adjustment of the Exercise Price pursuant to
this paragraph (a)), does not exceed 2% (on an annualized basis) of the Current
Market Price per share of Common Stock on such declaration date, then:
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<PAGE> 8
(i) the Exercise Price shall be reduced to equal the product
obtained by multiplying (A) the Exercise Price then in effect by (B) a
fraction, (x) the numerator of which shall be (I) the Current Market
Price per share of Common Stock on the record date for such
distribution less (II) the sum of (a) the cash portion, if any, of such
distribution per share of Common Stock outstanding (exclusive of any
treasury shares) on the record date for such distribution plus (b) the
then fair market value (as determined in good faith by the Board of
Directors of the Company) per share of Common Stock outstanding
(exclusive of any treasury shares) on the record date for such
distribution of that portion, if any, of such distribution consisting
of Assets other than cash, and (y) the denominator of which shall be
such Current Market Price per share of Common Stock on the record date
for such distribution, and
(ii) the number of Warrant Shares shall be increased to equal
the product obtained by multiplying (A) the Exercise Price in effect
immediately prior to the record date for such distribution by (B) a
fraction, (x) the numerator of which shall be the Exercise Price in
effect immediately prior to the adjustment required by clause (i) of
this paragraph and (y) the denominator of which shall be the Exercise
Price in effect immediately after such adjustment.
The adjustments required by this paragraph (a) shall be made whenever
any such distribution is made and shall be retroactive to the record date for
the determination of stockholders entitled to receive such distribution.
(b) Dividends Payable in Common Stock and Changes in Common Stock. In
the event the Company shall, at any time or from time to time, (x) issue any
shares of Common Stock as a stock dividend to the holders of Common Stock or (y)
subdivide or combine any outstanding shares of Common Stock into a greater or
lesser number of shares (each such event being a "Change of Shares"), then:
(i) the number of Warrant Shares immediately prior to such
action shall be adjusted so that the Holder, upon exercising the
Warrant shall be entitled to the number of shares of Common Stock that
the Holder would have owned or have been entitled to receive after the
happening of such event had the Warrant been exercised immediately
prior to the record date (or, if there is no record date, the effective
date) for such event, and
(ii) the Exercise Price shall be adjusted to equal the product
determined by multiplying (A) the Exercise Price in effect immediately
prior to such event by (B) a fraction, (x) the numerator of which shall
be the number of Warrant Shares immediately prior to such event and (y)
the denominator of which shall be the number of Warrant Shares after
the adjustment referred to above.
An adjustment made pursuant to this clause (b) shall become effective
retroactively immediately after the record date in the case of a dividend and
shall become effective
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<PAGE> 9
immediately after the effective date in other cases, but any shares of Common
Stock issuable solely as a result of such adjustment shall not be issued prior
to the effective date of such event.
(c) Common Stock Issuances. In the event the Company shall, at any time
or from time to time, issue, sell or otherwise distribute (including by way of
deemed distributions pursuant to paragraphs (e) and (f) below) any shares of
Common Stock (other than pursuant to a Change of Shares or the exercise of any
Option or Convertible Security) (any such event, including any deemed
distributions described in paragraphs (e) and (f) below, being herein called a
"Common Stock Distribution"), for a consideration per share less than either (x)
the Current Market Price per share of Common Stock on the date of such Common
Stock Distribution or (y) the Exercise Price in effect at the time of such
distribution, then, effective upon such Common Stock Distribution:
(i) the Exercise Price shall be reduced to equal the product
obtained by multiplying (A) the Exercise Price in effect immediately
prior to such Common Stock Distribution by (B) a fraction, (x) the
numerator of which shall be the sum of the number of shares of Common
Stock outstanding (exclusive of any treasury shares) immediately prior
to such Common Stock Distribution plus the number of shares of Common
Stock which the aggregate consideration received by the Company would
purchase at the greater of (I) the Exercise Price in effect immediately
prior to such Common Stock Distribution and (II) the Current Market
Price per share of Common Stock and (y) the denominator of which shall
be the total number of shares of Common Stock outstanding (exclusive of
any treasury shares) immediately after such Common Stock Distribution,
and
(ii) the number of Warrant Shares shall be increased to equal
the product obtained by multiplying (A) the number of Warrant Shares in
effect immediately prior to such Common Stock Distribution by (B) a
fraction, (x) the numerator of which shall be the Exercise Price in
effect immediately prior to such adjustment and (y) the denominator of
which shall be the Exercise Price in effect immediately after such
adjustment.
The provisions of this paragraph (c) (including by operation of
paragraph (e) or (f) below) shall not operate to increase the Exercise Price or
reduce the number of Warrant Shares, except by operation of paragraph (g) below.
(d) Other Securities. In the event that (i) the Company shall, at any
time or from time to time, issue any shares of its capital stock in a
reclassification or reorganization of the Common Stock, or (ii) at any time, as
a result of an adjustment made pursuant to this Section 2, the Holder shall
become entitled to receive any securities of the Company other than shares of
Common Stock, thereafter, in each such case, the number of such other securities
so receivable upon exercise of the Warrant and the Exercise Price applicable to
such exercise shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the shares of Common Stock contained in this Section.
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<PAGE> 10
(e) Issuance of Options. In the event the Company shall, at any time or
from time to time, issue, sell, distribute or otherwise grant in any manner
(including by assumption) any Options, whether or not such Options (or in the
case of Options to acquire Convertible Securities, the right to convert or
exchange such Convertible Securities) are immediately exercisable, and the
Present Value of the Exercise Price Per Share with respect to such Options shall
be less than either (i) the Current Market Price per share of Common Stock on
the date of the issuance, sale, distribution or granting of such Options or (ii)
the Exercise Price then in effect, then, for purposes of paragraph (c) above,
the total maximum number of shares of Common Stock issuable upon the exercise of
all such Options or upon the conversion or exchange of the total maximum amount
of the Convertible Securities issuable upon the exercise of all such Options
shall be deemed to have been issued as of the date of the issuance, sale,
distribution or granting of such Options and thereafter shall be deemed to be
outstanding and the Company shall be deemed to have received as consideration
such Present Value of the Exercise Price Per Share, determined as provided
above, therefor.
Except as otherwise provided in paragraph (g) below, no additional
adjustment of the Exercise Price shall be made upon the actual exercise of such
Options or upon conversion or exchange of the Convertible Securities issuable
upon the exercise of such Options.
(f) Issuance of Convertible Securities. In the event the Company shall,
at any time or from time to time, issue, sell or otherwise distribute (including
by assumption) any Convertible Securities (other than upon the exercise of any
Option), whether or not the right to convert or exchange such Convertible
Securities are immediately exercisable, and the Present Value of the Exercise
Price Per Share shall be less than (i) the Current Market Price per share of
Common Stock on the date of such issuance, sale or distribution or (ii) the
Exercise Price then in effect, then, for purposes of paragraph (c) above, the
total maximum number of shares of Common Stock, issuable upon the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
as of the date of the issuance, sale or distribution of such Convertible
Securities and thereafter shall be deemed to be outstanding and the Company
shall be deemed to have received as consideration such Present Value of the
Exercise Price Per Share, determined as provided above, therefor.
Except as otherwise provided in paragraph (g) below, no additional
adjustment of the Exercise Price shall be made upon the actual conversion or
exchange of such Convertible Securities.
(g) Changes in Options and Convertible Securities. If (i) the exercise
price provided for in any Options referred to in paragraph (e) above, (ii) the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in paragraph (e) or (f) above, or (iii) the
rate at which any Convertible Securities referred to in paragraph (e) or (f)
above are convertible into or exchangeable for Common Stock, shall change at any
time (other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Section), the Exercise Price then in effect and the number of Warrant Shares
shall forthwith be readjusted to the Exercise Price and the number of
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<PAGE> 11
Warrant Shares that would then be in effect had the adjustment made upon the
issuance, sale, distribution or granting of such Options or Convertible
Securities been made based upon such changed purchase price, additional
consideration or conversion rate, as the case may be, but only with respect to
such Options and Convertible Securities as then remain outstanding.
(h) Certain Distributions. If the Company shall pay a dividend or make
any other distribution payable in Options or Convertible Securities, then, for
purposes of paragraph (c) above (by operation of paragraph (e) or (f) above, as
the case may be), such Options or Convertible Securities shall be deemed to have
been issued or sold without consideration except for such amounts of
consideration as shall have been deemed to have been received by the Company
pursuant to paragraphs (e) or (f) above, as appropriate.
(i) Special Anti-dilution Protection For Conversion of Zaucha
Obligations. Notwithstanding any other provision of this Agreement, in the event
(i) all or any portion of the Zaucha Obligations (as defined in the Credit
Agreement) is converted into, exchanged for, redeemed or repaid with shares of
Common Stock or Convertible Securities or (ii) one or more holders of all or any
portion of the Zaucha Obligations receives any shares of Common Stock or
Convertible Securities with respect to all or any portion of the Zaucha
Obligations (any of the foregoing in clauses (i) or (ii) being a "Conversion" ),
then:
(i) the number of Warrant Shares in effect immediately
following the Conversion shall be increased to equal the product
obtained by multiplying (A) the number of Warrant Shares in effect
immediately prior to the Conversion by (B) a fraction, (x) the
numerator of which is the number of shares of Common Stock outstanding
immediately after the Conversion (calculated on a fully diluted basis,
including, without limitation, all shares of Common Stock which may be
issued pursuant to any Convertible Securities issued to the holders of
any Zaucha Obligations and shares of Common Stock which may be issued
upon the exercise of this Warrant), and (y) the denominator of which is
the number of shares of Common Stock outstanding immediately prior to
the Conversion (calculated on a fully diluted basis, including, without
limitation, all shares of Common Stock which may be issued upon the
exercise of this Warrant), and
(ii) the Exercise Price in effect immediately following the
Conversion shall equal the Exercise Price that was in effect
immediately prior to such Conversion.
(j) Equitable Adjustments. In case any other corporate event or
transaction of the Company, outside the ordinary course of business consistent
with past practice, not specified in this Section occurs which equitably
requires an anti-dilutive adjustment to the Warrant, the Company's Board of
Directors and the Holder shall consult with each other in good faith and
mutually agree upon appropriate adjustments to the Exercise Price and the number
of Warrant Shares, so that the property (including securities) to be received by
the Holder hereunder upon exercise of the Warrant after the effective date of
such event, shall be substantially similar, as nearly as practicable, to those
which the Holder would have been entitled immediately prior to such event had
the Holder exercised the Warrant prior to such event.
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<PAGE> 12
(k) Definitions. For purposes of this Section 2, the following
capitalized terms have the following meanings:
"Assets" means cash, evidences of indebtedness, other
securities or other properties or assets, or any options, warrants or
other rights to subscribe for or purchase any of the foregoing.
"Convertible Securities" means any stock or securities
convertible into or exchangeable for Common Stock.
"Current Market Price" per share of Common Stock at any date
shall be the Closing Price.
"Options" means any rights to subscribe for or to purchase, or
any warrants or options for the purchase of, Common Stock or any
Convertible Security.
"Present Value of the Exercise Price Per Share" with respect
to the issuance of any:
(i) Options, means the present value determined by
discounting from the last date on which such Options are
exercisable, at 9% per annum, the exercise price per share at
which Common Stock is issuable upon the exercise of such
Options or in the case of Options to acquire Convertible
Securities, upon the conversion or exchange of such
Convertible Securities (the "Option Exercise Price"). The
Option Exercise Price is determined by dividing (x) the sum of
(A) the aggregate amount, if any, received or receivable by
the Company as consideration for the issuance, sale,
distribution or granting of such Options, plus (B) the minimum
aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Options, plus (C)
in the case of Options to acquire Convertible Securities, the
minimum aggregate amount of additional consideration, if any,
payable upon the conversion or exchange of all such
Convertible Securities, by (y) the total maximum number of
shares of Common Stock issuable upon the exercise of all such
Options or upon the conversion or exchange of all Convertible
Securities issuable upon the exercise of all such Options, and
(ii) Convertible Securities, means the present value
determined by discounting from the last date on which such
Convertible Securities are convertible or exercisable, at 9%
per annum, the price per share at which Common Stock is
issuable upon the conversion or exchange of such Convertible
Securities (the "Convertible Securities Exercise Price"). The
Convertible Securities Exercise Price shall be determined by
dividing (x) the sum of (A) the aggregate amount, if any,
received or receivable by the Company as consideration for the
issuance, sale or distribution of such Convertible Securities,
plus (B) the
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<PAGE> 13
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange of all
such Convertible Securities, by (y) the total maximum number
of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities.
(l) Miscellaneous.
(i) Deferral of Certain Adjustments. No adjustment to the Exercise
Price (including the related adjustment to the number of Warrant Shares) shall
be required hereunder unless such adjustment, together with other adjustments
carried forward as provided below, would result in an increase or decrease of at
least 1% of the Exercise Price; provided, however, that any adjustment which by
reason of this paragraph is not required to be made shall be carried forward and
taken into account in any subsequent adjustment. No adjustment need be made for
a change in the par value of the Common Stock.
(ii) Notice of Certain Transactions. In the event that:
(A) the Company takes any action that would require an
adjustment in the Exercise Price or the number of Warrant Shares,
(B) the Company declares or distributes any dividend,
distribution, security, instrument or other rights to its stockholders
that would require an adjustment pursuant to this Section,
(C) the Company consolidates or merges with, or transfers all
or substantially all of its assets to, or makes any statutory exchange
of securities with, another corporation or engages in any
reorganization, restructuring, recapitalization, reclassification of
capital stock or spin-off or other similar transaction, or
(D) there is a dissolution or liquidation or other winding up
of the Company,
the Company shall, not later than 10 days prior to the earliest of the proposed
record or effective date, as the case may be, or any other applicable date with
respect to any of the foregoing actions or transactions (including the date, if
any is to be fixed, as of which holders of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon any such merger, consolidation, reorganization, restructuring,
recapitalization, reclassification, transfer, dissolution, liquidation or
winding up), give the Holder a written notice stating such proposed record or
effective date, as the case may be, or such other applicable date.
(iii) Consideration Received. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for a consideration
other than cash, the amount of the consideration other than cash received by the
Company in respect thereof shall be deemed to be the fair market value of such
consideration (as mutually agreed in good faith by the Board of Directors of the
Company and the Holder). If any Options shall be issued in connection with the
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<PAGE> 14
issuance and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been
issued, sold or distributed for such amount of consideration as shall be
allocated to such Options as mutually agreed in good faith by the Board of
Directors of the Company and the Holder.
(iv) Computation of Adjustments. Anything herein to the contrary
notwithstanding, upon each computation of an adjustment in the Exercise Price or
the number of Warrant Shares, the Exercise Price shall be computed to the
nearest cent (i.e., fractions of less than half of a cent shall be disregarded
and fractions of half of a cent, or more, shall be treated as being one cent)
and the number of Warrant Shares, shall be calculated to the nearest share
(i.e., fractions of less than half of a share shall be disregarded and fractions
of half of a share, or more, shall be treated as being one share).
(v) Certificate as to Adjustments. Upon any adjustment to the Exercise
Price or the number of Warrant Shares, the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the Holder at the
address of the Holder as shown on the books of the Company, which notice shall
state the Exercise Price resulting from such adjustment and the increase or
decrease, if any, in the number of Warrant Shares resulting from such
adjustment, setting forth in reasonable detail the calculations and the facts
upon which such calculation is based.
Section 3. Representations and Covenants of the Company. The Company
hereby represents, warrants and covenants to and with the Holder as follows:
(a) Power. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company has the necessary
corporate power and authority, to execute and deliver this Warrant, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby.
(b) Binding Effect. This Warrant has been duly executed and
delivered by the Company and is the legal, valid and binding
obligations of the Company enforceable against it in accordance with
its terms.
(c) Contravention. Neither the execution, delivery and
performance of this Warrant nor the consummation of the transactions
contemplated hereby will (with or without notice or lapse of time or
both) (i) conflict with or breach any provision of the Company's
certificate of incorporation or bylaws, (ii) violate any law, rule or
regulation by which the Company or any of its properties may be bound
or affected, or (iii) conflict with or result in a default under any
material contract or other material agreement to which the Company is a
party or by which it or any of its properties may be bound or affected.
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<PAGE> 15
(d) Approvals. No authorization, consent, order or approval
of, notice to or registration or filing with, or any other action by
any governmental authority or other person is required or advisable in
connection with (i) the due execution and delivery by the Company of
this Warrant, or (ii) the performance by the Company of its
obligations under this Warrant.
(e) Reservation of Shares. The Company shall reserve and keep
available out of its authorized but unissued Common Stock for issuance
upon the exercise of this Warrant, free from preemptive rights, such
number of shares of Common Stock for which this Warrant shall from time
to time be exercisable.
(f) Warrant Shares Duly Authorized, etc. All shares of Common
Stock which may be issued upon the exercise of this Warrant will, upon
issuance, be fully paid and nonassessable and be free from all taxes,
liens and charges in respect of the issuance thereof.
(g) No Impairment. The Company will not, by amendment of its
charter documents, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other
voluntary action, willfully avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, and will at all times
in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder under this Warrant.
(h) Regulatory Approval of Issuance. The Company further
covenants and agrees that if any shares of Common Stock to be reserved
for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental
authority under any Federal or State law before such shares may be
validly issued or delivered upon exercise of this Warrant, then the
Company will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be, and the right
to exercise this Warrant shall be extended until 15 days after the
completion of any such registration or approval.
(i) Listing Requirements. If and so long as any Common Stock
issuable upon the exercise of this Warrant is listed on any national
securities exchange, the Company will, if permitted by the rules of
such exchange, list and keep listed on such exchange, upon official
notice of issuance, all shares of Common Stock issuable upon exercise
of this Warrant.
Section 4. Representations and Warranties of the Holder. The Holder
hereby represents and warrants to the Company as follows:
(a) Power. The Holder is a limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The
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<PAGE> 16
Holder has the necessary power and authority, to execute and deliver
this Warrant, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
(b) Binding Effect. This Warrant has been duly executed and
delivered by the Holder and is the legal, valid and binding obligation
of the Holder enforceable against it in accordance with its terms.
(c) Contravention. Neither the execution, delivery and
performance of this Warrant nor the consummation of the transactions
contemplated hereby will (with or without notice or lapse of time or
both) (i) conflict with or breach any provision of the Holder's
organizational documents, (ii) violate any law, rule or regulation by
which the Holder or any of its properties may be bound or affected, or
(iii) conflict with or result in a default under any material contract
or other material agreement to which the Holder is a party or by which
it or any of its properties may be bound or affected.
(d) Approvals. No authorization, consent, order or approval
of, notice to or registration or filing with, or any other action by
any governmental authority or other person is required or advisable in
connection with (i) the due execution and delivery by the Holder of
this Warrant, or (ii) the performance by the Holder of its obligations
under this Warrant.
(e) Review of Information. The Holder has carefully read and
reviewed the material furnished to it with respect to the Company and
the Warrant.
(f) No Registration Under Securities Act. The Holder
understands and acknowledges that the Warrants and the shares of Common
Stock issuable upon conversion thereof are not being registered under
the 1933 Act or any state securities laws, on the grounds that the
issuance thereof is exempt under Section 4(2) of the 1933 Act, and such
state securities laws as a transaction by an issuer not involving any
public offering, and that reliance on such exemption is predicated in
part on the representations by the Holder herein. The Holder
understands that the Warrants cannot be sold unless they are
subsequently registered under the 1933 Act and applicable state
securities laws or an exemption from such registration is available.
(g) Investment Intent. The Holder is acquiring the Warrant for
investment, solely for the Holder's own account and not with a view to,
or for resale in connection with, the distribution or other disposition
thereof.
(h) Accredited Investor. The Holder is an accredited investor,
as defined in Rule 501 of Regulation D promulgated under the 1933 Act.
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Section 5. Registration Rights.
(a) Registrable Securities. As used herein the term "Registrable
Security" means each of the Warrants, the Warrant Shares and any shares of
Common Stock or other securities issued upon any stock split, stock dividend or
similar transaction in respect of such Warrant Shares; provided, however, that
with respect to any particular Registrable Security, such security shall cease
to be a Registrable Security when, as of the date of determination, (i) it has
been effectively registered under the 1933 Act and disposed of pursuant thereto,
(ii) registration under the 1933 Act is no longer required for the immediate
public distribution of such security or (iii) it has ceased to be outstanding.
The term "Registrable Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the rights granted pursuant to this Section 5
pursuant to the provisions of Section 2 hereof.
(b) Piggyback Registration. (i) If, at any time during the six years
following the date of this Agreement, the Company proposes to register its
securities or any such securities of the Company held by its security holders by
filing a registration statement, or any post-effective amendment to a
registration statement filed by the Company, pursuant to the 1933 Act (in any
such case, other than pursuant to Form S-8 of the 1933 Act or any successor
form) (a "Registration Statement"), it will give written notice of its intention
to do so by registered mail ("Notice"), at least 30 business days prior to the
filing of each such Registration Statement, to all holders of the Registrable
Securities. Upon the written request of such a holder (a "Requesting Holder"),
made within 15 business days after receipt of the Notice, that the Company
include the Requesting Holder's Registrable Securities in the proposed
Registration Statement (such request to specify the number and classes of
Registrable Securities to be so included in an amount equal to no less than the
lesser of (a) 50,000 shares or (b) the Requesting Holder's total number of
Registrable Securities), the Company shall, as to each such Requesting Holder,
use its best efforts to effect the registration under the 1933 Act of the
Registrable Securities which it has been so requested to register (a "Piggyback
Registration"), at the Company's sole cost and expense; provided, however, that
if, in the written opinion of the Company's managing underwriter, if any, for
such offering the inclusion of all or a portion of the Registrable Securities
requested to be registered, when added to the securities being registered by the
Company or the selling security holders, will exceed the maximum amount of the
Company's securities which can be sold (x) at a price reasonably related to
their then current market value, or (y) without materially adversely affecting
the entire offering, then the Company may exclude from such offering all or a
portion of the Registrable Securities which it has been requested to register.
(ii) If securities are proposed to be offered for sale pursuant to such
Registration Statement by other selling security holders of the Company and the
total number of securities to be offered by the Requesting Holders and such
other selling security holders is required to be reduced pursuant to a request
from the managing underwriter (which request shall be made only for the reasons
and in the manner set forth above), the aggregate number of Registrable
Securities to be offered by Requesting Holders pursuant to such Registration
Statement shall equal the number which bears the same ratio to the maximum
number of securities that the managing
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<PAGE> 18
underwriter believes may be included for all the selling security holders
(including the Requesting Holders) as the original number of Registrable
Securities proposed to be sold by the Requesting Holders bears to the total
original number of securities proposed to be offered by the Requesting Holders
and other selling security holders.
(iii) Notwithstanding the provisions of this Section 5(b), the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section 5(b) (irrespective of whether any written request for
inclusion of such securities shall have already been made) to elect not to file
any such proposed Registration Statement, or to withdraw the same after the
filing but prior to the effective date thereof. Any Requesting Holder shall have
the right to withdraw its request for inclusion of its Registrable Securities in
any Registration Statement pursuant to this Section 5(b) by giving written
notice to the Company of its request to withdraw any time prior to the effective
date of the Registration Statement.
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<PAGE> 19
(c) Demand Registration.
(i) At any time during the five years following the date of this
Agreement, any "Majority Holder" (as such term is defined in Section 5(c)(iii)
below) of the Registrable Securities shall have the right (which right is in
addition to the piggyback registration rights provided for under Section 5(b)
hereof), exercisable by written notice to the Company (the "Demand Registration
Request"), to have the Company prepare and file with the Securities and Exchange
Commission (the "Commission"), on one occasion, at the sole cost and expense of
the Company, a Registration Statement and such other document, including a
prospectus, as may be necessary (in the opinion of both counsel for the Company
and counsel for such Majority Holder), in order to comply with the provisions of
the 1933 Act, so as to permit a public offering and sale of the Registrable
Securities by the holders thereof, for a period of 24 consecutive months,
provided, that, if any such Majority Holder shall so request within a reasonable
time prior to the end of such 24 month period, such Majority Holder shall also
have the right to have the Company take such actions as may be necessary to
extend the period of effectiveness of such Registration Statement and the public
offering and sale of the Registrable Securities for such additional time (not to
exceed an additional 24 months) as may be reasonably requested by such Majority
Holder.
(ii) The Company covenants and agrees to give written notice of any
Demand Registration Request to all holders of the Registrable Securities within
ten days from the date of the Company's receipt of any such Demand Registration
Request. After receiving notice from the Company as provided in this Section
5(c)(ii), holders of Registrable Securities may request the Company to include
their Registrable Securities in the Registration Statement to be filed pursuant
to Section 5(c)(i) hereof by notifying the Company of their decision to include
such securities within ten days of their receipt of the Company's notice.
(iii) The term "Majority Holder" as used herein shall mean any holder
or any combination of holders of Registrable Securities, if such holders'
aggregate number of Warrant Shares (including Shares already issued and Warrant
Shares issuable pursuant to the exercise of outstanding Warrants) of Registrable
Securities constitute a majority of the aggregate number of Warrant Shares
(including Warrant Shares already issued and Warrant Shares issuable pursuant to
the exercise of outstanding Warrants) of the Registrable Securities.
(iv) A registration under this Section 5(c) will not be deemed to have
been effected unless the Registration Statement has been declared effective by
the Commission and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided that if, after
it has become effective, the offering of the Registrable Securities pursuant to
such Registration Statement is or becomes the subject of any stop order,
injunction or other order or requirement of the Commission or any other
governmental or administrative agency, the NASD or if the Commission, any other
governmental or administrative, the NASD agency or any court prevents or
otherwise limits the sale of the Registrable Securities pursuant to the
registration, such registration will be deemed not to have been effected as to
the Registrable Securities subject to such stop order, injunction, other order,
requirement or limitation. If (x) a registration requested pursuant to this
Section 5(c) is deemed
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<PAGE> 20
not to have been effected or (y) the Registration Statement requested pursuant
to this Section 5(c) does not remain effective for a period of at least 24
consecutive months beyond the effective date thereof or such longer period as
any Majority Holder may have requested pursuant to this Section 5(c), then the
Company shall continue to be obligated to effect such registration pursuant to
this Section 5(c).
(d) Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to Section 5(c) hereof (each, a "Selling Holder"), the Company will use its best
efforts to effect registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof as quickly as
practicable, and in connection with any such request:
(i) The Company will expeditiously as possible prepare and
file with the Commission a Registration Statement on any form for which
the Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with
the intended method of distribution thereof, and use its best efforts
to cause such filed Registration Statement to become and remain
effective for a period of not less than 24 consecutive months.
(ii) The Company will as expeditiously as possible prepare and
file with the Commission such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith
as may be necessary to keep such Registration Statement effective for a
period of not less than 24 consecutive months or for such longer period
as any Majority Holder may have requested pursuant to Section 5(c)
above, and comply with the provisions of the 1933 Act with respect to
the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended method of
disposition of each holder of Registrable Securities selling
Registrable Securities thereunder.
(iii) The Company will, prior to filing a Registration
Statement or prospectus or any amendment or supplement thereto, furnish
to (x) each Selling Holder and (y) not more than one counsel
representing all Selling Holders, to be selected by the Majority
Holder, copies of such Registration Statement, each amendment or
supplement thereto and any prospectus included in such Registration
Statement (including any preliminary prospectus) as proposed to be
filed, together with exhibits thereto and documents incorporated by
reference therein, which documents will be subject to review and
approval by the foregoing within five days after delivery, and
thereafter furnish to such Selling Holders and counsel such number of
copies of such Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto and documents
incorporated by reference therein), any prospectus included in such
Registration Statement (including any preliminary prospectus) and such
other documents or
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<PAGE> 21
information as such Selling Holders or counsel may reasonably request
in order to facilitate the disposition of the Registrable Securities
owned by such Selling Holders.
(iv) After the filing of the Registration Statement, the
Company will promptly notify each Selling Holder of Registrable
Securities covered by such Registration Statement of any stop order
issued or threatened by the Commission in connection therewith and take
all reasonable actions required to prevent the entry of such stop order
and to remove it if entered.
(v) The Company will use its reasonable efforts to (x)
register or qualify such Registrable Securities under the securities or
blue sky laws of such jurisdictions in the United States as any Selling
Holder of such Registrable Securities may reasonably (in light of such
Selling Holder's intended plan of distribution, if any) request, and
(y) cause such Registrable Securities to be registered with or approved
by such other governmental agencies or authorities in the United States
as may be necessary by virtue of the business and operations of the
Company and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Selling Holder to consummate the
disposition of the Registrable Securities owned by such Selling Holder;
provided that the Company will not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph (v), (B) subject itself to
taxation in any such jurisdiction, or (C) consent to general service of
process in any such jurisdiction.
(vi) The Company will immediately notify each Selling Holder
of such Registrable Securities, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, (x) of the
occurrence of any event requiring the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, (y) promptly make available to each Selling
Holder the number of copies of any such supplement or amendment as each
Selling Holder may reasonably request, and (z) of the period during
which sales of the Registrable Securities cannot be made.
(vii) The Company will enter into customary agreements and
take such other actions as are reasonably required in order to expedite
or facilitate the disposition of such Registrable Securities.
(viii) The Company will use its reasonable efforts to cause
all such Registrable Securities (other than the Warrants) to be listed
on each exchange or
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<PAGE> 22
market on which the Common Stock is then listed (if any), if the
listing of such Registrable Securities is then permitted under the
rules of such exchange or market and, without limiting the generality
of the foregoing, to arrange for at least two market makers to register
as such with respect to such Registrable Securities with the National
Association of Securities Dealers, Inc. (the "NASD").
(ix) The Company will appoint a transfer agent and registrar
for all such Registrable Securities covered by such Registration
Statement not later than the effective date of such Registration
Statement. The Company may require each Selling Holder to promptly
furnish in writing to the Company such information regarding such
Selling Holder's proposed distribution of Registrable Securities as the
Company may from time to time reasonably request and such other
information as may be legally required in connection with such
registration including, without limitation, all such information as may
be requested by the Commission or the NASD. The Company may exclude
from such registration any Selling Holder who fails to provide such
information.
(e) Registration Expenses. In connection with any Demand Registration
pursuant to Section 5(c) hereof and any Piggyback Registration pursuant to
Section 5(b) hereof, the Company shall pay the following registration expenses
incurred in connection with the registrations thereunder: (i) all registration
and filing fees, (ii) fees and expenses of compliance with securities or blue
sky laws (including fees and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities), (iii) fees and expenses
associated with filings to be made with the NASD (including fees and
disbursements of counsel in connection therewith), (iv) printing expenses, (v)
the Company's internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
(vi) the fees and expenses incurred in connection with the listing of the
Registrable Securities, (vii) fees and disbursements of counsel for the Company
and customary fees and expenses for independent public accountants retained by
the Company, (viii) the fees and expenses of any special experts retained by the
Company in connection with such registration, (ix) reasonable fees and expenses
of one firm of counsel for the Selling Holders to be chosen by the Majority
Holder and (x) any reasonable out-of-pocket expenses of the Selling Holders. The
Company shall have no obligation to pay any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities, such costs to be
borne by the holder or holders making the request.
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<PAGE> 23
(f) Indemnification and Contribution.
(i) The Company agrees to indemnify, defend and hold harmless any
holder of Registrable Securities to be sold pursuant to any Registration
Statement, any person deemed to be an underwriter under the 1933 Act and each
person, if any, who controls such holder or person deemed to be an underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange
Act, each such holder or person deemed to be an underwriter's agent, employee,
officer and/or director and the agents, employees, officers and directors of any
such controlling persons (collectively, the "Holder Indemnified Parties") from
and against any losses, claims, damages, judgements, liabilities and expenses,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense, settlement, and
investigation and all reasonable attorneys' fees and expenses), to which such
Holder Indemnified Party may become subject (regardless of whether the Holder
Indemnified Party is a party to the litigation, if any) under the 1933 Act or
otherwise, and will reimburse, as incurred, such Holder Indemnified Party for
any legal or other expenses reasonably incurred in connection with settling,
investigating, defending against or appearing as a third party witness in
connection with any losses, claims, damages, judgments, liabilities and
expenses, insofar as such losses, claims, damages, judgments, liabilities and
expenses (or actions in respect thereof) (x) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
(A) a Registration Statement or any other registration statement filed by the
Company under the 1933 Act, any preliminary prospectus or prospectus included
therein, or any amendment or supplement thereto, required to be filed or
furnished by reason of this Agreement, or (B) any blue sky application or other
document executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Registrable Securities under
the securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or (y) arise out of or are based
upon the omission or alleged omission to state in any such registration
statement, any preliminary prospectus, prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, a material fact required to
be stated therein or necessary to make the statements therein, and with respect
to any preliminary prospectus or prospectus, in light of the circumstances in
which they were made, not misleading; provided, however, that the Company will
not be liable in any such case to the extent, but only to the extent, that any
such loss, claim, damage, judgment, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made based upon, and in conformity with, written information
furnished by any holder of Registrable Securities to the Company concerning the
holders of Registrable Securities specifically for use in the preparation of
such registration statements or any such amendment or supplement thereof or any
such Blue Sky Application or any such preliminary prospectus or prospectus or
any such amendment or supplement thereto. This indemnity will be in addition to
any liability which the Company may otherwise have.
If any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any Holder
Indemnified Party with respect to which indemnity may be sought against the
Company pursuant to this Section 5(f), such Holder
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<PAGE> 24
Indemnified Party shall promptly notify the Company in writing of the
institution of such action, and the Company shall assume the defense of such
action, including the employment of counsel satisfactory to the Holder
Indemnified Party and payment of all fees and expenses; provided, that the
omission so to notify the Company shall not relieve the Company from any
liability that it may have to any Holder Indemnified Party unless such an
omission to notify the Company prejudices the Company's ability to defend such
actions or proceeding. A Holder Indemnified Party shall have the right to employ
separate counsel in any such action or proceeding and to assume the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Holder Indemnified Party unless (i) the employment of such counsel shall
have been authorized in writing by the Company, (ii) the Company has failed
promptly to assume the defense and employ counsel satisfactory to the Holder
Indemnified Party after being notified in writing by the Holder Indemnified
Party of such action or proceeding, or (iii) such Holder Indemnified Party shall
have reasonably concluded that there may be one or more defenses available to
the Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the Holder Indemnified Party), in any of
which events such fees and expenses shall be borne by the Company and reimbursed
as they are incurred. It is understood, however, that the Company shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time
for all such Holder Indemnified Parties, which firm shall be designated in
writing by the Majority Holder and that all such fees and expenses shall be
reimbursed as they are incurred. Anything in this paragraph to the contrary
notwithstanding (i) no Holder Indemnified Party shall be liable for any
settlement of any such claim or action effected without the written consent of
such Holder Indemnified Party (which consent shall not be unreasonably withheld
or delayed), but if settled with the written consent of the Holder Indemnified
Parties, or if there is a final judgment with respect thereto, the Company
agrees to indemnify and hold harmless each Holder Indemnified Party from and
against any loss or liability by reason of such settlement or judgment and (ii)
no settlement of any such claim or action shall be effected without including an
unconditional and irrevocable release of the Holder Indemnified Parties from all
liability in respect of such claim or action.
(ii) Each holder of Registrable Securities severally, but not jointly
and severally, will indemnify, defend and hold harmless the Company, each of its
directors, each nominee (if any) for director named in the prospectus included
in the Registration Statement, each of its officers who have signed the
Registration Statement, each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act
(collectively, the "Company Indemnified Parties") to the same extent as the
foregoing indemnity from the Company but only with respect to written
information furnished through such holder of Registrable Securities to the
Company concerning such holder of Registrable Securities specifically for use in
the preparation of such Registration Statement or prospectus. In case any action
shall be brought against any Company Indemnified Party based on such
Registration Statement or any prospectus and in respect of which indemnity may
be sought against any holder of Registrable Securities pursuant to this Section
5(f)(ii), the holder of Registrable Securities shall have the rights and duties
given to the Company by Section 5(f) (except that if the Company
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<PAGE> 25
shall have assumed the defense thereof such holder shall not be required to do
so, but such holder may nonetheless employ separate counsel therein and
participate in the defense thereof; provided that the fees and expenses of such
separate counsel shall be at such holder's expense), and the Company Indemnified
Parties shall have the rights and duties given to the Holder Indemnified Parties
by Section 5(f)(i).
(iii) In order to provide for just and equitable contribution under the
1933 Act in any case in which (x) any Holder Indemnified Party or the Company
makes claim for indemnification pursuant to Section 5(f) hereof but it is
judicially determined by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such
case, notwithstanding the fact that the express provisions of Section 5(f)
provide for indemnification in such case, or (y) contribution under the 1933 Act
may be required on the part of any holder of Registrable Securities or Company
Indemnified Party, then the Company Indemnified Party and any such holder of
Registrable Securities shall contribute to the aggregate losses, claims,
damages, judgments, liabilities or expenses to which they may be subject (which
shall, for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense, settlement and investigation and all reasonable
attorneys' fees and expenses) in either such case (after contribution from
others) in such proportions as is appropriate to reflect the relative fault of
the Company and any holder of Registrable Securities in connection with the
statements or omissions which resulted in such damages and other relevant
equitable considerations shall also be considered. The relative fault shall be
determined by reference to, among other things, whether in the case of an untrue
statement of a material fact or the omission to state a material fact, such
statement or omission relates to information supplied by the Company, or the
holder of Registrable Securities and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Holder agree (A) that it would not be
just and equitable if the respective obligations of the Company and the holders
of Registrable Securities to contribute pursuant to this Section 5(f)(iii) were
to be determined by pro rata or per capita allocation of the aggregate damages
(even if the holders of Registrable Securities were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the first sentence of this Section
5(f)(iii), and (B) that the contribution of each contributing holder of
Registrable Securities shall not be in excess of the proceeds received by such
person from sales of Registrable Securities unless such holder of Registrable
Securities is found guilty by a court of competent jurisdiction of fraudulent
misrepresentation. No person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who is not guilty of such fraudulent misrepresentation. If the
full amount of the contribution specified in this paragraph is not permitted by
law, then any holder of Registrable Securities shall be entitled to contribution
from the Company and the Company shall be entitled to contribution from any
holder of Registrable Securities to the full extent permitted by law.
(iv) Notwithstanding anything contained herein to the contrary, no
holder of Registrable Securities or person that controls any such holder within
the meaning of the 1933 Act, if
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<PAGE> 26
applicable, shall be obligated to indemnify any Company Indemnified Party or to
make any contribution pursuant to this Section 5(f), in an amount in excess of
the net proceeds received by such holder of Registrable Securities with respect
to the sale of its Registrable Securities unless such holder of Registrable
Securities is found guilty by a court of competent jurisdiction of fraudulent
misrepresentation.
(g) No Obligation to Exercise. Nothing contained in this Agreement
shall be construed as requiring any Holder to exercise its Warrants prior to the
initial filing of any Registration Statement or the effectiveness thereof.
Section 6. Transferability. This Warrant shall be transferable in whole
or in part to one or more transferees. Any such transfer, assignment or
conveyance shall be made on the books of the Company maintained for such purpose
at the principal office of the Company upon surrender of this Warrant and a
properly completed and executed assignment substantially in the form of Exhibit
B attached hereto.
Section 7. Exchangeability. This Warrant is exchangeable, upon the
surrender hereof by the Holder at said office of the Company, for new Warrants
of like tenor and date representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder, each of such
new Warrants to represent the right to purchase such number of shares as shall
be designated by the Holder at the time of such surrender.
Section 8. Lost, Stolen, Mutilated or Destroyed Warrant. Upon receipt
of evidence reasonably satisfactory to the Company of the loss, theft,
mutilation or destruction of this Warrant, receipt by the Company of an executed
affidavit of lost or stolen warrant and, if reasonably requested by the
Company's transfer agent or any federal or state laws, rules or regulations the
post of a bond by the Holders and, in case of loss, theft or destruction, upon
the agreement of the Holder to indemnify and hold harmless the Company, and its
directors and officers against any and all loss, liability, damage, cost and
expenses (including reasonable attorneys' fees) which may be incurred by the
Company in connection with, or arising out of, the issuance of a new Warrant or,
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall issue a new Warrant of like denomination and tenor as the Warrant
so lost, stolen, mutilated or destroyed.
Section 9. No Voting Rights. This Warrant shall not entitle the Holder
to any voting rights or other rights as a stockholder of the Company whatsoever,
except the rights expressed herein, and no dividend or interest shall be payable
or accrue in respect of this Warrant or the interest represented hereby or the
shares purchasable hereunder until and unless, and except to the extent that,
this Warrant shall be exercised.
Section 10. Definition of Common Stock. As used herein, "Common Stock"
shall mean the Common Stock, par value $0.01 per share, of the Company as
authorized on the date hereof, and also any capital stock of any class of the
Company hereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
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<PAGE> 27
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Company; provided, however, that
the shares purchasable pursuant to this Warrant shall include only shares
designated as Common Stock, par value $0.01 per share, of the Company on the
date hereof, or shares of any class or classes resulting from any
reclassification or reclassifications thereof which are not limited to any such
fixed sum or percentage and are not subject to redemption by the Company and in
case at any time there shall be more than one such resulting class, the shares
of each such class then so issuable shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
Section 11. Miscellaneous.
(a) Amendment of Warrant. This Warrant may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(b) Successors and Assigns. This Warrant will be binding upon and inure
to the benefit of and is enforceable by the respective successors and permitted
assigns of the parties hereto.
(c) No Waiver; Remedies. No failure or delay by any party in exercising
any right, power or privilege under this Agreement will operate as a waiver of
the right, power or privilege. A single or partial exercise of any right, power
or privilege will not preclude any other or further exercise of the right, power
or privilege or the exercise of any other right, power or privilege. The rights
and remedies provided in this Agreement will be cumulative and not exclusive of
any rights or remedies provided by law.
(d) Severability. If any term or other provision of this Warrant is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Warrant will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto will negotiate in
good faith to modify this Warrant so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
(e) Governing Law. This Warrant will be governed by, and construed in
accordance with, the internal laws of the State of New York without giving
effect to any choice of law or conflict of law, provision or rule of the State
of New York.
(f) Counterparts. This Warrant may be executed simultaneously in one or
more counterparts, and by different parties hereto in separate counterparts,
each of which when executed will be deemed an original, but all of which taken
together will constitute one and the same instrument.
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<PAGE> 28
(g) Descriptive Headings. The headings in this Warrant and in the
schedules and exhibits hereto are included for convenience of reference only and
will not affect in any way the meaning or interpretation of this Agreement.
(h) Submission to Jurisdiction. Any lawsuit, action or proceeding with
respect to this Warrant may be brought in the courts of the State of New York or
of the United States of America for the Southern District of New York, and each
of the Company and the Holder hereby accept for themselves and in respect of its
property, generally and unconditionally, the jurisdiction of these courts. Each
of the Company and the Holder hereby irrevocably waives any objection,
including, without limitation, any objection to the laying of venue or based on
the grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any lawsuit, action or proceeding in those jurisdictions.
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<PAGE> 29
IN WITNESS WHEREOF, the Company and the Holder have caused this Warrant
to be executed as of the date first written above.
NORTHSTAR HEALTH SERVICES, INC.
By:____________________________________
Name:
Title:
CERBERUS CAPITAL MANAGEMENT, LLC, as
Agent for the Lenders under the
Credit Agreement
By:____________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 10.12
[EXECUTION COPY]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER ANY STATE
SECURITIES LAWS AND SUCH WARRANTS HAVE BEEN ISSUED TO THE HOLDER IN RELIANCE
UPON CERTAIN EXEMPTIONS FROM REGISTRATION AND QUALIFICATION PROVIDED IN THE 1933
ACT AND THE RULES AND REGULATIONS THERETO AND THE APPLICABLE STATE SECURITIES
LAWS. ACCORDINGLY, NEITHER SUCH SECURITIES OR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE 1933 ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED, OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS.
Warrant No.: W-1 As of September 30, 1999
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
NORTHSTAR HEALTH SERVICES, INC.
THIS CERTIFIES THAT, for value received, CERBERUS CAPITAL MANAGEMENT
LLC, as Agent for the Lenders under the Credit Agreement referred to below, or
its assignee together with any transferee (the "Holder"), is entitled, in
accordance with the terms and conditions hereinafter set forth, to subscribe for
and purchase from Northstar Health Services, Inc., a Delaware corporation (the
"Company"), at any time after the date of this Warrant and on or prior to 5:00
p.m. New York City time on January 1, 2003 (the "Expiration Date"), up to
240,000 shares of the Company's common stock, par value $0.01 per share (the
"Common Stock") (such number of shares as from time to time adjusted as
hereinafter provided, the "Warrant Shares"), at the price of $.25 per share
(such price as from time to time adjusted as hereinafter provided, the "Exercise
Price") and to receive a certificate or certificates for the Warrant Shares so
purchased, upon presentation and surrender of this Warrant at the location set
forth in Section 1(a) below, together with the Exercise Price of the shares so
purchased. For purposes of this Warrant, the term "Credit Agreement" means that
certain Amended and Restated Credit Agreement, dated as of September 30, 1999,
among the Company, the Subsidiary Guarantors party thereto, the Lenders listed
therein, Cerberus Capital Management, LLC, as Agent and The Chase Manhattan
Bank, as Collateral Agent.
<PAGE> 2
Section 1. Exercise.
(a) Method of Exercise. Subject to compliance with all applicable
securities laws, this Warrant may be exercised from time to time in whole or in
part on or prior to the Expiration Date, by delivering to the Company at The
Atrium, 665 Philadelphia Street, P.O. Box 1289, Indiana, Pennsylvania 15701 (i)
this Warrant, (ii) a subscription form, substantially in the form of Exhibit A
attached hereto (the "Subscription Form") duly completed and executed by the
Holder and (iii) payment of the Exercise Price as set forth below in Section
1(b).
(b) Payment of Exercise Price. Payment of the Exercise Price may be
made, at the option of the Holder, either (i) by payment to the Company, by
check or wire transfer of an amount in immediately available funds equal to the
product of (A) the then applicable Exercise Price, multiplied by (B) the number
of Warrant Shares then being purchased, or (ii) by surrender of the right to
receive upon exercise of this Warrant a number of shares of Common Stock having
a value (as determined below) equal to the product of (A) the then applicable
Exercise Price, multiplied by (B) the number of Warrant Shares then being
purchased, in which case, the number of Warrant Shares to be issued to the
Holder upon such exercise shall be calculated using the following formula:
Y * (A - B)
-----------
X = A
with X = the number of shares of Common Stock to be issued to
the Holder
Y = the number of Warrant Shares with respect to which
the Warrant is being exercised
A = the Fair Market Value (as determined below) of one
share of Common Stock
B = the then applicable Exercise Price of the Warrant.
For purposes of this Warrant, the term "Fair Market Value" shall mean
the average of the daily Closing Prices (as hereinafter defined) for the 10
consecutive Trading Days (as hereinafter defined) immediately prior to the date
in question. "Closing Price" on any day means the last sales price, regular way,
per share of such stock on such day, or if no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the shares of such stock are listed or admitted to
trading, or, if the shares of such stock are not listed or admitted to trading
on any national securities exchange, the average of the high bid and low asked
prices in the over-the-counter market as reported by the National Association of
Securities Dealers Inc.'s Automated Quotation System. "Trading Day" means a day
on which the principal national securities exchange on which such
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<PAGE> 3
shares of such stock are listed or admitted to trading is open for the
transaction of business or, if the shares of such stock are not listed or
admitted to trading on any national securities exchange, a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in the Borough of
Manhattan, City and State of New York, are not authorized or obligated by law or
executive order to close.
(c) Date of Exercise. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided in Section 1(a) above, and the person
entitled to receive the Warrant Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Warrant Shares as of
the close of business on such date.
(d) Issuance of Certificates for Warrant Shares; No Fractional Shares.
As soon as practicable after the Company's receipt of the Warrant surrendered in
connection with an exercise provided for in Section 1(a) above, the Company
shall issue and deliver to the person or persons entitled to receive the Warrant
Shares issuable upon such exercise of the Warrant, a certificate or certificates
for the number of whole shares of Warrant Shares issuable upon such exercise,
together with cash in lieu of any fraction of a share equal to such fraction of
the current fair market value of one whole share of Common Stock as of the date
of exercise, as determined in good faith by the Board of Directors of the
Company. No fractional shares shall be issued upon the exercise of this Warrant,
and any fractions shall be rounded down to the nearest whole number of shares.
(e) Partial Exercise. Upon a partial exercise of this Warrant, this
Warrant shall be surrendered by the Holder and replaced with a new Warrant of
like tenor in the name of the Holder providing for the right to purchase the
number of shares of Common Stock as to which this Warrant has not then been
exercised.
(f) Taxes. The issuance of certificates for shares of Common Stock upon
the exercise of this Warrant will be made without charge by the Company to the
Holder for any issue tax (other than applicable income tax).
Section 2. Adjustment of Exercise Price and Number of Warrant Shares.
The Exercise Price and the number of Warrant Shares shall each be subject to
adjustment from time to time as set forth below.
(a) Dividends and Distributions. In the event the Company shall, at any
time or from time to time, distribute to the holders of any of its Common Stock
any dividend or other distribution of any Assets, other than dividends payable
in Common Stock, Options or Convertible Securities, and any cash dividend that,
when added to all other cash dividends paid in the 12 months immediately
preceding the declaration date of such dividend (excluding any such other
dividend included in a previous adjustment of the Exercise Price pursuant to
this paragraph (a)), does not exceed 2% (on an annualized basis) of the Current
Market Price per share of Common Stock on such declaration date, then:
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(i) the Exercise Price shall be reduced to equal the product
obtained by multiplying (A) the Exercise Price then in effect by (B) a
fraction, (x) the numerator of which shall be (I) the Current Market
Price per share of Common Stock on the record date for such
distribution less (II) the sum of (a) the cash portion, if any, of such
distribution per share of Common Stock outstanding (exclusive of any
treasury shares) on the record date for such distribution plus (b) the
then fair market value (as determined in good faith by the Board of
Directors of the Company) per share of Common Stock outstanding
(exclusive of any treasury shares) on the record date for such
distribution of that portion, if any, of such distribution consisting
of Assets other than cash, and (y) the denominator of which shall be
such Current Market Price per share of Common Stock on the record date
for such distribution, and
(ii) the number of Warrant Shares shall be increased to equal
the product obtained by multiplying (A) the Exercise Price in effect
immediately prior to the record date for such distribution by (B) a
fraction, (x) the numerator of which shall be the Exercise Price in
effect immediately prior to the adjustment required by clause (i) of
this paragraph and (y) the denominator of which shall be the Exercise
Price in effect immediately after such adjustment.
The adjustments required by this paragraph (a) shall be made whenever
any such distribution is made and shall be retroactive to the record date for
the determination of stockholders entitled to receive such distribution.
(b) Dividends Payable in Common Stock and Changes in Common Stock. In
the event the Company shall, at any time or from time to time, (x) issue any
shares of Common Stock as a stock dividend to the holders of Common Stock or (y)
subdivide or combine any outstanding shares of Common Stock into a greater or
lesser number of shares (each such event being a "Change of Shares"), then:
(i) the number of Warrant Shares immediately prior to such
action shall be adjusted so that the Holder, upon exercising the
Warrant shall be entitled to the number of shares of Common Stock that
the Holder would have owned or have been entitled to receive after the
happening of such event had the Warrant been exercised immediately
prior to the record date (or, if there is no record date, the effective
date) for such event, and
(ii) the Exercise Price shall be adjusted to equal the product
determined by multiplying (A) the Exercise Price in effect immediately
prior to such event by (B) a fraction, (x) the numerator of which shall
be the number of Warrant Shares immediately prior to such event and (y)
the denominator of which shall be the number of Warrant Shares after
the adjustment referred to above.
An adjustment made pursuant to this clause (b) shall become effective
retroactively immediately after the record date in the case of a dividend and
shall become effective
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<PAGE> 5
immediately after the effective date in other cases, but any shares of Common
Stock issuable solely as a result of such adjustment shall not be issued prior
to the effective date of such event.
(c) Common Stock Issuances. In the event the Company shall, at any time
or from time to time, issue, sell or otherwise distribute (including by way of
deemed distributions pursuant to paragraphs (e) and (f) below) any shares of
Common Stock (other than pursuant to a Change of Shares or the exercise of any
Option or Convertible Security) (any such event, including any deemed
distributions described in paragraphs (e) and (f) below, being herein called a
"Common Stock Distribution"), for a consideration per share less than either (x)
the Current Market Price per share of Common Stock on the date of such Common
Stock Distribution or (y) the Exercise Price in effect at the time of such
distribution, then, effective upon such Common Stock Distribution:
(i) the Exercise Price shall be reduced to equal the product
obtained by multiplying (A) the Exercise Price in effect immediately
prior to such Common Stock Distribution by (B) a fraction, (x) the
numerator of which shall be the sum of the number of shares of Common
Stock outstanding (exclusive of any treasury shares) immediately prior
to such Common Stock Distribution plus the number of shares of Common
Stock which the aggregate consideration received by the Company would
purchase at the greater of (I) the Exercise Price in effect immediately
prior to such Common Stock Distribution and (II) the Current Market
Price per share of Common Stock and (y) the denominator of which shall
be the total number of shares of Common Stock outstanding (exclusive of
any treasury shares) immediately after such Common Stock Distribution,
and
(ii) the number of Warrant Shares shall be increased to equal
the product obtained by multiplying (A) the number of Warrant Shares in
effect immediately prior to such Common Stock Distribution by (B) a
fraction, (x) the numerator of which shall be the Exercise Price in
effect immediately prior to such adjustment and (y) the denominator of
which shall be the Exercise Price in effect immediately after such
adjustment.
The provisions of this paragraph (c) (including by operation of
paragraph (e) or (f) below) shall not operate to increase the Exercise Price or
reduce the number of Warrant Shares, except by operation of paragraph (g) below.
(d) Other Securities. In the event that (i) the Company shall, at any
time or from time to time, issue any shares of its capital stock in a
reclassification or reorganization of the Common Stock, or (ii) at any time, as
a result of an adjustment made pursuant to this Section 2, the Holder shall
become entitled to receive any securities of the Company other than shares of
Common Stock, thereafter, in each such case, the number of such other securities
so receivable upon exercise of the Warrant and the Exercise Price applicable to
such exercise shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the shares of Common Stock contained in this Section.
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(e) Issuance of Options. In the event the Company shall, at any time or
from time to time, issue, sell, distribute or otherwise grant in any manner
(including by assumption) any Options, whether or not such Options (or in the
case of Options to acquire Convertible Securities, the right to convert or
exchange such Convertible Securities) are immediately exercisable, and the
Present Value of the Exercise Price Per Share with respect to such Options shall
be less than either (i) the Current Market Price per share of Common Stock on
the date of the issuance, sale, distribution or granting of such Options or (ii)
the Exercise Price then in effect, then, for purposes of paragraph (c) above,
the total maximum number of shares of Common Stock issuable upon the exercise of
all such Options or upon the conversion or exchange of the total maximum amount
of the Convertible Securities issuable upon the exercise of all such Options
shall be deemed to have been issued as of the date of the issuance, sale,
distribution or granting of such Options and thereafter shall be deemed to be
outstanding and the Company shall be deemed to have received as consideration
such Present Value of the Exercise Price Per Share, determined as provided
above, therefor.
Except as otherwise provided in paragraph (g) below, no additional
adjustment of the Exercise Price shall be made upon the actual exercise of such
Options or upon conversion or exchange of the Convertible Securities issuable
upon the exercise of such Options.
(f) Issuance of Convertible Securities. In the event the Company shall,
at any time or from time to time, issue, sell or otherwise distribute (including
by assumption) any Convertible Securities (other than upon the exercise of any
Option), whether or not the right to convert or exchange such Convertible
Securities are immediately exercisable, and the Present Value of the Exercise
Price Per Share shall be less than (i) the Current Market Price per share of
Common Stock on the date of such issuance, sale or distribution or (ii) the
Exercise Price then in effect, then, for purposes of paragraph (c) above, the
total maximum number of shares of Common Stock, issuable upon the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
as of the date of the issuance, sale or distribution of such Convertible
Securities and thereafter shall be deemed to be outstanding and the Company
shall be deemed to have received as consideration such Present Value of the
Exercise Price Per Share, determined as provided above, therefor.
Except as otherwise provided in paragraph (g) below, no additional
adjustment of the Exercise Price shall be made upon the actual conversion or
exchange of such Convertible Securities.
(g) Changes in Options and Convertible Securities. If (i) the exercise
price provided for in any Options referred to in paragraph (e) above, (ii) the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in paragraph (e) or (f) above, or (iii) the
rate at which any Convertible Securities referred to in paragraph (e) or (f)
above are convertible into or exchangeable for Common Stock, shall change at any
time (other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Section), the Exercise Price then in effect and the number of Warrant Shares
shall forthwith be readjusted to the Exercise Price and the number of
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<PAGE> 7
Warrant Shares that would then be in effect had the adjustment made upon the
issuance, sale, distribution or granting of such Options or Convertible
Securities been made based upon such changed purchase price, additional
consideration or conversion rate, as the case may be, but only with respect to
such Options and Convertible Securities as then remain outstanding.
(h) Certain Distributions. If the Company shall pay a dividend or make
any other distribution payable in Options or Convertible Securities, then, for
purposes of paragraph (c) above (by operation of paragraph (e) or (f) above, as
the case may be), such Options or Convertible Securities shall be deemed to have
been issued or sold without consideration except for such amounts of
consideration as shall have been deemed to have been received by the Company
pursuant to paragraphs (e) or (f) above, as appropriate.
(i) Special Anti-dilution Protection For Conversion of Zaucha
Obligations. Notwithstanding any other provision of this Agreement, in the event
(i) all or any portion of the Zaucha Obligations (as defined in the Credit
Agreement) is converted into, exchanged for, redeemed or repaid with shares of
Common Stock or Convertible Securities or (ii) one or more holders of all or any
portion of the Zaucha Obligations receives any shares of Common Stock or
Convertible Securities with respect to all or any portion of the Zaucha
Obligations (any of the foregoing in clauses (i) or (ii) being a "Conversion"),
then:
(i) the number of Warrant Shares in effect immediately
following the Conversion shall be increased to equal the product
obtained by multiplying (A) the number of Warrant Shares in effect
immediately prior to the Conversion by (B) a fraction, (x) the
numerator of which is the number of shares of Common Stock outstanding
immediately after the Conversion (calculated on a fully diluted basis,
including, without limitation, all shares of Common Stock which may be
issued pursuant to any Convertible Securities issued to the holders of
any Zaucha Obligations and shares of Common Stock which may be issued
upon the exercise of this Warrant), and (y) the denominator of which is
the number of shares of Common Stock outstanding immediately prior to
the Conversion (calculated on a fully diluted basis, including, without
limitation, all shares of Common Stock which may be issued upon the
exercise of this Warrant), and
(ii) the Exercise Price in effect immediately following the
Conversion shall equal the Exercise Price that was in effect
immediately prior to such Conversion.
(j) Equitable Adjustments. In case any other corporate event or
transaction of the Company, outside the ordinary course of business consistent
with past practice, not specified in this Section occurs which equitably
requires an anti-dilutive adjustment to the Warrant, the Company's Board of
Directors and the Holder shall consult with each other in good faith and
mutually agree upon appropriate adjustments to the Exercise Price and the number
of Warrant Shares, so that the property (including securities) to be received by
the Holder hereunder upon exercise of the Warrant after the effective date of
such event, shall be substantially similar, as nearly as practicable, to those
which the Holder would have been entitled immediately prior to such event had
the Holder exercised the Warrant prior to such event.
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<PAGE> 8
(k) Definitions. For purposes of this Section 2, the following
capitalized terms have the following meanings:
"Assets" means cash, evidences of indebtedness, other
securities or other properties or assets, or any options, warrants or
other rights to subscribe for or purchase any of the foregoing.
"Convertible Securities" means any stock or securities
convertible into or exchangeable for Common Stock.
"Current Market Price" per share of Common Stock at any date
shall be the Closing Price.
"Options" means any rights to subscribe for or to purchase, or
any warrants or options for the purchase of, Common Stock or any
Convertible Security.
"Present Value of the Exercise Price Per Share" with respect
to the issuance of any:
(i) Options, means the present value determined by
discounting from the last date on which such Options are
exercisable, at 9% per annum, the exercise price per share at
which Common Stock is issuable upon the exercise of such
Options or in the case of Options to acquire Convertible
Securities, upon the conversion or exchange of such
Convertible Securities (the "Option Exercise Price"). The
Option Exercise Price is determined by dividing (x) the sum of
(A) the aggregate amount, if any, received or receivable by
the Company as consideration for the issuance, sale,
distribution or granting of such Options, plus (B) the minimum
aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of all such Options,
plus (C) in the case of Options to acquire Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the conversion or exchange
of all such Convertible Securities, by (y) the total maximum
number of shares of Common Stock issuable upon the exercise of
all such Options or upon the conversion or exchange of all
Convertible Securities issuable upon the exercise of all such
Options, and
(ii) Convertible Securities, means the present value
determined by discounting from the last date on which such
Convertible Securities are convertible or exercisable, at 9%
per annum, the price per share at which Common Stock is
issuable upon the conversion or exchange of such Convertible
Securities (the "Convertible Securities Exercise Price"). The
Convertible Securities Exercise Price shall be determined by
dividing (x) the sum of (A) the aggregate amount, if any,
received or receivable by the Company as consideration for the
issuance, sale or distribution of such Convertible Securities,
plus (B) the
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<PAGE> 9
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange of all
such Convertible Securities, by (y) the total maximum number
of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities.
(l) Miscellaneous.
(i) Deferral of Certain Adjustments. No adjustment to the Exercise
Price (including the related adjustment to the number of Warrant Shares) shall
be required hereunder unless such adjustment, together with other adjustments
carried forward as provided below, would result in an increase or decrease of at
least 1% of the Exercise Price; provided, however, that any adjustment which by
reason of this paragraph is not required to be made shall be carried forward and
taken into account in any subsequent adjustment. No adjustment need be made for
a change in the par value of the Common Stock.
(ii) Notice of Certain Transactions. In the event that:
(A) the Company takes any action that would require an
adjustment in the Exercise Price or the number of Warrant Shares,
(B) the Company declares or distributes any dividend,
distribution, security, instrument or other rights to its stockholders
that would require an adjustment pursuant to this Section,
(C) the Company consolidates or merges with, or transfers all
or substantially all of its assets to, or makes any statutory exchange
of securities with, another corporation or engages in any
reorganization, restructuring, recapitalization, reclassification of
capital stock or spin-off or other similar transaction, or
(D) there is a dissolution or liquidation or other winding up
of the Company,
the Company shall, not later than 10 days prior to the earliest of the proposed
record or effective date, as the case may be, or any other applicable date with
respect to any of the foregoing actions or transactions (including the date, if
any is to be fixed, as of which holders of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon any such merger, consolidation, reorganization, restructuring,
recapitalization, reclassification, transfer, dissolution, liquidation or
winding up), give the Holder a written notice stating such proposed record or
effective date, as the case may be, or such other applicable date.
(iii) Consideration Received. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for a consideration
other than cash, the amount of the consideration other than cash received by the
Company in respect thereof shall be deemed to be the fair market value of such
consideration (as mutually agreed in good faith by the Board of Directors of the
Company and the Holder). If any Options shall be issued in connection with the
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<PAGE> 10
issuance and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been
issued, sold or distributed for such amount of consideration as shall be
allocated to such Options as mutually agreed in good faith by the Board of
Directors of the Company and the Holder.
(iv) Computation of Adjustments. Anything herein to the contrary
notwithstanding, upon each computation of an adjustment in the Exercise Price or
the number of Warrant Shares, the Exercise Price shall be computed to the
nearest cent (i.e., fractions of less than half of a cent shall be disregarded
and fractions of half of a cent, or more, shall be treated as being one cent)
and the number of Warrant Shares, shall be calculated to the nearest share
(i.e., fractions of less than half of a share shall be disregarded and fractions
of half of a share, or more, shall be treated as being one share).
(v) Certificate as to Adjustments. Upon any adjustment to the Exercise
Price or the number of Warrant Shares, the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the Holder at the
address of the Holder as shown on the books of the Company, which notice shall
state the Exercise Price resulting from such adjustment and the increase or
decrease, if any, in the number of Warrant Shares resulting from such
adjustment, setting forth in reasonable detail the calculations and the facts
upon which such calculation is based.
Section 3. Representations and Covenants of the Company. The Company
hereby represents, warrants and covenants to and with the Holder as follows:
(a) Power. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company has the necessary
corporate power and authority, to execute and deliver this Warrant, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby.
(b) Binding Effect. This Warrant has been duly executed and
delivered by the Company and is the legal, valid and binding
obligations of the Company enforceable against it in accordance with
its terms.
(c) Contravention. Neither the execution, delivery and
performance of this Warrant nor the consummation of the transactions
contemplated hereby will (with or without notice or lapse of time or
both) (i) conflict with or breach any provision of the Company's
certificate of incorporation or bylaws, (ii) violate any law, rule or
regulation by which the Company or any of its properties may be bound
or affected, or (iii) conflict with or result in a default under any
material contract or other material agreement to which the Company is a
party or by which it or any of its properties may be bound or affected.
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<PAGE> 11
(d) Approvals. No authorization, consent, order or approval
of, notice to or registration or filing with, or any other action by
any governmental authority or other person is required or advisable in
connection with (i) the due execution and delivery by the Company of
this Warrant, or (ii) the performance by the Company of its
obligations under this Warrant.
(e) Reservation of Shares. The Company shall reserve and keep
available out of its authorized but unissued Common Stock for issuance
upon the exercise of this Warrant, free from preemptive rights, such
number of shares of Common Stock for which this Warrant shall from time
to time be exercisable.
(f) Warrant Shares Duly Authorized, etc. All shares of Common
Stock which may be issued upon the exercise of this Warrant will, upon
issuance, be fully paid and nonassessable and be free from all taxes,
liens and charges in respect of the issuance thereof.
(g) No Impairment. The Company will not, by amendment of its
charter documents, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other
voluntary action, willfully avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, and will at all times
in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder under this Warrant.
(h) Regulatory Approval of Issuance. The Company further
covenants and agrees that if any shares of Common Stock to be reserved
for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental
authority under any Federal or State law before such shares may be
validly issued or delivered upon exercise of this Warrant, then the
Company will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be, and the right
to exercise this Warrant shall be extended until 15 days after the
completion of any such registration or approval.
(i) Listing Requirements. If and so long as any Common Stock
issuable upon the exercise of this Warrant is listed on any national
securities exchange, the Company will, if permitted by the rules of
such exchange, list and keep listed on such exchange, upon official
notice of issuance, all shares of Common Stock issuable upon exercise
of this Warrant.
Section 4. Representations and Warranties of the Holder. The Holder
hereby represents and warrants to the Company as follows:
(a) Power. The Holder is a limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The
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<PAGE> 12
Holder has the necessary power and authority, to execute and deliver
this Warrant, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
(b) Binding Effect. This Warrant has been duly executed and
delivered by the Holder and is the legal, valid and binding obligation
of the Holder enforceable against it in accordance with its terms.
(c) Contravention. Neither the execution, delivery and
performance of this Warrant nor the consummation of the transactions
contemplated hereby will (with or without notice or lapse of time or
both) (i) conflict with or breach any provision of the Holder's
organizational documents, (ii) violate any law, rule or regulation by
which the Holder or any of its properties may be bound or affected, or
(iii) conflict with or result in a default under any material contract
or other material agreement to which the Holder is a party or by which
it or any of its properties may be bound or affected.
(d) Approvals. No authorization, consent, order or approval
of, notice to or registration or filing with, or any other action by
any governmental authority or other person is required or advisable in
connection with (i) the due execution and delivery by the Holder of
this Warrant, or (ii) the performance by the Holder of its obligations
under this Warrant.
(e) Review of Information. The Holder has carefully read and
reviewed the material furnished to it with respect to the Company and
the Warrant.
(f) No Registration Under Securities Act. The Holder
understands and acknowledges that the Warrants and the shares of Common
Stock issuable upon conversion thereof are not being registered under
the 1933 Act or any state securities laws, on the grounds that the
issuance thereof is exempt under Section 4(2) of the 1933 Act, and such
state securities laws as a transaction by an issuer not involving any
public offering, and that reliance on such exemption is predicated in
part on the representations by the Holder herein. The Holder
understands that the Warrants cannot be sold unless they are
subsequently registered under the 1933 Act and applicable state
securities laws or an exemption from such registration is available.
(g) Investment Intent. The Holder is acquiring the Warrant for
investment, solely for the Holder's own account and not with a view to,
or for resale in connection with, the distribution or other disposition
thereof.
(h) Accredited Investor. The Holder is an accredited investor,
as defined in Rule 501 of Regulation D promulgated under the 1933 Act.
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Section 5. Registration Rights.
(a) Registrable Securities. As used herein the term "Registrable
Security" means each of the Warrants, the Warrant Shares and any shares of
Common Stock or other securities issued upon any stock split, stock dividend or
similar transaction in respect of such Warrant Shares; provided, however, that
with respect to any particular Registrable Security, such security shall cease
to be a Registrable Security when, as of the date of determination, (i) it has
been effectively registered under the 1933 Act and disposed of pursuant thereto,
(ii) registration under the 1933 Act is no longer required for the immediate
public distribution of such security or (iii) it has ceased to be outstanding.
The term "Registrable Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the rights granted pursuant to this Section 5
pursuant to the provisions of Section 2 hereof.
(b) Piggyback Registration. (i) If, at any time during the six years
following the date of this Agreement, the Company proposes to register its
securities or any such securities of the Company held by its security holders by
filing a registration statement, or any post-effective amendment to a
registration statement filed by the Company, pursuant to the 1933 Act (in any
such case, other than pursuant to Form S-8 of the 1933 Act or any successor
form) (a "Registration Statement"), it will give written notice of its intention
to do so by registered mail ("Notice"), at least 30 business days prior to the
filing of each such Registration Statement, to all holders of the Registrable
Securities. Upon the written request of such a holder (a "Requesting Holder"),
made within 15 business days after receipt of the Notice, that the Company
include the Requesting Holder's Registrable Securities in the proposed
Registration Statement (such request to specify the number and classes of
Registrable Securities to be so included in an amount equal to no less than the
lesser of (a) 50,000 shares or (b) the Requesting Holder's total number of
Registrable Securities), the Company shall, as to each such Requesting Holder,
use its best efforts to effect the registration under the 1933 Act of the
Registrable Securities which it has been so requested to register (a "Piggyback
Registration"), at the Company's sole cost and expense; provided, however, that
if, in the written opinion of the Company's managing underwriter, if any, for
such offering the inclusion of all or a portion of the Registrable Securities
requested to be registered, when added to the securities being registered by the
Company or the selling security holders, will exceed the maximum amount of the
Company's securities which can be sold (x) at a price reasonably related to
their then current market value, or (y) without materially adversely affecting
the entire offering, then the Company may exclude from such offering all or a
portion of the Registrable Securities which it has been requested to register.
(ii) If securities are proposed to be offered for sale pursuant to such
Registration Statement by other selling security holders of the Company and the
total number of securities to be offered by the Requesting Holders and such
other selling security holders is required to be reduced pursuant to a request
from the managing underwriter (which request shall be made only for the reasons
and in the manner set forth above), the aggregate number of Registrable
Securities to be offered by Requesting Holders pursuant to such Registration
Statement shall equal the number which bears the same ratio to the maximum
number of securities that the managing
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<PAGE> 14
underwriter believes may be included for all the selling security holders
(including the Requesting Holders) as the original number of Registrable
Securities proposed to be sold by the Requesting Holders bears to the total
original number of securities proposed to be offered by the Requesting Holders
and other selling security holders.
(iii) Notwithstanding the provisions of this Section 5(b), the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section 5(b) (irrespective of whether any written request for
inclusion of such securities shall have already been made) to elect not to file
any such proposed Registration Statement, or to withdraw the same after the
filing but prior to the effective date thereof. Any Requesting Holder shall have
the right to withdraw its request for inclusion of its Registrable Securities in
any Registration Statement pursuant to this Section 5(b) by giving written
notice to the Company of its request to withdraw any time prior to the effective
date of the Registration Statement.
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(c) Demand Registration.
(i) At any time during the five years following the date of this
Agreement, any "Majority Holder" (as such term is defined in Section 5(c)(iii)
below) of the Registrable Securities shall have the right (which right is in
addition to the piggyback registration rights provided for under Section 5(b)
hereof), exercisable by written notice to the Company (the "Demand Registration
Request"), to have the Company prepare and file with the Securities and Exchange
Commission (the "Commission"), on one occasion, at the sole cost and expense of
the Company, a Registration Statement and such other document, including a
prospectus, as may be necessary (in the opinion of both counsel for the Company
and counsel for such Majority Holder), in order to comply with the provisions of
the 1933 Act, so as to permit a public offering and sale of the Registrable
Securities by the holders thereof, for a period of 24 consecutive months,
provided, that, if any such Majority Holder shall so request within a reasonable
time prior to the end of such 24 month period, such Majority Holder shall also
have the right to have the Company take such actions as may be necessary to
extend the period of effectiveness of such Registration Statement and the public
offering and sale of the Registrable Securities for such additional time (not to
exceed an additional 24 months) as may be reasonably requested by such Majority
Holder.
(ii) The Company covenants and agrees to give written notice of any
Demand Registration Request to all holders of the Registrable Securities within
ten days from the date of the Company's receipt of any such Demand Registration
Request. After receiving notice from the Company as provided in this Section
5(c)(ii), holders of Registrable Securities may request the Company to include
their Registrable Securities in the Registration Statement to be filed pursuant
to Section 5(c)(i) hereof by notifying the Company of their decision to include
such securities within ten days of their receipt of the Company's notice.
(iii) The term "Majority Holder" as used herein shall mean any holder
or any combination of holders of Registrable Securities, if such holders'
aggregate number of Warrant Shares (including Shares already issued and Warrant
Shares issuable pursuant to the exercise of outstanding Warrants) of Registrable
Securities constitute a majority of the aggregate number of Warrant Shares
(including Warrant Shares already issued and Warrant Shares issuable pursuant to
the exercise of outstanding Warrants) of the Registrable Securities.
(iv) A registration under this Section 5(c) will not be deemed to have
been effected unless the Registration Statement has been declared effective by
the Commission and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided that if, after
it has become effective, the offering of the Registrable Securities pursuant to
such Registration Statement is or becomes the subject of any stop order,
injunction or other order or requirement of the Commission or any other
governmental or administrative agency, the NASD or if the Commission, any other
governmental or administrative, the NASD agency or any court prevents or
otherwise limits the sale of the Registrable Securities pursuant to the
registration, such registration will be deemed not to have been effected as to
the Registrable Securities subject to such stop order, injunction, other order,
requirement or limitation. If (x) a registration requested pursuant to this
Section 5(c) is deemed
-15-
<PAGE> 16
not to have been effected or (y) the Registration Statement requested pursuant
to this Section 5(c) does not remain effective for a period of at least 24
consecutive months beyond the effective date thereof or such longer period as
any Majority Holder may have requested pursuant to this Section 5(c), then the
Company shall continue to be obligated to effect such registration pursuant to
this Section 5(c).
(d) Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to Section 5(c) hereof (each, a "Selling Holder"), the Company will use its best
efforts to effect registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof as quickly as
practicable, and in connection with any such request:
(i) The Company will expeditiously as possible prepare and
file with the Commission a Registration Statement on any form for which
the Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with
the intended method of distribution thereof, and use its best efforts
to cause such filed Registration Statement to become and remain
effective for a period of not less than 24 consecutive months.
(ii) The Company will as expeditiously as possible prepare and
file with the Commission such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith
as may be necessary to keep such Registration Statement effective for a
period of not less than 24 consecutive months or for such longer period
as any Majority Holder may have requested pursuant to Section 5(c)
above, and comply with the provisions of the 1933 Act with respect to
the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended method of
disposition of each holder of Registrable Securities selling
Registrable Securities thereunder.
(iii) The Company will, prior to filing a Registration
Statement or prospectus or any amendment or supplement thereto, furnish
to (x) each Selling Holder and (y) not more than one counsel
representing all Selling Holders, to be selected by the Majority
Holder, copies of such Registration Statement, each amendment or
supplement thereto and any prospectus included in such Registration
Statement (including any preliminary prospectus) as proposed to be
filed, together with exhibits thereto and documents incorporated by
reference therein, which documents will be subject to review and
approval by the foregoing within five days after delivery, and
thereafter furnish to such Selling Holders and counsel such number of
copies of such Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto and documents
incorporated by reference therein), any prospectus included in such
Registration Statement (including any preliminary prospectus) and such
other documents or
-16-
<PAGE> 17
information as such Selling Holders or counsel may reasonably request
in order to facilitate the disposition of the Registrable Securities
owned by such Selling Holders.
(iv) After the filing of the Registration Statement, the
Company will promptly notify each Selling Holder of Registrable
Securities covered by such Registration Statement of any stop order
issued or threatened by the Commission in connection therewith and take
all reasonable actions required to prevent the entry of such stop order
and to remove it if entered.
(v) The Company will use its reasonable efforts to (x)
register or qualify such Registrable Securities under the securities or
blue sky laws of such jurisdictions in the United States as any Selling
Holder of such Registrable Securities may reasonably (in light of such
Selling Holder's intended plan of distribution, if any) request, and
(y) cause such Registrable Securities to be registered with or approved
by such other governmental agencies or authorities in the United States
as may be necessary by virtue of the business and operations of the
Company and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Selling Holder to consummate the
disposition of the Registrable Securities owned by such Selling Holder;
provided that the Company will not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph (v), (B) subject itself to
taxation in any such jurisdiction, or (C) consent to general service of
process in any such jurisdiction.
(vi) The Company will immediately notify each Selling Holder
of such Registrable Securities, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, (x) of the
occurrence of any event requiring the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, (y) promptly make available to each Selling
Holder the number of copies of any such supplement or amendment as each
Selling Holder may reasonably request, and (z) of the period during
which sales of the Registrable Securities cannot be made.
(vii) The Company will enter into customary agreements and
take such other actions as are reasonably required in order to expedite
or facilitate the disposition of such Registrable Securities.
(viii) The Company will use its reasonable efforts to cause
all such Registrable Securities (other than the Warrants) to be listed
on each exchange or
-17-
<PAGE> 18
market on which the Common Stock is then listed (if any), if the
listing of such Registrable Securities is then permitted under the
rules of such exchange or market and, without limiting the generality
of the foregoing, to arrange for at least two market makers to register
as such with respect to such Registrable Securities with the National
Association of Securities Dealers, Inc. (the "NASD").
(ix) The Company will appoint a transfer agent and registrar
for all such Registrable Securities covered by such Registration
Statement not later than the effective date of such Registration
Statement. The Company may require each Selling Holder to promptly
furnish in writing to the Company such information regarding such
Selling Holder's proposed distribution of Registrable Securities as the
Company may from time to time reasonably request and such other
information as may be legally required in connection with such
registration including, without limitation, all such information as may
be requested by the Commission or the NASD. The Company may exclude
from such registration any Selling Holder who fails to provide such
information.
(e) Registration Expenses. In connection with any Demand Registration
pursuant to Section 5(c) hereof and any Piggyback Registration pursuant to
Section 5(b) hereof, the Company shall pay the following registration expenses
incurred in connection with the registrations thereunder: (i) all registration
and filing fees, (ii) fees and expenses of compliance with securities or blue
sky laws (including fees and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities), (iii) fees and expenses
associated with filings to be made with the NASD (including fees and
disbursements of counsel in connection therewith), (iv) printing expenses, (v)
the Company's internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
(vi) the fees and expenses incurred in connection with the listing of the
Registrable Securities, (vii) fees and disbursements of counsel for the Company
and customary fees and expenses for independent public accountants retained by
the Company, (viii) the fees and expenses of any special experts retained by the
Company in connection with such registration, (ix) reasonable fees and expenses
of one firm of counsel for the Selling Holders to be chosen by the Majority
Holder and (x) any reasonable out-of-pocket expenses of the Selling Holders. The
Company shall have no obligation to pay any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities, such costs to be
borne by the holder or holders making the request.
-18-
<PAGE> 19
(f) Indemnification and Contribution.
(i) The Company agrees to indemnify, defend and hold harmless any
holder of Registrable Securities to be sold pursuant to any Registration
Statement, any person deemed to be an underwriter under the 1933 Act and each
person, if any, who controls such holder or person deemed to be an underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange
Act, each such holder or person deemed to be an underwriter's agent, employee,
officer and/or director and the agents, employees, officers and directors of any
such controlling persons (collectively, the "Holder Indemnified Parties") from
and against any losses, claims, damages, judgements, liabilities and expenses,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense, settlement, and
investigation and all reasonable attorneys' fees and expenses), to which such
Holder Indemnified Party may become subject (regardless of whether the Holder
Indemnified Party is a party to the litigation, if any) under the 1933 Act or
otherwise, and will reimburse, as incurred, such Holder Indemnified Party for
any legal or other expenses reasonably incurred in connection with settling,
investigating, defending against or appearing as a third party witness in
connection with any losses, claims, damages, judgments, liabilities and
expenses, insofar as such losses, claims, damages, judgments, liabilities and
expenses (or actions in respect thereof) (x) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
(A) a Registration Statement or any other registration statement filed by the
Company under the 1933 Act, any preliminary prospectus or prospectus included
therein, or any amendment or supplement thereto, required to be filed or
furnished by reason of this Agreement, or (B) any blue sky application or other
document executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Registrable Securities under
the securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or (y) arise out of or are based
upon the omission or alleged omission to state in any such registration
statement, any preliminary prospectus, prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, a material fact required to
be stated therein or necessary to make the statements therein, and with respect
to any preliminary prospectus or prospectus, in light of the circumstances in
which they were made, not misleading; provided, however, that the Company will
not be liable in any such case to the extent, but only to the extent, that any
such loss, claim, damage, judgment, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made based upon, and in conformity with, written information
furnished by any holder of Registrable Securities to the Company concerning the
holders of Registrable Securities specifically for use in the preparation of
such registration statements or any such amendment or supplement thereof or any
such Blue Sky Application or any such preliminary prospectus or prospectus or
any such amendment or supplement thereto. This indemnity will be in addition to
any liability which the Company may otherwise have.
If any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any Holder
Indemnified Party with respect to which indemnity may be sought against the
Company pursuant to this Section 5(f), such Holder
-19-
<PAGE> 20
Indemnified Party shall promptly notify the Company in writing of the
institution of such action, and the Company shall assume the defense of such
action, including the employment of counsel satisfactory to the Holder
Indemnified Party and payment of all fees and expenses; provided, that the
omission so to notify the Company shall not relieve the Company from any
liability that it may have to any Holder Indemnified Party unless such an
omission to notify the Company prejudices the Company's ability to defend such
actions or proceeding. A Holder Indemnified Party shall have the right to employ
separate counsel in any such action or proceeding and to assume the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Holder Indemnified Party unless (i) the employment of such counsel shall
have been authorized in writing by the Company, (ii) the Company has failed
promptly to assume the defense and employ counsel satisfactory to the Holder
Indemnified Party after being notified in writing by the Holder Indemnified
Party of such action or proceeding, or (iii) such Holder Indemnified Party shall
have reasonably concluded that there may be one or more defenses available to
the Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the Holder Indemnified Party), in any of
which events such fees and expenses shall be borne by the Company and reimbursed
as they are incurred. It is understood, however, that the Company shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time
for all such Holder Indemnified Parties, which firm shall be designated in
writing by the Majority Holder and that all such fees and expenses shall be
reimbursed as they are incurred. Anything in this paragraph to the contrary
notwithstanding (i) no Holder Indemnified Party shall be liable for any
settlement of any such claim or action effected without the written consent of
such Holder Indemnified Party (which consent shall not be unreasonably withheld
or delayed), but if settled with the written consent of the Holder Indemnified
Parties, or if there is a final judgment with respect thereto, the Company
agrees to indemnify and hold harmless each Holder Indemnified Party from and
against any loss or liability by reason of such settlement or judgment and (ii)
no settlement of any such claim or action shall be effected without including an
unconditional and irrevocable release of the Holder Indemnified Parties from all
liability in respect of such claim or action.
(ii) Each holder of Registrable Securities severally, but not jointly
and severally, will indemnify, defend and hold harmless the Company, each of its
directors, each nominee (if any) for director named in the prospectus included
in the Registration Statement, each of its officers who have signed the
Registration Statement, each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act
(collectively, the "Company Indemnified Parties") to the same extent as the
foregoing indemnity from the Company but only with respect to written
information furnished through such holder of Registrable Securities to the
Company concerning such holder of Registrable Securities specifically for use in
the preparation of such Registration Statement or prospectus. In case
any action shall be brought against any Company Indemnified Party based on such
Registration Statement or any prospectus and in respect of which indemnity may
be sought against any holder of Registrable Securities pursuant to this Section
5(f)(ii), the holder of Registrable Securities shall have the rights and duties
given to the Company by Section 5(f) (except that if the Company
-20-
<PAGE> 21
shall have assumed the defense thereof such holder shall not be required to do
so, but such holder may nonetheless employ separate counsel therein and
participate in the defense thereof; provided that the fees and expenses of such
separate counsel shall be at such holder's expense), and the Company Indemnified
Parties shall have the rights and duties given to the Holder Indemnified Parties
by Section 5(f)(i).
(iii) In order to provide for just and equitable contribution under the
1933 Act in any case in which (x) any Holder Indemnified Party or the Company
makes claim for indemnification pursuant to Section 5(f) hereof but it is
judicially determined by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such
case, notwithstanding the fact that the express provisions of Section 5(f)
provide for indemnification in such case, or (y) contribution under the 1933 Act
may be required on the part of any holder of Registrable Securities or Company
Indemnified Party, then the Company Indemnified Party and any such holder of
Registrable Securities shall contribute to the aggregate losses, claims,
damages, judgments, liabilities or expenses to which they may be subject (which
shall, for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense, settlement and investigation and all reasonable
attorneys' fees and expenses) in either such case (after contribution from
others) in such proportions as is appropriate to reflect the relative fault of
the Company and any holder of Registrable Securities in connection with the
statements or omissions which resulted in such damages and other relevant
equitable considerations shall also be considered. The relative fault shall be
determined by reference to, among other things, whether in the case of an untrue
statement of a material fact or the omission to state a material fact, such
statement or omission relates to information supplied by the Company, or the
holder of Registrable Securities and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Holder agree (A) that it would not be
just and equitable if the respective obligations of the Company and the holders
of Registrable Securities to contribute pursuant to this Section 5(f)(iii) were
to be determined by pro rata or per capita allocation of the aggregate damages
(even if the holders of Registrable Securities were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the first sentence of this Section
5(f)(iii), and (B) that the contribution of each contributing holder of
Registrable Securities shall not be in excess of the proceeds received by such
person from sales of Registrable Securities unless such holder of Registrable
Securities is found guilty by a court of competent jurisdiction of fraudulent
misrepresentation. No person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who is not guilty of such fraudulent misrepresentation. If the
full amount of the contribution specified in this paragraph is not permitted by
law, then any holder of Registrable Securities shall be entitled to contribution
from the Company and the Company shall be entitled to contribution from any
holder of Registrable Securities to the full extent permitted by law.
(iv) Notwithstanding anything contained herein to the contrary, no
holder of Registrable Securities or person that controls any such holder within
the meaning of the 1933 Act, if
-21-
<PAGE> 22
applicable, shall be obligated to indemnify any Company Indemnified Party or to
make any contribution pursuant to this Section 5(f), in an amount in excess of
the net proceeds received by such holder of Registrable Securities with respect
to the sale of its Registrable Securities unless such holder of Registrable
Securities is found guilty by a court of competent jurisdiction of fraudulent
misrepresentation.
(g) No Obligation to Exercise. Nothing contained in this Agreement
shall be construed as requiring any Holder to exercise its Warrants prior to the
initial filing of any Registration Statement or the effectiveness thereof.
Section 6. Transferability. This Warrant shall be transferable in whole
or in part to one or more transferees. Any such transfer, assignment or
conveyance shall be made on the books of the Company maintained for such purpose
at the principal office of the Company upon surrender of this Warrant and a
properly completed and executed assignment substantially in the form of Exhibit
B attached hereto.
Section 7. Exchangeability. This Warrant is exchangeable, upon the
surrender hereof by the Holder at said office of the Company, for new Warrants
of like tenor and date representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder, each of such
new Warrants to represent the right to purchase such number of shares as shall
be designated by the Holder at the time of such surrender.
Section 8. Lost, Stolen, Mutilated or Destroyed Warrant. Upon receipt
of evidence reasonably satisfactory to the Company of the loss, theft,
mutilation or destruction of this Warrant, receipt by the Company of an executed
affidavit of lost or stolen warrant and, if reasonably requested by the
Company's transfer agent or any federal or state laws, rules or regulations the
post of a bond by the Holders and, in case of loss, theft or destruction, upon
the agreement of the Holder to indemnify and hold harmless the Company, and its
directors and officers against any and all loss, liability, damage, cost and
expenses (including reasonable attorneys' fees) which may be incurred by the
Company in connection with, or arising out of, the issuance of a new Warrant or,
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall issue a new Warrant of like denomination and tenor as the Warrant
so lost, stolen, mutilated or destroyed.
Section 9. No Voting Rights. This Warrant shall not entitle the Holder
to any voting rights or other rights as a stockholder of the Company whatsoever,
except the rights expressed herein, and no dividend or interest shall be payable
or accrue in respect of this Warrant or the interest represented hereby or the
shares purchasable hereunder until and unless, and except to the extent that,
this Warrant shall be exercised.
Section 10. Definition of Common Stock. As used herein, "Common Stock"
shall mean the Common Stock, par value $0.01 per share, of the Company as
authorized on the date hereof, and also any capital stock of any class of the
Company hereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
-22-
<PAGE> 23
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Company; provided, however, that
the shares purchasable pursuant to this Warrant shall include only shares
designated as Common Stock, par value $0.01 per share, of the Company on the
date hereof, or shares of any class or classes resulting from any
reclassification or reclassifications thereof which are not limited to any such
fixed sum or percentage and are not subject to redemption by the Company and in
case at any time there shall be more than one such resulting class, the shares
of each such class then so issuable shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
Section 11. Miscellaneous.
(a) Amendment of Warrant. This Warrant may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(b) Successors and Assigns. This Warrant will be binding upon and inure
to the benefit of and is enforceable by the respective successors and permitted
assigns of the parties hereto.
(c) No Waiver; Remedies. No failure or delay by any party in exercising
any right, power or privilege under this Agreement will operate as a waiver of
the right, power or privilege. A single or partial exercise of any right, power
or privilege will not preclude any other or further exercise of the right, power
or privilege or the exercise of any other right, power or privilege. The rights
and remedies provided in this Agreement will be cumulative and not exclusive of
any rights or remedies provided by law.
(d) Severability. If any term or other provision of this Warrant is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Warrant will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto will negotiate in
good faith to modify this Warrant so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
(e) Governing Law. This Warrant will be governed by, and construed in
accordance with, the internal laws of the State of New York without giving
effect to any choice of law or conflict of law, provision or rule of the State
of New York.
(f) Counterparts. This Warrant may be executed simultaneously in one or
more counterparts, and by different parties hereto in separate counterparts,
each of which when executed will be deemed an original, but all of which taken
together will constitute one and the same instrument.
-23-
<PAGE> 24
(g) Descriptive Headings. The headings in this Warrant and in the
schedules and exhibits hereto are included for convenience of reference only and
will not affect in any way the meaning or interpretation of this Agreement.
(h) Submission to Jurisdiction. Any lawsuit, action or proceeding with
respect to this Warrant may be brought in the courts of the State of New York or
of the United States of America for the Southern District of New York, and each
of the Company and the Holder hereby accept for themselves and in respect of its
property, generally and unconditionally, the jurisdiction of these courts. Each
of the Company and the Holder hereby irrevocably waives any objection,
including, without limitation, any objection to the laying of venue or based on
the grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any lawsuit, action or proceeding in those jurisdictions.
-24-
<PAGE> 25
IN WITNESS WHEREOF, the Company and the Holder have caused this Warrant
to be executed as of the date first written above.
NORTHSTAR HEALTH SERVICES, INC.
By:____________________________________
Name:
Title:
CERBERUS CAPITAL MANAGEMENT, LLC,
as Agent for the Lenders under the Credit
Agreement
By:____________________________________
Name:
Title:
-25-
<PAGE> 26
EXHIBIT A
to
WARRANT AGREEMENT
Subscription Form
-----------------
To: Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
(a) The undersigned hereby elects to purchase [INSERT NUMBER OF SHARES]
of Common Stock of Northstar Health Services, Inc., pursuant to the terms of the
attached Warrant, and tenders payment of the purchase price for such shares in
full.
(b) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that all of the representations and warranties of the undersigned
set forth in Section 4 of the Warrant are true and correct as of this date.
(c) Please issue a certificate or certificates representing said shares
of Common Stock in the name or names specified below:
[INSERT NAME, ADDRESS AND NUMBER OF SHARES TO BE ISSUED]
(d) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
[INSERT NAME OF HOLDER IF APPLICABLE]
Dated: ____________________ HOLDER:
CERBERUS CAPITAL MANAGEMENT, LLC,
as Agent for the Lenders under the Credit
Agreement
By:____________________________________
Name:
Title:
-26-
<PAGE> 27
EXHIBIT B
to
WARRANT AGREEMENT
Form of Assignment
------------------
To: Northstar Health Services, Inc.
The Atrium
665 Philadelphia Street
P.O. Box 1289
Indiana, Pennsylvania 15701
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant
hereby sells, assigns and transfers unto each of the Assignee(s) named below all
of the rights of the undersigned under such Warrant, with respect to the number
of Warrant Shares set forth below:
Number of Shares
of Warrant
Name of Assignee Address Stock Assigned
- ---------------- ------- ----------------
- ---------------------- ------------------------- ----------------
and does hereby irrevocably constitute and appoint the Secretary of Northstar
Health Services, Inc. (the "Company") as attorney to make such transfer on the
books of the Company maintained for such purpose, with full power of
substitution.
Dated: ___________________ HOLDER:
CERBERUS CAPITAL MANAGEMENT, LLC,
as Agent for the Lenders under the Credit
Agreement
By:____________________________________
Name:
Title:
-27-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 590
<SECURITIES> 0
<RECEIVABLES> 4,361
<ALLOWANCES> 447
<INVENTORY> 0
<CURRENT-ASSETS> 5,046
<PP&E> 1,623
<DEPRECIATION> 3,453
<TOTAL-ASSETS> 25,084
<CURRENT-LIABILITIES> 19,481
<BONDS> 12,060
0
0
<COMMON> 63
<OTHER-SE> (1,487)
<TOTAL-LIABILITY-AND-EQUITY> 25,084
<SALES> 20,813
<TOTAL-REVENUES> 20,813
<CGS> 9,367
<TOTAL-COSTS> 11,040
<OTHER-EXPENSES> 3
<LOSS-PROVISION> 302
<INTEREST-EXPENSE> 1,518
<INCOME-PRETAX> (333)
<INCOME-TAX> (14)
<INCOME-CONTINUING> (319)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (583)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
